ACTIONS FOR BREACH OF

CONTRACT OF SALE OF GOODS

Art. 1594. Actions for breach of the contract of sale of
goods shall be governed particularly by the provisions
of this Chapter, and as to matters not specifically
provided for herein, by other applicable provisions of
this Title.
Action for payment of the price (Art. 1595);
Action for damages for non- acceptance of goods (Art. 1596);
Action for rescission of the contract (Art. 1597)
Action for specific performance (Art. 1598)
Action by the buyer for rescission and damages for breach of
warranty (Art. 1599)

Art. 1595. Where, under a contract of sale, the ownership of

the goods has passed to the buyer and he wrongfully neglects
or refuses to pay for the goods according to the terms of the
contract of sale, the seller may maintain an action against him
for the price of the goods.
Where, under a contract of sale, the price is payable on a
certain day, irrespective of delivery or of transfer of title and
the buyer wrongfully neglects or refuses to pay such price, the
seller may maintain an action for the price although the
ownership in the goods has not passed. But it shall be a
defense to such an action that the seller at any time before
the judgment in such action has manifested an inability to
perform the contract of sale on his part or an intention not to
perform it.
Although the ownership in the goods has not passed, if they
cannot readily be resold for a reasonable price, and if the
provisions of article 1596, fourth paragraph, are not
applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the
buyer that the goods are thereafter held by the seller as bailee
for the buyer. Thereafter the seller may treat the goods as the
buyer's and may maintain an action for the price.

Action for payment of the price may be maintained by

the vendor when:
When the ownership of the goods has passed to the buyer and
he wrongfully neglects or refuses to pay such price;
When the price is payable on a certain day and the buyer
wrongfully neglects or refuses to pay such price, irrespective
of delivery or of transfer of title; and
When the goods cannot readily be resold for a reasonable price
and the buyer wrongfully refuses to accept them even
before the ownership in the goods has passed. (Art. 1595)
Note: If there is no justifiable reason for buyer to refuse
acceptance, despite of delivery goods, the title to the goods
passes to the buyer from the moment they are placed at his
disposal.

Art. 1596. Where the buyer wrongfully neglects or refuses to

accept and pay for the goods, the seller may maintain an action
against him for damages for nonacceptance.
The measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events from the
buyer's breach of contract.
Where there is an available market for the goods in question,
the measure of damages is, in the absence of special
circumstances showing proximate damage of a different
amount, the difference between the contract price and the
market or current price at the time or times when the goods
ought to have been accepted, or, if no time was fixed for
acceptance, then at the time of the refusal to accept.
If, while labor or expense of material amount is necessary on
the part of the seller to enable him to fulfill his obligations
under the contract of sale, the buyer repudiates the contract or
notifies the seller to proceed no further therewith, the buyer
shall be liable to the seller for labor performed or expenses
made before receiving notice of the buyer's repudiation or
countermand. The profit the seller would have made if the
contract or the sale had been fully performed shall be
considered in awarding the damages.

An action against the buyer for damages for non-acceptance

may be maintained by the vendor if in case the buyer
wrongfully neglects or refuses to accept and pay for the
goods.
In executory contract, where ownership in the goods has not
passed, and the seller cannot maintain an action to the price
as a rule (See Art. 1595), the sellers remedy will be action
for damages.
Measurement of damages for non-acceptance of goods:
If there is available market : difference between contract
price and market price. The measure of damage is the estimated
loss directly and naturally resulting from the buyers breach of
contract.
Contract price (amount of the obligation which buyer failed to fulfill)
and market or current price (value of goods which the seller has left
upon him). Damages comprehend not only the actual loss suffered
but also unrealized profit (Article 2200).

If there is no available market, in which goods can be sold at the

time, the seller is entitled to the full amount of damage which
he really sustained by a breach of contract.
Article 1593, in special circumstances, proximate damages can
be claimed. On top of the difference between the contract price
and current/market price, seller may be entitled reasonably
attribute to the non-performance of the obligation.
Measure of damages for repudiation or countermand
In case of the repudiation of the contract by the buyer, the
measure of damages to which the seller is entitled would
include:
1.The labor performed and expenses incurred for materials
before receiving notice of the buyers repudiation, and
2.Profit he would have realized if the sale had been fully
performed.

Art. 1597. Where the goods have not been delivered to

the buyer, and the buyer has repudiated the contract of
sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach
thereof, the seller may totally rescind the contract of sale
by giving notice of his election so to do to the buyer.
The vendor may rescind the sale of goods which have not
yet delivered when:
When the buyer has repudiated the contract of sale;
When the buyer has manifested his inability to perform his
obligations thereunder; and
When the buyer has committed a breach of the contract of sale
(Art. 1597)
Rights is provided by Article 1191 ( Exact fulfillment or rescission
with damages in either case). If the goods have been delivered,
the seller may recover the value of what he has given (Art. 1595)

Art. 1598. Where the seller has broken a contract to deliver

specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall be
performed specifically, without giving the seller the option
of retaining the goods on payment of damages. The
judgment or decree may be unconditional, or upon such
terms and conditions as to damages, payment of the price
and otherwise, as the court may deem just.
Vendee can maintain an action against the vendor for
specific performance in case the vendor fails to comply
with his contract to deliver specific or ascertained goods,
goods
the seller cannot retain the goods on payment of damages.
( Art. 1598)
Reason:
Damages are imposed by law to insure fulfillment of the contract
and to substitute for it. (Art. 1911)

Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of
warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of
warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been
received, return them or offer to return them to the seller and recover the price or any part thereof
which has been paid.

When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can
thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach
of warranty when he accepted the goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the
seller in substantially as good condition as they were in at the time the ownership was transferred to
the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the
seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods. If the price or any part thereof has already been
paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return
of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an
offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee
for the seller, but subject to a lien to secure payment of any portion of the price which has been paid,
and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances
showing proximate damage of a greater amount, is the difference between the value of the goods at
the time of delivery to the buyer and the value they would have had if they had answered to the
warranty.

Remedies available to the buyer when the seller has been guilty
of a breach
of promise or warranty:
Recoupment. - accept goods and set up the seller's breach to reduce
or extinguish the price;
Action for damages. - accept the goods and maintain an action for
damages of the warranty;
Counterclaim for damages. - refuse to accept the goods and maintain
an action for damages for the breach of the warranty;
Rescission - rescind the contract of sale by returning or offering the
return of the goods and recover the price. (Art. 1599)
Note:The above remedies are alternative.
The only exception is when after the payee has chosen fulfillment, it
should become impossible, in which case he may also sue for rescission.
Measure of damages the general measure of damage in case of breach
of warranty of quality is provided in paragraph no. 5 in the absence of
special circumstances showing proximate damage of a greater amount,
difference between the value of the goods at the time of delivery to the
buyer and the value they would had if they had answered to the
warranty.

Rescission by the buyer is not allowed:

1.If the buyer accepted the goods knowing of the breach of
warranty without protest;
2.If he fails to notify the seller within a reasonable time of his
election to rescind; and
3.If he fails to return or offer to return the goods in substantially as
good condition as they were in at the time of the transfer of
ownership to him. But where the injury to the goods was caused
by the very defect against which the seller warranted, the buyer
may still rescind the sale (par. 3)
Rights and obligations of buyer in case of rescission:
1.In case of rescission, the buyer shall cease to be liable for the
price, his only obligation being to return the goods.
2.If he has paid the price or any part thereof, he may recover it
from the seller (par. 4)
3.He has also the right to hold the goods as bailee for the seller
should the latter refuse the return of the goods and to have a lien
thereon for any portion of the price already paid which lien he may
enforce as if he were an unpaid seller.

EXTINGUISHMENT OF SALE
Art. 1600. Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this
Title, and by conventional or legal redemption.
Causes:
Common - those causes, which are also means of extinguishing all
other contracts like payment, loss of the thing, condonation, etc. (Art.
1231);
Special - those causes which are recognized by law on sales (such those
covered by Arts. 1484 (Sale of Personal Property by Installment/Recto
Law), 1532 (Stoppage in Transitu), 1539 (Rescission lacking in area), Art.
1541 (Rescission applicable to judicial sales, Art. 1542 ( rescission
allowed in sale in lump sum), 1556 (partial eviction allows rescission),
1560( Warranty against hidden encumbrance), 1567 (accion redhibitoria);
Extra-special - those causes, which are given special discussion by the
Civil Code and these, are conventional redemption and legal redemption

EXTINGUISHMENT OF SALE
SECTION 1. - Conventional Redemption
Art. 1601. Conventional redemption shall take place when
the vendor reserves the right to repurchase the thing sold,
with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed
upon.
Define Conventional Redemption:
It is the right, which the vendor reserves to himself, to reacquire
the property sold provided he (1) reimburses the vendee of (a)
the price, (b) the expenses of the contract, (c) any other
legitimate payments made thereof and (d) the necessary and
useful expenses made on the thing sold (art. 1616); and (2) fulfills
other stipulations which may have been agreed upon. (Art. 1601)

EXTINGUISHMENT OF SALE
Nature of Conventional Redemption
contractual
accidental stipulation
real right, when it is registered as it binds third persons
potestative, it depends on the will of the vendor
resolutory condition, when the right is exercised, the
right of ownership by the vendee is extinguished;
Reserved at he moment of the perfection of the contract
for if it is agreed afterwards, there is only a promise to
sell which produces different rights and effects.

EXTINGUISHMENT OF SALE
A sale that contains right to repurchase or conventional
redemption is called: PACTO DE RETRO
It is imperative that the conventional redemption is
agreed by the parties at the time of the sale, otherwise it
shall not be considered a pacto de retro sale. Moreover,
the right to repurchase cannot be granted. Hence any
agreement to repurchase the property entered after the
sale is not a sale with right to conventional redemption.
Subject matter both real and personal property.

EXTINGUISHMENT OF SALE
Art. 1602. The contract shall be presumed to be an equitable mortgage,
in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period
is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment
of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.

EXTINGUISHMENT OF SALE
Meaning of Equitable Mortgage.
An equitable mortgage is one, which although it lacks the proper
formalities of a mortgage, shows the intention of the parties to make the
property as security for a debt.
Designed to provide safeguards and restriction against the evils of sale
with right of repurchase commonly called pacto de retro sale.
It is possible that this is resorted to conceal the real agreement of the
parties. The intention of the parties is that the pretended purchase price
is money loaned and in order to secure the payment of loan a contract
purporting to be a sale with right to repurchase is drawn. This is because
under the pacto commissorio rule, the mortgagor or pledger is prohibited
to automatically appropriate the thing pledged or mortgaged in case of
non-payment of the loan. This stipulation is void. Hence instead of
appropriation, mortgagor or pledger will have to cause the foreclosure of
the mortgage or public sale of the pledge for them to collect the claim
against the debtor from the proceeds of the foreclosure or sale. The
procedure is long, rigorous and even costly. Hence, by resorting to this
scheme, they may indirectly avoid the procedure by concealing their true
agreement. For this very reason this provision was created.

EXTINGUISHMENT OF SALE
Article 1602 creates a disputable presumption only. Note
not all pacto de retro sale is a form of relative simulated
contract. The presumption is created if there is a strong
indication or inference that the real intention of the parties
to the transaction shall secure the payment of the debt or
performance of any other obligation.
Any money, fruits or other benefit to the received by the
buyer shall be treated as rent or otherwise shall be
considered as interest which shall be subject to the usury
laws.

EXTINGUISHMENT OF SALE
Art. 1603. In case of doubt, a contract purporting to
be a sale with right to repurchase shall be construed
as an equitable mortgage.

Art. 1604. The provisions of Article 1602 shall also

apply to a contract purporting to be an absolute sale.
Art. 1605. In the cases referred to in Articles 1602
and 1604, the apparent vendor may ask for the
reformation of the instrument.

EXTINGUISHMENT OF SALE
Art. 1606. The right referred to in Article 1601, in
the absence of an express agreement, shall last
four years from the date of the contract.
Should there be an agreement, the period cannot
exceed ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase.

EXTINGUISHMENT OF SALE
Period to exercise the right to repurchase in conventional
redemption may be exercised:
If there is no agreement granting the vendor the right to redeem, there
is no right of redemption since the sale is considered as an absolute sale.
If the parties agreed only on the right to redeem on the part of the
vendor but there is a total absence of express stipulation as to the time
within which the repurchase should be made, then the period of
redemption shall be four (4) years from the date of contract;
If the parties agree on a definite period of redemption, then the right to
redeem must be exercised within the period fixed provided it does not
exceed 10 years;
If the parties agree that the vendor shall have the right to redeem and
they intend a period which, however is not specified (e.g. at any time the
vendor has the money) then the redemption period is 10 years.
From the time final judgment was rendered in a civil action on the basis
that the contract was a true sale with the right to repurchase the vendor
a retro has 30 days within which to exercise the right to repurchase. (Art.
1606)

EXTINGUISHMENT OF SALE
Reason for limiting period of redemption is premised on
question of public interest.
Period of Redemption cannot be extended after its
expiration because what is to be extended has
already extinguished. Before its expiration, it can be
extended provided the extension including the original
term shall not extend beyond 10 years; otherwise the
extension is void as to the excess.

EXTINGUISHMENT OF SALE
Art. 1607. In case of real property, the consolidation of
ownership in the vendee by virtue of the failure of the
vendor to comply with the provisions of article 1616
shall not be recorded in the Registry of Property without
a judicial order, after the vendor has been duly heard.
Notes:
Necessity of judicial order for recording of consolidation
of ownership if real property is involved in the sale. If
the vendor failed to redeem within the period agreed
upon, the vendees title becomes irrevocable but to
complete the same, consolidation of ownership must be
declared by court order through a judicial proceedings
where the vendor is given opportunity to be heard and
such order will be basis for recording of said ownership
to the Registry of Property.

EXTINGUISHMENT OF SALE
Art. 1608. The vendor may bring his action against
every possessor whose right is derived from the
vendee, even if in the second contract no mention
should have been made of the right to repurchase,
without prejudice to the provisions of the Mortgage
Law and the Land Registration Law with respect to
third persons.
Right to redeem is a real right. Any possessor
thereof shall respect if said right is duly recorded
with the Registry of Property.

EXTINGUISHMENT OF SALE
Art. 1609. The vendee is subrogated to the vendor's
rights and actions.
Meaning of subrogation transfers to the person
the credit and rights thereto appertaining. All
rights of the vendee would be transfer to any
person whom he would sell, dispose, cede or
transfer his rights over said property subject to the
right of repurchase of the vendor.

EXTINGUISHMENT OF SALE
Art. 1610. The creditors of the vendor cannot make use
of the right of redemption against the vendee, until
after they have exhausted the property of the vendor.
Practical application of Article 1177 of the Civil Code
permitting creditors to exercise to the rights and
actions of their debtors after exhausting his properties
to satisfy their claims. The right to redeem, being in
the nature of property, is answerable for the debtor
debts of the vendor provided the vendors properties
must be first exhausted. The exhaustion must be
established to the satisfaction of the vendee before
creditors can utilized right to redeem as part of accion
subrogatoria.

Art. 1611. In a sale with a right to repurchase, the

vendee of a part of an undivided immovable who
acquires the whole thereof in the case of article
498, may compel the vendor to redeem the whole
property, if the latter wishes to make use of the
right of redemption.
Art. 1612. If several persons, jointly and in the same
contract, should sell an undivided immovable with a
right of repurchase, none of them may exercise this
right for more than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which
case each of the latter may only redeem the part
which he may have acquired.

Art. 1613. In the case of the preceding article, the

vendee may demand of all the vendors or co-heirs
that they come to an agreement upon the
purchase of the whole thing sold; and should they
fail to do so, the vendee cannot be compelled to
consent to a partial redemption. (1515)
Art. 1614. Each one of the co-owners of an
undivided immovable who may have sold his share
separately, may independently exercise the right
of repurchase as regards his own share, and the
vendee cannot compel him to redeem the whole
property. (1516)

Art. 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against
each of them except for his own share, whether the thing be undivided, or it has been partitioned among
them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the whole. (1517)
Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the
price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold. (1518)
Art. 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits,
there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity
was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall
be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time
he possessed the land in the last year, counted from the anniversary of the date of the sale. (1519a)
Art. 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages
constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith,
and in accordance with the custom of the place where the land is situated.