LAW ON SALES

PART 1
Article 1458. By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.

A contract of sale may be absolute or

conditional.
Stages of a Contract of Sale
1.Preparation/Conception- the time the contracting parties
shows interest in the contract.
(the parties negotiate as to the offer)

2. Perfection/birth- concurrence of the essential elements of the

sale
(meeting of the OFFER and ACCEPTANCE upon the thing and the
cause/ consideration)

3.Consummation/death- begins when the parties perform their

respective undertakings, resulting in the extinguishment thereof.
Nature of Obligation Created

a) For the SELLER:

• To transfer ownership and to deliver
possession of the subject matter

b) For the BUYER:

• to pay the price
Sale as a Title
Contract of sale DOES NOT transfer the ownership
of the subject matter. It is merely a title that
creates the obligation to transfer ownership and a
mode thereof. The contract of sale transfers no
real rights. Ownership and position is
transferred through delivery or tradition.
PERFECTION (Art. 1475)
Contract of sale is perfected at the moment of the
meeting of the minds of the parties.
From the moment of perfection, parties may reciprocally
demand performance.
In the meantime, buyer has personal right. Hence if
seller sells again a parcel of land to a stranger in good
faith, the proper remedy of the buyer would be to
sue for damages for he cannot recover ownership over
something he had never owned before.
Effect of Non-Payment of Price of a Perfected Contract
“It is not the payment of the price that determines
the validity of a contract of sale.

Failure to pay the consideration

Results in a right to demand the fulfillment or
cancellation of the obligation under an existing
valid contract

Lack of Consideration
prevents the existence of a valid contract (void
contract)
Effect of DELIVERY (Art. 1477)
General Rule: The OWNERSHIP of the thing sold shall be
transferred to the vendee upon the actual or
constructive DELIVERY thereof.
--- after delivery, the buyer acquires a real right over the
thing (enforceable against the world)
Exception:
The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the
price. (Art. 1478)
Elements of a Contract of Sale
1. Essential Elements

a. Consent- Also called meeting of the minds, mutual

agreement, or consensus ad idem. It essentially refers
to a situation where the two parties of the contract
has a mutual understanding in the formation of the
contract of sale. This essentially means that there is
consent in the part of the seller to transfer ownership
of the determinate thing and in the part of the buyer
to pay the equivalent price.
Elements of a Contract of Sale

b. (Determinate) Object -- This is the subject

matter of the contract. It must be determinate or
capable of being determinable– a certain thing

c. Price certain in money (Cause/ Consideration) --

This refers to the price, in terms of money or its
equivalent.
2. Natural Elements
a. Warranty against eviction

b. Warranty against hidden defects and

encumbrances (defect/s that render the good
unfit for its intended use or diminishes its fitness
for such use intended)
3. Accidental Elements- refer to the stipulations,
clauses, terms or conditions established by the
contracting parties which modify, restrict the legal
effects like, CONDITIONS, PERIOD, INTEREST,
PENALTY etc.
Characteristics of a Contract of Sale
1. Consensual- perfected by mere consent
2. Principal- capable of standing alone without the need
of another contract
3. Bilateral- there is a reciprocal obligation between the
parties
4. Onerous- valuable consideration is given by both
parties
5. Commutative- the consideration exchange are of
equivalent values
6. Nominate- has a name given by law
Kinds of Contract of Sale

1. Absolute - This refers to a contract of sale that is not

subject to any condition or does not require any
condition for the transfer of ownership.

2. Conditional - This refers to a contract of sale that

contemplates contingency, or is subject to a condition.
It follows then that the delivery of the determinate
thing does not necessarily transfer ownership, unless
the contingency or condition is fulfilled.
SALE DISTINGUISHED FROM OTHER CONTRACTS
SALE DONATION
Onerous Gratuitous
Perfected by mere consent Perfected by donee’s
acceptance

SALE BARTER
Cause or consideration is Cause or consideration is
in MONEY ANOTHER THING
Problem:

A sold his car which has a market value of P1.5 M

to B. As agreed, B will give his house and lot with
a market value of P1.4 M to A as payment.
Is this an example of a BARTER or a SALE?
Rules to determine whether contract is sale or barter
(Art. 1468)
If the consideration of contract is partly in money, and
partly in another thing…
1. Consider the manifest intention of the parties
2. If such manifestation is not clear, consider the value of
the thing given as part of the consideration--
a. if the value of the thing given EXCEEDS the amount
of the money or its equivalent, it is BARTER
b. if value of the thing given is EQUAL or LESS than the
amount of money, it is considered a CONTRACT of SALE
SALE CONTRACT FOR PIECE OF WORK
Ordered in the Made specially for the
ORDINARY COURSE of customer upon his SPECIAL
business ORDER and not for the general
market

Thing transferred Thing transferred is not one in

already existed and existence and which would
can be a subject of never have existed but for the
sale to other persons order of the party desiring it
CONTRACT OF SALE CONTRACT TO SELL
* Ownership is * Ownership is transferred upon
transferred upon full payment
delivery
Full payment is a positive
Non-payment is a suspensive condition
resolutory condition ( if the price is not paid, it is as if
( extinguishes the the obligation of the seller to
contract) deliver and to transfer
ownership never became
effective and binding)
CONTRACT OF SALE CONTRACT TO SELL
Sale is already perfected No perfected sale yet
Vendor loses and cannot Title remains in the vendor if
recover ownership of the the vendee does not comply
thing sold until contract with the conditions of the
of sale is resolved and set contract
aside
Determine if Contract of Sale or Contract to Sell
1. The buyer promises to buy the house or
condominium unit either in full cash or in
installments.
2. The seller/ developer promises to sell the house to
the buyer.
3. The retailer buys goods from the supplier in bulk
payable in three instalments.
 SALE AGENCY TO SELL
Buyer receives goods as Agent receives goods of the
owner principal who retains
ownership
Buyer pays the price Agent delivers the price which
he got from his buyer
Buyer, as a general rule,
cannot return the object Agent can return the goods
sold
 SALE AGENCY TO SELL
Seller warrants the thing Agent makes no warranty
sold
Buyer can deal with the Agent can deal with the thing
thing sold received as long as it is within
his authority given by the
principal
CONSENT
--Meeting of the minds upon the thing that is the
OBJECT of the contract and upon the price.
-- there is an offer and acceptance thereof
-- Once there is meeting of the minds between
the parties, the contract of sale is perfected.
--- If no consent, the contract is non-existent
REQUISITES:

1. Consent should be intelligent or with an exact

notion of the matter to which it refers;

2. It should be free and spontaneous (voluntary)

OBJECT/ SUBJECT MATTER OF A CONTRACT OF
SALE
REQUISITES OF A VALID SUBJECT MATTER
A. For THINGS
1. LICIT / LAWFUL (Art.1459)
--Should not be impossible
-- It is within the commerce of man

Note: The vendor must have a right to transfer the

ownership at the time the thing is delivered (Art.1459)
KINDS OF ILLICIT THINGS

1. Per Se –of its nature, such as sale of decaying

fruits for human consumption; sale of illegal
drugs

2. Per Accidens– due to provisions of law

declaring it illegal such as sale of lottery tickets
Examples of illicit sale
1. Sale of future inheritance
2. Sale of animals suffering from contagious
disease
3. Sale of animal to be used for a service stated in
a contract, and they have found to be unfit
4. Sale or transfer of land to aliens (foreigners)
2. DETERMINATE OR DETERMINABLE THINGS (Art. 1460)
DETERMINATE/ SPECIFIC THING
A thing is determinate when it is particularly designated
or physically segregated from all others of the same class.

Requisites:
1. At the time the contract is entered into (perfection
stage) , the thing is capable of being made determinate;
and
2. There is no necessity of a new or further agreement
between the parties.
GOODS WHICH MAY BE OBJECT OF SALE
a. Existing Goods--- goods owned or possessed by
the seller

b. Future Goods--- goods to be manufactured,

raised or acquired by the seller after the
perfection of the contract. These are things
which are expected.
3. THINGS HAVING POTENTIAL EXISTENCE ( EMPTIO REI
SPERATAE) (Art. 1461)
GENERAL RULE: A person cannot sell or convey what he
does not have or own.
EXCEPTIONS:
1. Sale of a thing having potential existence
(emptio rei speratae) (Art . 1461)
Examples:
“still ungrown fruits”
wine that a particular vineyard is expected to produce
young of animals not yet in existence
2. Sale of future goods; and
3. Contract for delivery at certain price of an
article which the vendor in the ordinary course
of business manufactures or procures for the
general market, whether the same is on hand
at the time or not.
SALE OF MERE HOPE OR EXPECTANCY
(EMPTIO SPEI)
The sale of a mere hope or expectancy is deemed
subject to the condition that the thing
contemplated or expected will come into existence.

The Sale itself is valid even if the thing hoped or

expected does not come into existence, unless
if such hope or expectancy is in vain, such sale
is VOID
Example:

Sale of a lottery ticket that is yet to be drawn is

valid.
Sale of a lottery ticket that has already been
drawn and the object of the sale is a losing ticket,
the sale is void as it involves the sale of vain hope
or expectancy.
5. SALE OF UNDIVIDED INTEREST or SHARE–

Sale of an undivided interest of a property only

binds the co-owner only up to the portion of his/her
interest; consequently he/she can only transfer
ownership over the same to other parties.

The co-owner can dispose his share even without

the consent of the other co-owner/s
Co-ownership is created by law,
contract, succession (co-ownership
before partition), by chance, or
occupation.

Being a co-owner is no different from

being an owner, except that the share of
the co-owner is proportional to his or her
interest in the co-ownership.
Instances when co-ownership exists
1.Property of legally married persons
2.Property of two or more persons not
yet divided into parts (land) or is
incapable of physical segregation/
separation by two or more persons (ex.
building, car)
3.Inherited properties from deceased
parents
6. SALE OF AN UNDIVIDED SHARE IN A SPECIFIC
MASS OF FUNGIBLE GOODS

It makes the buyer a co-owner of the entire mass

in proportion to the amount he bought. (Art.
1464)
Example:
S is engaged in the business of buy and sell of rice and
he owns a bodega filled with undetermined sacks of
rice. Subsequently, B buys 100 sacks of rice. If there are
300 sacks of rice stored in the bodega, then S and B will
be co-owners where S owns 200 sacks of rice while B
owns 100 sacks of rice.
However, if there are only 95 sacks of rice stored in the
bodega, S is liable for the deficiency of 5 sacks of rice to
B because the contract of sale is still valid. The sacks of
rice should be of the same kind and quality.
7. SALE OF THINGS SUBJECT TO RESOLUTORY
CONDITION

Resolutory condition– uncertain event upon

the happening of which the obligation subject to
it is extinguished
Example:
S and B entered into a Contract of Sale with a
Right to Repurchase within 1 year over S’s parcel
of land. S then delivered said parcel of land to B.
In this case, the condition or uncertain event is,
“whether S will repurchase the said parcel of
land within 1 year”.
(If S purchases back the property within a year,
then the Contract of Sale is consummated and no
more obligation to be fulfilled)
B. For RIGHTS
1. Transmissible ---It does not contemplate a
future inheritance, unless expressly authorized
by law
2. Licit

Example:
right of usufruct--- right to use and enjoy one’s
property
rights acquired by virtue of a contract
QUESTIONS TO PONDER UPON

1. Can services be an object of a contract?

2. Can services be an object of a contract of sale?

PRICE
It is the sum stipulated as equivalent of the thing
sold
Requisites
1. Certain or ascertained at the time of perfection --
It must be EXPRESSED and AGREED in term of
SPECIFIC CURRENCY (like Peso)
2. In money or its equivalent (check; stocks; bond)
3. Real, not fictitious
A. CERTAINTY OF PRICE ( Art. 1469)
Price must be CERTAIN, otherwise the sale is void by
reason of absence of meeting of minds.

Price can be determined or certain when:

a.) Parties have fixed or agreed upon a definite price
Fixing of price cannot be left to the discretion of one
of the parties unless if such was accepted by the
other, therefor the sale is perfected.
b.) If it be certain with reference to another thing
certain

c.) Determination is left to the judgement of a

specified person
Price fixed by 3rd persons designated by the
parties is binding upon them.
FAILURE TO DETERMINE PRICE (Art. 1474)
General Rule:
Where the price cannot be determined, the contract is
inefficacious, hence, void.
Exception:
If the thing or any part thereof has been delivered to and
appropriated by the buyer, he must pay a reasonable price.
Reasonable Price
Generally, reasonable price is the market price at the time
and place fixed by the contract or by law for delivery of
goods.
B. INADEQUACY OF PRICE (Art. 1470)
GENERAL RULE: Gross inadequacy of price does
not affect the contract of sale (will not result in a
void contract)
EXCEPTION:
A. it may indicate a defect in consent, it may be
annulled.

(ex. Mistake, violence, intimidation, undue

influence or fraud)
b.) Where the price is so low as to be shocking to
conscience, sale may be set aside
( circumstances show that there has been
unfairness or taken advantaged of, or misled)

c.) Where the parties did not intend to be bound at

all, sale is VOID.

d. that the parties actually intended a donation or

some other act or contract
C. SIMULATION OF PRICE ( Art. 1471)
If the price is simulated (fictitious), the contract is void
for the lack of cause or consideration.
Note:
If there is no meeting of the minds of the parties as to
the price, because the price stipulated in the contract
is simulated, then the contract is VOID.

If the REAL PRICE is NOT STATED in the contract, the

contract is VALID but subject to reformation.
Example:
Esme sold to Tom her brand new motorcycle for
P200,000 not knowing that the fair market value of
which is P600,000. Is the sale valid?
Answer:
The sale is valid because gross inadequacy of the
selling price does not invalidate a contract of sale.
OPTION CONTRACT (Art. 1479 para 2)

An option contract is a contract where

one-person (the offeror/promissor) grants
to another person (the offeree/promisee)
the right or privilege to buy (or to sell) a
determinate thing at a fixed price, if he or
she chooses to do so within an agreed
period.
An option contract must be supported by a
separate consideration (option money)
that is either clearly specified as such in
the contract or duly proven by the
offeree/promisee.

This is akin to “reservation fee” that is not subject to

refund in case the prospective buyer decides not to
buy the property.
RIGHT OF FIRST REFUSAL

The right of first refusal or the preferential

right is a right which gives a party a right
to have the first opportunity to either
purchase or lease a property, or to enjoy a
right.
Example:
“When a lease contract contains a right of
first refusal, the lessor is under a legal
duty to the lessee not to sell to
anybody at any price until after he
has made an offer to sell to the latter
at a certain price and the lessee has
failed to accept it. The lessee has a
right that the lessor’s first offer shall be in
his favor.
(Tanay Recreation vs. Fausto (GR 140182, April 12,
Problem:
S and his family are leasing a land located in
Makati City on a monthly basis for almost 20
years. He built their house on the leased land. S
learned later on that the owner of the land is
selling the said property. S expressed his
willingness to buy the land. Is S entitled to such
right?
Ans. YES, in accordance to Section 6 of
Presidential Decree (PD 1517)
(When under a lease contract, there is no
stipulation as to right of first refusal indicated, this
law applies)
D. EARNEST MONEY (Art. 1482)
EARNEST MONEY OPTION MONEY
Part of Purchase Price Separate and distinct
from Purchase Price

Given only when there is Given when sale is

already a perfected sale NOT yet perfected (like
(like a down payment; a a reservation fee)
deposit to show good-faith
intention)
 EARNEST MONEY OPTION MONEY

Buyer is bound to pay the Would-be-buyer is not

balance required to buy

In case of non-payment, In case of non-

specific performance or payment, there can be
rescission can be filed an action for specific
performance
FORM OF CONTRACT OF SALE
1. General Rule
A contract may be entered in ANY FORM
provided the essential requisites for its validity are
present.
2. Where Contract covered by Statute of Frauds
The contract of sale should be covered by the
Statute of Frauds, the law does require that it be in
writing, subscribed by the party charged, otherwise
the contract cannot be enforced
Statutes of Frauds (Art. 1403 of the NCC)
• require that certain contracts enumerated therein to be
in writing and be SIGNED by all parties to be
ENFORCEABLE.
1. contracts in consideration of marriage,
2. contracts which cannot be performed within a year;
3. sale of an interest in LAND;
4. contracts in which one party becomes a SURETY ( act
as guarantor) for another party’s debt or other
obligation
PURPOSE: TO AVOID FRAUD
Statute of Fraud
• The following transaction must be in writing,
otherwise contract is unenforceable.
1. Sale of property at price not less than P500.00
2. Sale not to be performed within one year
3. Sale of real property or interest therein

NOTE: Applicable only to executory contracts and

not to contracts which are totally or partially
performed.
KINDS OF SALES
1. Sale by Auction
Perfected when the auctioneer accepts the bid by
the fall off the hammer, gavel, or in any other
customary manner.
2. Sale Of Goods By Description
Seller sells things as being a particular kind, and
buyer has not seen the article sold and relies on
the description given by the vendor.
3. Sale by Sample
Parties contracted solely with reference to the sample,
with the understanding that the bulk was like it. The
vendor warrants the thing sold will conform with the
sample in kind, character, and quantity. It is the
sole basis or inducement of the sale.
NOTE: goods must satisfy all the warranties. Otherwise,
contract may be rescinded.
Expenses for the execution and registration of the sale
shall be borne by the vendor, unless there is a
stipulation to the contrary.
SALE OF PERSONAL PROPERTY PAYABLE IN
INSTALLMENT (Art. 1484)
(RECTO LAW)

Requisites
a.) Must be a contract of sale
b.) Object is personal property
c.) Sale must be in installments

Does not apply for sale for cash or straight terms

Remedies of vendor in case of failure of buyer to pay

1. Exact fulfillment of the obligation, should the

vendee fails to pay;

2. Cancel the sale, should vendee fails to pay two or

more installments.
3. Foreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendee’s
failure to pay cover two or more installments.
In this case, he shall have no further action against
the purchaser to recover any unpaid balance of the
price. Any agreement to the contrary shall be void.

Note: The remedies are alternative– the exercise of one bars the
exercise of the others
Example:
Esme sold her 3-year old car to Tom for
P400,000.00 on installments. Their agreement
is four equal monthly installments or
P100,000.00 per month.
A.What if Tom paid the first installment but
defaulted on his second installment, can Esme
exercise the first remedy of exact fulfillment?
Ans: Yes, because the first remedy requires only one (1)
default.
B. What if Tom defaulted on his
second and third payments, can Esme
exercise the second remedy which is
cancellation of the sale?
Ans: yes, because the requirement for the second
remedy are defaults of at least two (2) installments
3. What if Tom defaulted only on his 2nd, 3rd and 4th
installments (for a total of P300,000.00), can Esme
exercise the third remedy?
Ans: No because it is required that B must execute
a chattel mortgage on it.
4. What if Tom executed a chattel mortgage
(car) on the said debt, can Esme exercise the
third remedy?
What if Esme forecloses the chattel
mortgage and sold the car to the highest
bidder for P250,000.00, can Esme recover the
deficiency against Tom?
Ans: No because the law provides that “no
further action against the purchaser to
recover any unpaid balance of the price.
Any agreement to the contrary shall be
void”
CAPACITY TO BUY AND SELL
All persons who can bind themselves by contract have also
legal capacity to buy and sell.

Absolute Incapacity- persons cannot bind themselves at

all
a. Minor
b. Insane or Demented
c. Deaf-mutes who do not know how to write
d. Civil interdiction
Relative Incapacity- Only with regards to
certain persons and certain class of property
The following persons cannot acquire property by
purchase, even at a public auction, either in person
or through the mediation of another:
1) Guardian, with respect to the property of his ward
2) Agents, the property whose administration or sale
may have been in trusted to them, unless consent of
principal is given
3) Executors and administrators, property of estate
under his administration.
(Violation would result to VOIDABLE CONTRACT)
4) Public officers and employees, with respect to
the properties of the government, political
subdivisions, or GOCCs, entrusted to them.
5) Judges, justice, prosecuting attorney, clerks of
court, etc., with respect to the property
in custogia legis.
6) Other persons disqualified by law
(Violation would result to VOID CONTRACT)
Husband and Wife
General Rule: Husband and wife cannot sell to each
other
(Note: It follows that husband and wife cannot
donate to each other except minimal gifts)

Exception:
1) When separation of property was agreed
2) There was a judicial separation of property
LOSS AND DETERIORATION
A thing is considered as lost when it:
1. Perishes (died, burnt) (physical loss)
2. Goes out of commerce (ex: public road, voluntary
easement; property of public dominion); (legal loss)
or
3. Disappears in such a way that its existence is
unknown or cannot be recovered (civil loss)
However, in an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does
not extinguish the obligation.
Res Perit Domino (owner bears the loss)
This is the concept that owner bears the risk of
loss and deterioration because ownership is
not transferred until delivery.

Rule on Risk of Loss and Deterioration

Before Perfection: Seller bears the risk /loss -- there
was no contract, for there was no cause
Loss or Deterioration of a thing At the time of
perfection: (Art. 1493)
If the thing is entirely lost, the Contract is VOID or
inexistent (without any effect).
If partially lost, vendee may elect between:
a. withdrawing from the contract or
b. demanding the remaining part, paying its price in
proportion to the sum agreed upon

Note: Preceding rules apply to sale of specific goods.

(Art.1494)
After perfection but before delivery: risk of loss is
shifted to the buyer but stipulations in the contract will
govern.
This is an exception to the rule of res perit domino.
Had the sale been perfected, the buyer would have
borne the loss, that is, he would still have had to pay
for the object if no delivery had been made
After delivery: buyer bears the risk. Unless delivery
was delayed through the fault of either parties, the risk
is with the party in fault; and when the ownership of
the goods has been retained by the seller
OBLIGATIONS OF THE VENDOR (Art. 1495)
1) Transfer ownership (Art. 1477)
2) Deliver the thing, with its accessions and
accessories, if any
3) Warrant against eviction and against hidden
defects
4) To take care of the thing, pending delivery, with
proper diligence of a good father of a family
5) To pay the expenses of the deed of sale, unless
there is stipulation to the contrary (Art. 1487)
DELIVERY
Ownership, as a consequence of certain contracts
such as sale, shall be transferred to the vendee
upon actual or constructive delivery.
When vendor is not bound to deliver
1. Vendee has not paid the price
2. No period for payment has been fixed
3. Even if a period for payment has been fixed, if the
vendee has lost the right to make use of the same.
Kinds of Delivery ( Art. 1497)
1. Actual or real- placing the thing under the control and
possession of the buyer
2. Legal or constructive- delivery is represented by other signs
or acts indicative thereof
3. Quasi-tradition- delivery of rights, credits or incorporeal
property, made by (i) placing titles of ownership in the hands
of the buyer or (ii) allowing the buyer to make use of rights
(Art. 1501)
4. Tradition by operations of law
Kinds of Constructive or Legal Delivery
1. By Legal Formalities- sale is made through public instrument. Gives rise only
to a prima facie presumption of delivery (Art. 1498)
2. Symbolic Delivery (tradition simbolica)-delivery of keys or depository where
the movable is kept or stored.
3. Traditio Longa Manu-delivery of a movable by mere consent or agreement.
Pointing at the thing (Art. 1499)
4. Traditio Brevi Manu-buyer simply continues in possession of the thing but
under ownership. Applies to movables only. Happens when buyer already has
possession of the thing sold before the sale. (Art. 1499)
5. Traditio Constitutum Posessorium- seller continues to be in possession of
the property sold but not as owner but in some other capacity. (Art. 1500)
Sale or Return (Art. 1502)
Property is sold, but the buyer has the option to return it
to the seller instead of paying the price. It depends on
the discretion of the buyer; it is a sale with a resolutory
condition.

Sale on Approval or Trial

Title remains with seller notwithstanding delivery of the
goods. It is in nature of an option to purchase. Sale is
dependent on the quality of the goods; it is a sale
with suspensive condition.
Goods Delivered Through Carrier (Art. 1523)
General Rule: Delivery to carrier is deemed to be delivery to
the buyer.
Exception: Where the right of possession or ownership of
specific goods sold is reserved (Art. 1503)

Seller’s Duty After Delivery to Carrier

1. To enter on behalf of buyer into such contract reasonable
under the circumstances
2. To give notice to buyer regarding necessity of insuring the
goods.
Sale of Goods by a Non-owner (Art. 1505)
General Rule: Buyer acquires no title even if in good faith or for value.
Nemo dat quid non habet (You cannot give what you do not have).
Exceptions:
1. Owner is estopped or precluded by his conduct
2. Sale is made by the registered owner or apparent owner
3. Sales sanctioned by judicial or statutory authority.
4. Purchase in a merchant’s store, fairs or markets (art. 559)
5. When a person who is not the owner sells and delivers a
thing, subsequently acquires title thereto
6. When the seller has a voidable title which has not been avoided at
the time of sale
Place of Delivery (Art. 1521)
1. Where there is an agreement: Place specified
2. Where there is no agreement: Place of delivery
determined by usage of trade
3. Where there is no agreement and
no prevalent usage: seller’s place of business
4. In any other case: seller’s residence
UNPAID SELLER (Art. 1525)
Unpaid seller is one who has not been paid the whole
amount of the price or one who received a negotiable
instrument and it has been dishonored, buyer is insolvent,
or otherwise.
Rights of the Unpaid Seller (Art. 1526)
1) Right to lien of goods or the rights to retain them for
the price while he is in possession of them
2) Right of stoppage in transit
3) Right of resale
4) Right to rescind the sale
RIGHT TO LIEN (Art. 1527)
Right to retain possession of goods until payment or tender of
the whole price, or unless he agrees to sell on credit
A) When available:
1.) Goods sold without stipulation as to credit
2.) Goods are sold on credit, but credit term has expired
3.) Buyer becomes insolvent
B) Lien on Partial Delivery:
When unpaid seller made partial delivery of the goods, he
may exercise his lien on the remainder, unless such part
delivery shows an intent to waive the lien or right of retention
 C) When lien is lost:
1.) Delivers the goods to a carrier or other bailee for
the purpose of transmission to the buyer without
reserving the ownership in the goods or the right
of possession thereof;
2.) Buyer or his agent lawfully obtains possession of
the goods;
3.) By waiver thereof
RIGHT OF STOPPAGE IN TRANSITU (Art. 1530)
Entitles unpaid seller to resume possession of the
goods while they are in transit before the goods
come in possession of the vendee.
A) When available:
1.) Buyer must be insolvent;
2.) Seller must be unpaid
3.) Goods are in transit
4.) Seller must actually take possession of the
goods sold or give notice of his claim to
the carrier or other person in possession.
5.) Seller must surrender the document of title,
if any, issues by the carrier or bailee;
6.) Seller must bear the expenses of delivery
after the exercise of the right
 B) When goods are considered in transit:
1.) After delivery to carrier or other bailee and
before the buyer or his agent
takes delivery of them;
2.) Goods are rejected by buyer, and carrier or
bailee continues to be in
possession of them, even if seller refused
to received them back.
 C) How to exercise:
1.) By obtaining actual possession of the goods.
2.) By giving notice of his claim to the carrier or bailee.
Such notice may be given in to the person in actual
possession or to
his principal. But if given to the principal, it must be
given at such time and
under such circumstances to be effectual so the
principal can prevent
delivery.
 D) Effects of exercise:
1.) Goods are no longer in transit
2.) Carrier shall be liable as depositary or other
bailee.
3.). Carrier must redeliver the goods to, or
according to the instructions of
the seller
 E) When goods are no longer in transit:
1.) After delivery to the buyer or his agent in that
behalf;
2.) Buyer obtains delivery of the goods before arrival
at the appointed destination
3.) Carrier or bailee acknowledges to hold the goods
on behalf of the buyer
4.) Carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent
RIGHT OF RESALE (Art. 1533)
A) When available:
1.) Seller has the right to lien or stoppage in
transitu.
2.) Under the following cases:
a. Goods are perishable by nature
b. Right to resell is expressly reserved
c. Buyer delays in payment for an unreasonable
time
B) Effects of resale
1.) Seller is not liable to the buyer for any profit
2.) If sells for less than the price, seller has right
to sue for the balance from buyer
3.) New buyer acquires good title as against the
original buyer
RIGHT TO RESCIND THE CONTRACT OF SALE (Art. 1534)
Return of the title over the undelivered goods to the
seller, and right to recover damages for breach of
contract
A)When available:
1.) Seller has the right to lien or stoppage in transitu
2.) Under either of the 2 situations:
a. Right to rescind is expressly reserved
b. When buyer delays in the payment of the price
for an unreasonable time
 B) Effects of rescission
1.) Seller resumes ownership of the goods
2.) Seller shall not be liable to the buyer upon the
contract
3.) Buyer may be held liable to the seller for damages
for any loss occasioned by the breach of contract

C) How seller may rescind: by notice to the buyer or by

some overt act showing an intention to rescind
Effect if Buyer Sold the Goods
Generally, the unpaid seller's right of lien
or stopage in transitu remains even if the buyer
has sold or otherwise disposed of the goods
Exceptions:
1.) Seller has given his consent
2.) When purchaser or buyer is a purchaser for
value in good faith of a negotiable document of
title.
SALE OF REAL ESTATE
When Vendee is Entitled to Rescind Sale of Real Property
1.) If the lack of area is at least 1/10th than that stated or
stipulated.
2.) If the deficiency in the quality specified in the contract
exceeds 1/10th of the price agreed upon
3.) If the vendee would not have bought the immovable had he
known of its smaller area or inferior quality.

Where immovable of a greater area or number

Vendee may accept the area included in the contract and reject
the rest. The vendee may not withdraw from the contract.
Prescription of Action
The action for either recission of the or reduction of the
price must be brought 6 months from the day of
delivery.
DOUBLE SALE

Requisites of Double Sale

1. Two or more valid contract of sale;
2. Two or more buyers ;
3. They must pertain exactly to the same object;
and
4. They must be bought from the same seller
Rules of Preference
1.) Double Sale of Movables
-who first takes possession in good faith

2.) Double Sale of Real Property

a. First registrant in good faith
b. First possessor in good faith
c. Person with oldest title in good faith
CONDITIONS
An uncertain event or contingency on the happening.
Conditions may be: 1.) Waived; or 2.) Considered as warranties

Effect of non-fulfillment of Condition

1.) If the obligation of either party is subjected to any condition and
such condition is not fulfilled, such party may;
a. Refuse to proceed with the contract
b. Proceed the contract, waiving the performance of the condition
2.) If condition is in nature a promise that it should happen, the non-
performance of such condition may be treated by the other party as
a breach of warranty
WARRANTIES
It is a promise that a fact is true.
In a sale, it is a statement of fact about the quality
or character of the goods sold to induce the sale
relied upon by the buyer. Breach or violation of it
gives rise to a suit for damages. Warranty is
enforceable only against the immediate vendor of
the party dispossessed.
 Warranty Condition

Goes into the performance of Affects the existence of the

an obligation and may, in itself, be obligation
an obligation

Stipulation or operation of law Must be stipulated

Non-fulfillment constitutes Non-happening does not breach

breach of contract the contract

May attach to the seller’s duty Always relate to the subject matter
to deliver or some other or the seller’s obligations
circumstances
Express Warranty
It is an affirmation of fact or any promise by the
seller about the subject matter where the natural
tendency of it is to induce the buyer to purchase the
thing and the buyer purchases the thing relying on
such affirmation or promise. An express warranty
can be made by and also be binding on the seller
even in the sale of a second hand article.
Implied Warranty
It is a natural, not an essential element of
a contract, and is deemed incorporated in
the contract of sale. It is inherent. Its reason is to
protect naive and unsuspecting buyers from
scrupulous sellers from running away from
their wrongful doings. It may be modified or
suppressed by agreement of the parties. Unless
waived, the warranties stay.
Implied Warranties in sale
1. Warranty as to seller’s title
2. Warrant against hidden defects
3. Warranty as to fitness or merchantability

When Implied Warranty not Applicable

1.) As is and where is sale
2.) Sale of secondhand articles
3.) Sale by virtue of authority in fact or law
Warranty Against Eviction
Eviction
Vendee is deprived of the whole or part of the thing
purchased. (art. 1548)

Warranty against Eviction

Seller guarantees that he has the right to sell the thing
sold and to transfer ownership to the buyer who shall
not be disturbed in his legal and peaceful possession
thereof. If evicted, vendor is liable thereof
Elements of Warranty Against Eviction
1.) Vendee has been deprived in whole or in part
of the thing purchased
2.) Deprived by virtue of final judgement
3.) Judgement is based on right prior to the sale or
act imputable to the vendor
4.) Vendor was summoned in the suit for eviction
at the instance of the vendee
5.) There is no waiver on the part of the vendee
Eviction in Part
Buyer may either enforce vendor’s liability for eviction or
he may demand rescission of the contract provided in
article 1556, if the buyer lose, by eviction, a part of the
thing sold of such importance that he would not have
bought it without said part.
• NOTE: Rescission is not a remedy against total
eviction. Rescission contemplates that the one
demanding it is able to return whatever he has received
under the contract. Since the buyer can no longer return
the thing sold to the seller, rescission cannot be carried
out
Rights and liabilities
In case eviction occurs, the vendee shall have the right to
demand of the vendor the following:
1. Return of value of thing
2. Income or fruits of thing
3. Cost of the suit
4. Expenses of the contract
5. Damages and interest, and ornamental expenses, if sale is
made in bad faith. (art. 1555)
Warranty Against Hidden Defects of, or Encumbrances upon,
the Thing Sold
Requisites for Warranty against Hidden Defects
1. Defect must be important or serious;
2. Must be hidden
3. Must exist at the time of sale
4. Vendee must give notice of defect to vendor within
reasonable time
5. Action for rescission or reduction in price must be brought
within 6 months from delivery or 40 days in case of animals
6. No waiver of warranty on the part of vendee
When defect important
a) Renders the thing sold unfit for its intended use;
b) Diminishes its fitness for such use
Implied Warranty of Fitness
Generally, there is no implied warranty of fitness for any
particular purpose except under the following:
a) Buyer expressly or impliedly manifest to the seller the
particular purpose of the goods acquired
b) Buyer relies upon the seller’s skill or judgement
There is an implied warranty that the goods are reasonably fit
for such special purpose
Implied Warrant of Merchantability
It’s a warranty that goods are reasonably fit for the
general purpose for which the same are sold.
Ignorance of Vendor of Hidden Defects
Ignorance does not relieve the vendor from liability.
Good faith cannot be availed of as a defense by the
vendor.
a)Doctrine of Caveat Venditor
Vendor is still liable even is he is not aware due to this
doctrine. It is based on the principle that a sound
price warrants a sound article.
Alternative Remedies of the Buyer

Vendee has the option to either:

1. Accion redhibitoria (withdraw from the contract)

2. Accion quanti minoris (reduction in price)

RULES IN CASE OF SALE OF ANIMALS
Redhibitory vice or defect
A defect which the seller is bound to warrant in
animals, the following special rules shall apply:
1. Defect must be hidden
2. Must be of such nature that expert knowledge is not
sufficient to discover it
Veterinarian is liable if he fails to discover or disclose the
hidden defect through ignorance or bad faith. (art. 1576)

Seller liable if animal dies within 3 days after its purchase due
to a disease that existed at the time of sale.

Limitation of the action : Rehibitory action must be brought 40

days from the date of their delivery to the vendee. (art. 1577)

No warranty against hidden defects

1. Animals sold at public fairs or public auctions.
2. Livestock sold as condemned
Void Sale of Animals
a) animals sold are suffering from contagious disease; or
b) found unfit for the use or service stated in the
contract.
Animal died with Vices
If loss is caused for fortuitous event or by fault of vendee
and animal has vices, the buyer may either:
1. withdraw from the contract; or
2. demand a reduction in price
EASEMENT OR SERVITUDE
Easement or servitude is an
encumbrance imposed upon an immovable for
the benefit of another immovable owned by a
different person.

Kinds of easement or servitude

a)Apparent easement- expressly made
b)Non-apparent easement - no
external indication of its existence
Requisites for Vendor’s Liability for Immovable
sold with Easement
1.) Must be non-apparent
2.) Not indicated in the agreement
3.) Must be of such nature that the vendee would
not have acquired the immovable had he been
aware thereof
Remedies & Right of Vendee
1.) Within 1 year from execution of the deed of sale:
a. Rescission; or
b. Damages.
2.) After one (1) year from of execution of deed of sale:
a. Damages, within a period of one (1) year from discovery
of easement or servitude

When Vendee’s rights cannot be exercised

1.) When servitude is apparent
2.) If non-apparent servitude is registered
3.) If vendee has knowledge of the encumbrance, registered or
not
OBLIGATIONS OF THE VENDEE
Principal Obligations of the Vendee
1.) Accept delivery
2.) Pay the price
3.) Bear expenses for the execution
and registration of the sale and
putting the goods in a deliverable state,
if such is the stipulation
Pertinent Rules:
1. Vendor not required to deliver the thing sold until the
price is paid nor the vendee to pay the price before the thing
is delivered in the absence of an agreement to the contrary;
(art. 1524)
2. If stipulated, vendee is bound to accept delivery and to
pay the price at the time and place designated;
3. If there is no stipulation as to the time and place of
payment and delivery, the vendee is bound to pay at the
time and place of delivery;
4. In the absence of stipulation as to the place
of delivery, it shall be made wherever the thing
might be at the perfection of the contract (art.
1251); and
5. If only the time for delivery has been
fixed the vendee is required to pay even
before the thing is delivered to him; (art. 1524)
Delivery in installments (art. 1583)
General Rule: Buyer is not bound to accept delivery or pay the price thereof by installments.
Exception: If there is a stipulation

Right of Buyer to Examine Goods

General Rule: Buyer has the right to a reasonable opportunity to examine the goods before accepting them. (art. 1584)
Exception:
(1) When there is an agreement;
(2) stipulation that the goods shall not be delivered to buyer until he paid the price (C.O.D.

If seller refused to allow an opportunity for inspection, buyer may rescind or recover the price paid.
NOTE: the right to examine the goods is a condition precedent to the transfer of ownership

When there is Acceptance of Goods

1. Express acceptance
2. Buyer does an act which only an owner can do
3. Failure to return after reasonable lapse of time
Effect of acceptance on vendor’s liability for breach of warranty
General Rule: Seller is not discharged from liability for breach of warranty by the acceptance of the goods
Exception:
1. If there is an agreement, express or implied;
2. if buyer fails to give notice to seller of breach of warranty within a reasonable time after buyer knows of
such breach. (art. 1586)
Effects if buyer refuses to accept delivery
1) Buyer justifiably refuses
a) Buyer has no duty to return the goods
b) Title does not pass
c) Not be obliged to pay the price
d) If he constitute himself as a depositary, he shall be liable as such
e) Obligation to notify the seller of such refusal (art. 1587)
2) Buyer unjustifiably refuses
a) Title passes to the buyer, unless there is stipulation and seller reserved the ownership
b) Obliged to pay the price (art. 1588)
Time and place for payment of price
a. Time and place stipulated
b. Time and place of delivery of thing, in absence of stipulation

When Vendee is liable for interest

Buyer shall pay interest for the period between delivery and payment of price in the following cases:
1. If there is stipulation
2. Thing sold produces fruits or income
3. If he is in default, from the time judicial or extrajudicial demand for payment of price. (art. 1589)

Suspension of Payment (art. 1590)

1. When buyer may suspend payment
a. If he is disturbed in the possession or ownership of thing bought; or
b. If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or
foreclosure of mortgage
2. When buyer may NOT suspend payment
a. Vendor give security for the return of the price;
b. It has been stipulated;
c. Vendor has caused the disturbance or danger to cease;
d. Disturbance is a mere act of trespass;
e. Vendee has fully paid the price.

When Vendor may Rescind the Sale

1) Sale of immovable- seller must have a reasonable ground to fear the:
a. Loss of the immovable property; AND
b. Loss of the price.

If one or both grounds do not exist, the vendor may choose between:
a. Fulfillment with damages;
b. Rescission with damages.

NOTE: Rescission of real property is not automatic. Demand is needed before rescission may take place. Demand is for the rescission and not for the
payment of the price
2)Sale of Movables- rescission of the sale of movable shall take place at the option of the vendor, if at the time fixed for the delivery of the thing, the
vendee:
a. does not accept delivery
b. does not pay the price, unless a longer period of payment is stipulated

BREACH OF CONTRACT OF SALE OF GOODS

Actions by the Seller
1. Action for payment of price
a. Ownership has passed to buyer and he wrongfully neglects or refuses to pay the price;
b. Price is payable on a certain day and buyer did not pay, even if there is no transfer of title; or
c. If the goods cannot be readily be resold for a reasonable price and buyer wrongfully refuses to accept them before ownership has passed.

2. Action for damages

3. Action for rescission
a. When buyer repudiated the contract of sale
b. When buyer manifested his inability to perform his obligation; and
c. When buyer has committed a breach in the contract
Action by the Buyer
1.Bring an action for specific performance, if the seller has broken the contract to deliver specific or ascertained goods.
2. In case of breach of warranty by seller:
a. Accept the goods and ask to reduce or extinguish the price
b. Accept goods and maintain an action for damages
c. Refuse to accept the goods and maintain an action for damages
d. Rescind the contract by the return of goods and recover of price

When rescission by Buyer not allowed

1. If buyer accepted the goods knowing of the breach of warranty without protest;
2. If he fails to notify the seller within a reasonable time
3. Fails to return or offer to return the goods to the seller in substantially as good condition as they were in the time of
delivery
Rights and Obligation in Rescission
1. Buyer
a. Obliged to return the goods, and cease to be liable for the price;
b. If paid the price or any part thereof, he may recover it;
c. Right to hold the goods as bailee if the seller refuse the return of goods;
d. Right to have a lien of the goods for any portion of price paid, as if he were an unpaid seller.

2. Seller
When seller may rescind before delivery
a. When the buyer repudiated the contract of sale;
b. When buyer manifested his inability to perform his obligation
c. When buyer committed a breach of the contract
EXTINGUISHMENT OF SALE

Sales are extinguish by:

1. By the same causes as all obligations (Art. 1600/1231)

I. Payment/performance
It is the DELIVERY of money or PERFRORMANCE, in any manner of an
obligation
Special Forms of Payment

a. Dacion en Pago
the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted
equivalent of the performance of obligation.
Example:
If A executed a PROMISSORY NOTE in 2018 promising to pay B P1M
within four years from the execution of the note, and in 2021 when
the obligation became demandable, the two entered into an
agreement by virtue of which A shall deliver his automobile to C as
the equivalent of the performance of the obligation, the effect is
the transformation of the previous contract into a contract of sale
with the automobile as the object and the loan of P1M as the
purchase price.
b. Application of Payment
It is the designation of the debt to which the
payment must be applied when the debtor has
several obligations of the same kind in favour of
the same creditor.
c. Cession
The debtor abandons ALL of his property for the benefit of
his creditors in order that from the PROCEEDS thereof, the
creditors may obtain payment of their credits.
What is transferred is the management or administration of
the property in order to sell the thing of the debtor for the
fulfillment of the obligation.
d. Consignation
The act of depositing the thing or amount due with
the proper court when the creditor does not desire,
or refuses to accept payment or cannot receive it,
after complying with the formalities required by law.
II. Loss of thing due
Loss or destruction of the DETERMINATE thing
due to fortuitous event ( without the fault of the
debtor) and there is NO DELAY
III. Novation
It is the modification or extinguishment of an obligation
by another, either by:
a. changing the object or principal condition
b. substituting the person of the debtor; or
c. subrogating a third person in the rights of the creditor
Example:
A bound herself to pay B P1M on November 30,
2021. The said date arrived and A gave to B, instead
of the P1M cash, a car which he bought amounting
to P1M.
IV. Condonation/Remission
it is the gratuitous abandonment by the creditor of his right. An
act of liberality by which the creditor/oblige, without receiving any
price, renounces the enforcement of the obligation, as a result of
extinguishing the obligation. It needs the acceptance of the obligor
(debtor)
V. Confusion or Merger
It is the merger of the character of the creditor and the debtor in one and
the same person by virtue of which the obligation is extinguished.

Example:
A owes B P1M for which A executed a negotiable promissory note in favor of
B. B indorsed the note to C who, in turn indorsed to D. Now, D bought goods
from the store of A and instead of paying cash, he just indorsed the
promissory note to A.
VI. Compensation
It takes place when two persons, in their own right, are debtors and
creditors of each other.

Example:
A owes B the amount of P5M. B owes A the amount of P4M. Both debts
became due and demandable today. Here the compensation take place
partially to the concurrent amount of P4M. So A shall be liable to B for only
P1M. If the two debts are of the same amount, there is total compensation.
2. by the various causes of extinguishment in title VI (sales):
a. Cancellation of sale of personal property in installments (art. 1484)
b. Resale of the goods by unpaid seller (art. 1532)
c. Rescission of the sale by unpaid seller (art. 1534)
d. Rescission by the buyer in case of partial eviction (art. 1556)
e. Rescission by buyer in case of breach of warranty against hidden defect (art.
1567)
f . Rescission by buyer in sale of animals with redhibitory defects (art. 1580)

3. By redemption
REDEMPTION
A.) CONVENTIONAL REDEMPTION
Also called the right to redeem or repurchase, takes place when the
vendor
reserved the right to reacquire the thing sold, provided that he:
1. Return to the vendee:
a. The price paid
b. Expenses of the contract and other legitimate payments made
thereof
c. Necessary and useful expenses made on the thing sold.
2. Comply with other stipulations

NOTE: the seller a retro must pay for

useful improvements introduced by the buyer a retro;
otherwise, the latter may retain possession of the land
until reimbursement is made
Effect of Failure to exercise right of repurchase
Ownership shall be consolidated in the vendee. In case of real property, a judicial order is required for the purpose
of recording the consolidation in the registry of property after the vendor has been duly heard. (art. 1607)

Who may Exercise the right to Repurchase

1. Vendor a retro
a. Vendee, who acquired the whole undivided interest, may compel the vendor, who only sold part thereof, to
redeem the whole property. (art. 1611)
b. Property sold by co-owners jointly and in the same contract may exercise the right in respect to his share only.
(art. 1612)
c. In the case above (b), vendee cannot be compelled to consent to a partial redemption, he may demand all
vendors or co-heirs to agree to repurchase the whole thing sold. (art. 1613)
Effect of Failure to exercise right of repurchase
Ownership shall be consolidated in the vendee. In case of real property, a judicial order is required for the purpose of recording the
consolidation in the registry of property after the vendor has been duly heard. (art. 1607)

Who may Exercise the right to Repurchase

1. Vendor a retro
a. Vendee, who acquired the whole undivided interest, may compel the vendor, who only sold part thereof, to redeem the
whole property. (art. 1611)
b. Property sold by co-owners jointly and in the same contract may exercise the right in respect to his share only.
(art. 1612)
c. In the case above (b), vendee cannot be compelled to consent to a partial redemption, he may demand all vendors or co-heirs
to agree to repurchase the whole thing sold. (art. 1613)
2. Creditors of the Vendor
a. They cannot make use of the right of redemption until after they have exhausted the property of the vendor.
(art. 1610)
B.) EQUITABLE MORTGAGE
One which lacks the proper formalities of a mortgage, but shows the
intention of the parties to make the property subject of the contract
as security for a debt. A contract may be presumed to be an equitable
mortgage under the following cases: (applies only to absolute sale)
1. Unusually inadequate purchase price;
2. Vendor remains in possession as lessee or otherwise;
3. Extension for period of right to repurchase;
4. Purchases retains for himself a part of the purchase
price;
5. Vendor binds himself to pay the taxes of the thing
sold;
6. When the real intention of the parties is to secure
the payment of an obligation
Rights of Parties as to the Fruits of Land
1. If there were fruits at the time of sale and vendee paid for them, he must be reimbursed.
2. If vendee did not pay for the fruits, no reimbursement for those existing at the time of redemption.
3. No fruits at the time of same and some exist at time of redemption, it is to be distributed proportionately to the vendor and vendee, giving
the latter a share in proportion to the time he possessed the property during the last year counted from the anniversary from the date of
sale to compensate the vendee for his expenses. (art. 1617)

B.) EQUITABLE MORTGAGE

One which lacks the proper formalities of a mortgage, but shows the intention of the parties to make the property subject of the contract as
security for a debt. A contract may be presumed to be an equitable mortgage under the following cases: (applies only to absolute sale)
1. Unusually inadequate purchase price;
2. Vendor remains in possession as lessee or otherwise;
3. Extension for period of right to repurchase;
4. Purchases retains for himself a part of the purchase price;
5. Vendor binds himself to pay the taxes of the thing sold;
6. When the real intention of the parties is to secure the payment of an obligation
B.) EQUITABLE MORTGAGE
One which lacks the proper formalities of a mortgage, but shows the intention of
the parties to make the property subject of the contract as security for a debt. A
contract may be presumed to be an equitable mortgage under the following cases:
(applies only to absolute sale)
1. Unusually inadequate purchase price;
2. Vendor remains in possession as lessee or otherwise;
3. Extension for period of right to repurchase;
4. Purchases retains for himself a part of the purchase price;
5. Vendor binds himself to pay the taxes of the thing sold;
6. When the real intention of the parties is to secure the payment of an obligation
NOTE: in case of doubt, a contract purporting to be a sale with right to repurchase (pacto de retro sale) shall
be construed as an equitable mortgage.

NOTE: Vendor may ask for reformation, or to correct the instrument to express the true intent of the parties
C.) LEGAL REDEMPTION
The right to be subrogated, upon the same terms and conditions stipulated in the contract, in
the place of one who acquires a thing by:
(1) purchase or
(2) dation in payment, or
(3) by any other transaction whereby ownership is transferred by onerous title
May be effected against movables or immovables. It must be exercised within thirty (30) days
from the notice in writing by the vendor.
NOTE: Written notice under is mandatory for the right of redemption to commence
Right of Legal Redemption of Co-owners
The following are the requisites for the right to exist:
1. There must be co-ownership;
2. There must be alienation of all or any of the shares of the other co-owners
3. The sale must be to a third person or stranger;
4. The sale must be before partition;
5. The right must be exercised within the period provided;
6. Vendee must be reimbursed for the price of the sale.

Against whom the right may be exercised

The right of legal redemption is not granted solely and exclusively to the original co-owner but applies to those who subsequently acquire their
respective share while the co-ownership subsist. In other words, the right cannot be exercised against another co-owner but rather it is
exercised against the buyer who bought the share
Legal Redemption of Adjacent Owners of RURAL Lands
The following are the requisites for the right to exist:
1. The land must be rural;
2. Land must be adjacent;
3. There must be alienation;
4. Rural land alienates must not exceed 1 hectare;
5. Vendee must already own some rural land; and
6. Rural land sold must not be separated by brooks, drainage, ravines, roads and other apparent servitudes from the adjoining lands.

NOTE:
Legal right of redemption of rural land refers to land used for agriculture rather than residential purposes. [Fabia vs Intermediate Appellate Court,
Nov. 21, 1984]
If two or more adjoining owners desire to exercise the right of redemption
1. Owner of the smaller area shall be preferred.
2. If both lands have same area, the one who first requested the redemption shall be preferred.
(art. 1621)

Rights of Adjacent Owner of URBAN Lands

The owners may exercise two (2) rights, right of pre-emption or right of redemption. The following are the requisites in order to exercise such right:
1. Land must be urban;
2. One exercising the right must be an adjacent owner;
3. The land sold must be so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time;
4. Such urban land was bought by its owner merely for speculation; and
5. It is about to be resold, or that its resale has been perfected.

NOTE:
If two or more owner wish to exercise their rights, the one whose intended use of the land appears best justified shall be preferred. (art. 1622)
Co-owners are preferred over adjacent owners. (art. 1623, par 2)
Pre-emption
It is the act of purchasing before others. If exercised, they will have preference
over other potential buyers.
PRE-EMPTION REDEMPTION
Arises before sale Arises after sale

No rescission because no sale as yet exist There cane be rescission of the original sale

The action is directed against the Action is directed against the buyer
prospective buyer
May attach to the seller’s duty to deliver or Always relate to the subject matter or the
some other circumstances seller’s obligations