LESSON 1: SALES NATURE, FORM, REQUISITES, WARRANTIES, EARNEST MONEY

AND OPTION MONEY

 CONTRACT OF SALE
- By the contract of sale one of the contracting parties obligates himself to transfer the ownership
and to deliver a determinate thing (or at least determinable), and the other to pay therefor a price
certain in money or its equivalent (price must be FIXED).
- It is consensual, meaning it is perfected by mere meeting of the minds.
- A contract of sale may be absolute or conditional. (Art. 1458)
 STAGES
1. Negotiation (Policitacion)
- The parties will talk about the thing, its characteristics and there will be negotiation in terms of
the price and other conditions
- The offer of the seller will be conveyed to the prospective buyer.
- The prospective buyer may give counter-offers and impose conditions to the seller
2. Perfection
- Once the offer is accepted, there is meeting of the minds, then it is PERFECTED.
- Once the parties agreed sa price and subject matter, the contract is deemed to exist even if wala
pa nakabayad or delivery.
3. Consummation
- Stage wherein the subject matter is delivered and the price is paid by the buyer
- The contract will be completed during this stage
 PARTIES TO THE CONTRACT OF SALE
1. Vendor — seller, has the obligation to deliver the thing and transfer its ownership
2. Vendee — buyer, has the obligation to pay the price

NOTE:

- Both the vendor and vendee has an obligation that is why it is BILATERAL CONTRACT.
- POV of the Vendor: he has the obligation to deliver the thing , he is the debtor/obligee. The buyer
in the POV of the vendor is the obligor or the creditor because he can command for the
performance of the contract (specifically, to deliver the thing and transfer the ownership)
- POV of the Vendee: he has the obligation to pay the price, he is the debtor or oblige. The vendor
will be the creditor or the obligor because he has the right to demand the performance of paying
the price.
 NATURE OR CHARACTERISTICS OF THE CONTRACT OF SALE
1. Consensual
- It is perfected by mere consent.
- Kapag nag agree ang parties sa subject matter and price or may meeting of the minds then it is
perfected.
- Real obligations (obligations to give) are involved, but it is not a real contract that is perfected by
delivery.
- Bale real ang obligation ng parties BUT the CONTRACT is not real kasi perfected na siya agad by
mere meeting of minds and not by delivery.
2. Bilateral
 - both contracting parties are bound to fulfill their obligations towards each other
3. Onerous
- The thing is sold in consideration of a price. (There is a PRICE kaya onerous)
4. Commutative
- The thing sold is generally considered equivalent of the price.
- The value of what you give is the value that you will get (general principle)
5. Nominative
- It is given a name or designation by law.
- The law itself gave it a name: CONTRACT OF SALE
6. Principal
- its validity is not dependent upon another contract
- It is a contract that can stand alone, di siya ga depende sa another contract
- Contract of sale is a PRINCIPAL contract and not an accessory contract because it can stand on its
own as a contract.

 ESSENTIAL REQUISITES OF THE CONTRACT OF SALE

- relate this to the essential requisites of contracts in your Obligation and Contracts
1. Consent or meeting of the minds
2. Object or Subject Matter
3. Cause or Consideration

CONSENT OR MEETING OF THE MINDS (all contracts must have consent)

 The contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price. From that moment, the parties may reciprocally
demand performance, subject to the provisions of the law governing the form of contracts (Art.
1475).
 In case of public auctions, the auctioneer announces the perfection by the fall of the hammer.
 Parties have legal capacity to contract, there must be offer and acceptance.
- They must have a sound mind and of legal age (legally capacitated)
 unemancipated minors, insane or demented persons, and deaf-mutes who do not know how to
read and write cannot give consent. If they do, the contract will be voidable.
- In case na mag give ng consent, Valid but voidable.
- Voidable contract is a valid obligation until it is annulled in court
 Where necessaries are sold and delivered to a minor or other person without capacity to act, he
must pay a reasonable price therefor (Art. 1489).
- Necessaries: food, shelter, medicine
- If necessaries are delivered them then they must still pay because these are delivered for
their own good
 Sale between husband and wife is VOID.
 REASONS: (applicable to common law husband and wife)
1. prevent defrauding of creditors
- Ex. Si husband may utang, then para matakasan ang mga creditors, gi benta ni husband kay
wife para di mahabol ng creditors ang property.
2. avoid situation where dominant spouse takes advantage of the other
 3. avoid circumvention on prohibition of donation between spouses
 EXCEPTIONS:
1. separation of property agreed (marriage settlement): prenuptial agreement
2. judicial separation of property (annulled)

OBJECT OR SUBJECT MATTER

 Must NOT be contrary to law, morals, good customs, public order or public policy
 Must not be impossible
 Must be within the commerce of man (you cannot sell the stars and moon)
 Must be determinate or at least determinable
 Vendor must have the right to transfer ownership of the thing sold at the time of delivery,
otherwise, it is unenforceable.
- Kahit pa wala pang right to transfer ownership ang vendor during the perfection of the
contract: OKAY LANG basta dapat during sa time of delivery meron na
 Transmissible rights may also be an object of sale. It is called an "assignment".
- Example may lupa ka tapos co-owner ka, you can sell your right (a portion of the land that
you own) to other person
- Usually property rights ang transmissible rights
- Rights is intangible kaya siya ginatawag na assignment
- You are assigning your right to another person
 Services may not be the object of sale.
- The property contract for this is contract of services not contract of sale
- Ex. CPA offered his services to the public= contract of service
 A contract for the delivery at a certain price of an article which the vendor in the ordinary course
of his business manufactures or procures for the general market, whether the same is on hand at
the time or not, is a contract of sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general market, it is a contract for a piece of
work. (Art. 1467)
- Custom made: contract of a piece of work and not a contract of sale because the thing
involved here is not available in the ordinary course of business and not for everyone.
 Things having potential existence may be an object of sale (emptio rei speratae — sale of future
things).
- Example: Fisherman ka, before ka nangisda you entered a contract with your neighbor that
whatever you will caught kay ibaligya nimo saiyaha. Dito wala pang present na object, but
the contract is VALID kasi may potential existence (provided na the FISH will be caught)
 Hope or expectancy may be an object of sale, subject to the condition that the thing will come
into existence (emptio spei — sale of hope or expectancy).
- Example: lottery ticket, raffle tickets
- You are not buying the paper but the expectancy that you will win
 Sale of vain hope or expectancy is void.
- Example: you are selling raffle that is already done
-

CAUSE OR CONSIDERATION
  Technically, the cause in sale is, as to the seller, the buyer's promise to pay the price, and as to
the buyer, the seller's promise to deliver the thing sold. (if you want to be technical)
 Generally, a price certain in money or its equivalent, is considered the cause or consideration of
sale.
- The object is the thing and the cause is the price (IF YOU WANT TO BE GENERAL)
 If the consideration of the contract consists partly in money, and partly in another thing, the
transaction shall be characterized by the manifest intention of the parties. If such intention does
not clearly appear, it shall be considered a barter if the value of the thing given as a part of the
consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. (Art.
1468)
- Intention will always prevail (look at the intention first then if not clear, look at the value)
- Kung ang value ng thing na pambayad plus ang pera, tapos mas malaki ang value ng thing
then it is BARTER (kapag hindi clear ang intention)
- If money is greater than the thing then it is a contract of sale
- Ex. Nag bili ka ng bagay then ang bayad mo is PERA + another THING.
 Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in
the consent, or that the parties really intended a donation or some other act or contract. (Art.
1470)
- The thing is very valueable tapos gamay kaayo ang price.
- Ex. You are selling your phone for 2,000 (yun talaga ang intention mo)= contract of sale
- Pero if not clear ang intention, then it can be donation or other contrac
 If the price is simulated, the sale is void, but the act may be shown to have been in reality a
donation, or some other act or contract. (Art. 1471)
- Sometimes kasi gina palabas lang ng iba na binili pero actually it is a donation
- There is no SALE kasi nga walang price BUT the contract is valid (donation)
 The fixing of the price can never be left to the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.
(Art. 1473)
- Hindi pwede isa lang mag decide but dapat gi agreehan ito ng parties
- If the price is not yet fixed, then there will be no cause or consideration. Contract of Sale is
therefore not perfected.
 NATURAL ELEMENTS (Whenever there is sale, these elements are ALWAYS present)
- Those which are deemed to exist, in the absence of any contrary stipulations (like the
warranty against eviction and the warranty against hidden defects).
- Pwede niyo i-waive expressly para mawala sa contract and pwede din i-stipulate
- If walang waiver, then problem is silent, these elements are assumed to be present
 WARRANTY
- Is any representation made by the seller with respect to its character, quality or ownership,
by which he induces the buyer to purchase the same relying on said representation.

 TWO KINDS OF WARRANTY

1. Express warranties (kung ano yung pinagyabang ng seller)
 2. Implied warranties (hindi na kailangan agreehan, NATURAL na jud ni na included sa contract of
sale but you can waive them)
A. Implied warranty as to the seller's title or IMPLIED WARRANTY AGAINST EVICTION
 That the seller guaranteed that he has a right to sell the thing and to transfer ownership to the
buyer who will not be disturbed of his legal or peaceful possession thereof.
 Akin to and ibebenta ko sayo. Pag nasayo ang thing, you will not be evicted of the possession or
walang kukuha niyan sayo.
 Ex. Bili ka cellphone from the seller. The seller said that “this is mine and I will transfer the
ownership to you”. The cellphone was delivered to you but then someone else claimed it to be
theirs. You can go after the seller for BREACH OF WARRANTY.

B. IMPLIED WARRANTY AGAINST HIDDEN DEFECTS

 that the seller guarantees that the thing sold is free from any hidden faults or defects or any
charge or encumbrance not declared or known to the buyer.
 Not applicable to 2nd hand things
 Dapat hidden ang defects. Kasi kapag clear tapos binili mo then you cannot claim this warranty.
 If di siya mag payag then you can file a case for BREACH OF WARRANTY

C. IMPLIED WARRANTY AS TO FITNESS OR MERCHANTABILITY

 that the seller guarantees that the thing sold is reasonably fit for the known particular purpose
for which it was acquired by the buyer, or, where it was brought by description, that it is of
merchantable quality. (The quality of the thing is fit for commerce or to be sold)

 IMPLIED WARRANTIES ARE NOT APPLICABLE TO:

1. As is, where is" sale (sale of surplus products: whatever the condition of thing you will buy it)
2. Sale of second-hand articles (they may have defects and may be claimed by other person)
3. Sale by virtue of authority in fact or law (Ex. Si sheriff, gi kuha ang properties ng isang person by
court order, then he sold it in auction. You cannot go after the sheriff for breach of contract
because it was sold by virtue of authority.)

 CAVEAT EMPTOR
 Let the buyer beware.
 Naturally, the buyer has less information about the good or service being purchased and it is
usually only the seller that is aware of any defects thereon. This is called information asymmetry.
Thus, the buyer must beware. This was under the Old Civil Code. However, to some extent, this
rule still applies.
 Ex. You bought a land with Torren’s title. As a buyer you must exercise caveat emptor to ensure
there is no defects in the land that you are buying. Go to the register of deeds, look at the title if
it is already sold, and other encumbrances sa likod ng title.

 CAVEAT VENDITOR
 Let the seller beware (seller must be careful kasi they can be liable for breach of contract)
  This was adopted under the New Civil Code. The vendor is liable to the vendee for violations of
the warranties.
 In this day and age, the seller must also beware as the State has enacted laws that protect
consumer rights.
 Republic Act No. 7394 or the Consumer Act of the Philippines, which, among others, mandates
the State to promote and encourage fair, honest and equitable relations among parties in
consumer transactions and protect the consumers against deceptive, unfair and unconscionable
sales acts and practices.

 ACCIDENTAL ELEMENTS (stipulations agreed and made by the parties)

 Depends upon the stipulations of the parties (like conditions, interest, penalty, time or place of
payment or delivery).

 TWO KINDS OF CONTRACT OF SALE

1. ABSOLUTE
- Is not subject to any condition, ownership passes to the buyer upon delivery of the thing
sold. (Deliver= ownership is passed also without any further act)
2. CONDITIONAL
- The contract is made subject to certain conditions, the delivery of the thing sold does not
transfer ownership until the condition is fulfilled. (Delivery of the thing does not result to
the transfer of ownership but once the Condition is fulfilled= ownership is passed)

 CONTRACT OF SALE VS. CONDITIONAL SALE VS CONTRACT TO SELL VS. AGENCY TO SELL
1. ABSOLUTE CONTRACT OF SALE
- Absolute, no conditions, ownership is transferred upon delivery

2. CONDITIONAL SALE
- Subject to certain conditions, upon the happening of the condition the sale becomes
absolute.
- There is NO OTHER ACTS, basta nangyari na ang condition, the ownership will be transferred
na agad.

3. CONTRACT TO SELL (I GIVE THAT YOU MAY GIVE)

- A bilateral contract whereby the prospective seller, while expressly reserving the ownership
of the subject property despite its delivery to the prospective buyer, commits to sell the
property exclusively to the prospective buyer upon full payment of the purchase price (a
subsequent act to transfer ownership is needed for this, unlike in a conditional deed of
sale).
- Prospective kasi wala pang sale (prospective pa ang tawag sa dalawa)
- The prospective commits to sell the thing to the prospective buyer. The prospective buyer
promises to buy the thing. The prospective seller will then reserve the ownership of the
thing even if it is already delivered until the buyer will pay the FULL payment.
- Pero kahit pa nabayaran na ang full payment, wala paring transfer of ownership. The seller
needs to perform another SUBSEQUENT ACT for the transfer of ownership.
 - EXAMPLE: they entered to a contract to sell and gi pa notarize. After full payment, they
need to make another contract which is the transfer of ownership then ipa notarize ulit

4. AGENCY TO SELL
- A contract whereby a person, called an agent, receives the goods of the principal, who
retains ownership over them. The agent has simply to account for the proceeds of the sale
he may make on the principal's behalf.
- The seller, principal party, contact another person called an agent and ask that agent to sell
the property to other person in behalf of the seller.
- The transfer of property from the seller to agent is not considered transfer of ownership
kasi wala naman gi bili ng agent.

 EARNEST MONEY VS. OPTION MONEY

- Whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract (Art. 1482).
- Earnest Money is a partial payment and is proof of the perfection of the contract being
offered.
- An option Contract is giving a person, for a consideration (Option Money), a certain period
(Option Period) within which to accept the offer. It is separated and distinct from the
contract that is being offered. Here, the offer cannot be withdrawn during the option
period.

LESSON 2.1 SALES OBLIGATIONS AND RIGHTS OF THE VENDOR

 OBLIGATIONS OF THE VENDOR/SELLER
1. To deliver the thing (including fruits, accessions and accessories, accruing from the time of perfection:
Art. 1537)
- From the time of the meeting of the minds, all the fruits, accessions and accessories shall
be delivered to the vendee.
2. To transfer ownership of the thing (General rule: the delivery of the thing=transfer of ownership)
3. To spend for the transfer of ownership, unless otherwise stipulated (freight & registration)
4. To warrant the thing (express and implied warranties)
5. To take care of the thing with the proper diligence, pending delivery (unless the law requires another
standard of care)
 HOW SHOULD THE DELIVERY BE MADE BY THE DEBTOR?
- Delivery or Tradition may be either ACTUAL or CONSTRUCTIVE.
1. Actual Delivery — where the thing changes hands physically.
2. Constructive Delivery, may be:
a) Traditio Simbolica (symbolical tradition) — like when the keys of a bodega are given.
b) Traditio Longa Manu (delivery by mere consent or the pointing out of the object) —like when
pointing out the car to be sold.
c) Traditio Brevi Manu (delivery by the short hand, whereby a possessor of a thing not as an owner,
becomes the owner) — like when a tenant buys the house he is renting.
 d) Traditio Constitutum Possessiorum (the opposite of brevi manu, whereby an owner who is the
possessor of the thing, retains possession not as an owner) — like when a house owner sells his
house, but remains in possession as a tenant.
e) Tradition by Execution of Legal Forms and Solemnities — like when an absolute deed of sale is
executed for the selling of the land.

 WHO BEARS THE LOSS OR DETERIORATION?

- The party who is guilty of mora (delay), culpa (crime) or dolo (fraud) bears the loss and
deterioration.
- If there is no mora, culpa or dolo involved:
1. Before Perfection
 Res pent domino (the thing will follow the owner)
 Seller is still the owner, so seller bears risk.
2. At Perfection (with meeting of the minds: wala ng object; the sale cannot proceed kasi di kumpleto
ang COC)
 Res pent domino
 The seller is still the owner of the thing because there is no delivery (he will bear the loss)
3. After Perfection but before Delivery (meeting of the minds before delivery)
 Loss — 2 views
1. The buyer will pay because there is a perfected sell (buyer will bear)
2. The seller cannot deliver because the thing is lost so he cannot ask for payment (seller will
bear)
 My view: Res pent domino (Seller is still the owner so he will bear the loss without asking payment
from the buyer because there was no delivery)
 IN BREVI MANU — there is already a delivery to the buyer, so he will bear the loss.
 IN CONSTITUTUM POSSESSIORUM — there is already a delivery to the seller, so he will bear the
loss. (Even if the buyer is still in possession(tenant), he already delivered it to the seller)
 DETERIORATION — buyer bears the deterioration.
4. After delivery
 Res pent domino
 Buyer is the owner, so buyer bears risk. (There is already a transfer of ownership)
 If the seller will still be the owner, in case of the reservation of rights, seller will bear the risk.
 RIGHTS OF AN UNPAID SELLER / VENDOR (Art. 1526)
1. Possessory lien / Right to retain
2. Right of stoppage in transitu
3. Right of resale
4. Right to rescind
POSSESSORY LIEN / RIGHT TO RETAIN (ART. 1527-1529)
 applicable only if the goods are still in the seller
 The seller is not bound to deliver if the buyer has not paid him the price for the goods.
- The seller will retain the ownership if the buyer has not yet paid
 Notice by the seller to the buyer is not essential for this right to be exercised.
- Hindi niya na kailangan i-inform ang buyer kasi alam man ng buyer mismo na hindi pa siya
nag bayad.
  The right to retain cannot be availed when seller is not anymore in possession of the goods, but
he can exercise his right of stoppage in transit (Ex. Nasa LBC na)
 When part of goods has been delivered, seller may still exercise the right on goods not yet
delivered.
 The right maybe exercised only in following circumstances:
1. The goods are sold without stipulation as to credit. (Walang stipulation about sa kung
kalian mag bayad ang buyer; the goods will remain in the seller)
2. The goods are sold on credit, but term of credit has expired. (Utang ang goods, may naka
stipulate na term pero nag expire na tapos wala parin nag bayad si buyer; applicable lang
pag nag DUE na ang term)
3. The buyer becomes insolvent (wala nang enough pera si buyer)
 Instances when possessory lien is lost:
1. The seller delivers goods to carrier for transmission to buyer without reserving ownership
in goods or right to possess them (kapag pina deliver na then walang reservation; pero
meron pang stoppage in transit)
2. The buyer or his agent lawfully obtains possession of goods. (nasa kamay na ng buyer)
3. Waiver by the seller (if gi waive ng seller ang right)

RIGHT OF STOPPAGE IN TRANSITU (ART. 1530-1532)

Requisites:
1. The goods are in transit (right to retain is not already applicable in this scenario)
 WHEN ARE GOODS IN TRANSIT?
 From the time goods are delivered to carrier for purpose of transmission to buyer
 Goods rejected by buyer and carrier continues to possess them (ayaw tanggapin ni buyer; goods
are still considered in transit)

 WHEN ARE GOODS NO LONGER IN TRANSIT?

 When they reached the point of destination.
 Before reaching destination, buyer met seller along the way.
 Goods are supposed to have been delivered to buyer but carrier refused.

2. It is shown by seller that buyer is insolvent (failure of buyer to pay when debts become due)

HOW IS THE RIGHT OF STOPPAGE IN TRANSITU EXERCISED?

 The seller obtains actual possession of the goods. (Stop the deliver and re possess the goods)
 The seller gives notice of claim to the carrier/bailee who is in possession of the goods. (Notify the
carrier to stop the delivery)
 Notice by seller to the buyer is not required; Notice to the carrier is essential.

RIGHT OF RESALE (ART 1533)

 Requisites:
1. The seller has exercised a right of lien or stoppage in transitu.
- The seller must be in possession of the thing through one of this rights
- The seller cannot resell the thing if wala pa sakanya ang goods
 2. The goods involved are perishable OR it has been stipulated that the seller has the right of
resale in case the buyer defaults in the payment.
- Kapag perishable then the seller stopped the delivery kasi the buyer refused to pay.
- The seller can find other buyers so that the thing will not perish
- Di na kailangan ng stipulation if the thing is perishable
3. The buyer is in default for an unreasonable amount of time.
- The buyer refused to pay then the seller must exercise right of lien or stoppage in transitu
 Notice by seller to the buyer is NOT essential.
 The buyer maybe made liable for damages caused to the seller. (also in the first two rights)


RIGHT TO RESCIND (ART 1534)

 Requisites:
1. The seller has exercised a right of lien or stoppage in transit. (The seller must be in possession
of the thing again)
2. The right to rescind is expressly stipulated in the contract.
3. The buyer is in default for an unreasonable amount of time.
 Notice is needed to be given by the seller to the buyer. (the seller must NOTIFY the buyer so that
the buyer will not EXPECT)
 The buyer maybe made liable for damages caused to the seller.

 DOUBLE SALE (ART. 1544)

- The seller sells the same thing to 2 or more persons.
- General Rule: He who is first in time is preferred in right.
- If the same thing should have been sold to different vendees:
1. In case of MOVABLE property, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith.
- Movable property: can be physically possessed
- Hindi lang dapat nauna but must be in GOOD FAITH
2. In case of IMMOVABLE property, the ownership shall belong to the person acquiring it who in
good faith:
a) First recorded it in the Registry of Property. (Unang naka register kahit pa hindi pa nasa
kanya)
b) Should there be no inscription in the Registry of Property, to the person who was first in
the possession, still in good faith.
c) In the absence thereof, to the person who presents the oldest title.
- Title: anything that may prove like receipt
- The person with the oldest date will take possession of the immovable property.

 WHAT IS GOOD FAITH?

- If the one who buys property has no notice that another person has a right or interest in
such property. (Dapat wala siyang alam about other claimants; about knowledge)
 LIS PENDENS — notice that subject matter is in litigation
 ADVERSE CLAIM — notice that somebody is claiming better right
 NOTE: Kapag ang buyer is nag go sa register of deeds then nalaman niya na may lis pendens or
adverse claim sa lupa, he is no longer in GOOD FAITH kasi may knowledge na siya.

LESSON 2.2: SALES — OBLIGATIONS AND RIGHTS OF THE VENDEE/BUYER

 OBLIGATIONS OF THE VENDEE/BUYER (Art. 1582)
1. To accept the delivery
2. To pay the price of the thing sold

 WHERE SHOULD BE THE DELIVERY BE MADE? (The buyer must accept either in place 1 or 2)
1. At the place agreed upon by the parties.
2. If there is none, then the delivery shall be made wherever the property may be at the perfection
of the contract. (kung saan nangyari ang meeting of the minds)
 ACCEPTANCE OF DELIVERY
1. Express acceptance — the buyer intimates (said) to the seller that he has accepted the goods
2. Implied acceptance —
a) the buyer upon receiving the goods does any acts of ownership over the goods, or
b) when, after the lapse of a reasonable time, the buyer retains/keeps the goods without
intimating (telling) to the seller that he has rejected them.
 Unless otherwise agreed, the buyer of goods is NOT bound to accept delivery by installments.
- No installment delivery if it is not agreed
 Acceptance of the goods by the buyer shall not discharge the seller from liability in damages or
other legal remedy for breach of warranty.
- Acceptance does not mean na the buyer is waiving or freeing the responsibilities of the
seller
 The buyer should give notice to the seller of the breach of warranty within a reasonable time after
the buyer knows, or ought to know of such breach, otherwise, the seller shall not be liable
therefor.
- As a buyer you must check immediately the thing and inform the seller ASAP. Otherwise,
you have deemed to waive any breaches of warranty.
 Unless otherwise agreed, where the buyer refuses to accept the goods, he is not bound to return
them to the seller. It is sufficient that he notifies the seller that he refuses to accept them.
- Pag walang agreement kung ibalik ba ni buyer kay seller if he refuses to accept, he is not
required to return it. He is only required to notify the seller. The carrier is bound to return.
 WHEN AND WHERE PAYMENT SHOULD BE MADE?
1. At the time and place agreed upon by the parties.
2. If there are none, at the time and place of delivery.

 RIGHTS OF THE VENDEE

1. Right to examine the goods (Art. 1584)
 The vendor must give the vendee a reasonable opportunity of examining the goods for the
purpose of ascertaining whether they are in conformity with the contract.
 The buyer has the right to examine the goods before accepting and paying.
2. Right to suspend payment (Art 1590)
 The vendee has the right to suspend payment:
 a) If the vendee is disturbed in the possession or ownership of the thing (there are other claimants)
b) If the vendee has reasonable grounds to fear such disturbance, by a vindicatory action (there is a
case file from court) or a foreclosure of mortgage

LESSON 2.3: SALES - ACTIONS FOR BREACH OF CONTRACT

 COURT ACTIONS AVAILABLE:
TO VENDOR AGAINST THE VENDEE
1. Action for the payment of the price (Art. 1595)
 If the vendee refuses to pay for the goods, after accepting the goods.
 The vendor can file a case in the court demanding for payment
2. Action for DAMAGES for non-acceptance of the goods (Art. 1596)
 If the vendee wrongfully refuses to accept the goods (mora accipiende)
 The vendor can file a case in the court demanding for damages
3. Action for RESCISSION of the contract (Art. 1597) (ipa cancel kapag di pa na deliver)
 If the goods have not yet been delivered, and the vendee:
a) has repudiated the contract of sale, or (the buyer does not recognize the contract)
b) has manifested his inability to perform his obligations thereunder, or (the buyer
cannot pay)
c) has committed a breach thereof. (he violated the terms of the contract)
 the vendor may also demand for payment for damages along with recision

TO VENDEE AGAINST THE VENDOR

1. Action for SPECIFIC PERFORMANCE (Art. 1598)
 If the vendor has broken the contract to deliver the goods
 Ordering the seller or 3rd person to deliver
 The buyer can file a case of specific performance in the court
2. Action for RESCISSION to recover the price for BREACH OF WARRANTY (Art. 1599)
 This is only available for the vendee or buyer (walang warranty sa seller)
 Vendee does not accept the goods or returns the goods for breach of warranty.
 If the vendee filed for rescission dapat ibalik niya sa seller ang thing/goods
3. Action for DAMAGES for BREACH OF WARRANTY (Art. 1599)
 Vendee may or may not accept the goods for breach of warranty.
 If the vendee will keep the goods: mabawasan lang ang price (recpoupment)
 If the vendee will return the goods: mabalik ang payment
 Vendee may also ask for recoupment in diminution or extinction of the price.

LESSON 3.1: SALES EXTINGUISHMENT OF SALES: CONVENTIONAL REDEMPTION

 GROUNDS FOR EXTINGUISHMENT OF SALES:
1. The grounds for the extinguishment of contract, in general, are applicable to the contract of sale:
a) payment or performance (the buyer already paid for the thing)
b) loss of the thing due
c) condonation or remission
d) confusion or merger
 e) compensation
f) novation
g) annulment
h) rescission
i) fulfillment of a resolutory condition
j) mutual desistance or withdrawal
k) arrival of a resolutory period
l) compromise
m) impossibility of fulfillment
n) happening of a fortuitous event
o) prescription

2. Conventional Redemption — applicable to sales only

 This is redemption that is agreed by the parties, hence, conventional.

3. Legal Redemption — applicable to sales only

 This is redemption provided for by law, hence, legal.

 CONVENTIONAL REDEMPTION (SALE WITH A RIGHT TO REPURCHASE)

 Is the right reserved by the vendor to repurchase the thing sold (sale a retro or pacto de retro
sale)
- There can be a sale with an agreement that the seller can repurchase the thing sold
- It is not applicable to all kinds of sale; it is only applicable if the parties AGREED
 Coupled with obligation to return price of the sale, expenses of the contract and other legitimate
payments and the necessary and useful expenses made on the thing sold.
- The vendor must not only return the payment but pay for the expenses mentioned above
- Extravagant expenses are not covered by this requirement
 The right must be recognized in the same deed of sale. (pwede din if there is another document)
 The right to redeem is a real right.
- It can be enforced against the whole world
- Ex. The seller sold a thing to a buyer with an right to repurchase. Later on, the buyer sold
the thing to Mr. X. Mr. X must acknowledge the right of the original seller to repurchase the
thing.
 The parties: seller a retro and buyer a retro
 There is a transfer of ownership.
- Originally from the beginner, the ownership is already transferred from the seller to the
buyer.
- Pag wala pang repurchase, the buyer is already the owner. Kapag nag repurchase doon lang
itransfer balik
- In case of repurchase, there will be another transfer of ownership from the original buyer
to the original seller (gi balik niya ang ownership)
 NOTE: If there is no agreement granting the vendor a right to redeem, then, there is no right of
redemption.
  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.
- Hindi pwede kunin ng creditors ng vendor ang property then hatian ang property
- They must exhaust the properties of the vendor first, if ubos na they can go after the buyer
a retro and REPURCHASE (not take away) for themselves.

 EQUITABLE MORTGAGE
 a contract with right to repurchase is presumed to be an equitable mortgage, in any of the
following:
1. Price of sale with right to repurchase is unusually inadequate.
- Ex. 1 million ang land tapos ang price is just 100,000. This is an equitable mortgage, no
transfer of ownership. The original owner (seller) will remain the owner, he can redeem by
paying the inadequate price back to the buyer.
2. Vendor remains in possession as a lessee or otherwise.
3. After expiration of right to repurchase, another instrument extending the period of
redemption is executed.
4. Buyer retains for himself a part of the purchase price.
5. Seller binds himself to pay taxes on thing sold.
6. Real intention of parties is to secure the payment of a debt or performance of other obligation
(Parang prenda)
 Equitable mortgage is one which, although it lacks the proper formalities of a mortgage, shows
the intention of the parties to make the property subject of the contract as a security for the
fulfillment of an obligation.
- EQUITY: what is fair and just applies to the parties
- It is like a sale with the right to repurchase but there is NO transfer of ownership
 There is NO transfer of ownership here.
 In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as
an equitable mortgage. (Pag di ka sure, consider it equitable mortgage)
 The apparent vendor may ask for the reformation of the instrument for his benefit
 Reason: Equitable mortgage effects a lesser transmission of rights than a contract of sale.

 PERIOD OF REDEMPTION IN CONVENTIONAL REDEMPTION IN A SALE WITH A RIGHT TO

REPURCHASE (Amount of time given to the seller to repurchase back the thing sold by returning the
amount and by paying other expenses)
1. If the parties have not agreed on a particular period
- the redemption period is 4 years from date of contract
2. When there is an agreement as to the period
- the period should not exceed 10 years
- Kapag nag agree na 2 years then after 2 years, bawal na. Kahit pa 10 years ang maximum.
- if it exceeds, it will be valid only for the first 10 years (Ex. 20 yrs= 10 yrs lang parin counted)
3. When period to redeem has expired and there has been a previous suit on the nature of the contract
- Seller still has 30 days from final judgment on the basis that contract was really a sale with pacto
de retro.
 - Kapag daw pending yung kaso sa court tapos nag sobra na ng 10 years or sa agreed years, meron
pang 30 days si seller para i-repurchase ulit.
 EFFECT WHEN NO REDEMPTION IS MADE:
1. The buyer's title becomes irrevocable.
2. However, in case of immovable properties, there must be a judicial order before the transfer of
ownership can be recorded in the Registry of Property.
- The buyer is now the OWNER of the property but the law requires a court order before the
transfer of ownership

 HOW IS REDEMPTION EFFECTED IN CONVENTIONAL REDEMPTION?

- The vendor a retro must return the following to the vendee:
1. the price of the thing sold
2. expenses of the contract and other legitimate payments made by reason of the sale
3. necessary and useful expenses made on the thing sold

 SPECIFIC SCENARIOS PERTAINING TO IMMOVABLE PROPERTY (LAND AND BUILDING)

 Scenario #1: A vendor sold, with a right to repurchase, only a portion of an immovable property
to a vendee. Later, the vendee has acquired the whole of the property. The vendee may compel
the vendor to redeem the whole property if he wishes to exercise his right of redemption.
- The vendee is given the choice to give back a portion of the property or the whole property
- Kapag nag sabi si vendee na whole property ang i-repurchase, walang magawa si vendor.
 Scenario #2: Co-owners, jointly and in the same contract, sold, with a right to repurchase, an
undivided immovable property. None of them may exercise the right of redemption for more than
their respective share.
- Maraming owner ang isang lupa na hindi pa na divide. They sold the whole property to a particular
buyer. If they want to redeem, yung portion lang nila ang pwede nila i-redeem.
- Ex. Dalawang owner, isang land. If one will redeem, he can only redeem half of the land. Unless,
the parties agreed. Nag agree si buyer and yung co-owner.
 Scenario #3: A lone vendor sold, with a right to repurchase, an immovable property. Later, he died
leaving several heirs. None of the heirs may exercise the right of redemption for more than their
respective share.
- Namatay ang vendor, tapos maraming tagapagmana. Heirs can only redeem their respective share
and not the whole property.
- However, the vendee may demand of all the co-heirs that they come to an agreement upon the
purchase of the whole thing; and should they fail to do so, the vendee cannot be compelled to
consent to a partial redemption.
- The buyer a retro may demand that the co-heirs should agree to purchase the whole property
and bawal siya sabihan or pilitan ng mga heirs na partial redemption nalang. Unless, mag payag si
vendee.
 Scenario #4: Co-owners separately sold, with a right to repurchase, an undivided immovable
property. Each of them may independently exercise the right of repurchase as regards his own
share, and the vendee cannot compel him to redeem the whole property.
- Ex. Dahil separate ang pagka sold, hindi pwede mag compel si vendee na whole property ang I
redeem. They can only redeem what they have sold.
  Scenario #5: A vendor sold, with a right to repurchase, an immovable property to a vendee. Later,
the vendee died leaving several heirs. The vendor must redeem from each of the heirs for their
respective shares. However, if the immovable property has been awarded to only one of the heirs,
the vendor should redeem the whole property from said heir.
- Si buyer ang namatay, tapos marami siyang heirs. Si vendor I redeem niya dapat sa lahat ng heirs.
Kung isa lang ang heir, then the vendor can redeem the whole property doon sa specific heir.

 FRUITS OF A LAND SOLD WITH A RIGHT TO REPURCHASE:

1. The parties to the sale a retro may make stipulations as to the fruits of the land.
2. If they have not agreed on the fruits, the following rules will apply:
a) At time of execution of the sale a retro there should be visible or growing fruits
- There shall be no pro-rating at time of redemption if no indemnity was paid by the vendee.
- May lupa and fruits, walang napag agreehan sa fruits. Sa pag redeem, wala ding consideration sa
fruits.
- May bayad lang kapag nag sabi si seller na bayaran din yung fruits. Kapag i-redeem mo na, I return
mo bayad sa lupa and sa fruits.
b) At time of execution of the sale a retro there should be no fruits but there are fruits at time of
redemption
- Fruits are pro-rated between vendor and vendee giving the vendee a retro a part corresponding
to the time he possessed the land.
- Ang Fruits sa time of redemption, i-divide daw dapat between the buyer and the seller (may
specific computation)

LESSON 3.2: SALES EXTINGUISHMENT OF SALES: LEGAL REDEMPTION

 LEGAL REDEMPTION
- Is the right to be subrogated upon the same terms and conditions stipulated in the contract, in
the place of one who acquires the thing by purchase or by dation in payment or by other
transaction whereby ownership is transmitted by onerous title (Art. 1619)
- It is given by law and not agreed by the parties to a particular person in specific contracts of sale

1. AMONG CO-OWNERS
 A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-
owners or of any of them, are sold to a third person.
- There is a thing owned by several owners. Some owners sold their portions. Remaining co-owners
can redeem the sold portions.
- Ex. May isang property is A, B, C. Si A and B is gibenta nila yung portion nila sa lupa. Si C ngayon is
given the right (by the law) na pwede niya i-repurchase ang portions na binenta ni A and B.
 If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable
one.
- A co-owner have the right to redemption and pay only a reasonable price. Kung dili mag sugot si
buyer then pwede mag file ang co-owner og case sa court, ordering the buyer to return the
property to the redeeming owner.
  Should two or more co-owners desire to exercise the right of redemption, they may only do so in
proportion to the share they may respectively have in the thing owned in common.
- Kapag 2 or more ang gusto mag redeem, then yung portion lang nila ang pwede.

2. AMONG OWNERS OF ADJOINING LANDS (Separate owners pero magkatabi ang lupa)
 RURAL LANDS (MGA BUKID)
 The owners of adjoining lands shall also have the right of redemption when a piece of rural land,
the area of which does not exceed one hectare, is alienated (SOLD), unless the grantee does not
own any rural land.
- Yung lupa sa rural area binenta, yung katabing lupa has the right to redemption provided na ang
lupa does not exceed 1 hectare (pag nag exceed walang right to redemption)
- Ang sabi ng law kay i-redeem mo nalang yung maliit na lupa para maging saiyo nalang din. Yung
katabi ang mag redeem para mag laki naman konti ang lupa niya.
 This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads
and other apparent servitudes for the benefit of other estates.
- Kapag naay sapa or any mentioned above is naa sa gitna sa duha ka lupa, walay right to
redemption.
 If two or more adjoining owners desire to exercise the right of redemption at the same time, the
owner of the adjoining land of smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption.
- Tatlo sila magkatabi, yung nasa gitna binenta niya ang lupa niya. Yung dalawang katabing lupa is
gusto nila i-redeem. Kung sino yung mas may maliit na lupa kay siya ang pwede maka exercise
- If same size, then kung sino yung una na nag request.

 URBAN LAND
 Whenever a piece of urban land which is so small and so situated that a major portion thereof
cannot be used for any practical purpose within a reasonable time, having been bought merely
for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption
at a reasonable price.
- Ang lupa is about to be resold. Ang lupa is maliit and hindi mapakinabangan. The lupa is sold out
of speculation (baka mag laki ang value soon). Yung mga katabing lupa kay pwede nila bilihin (they
are given the right to pre-emption: instead na ibenta sa iba kay doon nalang sa owner of adjoining
land)
- Applicable ito as long as SMALL jud ang lupa and hindi pwede gamitin for practical use.
 If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption,
also at a reasonable price.
- Kapag nabenta tapos hindi naabutan ng owner of the adjoining land, meron siyang right of
redemption at a reasonable price.
 When two or more owners of adjoining lands wish to exercise the right of pre-emption or
redemption, the owner whose intended use of the land in question appears best justified shall be
preferred.
- Ang parties ang mag agree kung sino ang may justified purpose for the land, yung dalawang
owners and yung naga benta ng lupa. If di sila mag agree then they can file a case in the court.

NOTE: right of re-emption and redemption can only be exercised by the owner of the adjoining land
 PERIOD OF LEGAL REDEMPTION AND PRE-EMPTION:
 Right of legal pre-emption or redemption shall be exercised within 30 days from written notice by
the prospective vendor or vendor.
- Dapat mag inform si vendor sa kanyang co-owners and owners of adjoining land baka kasi gusto
nila i-redeem or pre-empt ang lupa.
 The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
 The right of redemption of co-owners excludes that of adjoining owners.
- If there is one property then may adjoining land. If yung land is may co-owners.
- Co-owners will be preferred kesa doon sa mga katabi lang na lupa.

LESSON 4: INSTALLMENT SALES UNDER RECTO LAW, MACEDA LAW, PD 957

 RECTO LAW (PERSONAL PROPERTY ON INSTALLMENT BASIS WITH DEFAULT BUYER)
 Art. 1484-1486 of the Civil Code
 1933 — Senator Claro M. Recto authored Act No. 4122, “The Installment Sales Law”
 also called the "Recto Law"
 Naka focus sa anong pwedeng gawin ni UNPAID SELLER
 1950 — Act No. 386, The Civil Code of the Philippines, incorporated the provisions of the "Recto
Law" in Art. 1484-1486 thereof.

REMEDIES OF AN UNPAID SELLER APPLICABLE TO: (not applicable to immovable properties/cash to

cash basis)
1. Sale of PERSONAL PROPERTY payable on INSTALLMENT (Art. 1484)
2. Contracts purporting to be leases of PERSONAL PROPERTY with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing (Art. 1485)
- Ex. Meron kang motor tapos gi rentahan. Gi bigyan mo ng option yung nag renta na pwede niyang
bilihin yung motor. Yung gina bayad niya na “rental fees” will be deducted pag binili niya na yung
motor. So parang binili niya lang din ng installment.

RULES:
- The unpaid seller may exercise ONLY ONE of the following:
1. Exact fulfillment of the obligation, should the vendee fail to pay
 Remedy of Specific Performance (bayaran ni vendee si seller)
 Ex. Naputol ang pagbayad ng installment, ang first option ni seller is i-enforce niya ang
pangongolekta ng payment. If he refuses to pay, then the seller can go to court and file a case
against the buyer. If the buyer will not still pay, the sheriff may get the property of the buyer, sell
it in an auction and then give the proceeds to the unpaid seller.
2. Cancel the sale, should the vendee's failure to pay cover 2 or more installments
 Remedy of Rescission: pwede mo lang to gawin if 2 or more installment ang hindi nabayaran
 In rescission, it is essential that the previous payments be returned, unless there is a stipulation
about forfeiture thereof, but the forfeiture must not be unconscionable or excessive.
- The unpaid seller should return the payments (installments paid) to the buyer and then the buyer
must give the personal property back to the unpaid seller
- Pero the parties can agree to forfeit the the payments then ibalik ang personal property.
 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
failure to pay cover 2 or more installments
 Remedy of Foreclosure
 This is usually the practice.
 Ex. Nag kuha ka ng TV sa isang appliance center. Dapat I mortgage mo back yung TV sa appliance
center para if hindi ka makabayad, kukunin nila ulit. Ibenta nila sa public auction then ang
proceeds is yun ang pambayad sa utang ng default buyer. If walang mag bili, pwede na kunin yung
item mismo.
 The unpaid seller shall have no further action against the buyer to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.
- If kulang ang proceeds from the auction, hindi pwede singilin ni seller si default buyer.

 MACEDA LAW (INSTALLMENT PAYMENTS FOR IMMOVABLE PROPERTIES)

 Republic Act No. 6552
 The Realty Installment Buyer Act
 Authored by Sen. Ernesto Maceda in 1972
 Purpose of the law: To protect buyers of real estate in installment payments against onerous and
oppressive conditions.

APPLICABLE TO:
1. Sale of REAL ESTATE on installment payments
2. Contract to Sell REAL ESTATE on installment payments
3. Financing transactions involving REAL ESTATE on installment payments (Gi refinance ng bank)
NOT APPLICABLE TO:
1. Industrial lots
2. Commercial buildings
3. Sale to tenants under agrarian laws

RULES: RIGHTS GRANTED TO THE BUYER

1. When the buyer has paid at least 2 years of installments tapos nag stop
a) The buyer can pay, without interest, the unpaid installments due within a grace period of 1 month
for every year of installment payments made
 This right can only be exercised by the buyer once every 5 years
 Ex. 2 years na siya naga bayad: 2 months ang grace period niya.
 GRACE PERIOD: period na kung saan mag hanap siya ng way para makabayad without interest
b) When buyer cannot pay, the contract will be cancelled.
- After ng grace period is hindi na talaga siya makbayad, the seller will rescind the contract.
 Buyer is entitled to a cash surrender value of 50% of total payments
 Plus 5% for every year but not exceeding 90% of total payments made
 Down payments, deposits or options on the contract shall be included in the computation of
the total number of installment payments made.
 The actual cancellation of the contract will be by a notarial act and upon full payment of the
cash surrender value to the buyer. (after mabigay ang cash surrender value sa buyer)
2. When the buyer has paid less than 2 years of installments
 The buyer has a grace period of 60 days from the date the installment become due. He can
pay without interest.
 When the buyer cannot pay, the contract will be cancelled after 30 days from receipt by the
buyer of the notice of cancellation by a notarial act. Buyer can still pay during this, but with
interest.
 Upon full payment of the contract, the buyer has the right to have the full payment of the
price annotated in the certificate of title covering the property.
- Example nabayaran na ni buyer lahat, dapat naka tatak sa likod ng lupa na FULLY PAID na siya
 Before cancellation, the buyer can assign his rights to another person by a notarial act.
- Assignment: sale of rights
- Kapag nahirapan na talaga si buyer, pwede niya i-benta ang right niya sa lupa (na nakareserve
sakanya ang lupa) to another person, basta dapat naka NOTARIZE.
- The buyer of the right can take over in terms of paying the installment
 Any stipulation contrary to the rules is null and void.

 PRESIDENTIAL DECREE NO. 957

- The Subdivision and Condominium Buyers' Protective Decree
- Issued by President Ferdinand Marcos in 1976
- Purpose: To closely supervise and regulate the real estate subdivision and condominium
businesses and impose penalties on their fraudulent practices and manipulations.
APPLICABLE TO:
1. Sale of subdivision lots (Real Property)
2. Sale of condominium units (Real Property)
RIGHTS OF THE BUYER OF A SUBDIVISION LOT OR CONDOMINIUM UNIT:
1. Stop from further payments (Sec. 23)
 Reason: for FAILURE of the owner/developer to develop the subdivision or condominium project
according to the approved plans and within the time prescribed by law.
- Pwede ka mag stop ng payment until such time na mag develop ulit sila
 Or kung mag stop kana talaga kanang mag hawa naka, The installment payments made by the
buyer will not be forfeited.
 The buyer may, at his option, be reimbursed the total amount paid including interest at the legal
rate (basta ang ground is nag failed to develop ang owner or subdivision owner
2. Avail of the Maceda Law, in case of failure to pay installments (Sec. 24). Any condition, stipulation, or
provision contrary to these shall be void (Sec. 33).
- Ditto mag stop ka bayad kasi di mo na kaya mag bayad