SALES

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 for a price certain in money or its equivalent.
• consensual contract

Contract for a Piece of Work - goods are to be manufactured specially for the customer and upon his
special order, and not for the general market

Barter - consideration consists of partly in money and thing; intention not clear, it shall be considered a
barter if the value of the thing given exceeds the amount of the money or its equivalent.

Promise to Buy and Sell - reciprocally demandable

Accepted Unilateral Promise to Buy or Sell - binding when supported by a consideration distinct from
the price

Things in Contract of Sale

• Determinate
• Licit
• Free disposal (vendor must have a right to transfer the ownership at the time of delivery)
• Future Goods
o Potential existence, mere hope or expectancy, and vain hope or expectancy
• Undivided Interest
• Fungible Goods

Price in Contract of Sale

• Certain
o Reference to another thing
o Determination left to a special person, his inability or unwillingness - contract is
inefficacious
• Earnest Money - part of the price and proof of perfection
• No price - contract is inefficacious
 Rules on Ownership and Delivery

• Ownership is transferred (acquired by the vendee) upon actual or constructive delivery except
when parties stipulate that ownership shall not pass until price is fully paid
• Delivery - thing (accessions, accessories, and in the condition which they were at the perfection
of the contract) placed in the possession and control of the vendee
o Place of Delivery - stipulation, usage of trade, seller's place of business, or some other
place (where the thing is)
o Time of Delivery - stipulation, reasonable period of time
o Expenses for the Delivery including the execution and registration of sale – Vendor

Delivery to Carrier

• Delivery to carrier is delivery to the buyer

• Seller as agent of buyer when contracting with carrier:
o Contract with carrier in behalf of buyer
o Consider the nature of goods and circumstances of the case
o Notice to buyer of circumstances

RISK OF LOSS OF GOODS

• Before delivery: Seller

• After delivery: Buyer Ownership is transferred, regardless of delivery Delivered to buyer but
ownership retained by seller Delay in actual delivery due to his fault.

Status of SPECIFIC THING at the time of PERFECTION

• Deterioration (without knowledge of seller)

Buyer's option: (1) Avoid the sale, or (2) Valid as to existing goods
• Loss Contract without effect (Partial loss - proportionate)

Sale by Auction

• Perfected when the auctioneer announces its perfection by fall of the hammer
• Seller may not bid unless such right is expressly reserved
Sale by Sample

• when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is not
present and there is no opportunity to inspect or examine the same
• the sample is treated as the standard of quality and that the product to be delivered would
correspond to the sample

Sale by Description

• when a seller sells things as being of a particular kind, the buyer not knowing whether the seller's
representations are true or false, but relying on them as true
• the buyer has not seen the article sold and relies on the description given to him by the seller

Art. 1484 Sale of Personal Property by Installment Lease of Personal Property with Option to Buy (Recto
Law)

• Exact Fulfillment
• Cancel the Sale
• Foreclose the Chattel Mortgage

Obligations of the Vendor:

1. Deliver
2. Transfer the ownership of, and
3. Warrant
o the thing which is the object of the sale

Delivery of the Thing Sold

1. ACTUAL
2. CONSTRUCTIVE
o A. Immovable & Incorporeal Rights / Intangible Property
1. Execution of public instrument
o B. Movable
1. Traditio Symbolica
2. Traditio Brevi Manu
3. Constitutum Possessorium
4. Traditio Longa Manu
5. Agreement or consent

SALE OR RETURN

• Ownership passes to the vendee upon delivery

• Reversion of ownership to the vendor by return

SALE ON TRIAL

• Ownership passes to the vendee when he signifies acceptance or retains without giving objection
 • Sale on satisfaction

Where the seller of goods draws on the buyer and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return
the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading
he acquires no added right thereby.

If he bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named therein => one who purchases in good faith, for
value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, provided that
such purchaser has received delivery of the endorsed bill of lading without notice of the facts making the
transfer wrongful.

Sale of goods by a person other than the owner

→ the buyer acquires no better title, except:

1. Owner is precluded to deny the seller's authority

2. Person who is the apparent owner of goods
3. Sale by order of a court of competent jurisdiction
4. Sale in a merchant's store, or in fairs, or markets

Seller of goods has a voidable title

→ Buyer acquires a good title to the goods, provided

1. He buys in good faith,

2. He buys for value, and
3. He buys without notice of the seller's defect of title
Sale as Reciprocal Obligation

• The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price,
or if no period for the payment has been fixed in the contract.
• The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make
use of the terms / period.

Unpaid Seller

1. Right to retain while in possession (possessory lien)

2. Right of stopping the goods in transitu (with insolvent buyer)
3. Right of resale
4. Right to rescind
Double Sale
ownership belongs to one who

For Movables: first to take possession

For Immovables
1. First to record in Registry of Property in good faith
2. First to take possession
3. Presents oldest title

Conditional Sale
None happening of condition
• Refuse to proceed with contract
• Waive the condition and proceed with the contract
Promise that the condition will happen, and it did not happen - breach of warranty, except when
ownership has not passed

Express Warranty
• Any affirmation of fact or any promise by the seller relating to the thing with the natural tendency
to induce the buyer to purchase and the buyer purchases the thing relying thereon
• Affirmation of the value, or a statement of the seller's opinion made by an expert and it was relied
upon by the buyer

Seller's Implied Warranty

• To sell the thing at the time when the ownership is to pass, and that the buyer shall have the legal
and peaceful possession of the thing; and
• The thing shall be free from any hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer

Warranty Against Eviction

Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act
imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.

Buyer's Remedy:
(1) Damages for Breach of Warranty, or
(2) Rescission

Seller's Liability: Breach of Warranty Against Eviction

1. Return of the value at the time of the eviction
2. For the income or fruits
3. Costs of the suit
4. Expenses of the contract
5. Damages and interests, and ornamental expenses

Warranty Against Servitude

REQUISITES
1. Non-apparent servitude
2. Not agreed upon
3. Vendee would not have acquired it had he been aware
Warranty Against Hidden Defects
Hidden Defect - unfit for the use for which it was intended; diminished fitness, would not have acquired
or paid lower price had he/she be aware
Exceptions: Patent defects, visible defects, expert vendee
Vendor liable though he is unaware
Prescriptive Period - 6 months from delivery

Warranty Against Hidden Defects in Animals

If two or more animals are sold together, the redhibitory defect of one shall only give rise to its
redhibition, unless the vendee would not have purchased the sound animal without the defective one

• Not applicable to animals sold at fairs or at public auctions, or of live stock sold as condemned

• Prescripive period: 40 days from delivery

Warranty as to Fitness of Goods

• Where the buyer, expressly or by implication, makes known to the seller the particular purpose
for which the goods are acquired, and it appears that the buyer relies on the seller's skill or
judgment

Warranty as to Merchantible Quality

• Where the goods are brought by description from a seller who deals in goods of that description

Obligations of the Vendee

• To accept delivery and to pay the price of the thing sold at the time and place stipulated in the
contract, otherwise, payment must be made at the time an place of delivery
Rules on Acceptance

1. Prior to acceptance, the vendee has the right to examine, except when the goods are delivered to the
carrier, in such case, the vendee can exercise his/her right after payment

A. Express Acceptance - vendee intimates to the seller that he has accepted them

B. Implied Acceptance - vendee does any act which is inconsistent with the ownership of the seller, or
retains the goods (beyond reasonable time) without intimating to the seller that he has rejected them

2. Acceptance shall not discharge the vendor from liability, except when vendee failed to notify the
vendor of such breach within reasonable period of time after knowledge 3. Refusal or rejection to accept
by the vendee does not obligate him to return to the vendor, it is sufficient that he notifies the vendor of
his refusal or rejection, except when the goods are delivered to the carrier, title thereto passes to him from
the moment they are placed at his disposal

Vendee Liable to Pay Interest for Period Between Delivery and Payment

• Stipulated
• Thing sold or delivered produce fruits or income
• In default (from demand to payment of price)

Vendee can Suspend Payment

When he is disturbed in the possession or ownership of the thing, or should he have reasonable grounds to
fear such disturbance,unless the vendor gives security for the return of the price

Note: Disturbance mean any vindicatory action or foreclosure mortgage and not a mere act of trespass

Remedies of the Vendor (1)

• Action for the Price of Goods - vendee wrongfully neglects or refuses to pay the price when
• (a) ownership has passed,
• (b) ownership has not passed and price is payable on a certain day, or
• (c) ownership has not passed but they cannot be resold at reasonable price
• [when the vendor offering to deliver but the vendee refuses and the vendor has notified the
vendee that he is holding the goods for vendee as bailee]

Remedies of the Vendor (2)

• Action for Damages for Non-Acceptance - vendee wrongfully neglects or refuses to accept and
pay for the goods
• Measure of Damages:
• (a) no available market: loss resulting to vendee's breach;
• (b) with available market: the difference between the contract price and the market or current
price at the time of acceptance or refusal to accept (if no time was fixed for acceptance) plus
profit which the vendor may have made provided the vendor incurred labor or material expense
prior to receiving vendee's repudiation or countermand.
Remedies of the Vendor (3)

• Rescission - when the goods were not delivered, and the vendee
• (a) repudiated,
• (b) manifested his inability to perform his
• obligations, or (c) has committed a breach

When may the vendor exercise his right to rescind?

1. If he have reasonable grounds to fear the loss of immovable property sold and its price
2. If the vendee, upon the expiration of the period fixed for the delivery of the thing, should
not have appeared to receive it
3. If the vendee after receiving, did not tender price (unless a longer period has been
stipulated for its payment)

Vendee's Option

• (Automatic Rescission in Sale of Immovable Property)

• Though it may have been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even after the expiration
of the period, as long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new term.

Remedies of the Vendee [1]

• Specific Performance
• When the vendor broke his contract to deliver specific or ascertained goods

Remedies of the Vendee [2]

• (for Breach of Warranty by the Vendor) Accept the goods and set up against the seller, the breach
of warranty by way of recoupment in diminution or extinction of the price
• Accept or keep the goods and maintain an action against the seller for damages for the breach of
warranty
• Refuse to accept the goods, and maintain an action against the seller for damages for the breach
of warranty

Measure of Damages

• (Breach of Warranty of Quality)

• special circumstances showing proximate damage →DAMAGES "A"
• value of the goods at the time of delivery less: value they would have had, if not for the defect
→DAMAGES "B"
• the higher between DAMAGES A and DAMAGES B
Remedies of the Vendee [3] (for Breach of Warranty by the Vendor)

• Refuse to receive the goods, rescind the contract of sale and and recover the price paid
• Return the goods received, rescind the contract of sale and and recover the price paid, however,
he cannot rescind if
• (a) he knew of the breach of warranty when he accepted the goods without protest,
• (b) he fails to notify the seller within a reasonable time of the election to rescind, or
• (c) he fails to return or to offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer except when the
deterioration is due to the breach or warranty

Effect of Rescission by the Vendee (for Breach of Warranty)

• As to price - Vendee cease to be liable for the price upon returning or offering to return the goods,
if price paid, the vendor shall repay
• As to goods - Vendee deemed to hold the goods as bailee for the seller, if the seller refuses to
accept, with vendee's lien for price which has been paid

Extinguishment of Sale

General

• Payment or Performance
• Loss of Specific Thing
• Compensation
• Condonation.
• Confusion
• Novation

Special

• Redemption
o Conventional Redemption
o Legal Redemption
• Equittable Mortgage

Conventional Redemption

The vendor reserves the right to repurchase the thing sold, with the obligation to:

1. Return to the vendee the:

A. Price of the sale,
B. Expenses of the contract, and
C. Necessary and useful expenses made on the thing sold; and
2. Comply with other stipulations which may have been agreed upon.
Should the vendee be reimbursed by the vendor-redemptioner/repurchaser for the fruits existing at the
time of redemption?

• + No Reimbursement - if at the time of the execution of the sale there be visible or growing fruits
on the land, and no indemnity was paid by the purchaser
• + Pro-rated Reimbursement - if at the time of the execution of the sale there are no fruits on the
land, they shall be prorated between the redemptioner and the vendee

The contract of sale will be treated as that of equittable mortgage in the following circumstances:

1. When the price of a sale with right to repurchase is unusually inadequate

2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

• CONTRACT TO SELL
• CONDITIONAL SALE
• ABSOLUTE SALE
• PACTO DE RETRO SALE
• PACTO COMMISSORIO

PERIOD OF CONVENTIONAL REDEMPTION

• with stipulation as to period -ten (10) years from the date of contract
• without stipulation as to period -four (4) years from the date of contract
• civil action- thirty (30) days from final judgement

When the vendor failed to redeem:

1. The vendee can apply for Consolidation of Ownership

2. The vendor will be summoned in the court proceedings
3. Judicial Order shall be recorded in the Registry of Property
Redemption Right - REAL RIGHT

• + Vendor can enforce against every possessor whose right is derived from the vendee, without
prejudice to the provisions of the Mortgage Law
• + Vendor's creditors cannot make use of the right of redemption against the vendee, until after
they have exhausted the property of the vendor.

Redemption in Undivided Immovable

• The vendor who is either a co-owner or a co-heir may not exercise his redemption right more than
his respective share.
• The action by the vendor for redemption must be brought against all the vendee's heirs,
individually for his share, except when the inheritance has been divided, and the thing sold has
been awarded to one of the heirs.
• The vendee may compel the vendor/co-owners to redeem the whole property and he cannot be
compelled to consent to partial redemption, except when, each of the co-owners sold their share
separately.

Effect of Redemption

• The vendor who recovers the thing sold shall receive it free from all charges or mortgages
constituted by the vendee, but he shall respect the leases which the vendee may have executed in
good faith.

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 purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.

Legal Right of Redemption

• A co-owner of a thing as to the share of a co-owner sold to third person (two or more co-owners
redeeming, pro-rata)
• An owner of adjoining rural land, an area not exceeding one hectare (two or more adjoining
owners, the one with smaller land or the one who first requested)
• The right of redemption of co-owners excludes that of adjoining owners.

Pre-emption

1. Adjoining owner of a small piece of urban land (preference given to the one whose
intended use appears to be best justified)
2. Exercised within thirty (30) days from the written notice by the vendor or prospective
vendor
3. 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 to all possible redemptioners
Assignment (Credit and Other Incorporeal Rights)

• Perfected by meeting of the minds but shall produce no effect as against third persons, unless it
appears in a public instrument, or the instrument is recorded in the Registry of Property.
• + It includes all the accessory rights, such as a guaranty, mortgage, pledge or preference.

Effect of Assignment To the Debtor of the Credit

• The debtor who pays his creditor, before having knowledge of the assignment, shall be released
from the obligation.

Warranties of the Vendor/Assignor/Creditor ASSIGNMENT OF CREDIT

• Existence and legality of the credit at the time of the sale, but not for the solvency of the debtor,
unless the insolvency is of common knowledge or unless expressly stipulated.
• Period of Warranty on Solvency Period of Payment
• one (1) year from assignment Expired
• one (1) year from maturity Not yet expired

Warranties of the Vendor/Assignor/Creditor

• For sale of inheritance - the character as an heir.

• For a lump sum sale or assignment of certain rights, rents, or products - the legitimacy of the
whole.

Unless otherwise stipulated, the assignment of inheritance shall have the following effects:

• The vendor/assignor shall pay the vendee any profits derived from the fruits received from the
inheritance sold
• The vendee/assignee shall reimburse the vendor for all the vendor may have paid for the debts of
and charges on the estate
• Not applicable to: assignment to a co-heir or co-owner of the right assigned

The effect of assignment of a credit or other incorporeal right in litigation:

• The debtor can extinguish it by reimbursing the assignee for the price paid, the judicial costs
incurred, and the interest on the price from the day on which the same was paid.

• The debtor may exercise his right within thirty days from the date the assignee demands payment
from him.

• Not applicable to: assignment to a creditor in payment of his credit; and assignment to the
possessor of a tenement or piece of land which is subject to the right in litigation assigned.
Consumer Act of the Philippines Republic Act 7394 (1992)

Consumer Rights

• Right to basic needs

• Right to safety
• Right to information
• Right to choose
• Right to representation
• Right to redress
• Right to consumer education
• Right to healthy environment

Consumer Responsibilities

• Critical awareness
• Action
• •Social concern
• Environmental awareness
• Solidarity

Bureau of Philippine standards

Consumer Product Quality and Safety

• Product Certification (PS Mark and ICC)

• Philippine National Standards Catalogue

PS Mark- Philippine Standard (PS) Quality and/or Safety Certification Mark Licensing Scheme

• Granted to either local or foreign manufacturer whose factory and product have successfully
complied with the requirements of the PNS ISO 9001 and the relevant product standard/s

ICC Certificate- Import Commodity Clearance (ICC) Certification Scheme

• Issued to an importer whose imported products have shown conformance to relevant PNS through
inspection and product testing by the BPS Testing Laboratory or BPS-recognized testing
laboratory

Philippine National Standards (PNS) Catalogue

• PNS number
• ICS code (International Classification for Standards)

Prohibited sales acts or practice

An act or practice, whether it occurs before, during or after the consumer transaction, shall be deemed:

1. Deceptive
2. Unfair or Unconscionable
3. Prohibited Representation
 (1) Deceptive Sales Acts/Practices
Whenever the producer, manufacturer, supplier or seller, through concealment, false
representation of fraudulent manipulation, induces a consumer to enter into a sales or lease
transaction of any consumer product or service.
(2) unfair or unconscionable Sales Acts/Practices
Whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the
consumer's physical or mental infirmity, ignorance, illiteracy, lack of time or the general
conditions of the environment or surroundings, induces the consumer to enter into a sales or lease
transaction grossly inimical to the interests of the consumer or grossly one-sided in favor of the
producer, manufacturer, distributor, supplier or seller.
(3) Prohibited Representations (Home Solicitations)
A home solicitation sale shall not represent that:
a) the buyer has been specially selected;
b) a survey, test or research is being conducted; or
c) the seller is making a special offer to a few persons only for a limited period of time

Express Warranty

• Terms of warranty
• Operative from the moment of sale
• Full or limited warranty

• Duration similar to implied warranty (6 months to 1 year)

Warranties in Supply of Services

• Implied warranty that the service will be rendered with due care and skill and that any material
supplied in connection with such services will be reasonably fit for the purpose for which it is
supplied.
• Implied warranty that the services supplied under the contract and any material supplied in
connection therewith will be reasonably fit for that purpose or are of such a nature or quality that
they might reasonably be expected to achieve that result (when the consumer makers known to
the supplier the purpose for which the services are required)

Labeling requirements

• Trade name, trademark, brand name

• Directions for use
• Business name
• Address
• Ingredients
• Net weight
• Country of manufacture
• Process of manufacture
• For foods: expiration date, nutritive value and natural or not ingredients
• Wattage, voltage or amperes
• Flammable or not, toxicity if any
Other Packaging Requirements

• Special for the Protection of Children

• Price Tag
• Drugs
• Cosmetics
• Hazardous Substances

ARTICLE 81 Price Tag Requirement

It shall be unlawful to offer any consumer product for retail sale to the public without an appropriate price
tag, label or marking publicly displayed to indicate the price of each article and said products shall not be
sold at a price higher than that stated therein and without discrimination to all buyers: Provided, That
lumber sold, displayed or offered for sale to the public shall be tagged or labeled by indicating thereon the
price and the corresponding official name of the wood: Provided, further, That if consumer products for
sale are too small or the nature of which makes it impractical to place a price tag thereon price list placed
at the nearest point where the products are displayed indicating the retail price of the same may suffice.

Section 2 Administrative Order No. 10, S. 2006

• One Price Tag Requirement. Every retailer is required to display a price tag to indicate the price
of each consumer good and/or services, as required in Articles 81 to 83 of the Consumer Act
ofthe Philippines or R.A. 7394.
• The price tag must be written clearly, indicating the price of the consumer product including
Value Added Tax (VAT) whenever the consumer product is VA TABLE. Service charge, if any,
shall not be included in the price tag.

Unlawful Labeling and Unfair Packaging

• A person, either principal or agent, engaged in the labeling or packaging of any consumer product
• Display or distribute or to cause to be displayed or distributed in commerce any consumer
product whose package or label does not conform with the requirements of the law

Advertisement Rules

• Prohibition against the dissemination of false, deceptive and misleading advertisement for the
purpose of inducing the purchase of consumer products or services
• Prohibition against credit advertising (No advertisement to aid, promote, or assist, directly or
indirectly, any extension of consumer credit)
• Special advertising requirement for food, drug, costing, device or hazardous substance

Consumer Credit Transaction

• Charges: finance, delinquency, and deferral charge (periodic statement)

• Payment: pre-pay and rebates
• Disclosures: Credit cost and Credit sale
Philippine Lemon Law Republic Act No. 10642
Objective

• OBJECTIVE-To strengthen consumer protection in the purchase of brand new motor vehicles
• COVERAGE - brand new motor vehicles purchased in the Philippines reported by a consumer to
be in nonconformity with the vehicle's manufacturer or distributor's standards or specifications
within twelve (12) months from the date of original delivery to the consumer, or up to twenty
thousand (20,000) kilometers of operation after such delivery, whichever comes first
• CONDITION - Repair attempts at any time within the period, and after at least four (4) separate
repair attempts by the same manufacturer, distributor, authorized dealer or retailer for the same
complaint, and the nonconformity issue remains unresolved

Requirements

1. The consumer notifies in writing the manufacturer, distributor, authorized dealer or retailer of the
unresolved complaint, and his/her intention to invoke his or her rights under the law within the
period
2. The consumer shall bring the vehicle to the manufacturer, distributor, authorized dealer or retailer
from where the vehicle was purchased for a final attempt to address the complaint of the
consumer to his or her satisfaction.
3. The consumer files a complaint before the DTI (the vehicle is not returned for repair, based on the
same complaint, within thirty (30) calendar days from the date of notice of release of the motor
vehicle to the consumer following this repair attempt within the period, the repair is deemed
successful unless the the nonconformity issue still exists or persists after the thirty (30)- day
period but still within the period
4. DTI exercised exclusive and original jurisdiction for dispute resolution through:
- Mediation
-Arbitration
- Adjudication
5. Appeal to the SoTI within 30 days from receipt

Rights of Consumer

• Reasonable daily transportation allowance to compensate for the non-usage of the vehicle while
under repair and during the period of availment of the Lemon Law rights
• Replacement to comparable motor vehicle offset by reasonable allowance for use (20% /annum
deduction from the purchase price or kilometrage multiplied by purchase price divided by 100k)
of the first motor vehicle