Review on Law on Sales

7/30/2019 Review on Law on Sales

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REVIEW ON LAW ON SALES


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IMPORTANT TIPS ON THE LAW ON SALES

(Arts. 1458-1637, CIVIL CODE)

Contract of Sale Defined: Sale is a contract

where one party (seller or vendor) obligates

himself to transfer the ownership of and to

deliver a determinate thing, while the other

party (buyer or vendee) obligates himself to

pay for said thing a price certain in money or

its equivalent. (Art. 1458, Civil Code)


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Essential Characteristics of the Contract of Sale:

Consensual (as distinguished as real), because

the contract is perfected by mere consent;

Bilateral reciprocal - because both parties are

bound by obligations dependent upon each

other.

Onerous, because to acquire the rights,

valuable considerations must be given.


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Commutative, as a rule, because the valuesexchanged are almost equivalent to each other.

(NOTE: By way of exception, some contracts ofsale are aleatory, that is, what one receives mayin time greater or smaller than what he hasgiven. Example: The sale of genuine sweepstakes

ticket.) Principal (as distinguished from an accessory

contract), because for the contract of sale to bevalidly exist, there is no necessity for it to dependupon the existence of another valid contract.

Nominate because the Code refers to it by aspecial designation or name, that is the contract

of sale.


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Elements of the Contract of Sale:

Essential elements (those without which there can beno valid sale)

Consent or meeting of the minds, that is consenttransfer ownership in exchange for the price

Determinate subject matter (generally, there is nosale of generic thing, moreover, if the parties differ as

to the object, there be no meeting of the minds). Price certain in money or its equivalent (this is the

cause or consideration) (The price need not be inmoney)


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Natural elements (those which are inherent in thecontract, and which in the absence of anycontrary provision, are deemed to exist in thecontract)

Warranty against eviction, deprivation of theproperty bought)

Warranty against Hidden Defects

Accidental elements (those which may be presentor absent in the stipulation, such as the place ortime of payment, or the presence of conditions)


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Stages in the Contract of Sale:

Generation or Negotiation

Perfection - Meeting of the Minds

Consummation - when the object isdelivered and the price is paid.


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SALE DATION IN PAYMENT

There is no pre-existing credit.

Give rise to an obligation.

The cause or consideration here is

the price, from the viewpoint of

the seller; or of the obtaining of

the object from the viewpoint of

the buyer.

There is greater freedom in the

determination of the price.

The giving of the price may

generally end the obligation of the

There is a pre-existing credit.

Extinguishes obligations.

The cause or consideration here,

from the viewpoint of the person

offering the dation, is the

extinguishing of his debt; from theviewpoint of the creditor is the

acquisition of the object offered in

lieu of the original credit.

There is less freedom in the

determination of the price

The giving of the object in lieu of

the credit may extinguishcompletely or partially the credit


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Difference between a Contract of Sale and a Contract to Sell

In a Contract of Sale, the non-payment of the price is a resolutorycondition, that is the contract of sale may by such occurrence putan end to a transaction that once upon a time existed.; In aContract to Sell, the payment in full of the price is a positivesuspensive condition. Hence if the price is not paid, it is as if theobligation of the seller to deliver and to transfer ownership neverbecame effective.

In the Contract of Sale, title over the property generally transfer tothe buyer upon delivery; in the Contract of Sell, ownership isretained by the seller, regardless of the delivery and it will not passuntil full payment of the price.

In a contract of Sale, after delivery has been made, the seller has

lost ownership and cannot recover it unless the contract isresolved or rescinded. In a Contract to Sell, since the seller retainsownership, despite delivery, he is enforcing the contract if he seeksto oust the buyer for failure to pay.


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The object of Sale must be LICIT and the Vendor must have

the right to transfer ownership at the time the object is

delivered. (Art. 1459)

The object of the sale must be determinate, that is specific,but it is not essential really that at the time of perfection, the

object be already specific. It is sufficient that it be capable of

being determinate without nee of any new agreement.

Things of potential Existence may be an object of sale. This isa future thing that may be sold. Example: "All my rice

harvest next year." Note however that future inheritance

cannot be sold, however. (Art. 1347, par. 2, Civil Code)

Other examples of things possessed of a potential existence: Young animals not yet in existence or still ungrown fruits;

The wine that a particular vineyard is expected to produce;

Expected goodwill of a business


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Sale of expected thing and sale of mere hope or expectancy). Art.

1461

Sale of expected thing (Emptio Rei Sperati)

Sale of hope itself (Emptio Spei)

NOTE: If the expected thing in (a) does not materialize, the sale is

not effective. In the second, it does not matter whether the

expected thing materialized or not; what IS IMPORTANT IS THAT

THE HOPE ITSELF VALIDLY EXISTED. The first deals with future

thing - that which is expected; the second deals with the presentthing - certainty the hope or expectancy already exist.

Example of Emptio Spei: Sale of a valid sweepstakes ticket.

Whether the sweepstake ticket wins or not, the sale is valid.

NOTE: If the hope or expectancy itself is in vain, the sale is itselfVOID. Be it noted that this is not an aleatory contract for while

in aleatory contract there is an element of chance, here there is

completely no chance.

Example : Sale of a losing ticket for a sweepstake already drawn.


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Goods may be future or existing goods.Future goods are those still to bemanufactured, raised or those acquired by

the seller after the perfection of the contract.Art. 1462

14 An undivided Interest may also be sold.Art 1463. Also things subject to a resolutorycondition may be sold. Art. 1465


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Requisites in order that a thing may be the object ofsale:

The thing must be existing, or at least, have a futureor contingent existence (Arts. 1461, 1462, 1465);

It must be determinate or determinable bydescription or segregation (Art. 140);

It must be licit or legal (Art. 1459) The vendor must have real right to transfer ownership

of the thing at the time it is delivered (Art. 1459)


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Objects of Contract of Sale:

The following may be the objects of sale:

Things having potential existence (Art. 1461, NCC);

Things that are existing or to be manufactured,

raised or acquired in the future or future goods (Art.1462, NCC)

Those whose acquisition by the seller depends uponcontingency which may or may not happen (Art.

1462, NCC); Things subject to a resolutory condition (Art. 1465)


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Requisites of price in a contract of sale:

The price must be in money or its equivalent (Art. 1458)

It must be certain or ascertainable (Art. 1469)

It must be real, i.e., not simulated, (Art. 1471)

Meaning of a price certain:

The parties have fixed or agreed upon a definite amount;or

It be certain with reference to another thing certain (SeeArt. 1472), as where the buyer agrees to pay the price asindicated in the invoices;

The determination of the price is left to the judgment of aspecified person or persons (Art. 1469)

The last two cases are applicable only when no specific

amount has been stipulated by the parties.


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Rules if price is to be determined by a third person:

The price fixed by the third person is binding except when he

acts in bad faith or by mistake;

In such case, the courts may fix the price; If the third person is unable or unwilling to fix the price, the

contract shall be inefficacious (without effect), unless the

parties subsequently come to an agreement ; and

If the third person is prevented from fixing the price by thefault of the seller or buyer, the party not in fault may choose

between rescission or fulfillment with damages in either

case. (Art. 1469)

The fixing of the price may not be left to the discretion of one

of the contracting parties, as it cannot be said that there is

meeting of minds upon the fixed price. (Art. 1308) But if the

other accepts price fixed, the sale is deemed perfected.


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If the price cannot be determined, the contract isinefficacious. However, if the thing or any partthereof has been delivered to and appropriated by

the buyer, he is under obligation to pay reasonableprice thereof. (Art. 1474)

Effect of Gross Inadequacy of Price:

It does not affect the contract of sale except whenthe inadequacy may indicate that there is a defect inthe consent, or that the parties really intended a

donation or some other act or contract.


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CONTRACT OF SALE AGENCY TO SELL

In contract of sale, the buyer

pays the price.

In sale, the buyer after

delivery becomes the owner;

In sale, the seller warrants

In an agency to sell, the agent

delivers the price which inturn he got from his buyer;

The agent who is supposed to

sell does not become the

owner, even if the property

has been delivered to him;

The agent who sells assumes

no personal liability as long ashe acts within his authority

and in the name of the

principal


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Rules to determine whether contract is sale or barter.In a contract where the consideration is partlymoney and partly goods, the following rules shall

apply:

the intention of the parties must be determined;

If the intent is not clear, then apply the following

rules:

If the sold thing is more valuable than money, thecontract is barter;

If the money and the thing are equal value, thecontract is sale;

If the thing is less valuable than money, the contractis a contract of sale (Art. 1468, NCC)


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Contract of Sale as against Contract for a Piece of Work:

By the contract for a piece of work, the contractor binds

himself to execute a piece of work for the employer (e.g., toconstruct a house) in consideration of a certain price or

compensation. The contractor may either employ his labor

or skill, or also furnish the material. (Art. 1713.)

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 especially for the

customer and upon his special order (e.g. dress made on the

basis of the body measurement of the customer) and not for

the general market, it is a contract for a piece of work. (Art.

1467)


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Perfection of sale: The contract of sale is perfected at the

moment there is meeting of the minds upon the thing

which is the object of contract and upon the price.

Effects of perfection of sale:

From the moment consent is given, the reciprocal

obligations of the parties arise and they may reciprocally

demand the performance, subject to the Statute of Fraud;

The ownership of the thing sold is not transferred until it isdelivered, actually or constructively, to the buyer (Art.

1477); and

In case one of the contracting parties does not comply

with what is incumbent upon him, the injured party maysue for fulfillment or rescission with the right to damages

in either case. (art. 1191)


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Effect of an accepted unilateral promise to sell or

buy a thing for a price certain:

Such unilateral promise also known as option

contract does not bind the promissor and may be

withdrawn at any time;

If the promise, however, is supported by a

consideration distinct from the price, its

acceptance gives rise to the perfection of the

contract.


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Effect of a bilateral promise to buy and sell a thing

for a price certain:

When the promise is bilateral, that is, one party

accepts the other's promise to buy and the latter,

the former's promise to sell, a determinate thing

for a price certain, it has practically the sameeffect as a perfected contract of sale since it is

reciprocally demandable. But there is no contract

of sale yet until it is executed.


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Rules with regards to any injury to or benefit from the thing

sold, after contract is perfected but before delivery.

The vendor is obliged to take care of the thing sold with

proper diligence. (Art. 1163)

The vendor has the right to the fruits of the thing from the

time the obligation to deliver arises but shall acquire no

real right or ownership over it until the same has been

delivered to him (Art. 1164; Art. 1537) If the thing is determinate, the vendee may compel the

vendor to make the delivery, and hold him liable for

damages by reason of fraud, delay, etc., Arts. 1165 and

1170) If the thing is generic, he may ask that the obligation be

complied with at the expense of the vendor if the latter

fails to make delivery also with a right to damages in

proper case (Arts. 1165, 1170);


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If the thing is determinate, and it is lost or destroyed---

a. Through the fault of one party, the party at fault is liable

for damages;

b. Through fortuitous event, the vendor is released from the

obligation to deliver and the vendee is liable to pay the

price if he has not yet paid the same (see Arts. 1480, 1583,

1189 and 1269). Art. 1504, par. 1 however provides a rule

contrary to 1480);c. The vendor shall be responsible for any fortuitous event if

it is so stipulated, or if the same took place after he has

incurred delayed, or he has promised to deliver the same

thing to two or more persons who do not have the sameinterest, Arts. 1164, 1262)


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d. The rule under letter (b) applies to the sale of fungible

things, made independently and for a single price or

without consideration or their weight, number or

measurement (Art. 1480). Reason: In such case, thefungible things have been " particularly designated or

physically segregated"

e. It does not apply where the fungible things have been sold

for a price fixed in relation to weight, number or measure.In such case, the risk shall not be imputed to the vendee

until they have been weighed, counted or measured and

delivered;

If the thing is generic, the loss with or without the vendor's

fault, of anything of the same kind does not distinguish his

obligation to deliver. (Art 1262)


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Special Rules on sales by description and saleby sample

In the contract of sales of goods by descriptionor by sample, the contract may be rescinded ifthe bulk of goods delivered do not correspondwith the description or by the sample;

If the contract be by sample as well as bydescription, it is not sufficient that the bulk ofgoods correspond with sample if they do notcorrespond with the description;

The buyer shall have reasonable opportunityof comparing bulk with the description orsample (Art. 1481)


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Principle of Earnest Money:

Earnest Money is that given by the buyer to the seller to

bind the bargain. It is actually a partial payment of the

purchase price and is considered as proof of the perfectionof the contract.

Earnest Money vs. Option Money

Earnest money is part of the purchase price, while option

money is given as distinct consideration for an optioncontract;

Earnest money is given only if there is already a sale while

option money applies to sales not yet perfected;

When the earnest money is given, the buyer is bound topay the balance, while the would be buyer who gives

option money is not required to buy.

But option money may become earnest money if the parties

so agree.


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Remedies of vendor in Sale of Personal Property Payable in

Installments. (RECTO LAW))

The vendor of personal property payable in installments

may exercise any of the following remedies:

Elect fulfillment upon the vendee's failure to pay;

Cancel the sale, if the vendee shall have failed to pay two

or more installments; or

Foreclose the chattel mortgage, if one has been

constituted, if the vendee shall have failed to pay two or

more installments.

Nature of the above remedies in Recto Law:

These remedies are alternative and are not to be exercised

cumulatively or successively and the election of one is a

waiver of the right to resort to the others.


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Right of the vendor to recover the unpaid balance of the

purchase price:

The vendor who has chosen specific performance or to

exact fulfillment of the obligation is not limited to theproceeds of the sale, on execution, of the mortgaged

goods. He may still recover from the purchaser the unpaid

balance of the price, if any on real or personal properties

of the purchaser not exempt by law from attachment orexecution;


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If the vendor chooses rescission or cancellation of the

contract upon the vendee's failure to pay two or more

installments, the latter can demand the return of

payments already made unless there is a stipulation aboutforfeiture. (See Art. 1468)

If the vendor has chosen the third remedy of foreclosure of

the chattel mortgage, he shall have no further action

against the vendee for the recovery of any unpaid balanceof the price and any agreement to the contrary is void.

The foreclosure is caused by selling the mortgaged

personal property at public auction and applying the

proceeds of the sale to the satisfaction of the claim

secured by the mortgage.


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Requisites before Art. 1484 may be applied:

There must be a contract

The contract must be of sale, an absolute sale or

conditional;

What is sold in personal property

The sale must be in installment

Instances where Art. 1484 may not be applied:

It does not apply in real property mortgage.

It does not apply to sale of personal property in straight

terms, a sale on straight terms being one, which thebalance, after the payment of initial sum should be paid in

totality at the time specified.


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Lease of Personal Property with Option to Buy is

considered as sale of property in installments.

(Art. 1485) As a rule, payment of installments

should be returned unless parties stipulate that

the same shall not be returned.

Expenses for the execution and registration shall beborne by the vendor in the absence of any

agreement between the parties to the contrary.


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REALTY INSTALLMENT BUYER PROTECTION ACT (MACEDA

LAW)R.A. NO. 6552

In transactions involving the sale or financing of real

estate on installment payments including residential

condominium apartments, under the Maceda Law,

(R.A.NO. 6552), the rights of the buyer who has paid at

least two (2) years installments and subsequentlydefaulted in the succeeding installments are the following:

To pay w/out additional interest, the unpaid installment

within total grace period earned by him fixed at the rate of

one-month grace period for every one year of installmentsmade. The right however shall be exercised by him only

once in every 5 years of the life of the contract and its

extensions, if any; and


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If the contract is cancelled, the seller shall refund to thebuyer the cash surrender value of the payments on

property equivalent to 50% of the total payments madeand after 5 years of installments, and additional 5% everyyear but not to exceed 90% of the total payments made.(Section 3, R.A. No. 6552 (Maceda Law), Realty InstallmentBuyer Protection Act)

The above law excludes from its operation sales on

installments of industrial lots and commercial buildingsand sales to tenants under the CARP.

Down payments, deposits or options on the contract shallbe included in the computation of the total number ofinstallments payable.


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Effect of buyer on realty installments has paid less than 2

years of installments:

The seller shall give him a grace period of not less than 60

days from the date the installment became due. If he failsto pay the installments due at the expiration of the grace

period, the seller may cancel the contract after 30 days

from receipt of the buyer of the notice of cancellation or

the demand for rescission of the contract by notarial act.Sec. 24 of P.D No. 957 otherwise known as the Subdivision

and Condominium Buyers Protective Decree provides that

the rights of the buyer of subdivision lot or condominium

unit in the event of his failure to pay the installments due

to reasons other than failure of the owner or developer to

develop the project shall be governed by R.A No. 6552 or

the Maceda Law.


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Capacity to sell and buy: (Who can enter in a Contract of

Sale?)

General Rule: All persons, whether natural or

juridical, who are authorized by the Civil Code to obligethemselves may enter in to a contract of sale. Exceptions

are those who suffer absolute incapacity and relative

incapacity under Arts. 1490-1491)

NOTE : Minors and other incapacitated persons may validly

enter into contracts of sale on necessaries and the price

payable in such case shall be the reasonable price. (Art.

1489)Meaning of Necessaries: those which are needed for

sustenance, dwelling, clothing and medical

attendance in keeping with the financial capacity of the

family of the incapacitated person (Art. 194. Family

Code.)


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Persons disqualified to sell and buy:

The husband and wife cannot sell property to each other,

except:

when a separation of property was agreed upon in the

marriage settlement; or

when there has been judicial separation of property

Persons who, because of their position and relation with the

person under their charge or property under their control

are prohibited from acquiring said property either directly

or indirectly and whether in private or public sale, namely:

guardians;

agents;


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executors and administrators;

public officers and employees; and

judicial officers and employees and lawyers

others especially disqualified by law

The seller in an auction sale may not bid unless notice is

given reserving such right. (Art. 1476 (4);

An unpaid seller cannot buy, directly or indirectly the

goods sold by him, in case of resale (Art. 1533)

Note: Sales contracted in violation of Nos. 1, 2 & 3 would

make the contract voidable. If sale was contracted by those

falling under nos. 4-6 would make the contract void for beingcontrary to public policy.


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The prohibition udder Nos. 1 & 2 are applicable to sales in

legal redemption, compromises and renunciations. Art.

1492)

Compromise is a contract whereby the parties, by reciprocal

concessions, avoid a litigation or put an end to one already

commenced. (Aer. 2028). It is the amicable settlement of

a controversy.Renunciation, a creditor gratuitously abandons his right

against his creditor. The other terms used by the law are

condonation and remission.

The persons disqualified to buy referred to in Articles 1490and 1491 are also disqualified to become lessees of the

things mentioned therein.


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Art. 1493. If at the time the contract of sale is

perfected, the thing which is the object of the

contract has been entirely lost, the contract shall be

without any effect.

But if the thing should have been lost in part only,

the vendee may choose between withdrawing fromthe contract and demanding the remaining part,

paying its price in proportion to the total sum agreed

upon.

OBJECT Specific thing


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Art. 1494. Where the parties purport a sale of specific goods,

and the goods without the knowledge of the seller have

perished in part or have wholly or in a material part so

deteriorated in quality as to be substantially changed incharacter, the buyer may at his option treat the sale:

(1) As avoided; or

(2) As valid in all of the existing goods or in so much thereofas have not deteriorated, and as binding the buyer to pay the

agreed price for the goods in which the ownership will pass, if

the sale was divisible.

Object specific goods refer to definitionGOODS IDENTIFIED AND AGREED UPON AT THE TIME

A CONTRACT OF SALE IS MADE.


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Rules regarding risk of loss in contracts of sale:

If the thing is lost before perfection, the seller and not the

one who intends to purchase bears the loss in accordance

with the principle that the thing perishes with the owner(res permit domino).

If the thing is lost at the time of perfection, the contract is

void or inexistent (Art. 1409 The legal effect is the same

as when the object is lost before the perfection of thecontract of sale (Art. 1493)

If the subject matter (i.e., a specific thing like car) is only

partially lost, the vendee may choose between

withdrawing from the contract and demanding theremaining part, paying its proportionate price. (Art. 1493)


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If the subject matter (i.e., a specific mass like

100 cavans of rice in a warehouse) have

perished in part or in whole or in materialpart so deteriorated in quality, without the

knowledge of the vendee, the vendee may

choose to avoid or cancel the contract or treat

valid the existing goods if divisible and pay

the agreed price for the remaining goods. If

the contract is indivisible, the object is treated

as specific thing. (Art. 1494)


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If the thing is lost after perfection but before delivery, that

is even before ownership is transferred to the buyer, the

risk of loss by a fortuitous event without the sellers fault is

borne by the buyer as an exception to the rule ofres peritdomino. (Art. 1480).

Note: This is in conflict with Article 1504 which provides that

unless otherwise agreed, the goods remain at the sellers

risk until ownership therein is transferred to the buyer


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If the thing is lost after delivery, the buyer bears the risk of

loss following the rule of res permit domino.

Where the seller reserves ownership of goods merely to

secure the performance by the buyer of his obligationsunder the contract, the goods are at the buyer's risk from

the time of delivery.

Where the actual delivery has been delayed through the

fault of either the buyer or the seller, the goods are risk ofthe party at fault. (Art. 1504)


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Obligations of the Vendor:

to transfer ownership (cannot be waived)

to deliver (cannot be waived)

to warrant the object sold (this can be

waived or modified since warranty is not an

essential element of a contract of sale;

to preserve the thing from perfection to

delivery otherwise he can be held liable for

damages.


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Effect of Failure to deliver in time:

If the seller promised to deliver at a stipulated time

and such period is of the essence of the contract, but

did not comply with his obligation on time, he hasno right to demand payment of the price. As a

matter of fact, the vendee-buyer may ask for

rescission of the sale.


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Ownership is transferred generally only by

delivery.

Kinds of Delivery

1. Actual or real (Art. 1497)

2. Legal or constructive

a. legal formalities (Art. 1498)

b. symbolica tradition or traditio symbolica

(such as the delivery of the key of the place

where the movable sold is being kept) (Art.

1498 par. 2);


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c. traditio longa manu (by mere consent or

agreement) if the movable sold cannot yet

be transferred to the possession of thebuyer at the time of the sale (Art. 1499)

d. traditio breva manu ( if the buyer had

already the possession of the object evenbefore the purchase, as when the tenant of

the car buys the car, that his possession as

an owner). ( Art. 1499)


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e. traditio constitutum possessorium (opposite of

tradito breva manu) possession as owner

changed, for example possession as a lease. I.e, I

sold my car but continued to possess it as a lessee

of the purchaser (Art. 1500)

f. Quasi-tradition - delivery of rights, credits or

incorporeal property made by: by placing titles of ownership in the hands of the

buyer;

or allowing the buyer to make use of the rights.

(Art. 1501)

execution of legal documents


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Cases when delivery does not transfer

ownership over thing sold.

1. Where a contrary intention appears by theterms of the contract:

a. In case of express reservation by the seller

of his title, until certain conditions havebeen fulfilled (Art. 1503, par. 1) particularly

the full payment of the purchase price.

(Art. 1478);

b. In case of implied reservation of title as

when goods are deliverable to the order of

the seller or his agent; and

(


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c. In sale on approval, or trial or on satisfaction (Art.

1502);

2. Where the seller failed to make such contract with

the carrier on behalf of the buyer as may be

reasonable under the circumstances (See Art.

1523, par. 2); and

3. Where the seller failed to give notice to the buyeras may enable him to insure the goods during

their transit if under the circumstances it is usual

to insure them.

(Note: Nos. 2 & 3 are also exceptions to the general

rule that delivery to the carrier is deemed delivery

to the buyer)


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Sale or Return - it is a contract by which

property is sold but the buyer who becomes

the owner of the property on delivery has

the option to return the same to the seller

instead of paying the price.

Note : In sale or return, the risk of loss or

injury rests upon the buyer


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Sale on Trial or Approval - It is a contract in the nature ofoption to purchase if goods prove satisfactory, theapproval of the buyer being a condition precedent. In this

kind of contract, the title shall continue in the seller untilthe sale has become absolute:

Upon the buyer's approval or acceptance made known tothe seller;

Upon the buyer's doing any other act adopting the

transaction; or Upon the retention by the buyer of the goods beyond the

time fixed (or a reasonable time) without giving notice ofrejection. (Art. 1502)

Note : In sale or return, the risk of loss or injury rests uponthe buyer while in sale on approval, the risk still remainsin the seller.


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RESERVATION OF OWNERSHIP

General rule, delivery to the buyer transfers

ownership. Exceptions:

When there is express reservation ownershipmade by the seller.

When there is implied reservation ownership

such as in the following:


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1. Where the goods are shipped and by the bill oflading the goods are deliverable to seller or his

agent, the seller thereby reserves ownership inthe goods. (Art. 1503 paragraph 2)

In this case, the carrier becomes the bailee forthe seller. The last sentence of paragraph 2 states

however that if it were not for the bill of lading,ownership would still pass to the buyer, then thesellers property or right in the specific goods

shall merely for security only, meaning the seller

is reserving his right to the goods not in theconcept of the owner but merely for purpose ofensuring that the buyer will fulfill his obligationsunder the contract of sale.


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2. Where goods are shipped and by the bill oflading the goods are deliverable to the order

of the buyer or his agent, but the possessionof the bill of lading is retained by the seller oragent, the seller thereby retains a right to thepossession of the goods as against the seller.

(Art. 1503 par. 3)

In this case, the buyer, as a consigneecannot take delivery of the specific goods until

the seller releases the bill of lading. The sellerwill not release possession of the bill of ladingto the buyer, until the latter pays the purchaseprice and fulfill any other conditions, if any.


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3. Where the seller draws on the buyer for the price andtransmits the bill of exchange and the bill of ladingtogether to the buyer to secure acceptance or payment

of the bill of exchange, the title is regarded as retainedin the seller until the bill of exchange is paid. The factthat the bill of lading and bill of exchange are attachedtogether indicates that the seller intends to make thedelivery of the goods conditional upon the payment or

acceptance of the draft. In this case, attachment of thebill of exchange to the bill of lading will serve notice tothe carrier not to deliver the goods until the buyer isable to accept or pay the bill of exchange. Should thebuyer dishonor the bill of exchange by non-acceptance

or by non-payment, he must return thee bill of lading tothe seller. If the wrongfully retains the bill of lading, heacquires no additional right.


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The last portion of par. 4 of Art. 1503 states that

if in the bill of lading the specific goods are:

a) Made deliverable to the buyer or to order of

the buyer,

b) The bill of lading is indorsed in blank, or

c) The bill of lading is indorsed to the buyer by

the consignee name therein, a subsequent

purchaser in good faith and for value of the

bill of lading or of the goods from the buyer

will acquire ownership of the goods although

the bill of exchange has been dishonored.


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Unless otherwise authorized by the buyer, seller

must make contract with the carrier on behalf

of the buyer as may be reasonable, having

regard to the nature of the goods. If the seller

fails to do so and the goods are lost or

damaged in the course of transit, the buyermay decline to treat the delivery to the carrier

as a delivery to himself, or may hold the seller

liable for damages. (Article 1523 par. 2)

A ti l 1504 it t th i i l f it d i


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Article 1504 reiterates the principle of res perit dominomeaning the owner bears the loss. Unless otherwiseagree, if the seller retains ownership of the goods sold,

then he bears the loss through fortuitous event. Ifownership of the goods is already to the transferred tothe buyer, he bears the risk.

Exceptions:

a) Reservation of owner for purpose of securingperformance by the buyer of his obligation specificallypayment in full of the purchase price, in this case,buyer bears the risk.

b) Where the actual delivery of the goods havee beendelayed through the fault either of the seller or thebuyer, the party at fault shall bear the risk of loss ofthe goods.


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What title is acquired by the vendee or buyer if the object which hebought was sold by somebody who is not the owner thereof andwho was not authorized to sell it?

The vendee, in such a case acquires no better title to the objectthan the vendor had. Reason. He is not the owner of the goodshimself and he has no authority to sell the goods from the owneror he sold the goods without the owners consent. This rule,however is subject to the following exceptions:

Where the owner ratifies the sale made by the seller

Where the true owner is estopped or precluded by his conductfrom denying the vendor's authority to sell;

Where the sale is made by the registered or apparent owner inaccordance with recording or registration laws;

Where the sale or under the order of a court of competent

jurisdiction; and Where the purchase is made in a merchant's store or in fairs, or

markets, in accordance with the Code of Commerce and speciallaws (Art. 1505)


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Where the seller of goods has a voidable title

thereto, but his title has not been avoided at

the time of the sale, a) the buyer acquires

good title to the goods, provided (2) he buys

them in good faith, for value and (3) withoutnotice of the seller defect of title. (Art. 1506)

fi i bl f i l


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Define Negotiable Document of Title:

A document of title in which it is stated that

the goods referred to therein will be deliveredto the bearer, or to the order of the any

person named in such document is a

negotiable document of tile. (Art. 1507)Nature of Document of Title: It refers to goods

and not to money. They all have this in

common: that they are receipts of a bailee,or orders upon a bailee,

C f f D t f titl


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Common forms of Document of title:

Bill of Lading- A contract or receipt for the transport of

goods and their delivery to the persons named therein, to

order or to bearer. It usually involves three persons - the

carrier, the shipper and the consignee. The shipper and

the consignee may be one and the same person.

Dock warrant- An instrument given by dock owners to an

importer of goods warehoused on the dock recognizing the

importer's title to the said goods;

Warehouse receipt - A contract or receipt for goods

deposited with the warehouseman containing the latter's

undertaking to hold and deliver the said goods to a

specified person, to order or to bearer. Quedan is

warehouse receipt usually for sugar received by

warehouseman.


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A negotiable document of title may be negotiated bydelivery:

Where by the terms of the document the carrier,

warehouseman or other bailee issuing the sameundertakes to deliver the goods to the bearer;

Where by the terms of the document the carrier,warehouseman or other bailee negotiating the sameundertakes to deliver to deliver the goods to the order of a

specified person, and such person or a subsequentindorsee of the document has indorsed it in blank or to thebearer;

Where by the terms of a negotiable document of title, thegoods are deliverable to bearer or where the negotiable

document of title has been indorsed in blank or bearer,any holder may indorse the same to himself or to anyspecified person, and in such are the document shallthereafter be negotiated only by the indorsement of suchindorsee. (Art. 1508)


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Negotiable document of title be negotiated byindorsement

A negotiable document of title may benegotiated by the indorsement of the person towhose order the goods are by the terms of thedocument deliverable. Such indorsement maybe in blank, to bearer or to a specified person. Ifindorsed to a specified person, it may be againnegotiated by the indorsement of such person inblank, to bearer or to another specified person.Subsequent negotiations may be made in likemanner. (Art. 1509)


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Who may negotiate a negotiable document of title?

By the owner thereof;

By any person to whom the possession or custody ofthe document has been entrusted by the owner, if bythe terms of the document the bailee issuing thedocument undertakes to deliver the goods to the

order of the person to whom the possession orcustody of the document has been entrusted, or if atthe time of such entrusting the document is such formthat it may be negotiated by delivery (Art. 1512)


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A person to whom negotiable document of titlehas been duly negotiated acquires thereby:

Such title to the goods as the person negotiatingthe document to him had or had ability toconvey to a purchaser in good faith for value and

also such title to the goods as to the person towhose order the goods were to be delivered bythe terms of the document had and had abilityto convey to a purchaser in good faith for value;

The direct obligation of the bailee issuing thedocument to hold possession of the goods forhim according to the terms of document as fullyas if such bailee had contracted directly with him(Art. 1513).


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What are the implied warranties of the person whonegotiates a document of title by indorsement ordelivery?

A person, who for value negotiates or transfers adocument of title by indorsement or delivery, includingone who assigns for value a claim secured by a documentof title unless a contrary intention appears, warrants:

That the document is genuine;

That he has legal right to negotiate or transfer it; That he has knowledge of no fact which would impair the

validity or worth of the document; and

That he has right to transfer the title of the goods are

merchantable or fit for a particular purpose, wheneversuch warranties would have been implied if the contract ofthe parties had been to transfer without a document oftitle of goods represented thereby (Art. 1516)


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Note : The person to whom a negotiable

document of title was issued must be the

owner of the goods, otherwise, it cannot

effect a valid negotiation. Hence, if the goods

are stolen and place to the bailee for deposit.

The negotiation of the document of titlecannot validly transfer ownership.


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But if goods are legitimately deposited, Article1518 applies. The validity of the negotiation of

a negotiable document of title is not impaired bythe fact that the negotiation was a breach ofduty on the part of the person making thenegotiation, or by the fact that the owner of the

document was deprived of the possession of thesame by loss, theft, fraud, accident, mistake,duress or conversion, if the person to whom thedocument was subsequently negotiated paid

value therefore in good faith without notice ofthe breach of duty, or loss, theft, frau, accident,mistake, duress or conversion.


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Art. 1519. If goods are delivered to a bailee by theowner or by a person whose act in conveying the

title to them to a purchaser in good faith for valuewould bind the owner and a negotiable documentof title is issued for them they cannot thereafter,while in possession of such bailee, be attached by

garnishment or otherwise or be levied under anexecution unless the document be firstsurrendered to the bailee or its negotiationenjoined. The bailee shall in no case be compelled

to deliver up the actual possession of the goodsuntil the document is surrendered to him orimpounded by the court.


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Art. 1520. A creditor whose debtor is the ownerof a negotiable document of title shall be entitled

to such aid from courts of appropriate jurisdictionby injunction and otherwise in attaching suchdocument or in satisfying the claim by meansthereof as is allowed at law or in equity in regard

to property which cannot readily be attached orlevied upon by ordinary legal process.

As a general rule, attachment or levy of goodscovered by negotiable document of title is

prohibited. The only recognized exceptions to thegeneral rule are as follows: a) If the document issurrendered to him; or (2) negotiation is enjoined.


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Instances when bailee can be compelled to

surrender goods. The rule is baille cannot be

compelled to surrender the goods in hispossession covered by a negotiable document

of title. He may do so, however: ( a) if

document is surrendered to him or (2) thedocument is impounded by the court.

Art 1521 Whether it is for the buyer to take


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Art. 1521. Whether it is for the buyer to takepossession of the goods or of the seller to send themto the buyer is a question depending in each case on

the contract, express or implied, between the parties.Apart from any such contract, express or implied, orusage of trade to the contrary, the place of delivery isthe seller's place of business if he has one, and if nothis residence; but in case of a contract of sale of

specific goods, which to the knowledge of the partieswhen the contract or the sale was made were in someother place, then that place is the place of delivery.

Where by a contract of sale the seller is bound to sendthe goods to the buyer, but no time for sending them isfixed, the seller is bound to send them within areasonable time.

Wh th d t th ti f l i th


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Where the goods at the time of sale are in the

possession of a third person, the seller has not

fulfilled his obligation to deliver to the buyerunless and until such third person acknowledges

to the buyer that he holds the goods on the

buyer's behalf.

Demand or tender of delivery may be treated as

ineffectual unless made at a reasonable hour.

What is a reasonable hour is a question of fact.

Unless otherwise agreed, the expenses of andincidental to putting the goods into a deliverable

state must be borne by the seller. (n)

Art 1522 Where the seller delivers to the buyer a


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Art. 1522. Where the seller delivers to the buyer aquantity of goods less than he contracted to sell, thebuyer may reject them, but if the buyer accepts or

retains the goods so delivered, knowing that the selleris not going to perform the contract in full, he must payfor them at the contract rate. If, however, the buyer hasused or disposed of the goods delivered before heknows that the seller is not going to perform his

contract in full, the buyer shall not be liable for morethan the fair value to him of the goods so received.

Where the seller delivers to the buyer a quantity ofgoods larger than he contracted to sell, the buyer mayaccept the goods included in the contract and rejectthe rest. If the buyer accepts the whole of the goods sodelivered he must pay for them at the contract rate.

Where the seller delivers to the buyer the


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Where the seller delivers to the buyer thegoods he contracted to sell mixed with goods

of a different description not included in thecontract, the buyer may accept the goodswhich are in accordance with the contract andreject the rest.

In the preceding two paragraphs, if the subjectmatter is indivisible, the buyer may reject thewhole of the goods.

The provisions of this article are subject to anyusage of trade, special agreement, or courseof dealing between the parties. (n)

Under Article 1523 the general rule delivery to the carrier


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Under Article 1523, the general rule delivery to the carrieris delivery to the buyer when the seller is authorized orrequired to send the goods to the buyer (See. Art. 1521)

Exceptions are in case of express and implied reservations (Art. 1503)

Seller duties if required to deliver the goods to the buyer

To enter on behalf of buyer into such contract with thecarrier reasonable under circumstances. If he omits to do

so, (1) the buyer may decline to treat delivery to carrier asdelivery to himself in case goods are lost or damaged incourse of transit, or (2) the buyer may hold the sellerresponsible in damages ( par 2 of Art. 1523) If buyerexercised the first option, the transfer of ownership will be

deemed not to have taken place; and To give notice to buyer regarding necessity to insure goods,

if under the circumstances it is usual to insure them. Ifseller fails to so, the risk will be borne by him.

PLACE OF DELIVERY (A 1521)


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PLACE OF DELIVERY (Art. 1521)

Where there is an agreement, express or implied, theplace of delivery is that agreed upon;

Where there is no agreement, the place of delivery isdetermined by usage of trade;

Where there is no agreement and there is also no

prevalent usage, the place of delivery is the sellersplace of business;

In any other case, the place of delivery is the sellersresidence; and

In case of specific goods, which to the knowledge ofthe parties at the time the contract was made were insome other place, that place is the place of delivery, inthe absence of any agreement or usage of trade tothe contrary.

E l i F O B C I F F A S & C & F EX (P i f


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Explain F.O.B, C.I.F., F.A.S., & C & F., EX (Point ofOrigin) and Ex dock;

F.O.B - The initials for the words, "Free on Board". Thismeans that the goods are to be deliverable free ofexpense to the buyer to the point where they are F.O.B.

C.I.F. - The initials stand for the words "cost, insurance

and freight." They signify that the price fixed covers notonly the cost of the goods, but the expense of freightand insurance to be paid by the seller up to the pointespecially named.

F.A.S. - The initials mean "free alongside vessel"(named port of shipment). Under this term, the sellerpays all charges and bears the risk until the goods areplaced alongside overseas vessel and within reach of itsloading tackle.


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C & F - The initials signify that the price fixed

includes cost and freight to the named point ofdestination.

Ex Factory, Ex Warehouse, etc. (named point oforigin) - Under this term, the price quoted applies

only at the point of origin, and the seller agrees toplace the goods at the disposal of the buyer at theagreed place on the date within the period fixed.

Ex Dock (named port of importation). - Under thisterm, the seller quotes a price including the costof the goods on the dock at the named port ofimportation.

Th d h ll t b b d t d li th


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The vendor shall not be bound to deliver thething sold, if the vendee has not paid him theprice, or if no period for payment has been fixedin the contract.

As a rule, the obligation to deliver the thingsubject matter of a contract arises from themoment of its perfection and from the time the

obligation may be enforced. But a contract of saleis bilateral and so the obligation to deliver thething is accompanied the obligation by thepayment of the price. These obligations are

reciprocal. Exception: If the time for such payment has been

fixed in the contract, the thing must be deliveredthough the price has not been paid yet.

D fi id ll d A t 1525


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Define an unpaid seller under Art. 1525

An unpaid seller is one - who has not been paid or tendered the whole price;

or

who has received a bill of exchange or othernegotiable instrument as conditional payment and

the condition on which it was received has beenbroken by reason of dishonor of the instrument. (Art.1525)

Ri h f h UNPAID SELLER


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Rights of the UNPAID SELLER

Even if the ownership in the goods has already passed

to the buyer, they are: A lien on the goods or right to retain them for the

price while in his possession; POSSESSORY LIEN

A right of stopping the goods in transitu in case of

insolvency of the buyer; STOPPAGE IN TRANSITU A right of resale; and

A right to rescind the sale.

C h th id ll i hi i ht f


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Cases where the unpaid seller exercises his right ofpossessory lien:

When the goods have been sold without anystipulation as to credit;

Where the goods have been sold on credit, butthe term of the credit has expired; and

Where the buyer becomes insolvent. The seller may exercise his right o lien

notwithstanding that he is in possession of thegoods as agent or bailee for the buyer. (Art.

1527)


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An unpaid seller loses his lien to the goods:

When he delivers the goods to a carrier or otherbailee for the purpose of transmission to the buyerwithout reserving ownership of the goods or the rightof possession thereof;

When the buyer or his agent lawfully obtains

possession of the goods; When the unpaid seller waives his lien.

Mere judgment by a court obtained by the unpaidseller for the price of the goods is not a ground for the

loss of his lien. (Art. 1529)

Th i ht f t i t it i th i ht f


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The right of stoppage in transitu is the right ofthe unpaid seller who has parted with the

possession of the goods, when the buyer is orbecomes insolvent, to stop them and resumepossession while they are in transit. Theunpaid seller will become entitled to the

same rights to the goods as if he had neverparted with possession (Art. 1530)

Requisites in the exercise of the right of stoppage in transitu:


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Requisites in the exercise of the right of stoppage in transitu:

The seller must be unpaid (Art. 1525)

The buyer must be insolvent;

The goods must be in transit (Art. 1531)

The seller must either actually take possession of thegoods sold or give notice of his claim to the carrier or

other person in possession (Art. 1532 p. 1) The seller must surrender the negotiable document of

title, if any, issued by the carrier or bailee (ibid, p. 2)

The seller must bear the expenses of delivery of the goodsafter the exercise of the right. (Ibid.)

Manner of which unpaid seller may exercise the


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Manner of which unpaid seller may exercise theright to stop the goods in transitu:

Either by taking actual possession of the goods;

By giving notice of his claim to the carrier ofbusiness in whose possession the goods are.

The seller must surrender the negotiabledocument of title, if any issued by the carrier orbailee. (Art. 1532)

Instances where goods are considered not already in


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Instances where goods are considered not already intransitu:

The goods are no longer in transit after delivery to the buyeror his agent in that behalf and in the following cases:

If the buyer or his agent obtains possession of the goodsat a point before the destination originally fixed;

If the carrier or bailee acknowledges to hold the goods onbehalf of the buyer; and

If the carrier or bailee wrongfully refuses to deliver thegoods to the buyer. (Art. 1531)

Effects of Sale of Goods subject to unpaid


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j psellers right of lien or stoppage in transitu:

They are: The seller's right is not affected by any

disposition of goods made by the buyer,unless he has assented thereto.

If, however, the goods are covered by anegotiable document of title, the seller'sright cannot prevail rights of purchaser for

value in good faith to whom the documenthas been indorsed. (Art. 1535)

Right to Resale:


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Right to Resale:

This right can be the unpaid seller only when he

has right of lien or right to stop goods intransitu and under any of the three followingcases:

a. Where the goods are perishable in nature;

b. Where the right to resell is expressly reserved incase the buyer should make a default; and;

c. Where the buyer delays in the payment of the

price for an unreasonable time.

Eff t f R l


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Effect of Resale:

The seller is not liable for any profit made by

such resale; but if he sells for less than the

price, he has the right to sue for the balance.

As against the original buyer, the new buyer

acquires a good title to the goods.

Note: It is not essential to the validity of a resale that notice


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Note: It is not essential to the validity of a resale that notice

of an intention to resell the goods be given by the seller to

the original seller. Except where the resale is based on the

default of the buyer in the payment of the price, as notice

in this case is relevant in any question whether the buyer

had been in default for unreasonable time before the

resale was made.

No notice is required for the time and place of such resale

to the buyer.

Seller is not allowed to directly or indirectly buy the goods in

a public or private sale.

Cases when an unpaid seller exercises his right to


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Cases when an unpaid seller exercises his right to

rescind:

Either of the two situations, namely: When the right to rescind is expressly reserved; or

When the buyer defaults or delays in the payment

of the price for an unreasonable time.In the case of rescission, the seller resumes ownership

in the goods. While the seller shall not be liable to

the buyer upon the contract of sale, the latter,

however, may be made liable to the seller fordamages for any loss occasioned by the breach of

contract. (Art. 1534)

Note ; An unpaid seller has right to rescind only if he


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Note ; An unpaid seller has right to rescind only if he

has either a right of lien or a right to stop goods in

transitu.Effect of Rescission:

The seller resumes ownership of the goods. While

the seller shall not be liable to the buyer upon the

contract of sale, the latter however may be made

liable to the seller for damages for any loss in

occasioned by the breach of contract (par. 1, Art.

1533)

How to rescind?


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How to rescind?

An election by the seller to rescind may be

manifested by notice to the buyer or some other

over act showing an intention to rescind.

Communication of such election to the buyer is not

necessary.

Rules In Case the Area or Number

l f l


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Sale of Real Estate:

Rules in case the area or number is greater or lessthat stated in the contract of Sale of Real Estate:

The sale is made with a statement of its area at therate of a certain price for a unit of measure or number

(e.g. a parcel of land containing an area of 1,000square meters is sold at P 100.00 per square meter)

If the actual area, for example is 1,100 sq. meters - Thevendee may accept the area included in the contract

(1,000 sq. meters) and the rest (100 sq. meters). If heaccepts the whole area, he must pay for the same atthe contract rate of P 110,000. (Art. 1546)

Rules In Case the Area or Number

S l f l


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Sale of Real Estate: If the actual area is 900 sq. meters - The vendee may choose

between a proportionate reduction of the price (P 90,000)and the rescission of the contract, provided in the latter case

the lack in the area be not less than 1/10 or more of that

stated. (See Art. 1539)

The sale is made for lump sum - There shall be no increase ordecrease of the price. (Art. 1542) Reason: The law presumes

that the purchaser had in mind a determinate price for the

real estate and that he ascertained the area and quality

before the contract was perfected. This rule applies whentwo or more immovable properties are sold for a single price

(See Art. 1541). It does not apply if the deficiency is so

material as to go to the essence of the contract, for under

such circumstances, gross mistake may be inferred.

RULES ON DOUBLE SALES


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If the property sold is movable, the vendee who firsttook possession in good faith shall acquire theownership.

If the property sold is immovable, the ownership shallbelong to:

The vendee who first registered the sale in good faithin the Registry of Property (Registry of Deeds);

In the absence of registration, the vendee who in goodfaith, first took possession; and

In the absence of both registration and possession, thevendee who presents the oldest title (who first boughtthe property), provided there is good faith. (Art. 1544)



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The rule on double sales do not apply incases:

The contract first registered is fictitious or

forged;

The vendor is not the owner of the property;

or

The sale is not made by the same vendor

CONDITIONS AND WARRANTIES


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What is a condition?

It means an uncertain event or contingency onthe happening of which the obligation of thecontract depends. In such case the obligation ofthe contract does not attach until the condition is

performed.Effect of condition: If the obligation of either party

is subject to any condition and such condition isno fulfilled, such party may either:

a. Refuse to proceed with the contract; orb. Proceed with the contract, waiving the

performance of the condition



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Express or Promissory Warranty - They are any

affirmation of fact or any promise by the seller relatingto the thing, the natural tendency of which is to inducethe buyer to purchase the thing and the buyer thusinduced purchases the same.

It is express as this one agreed by the parties. Seller

makes any statement or promise about the goods andthe buyer completely rely on the strength of suchstatement or promise when he purchased the goods.

Be it noted that a warranty is part of the contract of sale.

It is therefore, immaterial, whether the seller did notknow that it was true or false. No intent is necessaryto make the seller liable for his warranty.



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Effect of Opinion:

There is no sellers warranty if the seller merely expresseshis opinion as to the goods. The exception is when theseller is considered an expert on the matter and the buyerrelies on such expert opinion and buys the goods.

Art. 1340 The usual exaggerations in trade, when the otherparty has opportunity to know the facts are not inthemselves fraudulent.

Art. 1341- A mere expression of an opinion does not signify

fraud, unless made by an expert and the other party hasrelied on the formers special knowledge.

Misrepresentation in good faith is not fraudulent but mayconstitute error (Art. 1343)

Warranties in the Contract of Sale


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Warranties in the Contract of Sale

Implied Warranties: They are agreements orstipulations the existence of which is

presumed although not expressed in any

words in the contract.It automatically comes into existence when a

merchant sells goods, guaranteeing that items

sold are fit for the purpose for which goodswould ordinarily be used .

Implied Contracts:


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Warranty against eviction -the seller warrantsthat he has a right to sell the thing at the timewhen the ownership is to pass and that the buyershall from that time have and enjoy the legal

peaceful possession of the thing; Warranty against hidden defects or unknown

encumbrances - The seller guarantees the thingsold is free from any hidden faults or defects orany charge or encumbrance not declared orknown to the buyer. (Art. 1547)

Implied Contracts:


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Warranty against hidden defects or unknownencumbrances - The seller guarantees the

thing sold is free from any hidden faults or

defects or any charge or encumbrance notdeclared or known to the buyer. (Art. 1547)

Implied Contracts:


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Warranty of Fitness or Merchantability - The sellerwarrants that the seller guarantees that the thing sold isreasonably fit for the known particular purpose forwhich it was acquired by the buyer or, where it wasbought by description, that it is of merchantable quality.

(Art. 1565)

Note: the rule on warranty does not apply to a sheriff,auctioneer, mortgage, pledgee or other person who sells

by virtue of authority in fact or law. In other words, thepersons enumerated are not liable to a third personwith a legal and equitable interest in the thing sold.(Art. 1547, par. 2)

Implied Contracts:


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Implied Warranty are not applicable in the following cases:

a. As is and where is basis sale reason seller makes nowarranty at all.

b. Sale of second hand articles exception is if it is soldunder circumstances as to raise an implied warranty

c. Sale by virtue of authority in fact or law- the sheriff,auctioneer, mortgagee, pledgee or other person who

sells the object by virtue of foreclosure or execution.The rule on caveat emptor or let buyer beware applies

Warranty Against EvictionTh i i li d t t hi Th ll


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There is implied warranty as to ownership. The sellerwarrants that

a. He has the right to sell the thing either as an owneror the authorized representative of the owner.

b. He can pass legal title to the goods at the time ofdelivery;

c. The buyer shall have legal and peaceful possessionand enjoyment of the object.

Meaning of eviction:

It is a judicial process whereby the vendee is deprivedof the whole or part of the thing purchased by virtue ofa final judgment based on a right prior to the sale or anact imputable to the vendor. (Art. 1548)

EVICTION


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EVICTION

Requisites for Warranty of Eviction The vendee is deprived in whole or in part of the thing

purchased;

He is deprived by virtue of a final judgment (Art. 1557)

The judgment is based on a right prior to the sale or anact imputable to the vendor;

The vendor was summoned in the suit for eviction atthe instance of the vendee (Art. 1558); and

There is no waiver on the part of the vendee. (Art.1548)

Warranty Against EvictionW t i t i ti f t t i l


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Warranty against eviction refers to trespass in lawand not mere trespass in fact. The disturbance

refers to is disturbance of law which requires aperson to go to courts claiming the thing sold orpart thereof necessitating judgment from thecourt.

Art. 1549 Vendee has no duty to appeal from thejudgment in order to hold seller liable foreviction.

Art. 1550 If adverse possession had beencommenced before the sale but the prescriptiveperiod is completed after the transfer the vendorshall not be liable.

Warranty Against Eviction2 kinds of Prescription


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2 kinds of Prescription:

a) Acquisitive prescription right is acquired

through lapse of time.b) Extinctive prescription- when ownership or

dominion is lost through lapse of time.

Completed before the sale seller is liable because

the deprivation is based on a right prior to thesale and an act imputable to the seller.

Completed after the sale. Even if prescriptionbegun before the sale but completed after the

sale as the limit prescribed by law has beencompleted, the seller this time is not liable.Reason the vendee could easily interrupt therunning the prescriptive period by bringing the

appropriate action

Warranty Against EvictionA t 1551 f t i ti d t t


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Art.1551- refers to eviction due to non-paymentof taxes.

The vendor will be liable to the vendee foreviction if the latter is deprived of the landdue to the vendors non-payment of overdue

real estate taxes. If the vendor did not informthe vendee of the taxes in arrears at the timeof the sale, the vendor is in bad faith and willbe liable. The eviction is due to an act

imputable to the vendor.

Art. 1552 The judgment debtor is alsoresponsible for eviction in judicial sales unless

it is otherwise decreed in the judgment

Warranty Against Evictionl h d f h


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Any stipulation exempting the vendor from the

obligation to answer for eviction shall be

VOID, if he acted in bad faith. (Art. 1552)

When is in vendor in bad faith and therefore

liable in case of eviction despite the presence

of stipulation exempting him:

a. If he sells the same property to 2 or more

vendees.

b. If he knows of any cause for eviction at the

time of the sale and he did not inform the

vendee of it.

EVICTION


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EVICTION

Kinds of Waiver of Eviction

Consciente. - The waiver is voluntarily made bythe vendee without the knowledge andassumption of risks of eviction. The vendor shall

only pay the value of which the thing sold had atthe time of eviction; and

Intencionada. - The vendee makes the waiverwith knowledge of the risks of eviction and

assumption of its consequences. (Art. 1554) Thevendor is not liable for eviction if he acted ingood faith. (Art. 1553)

EVICTION


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EVICTION

Rights of the vendee in case of eviction occurs:

The return of the value which the thing sold hadat the time of the eviction, be it greater or lesser

than the price of the sale; The income or fruits if he has been ordered to

deliver them to the party who won the suitagainst him;

The costs of the suit which caused the eviction,and, in a proper case, those of the suit broughtagainst the vendor for the warranty;

EVICTION


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EVICTION

The expenses of the contract, if the vendee has paid them;

and

The damages and interests, and the ornamental expenses,if the sale was made in bad faith. (Art. 1555)

Note: In case of partial eviction, the vendee has the optioneither to enforce the vendor's liability for eviction (Art.1555) or to demand rescission of the contract. (Art. 1556)

In case the vendee is totally evicted from the thing sold,he cannot avail of the remedy contemplates that the onedemanding it is able to return whatever he has receivedunder the contract.

EVICTION


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EVICTION

Rights of the vendee in case of eviction occurs:

The return of the value which the thing sold hadat the time of the eviction, be it greater or lesser

than the price of the sale; The income or fruits if he has been ordered to

deliver them to the party who won the suitagainst him;

The costs of the suit which caused the eviction,and, in a proper case, those of the suit broughtagainst the vendor for the warranty;

EVICTION


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The vendor shall not be obliged to make goodthe proper warrant, unless he is summoned inthe suit for eviction at the instance of thevendee. (Art. 1558)

The vendee must make vendor a co-defendant.Hence the vendee has to file a third party

complaint against the vendor when sued forthe recovery of the property. (Art. 1559)

Requites of Warranty against hidden

b


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encumbrances:

Meaning of Easement or servitude:An easement or servitude imposed

upon an immovable for the benefit of

another immovable belonging to a

different owner. The immovable in favor

of which the easement is established is

known as dominant estate and that

which is subject thereto is servient

estate. (Art. 13, NCC)


b


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encumbrances:

Types of easements:a. Continuous easements those the use of which isor may be incessant, without the intervention ofhuman act.

b. Discontinuous easements those which are usedat intervals and depend upon the acts of man.

c. Apparent easements those which are madeknown and are continually kept in view byexternal signs that reveal use and enjoyment of

the same. A right of way is an apparenteasement.

d. Non-apparent easements- those which show noexternal indication of their existence. A party wallis a non-apparent easement.


b


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encumbrances:

The encumbrance must be important(the vendee would not have purchased

the property had he been aware of its

existence);

The encumbrance is not registered,

unless expressly warranted free from

burdens. Reason: Registration

constitute constructive notice.


enc mbrances


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encumbrances:

The vendee had no knowledge of the encumbrancewhether it is registered or not. Reason: Otherwise,

there is no warranty; and

The action for rescission or damages must be brought

within the proper period (supra); in case of

immovable property encumbered with any non-

apparent burden or easement-within one year from

the execution of the deed of sale. (Art. 1560)

If the period of one year has elapsed, the vendee of

an immovable may only bring an action for damages

also within one year from the discovery of the non-

apparent burden or servitude

Warranty Against Redhibition


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y g

Warranty against Redhibition - is the avoidanceof a sale on account of some service or defect in

the thing sold, which renders its use impossible,

or so inconvenient and imperfect that it must be

supposed that the buyer would not have

purchased it has he known of the vice.

Requisites of Warranty Against Redhibitory

Defects (Hidden, Physical defects):

The defect must be serious or important;

It must be hidden;

Warranty Against Redhibition


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y g

It must exist at the time of the sale; The vendee must give notice of the defect to the

vendor within a reasonable time (Art. 1586)

The action for rescission or reduction of the pricemust be brought within the proper period - 6

months from the delivery of the thing sold (Art.

1571) or within 40 days from the date of delivery

in case of animals (Art. 1577, par. 10 and;

There must be no waiver of warranty on the part

of the vendee.

WARRANTY AGAINST HIDDEN DEFECTS


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When is defect considered important: If it renders the thing sold unfit for which it is intended;

If it diminishes its fitness for such use to such extentthat the vendee would not have acquired it had he hadbeen aware thereof or would have given a lower pricefor it. (Art. 1561)

Defect is hidden when it was not known and couldnot have been known to the vendee. Hence, there is

no warranty if the defect is patent and visible.

IMPLIED WARRANTIES OF QUALITY


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QWarranty ofMerchantability is

a warranty that goods are fitfor general purpose for whichthey are sold, while warrantyof fitness is a warranty that thegoods are suitable for thespecial purpose of the buyerwhich will be satisfied by merefitness for general purpose .

Meaning of Quality of Goods-includes their state orcondition (Art. 1636).

This is aimed to promote the highstandard in business and todiscourage unfair dealings.



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Q

They are based on the

principle that HONESTY

IS THE BEST POLICY.



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Is there warranty as to quality orfitness for any particular purpose?

None. Except if:

The buyer expressly or byimplication, manifests to the sellerthe particular purpose for whichthe goods are acquired;

The buyer relies upon the seller'sskill or judgment.



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Implied Warranty of MerchantabilityWhere goods are bought bydescription, the seller impliedlywarrants that goods are ofmerchantable quality.

Merchantable is not a warranty ofquality in the sense of requiring aparticular grade but it does requireidentity between what is described

in the contract and what istendered, in the sense that thelatter is sold of such quality to havesome value.



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Sale Under Patent or Trade Namethere is no warranty as to its fitnessfor any particular purpose, unlessthere is a stipulation to thecontrary. Reason is when the

buyer by defining what he wantsexercised his own judgment insteadof relying to the upon the seller.Exception: if there is a stipulation.

Thus there is implied warranty offitness for a particular purposewhen the buyer relied upon thesellers judgment rather than thepatent or trade name.



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An implied warranty or condition as to quality orfitness for a particular purpose may be annexedby the usage of trade. (Art. 1564)

In case of a contract of sale by sample, if the selleris a dealer in goods of that kind, there is impliedwarranty that the goods shall be free from any

defect rendering them unmerchantable whichwould not be apparent on reasonableexamination of the sample.

IMPLIED WARRANTY


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The vendor is responsible to the vendee for any

hidden faults or defects in thing sold, even

though he was not aware thereof. This provision

shall not apply if the contrary has been stipulated

and the vendor was not aware of the hiddenfaults or defects in the thing sold. - Article 1566

this principle is known as caveat vendidor. A

sound price warrants a sound article.

With respect to third person, the principle of caveat

emptor still applies.

IMPLIED WARRANTY


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Caveat venditor is the general rule at present.

Caveat emptor Let the buyer beware. With

respect to third persons, caveat emptor

applies. Thus one who buy real property

without checking the vendors title where

persons other than the vendor in possession,

takes all the risk and losses consequent to

such failure in case the vendors title isdefective.

IMPLIED WARRANTY


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Alternative remedy of the buyer to enforcewarranty:

Accion redhibitoria to withdraw from thecontract.

Accion quanti minoris- demand a proportionatereduction of the price

With right of damages in either case.

This right is also given to the vendee in case ofsale of animals with redhibitory defect. Arty.1567

IMPLIED WARRANTYArt. 1568 Effect of loss of thing sold on account of hidden

d f t


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defect.

a) If the vendor was aware of the hidden defect inconsequence of which the thing sold was lost, he shallbear the loss because he acted in bad faith. In suchcase, the vendee has the right to recover:

1. Price paid

2. The expenses of the contract; and3. Damages

b) If the vendor was not aware of them, he shall be obligedonly to return:

1. Price2. the interest thereon and

3. Expenses of the contract if paid by the vendee. Nodamages as he is not guilty of bad faith.

IMPLIED WARRANTYIf the thing sold had no hidden defect; its loss


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g ;

through a fortuitous event or through fault of

the vendee is of course to be borne by the

vendee. However, the vendor is obliged to

return the price paid, less the value of the thing

at the time of loss in case where hidden defectsexisted. Under Article 1569, the vendor is still

made liable on his warranty.

The above rule shall be applicable to judicialsales, except that the judgment debtor shall

not be liable for damages. (Art.1470)

IMPLIED WARRANTY


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Prescriptive Period:

Actions arising from the provisions of the

preceding ten articles shall be barred after sixmonths, from the delivery of the thing sold.

(Art. 1471)

IMPLIED WARRANTY IN SALE OF ANIMALS


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Art. 1572. If two or more animals are sold together,

whether for a lump sum or for a separate price foreach of them, the redhibitory defect of one shall onlygive rise to its redhibition, and not that of the others;unless it should appear that the vendee would nothave purchased the sound animal or animals without

the defective one.

The latter case shall be presumed when a team, yokepair, or set is bought, even if a separate price hasbeen fixed for each one of the animals composing thesame.

IMPLIED WARRANTY IN SALE OF ANIMALS


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Art. 1573. The provisions of the preceding

article with respect to the sale of animals

shall in like manner be applicable to the sale

of other things. Art. 1574. There is no warranty agains

Documents

Review on Law on Sales