SALES_2009

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San Beda College of Law113

Anthony Escasinas

MEMORY AID IN CIVIL LAW

SALES 2009

SALE

F A nominate contract whereby one ofthe contracting parties obligateshimself to transfer the ownership ofand to deliver a determinate thingand the other to pay therefor a pricecertain in money or its equivalent.

NOTES: Delivery and payment in acontract of sale are so interrelated andintertwined with each other that withoutdelivery of the goods there is nocorresponding obligation to pay. Thetwo complement each other. It is clearthat the two elements cannot bedissociated, for the contract of purchaseand sale is essentially a bilateralcontract, as it gives rise to reciprocalobligations. (Pio Barretto Sons, Inc. vs.Compania Maritima, 62 SCRA 167).

? Neither is the delivery of the thingbought nor the payment of the pricenecessary for the perfection of thecontract of sale. Being consensual,it is perfected by mere consent.

6. Onerous.

* Aleatory contract: one of the parties orboth reciprocally bind themselves to giveor to do something in consideration ofwhat the other shall give or do upon thehappening of an event which isuncertain, or which is to occur at anindeterminate time. (Ex: Sale of sweepstakes ticket)

Contract to sell

F exclusive right and privilege topurchase an object.

F a bilateral contract whereby theprospective seller, while expresslyreserving the ownership of thesubject property despite deliverythereof to the prospective buyerbinds himself to sell the saidpropertyexclusivelytotheprospective buyer upon fulfilment ofthe condition agreed upon, that is,full payment of the purchase price.

NOTE: Absent a proviso in the contractthat the title to the property is reserved

in the vendor until full payment of thepurchase price or a stipulation giving thevendor the right to unilaterally rescindthe contract the moment the vendeefails to pay within the fixed period, thetransaction is an absolute contract ofsale and not a contract to sell. (Dignosvs. CA [1988])* The contract of sale by itself is not amode of acquiring ownership. Thecontact transfers no real rights; itmerely causes certain obligations toarise.

Contract of Sale

1. Title passes to thebuyer upon deliveryof the thing sold

F Elements:

a. Essential elements – those withoutwhich, there can be no valid sale:

1. Consent or meeting of minds 2. A Determinable subject matter 3. Price certain in money or its

equivalentb. Natural elements – inherent in the

contract, and which in the absenceof any contrary provision, aredeemed to exist in the contract:

1. Warranty against eviction 2. Warranty against hidden defectsc. Accidental elements – may be

present or absent depending on thestipulation of the parties (e.g.:conditions, interest, penalty, timeor place of payment, etc.) Contract to

Sell

1. Ownership isreserved in theseller and is not topassuntilfullpayment of thepurchase price2. Full payment is a

positive suspensivecondition,the

F Characteristics:

1.

2.

3.

4.

5.

PrincipalConsensual;Bilateral;Nominate;Commutative; In some cases,aleatory (emptio spei);

2. Non-payment ofthepriceisanegativeresolutorycondition and the failure of which is

CIVIL LAW COMMITTEE&CHAIRPERSON: Romuald Padilla &ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad &EDP: Alnaiza Hassiman, Dorothy Gayon& SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. RhodoraFerrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John StephenQuiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD),Ma. Ricasion Tugadi (Conflicts of Law)

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remedy of the selleris to exact fulfilmentor to rescind thecontract

3. Vendor loses andcannotrecoverownership of thethingsoldanddelivered until thecontract of sale isresolvedandsetaside

not a breach –casual or seriousbutsimplypreventstheobligation of the

vendor to conveytitle from havingbinding force3. Title remains inthe vendor if thevendee does notcomply with theconditionprecedentofmaking paymentatthetimespecified in thecontract

Conditional Sale Contract toSell

1.Constructive/actual knowledge onthe part of the 2nd

buyer of the defect intheseller’stitle

renders him not aregistrant in goodfaith.Such secondbuyer cannot defeatthe first buyer’s title.Ratio: Fulfilment ofthesuspensiveconditions affects theseller’s title to theproperty and previousdeliveryofthepropertyautomaticallytransfersownership/title to thebuyer.

1. Third personbuyingtheproperty despitefulfilment of thesuspensive

condition cannotbe deemed abuyer in badfaithandprospectivebuyercannotseek the relief ofreconveyance ofproperty.Exception:IfThere was noprevious sale ofthe property.

As to reservation of title to the subjectproperty

In both cases the seller may reserve thetitle to the subject property untilfulfillment of the suspensive condition i.e.full payment of the price As to effect of fulfillment of suspensive

condition1. Upon fulfillment of 1.Uponthesuspensive fulfillment of thecondition,the suspensivecontract of sale is condition, whichtherebyperfected, isthefull

such that if there had payment of thebeen previous delivery purchase price,ofthesubject ownershipwillproperty to the buyer, notownershipthereto automaticallyautomaticallytransfer to thetransferstothe buyer althoughbuyer by operation the property mayof law without any havebeenfurther act by the previouslyseller.delivered to him.

The prospectiveseller still hasto convey titletotheprospective

buyerbyentering into acontractofabsolute sale.

As to effect of sale of the subjectproperty to 3rd persons

OBJECTS OF SALERequisites:1. THINGS:

a) determinate or determinable(Arts. 1458, 1460)b) lawful (Arts 1347, 1409 [1,4]c) should not be impossible (Art.1348) e.g. must be within thecommerce of man

2. RIGHTS – must be transmissibleExceptions:

-future inheritance- service

Emptio reisperatae

1. Sale of an expectedthing

Emptio spei

1. Sale of a merehopeorexpectancythatthe thing will cometo existence; Saleof the hope itself 2. Sale produceseffect even if the

thingdoesnotcomeintoexistence, unless itis a vain hope

3. The uncertaintyis with regard tothe existence ofthe thing

4. Object is apresent thing whichis the hope orexpectancy

2. Sale is subject to

the condition that thething will exist; if itdoes not, there is nocontract

3. The uncertainty iswith regard to thequantity and quality ofthe thing and not theexistence of the thing4. Object is a futurething


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NOTE: In case of doubt the presumptionis in favor of emptio rei speratae whichis more in keeping with the commutativecharacter of the contract

Goods which may be Object of Salea. Existing goods – goods owned or

possessed by the seller.b. Future goods – goods to be

manufactured, raised or acquired bythe seller after the perfection of thecontract.

NOTES:

? A sale of future goods is valid only asan executory contract to be fulfilledby the acquisition and delivery ofgoods specified.

? While there can be sale of future

property, there can generally be nodonation of future property (Article

751 Civil Code)

? Future inheritance cannot be sold.

? A contract of sale or purchase ofgoods to be delivered at a futuretime, if entered into without theintention of having any goods passfrom one party to another, but withan understanding that at theappointed time, the purchaser ismerely to receive or pay thedifference between the contract andthe market prices, is illegal. Such

contract falls under the definition of“futures” in which the partiesmerely gamble on the rise or fall inprices and is declared null and voidby law. (Art. 2018, NCC) (Onapal

Phil. Commodities, Inc. vs. CA [1993])

F Instances when the Civil Coderecognizes sale of things not

actually or already owned by theseller at the time of the sale:

1. Sale of a thing having potentialexistence (Article 1461)

2. Sale of future goods (Article 1462)3. Contract for the delivery at a certain

price of an article which the vendorin the ordinary course of thebusiness manufactures or procuresfor the general market, whether thesame is on hand at the time or not(Article 1467)

Sale

1. Buyer receivesthe goods as owner

Agency to sell

1. Agent receivesthe goods as goodsof the principal whoretainshis

ownershipoverthem2. Agent deliversthe price which inturn he got from hisbuyer3. Agent can returnthe goods in case heis unable to sell thesame to a thirdperson4. Agent makes nowarranty for whichhe assumes personalliability as long ashe acts within his

authority and in thename of the seller5. Agent in dealingwiththethingreceived, must actandisboundaccording to theinstructions of theprincipal

2. Buyer pays theprice

3. Buyer, as ageneral rule, cannotreturn the objectsold

4. Seller warrantsthe thing sold

5. Buyer can dealwith the thing soldas he pleases beingthe owner

Contract for

Piece of Work1.Thethingtransferred is onenot in existence andwhich never wouldhave existed but forthe order of theparty desiring toacquire it

2.Theservicesdominatethecontracteventhough there is asaleofgoods

involved

Sale

1.Thethingtransferred is onewhich would haveexisted and wouldhavebeenthesubject of sale tosome other person,even if the orderhad not been given2.Theprimaryobjective of thecontract is a sale ofthe manufactureditem; it is a sale ofgoods even though

theitemismanufacturedbylabor furnished bythe seller and uponprevious order ofthe customer3.WithintheStatute of Frauds

3. Not within theStatute of Frauds


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Rules to determine if the contract isone of Sale or Piece of work:a. If ordered in the ordinary course of

business – saleb. If manufactured specially for the

customer and upon his special order,and not for the market – piece of work

SCHOOLS OF THOUGHT: a) Massachusettsrule:If

specifically done at the order ofanother, this is a contract for apiece of work. (Philippineapplication)

b) New York rule: If thing alreadyexists-SALE; if not-WORK

c) English rule: If material is more

valuable-SALE; if skill is morevaluable-WORK

BARTER

F contract whereby one of the partiesbinds himself to give one thing inconsideration of the other's promiseto give another thing.

NOTE:The only point differencebetween contract of sale and barter is inthe element which is present in sale butnot in barter, namely: price certain inmoney or its equivalent

NOTE: If the consideration is partly inmoney and partly in another thing,determine:

a. The manifest intention of theparties

b. If the intent is not clear, applythe following rules:

1. If the thing is more valuablethan money – barter

2. If the money and the thingare of equal value – sale

3. If the thing is less valuablethan money – sale

Sale

No pre-existingcredit

2. Obligations arecreated

3. Consideration onthe part of the selleris the price; on thepart of the buyer isthe acquisition of

1.

the object

4. Greater freedomin determiningthe price

pay the price

it is the acquisitionof the object offeredin lieu of the originalcredit4. Less Freedom in

determining theprice

5. The payment isreceived by thedebtorbeforethe contract isperfected.

5. Buyer still has to

PRICE

F The sum stipulated as the equivalentof the thing sold and also everyincident taken into consideration for

the fixing of the price, put to thedebit of the vendee and agreed to byhim.

F Requisites:

1. Certainty or ascertainable at thetime of perfection

2. Real, not fictitious3. In some cases, must not be

grossly inferior to the value ofthe thing sold.

4. Paid in money or its equivalent

Dation in Payment

1. Pre-existing credit

2. Obligations areextinguished3. Consideration ofthe debtor is theextinguishmentofthe debt; on thepart of the creditor,

Certainty

F It is not necessary that the certaintyof the price be actual or determinedat the time of the execution of thecontract. The price is certain in thefollowing cases:1. If the parties have fixed or

agreed upon a definite amount; NOTE: The fixing of the price can

never be left to the discretion of oneof the contracting parties. Howeverif the price fixed by one of theparties is accepted by the other, thesale is perfected.2. If it be certain with reference to

another thing certain3. If the determination of the price

is left to the judgment of aspecified person or persons evenbefore such determination

4. In the cases provided under Art.1472 NCC


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Effect when the price is fixed by thethird person designated:þGENERAL RULE: Price fixed by a thirdperson designated by the parties isbinding upon them.

þEXCEPTIONS: 1. When the third person acts in

bad faith or by mistake2. When the third person disregards

the specific instructions or theprocedure marked out by theparties

Effect when the price is not fixed bythe third person designated: 1. If the third person refuses or

cannot fix the price, thecontractshallbecomeineffective, unless the partiessubsequently agree upon theprice

2. If the third person is preventedfrom fixing the price by the faultof the seller or buyer, the partynot in fault may obtain redressagainst the party in fault

Effect of Gross Inadequacy of Price:1. Voluntary salesþGENERAL RULE: Mere inadequacy of

the price does not affect validity of thesale.

? A valuable consideration, howeversmall or nominal, if given orstipulated in good faith is, in theabsenceoffraud,sufficient.(Rodriguez vs. CA, 207SCRA 553)

? Future inheritance cannot be sold.

þEXCEPTIONS:

a. Where the price is so low as tobe shocking to the moralconscience, judicial sale ofpersonal property will be set

asideb. In the event of a resale, a better

price can be obtained

NOTE: The validity of the sale is notnecessarily affected where the law givesto the owner the right to redeem, uponthe theory that the lesser the price, theeasier it is for the owner to effectredemption.

Effect where price is simulated

1. If it is shown to have been in realitya donation or some other act orcontractF The sale is void but the act or

contract may be valid as adonation

2. If notF The contract is void and

inexistent

Effect of Failure to determine price:1. Where contract executory

F The contract is inefficacious

2. Where the thing has been deliveredto and appropriated by the buyerF The buyer must pay a reasonable

price therefore

Reasonable price – generally the marketprice at the time and place fixed by thecontract or by law for the delivery of thegoods

PERFECTION OF SALEþGENERAL RULE: It is perfected at themoment there is meeting of the minds

upon a determinate thing (object), and acertain price (consideration), even ifneither is delivered. A choice betweenrescission and fulfilment, with damagesin either case)

NOTE: Sale is a consensual contract;Hence, delivery and payment are notessential for its perfectionþEXCEPTION: When the sale is subjectto a suspensive condition by virtue oflaw or stipulation.

þEXCEPTIONS:

a. Where low price indicates vice ofconsent, sale may be annulled;or contract is presumed to be anequitable mortgage

b. Where the price is so low as tobe “shocking to conscience”,sale may be set aside.

2. Involuntary or Forced salesþGENERAL RULE: Mere inadequacy ofthe price is not a sufficient ground forthe cancellation of the sale if property isreal.


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* The terms and conditions of paymentare merely accidental, not essentialelements of the contract of sale exceptwhere the partied themselves stipulatethat in addition to the subject-matter

and the price, they are essential ormaterial to the contract.

Requirements for perfectiona. When parties are face to faceF When an offer is accepted without

conditions or qualifications NOTES:

? A conditional acceptance is acounter-offer

? when negotiated thru phone it isas if it is negotiated face to face

b. Whencontractisthru

correspondence or thru telegramF When the offeror receives or has

knowledge of the acceptance by theofferee

NOTE: If the buyer has alreadyaccepted but the seller does notknow yet of the acceptance, theseller may still withdraw

c. When a sale is subject to asuspensive condition

F From the moment the condition isfulfilled

TRANSFER OF OWNERSHIPþGENERAL RULE: While a contract ofsale is consensual, ownership of thething sold is acquired only upon itsdelivery, actual or constructive, to thebuyer. (Daus vs. Sps. De Leon, 16 June2003)

? This is true even if the purchasehas been made on credit.Payment of the purchase price isnot essential to the transfer ofownership, as long as thepropertysoldhasbeendelivered. (Sampaguita Pictures,Inc vs. Jalwindor Manufacturers,Inc. 93 SCRA 420)

? Nonpayment only creates a rightto demand payment or to rescindthe contract, or to criminalprosecution in the case ofbouncingchecks.(EDCAPublishing and Distributing Corp.vs. Santos, 184 SCRA 614)

þEXCEPTIONS:

1. Contrary stipulation or Pactumreservatidominii (contractualreservation of title) – a stipulation,usually in sales by installment,whereby, despite delivery of theproperty sold, ownership remainswith the seller until full payment ofthe price is made.

2. Contract to sell3. Contract of insurance – a perfected

contract of sale, even withoutdelivery, vests in the vendee anequitable title, an existing interestover the goods sufficient to be thesubject of insurance

RULES GOVERNING AUCTION SALES1. Sales of separate lots by auction areseparate contracts of sale.2. Sale is perfected by the fall of thehammer3. Seller has the right to bid in theauction, provided:

a) such right was reservedb) notice was given that the sale was

subject to a right to bid on behalf of theseller

c) right is not prohibited by law or bystipulation4. Advertisements for bidders are simply

invitations to make proposals, and theadvertiser is not bound to accept thehighest or lowest bidder, unless thecontrary appears.

EFFECT OF PROMISE TREATED UNDERART. 1479 Civil Code:1. Accepted unilateral promise to sell

or buy

F Only one makes the promise, thispromise is accepted by the other.

Example: A promises to sell to B, B

accepts the promise, but does not inturn promise to buy.

F does not bind the promissor even ifaccepted and may be withdrawnanytime.

NOTE: Pending notice of its withdrawal,the accepted promise partakes thenature of an offer to sell which ifaccepted, results in a perfected contractof sale (Sanchez vs. Rigos 45 SCRA3 68).In other words, if the acceptance ismade before withdrawal, it constitutes a


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binding contract of sale although theoption is given without consideration.

F if the promise is supported by aconsideration distinct and separate

from the price (option money), itsacceptance will give rise to aperfected contract.

2. Bilateral promise to buy and sell

F One party accepts the other’spromise to buy and the latter, theformer’spromisetoselladeterminate thing for a price certain

F it is reciprocally demandable

F It requires no consideration distinctfrom the selling price

NOTE: this is as good as a perfected

sale.No title of dominion istransferred as yet, the parties beinggiven only the right to demandfulfillment or damages.

Policitation

F An unaccepted unilateral promise tobuy or sell. Even if accepted by theother party, it does not bind thepromissor and maybe withdrawnanytime. This is a mere offer, andhas not yet been converted into acontract.

Option contract

F A contract granting a privilege in oneperson, for which he has paid aconsideration, which gives him theright to buy certain merchandise, atanytime within the agreed period, ata fixed price.

F An option without consideration isvoid and the effect is the same as ifthere was no option

* However, in Sanchez vs. Rigos (1972),even though the option was not

supported by a consideration, themoment it was accepted, a perfectedcontract of sale resulted, applying Art.1324 of the NCC. In view of the ruling ofthe Supreme Court, the only importanceof the consideration for an option is thatthe option cannot be withdrawn by thegrantor after acceptance.* In an option to buy, the party who hasan option may validly and effectivelyexercise his right by merely notifying theowner of the former’s decision to buy

CIVIL LAW COMMITTEE

and expressing his readiness to pay thestipulated price.

Right of First Refusal

F It is a right of first priority all thingsand conditions being equal; thereshould be identity of the terms andconditions to be offered to theoptionee and all other prospectivebuyers, with optionee to enjoy theright of first priority. A deed of saleexecuted in favor of a third partywho cannot be deemed a purchaserin good faith, and which is inviolation of the of the right of firstrefusal granted to the optionee isNOT voidable under the Statute ofFrauds, such contract is valid BUTrescissible under Article 1380 to1381(3) of the New Civil Code(Guzman Bocaling & Co. vs.Bonnavie; Riviera Filipina, Inc vs. CAet.al. GR No. 117355, April 5, 2002).

F The basis of the right of first refusalmust be the current offer to sell ofthe seller or offer to purchase of anyprospective buyer. Only after theoptionee fails to exercise its right offirst priority under the same termsand within the period contemplatedcould the owner validly offer to sellthe property to a third person,again, under the same terms asoffered to the optionee (Paranaque

Kings Enterprises, Inc. vs. CA GR No.111538, February 26, 1997)

F The lessee’s right of first option tobuy the leased property in case of itssale is but a part of the bigger rightto lease the said property from thelessor. The option was given to thelessee because she was the lessee ofthe subject property.It was acomponent of the consideration ofthe lease. The option was by nomeans an independent right whichcan be exercised by the lessee. Ifthe lessee is barred by the contractfrom assigning her right to lease thesubject property to any other party,the lessee is similarly barred toassign her first option to buy theleasedpropertytoanother.(Bangayan et.al vs. CA and Lim GRNo.123581, August 29, 1997)

&CHAIRPERSON: Romuald Padilla &ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad &EDP: Alnaiza Hassiman, Dorothy Gayon& SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. RhodoraFerrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John StephenQuiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD),Ma. Ricasion Tugadi (Conflicts of Law)

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Earnest money – or “ARRAS” issomething of value to show that thebuyer was really in earnest, and given tothe seller to bind the bargain. It isconsidered as:

a) part of the purchase priceb) proof of perfection of the

contract*It shall be deducted from the totalprice.

Earnest money1. Title passes tothe buyer upondelivery of thething sold

2.In case ofnon-payment, anaction for specificperformanceorfor rescission canbe filed by theinjured party3. Part of thepurchase price

4. When given,the buyer is boundto pay the balance5. Given whenthere is already asale

according to weight, number ormeasure

2. seller is guilty of fraud,negligence, default or violationof contractual terms

3. object sold is generic(Civil Code of the Philippines, Paras)NOTE:This view conforms withManresa’s view. Buyer would havebeen the one to profit from the thinghad it not been lost or destroyed.

Contrary view:Where the ownership is transferredby delivery, as in our code, theapplication of the axiom res peritdomino, imposes the risk of lossupon the vendor; hence, if the thingis lost by fortuitous event beforedelivery, the vendor suffers the lossand cannot recover the price fromthe vendee (Commentaries and

Jurisprudence on the Civil Code of the Philippines, Tolentino)

d. The thing is lost after delivery: Buyer bears the loss.

Question: If one does not comply, theother need not pay?

Answer: True. But this only applies whenthe seller is able to deliver but does not.

EFFECT OF LOSS AT THE TIME OF SALE:a. Thing entirely lost at the time of

perfection: Contract is void andinexistent

b. Thing only partially lost: Vendeemay elect between withdrawingfrom the contract or demanding theremainingpart,payingitsproportionate price

Sale by description

F A sale where a seller sells things asbeing of a certain kind, buyer merelyrelyingontheseller’srepresentations or descriptions.

F There is warranty that the thing soldcorresponds to the representationsor descriptions.

Sale by sample

F A sale where a small quantity of acommodity is exhibited by the seller

Option money1.Ownership isreservedtotheseller and is not topassuntilfullpayment2.In case of

non-payment, therecan be action forspecificperformance

3. Money given as adistinctconsideration for anoption contract4. The would-bebuyer is not requiredto buy5. Applies to a sale

not yet perfected

RULES ON RISK OF LOSS ANDDETERIORATION:a. The thing sold is lost before

perfection: Seller bears the loss.b. The thing sold is lost at the time of

perfection: Contract is void orinexistent.

c. The thing sold is lost afterperfection, but before delivery:

þGENERAL RULE: Who bears the riskof loss is governed by thestipulations in the contractF Intheabsenceofany

stipulation:First view:Buyer bears the loss as an exceptionto the rule of res perit domino.þEXCEPTIONS:1. when object sold consists of

fungible goods for a price fixed


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as a fair specimen of the bulk, whichis not present and as to which thereis no opportunity to inspect orexamine. NOTE: The mere exhibition of the

sample does not necessarily make ita sale by sample. This exhibitionmust have been the sole basis orinducement of the sale.

F There is warranty that the bulk ofthe commodity will correspond inkind, quality, and character with thesample exhibited.

NOTE: In a sale by sample and bydescription, there is a two-foldwarranty.

RIGHTS OF BUYER:1) Return the thing and recover themoney paid, or2) Retain the thing and sue for thebreach of warranty.

PURCHASE BY MINORS: Contract isgenerally voidable but in case ofnecessaries, “where necessaries are soldand delivered to a minor or other personwithout capacity to act, he must pay areasonable price therefore. Necessaries

are those in Art. 290.”

FORMALITIES OF CONTRACT OF SALEþGENERAL RULE: Sale is a consensualcontract and is perfected by mereconsent.þEXCEPTIONS:Inordertobeenforceable by action, the followingmust be in writing: 1. Sale of personal property at a

price not less than P500 2. Sale of real property or an

interest therein 3. Sale of property not to be

performed within a year fromthe date thereof

4. “Applicable statute” requiresthat the contract of sale be in acertain form

NOTE: Statute of Frauds is applicableonly to executory contracts and not tocontracts which are totally or partiallyperformed.

CAPACITY TO BUY OR SELLþGENERAL RULE: All persons who canbind themselves also have legal capacityto buy and sell.þEXCEPTIONS:

1. Absolute incapacity (minors,demented persons, imbeciles,deaf and dumb, prodigals, civilinterdictees) - party cannot bindthemselves in any case.

2. Relative incapacity – incapacityexists only with reference tocertain persons or a certain classof property

Relative IncapacityA. Husband and wife (Art. 1490):

Generally, a sale by one spouse toanother is void.

F The husband and wife cannot sellproperty to each other except:

1. When a separation of propertywas agreed upon by the spouses

2. When there has been a judicialseparation of property underArticle 134 and 135 of the FamilyCode

B. Incapacity by reason of relation toproperty (Art. 1491)

F The following persons cannot acquireproperty by purchase, even at apublic auction, either in person orthrough the mediation of another:

(GAEP-JO) 1. the guardian, with respect to the

property of his ward; 2. agents, with respect to the

property whose administration orsale may have been entrusted tothem, unless the consent of theprincipal has been given;

3. executor or administrator, withrespect to the property of the

estate under administration; 4. public officers and employees,

with respect to the properties ofthe government, its politicalsubdivisions, or GOCCs, that areentrusted to them;

5. judges, justices, prosecutingattorneys, clerks of courts, etc.,with respect to the property incustogia legis; and


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6. any other person speciallydisqualified by law.

Examples of persons especiallydisqualified by law:

a. Aliens who are disqualified to

purchase agricultural landsb. An unpaid seller having a rightof lien or having stopped thegoods in transitu, who isprohibited from buying the goodseither directly or indirectly inthe resale of the same, at publicor private sale which he maymakec. The officer holding theexecution, or his deputy.

NOTE: While those disqualifiedunder Arts. 1490 and 1491 maynot become lessees (Art. 1646),

still aliens may become lesseeseven if they cannot buy lands.

F Effect of violation: a) With respect to nos. 1 to 3: the

sale is VOIDABLE.Reason: only private rights,which are subject to ratificationare violated

NOTE: In the case of Lao vs.Genato, 137 SCRA 77, theSupreme Court found that the

sale by the administrator ofcertain properties of the estatein order to settle the existingobligations of the estate was

made to the administrator’s sonfor a grossly low price.

Furthermore, the said sale wasnot submitted to the probatecourt for approval as mandatedby the order authorizing theadministrator to sell. The salewas indubitably illegal, irregularand fictitious, and the court’sapprovaloftheassailed

compromise agreement violatedArticle 1491 and cannot work toratify a fictitious contract whichis non-existent and void fromthe very beginning

b) With respect to nos. 4 to 6: thesale is NULL AND VOID.Reason: violation of publicpolicy cannot be subject toratification

OBLIGATIONS OF THE VENDOR: (WPD-TT)1. Transfer ownership (cannot be

waived)2. Deliver the thing sold (cannot be

waived)3. Warrant against eviction and against

hidden defects (can be waived ormodified since warranty is not anessential element of the contract of sale)

4. Take care of the thing, pendingdelivery, with proper diligence(Article 1163)

5. Pay for the expenses of the deed ofsale, unless there is stipulation tothe contrary

DELIVERY

F Is a mode of acquiring ownership, asa consequence of certain contractssuch as sale, by virtue of which,actually or constructively, the objectis placed in the control andpossession of the vendee.

? Delivery of the thing together

with the payment of the price,marks the consummation of thecontract of sale(PNB vs. Ling, 69

Phil. 611)? In all forms of delivery, it isnecessary that the act ofdelivery be coupled with theintention of delivering the thing.The act without the intention isinsufficient. (Norkis Distributor,Inc. vs. CA, 195 SCRA 694)

F Kinds:

1. Actual or real – placing the thingunder the control and possession of

the buyer.2. Legal or constructive – delivery isrepresented by other signs or actsindicative thereof

a. delivery by the execution of apublic instrument.

NOTE: Gives rise only to a primafacie presumption of delivery whichis destroyed when actual delivery isnot effected because of a legalimpediment (Ten Forty Realty vs.Cruz, 10 Sept. 2003)


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b. traditio symbolica - to effectdelivery, the parties make use ofa token or symbol to representthe thing delivered

c. traditio longa manu – seller

pointing out to the buyer thethings which are transferred,which at the time must be insight.

d. traditio brevi manu – buyersimply continues in possession ofthe thing but under title ofownership.

e. traditioconstitutumpossessorium – seller continuesin possession but under adifferenttitleotherthanownership.

3. Quasi-tradition – delivery of rights,

credits or incorporeal property,made by:a. placing titles of ownership in the

hands of buyerb. allowing buyer to make use of

rights4. Tradition by operation of law

Constructive delivery requires threethings before ownership may betransferred:

1. The seller must have control overthe thing2. The buyer must be put under control3. There must be the intention to

deliver the thing for purposes ofownership

When is the vendor not bound todeliver the thing sold:1. If the vendee has not paid him the

price2. If no period for payment has been

fixed in the contract

3. Even if a period for payment hasbeen fixed in the contract, if thevendee has lost the right to makeuse of the same.

Sale or return

F Property is sold, but the buyer, whobecomes the owner of the propertyon delivery, has the option to returnthe same to the seller instead ofpaying the price.

NOTES:

? It is a kind of sale with a conditionsubsequent.

? The buyer must comply with the

expressor impliedconditionsattached to the return privilege;otherwise,thesalebecomesabsolute.

? Buyer, being the owner, bears therisk of loss

Sale on trial, approval, or satisfaction

F A contract in the nature of an optionto purchase if the goods prove to besatisfactory, the approval of thebuyer being a condition precedent.

F Rules:

1. title remains in the seller2. risk ofloss remains with seller

except when the buyer is at fault orhas agreed to bear the loss

3. buyer must give goods a trial, exceptwhere it is evident that it cannotperform the work

4. period within which buyer mustsignify his acceptance runs onlywhen all the parts essential for theoperation of the object have beendelivered.

5. if it is stipulated that a third personmust satisfy approval or satisfaction,the provision is valid, but the thirdperson must be in good faith. Ifrefusal to accept is not justified,seller may still sue.

6. Generally, the sale and delivery to abuyer who is an expert on the objectpurchased is not a sale on approval,trial, or satisfaction.

Sale or return

1. Subject to aresolutory condition

2. Depends entirelyon the will of thebuyer

3.Ownershippasses to the buyeron delivery andsubsequent returnreverts ownershipin the seller

4. Risk of loss orinjury rests uponthe buyer

Sale on Trial

1.Subjecttoasuspensive condition

2. Depends on thecharacter or quality ofthe goods

3. Ownership remainsin the seller untilbuyersignifieshisapprovaloracceptance totheseller

4. Risk of loss remainswith the seller


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Instances where Seller is still theOwner despite Delivery:1. Sale on trial, approval or satisfaction2. Contrary intention appears by the

term of the contract;

3. Implied reservation of ownership(Article 1503)a. If under the bill of lading, the

goods are deliverable to seller oragent or their order;

b. If the bill of lading, althoughstating that the goods are to bedelivered to the buyer or hisagent, is kept by the seller or hisagent;

c. When the buyer, although thegoods are deliverable to order ofbuyer, and although the bill oflading is given to him, does not

honor the bill of exchange sentalong with it.

Transfer of ownership where goodssold delivered to carrierGeneral Rule: Delivery to the carrier isdeemed to be delivery to the buyerException:Where the right ofpossession or ownership of specific goodssold is reserved

SALE OF GOODS BY A NON-OWNER

þGENERAL RULE: Buyer acquires no titleeven if in good faith and for value underthe maxim Nemo dat quid non habet(“You cannot give what you do nothave”).þEXCEPTIONS: (SMERVS) 1. Owner is estopped or precluded

by his conduct 2. When sale is made by the registered owner or apparent

owner in accordance withrecording or registration laws

3. Sales sanctioned by judicial orstatutory authority

4. Purchases in a merchant's store,fairs or markets

5. When a person who is not theowner sells and delivers a thing,

subsequentlyacquirestitlethereto (Art. 1434)

6. When the seller has a voidable title which has not been avoided

at the time of the sale (Art.1506)

* “Unlawful deprivation” is no longerlimited to a criminal act. There isUnlawful Deprivation where there is novalid transmission of ownership.

Place of delivery of goods1. Where there is an agreement, place

of delivery is that agreed upon2. Where there is no agreement, place

of delivery determined by usage oftrade

3. Where there is no agreement and noprevalent usage, place of delivery isthe seller’s place

4. In any other case, place of deliveryis the seller’s residence

5. In case of specific goods, which tothe knowledge of the parties at the

time the contract was made were insome other place, that place is theplace of delivery, in the absence ofagreement or usage of trade to thecontrary

Time of delivery of goods1. Stipulated time2. In the absence thereof, within a

reasonable time

NEGOTIABLE DOCUMENT OF TITLE

(NDT)F A document of title in which it is

stated that the goods referred totherein will be delivered to thebearer, or to the order of any personnamed in such document.

F May be negotiated by delivery orindorsement.

The document is negotiable if:1. The goods are deliverable to the

bearer; or2. If the goods are deliverable to the

order of a certain person

Persons who may negotiate NDT:1. The owner; or2. Any person to whom the possession

or custody thereof has beenentrusted by the owner, if by theterms of the document the baileeissuing the document undertakes todeliver the goods to the order of theperson to whom the possession orcustody of the document has beenentrusted or if at the time of such


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entrusting the document in suchform that it may be negotiated bydelivery.

* If the holder of a negotiable documentof title (deliverable to bearer) entruststhe document to a friend for deposit,but the friend betrays the trust andnegotiates the document by delivering itto another who is in good faith, the saidowner cannot impugn the validity of thenegotiation. As between two innocentpersons, he who made the loss possibleshall bear the loss, without prejudice tohis right to recover from the wrongdoer.

RIGHTS OF PERSON TO WHOM

DOCUMENT HAS BEEN NEGOTIATED:1) The title of the person negotiating thedocument, over the goods covered bythe document;2) The title of the person (depositor orowner) to whose order by the terms ofthe document the goods were to bedelivered, over such goods;3) The direct obligation of the bailee tohold possession of the goods for him, asif the bailee had contracted to himdirectlyNOTE; Mere transferee does not acquiredirectly the obligation of the bailee (in

Art. 1513). To acquire it, he must notifythe bailee.

WHOCANDEFEATRIGHTS TRANSFEREE: 1. Creditor of transferor

2. Transferor3. Subsequent purchaser

OF

NOTE: Acceptance, even if not expressmay be implied when the buyerexercises acts of ownership over theexcess goods.

RULES WHEN GOODS MIXED WITHGOODS OF DIFFERENT DESCRIPTION:

F Buyer may accept the goods whichare in accordance with the contractand reject the rest

NOTE: If the subject matter isindivisible, in case of delivery of largerquantity of goods or of mixed goods, thebuyer may reject the whole of the goods

DELIVERY TO THE CARRIER

þGENERAL RULE: Where the seller isauthorized or required to send the goodsto the buyer, delivery to the carrier isdelivery to the buyer.þEXCEPTIONS: 1. When a contrary intention

appears 2. Implied reservation of ownership

under pars. 1,2,3 of Art. 1503

F Kinds of Delivery to the Carrier

RULES WHEN QUANTITY IS LESS THANAGREED UPON: 1. Buyer may reject; or

2. Buyer may accept what has beendelivered, at the contract rate

RULES WHEN QUANTITY IS MORE THANAGREED UPON: 1. Buyer may reject all; or 2. Buyer may accept the goods

agreed upon and reject the rest;or

3. Buyer may accept all and mustpay for them at the contractrate

a. C.I.F. (cost, insurance, freight) –signify that the price fixed

covers not only the costs of thegoods, but the expense of thefreight and the insurance to bepaid by the seller

b. F.O.B. (free on board) – goodsare to be delivered free ofexpense to the buyer to thepoint where they are F.O.B. Thepoint of F.O.B., either at thepoint of shipment or the point ofdestination, determines whenthe ownership passes.

NOTE: the terms C.I.F. and F.O.B.merely make rules of presumption

c. C.O.D. (collect on delivery) – thecarrier acts for the seller incollecting the purchase price,which the buyer must pay toobtain possession of the goods.

SELLER’S DUTY AFTER DELIVERY TOCARRIER1. To enter on behalf of buyer into suchcontractreasonableunderthecircumstances


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2. To give notice to buyer regardingnecessity of insuring the goods

PAYMENT OF THE PURCHASE PRICE

þGENERAL RULE: The seller is not boundto deliver the thing sold unless thepurchase price has been paid.þEXCEPTION: The seller is bound todeliver even if the price has not beenpaid, if a period of payment has beenfixed.

Sale of Real Property by Unit

F Entire area stated in the contractmust be delivered

F When entire area could not bedelivered, vendee may:

1. Enforce the contract with thecorresponding decrease in price2. Rescind the sale:

a. If the lack in area is at least1/10 than that stated orstipulated

b. If the deficiency in qualityspecified in the contractexceeds 1/10 of the priceagreed upon

c. If the vendee would not havebought the immovable hadhe known of its smaller areaofinferiorqualityirrespective of the extent oflack of area or quality

Sale for a Lump Sum (A Cuerpo Cierto)

F Vendor is obligated to deliver all theland included within the boundaries,regardless of whether the real areashould be greater or smaller

F Ordinarily, there can be no rescissionor reduction or increase whether thearea be greater or lesser, unlessthere is gross mistake.

NOTE: The Civil Code presumes that thepurchaser had in mind a particular pieceof land and that he ascertained its areaand quality before the contract of salewas perfected. If he did not do so, or ifhaving done so he made no objectionand consented to the transaction, he canblame no one but himself (Teran vs.Villanueva Viuda de Riosa 56 Phil 677). What is important is the deliveryof all the land included in theboundaries.

CIVIL LAW COMMITTEE

DOUBLE SALE (Art. 1544)F Requisites: VOCS

1. two or more transactions mustconstitute valid sales;

2. they must pertain exactly to thesame object or subject matter;

3. they must be bought from the sameor immediate seller; AND

4. two or more buyers who are at oddsover the rightful ownership of thesubject matter must represent

conflicting interests.

F Rules of preference:1. Personal Property

a. first possessor in good faith2. Real Property

a. first registrant in good faithb. first possessor in good faithc. person with oldest title in good

faith

NOTES:

? Purchaser in Good Faith – one whobuys the property of another withoutnotice that some other person has aright to or interest in such propertyand pays a full and fair price for thesame at the time of such purchase orbefore he has notice of the claim or

interest of some other person in theproperty (Veloso vs. CA).

? Registrationrequiresactualrecording; if the property was neverreally registered as when theregistrar forgot to do so although hehas been handed the document,there is no registration.

? Possession is either actual orconstructive since the law made nodistinction (Sanchez vs. Ramos 40Phil614)

? Possession in Art.1544 includes notonly material but also symbolicpossession (Ten Forty Realty vs.Cruz, 10 Sept. 2003.)

? Title means title because of sale,and not any other title or mode ofacquiring property (Lichauco vs.Berenguer 39 Phil 642)

? Hernandez vs. Katigbak Rule: Whenthe property sold on execution isregisteredunderTorrens,registration is the operative act thatgives validity to the transfer or


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creates a lien on the land, and apurchaser on execution sale is notrequired to go behind the registry todetermine the conditions of theproperty. Exception: Where the

purchaser had knowledge, prior to orat the time of the levy, of suchprevious lien or encumbrance, hisknowledgeisequivalenttoregistration.

CONDITIONF Effect of Non-fulfillment of Condition 1. If the obligation of either party

is subject to any condition andsuch condition is not fulfilled,such party may either:

a. refuse to proceed with thecontract

b. proceed with the contract ,waiving the performance ofthe condition.

2. If the condition is in the natureof a promise that it shouldhappen, the non-performance ofsuch condition may be treatedby the other party as breach ofwarranty.

NOTE: A distinction must be madebetween a condition imposed on theperfection of a contract and a conditionimposed merely on the performance ofan obligation. The failure to comply withthe first condition would prevent thejuridical relation itself from coming intoexistence, while failure to comply withthe second merely gives the optioneither to refuse or proceed with the saleor to waive the condition.

EFFECT IF BUYER HAS ALREADY SOLD THE GOODS:General Rule: The unpaid seller’s rightto lien or stoppage in transitu remainseven if buyer has sold the goods.

Except:1) When the seller has given consentthereto, or2) When the buyer is a purchaser in goodfaith for value of a negotiable documentof title.

WARRANTY

F a statement or representation madebythesellerofgoods,contemporaneously and as a part ofthe contract of sale, havingreference to the character, quality,or title of the goods, and by whichhe promises or undertakes to insurethat certain facts are or shall be ashe then represents.

F Kinds:

1. EXPRESS – any affirmation of fact orany promise by the seller relating tothe thing if the natural tendency ofsuch affirmation or promise is toinduce the buyer to purchase thesame and if the buyer purchases the

thing relying thereon

NOTE: A mere expression of opinion, nomatter how positively asserted, does notimport a warranty unless the seller is anexpert and his opinion was relied uponby the buyer.

2. IMPLIED- that which the lawderives by implication or inferencefrom the nature of the transaction ortherelativesituationorcircumstancesoftheparties,

irrespective of any intention of theseller to create it.

a. Warranty against evictionb. Warranty against hidden defectsc. Warranty as to Fitness and

MerchantabilityNOTE: An implied warranty is a natural,not an essential element of a contract,and is deemed incorporated in thecontract of sale. It may however, bewaivedormodifiedbyexpressstipulation. (De Leon)

? The mere fact that the second

contract of sale was perfected ingood faith is not sufficient if, beforetitle passes, the second vendeeacquires knowledge of the firsttransaction.The good faith orinnocence of the posterior vendeeneeds to continue until his contractripens into ownership by tradition orregistration. (Palanca vs. Dir. Of Lands, 46 PHIL 149)


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There is no implied warranty as to thecondition,adaptation,fitnessorsuitability or the quality of an articlesold as a second-hand article. But sucharticles might be sold under such

circumstances as to raise an impliedwarranty.* A certification issued by a vendor thata second-hand machine was in A-1condition is an express warranty bindingon the vendor. (Moles vs. IAC [1989])

A. Warranty against eviction

F Warranty in which the sellerguarantees that he has the right tosell the thing sold and to transferownership to the buyer who shall notbe disturbed in his legal andpeaceful possession thereof.

whatever he has received under thecontract. Since the vendee can no longerrestore the subject-matter of the sale tothe vendor, rescission cannot be carriedout.

* The suit for the breach can be directedonly against the immediate seller, notsellers of the seller unless such sellershad promised to warrant in favor of laterbuyers or unless the immediate sellerhas expressly assigned to the buyer hisown right to sue his own seller.NOTE: The disturbance referred to inthe case of eviction is a disturbance inlaw which requires that a person go tothe courts of justice claiming the thingsold, or part thereof and invoking

reasons. Mere trespass in fact does notgive rise to the application of thedoctrine of eviction.

F Elements:

1. vendee is deprived, in whole orin part, of the thing purchased;

2. the deprivation is by virtue of afinal judgment;

3. the judgment is based on a priorright to the sale or an actimputable to the vendor;

4. the vendor was summoned in thesuit for eviction at the instanceof the vendee; AND

5. no waiver of warranty by thevendee.

1. Total eviction: (VICED)a. Value of the thing at the time of

eviction;b. Income or fruits if he has been

ordered to deliver them to theparty who won the suit;

c. Costs of the suit;d. Expenses of the contract; AND

e. Damages and interests if the salewas in bad faith.

2. Partial eviction: a. to enforce vendor’s liability

for eviction (VICED); OR b. to demand rescission of

contract.

F Vendor’s liability is waivable but any

F Vendor's liability shall consist of:

stipulation exempting the vendorfrom the obligation to answer foreviction shall be void if he acted inbad faith.

? Kinds of Waiver: a. Consciente – voluntarily

made by the vendee withouttheknowledgeandassumption of the risks ofeviction

NOTE: vendor shall pay only thevalue which the thing sold had atthe time of evictionb. Intencionada – made by the

vendee with knowledge ofthe risks of eviction andassumptionofitsconsequences

EFFECT: vendor not liableNOTE: Every waiver is presumed to beconsciente. To consider it intencionada,it must be accompanied by somecircumstancewhichrevealsthevendor’s knowledge of the risks ofeviction and his intention to submit tosuch consequences.

Question: Why is rescission not a remedyin case of total eviction?Answer: Rescission contemplates thatthe one demanding it is able to return

CIVIL LAW COMMITTEE

WHERE IMMOVABLE SOLD ENCUMBEREDWITH NON-APPARENT BURDEN1. Right of vendee a) recission, or

b) indemnity


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2. When right cannot be exercised: a) if the burden or servitude isapparent

b) if the non-apparent burden orservitude is registered

c) if vendee had knowledge of theencumbrance, whether it is registeredor not 3. When action must be brought - within ONE YEAR from theexecution of the deed of sale

B. Warranty against hidden defects

F Warranty in which the sellerguarantees that the thing sold is freefrom any hidden faults or defects orany charge or encumbrance notdeclared or known to the buyer.

c. damages2. If vendor was not aware, he shall be

obliged to return: (PIE)a. price paidb. interest thereon

c. expenses of the contract if paidby the vendee

Effect if the cause of loss was not thehidden defect

? If the thing sold had any hidden faultat the time of the sale, and shouldthereafter be lost by a (1) fortuitousevent OR (2) through the fault of thevendee:

F the vendee may demand of thevendor the price which he paidless the value of the thing at the

time of its loss. NOTE: the difference between the

price paid and the value of the thingat the time of its loss represents thedamage suffered by the vendee andthe amount which the vendorenriched himself at the expense ofthe vendee

? If the vendor acted in bad faith: F vendor shall pay damages to the

vendee

C. Implied Warranties of QualityWarranty of Fitness

F Warranty in which the sellerguarantees that the thing sold isreasonably fit for the knownparticular purpose for which it wasacquired by the buyer

F Elements: (SHENPW)

1. defect must be Serious orimportant;

2. it must be Hidden;3. it must Exist at the time of the

sale;4. vendee must give Notice of the

defect to the vendor within areasonable time;

5. action for rescission or reductionof price must be brought withinthe proper Period (within 6 mos.

from delivery of the thing or 40days from date of delivery incase of animals); and

6. no Waiver of the warranty.

F Remedies of the Vendee:

a. Accion redhibitoria (rescission) b. Accion quanti minoris (reduction

of the price)NOTES:

? Hidden faults or defects pertain onlyto those that make the object unfit

for the use for which it was intended at the time of the sale.

? This warranty in Sales is applicablein Lease (Yap vs. Tiaoqui 13Phil433)

Effect of loss of thing on account of hidden defects:1. If vendor was aware of hidden

defects, he shall bear the loss andvendee shall have the right torecover: (PED)

a. the price paidb. expenses of the contract

CIVIL LAW COMMITTEE

þGENERAL RULE: There is no impliedwarranty as to the quality or fitness forany particular purpose of goods under acontract of saleþEXCEPTIONS: 1. Where the buyer, expressly or by

implication manifests to theseller the particular purpose forwhich the goods are required

2. Where the buyer relies upon theseller’s skill or judgment

Warranty of Merchantability

F Warranty in which the sellerguarantees, where the goods werebought by description, that they are


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reasonably fit for the generalpurpose for which they are sold

F It requires identity between what isdescribed in the contract AND whatis tendered, in the sense that thelatter is of such quality to have somevalue

Instances where implied warranties areinapplicable:1. As is and where is sale - vendor

makes no warranty as to the qualityor workable condition of the goods,and that the vendee takes them inthe condition in which they arefound and from the place where theyare located.

2. Sale of second-hand articles

3. Sale by virtue of authority in fact orlaw

Caveat Venditor (“Let the sellerbeware”): the vendor is liable to thevendee for any hidden faults or defectsin the thing sold, even though he wasnot aware thereof.

Caveat Emptor (“Let the buyerbeware”): requires the purchaser to beaware of the supposed title of the

vendor and one who buys withoutchecking the vendor’s title takes all therisks and losses consequent to suchfailure.

RULES IN CASE OF SALE OF ANIMALS1. When two or more animals have beensold at the same time and theredhibitory defect is in one, or some ofthem but not in all, the general rule isthat the redhibition will not affect theothers without it.It is immaterialwhether the price has been fixed for a

lump sum for all the animals or for aseparate price for each.2. No warranty against hidden defectsof animals sold at fairs or at publicauctions, or of livestock sold ascondemned.This is based on theassumption that the defects must havebeen clearly known to the buyer.3. Sale of animals shall be void when:

a) animals sold are suffering fromcontagious disease

b) if the use or service for whichthey are acquired has been stated in the

CIVIL LAW COMMITTEE

contract, and they are found to be unfittherefor4. Limitation of the action: 40 daysfrom the date of their delivery to thevendee

5. Vendor shall be liable if the animalshould die within 3 days after itspurchase if the disease which caused thedeath existed at the time of the contract

OBLIGATIONS OF THE VENDEE:A. Principal Obligations:1. To accept delivery2. To pay the price of the thing sold in

legal tender unless another modehas been agreed upon

NOTE:A grace period granted thevendee in case of failure to pay the

amount/s due is a right not anobligation. The grace period must notbe likened to an obligation, the non-payment of which, under Article 1169 ofthe Civil Code, would still generallyrequire judicial or extra-judicial demandbefore “default” can be said to arise(Bricktown Dev’t Corp vs. Amor TierraDev’t Corp. 57SCRA437)

B. Other Obligations1. To take care of the goods without

the obligation to return, where thegoods are delivered to the buyer andhe rightfully refuses to accept

NOTES:F The buyer in such a case is in the

position of a bailee who has hadgoods thrust upon him withouthis assent. He has the obligationto take reasonable care of thegoods but nothing more can bedemanded of him.

F The goods in the buyer’spossessionunderthesecircumstances are at the seller’srisk

2. To be liable as a depositary if hevoluntarily constituted himself assuch

3. To pay interest for the periodbetween delivery of the thing andthe payment of the price in thefollowing cases:a. Should it have been stipulated


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b. Should the thing sold anddelivered produce fruits orincome

c. Should he be in default, fromthe time of judicial or extra-

judicial demand for the paymentof the price

F Pertinent Rules:1. The vendor is not required to deliver

the thing sold until the price is paidnor the vendee to pay the pricebefore the thing is delivered in theabsence of an agreement to thecontrary (Article 1524).

2. If stipulated, the vendee is bound toaccept delivery and to pay the priceat the time and place designated;

3. If there is no stipulation as to thetime and place of payment anddelivery, the vendee is bound to payat the time and place of delivery

4. In the absence of stipulation as tothe place of delivery, it shall bemade wherever the thing might be atthe moment the contract wasperfected (Article 1251)

5. If only the time for delivery has beenfixed in the contract, the vendee isrequired to pay even before thething is delivered to him; if only thetime for payment has been fixed,

the vendee is entitled to deliveryeven before the price is paid by him(Article 1524)

Ways of accepting goods:1. Express acceptance2. Implied acceptance a. When buyer does an act which

only an owner can do, b. Failure to return goods after

reasonable lapse of time

NOTES:

? The retention of goods is strongevidence that the buyer hasaccepted ownership of the goods.

? Delivery and acceptance are twoseparate and distinct acts ofdifferent parties

F Delivery is an act of the vendorand one of the vendor’sobligations; vendee has nothingto do with the act of delivery bythe vendor

CIVIL LAW COMMITTEE

F Acceptance is an obligation ofthe vendee; acceptance cannotbe regarded as a condition tocomplete delivery;

F seller must comply with the

obligation to deliver althoughthere is no acceptance yet bythe buyer

? Acceptance by the buyer mayprecede actual delivery; there maybeactualreceiptwithoutacceptance and there may beacceptance without receipt

? Unless otherwise agreed upon,acceptance of the goods by thebuyer does not discharge the sellerfrom liability for damages or otherlegal remedy like for breach of anypromise or warranty

When vendee may suspend payment of the price:1. If he is disturbed in the possession or

ownership of the thing bought2. If he has well-grounded fear that his

possession or ownership would bedisturbed by a vindicatory action orforeclosure of mortgage

NOTES:

? If the thing sold is in the possessionof the vendee and the price isalready in the hands of the vendor,the sale is a consummated contractand Article 1590 is no longerapplicable.Article1590,presupposes that the price or anypart thereof has not yet been paidand the contract is not yetconsummated.

? Under Article 1590, the vendee hasno cause of action for rescissionbefore final judgement, otherwisethe vendor might become a victim ofmachinations between the vendeeand the third person

? Disturbance must be in possessionand ownership of the thing acquired

? If the disturbance is caused by theexistence of non-apparent servitude,the remedy of the buyer isrescission,notsuspensionofpayment.


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When vendee cannot suspend paymentof the price even if there isdisturbance in the possession orownership of the thing sold:1. if the vendor gives security for the

return of the price in a proper case2. if it has been stipulated that

notwithstandinganysuchcontingency, the vendee must makepayment (see Article 1548 par.3)

3. if the vendor has caused thedisturbance or danger to cease

4. if the disturbance is a mere act oftrespass

5. if the vendee has fully paid the price

REMEDIES FOR BREACH OF CONTRACT

A. Remedies of the seller1. Action for payment of the price (Art.1595)

2. Action for damages for non-acceptance of the goods (Art. 1596)

3. Action for rescission (Art. 1597)B. Remedies of the buyer1. Action for specific performance (Art.

1598)2. Action for rescission or damages for

breach of warranty (Art 1599)

A. REMEDIES OF THE SELLER FOR

BREACH OF CONTRACTF IN CASE OF MOVABLES1. Ordinary Remedies a. Movables in General – Failure of

the vendee to appear to receivedelivery or, having appeared,failure to tender the price at thesame time, unless, a longerperiod for its payment has beenstipulated

F action to rescind the sale(Art. 1593)

b. Sale of Goods –

F action for the price (Art.

1595) F action for damages (Art.

1596)2. Unpaid Seller

F Types: a. The seller of the goods who has

not been paid or to whom theprice has not been tendered

b. The seller of the goods, in case abill of exchange or othernegotiable instrument has been

CIVIL LAW COMMITTEE

received as conditional payment,AND the condition on which itwas received has been broken byreason of the dishonor of theinstrument, insolvency of the

buyer or otherwise.F Remedies:1. Possessory lien over the goods2. Right of stoppage in transitu after he has parted with the

possession of the goods and thebuyer becomes insolvent

3. Special Right of resale4. Special Right to rescind the sale5. Action for the price6. Action for damages

3. Article 1484 or Recto LawF Remedies of vendor in sale of

personal property by installments

F Requisites: 1. Contract of sale 2. Personal property 3. Payable in installments 4. In the case of the second and

third remedies, that there hasbeen a failure to pay two ormore installments

NOTE: Apply likewise to contractspurporting to be leases of personalproperty with option to buy

F Art. 1484 does not apply to a sale: 1. Payable on straight terms (partly

in cash and partly in one term) 2. Of Real property

F Remedies: 1. Specificperformanceupon

vendee’s failure to pay NOTE: Does not bar full recovery for

judgment secured may be executedon all personal and real properties ofthe buyer which are not exemptfrom execution (Palma v. CA.)

2. Rescission of the sale if vendeeshall have failed to pay two or

more installments NOTES:

? Nature of the remedy – whichrequires mutual restitution – barsfurther action on the purchaseprice (Nonato vs. IAC.)

? þGENERAL RULE: cancellationofsalerequiresmutualrestitution, that is all partial


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payments of price or rents mustbe returned

þEXCEPTIONS: a stipulation thatthe installments or rents paidshall not be returned to the

vendee or lessee shall be validinsofar as the same may not beunconscionableunderthecircumstan-ces (Article 1486).

3. Foreclosure of the chattelmortgage on the thing sold ifvendee shall have failed to paytwo or more installments. In thiscase, there shall be no furtheraction against the purchaser torecover unpaid balance of theprice.

NOTES:

? Further recovery barred only fromthe time of actual sale at public auctionconducted pursuant to foreclosure(Macondray vs. Tan.)

? Other chattels given as securitycannot be foreclosed if they are notsubject of the installment sale (Ridad vs.Filipinas investment and Finance Corp.GR 39806, Jan. 28, 1983)

? If the vendor assigns his right to afinancing company, the latter may beregarded as a collecting agency of thevendor and cannot therefore recover anydeficiency from the vendee (Zayas vs.Luneta Motors Co.)

? When the vendor assigns his credit toanother person, the latter is likewisebound by the same law. Accordingly,when the assignee forecloses on themortgage, there can be no furtherrecovery of the deficiency and thevendor-mortgagee is deemed to haverenounced any right thereto (Borbon IIvs.ServicewideSpecialist,Inc.258SCRA658)NOTE: However, Article 1484(3) doesNOT bar one to whom the vendor hasassigned on with a recourse basis hiscredit against the vendee fromrecovering from the vendor theassigned credit in full although thevendor may have no right of recoveryagainst the vendee for the deficiency(Filipinas Invest. & Finance Corp. vs.Vitug, Jr. 28SCRA658)

NOTE: Remedies are alternative andexclusive

F IN CASE OF IMMOVABLES

1. Ordinary Remedies a. In case of anticipatory breach –

F rescission (Article 1591)

b. Failure to pay the purchase price–

F rescission upon judicial ornotarialdemandforrescission (Article 1592)

F the vendee may pay, evenafter the expiration of theperiod, as long as no demandfor rescission has been madeupon him

NOTE: Article 1592 does not

apply to:1) Sale on instalment of real

estate2) Contract to sell3) Conditional sale4) Cases covered by RA 6552:

Realty Installment buyerprotection act

2. R.A. No. 6552 or Maceda LawF An Act to Provide Protection to

buyers of Real Estate on InstallmentPayments

F Law governing sale or financing ofreal estate on installment payments

F Requisites: 1. transactionsorcontracts

involving the sale OR financing ofreal estate on installmentpayments, including residentialcondominium apartments; and

2. buyer defaults in payment ofsucceeding installments.

F Rights of the buyer:A. If Buyer has paid at least two

(2) years of installments1. The buyer must pay, without

additional interest, the unpaidinstallments due within the totalgrace period earned by him.There shall be one (1) monthgrace period for every one (1)year of installment paymentsmade

NOTE:This right shall beexercised by the buyer ONLY


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once in every 5 years of the lifeof the contract AND itsextensions.

2. Actual cancellation can only takeplace after 30 days from receipt

by the buyer of the notice ofcancellation OR demand forrescission by a notarial act ANDupon full payment of the cashsurrender value to the buyer

(Olympia Housing vs. Panasiatic,16 January 2003.)NOTE: The seller shall refund tothe buyer the cash surrendervalue of the payments on theproperty equivalent to 50% ofthe total payments made. Afterfive (5) years of installments,there shall be an additional 5%

every year but not to exceed 90%of the total payments made

3. The buyer shall have the right tosell his rights or assign the sameto another person OR toreinstatethecontractbyupdating the account during thegrace period and before actualcancellation of the contract

4. The buyer shall have the right topay in advance any installmentor the full unpaid balance of thepurchase price any time withoutinterest and to have such full

payment of the purchase priceannotated in the certificate oftitle covering the property.

B. If Buyer has paid less than 2years of installments

1. The seller shall give the buyer agrace period of NOT less than 60days from the date theinstallment became due. If the

buyerfailstopaytheinstallmentsdueattheexpiration of the grace period,the seller may cancel thecontract after 30 days fromreceipt by the buyer of thenotice of cancellation or thedemandforrescissionofcontract by a notarial act.

2. Same No. 3 and 4 paragraph Aabove

NOTE:Down payments, deposits oroptions on the contract shall be includedin the computation of the total numberof installment payments made

Remedies of Unpaid SellerI. Possessory Lien

F When may be exercised: 1. Where the goods have been sold

without any stipulation as tocredit

2. When the goods have been soldon credit, but the term of credithas expired

3. Where the buyer becomesinsolvent

F When lost: 1. Delivery of the goods to a carrier

or bailee for the purpose oftransmission to thebuyerwithout reserving ownership orright of possession

2. When the buyer lawfully obtainspossession of the goods

3. By waiver of the lienNOTE: Possessory lien is lost after theseller loses possession but his lien as anunpaid seller remains; hence he is stillan unpaid creditor with respect to theprice of specific goods sold.Hispreference can only be defeated by thegovernments claim to the specific tax on

the goods themselves (Arts. 2247 and2241).NOTE: The bringing of an action torecover the purchase price is not one ofthe ways of losing the possessory lien.An unpaid seller does not lose his lien byreason that he has obtained a moneyjudgement or decree for the price ofgoods (Art. 1529, last paragraph).

II. Stoppage of goods in transitu

F Requisites: 1. Seller must be unpaid

2. Buyer must be insolvent3. Goods must be in transit4. Seller must either:

a. actually take possession ofthe goods sold OR

b. give notice of his claim tothe carrier or other person inpossession

5. Seller must surrender thenegotiable document of title, if


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any, issued by the carrier orbailee

6. Seller must bear the expenses ofdelivery of the goods after theexercise of the right

GOODS ARE CONSIDERED IN TRANSITU:1. after delivery to a carrier or otherbailee and before the buyer or his agenttakes delivery of them; and2. If the goods are rejected by thebuyer, and the carrier or other baileecontinues in possession of them

GOODS ARE NO LONGER CONSIDERED IN TRANSITU:1. after delivery to the buyer or his

agent in that behalf;2. if the buyer or his agent obtainspossession of the goods at a point beforethe destination originally fixed;3.if the carrier or the baileeacknowledges to hold the goods onbehalf of the buyer; and4. if the carrier or bailee wrongfullyrefuses to deliver the goods to the buyer

2. Where the right to resell isexpressly reserved in case thebuyer should make a default

3. Where the buyer delays in thepayment of the price for an

unreasonable time

IV. Rescission

F Types: 1. Special Right to Rescind Under

Art. 1534 – If the seller haseither the right of lien OR a rightto stop the goods in transitu ANDunder either of 2 situations:a. Where the right to rescind

ondefaulthasbeenexpressly reserved

b. Where the buyer has been in

default for an unreasonabletime

2. Under Art. 1597 (“technicalrescission”)

V. Action for the price

F When may be exercised: 1. Where the ownership has passed

to the buyer AND he wrongfullyneglects OR refuses to pay forthe price

2. Where the price is payable on a

day certain AND he wrongfullyneglects OR refuses to pay forthe price, irrespective of thedelivery or transfer of title

3. Where the goods cannot readilybe resold for a reasonable priceAND the buyer wrongfully refusesto accept them even before theownership of the goods haspassed, if Article 1596 isinapplicable.

VI. Action for damages

F When may be exercised: 1. In case of wrongful neglect or

refusal by the buyer to accept orpay for the thing sold (Art. 1596par.1)

2. In an executory contract, wherethe ownership in the goods hasnot passed, and the seller cannotmaintain an action to recoverthe price (Art 1595)

3. If the goods are not yetidentified at the time of thecontract or subsequently

F Effects of the exercise of the right

1. The goods are no longer in transit.2. The contract of carriage ends;

instead the carrier now becomes amere bailee, and will be liable assuch.

3. The carrier should not deliveranymore to the buyer or the latter’sagent; otherwise he will clearly beliable for damages.

4. The carrier must redeliver to, oraccording to the directions of theseller.

WAYS OF EXERCISING THE RIGHT TOSTOP:

1. By taking actual possession of thegoods2. By giving notice of his claim to thecarrier or bailee

III. Special Right of Resale

F May be exercised only when theunpaid seller has either a right oflien OR has stopped the goods intransitu AND under ANY of thefollowing conditions:1. Where the goods are perishable

in nature


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B. REMEDIES OF THE BUYERBREACH OF CONTRACT

FOR

1. Action for specific performance

(Art. 1598)F Where the seller has broken thecontract to deliver specific orascertained goods

F The judgment or decree may beunconditional, or upon such termsand conditions as to damages,payment of the price and otherwiseas the court may deem just

2. Remedies of buyer for breach of warranty by seller (Art. 1599):

1. Recoupment – accept the goods and

set up the seller’s breach to reduceor extinguish the price2. Accept the goods and maintain an

action for damages for breach ofwarranty

3. Refuse to accept the goods andmaintain an action for damages forbreach of warranty

4. Rescind the contract by returning oroffering the return of the goods, andrecover the price of any part thereof

NOTE: These are alternative remedies.

When rescission by buyer not allowed:1. if the buyer accepted the goodsknowing of the breach of warrantywithout protest2. if he fails to notify the seller within areasonable time of his election torescind3. if he fails to return or offer to returnthe goods in substantially as goodcondition as they were in at the time ofthe transfer of ownership to him

EXTINGUISHMENT OF SALE

1. Same causes as in allobligations

2. Conventional Redemption3. Legal Redemption

other

d. any other legitimate paymentsmade therefore and;

e. thenecessaryandusefulexpenses made on the thingsold; and

f. fulfills other stipulations whichmay have been agreed upon.

A sale with conventional redemption isdeemed to be an equitable mortgagein any of the following cases:(IPERTOD)

1. UnusuallyInadequatepurchaseprice;

2. Possession by the vendor remains, aslessee or otherwise;

3. Extension of redemption period afterexpiration;

4. Retention by the vendee of part ofthe purchase price;

5. Vendor binds himself to pay the Taxes of the thing sold;6. Any Other case where the parties

really intended that the transactionshould secure the payment of a debtortheperformanceofanyobligation; or

7. When there is Doubt as to whethercontract is contract of sale withright of repurchase or an equitablemortgage.

Equitable Mortgage

F One which lacks the properformalities, form of words, or otherrequisites prescribed by law for amortgage, but shows the intention ofthe parties to make the propertysubject of the contract as securityfor a debt and contains nothingimpossible or contrary to law(Cachola vs. CA 208SCRA496)

* When can there be presumption as toEquitable Mortgage?1) Parties must have entered into acontract denominated as a contract ofsale2) The intention of the parties was tosecure an existing debt by way ofmortgageNOTE: In the cases referred to in Arts.1602 and 1604, the apparent vendor mayask for the reformation of theinstrument.

CONVENTIONAL REDEMPTION

F The right which the vendor reservesto himself, to reacquire the propertysold provided he returns to thevendee:b. the price of the sale;c. expenses of the contract;


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Remedy of Reformation: To correct theinstrument so as to make it express thetrue intent of the parties.

Redemption Perioda. if there is an agreement: periodagreed upon cannot exceed 10 years

b. if no agreement as to the period: 4years from the date of the contract

c. the vendor who fails to repurchasethe property within the periodagreed upon may, however, exercisethe right to repurchase within 30days FROM the time final judgmentwas rendered in a civil action on thebasis that the contract was a truesale with right of repurchase

F This refers to cases involving atransaction where one of theparties contests or denies thatthe true agreement is one of salewith right to repurchase; not tocases where the transaction isconclusively a pacto de retrosale. Example: Where a buyer aretro honestly believed that heentered merely into an EquitableMortgage, not a pacto de retrotransaction, and because of suchbelief he had not redeemedwithin the proper period.

NOTE: Tender of payment issufficient to compel redemption, but

is not in itself a payment thatrelieves the vendor from his liabilityto pay the redemption price (Paezvs. Magno.)

LEGAL REDEMPTION

F The right to be subrogated, upon thesame terms and conditions stipulatedin the contract, in the place of onewho acquires a thing by (1) purchaseor (2) dation in payment, or (3) byany other transaction wherebyownership is transferred by oneroustitle.

F May be effected against movables orimmovables.

F It must be exercised within thirty(30) days from the notice in writingby the vendor.\

NOTE: Written notice under Article 1623is mandatory for the right of redemptionto commence (PSC vs. Sps. Valencia 19August 2003.)

BASIS OF LEGAL REDEMPTION: Not onany proprietary right, which after thesale of the property on execution, leavesthe judgment debtor and vests in thepurchaser, but on a bare statutoryprivilege to be exercised only by thepersons named in the statute.

F Tender of payment is not necessary;

offer to redeem is enough.

PRE-EMPTION

1. arises beforesale2. no rescissionbecause no sale asyet exists3. the action isdirectedagainsttheprospectiveseller

REDEMPTION

1. arises after sale

2. there can berescission of theoriginal sale3. action is directedagainst the buyer

Instances of legal redemption:A. Under the Civil Code (legalredemption):

1.

Sale of a co-owner of his shareto a stranger (Article 1620) 2. When a credit or other

incorporeal right in litigation issold (Article 1634)

3. Sale of an heir of his hereditaryrights to a stranger (Article

1088) 4. Sale of adjacent rural lands not

exceeding one hectare (Article 1621) 5. Sale of adjacent small urban

landsboughtmerelyforspeculation (Article 1622)

B. Under special laws: 1. An equity of redemption in cases

of judicial foreclosures 2. A right of redemption in cases of

extra-judicial foreclosures 3. Redemption of homesteads 4. Redemption in tax sales 5. Redemption by an agricultural

tenant of land sold by thelandowner


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ASSIGNMENT OF CREDIT

F a contract by which the owner of acredit transfers to another his rightsand actions against a third person inconsideration of a price certain inmoney or its equivalent

NOTE: Transfer of rights by assignmenttakes place by the perfection of thecontract of assignment without thenecessity of delivering the documentevidencing the credit. F this rule does not apply to

negotiabledocumentsanddocuments of title which aregoverned by special laws.

not the objects which make up hisinheritance.

Liabilities of the assignor of credit for

violation of his warranties1. Assignor in good faith

F Liability is limited only to theprice received and to theexpenses of the contract, andany other legitimate paymentsby reason of the assignment

2. Assignor in bad faith

F Liable not only for the paymentof the price and all the expensesbut also for damages

Legal Redemption in Sale or Credit or

other incorporeal right in litigationF Requisites:1. There must be a sale or assignment

of credit2. There must be a pending litigation at

the time of the assignment3. The debtor must pay the assignee:

a. price paid by himb. judicial cost incurred by him;

ANDc. interest on the price from the

date of payment

4. The right must be exercised by thedebtor within 30 days from the datethe assignee demands (judicially orextra-judicially) payment from him

SALEOFCREDITOROTHERINCORPOREAL RIGHTS IN LITIGATIONþGENERAL RULE: Debtor has the right oflegal redemption in sale of credit orincorporeal rights in litigationþEXCEPTIONS: a. Sale to a co-heir or co-owner

b. Sale to a co-owner

c. Sale to the possessor of propertyin question

F Effects of Assignment:1. transfers the right to collect the full

value of the credit, even if he paid aprice less than such value

2. transfers all the accessory rights3. debtor can set up against the

assignee all the defenses he couldhave set up against the assignor

Effect of payment by the debtor afterassignment of credit1. Before Notice of the assignment

F Payment to the original creditor

is valid and debtor shall bereleased from his obligation

2. After Notice

F Payment to the original creditoris not valid as against theassignee

F He can be made to pay again bythe assignee

Warranties of the assignor of credit: a. He warrants the existence of the

credit

b. He warrants the legality of thecredit at the perfection of thecontract

NOTE: There is no warranty as to thesolvency of the debtor unless it isexpressly stipulated OR unless theinsolvency was already existing and ofpublic knowledge at the time of theassignment

NOTE: The seller of an inheritancewarrants only the fact of his heirship but

BARTER

BARTER

F contract whereby one of the partiesbinds himself to give one thing inconsideration of the other's promiseto give another thing (Article 1638)


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NOTE: Barter is similar to a sale withthe only difference that instead ofpaying a price in money, another thing isgiven in lieu of the purchase price

PERFECTION and CONSUMMATION

F Perfected from the moment there isa meeting of minds upon the thingspromisedbyeachpartyinconsideration of the other

F Consummated from the time of

2. If it is made by one who producesand delivers a written waiver of theprovisions of the Bulk Sales Act fromhis creditors

3. If it is made by an executor,

administrator, receiver, assignee ininsolvency, or public officer, actingunder judicial process (Section 8);

and4. If it refers to properties exempt

from attachment or execution (Rules of Court, Rule 39, Section 12)

Protection Accorded to Creditors byBulk Sales Law:1. It requires the vendor, mortgagor,

transferor or assignor to deliver tothe vendee, mortgagee, or to his orits agent or representative a swornwritten statement of names andaddresses of all creditors to whomsaid vendor, etc. may have beenindebted together with the amountdue or to be due (Section 3)

2. It requires the vendor, mortgagor,transferor or assignor, at least 10days before the sale, transfer,mortgage, assignment to make a fulldetailed inventory showing thequantity and the cost of price ofgoods, and to notify every creditorof the price terms and conditions of

the sale, etc. (Section 5)

Effects of False Statements in theSchedule of Creditors:1. Without knowledge of buyer

F If the statement is fair upon itsface and the buyer has noknowledge of its incorrectnessand nothing to put him oninquiry about it, he will beprotected in its purchase

F The remedy of the creditor is notagainst the goods but toprosecute the seller criminally

2. Withknowledgeorimputedknowledge of buyerF The vendee accepts it at his

peril F The sale is valid only as between

the vendor and the vendee butvoid against the creditors

mutual delivery by the contractingparties of the things promised

NOTES:

? Where the giver of the thing

bartered is not the lawful ownerthereof, the aggrieved party cannotbe compelled to deliver the thingwhich he has promised and is alsoentitled to damages.

? Where a party is evicted of the thingexchanged, the injured party is giventhe option, either to recover theproperty he has given in exchangewith damages or only claim anindemnity for damages.

? As to matters not provided for by theprovisions on barter, the provisionson sales will apply suppletorily

BULK SALES LAW (Act No. 3952)When Sale or Transfer in Bulk:F Any sale, transfer, mortgage, or

assignment:1. Of a stock of goods, wares,

merchandise,provisions,ormaterials otherwise than in theordinary course of trade and theregular prosecution of business; or

2. Of all or substantially all, of thebusiness or trade; or

3. Of all or substantially all, of thefixtures and equipment used in thebusiness of the vendor, mortgagor,transferor or assignor (section 2)

When sale or transfer in bulk notcovered by Bulk Sales Law:1. If the sale or transfer is in the

ordinary course of trade and theregular prosecution of business ofthe vendor;


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3. With names of certain creditorswithout notice are omitted fromthe listF The sale is void as to such

creditors, whether the omission

was fraudulent or not,4. With respect to an innocent

purchaser for a value from theoriginal purchaserF An innocent purchaser for value

from the original purchaser isprotected

F However if the circumstancesare such as to bind thesubsequentpurchaserwithconstructive notice that the saletothevendor(originalpurchaser) was fraudulent, theproperty will be liable in his

hands to creditors of the originalvendor

Effect of violation of law on Transfer:1. As between the parties

F The Bulk Sales Law does not inany way affect the validity ofthe transfer as between theintermediate parties thereto

F A sale not in compliance withthe Bulk Sales Law is validagainst all persons other thanthe creditors.

2. As against creditorsF A purchaser in violation of the

law acquires no right in theproperty purchased as againstthe creditors of the seller

F His status is that of a trustee orreceiver for the benefit of thecreditors of the seller; as such,he is responsible for thedisposition of the property

Remedies Available to creditors:

F The proper remedy is one against thegoods to subject them to thepayment of the debt, such asexecution,attachment,garnishment, or by a proceeding inequity

F An ordinary action against thepurchasertoobtainmoneyjudgement will not lie, unless thepurchaser has sold or otherwisedisposed of, or dealt with theproperty, so as to become personallyliable to creditors for value of it.

CIVIL LAW COMMITTEE

Acts Punished by Bulk Sales Law:1. Knowingly or wilfully making or

delivering a statement required bythe Act which does not include thenames of all the creditors of the

vendor, etc. with the correctamount due or to become due orwhich contains any false or untruestatement; and

2. Transferring title to any stock ofgoods,wares,merchandise,provisions or materials sold in bulkwithout consideration or for nominalconsideration (Section 7)

RETAIL TRADE LIBERALIZATION ACT(RA 8762)

Retail Trade

F Any act occupation or calling ofhabitually selling direct to thegeneralpublicmerchandise,commoditiesorgoodsforconsumption, but the restrictions ofthis law shall not apply to thefollowing:

1. Sales by manufacturer, processor,laborer, or worker, to the generalpublic the products manufactured,processed produced by him if hiscapital does not exceed P100,000;

2. Sales by a farmer or agriculturalistselling the products of his farm

3. Sales in restaurant operations by ahotelownerorinn-keeperirrespective of the amount ofcapital; provided that the restaurantis incidental to the hotel business;and

4. Sales which are limited only toproducts manufactured, processed orassembled by a manufacturerthrough a single outlet, irrespectiveof capitalization

High-End or Luxury Goods

F Goods which are not necessary forlife maintenance and whose demandis generated in large part by thehigher income groups

F Shall include but not limited to:jewelry,brandedordesignerclothing and footwear, wearingapparel, leisure and sporting goods,electronics and other personaleffects


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NOTE: A natural-born citizen of thePhilippines who has lost his citizenshipbut who resides in the Philippines shallbe granted the same rights as Filipinocitizens

Foreign Equity Participation:

? Foreign-ownedpartnerships,associations and corporations formedand organized under the laws of thePhilippines may, upon registrationwith SEC and DTI, or in case ofForeign-owned single proprietorshipwith the DTI, engage or invest inretail trade business, subject to the

following categories:1. Category A:

F Paid-up capital of the equivalent

in Philippine Peso of:<$2,500,000 US Dollars

F Reserved exclusively for Filipinocitizens and corporations whollyowned by citizens

2. Category B:

F Minimum paid-up capital of theequivalent in Philippine Peso of

$2,500,000 US Dollars, but<$7,500,000

F May be wholly owned byforeigners except for the firsttwo years after the effectivity ofthisActwhereinforeignparticipation shall be limited to

not > 60% of total equity.3. Category C:

F Paid-up capital of the equivalentinPhilippinePesoof:

$7,500,000 US Dollars or more

F May be wholly owned byforeigners

NOTE: In no case shall the investments for establishing a

store in Categories B and C beless than the equivalent inPhilippine Peso of: US $830,000

4. Category D: F Enterprises specializing in high-end or luxury products with paid-up capital of the equivalent inPhilippine Peso of: $250,000 USDollars per store

F May be wholly owned byforeigners

NOTES:

? Foreign investor shall be required tomaintain in the Philippines the FULLamount of the prescribed minimumcapital, UNLESS the foreign investorhas notified the SEC and the DTI ofits intention to repatriate its capitaland cease operations in thePhilippines

? Failure to maintain the full amountof the prescribed minimum capitalprior to notification of the SEC andthe DTI shall subject the foreigninvestors to penalties or restrictionsonanyfuturetradingactivities/business in the Philippines

NOTE:Foreign Investors AcquiringShares of Stock of existing retail storeswhether or not publicly listed whose networth is in excess of the Peso equivalentof US $2,500,000 may purchase only upto the maximum of 60% of the equitythereof within the first 2 years, andthereafter, they may acquire theremaining percentage consistent withthe allowable foreign participation asherein provided

NOTE: All retail Trade enterprises under

categories B and C in which foreignownership exceeds 80% of equity shalloffer a minimum of 30% of their equityto the public through any stockexchange in the Philippines within 8years from the start of the operations

Qualification of Foreign Retailers1. Minimum of $200,000,000 US Dollars

net worth in its parent corporationfor Categories B and C and$50,000,000 net worth in its parentcorporation for Categories D

2. 5 retailing branches or franchises inoperation anywhere around theworld unless such retailer has atleast 1 store capitalized at aminimum of $25,000,000 US Dollars

3. 5-year track record in retailing; and4. Only nationals from, or juridical

entities formed or incorporated inCountries which allow to engage inretail trade in the Philippines


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PD 957 (SUBDIVISION ANDCONDOMINIUM BUYERS’ PROTECTIVE

DECREE

Registration of ProjectsF The registered owner of a parcel ofland who wishes to convert the sameinto a subdivision project shallsubmit his subdivision plan to theHOUSINGANDLAND-USEREGULATORY BOARD, which shall actupon and approve the same, upon afinding that the plan complies withthe Subdivision Standards' andRegulations enforceable at the timethe plan is submitted. The sameprocedure shall be followed in thecase of a plan for a condominiumproject except that, in addition, saidAuthority shall act upon and approvethe plan with respect to the buildingor buildings included in thecondominium project in accordancewith the National Building Code(R.A. No. 6541).

F The subdivision plan, as so approved,shall then be submitted to theDirector of Lands for approval inaccordance with the procedureprescribed in Section 44 of the LandRegistration Act (Act No. 496, asamended by R.A. No. 440): Provided,that it case of complex subdivision

plans, court approval shall no longerbe required. The condominium planas likewise so approved, shall besubmitted to the Register of Deedsof the province or city in which theproperty lies and the same shall beacted upon subject to the conditionsand in accordance with theprocedure prescribed in Section 4 ofthe Condominium Act (R.A. No.4726).

F National Housing authority (nowHousing and Land Use RegulatoryBoard) has the exclusive jurisdictionto regulate the real estate trade andbusiness.

License to sellF Such owner or dealer to whom has

been issued a registration certificateshall not, however, be authorized tosellanysubdivisionlotor

CIVIL LAW COMMITTEE

condominium unit in the registeredproject unless he shall have firstobtained a license to sell the projectwithin two weeks from theregistration of such project.

Exempt transactionsF A license to sell and performance

bond shall not be required in any ofthe following transactions:

1. Sale of a subdivision lot resultingfrom the partition of land among co-owners and co-heirs.

2. Sale or transfer of a subdivision lotby the original purchaser thereof andany subsequent sale of the same lot.

3. Sale of a subdivision lot or acondominium unit by or for the

account of a mortgagee in theordinary course of business whennecessary to liquidate a bona fidedebt.

Grounds for Revocation of registrationcertificate and license to sell of ownersor dealers1. Is insolvent; or2. Has violated any of the provisions of

this Decree or any applicable rule orregulation of the Authority, or anyundertaking of his/its performancebond; or

3. Has been or is engaged or is about toengage in fraudulent transactions; or

4. Has made any misrepresentation inany prospectus, brochure, circular orotherliteratureaboutthesubdivision project or condominiumproject that has been distributed toprospective buyers; or

5. Is of bad business repute; or6. Does not conduct his business in

accordance with law or soundbusiness principles.

LEASE

LEASE

F consensual, bilateral, onerous, andcommutative contract by virtue ofwhich one person binds himself togrant temporarily the use of thething or to render some service toanother who undertakes to pay somerent.


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Kinds of Leases (From the view point of the subject matter 1. Lease of things

2. Lease of service3. Lease of work

NOTE: Since lease is consensual and isnot imposed by law, only the lessor hasthe right to fix the rents. However, theincreasing of the rent is not an absoluteright on the part of the lessor.

Characteristics or Requisites for Leaseof Things 1. Consensual

2. Principal3. Nominate4. Purpose is to allow enjoyment or

use of a thing (the person toenjoy is the lessee; the personallowing the enjoyment byanother is the lessor

5. Subject matter must be withinthe commerce of man

6. Purpose to which the thing willbe devoted should not beimmoral

7. Onerous (there must rent orprice certain)

8. PeriodisTemporary(not perpetual, hence, the longest

period is 99 years)

9. Period is either definite orindefinite

F If no term is fixed, weshould apply Art.1682 (for ruralleases) and Art. 1687 (for urbanleases)

F If the term is fixed butindefinite, the court will fix thetermunderthelawofobligations and contracts

10. Lessor need not be the owner

NOTE:A usufructuary may thuslease the premises in favor of astranger, such lease to end at thetime that the usufruct itself ends

Rent

NOTES:

? When a student boards and lodges ina dormitory, there is no contract oflease.The contract is notdesignated specifically in the CivilCode. It is an innominate contract.It is however, believed that thecontract can be denominated as thecontract of board and lodging.

? There is a contract of lease when theuse and enjoyment of a safetydeposit box in a bank is given for aprice certain. This is certainly not acontract of deposit.

? A lease of personal property withoption to buy (at a nominal amount)at the end of the lease can beconsidered a sale.

LEASE

1. only use orenjoymentistransferred2.transferistemporary3. lessor need notbe the owner

4. the price of theobject,distinguished fromthe rent, is usuallynot mentioned

SALES

1. ownershiptransferred

is

2.transferispermanent3. seller must bethe owner at thetime the propertyis delivered4. usually, theselling price is

mentioned

Lease of Things

1. objectofcontract is athing2. lessor has todeliver the thingleased3. in case ofbreach,therecan be an actionforspecificperformance

Lease of Services(locatiooperatum)

1. theimportant objectisthelaborperformed by thelessor

Lease of Services

1. object is somework or service

2. lessor has toperform some workor service3. in case of

breach, no actionforspecificperformance

F The compensation either inmoney, provisions, chattels, orlabor, received by the lessorfrom the lessee.

Contract for aPiece of Work(locatio operas)

1. the importantobject is the workdone


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2. the result isgenerallynotimportant,hencethelaboreris

entitled to bepaid evenifthereisdestructionofthe work throughfortuitous event

2. the result isgenerallyimportant;generally, the priceis not payable until

theworkiscompleted,andsaid price cannot belawfully demandedif the work isdestroyed before itisfinishedandaccepted

* Lease may be made orally, but if thelease of Real Property is for more than 1year, it must be in writing under theStatue of Frauds.

Persons Disqualified to be LesseesBecause Disqualified to Buy

1. A husband and a wife cannot lease toeach other their separate propertiesexcept:a. if separation of property was

agreed uponb. if there has been judicial

separation of propertyPersons referred to in Art. 1491 aredisqualifiedbecauseoffiduciaryrelationships

SUBLEASE

F A separate and distinct contract oflease wherein the original lesseebecomes a sublessor to a sublessee.

F Allowed unless expressly prohibited.

F The sublessee is subsidiarily liablefor any rent due. The lessor has an

accion directa against the sublesseefor unpaid rentals and improper useof the object.

SUBLEASE

1. there are twoleases and twodistinct juridicalrelationshipsalthoughimmediatelyconnectedandrelated to eachother2.thepersonalityofthe lessee doesnot disappear3.the lessee doesnottransmitabsolutelyhisrightsandobligations to thesublessee4. the sublessee,generally, doesnot have anydirectactionagainst the lessor

Lease of Services

It is based on

employment–the lessor ofservices does notrepresenthisemployernordoes he execute juridical acts.Principalcontract

Agency

It is based onrepresentation–agent represents hisprincipal and entersinto juridical acts.

Preparatorycontract

Rule for Lease of Consumable GoodsþGENERAL RULE: Consumable goodscannot be the subject matter of a

contract of lease of things.Why? To use or enjoy hem, they willhave to be consumed. This cannot bedone by a lease since ownership overthem is not transferred to him by thecontract of lease.þEXCEPTIONS: a. If they are merely exhibited

b. If they are accessory to anindustrial establishment

RECORDING OF LEASE OF PERSONALPROPERTY

þGENERAL RULE: Lease of real propertyis personal rightþEXCEPTIONS: Lease partakes of thenature of real right if:

a. Lease of real property is morethan 1 year

b. Lease of real property isregistered regardless of duration

NOTE:Lease of personal propertycannot be registered. To be bindingagainst third persons, the parties mustexecute a public instrument.

CIVIL LAW COMMITTEE

ASSIGNMENT OFLEASE

1. there is only onejuridicalrelationship, that ofthe lessor and theassignee, who isconverted into alessee

2. the personality ofthelesseedisappears

3.thelesseetransmits absolutelyhis rights to theassignee

4. the assignee hasadirectactionagainst the lessor


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RIGHTS OF LESSOR IF SUBLEASEPROHIBITED BUT ENTERED INTO BYLESSEE:1) Rescission and damages, or2) Damages only (Contract will be

allowed to remain in force)3) Ejectment

Instances when sublessee is liable tothe lessor: a. All acts which refer to the use

and preservation of the thingleased in the manner stipulatedbetween the lessor and thelessee

b. The sublessee is subsidiarilyliable to the lessor for any rentdue from the lessee.

NOTE: The sublessee shall not beresponsible beyond the amount of rentdue from him.

Accion Directa: direct action which thelessor may bring against a sublessee whomisuses the subleased property.

OBLIGATIONS OF THE LESSOR (DnM) a. Delivery of the object (cannot

be waived)b. Making of necessary repairs

c. Maintenance in peaceful andadequate possession

OBLIGATIONS OF THE LESSEE (R2EN2U)a. to pay rent

b. to use thing leased as a diligentfather of a family, devoting it tothe use stipulated

c. to pay expenses for the deed oflease

d. to notify the lessor of usurpationor untoward acts

e. to notify the lessor of need forrepairs

f. to return the property leasedupon termination of the lease

Effect of Destruction of the ThingLeased:1. Total destruction by a fortuitous

event

F Lease is extinguished

2. Partial destruction a. Proportional reduction of the

rent, orb. Rescission of the lease

When lessee may suspend payment of

rent:1. lessor fails to undertake necessary

repairs2. lessor fails to maintain the lessee in

peaceful and adequate enjoyment ofthe property leased

NOTE: “Suspend”- for the interveningperiod, the lessee does not have to paythe rent.

EFFECTIVITY OF THE SUSPENSION:

The right begins:a) In the case of repairs, from the timehe made the demand for said repairs,and the demand went unheeded.b) In the case of eviction, from the timethe final judgment for eviction becomeseffective.

Alternative remedies of Aggrievedparty (Lessor/Lessee) in case of Non-fulfillment of duties:1. Rescission and damages2. Damages only, allowing the contract

to remain in force – SpecificPerformanceNOTE:Damages Recoverable inejectment cases are the rents or the fairrental value of the premises.Thefollowingcannotbesuccessfullyclaimed:

1. Profits plaintiff could haveearned were it not for thepossible entry or unlawfuldetainer

2. Material injury to the premises3. Actual, moral, or exemplary

damages

Immediate termination of lease underArt. 1660 applies:

1. only to dwelling place or any otherbuildingintendedforhumanhabitation

2. even if at the time the contract wasperfected, the lessee knew of thedangerous condition or waived theright to rescind on account of thiscondition


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Rules on Alteration of the Form of theLease

F The Lessor can alter provided thereis no impairment of the use to whichthe thing is devoted under the termsof the lease

F Alteration can also be made by the Lessee so long as the value of the

propertyisnotsubstantiallyimpaired

Rules in case of Urgent Repairs

F The lessee is obliged to tolerate thework although it may be veryannoying to him and although duringthe same time he may be deprivedof a part of the premises

1. If repairs last for more than 40 days:Lessee cannot act for reduction ofrent or rescission

2. If 40 days or more: lessee can askfor proportionate reduction

NOTE: In either case, rescission may beavailed of if the main purpose is toprovide a dwelling place and theproperty becomes uninhabitable.

Effects if Lessor fails to make UrgentRepairs1. Lessee may order repairs at the

lessor’s cost2. Lessee may sue for damages3. Lessee may suspend the payment of

the rent4. Lessee may ask for rescission, in case

of substantial damage to him

TRESPASS IN LEASE:1. Trespass in fact (perturbacion de

mere hecho):

F physical enjoyment is reduced

F Lessor will not be held liable.2. Trespass in law (perturbacion de

derecho):

F A third person claims legal rightto enjoy the premises

F Lessor will be held liable

NOTE: While the Japanese Occupationwas a fortuitous event, the lessor is stillnot excused from his obligation towarrant peaceful legal possession. Leaseis a contract that calls for prestationsboth reciprocal and repetitive; and theobligations of either party are not

CIVIL LAW COMMITTEE

discharged at any given moment, butmust be fulfilled all throughout the termof the contract. (Villaruel vs. ManilaMotor Co.)

Duration of Lease1. Lease made for a determinate time

or fixed Period

F Lease will be for the said periodand it ends on the day fixedwithout need of a demand

2. If there is no fixed periodA. For Rural Lands (Article 1680)

F it shall be for all time necessaryfor the gathering of fruits whichthe whole estate may yield in 1

year, or which it may yield once B. For Urban Lands (Article 1687) a. If rent is paid daily: lease is

from day to dayb. If rent is paid weekly: lease is

from week to weekc. If rent is paid monthly: lease is

from month to monthd. If rent is paid yearly: lease is

from year to year

RULES ON EXTENSION OF THE LEASEPERIOD:

1) If a lease contract for a definite termallows lessee to extend the term, thereis no necessity for lessee to notify lessorof his desire to so extend the term,unless the contrary is stipulated.2) “May be extended” as stipulation:lessee can extend without lessor’sconsent but lessee must notify lessor.3) “May be extended for 6 years agreedupon by both parties” as stipulation: Thismust be interpreted in favor of thelessee. Hence, ordinarily the lessee atthe end of the original period mayeither:

a) leave the premises; orb) remain in possession

4) In co-ownership, assent of all isneeded; otherwise, it is void orineffective as against non-consenting co-owners.5) Where according to the terms of thecontract, the lease can be extended onlyby the written consent of the partiesthereto, no right of extension can risewithout such written consent.


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Rule if Lessor Objects to the Lessee’scontinued Possession:

F Requisites:1. Contract has expired2. Lessee continued enjoying the thing3. Lessor Objected to this enjoyment

F If the three requisites are present,the lessee shall be considered a

possessor in bad faith

IMPLIEDNEWLEASE(TacitaReconducion)

F lease which arises if at the end ofthe contract the lessee shouldcontinue enjoying the thing leasedfor 15 days with the acquiescence ofthe lessor, unless a notice to thecontrary had previously been givenby either party.

which are by nature foreign to the rightof occupancy or enjoyment inherent in acontract of lease – such as an option topurchase the leased premises (Dizon vs.Magsaysay GR No. 23399, May 31,1974)

Perpetual Lease

F A lease contract providing that thelessee can stay in the premises for aslong as he wants and for as long ashe can pay the rentals and itsincreases.

F This is not permissible; it is a purelypotestative condition because itleaves the effectivity and enjoymentof leasehold rights to the sole andexclusive will of the lessee

NOTE: In Jespajo Realty vs. CA, 27Sept. 2002, the SC upheld a leasecontract, which provides that “the leasecontract shall continue for an indefiniteperiod provided that the lessee is up-to-date in the payment of his monthlyrentals” for the contract is one with aperiod subject to a resolutory condition.

PURCHASE OF THE LEASED PROPERTYþGENERAL RULE: Purchaser of thingleased can terminate lease.

þEXCEPTIONS: a. lease is recorded in Registry of

Propertyb. there is stipulation in the

contract of sale that purchasershall respect the lease

c. purchaser knows the existence ofthe lease

d. sale is fictitiouse. sale is made with right of

repurchase

GROUNDS FOR EJECTMENT UNDER ART.1673: (ELVU)1. Expiration of the period agreed upon

or the period under Arts. 1682 and1687;

2. Lack of payment of the pricestipulated;

3. Violation of any of the conditionsagreed upon in the contract; and

4. Unauthorized use or service by thelessee of the thing leased.

F Requisites:

a. the term of the original contracthas expired

b. the lessor has not given thelessee a notice to vacate

c. the lessee continued enjoyingthe thing leased for at least 15days with the acquiescence ofthe lessor

lease:1. When before or after theexpiration of the term, there is anotice to vacate given by eitherparty.2. When there is no definite fixedperiod in the original lease contractas in the case of successiverenewals.

a. The period of the new lease isnot that stated in the originalcontract but the time in Articles1682 and 1687.

b. Other terms of the originalcontract are revived.

F When there is no implied new

F Effects:

NOTE: Terms that are revived are onlythose which are germane to theenjoyment of possession, but not thosewith respect to special agreements


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FF

a.

b.

RENTAL REFORM ACT OF 2002(R.A. No. 9161)

Effectivity: January 1, 2002.Coverage:All residential units of NCR and other

highly urbanized cities, the totalmonthly rental for each of whichdoes not exceed P7,500;All residential units in other areasthe total monthly rental for each ofwhich does not exceed P4,000 as of1/1/02, without prejudice to pre-existing contracts.

SANOREAssignment of lease or subleasing of

residential units including theacceptanceofboardersorbedspacers without written consentof the owner or lessor;Arrears in payment of rent for atotal of 3 months;Legitimate needs of the owner orlessor to repossess for his own use orfor the use of any immediatemember of his family as a residentialunit, provided:a. owner or immediate member notbeing owner of any other availableresidential unit within the same city

or municipality;b. lease for a definite period hasexpired;c. lessor has given lessee formalnotice 3 months in advance; andd. owner or lessor is prohibitedfrom leasing the residential unit orallowing its use by a third person forat least 1 year.Absolute ownership by the lessee ofanother dwelling unit in the samecity or municipality which may belawfully used as his residenceprovided lessee is with formal notice

3 months in advance;Need of the lessor to make necessaryrepairs in the leased premises whichis the subject of an existing order ofcondemnationbyappropriateauthorities concerned in order tomake said premises safe andhabitable; andExpiration of period of the leasecontract.

NOTE:

F Except when the lease is for adefinite period, the provisions ofArt. 1673(1) of the Civil Code (CC),insofar as they refer to residentialunits, shall be suspended during theeffectivity of R.A. 9161, but otherprovisions of the CC and the Rules ofCourt on lease contracts insofar asthey are not in conflict with theprovisions of R.A. No. 9161 shallapply.

F No increase in monthly rental bymore than 10% is allowed.

TERMINATION OF THE LEASE

F If made for a determinate time, it

ceases upon the day fixed withoutthe need of a demand.

1) By the expiration of the period2) By the total loss of the thing3) By the resolution of the right of thelessor4) By the will of the purchaser ortransferee of the thing5) By rescission due to non-performanceof the obligation of one of the parties

Special Provisions for Rural Lands

F Effect of loss due to fortuitousevent:

1. Ordinary fortuitous event – noreduction

2. Extraordinary fortuitous event a. if more than ½ of the fruits were

lost, there shall be a reduction,unless there is a stipulation tothe contrary

b. if ½ or less, there shall be noreduction

F Lease duration: If not fixed, it shallbe for all time necessary for thegathering of fruits which the wholeestate may yield in 1 year, or whichit may yield once.

Special Provisions for Urban Lands

F Repairs for which urban lessor isliable:

1. special stipulation2. if none, custom of the place3. in case of doubt, the repairs are

chargeable against him

F Grounds for judicial ejectment:

1.

2.

3.

4.

5.

6.


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F Lease duration:

1. If there is a fixed period, lease will befor said period.2. If no fixed period, apply the followingrules:

a. If rent is paid daily: day to dayb. If rent is paid weekly: week to

weekc. If rent is paid monthly: month to

monthd. If rent is paid yearly: year to

year

Documents

SALES_2009