CPA in Transit Reviewer: Law on Sales 1

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I. SALES 3. Consummation/death- begins when
the parties perform their respective
A contract where one party obliges himself undertakings, resulting in the
to transfer ownership and to deliver a extinguishment thereof.
determinate thing and the another party to
pay a price certain in money or its Nature of Obligation Created
equivalent.
a.) For the SELLER: To transfer
ownership and to deliver possession
Elements of a Contract of Sale
of the subject matter
1. Essential Elements
a. Consent b.) For the BUYER: to pay the price
b. Determinate object
c. Price certain in money Sale as a Title
2. Natural Elements
Contract of sale DOES NOT transfer the
a. Warranty against eviction
ownership of the subject matter. It is merely
b. Warranty against hidden
a title that creates the obligation to transfer
defects and encumbrances
ownership and a mode thereof.
3. Accidental Elements- refer to the
stipulations of the contracting
The contract of sale transfers no real rights.
parties
Ownership and position is transferred
through delivery or tradition.
Characteristics of a Contract of Sale
1. Consensual- perfected by mere II. SALE DISTINGUISH FROM
consent OTHER CONTRACTS
2. Principal- capable of standing alone
without the need of another A) DONATION
contract Sale Donation
3. Bilateral- there is a reciprocal Onerous Gratuitous
obligation between the parties Perfected by
4. Onerous- valuable consideration is Perfected by mere
donee’s
given by both parties consent
acceptance
5. Commutative- the consideration
exchange are of equivalent values Donation is an act of liberality whereby a
6. Nominate- has a name given by law person disposes gratuitously of a thing or
right in favor of another, who accepts it.
Stages of a Contract of Sale
B) BARTER
1. Preparation/Conception- the time Sale Barter
the contracting parties shows Cause or Cause or
interest in the contract. consideration is in consideration is
2. Perfection/birth- concurrence of the money another thing
essential elements of the sale

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By contract of barter or exchange, one of Creates an Extinguishes an
the parties binds himself to give one thing in obligation obligation
consideration of the other’s promise to give Freedom in Price is value of the
another thing. [Art. 1638] determining price thing given
The cause or Cause is the
Note: Consideration is partly in money and consideration is the extinguishment of
partly in another thing. price and the the obligation and
delivery of the the delivery of the
The type of contract is determined under object object
the following hierarchy;
a. Manifest intention of the parties
b. If intention is not clear, the
following rules shall apply: E) CONTRACT TO SELL
i. Thing is more valuable than Contract of sale Contract to sell
money- barter Ownership is Ownership is
ii. Money is equal or more than transferred upon transferred upon full
to the value of the thing- sale delivery payment
Full payment is a
C) CONTRACT FOR PIECE OF WORK Non-payment is a
positive suspensive
Sale Contract for Piece resolutory condition
condition
of Work Sale is already
Ordered in the Made specially for No perfected sale yet
perfected
ordinary course of the customer upon Subsequent buyer is Subsequent buyer is
the business his special order presumed to be in presumed to be in
Thing transferred bad faith good faith
Thing transferred
already existed and Vendor loses and
existed due to the
can be a subject of cannot recover Title remains in the
order of the party
sale to other ownership of the vendor if the vendee
desiring it.
persons thing sold until does not comply with
Within the statues Not within the contract of sale is the conditions of the
of fraud statues of fraud resolved and set contract
aside
When each product or system executed is
always UNIQUE and could not mass- Contract to sell cannot be considered as a
produce the product because of its very contract of sale because the first element
nature, such is a contract for a piece of work. (consent) is lacking. The prospective seller
[Commissioner vs. Engineering Equipment does not consent until the happening of an
and Supply Co., 1975] event. The seller only agrees is to fulfill his
promise to sell the subject when full
D) DACION EN PAGO payment is made.
Sale Dacion en Pago
No pre-existing F) AGENCY TO SELL
Pre-existing debt
debt Sale Agency to Sell

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Agent receives goods Seller must be the
Buyer receives Lessor need not be
of the principal who owner at the time
goods as owner the owner
retains ownership of delivery
Agent delivers the
Buyer pays the price price which he got One person binds himself to grant
from his buyer temporarily the use of the thing or to render
Buyer, as a general some service to another who undertakes to
Agent can return the
rule, cannot return pay some rent.-
goods
the object sold
Seller warrants the Agent makes no III. OBJECT/SUBJECT MATTER
thing sold warranty
Agent can deal with Requisites of a Valid Subject Matter
the thing received as a. For Things:
Buyer can deal with
long as it is within his 1. Licit/ lawful
the thing sold
authority given by 2. Should not be impossible
the principal 3. Determinate or determinable
G) KINDS OF CONTRACT OF SALE
b. For Rights:
1) Absolute- sale is not subjected
1. Transmissible
to any condition and the title
2. Licit
immediately passes to the
purchaser upon delivery
2) Conditional- ownership of the
Goods which may be Object of Sale
object remains with vendor until
fulfillment of condition/s. a. Existing Goods- goods owned or
possessed by the seller
Conditional Contract to Sell b. Future Goods- goods to be
Contract of Sale manufactures, raised or acquired by
Sale is already Sale is not the seller after the perfection of the
perfected perfected contract. These are things which are
Upon fulfillment of Upon fulfillment of expected
condition, condition, Objects must be within the commerce of
ownership ownership does men. If the subject is illicit, contract is VOID
automatically not automatically and cannot be ratified.
transfers to the transfers to the
buyer buyer Instances of sale of things not actually or
already owned by seller at time of sale
H) LEASE 1. Sale of thing having potential
Sale Lease existence
Ownership 2. Sale of future goods
No transfer of 3. Contract for the delivery at a certain
transferred by
ownership price of a thing the vendor produces
delivery
in the ordinary course of the business
or for the general market.

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5) Fungible goods
LICIT 6) Undivided interest
The thing is licit when:
Future Goods (Emptio Rei Speratae)
1) It is within the commerce of man
It is in the form of a present sale, is valid
2) When right is transmissible
only as an executory contract to be fulfilled
3) It does not contemplate a future
by the acquisition and delivery of the goods
inheritance, unless expressly
specified. Upon the acquisition of goods,
authorized by law
either party may demand the execution of
Example of properties not within the the contract.
commerce of man:- Example of future things:
a) Public property 1. Goods to be manufactured or
a. Property for public use printed
b. Intended for public service 2. To be raised or future agricultural
c. Intended for development of products
national wealth 3. To be acquired by seller after the
b) Church perfection of the contract
c) Narcotics or drugs 4. Things whose acquisition depends
upon a contingency
Kinds of Illicit Things
1) Per Se- of its nature Potential Existence
2) Per Accidens- due to provisions of Goods not existing at the time can be an
law declaring it illegal object as long as it has a potential or
possible existence, that is, it is reasonably
certain to come into existence, and the title
Examples of illicit sale: will vest in the buyer the moment the thing
a. Sale of Future inheritance comes into existence.
b. Sale of animals suffering from
contagious disease
c. Sale of animal to be used for a Mere Hope or expectancy (Emptio Spei)
service stated in a contract, and they
have found to be unfit therefor. The sale of a mere hope or expectancy is
d. Sale or transfer of land to aliens deemed subject to the condition that the
thing contemplated or expected will come
EXISTING, FUTURE, CONTINGENT into existence.

Goods which form the subject may either The Sale it self is valid even if the thing
be: hoped or expected does not come into
1) Existing existence, unless if such hope or expectancy
2) Goods to be manufactures, raise or is in vain, such sale is VOID.
acquired by the seller
3) Things having potential existence Emptio Rei Speratae Emptio Spei
4) Sale of specific things

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Sale of an expected Sale of the hope in proportion to the amount he bought.
thing itself
Subjected to the Sale produces effect If later on it was discovered that the
condition that the even if the thing mass of fungible goods contain less than
thing will come into does not come into what was agreed upon, the buyer
existence existence becomes owner of whole mass and seller
Uncertain with must make up for the difference.
Uncertain with the
regard to quantity
existence of the D) Sale of Things Subject to a
and quality of the
thing Resolutory Condition
thing
Object is a future Object is a present If the resolutory condition happens, the
thing thing vendor cannot transfer ownership of
what he sold since there is no object.
Note: In case of doubt, presumption is in
favor of emptio rei speratae since it is more in DETERMINATE OR DETERMINABLE
keeping the commutative character of the A) Determinate
contract.
A thing is determinate when it is
SALE OF SPECIFIC THINGS particularly designated or physically
segregated from all others of the same
A) Sale of Things in Litigation class.
Entered into by defendant, without
knowledge and approval of the litigants B) Determinable
or the court is rescissible. [Art. 1381 (4)] A thing is determinable when it is
capable of being made determinate at
Rescission will not take place when the the time the contract was entered
thing legally is in the possession of a 3rd without the necessity of a new or further
person who acted in good faith. [Art. agreement between the parties.
1385 (2)]
Note:
B) Sale of Undivided Interest o Failure to state the exact location of the
Makes the buyer a co-owner of the land does not make the object
thing. The co-owner can dispose his indeterminate, so long as it can be
share even without the consent of the located.
other co-owner/s. o The fact that the exact area of the land
specified in the contract of sale is
C) Sale of undivided share of a subjected to the result of the survey
Specific Mass of Fungible Goods does not make the object
indeterminate.
The sale of an undivided share in a
specific mass of fungible goods makes
the buyer a co-owner of the entire mass
IV. PRICE

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It is the sum stipulated as equivalent of the fulfillment of obligation, with
thing sold and also every incident taken into damages.
consideration for the fixing of the price put B) INADEQUACY OF PRICE
to the debit of the buyer and agreed to by
Gross inadequacy of price does not
him.
affect the contract of sale except that it
may indicate a defect in consent.
Requisites
1. Certain or ascertained at the time of
1. Voluntary Sales
perfection
 General rule: Mere inadequacy of
2. In money or its equivalent
the price does not affect validity of
3. Real, not fictitious
the sale.
A) CERTAINTY OF PRICE
 Exceptions:
Price must be certain, otherwise the sale a.) When low price indicates vice of
is void by reason of absence of meeting consent, sale may be annulled
of minds. b.) Where the price is so low as to be
“shocking to conscience”, sale
Price can be determined or certain when: may be set aside
c.) Where the parties did not intend
a.) Parties have fixed or agreed upon a
to be bound at all, sale is VOID
definite price
Fixing of price cannot be left to the 2. Involuntary Sales
discretion of one of the parties unless if
such was accepted by the other, therefor  General Rule: Mere inadequacy of
the sale is perfected. the price is not a sufficient ground for
b.) If it be certain with reference to the cancellation of the sale if
another thing certain property is real.
c.) Determination is left to the  Exceptions:
judgement of a specified person 1. Where the price is so low as to be
shocking to the moral
Price fixed by 3rd persons designated by conscience, judicial sale will be
the parties is binding upon them. set aside.
Exemptions 2. In the event of resale, a better
1. If unable or unwilling: sale is price can be obtained.
inefficacious unless parties
subsequently agree about the C) SIMULATION OF PRICE
price. If the price is simulated, the contract
2. If in bad faith/by mistake: Courts is void for the lack of cause or
may fix the price. consideration, but can be shown as a
3. If 3rd person is prevented from donation or some other contract.
fixing price by fault of seller or Disagreement on the matter of payment
buyer: Innocent party may avail is tantamount to a failure on the price
of remedies through recession or

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1. False Price (Relative Simulation) Buyer is bound to Would-be-buyer is
Price stated in the contract is not the pay the balance not required to buy
true price parties intended to be In case of non- In case of non-
bound payment, specific payment, there can
2. Simulated Price (Absolute performance or be an action for
Simulation) rescission can be specific
Price stated in the contract is not filed performance.
intended to be paid. Parties never NOTE: Expenses for the execution and
intended to be bound. Contract is registration of the sale shall be borne by
void and inexistent. the vendor, unless there is a stipulation to
the contrary.
D) FAILURE TO DETERMINE PRICE Remedies of vendor to unpaid price
1. Where contract executory- contract 1. Exact fulfillment
is without effect. There is no 2. Cancel the sale, should vendee
obligation created. failed to pay two or more
installments.
2. Where delivery has been made- 3. Foreclose the chattel mortgage.
buyer must pay a reasonable price.
Requisites
Reasonable Price a.) Must be a contract of sale
What is a reasonable price is a question b.) Object is personal property
of fact dependent on the circumstances c.) Sale must be in installments
of each case. Does not apply for sale for cash or straight
It may be determined on the basis of a terms.
company’s balance sheet showing the
book or fair value of its shares. V. OFFER
Generally, reasonable price is the
market price at the time and place fixed  General Rule: Offer may be withdrawn at
by the contract or by law for delivery of any time without even communicating such
goods. withdrawal to the interested buyer

E) EARNEST MONEY  Exception: When the offeror has allowed

the offeree a certain period to accept, may
Partial payment of the purchase price & be withdrawn at any time before
considered proof of the perfection of acceptance by communicating such
the contract. withdrawal.
Earnest Money Option Money Exception to the exception: Cannot be
Part of purchase Separate and distinct withdrawn within a certain period if found
price from purchase price under a consideration.
Given only when
Given when sale in
there is already a
not yet perfected OPTION CONTRACT
sale

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An accepted unilateral promise to buy or sell 1. When parties are face to face, when an
supported by a consideration distinct from offer is accepted without conditions and
the price. It secures the privilege to buy. without qualifications. If negotiation is
made through a phone, it is as if the parties
Option Contract Sale
are face to face.
Unilateral Bilateral
2. When contract is through a
Sale of right to
Sale of Property correspondence or thru telegram, there is
purchase
perfection when the offeror receives or has
An option without consideration is VOID
knowledge of the acceptance by the
and the effect is the same as if there was no
offeree.
option.
3. When sale is made subject to a
Kinds of Promises suspensive condition, perfection is when
1. Unilateral promise to sell- promise from the moment the condition is fulfilled.
elects to buy
2. Unilateral promise to buy- promise
elects to sell
3. Bilateral promise to buy and sell- Statute of Fraud
either parties choose to exact The following transaction must be in
fulfillment writing, otherwise contract is unenforceable.
Unless ratified by failure to object to oral
VI. ACCEPTANCE acceptance of benefits under the contract.
1. Sale of property at price not less
The acceptance referred to which than P500.00
determines consent is the acceptance of the 2. Sale not to be performs within one
offer, and not of the goods delivered. year
Requisites 3. Sale of real property or interest
therein
1. It must be absolute
2. Must be plain and unconditional NOTE: Applicable only to executory
3. To bind the offeror, the offeree contracts and not to contracts which are
must comply with the conditions of totally or partially performed.
the offer.
Sale by Auction
VII.PERFECTION Perfected when the auctioneer accepts the
bid by the falloff the hammer, gavel, or in
Contract of sale is perfected at the moment any other customary manner.
of the meeting of the minds of the parties.
If the auction is announced “without
From the moment of perfection, parties reserved”, goods cannot be withdrawn from
may reciprocally demand performance. sale after the bid is made.
By taking part in the auction, the buyer
Requirements for Perfection
voluntarily submitted to the terms and
condition of the auction.

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c. Deaf-mutes who do not know
Sale Of Goods By Description how to write
d. Civil Interdiction
Seller sells things as being a particular kind,
2. Relative Incapacity- only with
and buyer has not seen the article sold and
regards to certain persons and
relies on the description given by the
certain class of property
vendor.
Sale by Sample Husband and Wife
Parties contracted solely with reference to  General Rule: Husband and wife cannot
the sample, with the understanding that the sell to each other
bulk was like it. The vendor warrants the
thing sold will conform with the sample in  Exception:
kind, character, and quantity. It is the sole 1) When separation of property was
basis or inducement of the sale. agreed
2) There was a judicial separation of
NOTE: goods must satisfy all the warranties. property
Otherwise, contract may be rescind.
Relative Incapacity
The following persons cannot acquire
Effect of Perfection property by purchase, even at a public
auction, either in person or through the
After perfection, parties must now comply mediation of another:
with their mutual obligations. In the 1) Guardian, with respect to the
meantime, buyer has personal rather than property of his ward
real right. Hence if seller sells again a parcel 2) Agents, the property whose
of land to a stranger in good faith, the administration or sale may have
proper remedy of the buyer would be to sue been in trusted to them, unless
for damages for he cannot recover consent of principal is given
ownership over something he had never 3) Executors and administrators,
owned before. property of estate under his
administration.
VIII. CAPACITY TO BUY AND SELL 4) Public officers and employees, with
respect to the properties of the
All persons who can bind themselves by government, political subdivisions,
contract have also legal capacity to buy and or GOCCs, entrusted to them.
sell. 5) Judges, justice, prosecuting
attorney, clerks of court, etc., with
Kinds of Incapacity respect to the property in custogia
1. Absolute Incapacity- persons legis.
cannot bind themselves at all 6) Other persons disqualified by law
a. Minors
b. Insane or Demented Effect of violation

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a. With respect to 1-3: VOIDABLE 3) Warrant against eviction and against
Reason: only private rights, which hidden defects
are subject to ratification are 4) To take care of the thing, pending
violated. delivery, with proper diligence
b. With respect to 4-6: NULL & VOID 5) To pay the expenses of the deed of
Reason: violation of public policy sale, unless there is stipulation to the
cannot be subjected to ratification contrary

IX. LOSS AND DETERIOTAION XI. DELIVERY

Res Perit Domino Ownership, as a consequence of certain
The concept that owner bears risk of loss contracts such as sale, shall be transferred
and deterioration because ownership is not to the vendee upon actual or constructive
transferred until delivery. delivery
Rule on Risk of Loss and Deterioration:
Intention to Transfer Ownership
 Before Perfection: Seller bears the
In all forms of delivery, the act of delivery
risk
shall be coupled with the intention of
 At the time of perfection: Contract
delivering the thing. The act without the
is VOID or inexistence
intention is insufficient.
 At the time of sale: if entirely lost,
contract is VOID or inexistence. If Requisites of Delivery
partially lost, vendee may elect 1. Identity
between withdrawing or demanding 2. Integrity
the remaining part. 3. Intentional
 After perfection but before delivery: When vendor is not bound to deliver
risk of loss is shifted to the buyer but
stipulations in the contract will 1. Vendee has not paid the price
govern. 2. No period for payment has been
 After delivery: buyer bears the risk. fixed
Unless delivery was delayed through 3. Even if a period for payment has
the fault of either parties, the risk is been fixed, if the vendee has lost the
with the party in fault; and when the right to make use of the same
ownership of the goods has been Kinds
retained by the seller.
1. Actual or real- placing the thing
under the control and possession of
X. OBLIGATIONS OF THE VENDOR the buyer
2. Legal or constructive- delivery is
1) Transfer ownership represented by other signs or acts
2) Deliver the thing, with its accessions indicative thereof
and accessories, if any 3. Quasi-tradition- delivery of rights,
credits or incorporeal property,

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made by (i) placing titles of Title remains with seller notwithstanding
ownership in the hands of the buyer delivery of the goods. It is in nature of an
or (ii) allowing the buyer to make option to purchase. Sale is dependent on the
use of rights quality of the goods; it is a sale with
4. Tradition by operations of law suspensive condition. Buyer become owner
when:
Kinds of Constructive or Legal Delivery
a) By Legal Formalities- sale is made 1) Buyer signifies his approval or
through public instrument. Gives acceptance to seller
rise only to a prima facie presump- 2) Does any other act adopting the
tion of delivery. transaction
b) Symbolic Delivery (tradition 3) Retains the goods without giving
simbolica)- delivery of keys or notice of rejection after the time
depository where the movable is fixed has expired; it no time has been
kept or stored. fixed, after the expiration of a
c) Traditio Longa Manu- delivery of a reasonable time
movable by mere consent or
agreement. Pointing at the thing Sale or Return Sale on Trial
d) Traditio Brevi Manu- buyer simply Subject to a Subject to a
continues in possession of the thing resolutory condition suspensive condition
but under ownership. Applies to Depends on the
Depends on the will
movables only. Happens when character or quality
of the buyer
buyer already has possession of the of the goods
thing sold before the sale. Ownership remains
e) Traditio Constitutum Posessorium- in the seller until
Ownership passes
seller continues to be in possession buyer signifies his
to buyer on delivery
of the property sold but not as a approval (meeting of
owner but in some other capacity. the minds)
Risk of loss or injury Risk of loss and injury
Sale or Return rest with the buyer remains with seller
Property is sold, but the buyer has the Goods Delivered Through Carrier
option to return it to the seller instead of
 General Rule: Delivery to carrier is
paying the price. It depends on the
deemed to be delivery to the buyer.
discretion of the buyer; it is a sale with a
resolutory condition.  Exception: Where the right of possession
or ownership of specific goods sold is
It is a kind of sale with condition subsequent. reserved.
Buyer, being the owner, bears the risk of
loss. The buyer must comply with express or
implied conditions otherwise, the sale Seller’s Duty After Delivery to Carrier
becomes absolute. 1. To enter on behalf of buyer into such
contract reasonable under the
Sale on Approval or Trial circumstances

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2. To give notice to buyer regarding 4. Purchase in a merchant’s store, fairs
necessity of insuring the goods. or markets (art. 559)
5. When a person who is not the owner
Instances Where Seller Is Still The Owner sells and delivers a thing,
Despite Delivery subsequently acquires title thereto.
1. Sale on trial, approval or satisfaction 6. When the seller has a voidable title
2. Contrary intention appears by the which has not been avoided at the
terms of the contract time of sale.
3. Implied reservation of ownership
a. Goods are shipped, but by Place of Delivery
the bill of landing goods are 1. Where there is an agreement: Place
delivered to seller or his specified
agent or their order 2. Where there is no agreement: Place
b. Bill of landing is kept by the of delivery determined by usage of
seller or his agent trade
c. When the buyer does not 3. Where there is no agreement and no
honor the bill of exchange by prevalent usage: seller’s place of
returning the bill of landing business
to seller. 4. In any other case: seller’s residence

Sale by one having a Voidable Title Payment of the Purchase Price

If the seller has only a voidable title, buyer  General Rule: Seller is not bound to deliver
acquires a good title to the goods provided unless the purchase price has been paid.
he buys them:  Exception: The Seller is bound to deliver
a) Before the title of the seller has been even if the price has not been paid, is a
avoided period of payments has been fixed.
b) In goods faith for value
c) Without notice of the seller’s defect Goods Delivered Less Than Quantity
of title Agreed
1. Buyer may reject; or
Sale of Goods by a Non-owner 2. Buyer may accept and pay at the
 General Rule: Buyer acquires no title even contract rate
if in good faith or for value. Nemo dat quid
non habet (“You cannot give what you do Quantity More Than Agreed Upon
not have”). 1. Buyer may reject all; or
2. Buyer may accept the goods agreed
 Exceptions: upon and reject the rest; or
1. Owner is estopped or precluded by 3. Buyer may accept all and must pay
his conduct for them at the contract rate
2. Sale is made by the registered owner
or apparent owner Goods Mixed With Goods Of Different
3. Sales sanctioned by judicial or Description
statutory authority

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Buyer may accept the goods which are in c) Warehouse Receipt- contract or
accordance with the contract and reject the receipt for goods deposited with a
rest. warehouseman containing the
latter’s undertaking to hold and
Indivisible Goods deliver the said goods to a specified
person, to order or bearer.
If the subject is indivisible, in case of delivery
of a large quantity of goods or a mixed
goods, the buyer may reject the whole of
the goods.
Right of rejecting the whole of the goods Classes of Documents of Title
delivered is given only if the subject matter
a) Negotiable Documents of title-
is indivisible.
stated that goods can be delivered to
bearer, or to the order of a person.
Rights of Vendee to the Fruits
b) Non-negotiable Instrument of Title-
Vendee has the right to the fruits of the stated that goods are to be delivered
thing sold from the time obligation to to a specified person.
deliver arises. Generally at time of
perfection, however parties may modify it Negotiation of negotiable document of
by agreement. title
1.) By Delivery
XII. DOCUMENT OF TITLE 2.) By indorsement plus delivery

A document of title in which is stated that Forms of Indorsement

the goods referred to therein will be
a) Blank Indorsement- consist of
delivered to the bearer, or to order of any
signature of the indorser without
person named in such document is a
specifying the name of the indorsee.
negotiable instrument of title.
b) To bearer- where the indorsement
Document is negotiable if: states that the goods are deliverable
1.) Goods are deliverable to bearer to bearer.
2.) Goods are deliverable to the order of c) Special Indorsement- name of
a certain person indorsee is specified.

Common forms of document of title Negotiable Document of title marked

a) Bill of Landing- contract or receipt “Non-negotiable”
for the transport of goods and their
Such mark will have no effect on the
delivery to the person named
instrument and remains to be negotiable.
therein, to order or bearer.
b) Dock Warrant- given by dock
Who may negotiate negotiable document
owners to an importer of goods
of title
recognizing the latter’s title of the
said goods 1. By the owner

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2. By the person to whom the 2. Right to compel the transferor to
possession or custody of the indorse
document has been entrusted by the Negotiation shall take effect as to the time
owner. when indorsement is actually made.
Rights of the Holder Warranties on sale of document
1. Title of the person negotiating the 1. Document is genuine
document, over the goods covered 2. He has a legal right to negotiate or
by the document; transfer it
2. Title of the person to whose order by 3. He has knowledge of no fact which
the terms of the document the would impair the validity or worth of
goods were to be delivered, over the document
such goods; 4. He has the right to transfer the title
3. The direct obligation of the bailee to to the goods and that goods are
hold possession of the goods for merchantable or fit for a particular
him, as if the bailee had contracted purpose
to him directly.
NOTE: Mere transfer foes not acquire
directly the obligation of the bailee. To
acquire it, he must notify the bailee.
Bailee
Rights of the Transferee The bailee has the direct obligation to hold
The rights of a transferee, tot whom a possession of the goods for the original
document is transferred but not negotiated, owner. The goods cannot be attached or
are not absolute as it is subjected to the levied and bailee cannot be compelled to
terms of the agreement. deliver the goods unless the document be
1. Title of the goods as against the first surrendered or its negotiation
transferor; prohibited by court.
2. Right to notify the bailee of the Failure of bailee or previous indorsers to
transfer thereof; fulfill their obligations
3. Right, thereafter, to acquire the
obligation of the bailee to hold Indorser hall not be liable for any failure on
goods for him. the part of the bailee or previous indorsers
to fulfill their respective obligation.
Transfer for Value by Delivery Effect of typographical or Grammatical
If a negotiable document of title is Error
transferred for value by delivery, and It does not destroy the negotiability of the
indorsement is essential for negotiation, document of title, for what should be
The right of the transferee are: considered is the intent.
1. Right to the goods as against the XIII. UNPAID SELLER
transferor;

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Unpaid seller is one who has not been paid RIGHT OF STOPPAGE IN TRANSITU
the whole amount of the price or one who An extension of the lien for the price;
received a negotiable instrument and it has entitles unpaid seller to resume possession
been dishonored, buyer is insolvent, or of the goods while they are in transit before
otherwise. the goods come in possession of the vendee
Rights of the Unpaid Seller A) When available:
1) Right to lien of goods or the rights to 1.) Buyer must be insolvent;
retain them for the price while he is 2.) Seller must be unpaid
in possession of them 3.) Goods are in transit
2) Right of stoppage in transit 4.) Seller must actually take
3) Right of resale possession of the goods sold or
4) Right to rescind the sale give notice of his claim to the
carrier or other person in
RIGHT TO LIEN possession.
Right to retain possession of goods until 5.) Seller must surrender the
payment or tender of the whole price, or document of title, if any, issues
unless he agrees to sell on credit by the carrier or bailee;
6.) Seller must bear the expenses of
A) When available: delivery after the exercise of the
1.) Goods sold without stipulation as right
to credit B) When goods are considered in
2.) Goods are sold on credit, but transit:
credit term has expired 1.) After delivery to carrier or other
3.) Buyer becomes insolvent bailee and before the buyer or his
B) Lien on Partial Delivery: agent takes delivery of them;
When unpaid seller made partial 2.) Goods are rejected by buyer, and
delivery of the goods, he may carrier or bailee continues to be
exercise his lien on the remainder, in possession of them, even if
unless such part delivery shows an seller refused to received them
intent to waive the lien or right of back.
retention. C) How to exercise:
C) When lien is lost: 1.) By obtaining actual possession of
1.) Delivers the goods to a carrier or the goods.
other bailee for the purpose of 2.) By giving notice of his claim to
transmission to the buyer the carrier or bailee.
without reserving the ownership Such notice may be given in to the
in the goods or the right of person in actual possession or to his
possession thereof; principal. But if given to the
2.) Buyer or his agent lawfully principal, it must be given at such
obtains possession of the goods; time and under such circumstances
3.) By waiver thereof to be effectual so the principal can
prevent delivery.

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D) Effects of exercise: Return of the title over the undelivered
1.) Goods are no longer in transit goods to the seller, and right to recover
2.) Carrier shall be liable as damages for breach of contract
depositary or other bailee. A) When available:
3.) Carrier must redeliver the goods 1.) Seller has the right to lien or
to, or according to the stoppage in transitu
instructions of the seller 2.) Under either of the 2 situations:
E) When goods are no longer in transit: a. Right to rescind is
1.) After delivery to the buyer or his expressly reserved
agent in that behalf; b. When buyer delays in the
2.) Buyer obtains delivery of the payment of the price for
goods before arrival at the an unreasonable time.
appointed destination B) Effects of rescission
3.) Carrier or bailee acknowledges 1.) Seller resumes ownership of the
to hold the goods on behalf of goods
the buyer 2.) Seller shall not be liable to the
4.) Carrier or other bailee wrongfully buyer upon the contract
refuses to deliver the goods to 3.) Buyer may be held liable to the
the buyer or his agent. seller for damages for any loss
occasioned by the breach of
RIGHT OF RESALE contract
A) When available: C) How seller may rescind:
1.) Seller has the right to lien or by notice to the buyer or by some
stoppage in transitu. overt act showing an intention to
2.) Under the following cases: rescind.
a. Goods are perishable by Communication to buyer of rescission is not
nature always necessary but giving/failure to give
b. Right to resell is expressly notice is relevant in determining
reserved reasonableness of time given to the buyer to
c. Buyer delays in payment make good his obligation under contract.
for an unreasonable time
Effect if Buyer Sold the Goods
Generally, the unpaid seller's right of lien or
B) Effects of resale stopage in transitu remains even if the buyer
1.) Seller is not liable to the buyer for has sold or otherwise disposed of the goods.
any profit
2.) If sells for less than the price, Exceptions:
seller has right to sue for the 1.) Seller has given his consent
balance from buyer 2.) When purchaser or buyer is a
3.) New buyer acquires good title as purchaser for value in good faith of a
against the original buyer negotiable document of title.

RIGHT TO RESCIND THE SALE IX. SALE OF REAL ESTATE

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Boundaries
Unit Price Contract Mentioning the boundaries of the land is
Payment will be made only on the basis of indispensable in every conveyance of real
contractual items actually performed. The estate. The vendor is bound to deliver all
amount agreed upon is merely an estimate. that is included within the said boundaries.
Price is depending upon the quantities The area of which, even if lesser or grater
performed multiplied by the unit prices than what is stipulated, is immaterial.
previously agreed upon.
Real property not in Vendor's Possession
Sale of Real Estate by the Unit The failure of a person to take the ordinary
The vendor must deliver the entire property precautions, specially in buying a piece of
agreed upon. The immovable property must land in the actual, visible and public
be of the quality specified in the contract. possession of another person, other than
the vendor, constitutes gross negligence
If the entire area could not be delivered,
amounting to bad faith. One who purchases
then the object of the contract is not
real property which is in the actual
delivered. Hence the vendee is entitled to
possession of another should, at least make
rescind it. But he may, however, enforce the
some inquiry concerning the right of those
contract with the corresponding decrease in
in possession. He can scarely, in the absence
price.
of such inquiry, be regarded as a bona fide
purchaser as against such possessors.
When Vendee is Entitled to Rescind Sale
of Real Property
Prescription of Action
1.) If the lack of area is at least 1/10th The action for either recission of the or
than that stated or stipulated. reduction of the price must be brought 6
2.) If the deficiency in the quality months from the day of delivery.
specified in the contract exceeds
1/10th of the price agreed upon X. DOUBLE SALE
3.) If the vendee would not have bought
the immovable had he known of its Requisites of Double Sale
smaller area or inferior quality. 1. Two or more valid contract of sale;
2. Two or more buyers ;
Where immovable of a greater area or 3. They must pertain exactly to the
number same object; and
Vendee may accept the area included in the 4. They must be bought from the
contract and reject the rest. The vendee same seller.
may not withdraw from the contract.
Rules of Preference
Lump Sum Sale (A Cuerpo Cierto) 1.) Double Sale of Movables
Sates the full purchase price based on the - who first takes possession in good
estimate or where both area and boundaries faith
are stated. 2.) Double Sale of Real Property

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a. First registrant in good faith violation of it gives rise to a suit for
b. First possessor in good faith damages.
c. Person with oldest title in Warranty is enforceable only against the
good faith immediate vendor of the party
dispossessed.
The requirement of the law then is two-fold: Warranty vs Condition
acquisition in good faith and registration in
Warranty Condition
good faith. Good faith must concur with the
Goes into the
registration. If it would be shown that a
performance of an
buyer was in bad faith, the alleged Affects the existence
obligation and may,
registration they have made amounted to of the obligation
in itself, be an
no registration at all.
obligation
Stipulation or
XI. CONDITIONS Must be stipulated
operation of law
Non-fulfillment Non-happening does
An uncertain event or contingency on the
constitutes breach not breach the
happening. Conditions may be:
of contract contract
1.) Waived; or
May attach to the
2.) Considered as warranties Always relate to the
seller’s duty to
subject matter or the
deliver or some
Effect of non-fulfillment of Condition seller’s obligations
other circumstances
1.) If the obligation of either party is
subjected to any condition and such
Kinds of Warranties
condition is not fulfilled, such party
1.) Express Warranty
may;
2.) Implied Warranty
a. Refuse to proceed with the
contract
Express of Opinion
b. Proceed the contract,
A mere expression of opinion by the seller
waiving the performance of
does not import a warranty unless:
the condition
1.) Seller is an expert; and
2.) If condition is in nature a promise
2.) Opinion was relied upon by the
that it should happen, the non-
buyer
performance of such condition may
Not every false representation voids the
be treated by the other party as a
contract, only those matters substantially
breach of warranty.
affecting the buyer’s interest
XII.WARRANTIES
Express Warranty
It is a promise that a fact is true. In a sale, it It is an affirmation of fact or any promise by
is a statement of fact abut the quality or the seller about the subject matter where
character of the goods sold to induce the the natural tendency of it is to induce the
sale relied upon by the buyer. Breach or buyer to purchase the thing and the buyer

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purchases the thing relying on such Warranty Against Eviction
affirmation or promise.
Eviction
An express warranty can be made by and
Vendee is deprived of the whole or part of
also be binding on the seller even in the sale
the thing purchased. (art. 1548)
of a second hand article.
Warranty against Eviction
Seller guarantees that he has the right to sell
the thing sold and to transfer ownership to
Implied Warranty the buyer who shall not be disturbed in his
legal and peaceful possession thereof. If
It is a natural, not an essential element of a evicted, vendor is liable thereof.
contract, and is deemed incorporated in the
contract of sale. It is inherent. Elements of Warranty Against Eviction
Its reason is to protect naïve and 1.) Vendee has been deprived in whole
unsuspecting buyers from scrupulous sellers or in part of the thing purchased
from running away from their wrongful 2.) Deprived by virtue of final
doings. judgement
It may be modified or suppressed by 3.) Judgement is based on right prior to
agreement of the parties. Unless waived, the sale or act imputable to the
the warranties stay. vendor
4.) Vendor was summoned in the suit
Implied Warranties in sale for eviction at the instance of the
1. Warranty as to seller’s title vendee
2. Warrant against hidden defects 5.) There is no waiver on the part of the
3. Warranty as to fitness or vendee
merchantability
Eviction in Part
When Implied Warranty not Applicable Buyer may either enforce vendor’s liability
1.) “As is and where is” sale for eviction or he may demand rescission of
2.) Sale of secondhand articles the contract provided in article 1556, if the
3.) Sale by virtue of authority in fact or buyer lose, by eviction, a part of the thing
law sold of such importance that he would not
have bought it without said part.
SUBSECTION 1
NOTE: Rescission is not a remedy against
total eviction. Rescission contemplates that Prescription
the one demanding it is able to return Where one acquires ownership and other
whatever he has received under the
real right through the lapse of time in the
contract. Since the buyer can no longer manner and conditions prescribed by law.
return the thing sold to the seller, rescission
cannot be carried out. a. Completed before sale- vendee can
enforce warranty against eviction

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b. Completed after sale- vendor is not
liable for eviction. (art. 1550) SUBSECTION 2
Warranty Against Hidden Defects of, or
Effect of Waiving Warranty in Bad Faith Encumbrances upon, the Thing Sold
a. Vendor in bad faith- cannot be
Requisites for Warranty against Hidden
exempted from warranty. Because
Defects
he has knowledge beforehand of a
1. Defect must be important or serious;
presence of a fact giving rise to
2. Must be hidden
eviction. (art. 1553)
3. Must exist at the time of sale
b. Vendee in bad faith- not entitled to
4. Vendee must give notice of defect to
warranty against eviction nor right
vendor within reasonable time
to recover damages. He proceeded
5. Action for rescission or reduction in
to the sale with the assumption of
price must be brought within 6
the risk of eviction. (art. 1554)
months from delivery or 40 days in
case of animals
Kinds of Waiver
6. No waiver of warranty on the part of
1. Consciente
vendee
a. voluntarily made by the
vendee without the
knowledge and assumption
of the risks of eviction.
When defect important
b. Vendor shall only pay the
a) Renders the thing sold unfit for its
value of the thing sold at the
intended use;
time of eviction
b) Diminishes its fitness for such use
2. Intencionada
a. Made by vendee with
NOTE: The use contemplated must be that
knowledge of risk of eviction
which is stipulated, and in absence of
and assumption of its
stipulation, that which is adopted to the
consequences
nature of the thing, and to the business of
b. Vendor not liable unless
the buyer.
acted in bad faith
Rights and liabilities Implied Warranty of Fitness
In case eviction occurs, the vendee shall
Generally, there is no implied warranty of
have the right to demand of the vendor the
fitness for any particular purpose except
following:
under the following:
1. Return of value of thing
a) Buyer expressly or impliedly
2. Income or fruits of thing
manifest to the seller the particular
3. Cost of the suit
purpose of the goods acquired
4. Expenses of the contract
b) Buyer relies upon the seller’s skill or
5. Damages and interest, and
judgement
ornamental expenses, if sale is made
in bad faith. (art. 1555)

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There is an implied warranty that the goods If the thing sold had any hidden defects at
are reasonably fit for such special purpose. the time of sale, and it is lost through the
fault of the vendee, vendor shall be liable for
Implied Warrant of Merchantability the price paid less value of the thing had
when it was lost. (art. 1569)
It’s a warranty that goods are reasonably fit
for the general purpose for which the same
RULES
are sold.
IN CASE OF SALE OF ANIMALS
Ignorance of Vendor of Hidden Defects Redhibitory vice or defect
Ignorance does not relieve the vendor from A defect which the seller is bound to warrant
liability. Good faith cannot be availed of as a in animals, the following special rules shall
defense by the vendor. apply:
a) Doctrine of Caveat Venditor 1. Defect must be hidden
Vendor is still liable even is he is not 2. Must be of such nature that expert
aware due to this doctrine. It is based knowledge is not sufficient to
on the principle that a sound price discover it
warrants a sound article.
Veterinarian is liable if he fails to discover or
Alternative Remedies of the Buyer disclose the hidden defect through
Vendee has the option to either: ignorance or bad faith. (art. 1576)
1. Accion redhibitoria (withdraw from
the contract) Seller liable if animal dies within 3 days after
2. Accion quanti minoris (reduction in its purchase due to a disease that existed at
price) the time of sale.
Limitation of the action: Rehibitory action
must be brought 40 days from the date of
Effects of Thing loss due to hidden defects their delivery to the vendee. (art. 1577)
a.) Vendor aware of hidden defect- he
shall bear the lost due to bad faith.
Vendee may recover:
1. Price paid
No warranty against hidden defects
2. Expenses of the contract
3. Damages 1. Animals sold at public fairs or public
b.) Vendor is not aware- since he acted auctions.
in good faith, he shall be obliged only 2. Livestock sold as condemned
to return: Void Sale of Animals
1. Price a) animals sold are suffering from
2. Interest contagious disease; or
3. Expenses of the contract paid b) found unfit for the use or service
by vendee stated in the contract.

Lost due to fault of Vendee Animal died with Vices

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If loss is caused for fortuitous event or by
fault of vendee and animal has vices, the XIV. OBLIGATIONS OF THE VENDEE
buyer may either:
1. withdraw from the contract; or Principal Obligations of the Vendee
2. demand a reduction in price. 1.) Accept delivery
2.) Pay the price
XIII. EASEMENT OR SERVITUDE 3.) Bear expenses for the execution and
registration of the sale and putting
Easement or servitude is an encumbrance the goods in a deliverable state, if
imposed upon an immovable for the benefit such is the stipulation
of another immovable owned by a different
person. Pertinent Rules:
Kinds of easement or servitude 1. Vendor not required to deliver the thing
a) Apparent easement- expressly sold until the price is paid nor the vendee to
made pay the price before the thing is delivered in
b) Non-apparent easement- no the absence of an agreement to the
external indication of its existence contrary; (art. 1524)
Requisites for Vendor’s Liability for 2. If stipulated, vendee is bound to accept
Immovable sold with Easement delivery and to pay the price at the time and
1.) Must be non-apparent place designated;
2.) Not indicated in the agreement 3. If there is no stipulation as to the time and
3.) Must be of such nature that the
place of payment and delivery, the vendee is
vendee would not have acquired the bound to pay at the time and place of
immovable had he been aware delivery;
thereof.
4. In the absence of stipulation as to the
Remedies & Right of Vendee place of delivery, it shall be made wherever
1.) Within 1 year from execution of the the thing might be at the perfection of the
deed of sale: contract (art. 1251); and
a. Rescission; or 5. If only the time for delivery has been fixed
b. Damages. the vendee is required to pay even before
2.) After one (1) year from of execution the thing is delivered to him; (art. 1524)
of deed of sale:
a. Damages, within a period of Delivery in installments (art. 1583)
one (1) year from discovery of  General Rule: Buyer is not bound to
easement or servitude accept delivery or pay the price thereof
When Vendee’s rights can’t be exercised by installments.
1.) When servitude is apparent  Exception: If there is a stipulation
2.) If non-apparent servitude is
registered Right of Buyer to Examine Goods
3.) If vendee has knowledge of the
encumbrance, registered or not

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 General Rule: Buyer has the right to a e) Obligation to notify the seller
reasonable opportunity to examine the of such refusal (art. 1587)
goods before accepting them. (art. 1584)
 Exception: (1) When there is an
agreement; (2) stipulation that the 2) Buyer unjustifiably refuses
goods shall not be delivered to buyer a) Title passes to the buyer,
until he paid the price (C.O.D.). unless there is stipulation and
seller reserved the ownership
If seller refused to allow an opportunity for
b) Obliged to pay the price
inspection, buyer may recind or recover the
(art. 1588)
price paid.
Time and place for payment of price
NOTE: the right to examine the goods is a
a. Time and place stipulated
condition precedent to the transfer of
b. Time and place of delivery of thing,
ownership.
in absence of stipulation
When there is Acceptance of Goods
1. Express acceptance When Vendee is liable for interest
2. Buyer does an act which only an Buyer shall pay interest for the period
owner can do between delivery and payment of price in
3. Failure to return after reasonable the following cases:
lapse of time 1. If there is stipulation
2. Thing sold produces fruits or income
Effect of acceptance on vendor’s liability 3. If he is in default, from the time
for breach of warranty judicial or extrajudicial demand for
payment of price. (art. 1589)
 General Rule: Seller is not discharged
from liability for breach of warranty by Suspension of Payment (art. 1590)
the acceptance of the goods 1. When buyer may suspend payment
 Exception: (1) If there is an agreement, a. If he is disturbed in the
express or implied; (2) if buyer fails to possession or ownership of thing
give notice to seller of breach of bought; or
warranty within a reasonable time after b. If he has a well-grounded fear
buyer knows of such breach. (art. 1586) that his possession or ownership
would be disturbed by a
Effects if buyer refuses to accept delivery vindicatory action or foreclosure
1) Buyer justifiably refuses of mortgage.
a) Buyer has no duty to return 2. When buyer may NOT suspend
the goods payment
b) Title does not pass a. Vendor give security for the
c) Not be obliged to pay the return of the price;
price b. It has been stipulated;
d) If he constitute himself as a c. Vendor has caused the
depositary, he shall be liable disturbance or danger to cease;
as such

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d. Disturbance is a mere act of c. If the goods can’t be readily be
trespass; resold for a reasonable price and
e. Vendee has fully paid the price. buyer wrongfully refuses to
accept them before ownership
has passed.
2. Action for damages
When Vendor may Rescind the Sale
3. Action for rescission
1) Sale of immovable- seller must have a. When buyer repudiated the
a reasonable ground to fear the: contract of sale;
a. Loss of the immovable b. When buyer manifested his
property; AND inability to perform his
b. Loss of the price. obligation; and
If one or both grounds do not exist, c. When buyer has committed a
the vendor may choose between: breach in the contract.
a. Fulfillment with damages;
Action by the Buyer
b. Rescission with damages.
1. Bring an action for specific
NOTE: Rescission of real property is not performance, if the seller has broken
automatic. Demand is needed before the contract to deliver specific or
rescission may take place. Demand is for ascertained goods.
the rescission and not for the payment 2. In case of breach of warranty by
of the price. seller:
2) Sale of Movables- rescission of the a. Accept the goods and ask to
sale of movable shall take place at reduce or extinguish the price
the option of the vendor, if at the b. Accept goods and maintain an
time fixed for the delivery of the action for damages
thing, the vendee: c. Refuse to accept the goods and
a. does not accept delivery maintain an action for damages
b. does not pay the price, unless d. Rescind the contract by the
a longer period of payment is return of goods and recover of
stipulated price
When rescission by Buyer not allowed
XV. BREACH OF CONTRACT OF 1. If buyer accepted the goods knowing
SALE OF GOODS of the breach of warranty without
protest;
Actions by the Seller 2. If he fails to notify the seller within a
1. Action for payment of price reasonable time
a. Ownership has passed to buyer 3. Fails to return or offer to return the
and he wrongfully neglects or goods to the seller in substantially as
refuses to pay the price; good condition as they were in the
b. Price is payable on a certain day time of delivery
and buyer did not pay, even if
there is no transfer of title; or Rights and Obligation in Rescission

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1. Buyer b. Resale of the goods by unpaid
a. Obliged to return the goods, and seller (art. 1532)
cease to be liable for the price; c. Rescission of the sale by unpaid
b. If paid the price or any part seller (art. 1534
thereof, he may recover it; d. Rescission by the buyer in case of
c. Right to hold the goods as bailee partial eviction (art. 1556)
if the seller refuse the return of e. Rescission by buyer in case of
goods; breach of warranty against
d. Right to have a lien of the goods hidden defect (art. 1567)
for any portion of price paid, as if f. Rescission by buyer in sale of
he were an unpaid seller. animals with redihibitory defects
(art. 1580)
2. Seller 3. By redemption
When seller may rescind before
delivery A.) CONVENTIONAL REDEMPTION
a. When the buyer repudiated the Also called the right to redeem or
contract of sale; repurchase, takes place when the vendor
b. When buyer manifested his reserved the right to reacquire the thing
inability to perform his sold, provided that he:
obligation 1. Return to the vendee:
c. When buyer committed a a. The price paid
breach of the contract. b. Expenses of the contract and
other legitimate payments
XVI. EXTINGUISHMENT OF SALE made thereof
c. Necessary and useful expenses
Sales are extinguish by: made on the thing sold.
1. By the same causes as all 2. Comply with other stipulations
obligations:
a. Payment/performance NOTE: the seller a retro must pay for useful
b. Prescription improvements introduced by the buyer a
c. Loss of thing due retro; otherwise, the latter may retain
d. Annulment possession of the land until reimbursement
e. Novation is made.
f. Condonation/remission
g. Confusion or merger Period of Redemption
h. Compensation a.) No agreement : 4 years from date of
i. Rescission contract
j. Resolutory Conditions b.) There is agreement: should not
2. by the various causes of exceed 10 years. The time in excess
extinguishment in title VI (sales): of 10 years shall be null and VOID.
a. Cancellation of sale of personal c.) Civil Action between the parties: 30
property in installments (art. days after final judgement was
1484) made, provided that the contract

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was a true sale with a right to 2. If vendee did not pay for the fruits,
repurchase. no reimbursement for those existing
at the time of redemption.
Effect of Failure to exercise right of 3. No fruits at the time of same and
repurchase some exist at time of redemption, it
Ownership shall be consolidated in the is to be distributed proportionately
vendee. In case of real property, a judicial to the vendor and vendee, giving the
order is required for the purpose of latter a share in proportion to the
recording the consolidation in the registry of time he possessed the property
property after the vendor has been duly during the last year counted from
heard. (art. 1607) the anniversary from the date of sale
to compensate the vendee for his
Who may Exercise the right to Repurchase expenses. (art. 1617)
1. Vendor a retro
a. Vendee, who acquired the whole B.) EQUITABLE MORTGAGE
undivided interest, may compel One which lacks the proper formalities of a
the vendor, who only sold part mortgage, but shows the intention of the
thereof, to redeem the whole parties to make the property subject of the
property.(art. 1611) contract as security for a debt.
b. Property sold by co-owners jointly
and in the same contract may A contract may be presumed to be an
exercise the right in respect to his equitable mortgage under the following
share only. (art. 1612) cases: (applies only to absolute sale)
c. In the case above (b), vendee 1. Unusually inadequate purchase
cannot be compelled to consent price;
to a partial redemption, he may 2. Vendor remains in possession as
demand all vendors or co-heirs to lessee or otherwise;
agree to repurchase the whole 3. Extension for period of right to
thing sold. (art. 1613) repurchase;
4. Purchases retains for himself a part
2. Creditors of the Vendor of the purchase price;
a. They cannot make use of the right 5. Vendor binds himself to pay the
of redemption until after they taxes of the thing sold;
have exhausted the property of 6. When the real intention of the
the vendor. (art. 1610) parties is to secure the payment of
an obligation.

Rights of Parties as to the Fruits of Land NOTE: in case of doubt, a contract

1. If there were fruits at the time of sale purporting to be a sale with right to
and vendee paid for them, he must repurchase (pacto de retro sale) shall be
be reimbursed. construed as an equitable mortgage.

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NOTE: Vendor may ask for reformation, or another co-owner but rather it is exercised
to correct the instrument to express the true against the buyer who bought the share.
intent of the parties.
Legal Redemption of Adjacent Owners of
C.) LEGAL REDEMPTION RURAL Lands
The right to be subrogated, upon the same The following are the requisites for the right
terms and conditions stipulated in the to exist:
contract, in the place of one who acquires a 1. The land must be rural;
thing by: 2. Land must be adjacent;
(1) purchase or 3. There must be alienation;
4. Rural land alienates must not exceed
(2) dation in payment, or
1 hectare;
(3) by any other transaction whereby 5. Vendee must already own some
ownership is transferred by onerous rural land; and
title. 6. Rural land sold must not be
May be effected against movables or separated by brooks, drainage,
immovables. It must be exercised within ravines, roads and other apparent
thirty (30) days from the notice in writing by servitudes from the adjoining lands.
the vendor.
NOTE: Legal right of redemption of rural
NOTE: Written notice under is mandatory land refers to land used for agriculture
for the right of redemption to commence. rather than residential purposes. [Fabia vs
Intermediate Appellate Court, Nov. 21, 1984]
Right of Legal Redemption of Co-owners
The following are the requisites for the right If two or more adjoining owners desire to
to exist: exercise the right of redemption
1. There must be co-ownership; 1. Owner of the smaller area shall be
2. There must be alienation of all or any preferred.
of the shares of the other co-owners; 2. If both lands have same area, the one
3. The sale must be to a third person or who first requested the redemption
stranger; shall be preferred. (art. 1621)
4. The sale must be before partition;
5. The right must be exercised within Rights of Adjacent Owner of URBAN
the period provided; Lands
6. Vendee must be reimbursed for the The owners may exercise two (2) rights,
price of the sale. right of pre-emption or right of redemption.
The following are the requisites in order to
Against whom the right may be exercised exercise such right:
The right of legal redemption is not granted 1. Land must be urban;
solely and exclusively to the original co- 2. One exercising the right must be an
owner but applies to those who adjacent owner;
subsequently acquire their respective share 3. The land sold must be so small and
while the co-ownership subsist. In other so situated that a major portion
words, the right cannot be exercised against

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thereof cannot be used for any Escudibo] However, no specific form of
practical purpose within a written notice is required.
reasonable time; The 30-day notice in writing should be
4. Such urban land was bought by its counted from notice, not of the perfected
owner merely for speculation; and sale, but of the actual execution and delivery
5. It is about to be resold, or that its of the document of sale. [Doromal v. COA L-
resale has been perfected. 36083, Sept. 5, 1975]
NOTE: If two or more owner wish to exercise
their rights, the one whose intended use of XVII. ASSIGNMENT OF CREDITS AND
the land appears best justified shall be OTHER INCORPOREAL RIGHTS
preferred. (art. 1622) Co-owners are
preferred over adjacent owners. (art. 1623, Assignment of credit is a contract where one
par 2) person (creditor/assignor) transfers to
another his rights and actions against a third
Pre-emption person (debtor) to another person
It is the act of purchasing before others. If (assignee) in consideration of a price certain
exercised, they will have preference over in money.
other potential buyers.
An assignment of credit not only entitles the
Pre-emption vs Redemption assignee to the credit, but also the power to
Pre-emption Redemption enforce it against the debtor of the assignor.
Arises before the Forms of assignment of credit
Arises after sale
sale 1. Between parties
No rescission There can be a. May be in any form, oral or
because no sale as rescission of the written. So long as the law does
yet exist original sale not require a specific form for
The action is its validity.
Action is directed
directed against the 2. To be binding against 3rd persons
against the buyer
prospective buyer a. If personal property- public
May attach to the instrument
Always relate to the
seller’s duty to b. If real property- public
subject matter or the
deliver or some instrument must be recorded
seller’s obligations
other circumstances in the Registry of Property.

Effects of payment by debtor to

creditor/assignor after assignment
Period which Right may be Exercised
1. No knowledge of assignment-
The period shall be exercised within 30 days
Released from obligation. (art. 1626)
from the notice in writing by the prospective
2. With knowledge of assignment- not
vendor, or by the vendor.
released.
If notice is not given, the 30-day period has
NOTE: Art. 1626 stresses “knowledge”
not even begun to run. [Vda. De Cangco v.
rather than when notice is received.

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Accessory Rights Included in Assignment

Duration of Assignor’s Warranty
The assignment of a credit does not only
1. Period Stipulated
includes the credit but also all accessory
2. If no period stipulated, 1 year from
thereto. It includes the following: (art. 1627)
date of maturity or assignment,
1. Guaranty
which ever comes later.
2. Mortgage
3. Pledge
Sale of successional or hereditary rights
4. Preference
The seller only warrants the fact that he is an
NOTE: this inclusion is based on the rule
heir if sold without specification of
that accessory follows the principal. (art.
properties. He does not warrants the objects
1537)
which makes up the inheritance.
Warranties of Assignor (art. 1628)
Unless stipulated, the vendor is liable to
1. When a creditor assigns his credit, he
deliver the fruits of the inheritance; if
warrants only at the perfection of
consumed, he must reimburse them; if sold,
the contract the:
he must deliver the price of sale. (art. 1632)
a. Existence; and
b. Legality of the credit. The vendee must reimburse the vendor the
NOTE: He is not liable of credit was debts and charges on the estate paid by the
sold as doubtful. latter. (art. 1633)
2. There is no warranty as to the NOTE: Since vendor already sold the
solvency of the debtor unless: inheritance, he should not profit except, of
a. There is a stipulation; or course, insofar as the price is concerned.
b. The insolvency was already
existing and of public Sale of whole of certain rights, rents, or
knowledge at the time of sale. products
Vendor only warrant the legitimacy of the
Liability for breach of warranty WHOLE and not obliged to warrant each of
1. In good faith the various parts of which it may be
a. Price received composed. Vendor is liable for eviction for:
b. Expenses of the contract 1. The whole of the thing; or
c. Other legitimate payments by 2. Part of the grater value. (art. 1631)
reason of assignment
2. In bad faith Legal redemption in sale of credit or other
a. Price received rights in litigation
b. Expenses of the contract Requisites before the right can be exercised:
c. Other legitimate payments by 1. There must be a sale or assignment
reason of assignment of a credit
d. Damages 2. There must be a pending litigation at
the time of assignment

3. Debtor must pay the assignee:

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a. Price paid by him
b. Judicial cost incurred.
c. Interest on the price from the
date of payment
4. Right must be exercised 30 days
from the date assignee demands
payment from him. (art. 1634)

Exceptions to debtor’s right to legal

redemption
The debtor’s right to legal redemption is not
available when the assignment of the right
in litigation is made to a: (art. 1635)
1. Co-heir or co-owner
2. Creditor in payment of his credit;
3. Possessor of property in question.

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Bibliography
Civil Code of the Philippines. (n.d.).
De Leon, H. S., & De Leon, Jr., H. M. (2013). The
Law on Sales, Agency and Credit
Transactions (2013 ed.). Manila: Rex Book
Store.
Domingo, A. D. (n.d.). RFBT MCQ CPA Reviewer
(2017 ed.). Benguet: Coaching for Results
Publishing.
Paras, E. (2013). Civil Code Volume V (Special
Contracts) (17th ed.). Rex Book Store.
Pineda, E. L. (2010). Sales and other Special
Contracts. Central Booksupply Inc.
San Beda College of Law. (n.d.). Memory Aid in
Civil Law.
Soriano, F. R. (2016). Notes in Business Law (2016
ed.).
UP Law Bar Operations Comission. (2016). UP
College of Law Bar Reviewer- Civil Law
(2016 ed.).
Villanueva, C. (2004). Law on Sales (2004 ed.). Res
Books Store.

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