Sales (UST)

SALES
SALES
Q:Whatisasale?
A: Sale is a contract where one party (seller)
obligateshimselftotransfertheownershipofand
to deliver a determinate thing, while the other
party (buyer) obligates himself to pay for said
thing a price certain in money or its equivalent.
(Tolentino,p.1,2000ed.)
229
UNIVERSITYOFSANTOTOMAS
Fac ul t a d de De r e c h o Ci v i l
ACADEMICSCHAIR:LESTERJAYALANE.FLORESII
VICECHAIRSFORACADEMICS:KARENJOYG.SABUGO&JOHNHENRYC.MENDOZA
VICECHAIRFORADMINISTRATIONANDFINANCE:JEANELLEC.LEE
VICECHAIRSFORLAYOUTANDDESIGN:EARLLOUIEM.MASACAYAN&THEENAC.MARTINEZ
I.INTRODUCTION
A.DEFINITIONOFTHECONTRACTOFSALE
Q:Whatisacontractofsale?
A: By the contract of sale, one of the contracting
parties obligates himself to transfer the
ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in
moneyoritsequivalent.(Art.1458,NCC)
KINDSOFSALES
Q:Whatarethedifferentkindsofsales?
A:Asto:
1. Natureofthesubjectmatter:
a. Saleofrealproperty;
b. Saleofpersonalproperty
2. Valueofthethingsexchanged:
a. Commutativesale;
b. Aleatorysale
3. Whether the object is tangible or
intangible:
a. Sale of property (tangible or
corporeal);
Note: A tangible object is also called
choseinpossession
b. Sale of a right (assignment of a
right, or a credit or other
intangibles such as copyright,
trademark,orgoodwill);
Note: An intangible object is a
choseinaction.
4. Validityordefectofthetransaction:
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void
5. Legalityoftheobject:
a. Licitobject
b. Illicitobject
6. Presenceorabsenceofconditions:
a. Absolute
b. Conditional
7. Wholesaleorretail:
a. Wholesale
b. Retail
8. Proximateinducementforthesale:
a. Salebydescription
b. Salebysample
c. Salebydescriptionandsample
9. Whenthepriceistendered:
a. Cashsale
b. Saleoninstallmentplan
ASTOPRESENCE ORABSENCEOFCONDITION
ABSOLUTESALE
Q:Whenisasaleabsolute?
A: The sale is absolute where the sale is not
subject to any condition whatsoever and where
the title passesto the buyer upon delivery of the
thingsold.(DeLeon,p.15)
Q:Whenisadeedofsaleconsideredabsolutein
nature?
A:Adeedofsaleisconsideredabsoluteinnature
where there is neither a stipulation in the deed
that title to the property sold is reserved in the
seller until the full payment of the price, nor one
giving the vendor the right to unilaterally resolve
the contract the moment the buyer fails to pay
withinafixedperiod.
CONDITIONALSALE
Q:Whenisasaleconditional?
A:Itisconditionalwherethesalecontemplatesa
contingency,andingeneral,wherethecontractis
subject to certain conditions, usually in the case
of the vendee, the full payment of the agreed
purchasepriceandinthecaseofthevendor,the
fulfillmentofcertainwarranties.(DeLeon,p.15)
UST GOLDEN NOTES 2011
Q: Distinguish a conditional sale from an

absolutesale
230
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM
A:
CONDITIONALSALE ABSOLUTESALE
Onewheretheselleris
grantedtherightto
unilaterallyrescindthe
contractpredicatedon
thefulfillmentornon
fulfillment,asthecase
maybe,ofthe
prescribedcondition.
Onewherethetitleto
thepropertyisnot
reservedtotheselleror
ifthesellerisnot
grantedtherightto
rescindthecontract
basedonthefulfillment
ornonfulfillment,asthe
casemaybe,ofthe
prescribedcondition.
Contractexecuted
betweenthesellerand
thebuyer
Contracts,firstthe
contracttosell(whichis
conditionalor
preparatorysale)and
second,thefinaldeedof
saleortheprincipal
contractwhichis
executedafterfull
paymentofthepurchase
price
Q:Whatistheeffectofthenonperformanceof
the condition or if the condition did not take
place?
A: Where the obligation of either party to a

contract of sale is subject to any condition which
is not performed, such party may refuse to
proceed with the contract or he may waive
performance of the condition. Unlike in a non
fulfillmentofawarrantywhichwouldconstitutea
breachofthecontract,thenonhappeningofthe
condition, although it may extinguish the
obligation upon which it is based, generally does
notamounttoabreachofacontractofsale.
Q:Inasalewithassumptionofmortgage,isthe
assumption of mortgage a condition without
which there will be no perfected contract of
sale?
A:Yes.Insaleswithassumptionofmortgage,the
assumption of mortgage is a condition to the
sellers consent so that without approval by the
mortgagee, no sale is perfected (Ramos v. Court
ofAppeals,G.R.No.108294Sept.15,1997)
B.ESSENTIALREQUISITES
OFACONTRACTOFSALE
Q:Whataretheelementsofacontractofsale?
A:ANE
1. Accidental elements dependent on
partiesstipulations;Examples:
a. Conditions
b. Interest
c. time&placeofpayment
d. penalty
2. Natural elements those that are

inherent even in absence of contrary
provision.
E.g.warranties
3. Essentialelementsforvalidity:
a. Consent
b. Determinatesubjectmatter
c. Consideration
Q:Whatistheeffectand/orconsequenceofthe
absenceofconsentoftheownerinacontractof
saleofsaidproperty?
A: The contract of sale is void. One of the

essential requirements of a valid contract of sale
istheconsentoftheowneroftheproperty.
FORMALITIESREQUIRED
Q: Is there a formal requirement for the validity

ofacontractofsale?
A:
GR: No form is required. It is a consensual
contract.(Pineda,p.78)
XPN: Under Statute of Frauds, the following

contracts must be in writing; otherwise, they
shallbeunenforceable:
1. Sale of personal property at a price not
lessthanP500;
2. Sale of a real property or an interest
therein;
3. Sale of property not to be performed
withinayearfromthedatethereof;
4. When an applicable statute requires
that the contract of sale be in a certain
form.(Art.1403,par.2)
Note: Statute of Frauds applies only to executory

contracts but not to partially executed contracts.
(Pineda,p.81)
SALES

Q: Are there instances where the Statute of
Frauds is not essential for the validity of a
contractofsale?
A:Yes.
1. When there is a note or memorandum
inwritingandsubscribedtobytheparty
or his agent (contains essential terms of
thecontract);
2. When there has been partial
performance/execution (seller delivers
with the intent to transfer title/receives
price);
3. When there has been failure to object
to presentation of evidence aliunde as
to the existence of a contract without
beinginwritingandwhichiscoveredby
theStatuteofFrauds;
4. When sales are effected through
electroniccommerce.(Villanueva,p.92)
231
C.STAGESOFACONTRACTOFSALE
Q: What are the 3 stages involved in the

formationofacontractofsale?
A:
1. Negotiation/Policitation
2. Perfection
3. Consummation
1.NEGOTIATION/PREPARATORY
A.OFFER
Q:Whataretherulesintheconceptionstage
abouttheoffer?
A:
OFFERIS
FLOATED
ANDITIS:
RULE
Offeris
floated
Priortoacceptance,maybe
withdrawnatwillbyofferorbutno
authoritytomodifyit
Witha
period
Mustbeacceptedwithintheperiod,
otherwise,extinguishedattheendof
periodandmaybewithdrawnatwill
byofferorbutmustnotbearbitrary,
otherwise,liablefordamages
Witha
condition
Extinguishedbyhappening/non
happeningofcondition
without
period/
condition
Continuestobevaliddependingupon
circumstancesoftime,placeand
person
Witha
counter
offer
Originalofferisextinguished
B.OPTIONCONTRACT
Q:Whatisanoptioncontract?
A: A contract granting a privilege in one person,

forwhichhehaspaidaconsideration,whichgives
him the right to buy certain merchandise or
specified property, from another person, at
anytimewithintheagreedperiod,atafixedprice.
Note: Consideration in an option contract may be
anything or undertaking of value, unlike in sale
whereitmustbeapricecertaininmoney.
Q:Whatisthenatureofanoptioncontract?
A: It is a preparatory contract in which one party

grants to another, for a fixed period and at a
determined price, the privilege to buy or sell, or
todecidewhetherornottoenterintoaprincipal
contract. It binds the party who has given the
option not to enter into the principal contract
with any other person during the period
designated, and within that period, to enter into
suchcontractwiththeonewhomtheoptionwas
granted, if the latter should decide to use the
option.Itisaseparateanddistinctcontract.

Note:Iftheoptionisperfected,itdoesnotresultin
the perfection or consummation of the sale. (Diaz,
p.7)
Q:Whatistheperiodwithinwhichtoexercise
theoption?
A:
1. Withinthetermstipulated
2. If there is no stipulation, the court may
fixtheterm
Notes:Anactionforspecificperformancetoenforce
theoptiontopurchasemustbefiledwithin10years
fromthetimethecauseofactionaccrues.
The implied renewal of the lease on a monthto
monthbasisdidnothavetheeffectofextendingthe
life of the option to purchase which expired at the
endoftheoriginalleaseperiod.Thelessoriscorrect
inrefusingtosellonthegroundthattheoptionhad
expired.(2001BarQuestion)
Q:Howisanoptionexercised?
A:Anoticeofacceptancemustbecommunicated
toofferorevenwithoutactualpaymentaslongas
paymentisdeliveredintheconsummationstage.
Q:Whatistheeffectofaseparateconsideration
inanoptioncontract?
A:
1. Withseparateconsideration:
a. Contractisvalid
b. Offeror cannot withdraw offer
untilafterexpirationoftheoption
c. Is subject to rescission & damages
butnotspecificperformance
2. Withoutseparateconsideration:
a. the option contract is not deemed
perfected
b. offer may be withdrawn at any
timepriortoacceptance
Note: However, even though the option was not

supported by a consideration, the moment it was
accepted,contractofsaleisperfected.(Art.1324)
Q: What is the effect of acceptance and

withdrawaloftheoffer?
A: If the offer had already been accepted and

such acceptance has been communicated to
before the withdrawal is communicated, the
acceptance creates a perfected contract, even if
noconsiderationwasasyetpaidfortheoption.
Inwhichcase,iftheofferordoesnotperformhis
obligationsundertheperfectedcontract,heshall
be liable for all consequences arising from the
breach thereof based on any of the available
remedies such as specific performance, or
rescissionwithdamagesinbothcases.
C.RIGHTOFFIRSTREFUSAL
Q:Whatistherightoffirstrefusal?
A: It is a right of first priority, all things and

conditions being equal; identity of the terms and
conditions offered to the optionee and all other
prospective buyers, with optionee to enjoy the
rightoffirstpriority.Itcreatesapromisetoenter
into a contract of sale and it has no separate
consideration.
Note:Adeedofsaleexecutedinfavorofa3rdparty
who cannot be deemed a purchaser in good faith,
and which is in violation of the right of first refusal
grantedtotheoptioneeisvalidbutrescissible.(Arts.
1380,1381[1])
232
Q:NDCandFirestoneenteredintoacontractof
lease wherein it is stipulated that Firestone has
the right of first refusal to purchase the leased
property "should lessor NDC decide to sell the
same. After the rumor that NDC will transfer
thelottoPUP,Firestoneinstitutedanactionfor
specific performance to compel NDC to sell the
property in its favor. PUP moved to intervene
arguing that the Memorandum issued by then
President Aquino ordered the transfer of the
whole NDC compound to the Government,
which in turn would convey it in favor of PUP.
CanFirestoneexerciseitsrightoffirstrefusal?
A: Yes. It is a settled principle in civil law that

when a lease contract contains a right of first
refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until
afterhehasmadeanoffertoselltothelatterata
certainpriceandthelesseehasfailedtoacceptit.
The lessee has a right that the lessor's first offer
shallbeinhisfavor.(PUPv.CA,G.R.No.143513,
Nov.14,2001)
Q: In a 20year lease contract over a building,

the lessee is expressly granted a right of first
refusal should the lessor decide to sell both the
land and building. However, the lessor sold the
property to a third person who knew about the
lease and in fact agreed to respect it.
Consequently,thelesseebringsanactionagainst
both the lessorseller and the buyer (a) to
rescind the sale and (b) to compel specific
performance of his right of first refusal in the
sense that the lessor should be ordered to
execute a deed of absolute sale in favor of the
lessee at the same price. The defendants
contend that the plaintiff can neither seek
rescission of the sale nor compel specific
performance of a "mere" right of first refusal.
Decidethecase.
A:
a. The action filed by the lessee, for both
rescission of the offending sale and
specificperformanceoftherightoffirst
refusal which was violated, should
prosper.Therulingin(EquatorialRealty
Development, Inc. v. Mayfair Theater,
Inc., G.R. No. 106063, Nov. 21, 1996), a
case with similar facts, sustains both
rightsofactionbecausethebuyerinthe
subsequent sale knew the existence of
rightoffirstrefusal,hence,inbadfaith.
b. The action to rescind the sale and to

compel the right of first refusal will not
prosper. (Ang Yu Asuncion v. CA, G.R.
CIVILLAWTEAM:
SALES

No. 109125, Dec. 2, 1994). The court
ruledthattherightoffirstrefusalisnot
foundeduponacontractbutonaquasi
delictual relationship covered by the
principlesofhumanrelationsandunjust
enrichment (Art 19, et seq. Civil Code).
Hence,theonly actionthatwill prosper
according to the Supreme Court is an
action for damages in a proper forum
forthepurpose.(1998BarQuestion)
Note:Theofferofthepersoninwhosefavortheright
offirstrefusalwasgivenmustconformwiththesame
termsandconditionsasthosegiventotheofferee.
Q:AndresleasedhishousetoIrisforaperiodof
2years,attherateofP25,000monthly,payable
annuallyinadvance.Thecontractstipulatedthat
it may be renewed for another 2year period
upon mutual agreement of the parties. The
contractalsograntedIristherightoffirstrefusal
to purchase the property at any time during the
lease, if Andres decides to sell the property at
the same price that the property is offered for
sale to a thirdparty. Twentythree months after
execution of the lease contract, Andres sold the
housetohismotherwhoisnotathirdparty.Iris
filedanactiontorescindthesaleandtocompel
Andres to sell the property to her at the same
price. Alternatively, she asked the court to
extend the lease for another two years on the
sameterms.
Q: Can Iris seek rescission of the sale of the
propertytoAndresmother?
A: Iris can seek rescission because pursuant to
EquatorialRealtyCo.v.MayfairTheaterrescission
isareliefallowedfortheprotectionofoneofthe
contracting parties and even third persons from
all injury and damage the contract of sale may
causeortheprotectionofsomeincompatibleand
preferredright.
233
Q: Will the alternative prayer for extension of
theleaseprosper?
A: No, the extension of the lease should be upon
the mutual agreement of the parties. (2008 Bar
Question)
Q:Isitnecessarythattherightoffirstrefusalbe
embodiedinawrittencontract?
A:Yes,thegrantofsuchrightmustbeclearand
express.
Note:Itisapplicableonlytoexecutorycontractsand
not to contracts which are totally or partially
performed.
If a particular form is required under the Statute of

Frauds: sale is valid & binding between the parties
butnotto3
rd
persons.
Q:Maytherightoffirstrefusalbewaived?
A: Yes. Like other rights, the right of first refusal

may be waived or when a party entered into a
compromiseagreement.(Diaz,p.55)
Q: Differentiate an option contract from a right
offirstrefusal.
A:Anoptioncontractisapreparatorycontractin
which one party grants to another, for a fixed
periodandatadeterminedprice,theprivilegeto
buy or sell, or to decide whether or not to enter
into a principal contract. It binds the party who
has given the option not to enter into the
principal contract with any other person during
the period designated, and within that period, to
enter into such contract with the one whom the
optionwasgranted,ifthelattershoulddecideto
use the option. It is a separate and distinct
contract.
In a right of first refusal,while the object may be

determinate, the exercise of the right would be
dependent not only on the grantors eventual
intention to enter into a binding juridical relation
with another but also on terms, including the
price,thatareyettobefirmedup.(Diaz,p.54)
OPTION
CONTRACT
RIGHTOFFIRST
REFUSAL
Principalcontract;
standsonitsown
Accessory;cannotstand
onitsown
Needs separate
consideration
Doesnotneedseparate
consideration
Subjectmatter&price
mustbevalid
Theremustbesubject
matterbutpricenot
important
Notconditional Conditional
Notsubject tospecific
performance
Subjecttospecific
performance
D.POLICITATION/MUTUALPROMISETOBUY
ANDSELL/
Q:Whatispolicitation?
A: Policitation is defined as an unaccepted

unilateralpromisetobuyorsell.Thisproducesno
judicialeffectandcreatesnolegalbond.Thisisa
mereoffer,andhasnotyetbeenconvertedintoa
contract. It covers the period from the time the
prospective contracting parties indicate interest
in the contract to the time the contract is
perfected.(Villanueva,p.6).
Q: Is there a legal bond already created in the

negotiationstage?
A: None. In negotiation (policitation) stage, the

offerisfloatedaswellastheacceptance.
2.PERFECTION
Q:Whenisacontractofsaledeemedperfected?
A:
GR: It is deemed perfected at the moment
there is meeting of minds upon the thing
which is the object of the contract and upon
theprice.(Art.1475,par.1)
XPN:Whenthesaleissubjecttoasuspensive
conditionbyvirtueoflaworstipulation.
Q: Spouses Raet and Mitra negotiated with
Gatusaboutthepossibilityofbuyinghisrightsto
certain units at a subdivision developed by Phil
Ville for them to be qualified to obtain loans
fromGSIS.TheypaidanamountforwhichGatus
issued them receipts in her own name. GSIS
disapproved their loan application. PhilVille
advisedthemtoseekothersourcesoffinancing.
In the meantime, they were allowed to remain
inthesubjectpremises.Isthereaperfectedand
enforceable contract of sale or at least an
agreement to sell over the disputed housing
units?
234
A:None.Therewasnocontractofsaleperfected
between the private parties over the said
property,therebeingnomeetingofthemindsas
toterms,especiallyonthepricethereof.Atbest,
only a proposed contract to sell obtained which
did not even ripen into a perfected contract due
at the first instance to private respondents'
inability to secure approval of their GSIS housing
loans. As it were, petitioners and private
respondents have not hurdled the negotiation
phaseofacontract,whichistheperiodfromthe
time the prospective contracting parties indicate
interest on the contract to the time the contract
comes into existence the perfection stage upon
the concurrence of the essential elements
thereof. (Sps. Raet & Sps. Mitra v. CA, G.R. No.
128016,Sept.17,1998)
Q: Severino executed two deeds when he sold

hispropertytoHenrysothatHenrycanobtaina
loan with Philam Life. He also authorized Henry
to file an ejectment suit against the lessees and
when the prayer for ejectment was granted,
Henrytookpossessionoftheproperty.Severino
now claims ownership over the property
claimingthatthesaleisfictitiousthereforethere
wasnosaletospeakof.IsSeverinoscontention
correct?
A:No.Thereisaperfectedcontractofsaledueto
the second deed of sale in this case. The basic
characteristic of an absolutely simulated or
fictitious contract is that the apparent contract is
not really desired or intended to produce legal
effectsoralterthejuridicalsituationoftheparties
in any way. However, in this case, the parties
already undertook certain acts which were
directed towards fulfillment of their respective
covenantsundertheseconddeed,indicatingthat
they intended to give effect to their agreement.
Further, the fact that Severino executed the two
deeds, primarily so that Henry could eject the
tenant and enter into a loan/mortgage contract
with Philam Life, is a strong indication that he
intendedtotransferownershipofthepropertyto
Henry.Forwhy(HernandoR.Penalosav.Severino
Santos,G.R.No.133749,Aug.23,2001)
Q: What is the effect of Severinos and Henrys

failure to appear before the notary public who
notarizedthedeed?
A: None. The nonappearance of the parties

before the notary public who notarized the deed
does not necessarily nullify nor render the
parties' transaction void ab initio. Article 1358,
NCConthenecessityofapublicdocumentisonly
forconvenience,notforvalidityorenforceability.
Whereacontractisnotintheformprescribedby
law,thepartiescanmerelycompeleachotherto
observe that form, once the contract has been
perfected.
Note: Contracts are obligatory in whatever form

they may have been entered into, provided all
essentialrequisitesarepresent.(Penalosav.Santos,
G.R.No.133749,Aug.23,2001)

CIVILLAWTEAM:
SALES

Q:Whenisanauctionsaleperfected?
A: A sale by auction is perfected when the

auctioneerannouncesitsperfectionbythefall of
thehammer,orinothercustomarymanner.(Art.
1476,par.2)
Q: Does the seller have the right to bid in an

auctionsale?
A: Yes. The seller has the right to bid provided

thatsuchrightwasreservedandnoticewasgiven
tothateffect.(Pineda,p.53)
Q:Whenisasaleofforeignexchangeconsidered
perfected?
A: A sale of foreign exchange is considered

perfected from the moment the Bangko Sentral
ng Pilipinas authorizes the purchase, even if the
foreign bank has not yet honored the letter of
credit. (Pacific Oxygen and Acetylene Co. v.
CentralBank,G.R.No.L21881,Mar.1,1968)
3.CONSUMMATION
Q: How does the consummation stage in a
contractofsaletakeplace?
A: It takes place by the delivery of the thing

togetherwiththepaymentoftheprice.
Q: A and PDS Development Corp. executed a

contract to sell a parcel of land. A died without
having completed the installment on the
property. His heirs then took over the contract
tosellandassumedhisobligationsbypayingthe
sellingpriceofthelotfromtheirownfunds,and
completed the payment. To whom should the
finalDeedofAbsoluteSalebeexecutedbyPDS?
A:Havingsteppedintotheshoesofthedeceased
with respect to the said contract, and being the
oneswhocontinuedtopaytheinstallmentsfrom
their own funds, As heirs became the lawful
ownersofthesaidlotinwhosefavorthedeedof
absolute sale should have been executed by
vendor PDS. (Dawson v. Register of Deeds of
QuezonCity,G.R.No.120600Sept.22,1998)
235
D.OBLIGATIONSCREATED
OBLIGATIONSOFTHEBUYER
Q:Whataretheobligationsofthebuyer?
A:
1. Paymentoftheprice
GR:Sellerisnotboundtodeliverunless
thepurchasepriceispaid
XPN: A period of payment has been
fixed
2. Acceptdeliveryofthingsold
3. Payforexpensesofdelivery
Note: A grace period granted the buyer in case of

failure to pay is a right not an obligation. Non
payment would still generally require judicial or
extrajudicialdemandbeforedefaultcanarise.
Q:Whataretheotherobligationsofthebuyer?
A:
1. To take care of the goods without the
obligation to return, where the goods
are delivered to the buyer and he
rightfullyrefusestoaccept;
Note:Thegoodsinthebuyerspossession
areatthesellersrisk.
2. To be liable as a depositary if he
voluntarilyconstitutedhimselfassuch;
3. To pay interest for the period between
delivery of the thing and the payment
ofthepriceinthefollowingcases:
a. shouldithavebeenstipulated;
b. shouldthethingsoldanddelivered
producesfruitsorincome;or
c. should he be in default, from the
time of judicial or extrajudicial
demand for the payment of the
price.
OBLIGATIONSOFTHESELLER
Q:Whataretheobligationsoftheseller?
A:DDTWTP
1. Deliverthethingsold;
2. Deliver fruits & accessions/accessories
accruingfromperfectionofsale;
3. Transfertheownership;
4. Warranties;
5. Takecareofthething,pendingdelivery,
withproperdiligence;
6. Payfortheexpensesofthedeedofsale
unless there is a stipulation to the
contrary
236
CIVILLAWTEAM:
E.CHARACTERISTICSOFACONTRACTOFSALE
Q: What are the characteristics of a contract of

sale?
A:
1. Consensual
2. Bilateral
3. GR:Commutative
XPN: Aleatory In some contracts of

sale, what one receives may in time be
greater or smaller than what he has
given.(Tolentino,p.2,2000ed)
4. Principal
5. Title and not a mode of acquiring
ownership
6. Onerous
7. Reciprocal
8. Nominate
Q: Is a contract of sale identified as such based

on the nomenclature given to the contract by
theparties?
A: No. Contracts are not defined by the parties

butbyprinciplesoflaw.Todeterminethenature
of the contract, the courts are not bound by the
name or title given to it by the contracting
parties. It is the intention of the parties which
controls. (Diaz, Law on Sales as expounded by
Jurisprudence,2006ed.,p.1)
Q: What are the factors to be considered in

determiningthenatureofthecontract?
A:
1. Languageofthecontract
2. Conductofparties
F.DISTINCTIONSOFTHECONTRACTOFSALE
WITHOTHERCONTRACTS
Q:DistinguishSalefromthefollowing:
1. Donation.
SALE DONATION
Onerous Gratuitous/onerous
Consensual Formalcontract
LawonSales LawonDonation
2. Barter
SALE BARTER
Considerationisgiving
ofmoneyaspayment
Considerationis
givingofathing
Ifconsiderationconsistspartyinmoney&partlyby
thinglookatmanifestintention;
IfintentionisnotclearArt.1468
Valueofthingisequal
orlessthanamountof
money=Sale
Valueofthingismore
thanamountofmoney=
Barter
Bothare governedbylawonsales
3. AgencytoSell
SALE AGENCYTOSELL
Buyerpaysforprice
ofobject
Agentnotobligedtopay
forprice;must
accountforthe
proceedsofthesale.
Buyerbecomes
ownerofthing
Principalremainsthe
ownerevenifthe
objectdeliveredto
agent
Sellerwarrants
Agentassumesnopersonal
liabilityaslongas
withinauthoritygiven
Notunilaterally
revocable
Mayberevoked
unilaterallyevenw/o
ground
Sellerreceivesprofit Agentnotallowedtoprofit
Realcontract Personalcontract
4. DacionenPago
SALE
DACIONENPAGO
Nopreexisting
credit
Contractwherepropertyis
alienatedtoextinguishpre
existingcredit/debt
Buyerseller
relationship
Novatescreditordebtor
relationshipintosellerbuyer
5. Lease
SALE LEASE
Obligationtoabsolutely
transferownershipof
thing
Useofthingisfor
specifiedperiodonly
withobligationto
return
Considerationistheprice
Considerationisthe
rental
Sellerneedstobeownerof
thingtotransfer
ownership.
Note:Leasewithoptionto
buyreallyacontractof
salebutdesignatedas
leaseinname.
Lessorneednotbe
owner
SALES

G.CONTRACTTOSELL
Q:Whatisacontracttosell?
A: It is one form of conditional sale where
ownership or title is retained by the seller until
the fulfillment of a positive suspensive condition,
normally the payment of the purchase price by
the buyer in the manner agreed upon. (Gomez v.
CA,et.al.,G.R.120747,Sept.21,2000)
Q: Distinguish a contract to sell from a contract

ofsale.
A:
237
CONTRACTOFSALE CONTRACTTOSELL
Asregardstransferofownership
Ownershipistransferred
tothebuyerupon
deliveryoftheobjectto
him.
Note:Vendorhaslost
andcannotrecover
ownershipuntiland
unlessthecontractis
resolvedorrescinded
Ownershipis
transferreduponfull
paymentofthe
purchaseprice.
Note:Priortofull
payment,ownershipis
retainedbytheseller.
Astonumbersofcontractsinvolved
Thereisonlyone
contractexecuted
betweenthesellerand
thebuyer.
Therearetwocontracts:
1.Thecontracttosell
Note:Conditionalor
preparatorysale
2.Thedeedofabsolute
sale
Note:Theprincipal
contractisexecuted
afterfullpaymentofthe
purchaseprice.
Paymentasacondition
Nonpaymentofthe
priceisaresolutory
condition.Vendorloses
ownershipoverthe
propertyandcannot
recoverituntiland
unlessthecontractis
resolvedorrescinded.
Fullpaymentofthe
priceisapositive
suspensivecondition.
Note:Failuretofully
paythepriceisnota
breachbutanevent
thatpreventsthe
obligationofthevendor
toconveytitlefrom
becomingeffective.
Remediesavailable
1. Specific
2. Performance
3. Rescission
4. Damages
1. Resolution
2. Damages
Q: Having agreed to sell property which they

inherited from their father, which was then still
in their fathers name, the Coronels executed a
document entitled "Receipt of Down Payment"
in favor of Alcaraz for the purchase of their
house and lot, with the condition that Ramona
will make a down payment upon execution of
the document. The Coronels would then cause
the transfer of the property in the name of
Ramonaandwillexecuteadeedofabsolutesale
in favor of Ramona. Ramona paid the
downpayment as agreed. Is there a perfected
contractofsaleoramerecontracttosell?
A:Theagreementcouldnothavebeenacontract
tosellbecausethesellershereinmadenoexpress
reservation of ownership or title to the subject
parcel of land. The Coronels had already agreed
tosellthehouseandlottheyinheritedfromtheir
father, completely willing to transfer full
ownership of the subject house and lot to the
buyer if the documents were then in order.
However, the TCT was then still in the name of
theirfather,thatiswhytheycausedtheissuance
of a new TCT in their names upon receipt of the
down payment.As soon as thenew TCT is issued
in their names, they were committed to
immediately execute the deed of absolute sale.
Only then will the obligation of the buyer to pay
the remainder of the purchase price arise. This
suspensive condition was fulfilled. Thus, the
conditional contract of sale became obligatory,
the only act required for the consummation
thereof being the delivery of the property by
means of the execution of the deed of absolute
sale in a public instrument, which they
unequivocally committed themselves to do as
evidenced by the "Receipt of Down Payment."
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
1996)
Q: Instead of executing a deed of Absolute Sale
in favor of Ramona, the Coronels sold the
property to Catalina and unilaterally and
extrajudicially rescinded the contract with
Ramona. Ramona then filed a complaint for
specific performance. Will Ramonas action
prosper?
A: Yes. Under Article 1187, the rights and
obligations of the parties with respect to the
perfected contract of sale became mutually due
and demandable as of the time of fulfillment or
occurrence of the suspensive condition. Hence,
petitionersellers' act of unilaterally and
extrajudicially rescinding the contract of sale
cannot be justified, there being no express
stipulation authorizing the sellers to
extrajudicially rescind the contract of sale.
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
1996)
Q:Whataretheinstanceswhenwhatisinvolved
isacontracttosell?
A:
1. Wheresubjectmatterisindeterminate
2. Saleoffuturegoods
3. Stipulation that deed of sale &
corresponding certificate of sale would
beissuedonlyafterfullpayment
238
CIVILLAWTEAM:
II.PARTIESTOACONTRACTOFSALE
Q:Whoarethepartiestoacontractofsale?
A:
1. Seller one who sells and transfers the
thingandownershiptothebuyer
2. Buyer one who buys the thing upon
payment of the consideration agreed
upon
A.CAPACITYOFTHEPARTIES
Q:Whomayenterintoacontractofsale?
A:
GR:Anypersonwhohascapacitytocontract
or enter into obligations, may enter into a
contract of sale, whether as partyseller or as
partybuyer.
XPN:
1. Minors, insane and demented persons
and deafmutes who do not know how
towrite
2. Persons under a state of drunkenness
orduringhypnoticspell
3. Husband and wife sale by and
betweenspouses
Note: Contracts of sale entered by such legally

incapacitated persons are merely voidable,
subject to annulment or ratification. However,
the action for annulment cannot be instituted
by the person who is capacitated since he is
disqualified from alleging the incapacity of the
personwithwhomhecontracts.
However,statusofprohibitedsalesbetween
spousesisnotmerelyvoidable,butnulland
void.
XPNtoXPN:
1. Where necessaries are sold and

delivered to a minor or other person
without capacity to act, he must pay a
reasonablepricetherefor.
2. Incaseofsalebetweenspouses:
a. whenaseparationofpropertywas
agreed upon in the marriage
settlements;or
b. when there has been a judicial
separation of property agreed
uponbetweenthem
B.ABSOLUTEINCAPACITY
Q:Whoarethoseabsolutelyincapacitatedto
enterintoacontractofsale?
A:
1. Unemancipatedminors(Art.1327,NCC);
2. Insane or demented persons, and deaf
mutes who do not know how to write
(Art.1327,NCC)
Q: May a capacitated person file an action for

annulment using as basis the incapacity of the
incapacitatedparty?
A: No. He is disqualified from alleging the

incapacity of the person whomhe contracts (Art.
1397,NCC);
Q: In a defective contract, where such defect

consists in the incapacity of a party, does the
incapacitated party have an obligation to make
restitution?
A:
GR:heincapacitatedpersonisnotobligedto
makeanyrestitution.
XPN:insofarashehasbeenbenefitedbythe
thing or price received by him. (Art. 1399,
NCC)
C.RELATIVEINCAPACITY
Q: Who are those relatively incapacitated to

enterintoacontractofsale?
A:
1. Spouses(Art.1490,NCC)
2. Agents, Guardians, Executors and
Administrators, Public Officers and
Employees, Court Officers and
Employees, and others specially
disqualifiedbylaw.(Art.1491,NCC)
Note: Under Art. 1490 of the NCC, spouses cannot

sellpropertytoeachother,except:
a. When a separation of property was

agreedinthemarriagesettlements;or
b. Whentherehasbeenajudicialseparation
ofpropertyagreeduponbetweenthem.

SALES

239
Q: What is the status of the following contracts
ofsale?
A:
1. Thatenteredintobyminors:
a. Merely voidable, subject to
annulmentorratification
b. Action for annulment cannot be
instituted by the person who is
capacitated since he is disqualified
from alleging the incapacity of the
person with whom he contracts
(withpartialrestitutioninsofaras
the minor is benefited) where
necessaries are sold and delivered
toaminororotherpersonwithout
capacity to act, he must pay a
reasonableprice(Art.1489)
2. Saleby&betweenspouses(Art.1490):
a. Status of prohibited sales between
spouses:
GR:Nullandvoid

XPN: In case of sale between
spouses:
i. When a separation of
property was agreed upon in
themarriagesettlements;or
ii. When there has been a
judicialseparationofproperty
agreeduponbetweenthem
Reasons:
i. Preventdefraudingcreditors
ii. Avoid situation where
dominant spouse takes
advantage over the weaker
spouse
iii. Avoid circumvention on
prohibition of donation
betweenspouses
b. Contractofsalewith3
rd
parties:
GR: Under the law on sales, it
would seem that a spouse may,
without the consent of the other
spouse, enter into sales
transactions in the regular or
normal pursuit of their profession,
vocation or trade. (in relation with
Art.73,FamilyCode)
XPN: Even when the property

regime prevailing was the conjugal
partnership of gains, the Supreme
Courtheldthesalebythehusband
of a conjugal property without the
consent of the wife is void, not
merely voidable under Art. 124 of
theFamilyCodesincetheresulting
contract lack one of the essential
elements of full consent. (Guiang
v. CA, G.R. No. 125172, June 26,
1998)
3. Between Common Law Spouses also

nullandvoid.
In CalimlimCanullas v. Fortun, the

Court decided that sale between
common law spouses is null and void
because Art. 1490 prohibits sales
between spouses to prevent the
exercise of undue influence by one
spouse over the other, as well as to
protect the institution of marriage. The
prohibition applies to a couple living as
husband and wife without the benefit
ofmarriage,otherwise,theconditionof
those incurred guilt would turn out to
be better than those in legal union.
(CalimlimCanullasv.Fortun,et.al.,G.R.
No.L57499,June22,1984)
But when the registered property has

beenconveyedsubsequentlytoathird
party buyer in good faith and for value,
then reconveyance is no longer
available to commonlaw spouseseller,
since under the Torrens system every
buyer has a right to rely upon the title
ofhisimmediateseller.(Cruzv.CA,G.R.
No.120122,Nov.6,1997)
Q:Whohastherighttoassailthevalidityofthe
transactionbetweenspouses?
A:Thefollowingaretheonlypersonswhocan
questionthesalebetweenspouses:
1. The heirs of either of the spouses who
havebeenprejudiced;
2. Priorcreditors;and
3. The State when it comes to the
paymentofthepropertaxesdueonthe
transactions

Q:Whoarethepersonswithrelativeincapacitytobethevendeeinacontractofsale?
A:AGECOP
RELATIVELY
INCAPACITATEDTOBUY
PROPERTIESINVOLVED STATUSOFSALE
RATIFICATION
Agents
Propertyentrustedtothemfor
administrationorsale
XPN:Whenprincipalgavehis
consent
Voidable
Canberatifiedafterthe
inhibitionhasceased
Reason:theonlywrongthat
subsistsistheprivatewrong
totheward,principalor
estate;andcanbecondoned
bytheprivateparties
themselves
Guardian
Propertyofthewardduring
periodofguardianship
Note:Contractsenteredby
guardianinbehalfofwardare
rescissibleifwardsufferslesion
bymorethanofthevalueof
property.
Executorsand
administrators
Propertyoftheestateunder
administration
Courtofficersand
employees
Propertyandrightsinlitigationor
leviedupononexecutionbefore
thecourtundertheirjurisdiction
Void
Cannotberatified
Reason:Itisaprivatewrong.
(Villanueva,LawonSales,p.
3031)
Othersspecially
disqualifiedbylaw
Pubicofficersand
employees
PropertyoftheStateentrustedto
themforadministration
Note:Prohibitionsareapplicabletosalesinlegalredemption,compromisesandrenunciations.
In the case of Rubias v. Batiller (51 SCRA 120), it sought to declare the difference in the nullity between contracts
enteredintobyguardians,agents,administratorsandexecutors,fromthecontractsenteredintobyjudges,judicial
officers,fiscalsandlawyers.
240
CIVILLAWTEAM:
SALES

D.SPECIALDISQUALIFICATIONS
Q:Whoarethosepersonsspeciallydisqualified
bylawtoenterintocontractsofsale?
A:ALIENUnOS
1. ALIENswhoaredisqualifiedtopurchase
privateagriculturallands(Art.XIISecs.3
&7)
2. Unpaid seller having a right of lien or
having stopped the goods in transitu, is
prohibitedfrombuyingthegoodseither
directly or indirectly in the resale of the
same at public/private sale which he
maymake(Art.1533[5];Art.1476[4])
3. The Officer holding the execution or
deputy cannot become a purchaser or
be interested directly or indirectly on
any purchase at an execution. (Sec. 21
Rule39,RulesofCourt)
4. In Sale by auction, seller cannot bid
unless notice has been given that such
sale is subject to a right to bid in behalf
oftheseller.(Art.1476)
Q: Atty. Leon G. Maquera acquired his clients

property as payment for his legal services, then
sold it and as a consequence obtained an
unreasonable high fee for handling his clients
case.Didhevalidlyacquirehisclientsproperty?
A: No. Article 1491 (5) of the New Civil Code

prohibits lawyers acquisition by assignment of
the clients property which is the subject of the
litigation handled by the lawyer. Also, under
Article 1492, the prohibition extends to sales in
legal redemption. (In Re: Suspension from the
Practice of Law in the territory of Guam of Atty.
LeonG.Maquera,B.M.No.793,July30,2004)

241
III.SUBJECTMATTEROFSALE
242
CIVILLAWTEAM:
A.REQUISITESOFAVALIDSUBJECTMATTER
Q: What are the requisitesof a proper objectof

sale?
A:
1. Things
a. Determinateordeterminable
b. Lawful (licit), otherwise contract is
void
c. Should not be impossible (within
thecommerceofmen)
2. Rights
GR:Mustbetransmissible.
XPN:
a. Futureinheritance
b. Service cannot be the object of
sale. They are not determinate
things and no transfer of
ownershipisavailablebutitcanbe
theobjectofcertaincontractssuch
uas contract for a piece of work.
(Pineda,Sales,2002ed.,p.13)
Q:RodriguezfirstpurchasedaportionofaLotA
consisting of 345 square meters located in the
middle of Lot B, which has a total area of 854
square meters, from Juan. He then purchased
another portion of said lot. As shown in the
receipt, the late Juan received P500.00 from
Rodriguez as "advance payment for the
residential lot adjoining his previously paid lot
on three sides excepting on the frontage. Juans
heirs now contests the validity of the
subsequent sale, alleging that the object is not
determinateordeterminable.Decide.
A: Their contention is without merit. There is no

disputethatRodriguezpurchasedaportionofLot
Aconsistingof345squaremeters.Thisportionis
locatedinthemiddleofB,whichhasatotalarea
of 854 square meters, and is clearly what was
referred to in the receipt as the "previously paid
lot."SincethelotsubsequentlysoldtoRodriguez
issaidtoadjointhe"previouslypaidlot"onthree
sides thereof, the subject lot is capable of being
determined without the need of any new
contract. The fact that the exact area of these
adjoiningresidentiallotsissubjecttotheresultof
asurveydoesnotdetract fromthefactthatthey
are determinate or determinable. Concomitantly,
the object of the sale is certain and determinate.
(Heirs of San Andres v. Rodriguez, G.R. No.
135634,May31,2000)
Note:Wherelandissoldforalumpsumandnotso
much per unit of measure or number, the
boundaries of the land stated in the contract
determinetheeffectsandscopeofthesale,notthe
areathereof.Thevendorsareobligatedtodeliverall
the land included within the boundaries, regardless
of whether the real area should be greater or
smaller than that recited in the deed. This is
particularly true where the area is described as
"humigitkumulang,"thatis,moreorless.(Semirav.
CA,G.R.No.76031,Mar.2,1994)
Q:Canrightsbetheobjectsofsale?
A:Yes,iftheyaretransmissible.(Art.1347)
B.PARTICULARKINDS
Q:Whatmaybeobjectsofsale?
A:
1. Existing Goods owned/ possessed by
selleratthetimeofperfection
2. Future Goods goods to be

manufactured,raised,acquiredbyseller
after perfection of the contract or
whose acquisition by seller depends
uponacontingency(Art.1462)
Note: Sale of future goods is valid only as an

executory contract to be fulfilled by the acquisition
&deliveryofgoodsspecified.
3. SaleofUndividedInterestorShare
a. Sole owner may sell an
undividedinterest.(Art.1463)
Ex.Afractionorpercentageof
suchproperty
b. Saleofanundividedshareina
specific mass of fungible
goods makes the buyer a co
owner of the entire mass in
proportion to the amount he
bought.(Art.1464)
c. A coowner cannot sell more
than his share (Yturralde v.
CA)
4. SaleofThingsinLitigation
a. Sale of things under litigation
isrescissibleifenteredintoby
the defendant , without the
approvalofthelitigantsorthe
court(Art.1381)
b. Norescissionisallowedwhere
the thing is legally in the
possession of a 3
rd
person
SALES

who did not acted in bad
faith.
5. Things subject to Resolutory Condition.

Ex. Things acquired under legal or
conventional right of redemption, or
subjecttoreservatroncal.(Art.1465)
6. Indeterminate Quantity of Subject

Matter
a. The fact that the quantity is
not determinate shall not be
an obstacle to the existence
of the contract provided it is
possible to determine the
same, without need of a new
contract.(Art.1349)
243
IV.OBLIGATIONOFTHESELLER
TOTRANSFEROWNERSHIP
Q:Shouldthesellerbetheowneratthetimeof
perfectionofthecontract?
A:
GR: No.Seller must have the right to transfer
ownership at the time of delivery or
consummation stage. He need not be the
owner at the time of perfection of the
contract.
XPN: Foreclosure sale wherein the mortgagor

shouldbetheabsoluteowner.
Q: EJ was subjected to a buybust operation

where police officers posed to buy 500 pesos
worth of S. She was then charged with a
violation of the Dangerous Drugs Act for
trafficking drugs. EJ uses as defense her lack of
possession of the object of the sale. Would her
contentionfreeherfromliability?
A: No. Though she was not in possession of the

object of sale, Article 1459 merely requires that
the vendor must have the right to transfer
ownership of the object sold at the time of
delivery. In the case at bar, though Beth is not
the owner, she had the right to dispose of the
prohibited drug. Ownership was thereafter
acquireduponherdeliverytothemeninthealley
after her payment of the price. (People v.
Ganguso,G.R.No.115430,Nov.23,1995)
A.SALEBYAPERSONWHODOESNOTOWNTHE
THINGSOLD
Q: What is the status of a sale by a person who

doesnotownthethingsubjectofthesale?
A:Itdependsuponthestageofthesale.
1. When seller is not owner at perfection
stagethesaleisvalid.
Ownershipofthesubjectmatterbythe
seller at this stage is not an essential
requirementforthevalidityofsale.Itis
necessary at the time of delivery.
Hence,avalidcontractofsalecancover
subjectmatterthatisnotyetexistingor
even a thing having only a potential
existence at the time of perfection; or
even a thing subject to a resolutory
condition.

Note:Ifthesellerlateracquirestitlethereto
anddeliversit,titlepassesbyoperationof
law.
2. When seller is not owner at

consummationstage
a. Old view the contract of sale is
valid, but the transfer of title is
void. (MindanaoAcademy, Inc. v.
Yap, G.R. No. L17681, Feb. 26,
1965)
b. New view the sale by a non
owner of the subject property is
void instead of treating the
tradition/delivery aspect as having
no effect on transferring
ownership to the buyer. (DBP v.
CA,G.R.No.110053,Oct.16,1995)
Note:Nemodatquodnonhabetyou
cannotgivewhatyoudonothave,properly
applicabletotheconsummationofasale.
Q: What is the legal effect of sale by a non

owner?
A:
GR: The buyer requires no better title to the
goods than the seller had; caveat emptor
(buyerbeware).
XPN:
1. Estoppel when the owner of the
goods is by his conduct precluded from
denyingthesellersauthoritytosell
2. When the contrary is provided for in
recordinglaws
3. When the sale is made under statutory

power of sale or under the order of a
courtofcompetentjurisdiction
244
CIVILLAWTEAM:
4. When the sale is made in a merchants

store in accordance with the Code of
Commerceandspeciallaws
5. When a person who is not the owner
sells and delivers a thing, and
subsequentlyacquiredtitlethereto
6. When the seller has a voidable title
whichhasnotbeenavoidedatthetime
ofthesale
7. Salebycoownerofthewholeproperty
oradefiniteportionthereof
8. Specialrightsofunpaidseller
Q: What are the instances when the Civil Code

recognizes sale of things not actually or already
ownedbytheselleratthetimeofsale?
A:
1. Sale of a thing having potential
existence(Art.1461,NCC)
2. Saleoffuturegoods(Art.1462,NCC)
3. Contract for the delivery at a certain
price of an article, which the seller in
the ordinary course of business
manufactures/procures for the general
market,whetherthesameisonhandat
thetimeornot(Art.1467,NCC)
B.SALEBYAPERONHAVINGAVOIDABLETITLE
Q:Whatistheeffectofasalemadebytheseller
withvoidabletitleovertheobject?
A:
1. Perfection stage: valid buyer acquires
titleofgoods
2. Consummation stage: valid Ifthe title
hasnotyetbeenavoidedatthetimeof
sale and the buyer must buy the goods
underthefollowingconditions:
a. Ingoodfaith
b. Forvalue
c. Withoutnoticeofsellersdefectof
title
EMPTIOREISPERATAE EMPTIOSPEI
Saleofthinghaving
potentialexistence
Saleofmerehopeor
expectancy
Uncertaintyisw/regard
toquantity&quality
Uncertaintyisw/regard
toexistenceofthing
Contractdealsw/future
thing
Contractdealsw/
presentthinghope
orexpectancy
Saleisvalidonlyifthe
expectedthingwill
exist.
Saleisvalideventhough
expectedthingdoes
notcomeinto
existenceaslongas
thehopeitselfvalidly
existed.(eg.lotto)
Note:ThepresumptionisEmptioReiSperatae
Q: Jose, as coowner, sold the entire land in

favor of his minor daughter, Ida. Alleging that
Jose had fraudulently registered it in his name
alone, his sisters, sued him for recovery of 2/3
share of the property. Ida did not pay for the
land.Isthesalevalid?
A: No. Jose did not have the right to transfer

ownership of the entire property to petitioner
since2/3thereofbelongedtohissisters.Also,Ida
couldnothavegivenherconsenttothecontract,
being a minor at the time. Consent of the
contracting parties is among the essential
requisites of a contract, including one of sale,
absent which there can be no valid contract.
Moreover,Idaadmittedlydidnotpayanycentavo
for the property, which makes the sale void.
Article1471oftheCivilCodeprovides:Iftheprice
is simulated, the sale is void, but the act may be
shown to have been in reality a donation, or
someotheractorcontract.(Labagalav.Santiago,
G.R.No.132305,Dec.4,2001)
V.PRICE
A.MEANINGOFPRICE
Q:Whatisaprice?
A: Price signifies the sum stipulated as the

equivalent of the thing sold and also every
incidenttakenintoconsiderationforthefixing of
thepriceputtothedebitofthebuyerandagreed
tobyhim.(Villanueva,p.52)
B.REQUISITESFORAVALIDPRICE
Q:Whataretherequisitesofprice?
A:Mustbe:
1. Real
2. Inmoneyoritsequivalent
3. Certain or ascertainable at the time of
theperfectionofthecontract
C.HOWPRICEISDETERMINED
Q:Whenispricecertain?
A:
1. Ifthereisastipulation
2. If it be with reference to another thing
certain
SALES

3. If the determination of the price is left
tothejudgmentofspecifiedperson(s)
4. By reference to certain fact(s) as
referredtoinArt.1472(Art.1469)
Note:Ifthepriceisbasedonestimates,itis
uncertain.
245
D.GROSSINADEQUACYOFTHEPRICE
Q:Whatistheeffectofgrossinadequacyof
price?
A:
GR:Itdoesnotaffectthevalidityofthesaleif
itisfixedingoodfaithandwithoutfraud
XPN:CoRDS
1. If Consent is vitiated (may be annulled
orpresumedtobeequitablemortgage)
2. If the parties intended a Donation or
someotheract/contract
3. If the price is so low as to be Shocking
totheconscience
4. If in the event of Resale, a better price
canbeobtained
Note:
GR:Thevalidityofthesaleisnotnecessarilyaffected
where the law gives the owner the right to redeem
because the lesser the price, the easier it is for the
ownertoeffectredemption.
XPN:Whilethereisnodisputethatmereinadequacy
ofthepricepersewillnotsetasideajudicialsaleof
realproperty,nevertheless,wheretheinadequacyof
the price is purely shocking to the conscience, such
thatthemindrevoltsatitandsuchthatareasonable
man would neither directly or indirectly be likely to
consent to it, the same willbe set aside. (Cometa v.
CA351SCRA294)
Q:Whatistheeffectifthepriceissimulated?
A:
GR:Contractofsaleisvoid.
XPN:Theactmaybeshowntohavebeenin
realityadonationorsomeotheractor
contract.
Q:Whatisconsideredreasonableprice?
A:Generallythemarketpriceatthetimeand
placefixedbythecontractorbylawforthe
deliveryofthegoods.
Q: What is the effect on the contract of sale in

case of a breach in the agreed manner of
payment?
A:None.Itisnottheactofpaymentofpricethat
determines the validity of a contract of sale.
Payment of the price has nothing to do with the
perfection of the contract, as it goes into the
performance of the contract. Failure to pay the
consideration is different from lack of
consideration. Failure to pay such results in a
right to demand the fulfillment or cancellation of
theobligationunderanexistingvalidcontract.On
theotherhand,lackofconsiderationpreventsthe
existence of a valid contract. (Sps. Bernardo
Buenaventura and Consolacion Joaqui v. CA, GR
No.126376,Nov.20,2003)
Q: Is payment of the purchase price essential to

transferownership?
A: Unless the contract contains a stipulation that

ownership of the thing sold shall not pass to the
purchaser until he has fully paid the price,
ownershipofthethingsoldshallbetransferredto
the vendee upon the actual or constructive
deliverythereof.(Diaz,p.48)
E.WHENNOPRICEISAGREEDUPONBYTHE
PARTIES
Q:Whatistheeffectoffailuretodeterminethe
price?
A:
1. Where contract is executory
ineffective
2. Where the thing has been delivered to
and appropriated by the buyer the
buyer must pay a reasonable price
therefore
Note: The fixing of the price cannot be left to the

discretionofoneoftheparties.However,iftheprice
fixedby one ofthepartiesis accepted bytheother,
thesaleisperfected.

F.MANNEROFPAYMENT
Q: What is the effect of a breach of the agreed

mannerofpaymenttothecontractofsale?
246
CIVILLAWTEAM:
A: None. A contract of sale being a consensual

contract, it becomes binding and valid upon the
meetingofthemindsastoprice.
1. If there is such meeting of the minds as
to price, the contract of sale is valid,
despite the manner of payment, or
even the breach of that manner of
payment.
2. If the real price is not stated in the
contract, then the contract of sale is
validbutsubjecttoreformation.
3. Ifthereisnomeetingofthemindsasto
thepricebecausethepricestipulatedin
the contract is simulated, then the
contract is void, in accordance with
Article 1471 of the Civil Code. (Sps.
Buenaventura v. CA, G.R. No. 126376,
Nov.20,2003)
Note: A definite agreement on the manner of

payment of the price is an essential element in the
formation of a binding and enforceable contract of
sale.(Cov.CA,G.R.No.123908,Feb.9,1998)
Q: In an action for specific performance with

damages,Xallegedthattherewasanagreement
to purchase the lot of Y. As regards the manner
of payment, however, Ys receipts contradicted
the testimony of X. The receipts failed to state
the total purchase price or prove that full
payment was made. For this reason, it was
contended that there was no meeting of their
minds and there was no perfected contract of
sale.Decide.
A: The question to be determined should not be

whethertherewasanagreedprice,butwhatthat
agreed price was. The sellers could not render
invalid a perfected contract of sale by merely
contradictingthebuyersobligationregardingthe
price, and subsequently raising the lack of
agreement as to the price. (David v. Tiongson,
G.R.No.108169,Aug.25,1999)
Q: Distinguish the failure to pay the

considerationfromlackofconsideration.
A:
FAILURETOPAY
CONSIDERATION
LACKOF
CONSIDERATION
Astovalidityofcontractofsale
Itisnottheactofpayment
ofpricethatdetermines
thevalidityofacontractof
sale.
Note:Paymentoftheprice
hasnothingtodowiththe
perfectionofthecontract.
Instead,itgoesintothe
performanceofthe
contract.
Lackofconsideration
preventsthe
existenceofavalid
contract.
Astoresultantright
Failuretopaythe
considerationresultsina
righttodemandthe
fulfillmentorcancellation
oftheobligationunderan
existingvalidcontract.
Thecontractofsaleis
nullandvoidand
producesnoeffect
whatsoever
G.EARNESTMONEYVISAVISOPTIONMONEYY
OPTIONMONEY
Q:Whatistheeffectoffailuretodeterminethe
price?
A:
1. Where contract is executory
ineffective
2. Where the thing has been delivered to
and appropriated by the buyer the
buyer must pay a reasonable price
therefore
Note: The fixing of the price cannot be left to the

discretionofoneoftheparties.However,iftheprice
fixedby one ofthepartiesis accepted bytheother,
thesaleisperfected.
Q:Whatisanoptionmoney?
A: The distinct consideration in case of an option

contract. It does not form part of the purchase
price hence, it cannot be recovered if the buyer
didnotcontinuewiththesale.
Q:Whenispaymentconsideredoptionmoney?
A:Paymentisconsideredoptionmoneywhenitis
given as a separate and distinct consideration
from the purchase price. Consideration in an
option contract may be anything or undertaking
ofvalue.
SALES

EARNESTMONEY
Q:Whatisanearnestmoneyorarras?
A: This is the money given to the seller by the

prospective buyer to show that the latter is truly
interestedinbuyingtheproperty,anditsaimisto
bindthebargain.(Pineda,p.75)
Q: What is the effect of giving an earnest

money?
A: It forms part of the purchase price which may

bedeductedfromthetotalprice.Italsoservesas
a proof of the perfection of the contract of sale.
The rule is no more than a disputable
presumption and prevails only in the absence of
contrary or rebuttable evidence. (PNB v CA, 262
SCRA464,1996)
Note: Option money may become earnest money if

thepartiessoagree.
Q: When is payment considered an earnest

money?
A: When the payment constitutes as part of the

purchase price. Hence, in case when the sale did
not happen, it must be returned to the
prospectivebuyer.
Q: Distinguish option money from earnest

money.
A:
247
OPTIONMONEY EARNESTMONEY
Moneygivenas
distinct
considerationfor
anoptioncontract
Formspartofthe
purchaseprice
Appliestoasale
notyetperfected
Givenonlywhenthereis
alreadyasale
Prospectivebuyeris
notrequiredto
buy.
Whengiven,thebuyeris
boundtopaythe
balance.
Ifbuyerdoesnot
decidetobuy,it
cannotbe
recovered.
Ifsaledidnotmaterialize,
itmustbereturned.
(Villanueva,p.87,
Pineda,p.77)
Q: Bert offers to buy Simeon's property under

the following terms and conditions: P1 million
purchase price, 10% option money, the balance
payable in cash upon the clearance of the
property of all illegal occupants. The option
money is promptly paid and Simeon clears the
propertyofallillegaloccupantsinnotimeatall.
However, when Bert tenders payment of the
balance and asks for the deed of absolute sale,
Simeonsuddenlyhasachangeofheart,claiming
that the deal is disadvantageous to him as he
has found out that the property can fetch three
times the agreed purchase price. Bert seeks
specific performance but Simeon contends that
he has merely given Bert an option to buy and
nothing more and offers to return the option
moneywhichBertrefusestoaccept.
1. Will Bert's action for specific

performanceprosper?Explain.
2. May Simeon justify his refusal to
proceed with the sale by the fact that
the deal is financially disadvantageous
tohim?Explain.
A:
1. Bert's action for specific performance
will prosper because there was a
binding agreement of sale, not just an
optioncontract.Thesalewasperfected
upon acceptance by Simeon of 10% of
the agreed price. This amount is in
reality an earnest money which, under
Art. 1482, "shall be considered as part
of the price and as proof of the
perfection of the contract." (Topacio v.
CA, G.R. No. 102606, July 3, 1992;
Villongco Realty v.Bormaheco, G.R. No.
L26872,July25,1975).
2. Simeon cannot justify his refusal to

proceed with the sale by the fact that
the deal is financially disadvantageous
to him. Having made a bad bargain is
not a legal ground for pulling out of a
binding contract of sale, in the absence
of some actionable wrong by the other
party (Vales v. Villa, G.R. No. 10028,
Dec. 16, 1916), and no such wrong has
been committed by Bert. (2002 Bar
Question)
VI.FORMATIONOFCONTRACTOFSALE
Note:seeIntroduction,StagesofContractofSale
pp.230234

VII.TRANSFEROFOWNERSHIP
248
CIVILLAWTEAM:
A.MANNEROFTRANSFER
Q:Whatistheeffectofdelivery?
A:
GR:Title/ownershipistransferred
XPN:Contraryisstipulatedasinthecaseof:
1. Pactum reservatii in domini
agreement that ownership will remain
with seller until full payment of price
(Contracttosell);
2. Saleonacceptance/approval;
3. Saleonreturn;
4. There is implied reservation of
ownership;
Note:Sellerbearsexpensesofdelivery.
Q: Spouses Bernal purchased a jeepney from

Union Motor to be paid in installments. They
then executed a promissory note and a deed of
chattelmortgageinfavorofUnionMotorwhich
in turn assigned the same with Jardine Finance.
To effectuate the sale as well as the assignment
of the promissory note and chattel mortgage,
the spouses were required to sign documents,
one of which was a sales invoice. Although the
Spouses have not yet physically possessed the
vehicle, Union Motors agent required them to
signthereceiptasaconditionforthedeliveryof
thevehicle.Itwasdiscoveredthatthesaidagent
stolethevehicleevenpriortoitsdeliverytothe
spouses. Was there a transfer of ownership of
thesubjectvehicle?
A: No. The issuance of a sales invoice does not

prove transfer of ownership of the thing sold to
the buyer; an invoice is nothing more than a
detailed statement of the nature, quantity and
cost of the thing sold and has been considered
notabillofsale.
The registration certificate signed by the spouses

does not conclusively prove that constructive
delivery was made nor that ownership has been
transferred to the respondent spouses. Like the
receipt and the invoice, the signing of the said
documentswasqualifiedbythefactthatitwasa
requirement of Union Motor for the sale and
financingcontracttobeapproved.Inallformsof
delivery, it is necessary that the act of delivery,
whether constructive or actual, should be
coupledwiththeintentionofdeliveringthething.
The act, without the intention, is insufficient.
Inasmuch as there was neither physical nor
constructive delivery of a determinate thing, (in
this case, the subject motor vehicle) the thing
sold remained at the sellers risk. The Union
Motor should therefore bear the loss of the
subject motor vehicle after its agent allegedly
stolethesame.(UnionMotorCorp.v.CA,G.R.No.
117187,July20,2001)
Q:Howmaythebuyeracceptthedeliveryofthe
thingsold?
A:
1. Express he intimates to seller that he
hasaccepted
2. Implied
a. Buyer does not act inconsistent
with ownership of seller after
delivery
b. Retainswithoutintimatingtoseller
thathehasrejected
Q: What is the effect if the buyer refuses to

acceptdespitedeliveryoftheobjectofthesale?
A: Delivery is completed. Since delivery of the

subject matter of the sale is an obligation on the
part of the seller, the acceptance thereof by the
buyer is not a condition for the completeness of
thedelivery.(Villanueva,p.117)
Note: Thus, even with such refusal of acceptance,

delivery (actual/constructive), will produce its legal
effects. (e.g. transferring the risk of loss of the
subject matter to the buyer who has become the
ownerthereof)(Villanueva,p.117)
UnderArt.1588,whenthebuyersrefusaltoaccept
the goods is without just cause, the title thereto
passes to him from the moment they are placed at
hisdisposal.(Villanueva,p.117)
Q: Is payment of the purchase price essential to

transferownership?
A: Unless the contract contains a stipulation that

ownership of the thing sold shall not pass to the
purchaser until he has fully paid the price,
ownershipofthethingsoldshallbetransferredto
the vendee upon the actual or constructive
deliverythereof.(Diaz,p.48)
Q: What are the effects of a sale of goods on

installment?
A:
1. Goods must be delivered in full except
whenstipulated
SALES

2. When not examined by the buyer it is
not accepted until examined or at least
hadreasonabletimetoexamine
Q:Whenmaythebuyersuspendpaymentofthe
price?
A:
GR:
1. If he is disturbed in the possession or
ownershipofthethingbought
2. If he has wellgrounded fear that his
possession or ownership would be
disturbed by a vindicatory action or
foreclosureofmortgage.
Note: These grounds are not exclusive. It can

only be exercised if the price or any part
thereofhasnotyetbeenpaidandthecontract
is not yet consummated. (Art. 1590) If the
disturbance is caused by the existence of non
apparentservitude,theremedyisrescission.
XPN:
1. Sellergivessecurityforthereturnofthe
priceinapropercase;
2. A stipulation that notwithstanding any
suchcontingency,thebuyermustmake
payment;
3. Disturbance or danger is caused by the
seller;
4. If the disturbance is a mere act of
trespass;
5. Uponfullpaymentoftheprice.
249
B.WHENDELIVERYDOESNOTTRANSFERTITLE
Q:Whendoesdeliverydoesnottransfertitle?
A:
1. SaleonTrial,Approval,orSatisfaction
2. When there is an EXPRESS
RESERVATION
a. If it was stipulated that
ownership shall not pass to
the purchaser until he has
fullypaidtheprice(Art.1478)
3. When there is an IMPLIED
RESERVATION
a. a. When goods are shipped,
but the bill of lading states
that goods are deliverable to
the seller or his agent, or to
the order of the seller or his
agent
b. b. When the bill of lading is
retained by the seller or his
agent
c. c. when the seller of the
goods draws on the buyer for
the price and transmits the
billofexchangeandthebillof
lading to the buyer , and the
latter does not honor the bill
of exchange by returning the
billofladingtotheseller
4. WhensaleisnotVALID
5. Whenthesellerisnottheownerofthe
goods
XPNs:
a. Estoppel: when the owner is
precluded from denying the
sellersauthoritytosell
b. Registered land bought in
good faith: Ratio: Buyer need
not go beyond the Torrens
title
c. Order of Courts in a Statutory
Sale
d. When the goods are
purchased in a Merchants
store, Fair or Market (Art.
1505)
SALEONTRIAL,APPROVALORSATISFACTION
Q:Whatissaleontrial,approvalorsatisfaction?
A: It is a contract in the nature of an option to

purchaseifthegoodsprovetobesatisfactory,the
approval of the buyer being a condition
precedent.
Q: What are the rules in case of sale on trial,

approvalorsatisfaction?
A:
Title Remainswithseller
RiskofLoss
GR:Bornebyseller
XPN:
1. Buyerisatfault
2. Buyeragreedto
beartheloss
Astotrial
GR:Buyermustgivegoodsa
trial
XPN:Buyerneednotdosoif
itisevidentthatitcannot
performthework.
Whenperiod
withinwhichbuyer
mustsignifyhis
acceptanceruns
Itrunsonlywhenalltheparts
essentialfortheoperationof
theobjecthasbeendelivered
250
CIVILLAWTEAM:
Validityof
stipulationthata
3
rd
personmust
satisfyapprovalor
satisfaction
Valid,providedthe3
rd
person
isingoodfath
Ifthesaleismade
toabuyerwhois
anexpertonthe
objectpurchased
Generally,itcannotbe
consideredasaleonapproval
C.KINDSOFDELIVERY
Q:Whatarethedifferentkindsofdelivery?
A:
1. Actual thing sold is placed under the
controlandpossessionofbuyer/agent;
2. Constructive does not confer physical
possession of the thing, but by
constructionoflaw,isequivalenttoacts
ofrealdelivery.
Requisites:
a. The seller must have control over
thething
b. The buyer must be put under
control
c. There must be intention to deliver
the thing for purposes of
ownership
i. Tradicion Symbolica delivery

of certain symbols
representingthething
ii. Tradicion Instrumental
delivery of the instrument of
conveyance.
iii. Traditio Longa Manu
Delivery of thing by mere
agreement;whensellerpoints
to the property without need
ofactuallydelivering
iv. TradicionBreviManuBefore
contract of sale, the wouldbe
buyer was already in
possession of the wouldbe
subjectmatterofsale
v. ConstitutumPossessoriumat
the time of perfection of
contract, seller continues to
have possession merely as a
holder
3. Quasitradition delivery of rights,

credits or incorporeal property, made
by:
a. Placing titles of ownership in the
handsofthebuyer;
b. Allowing buyer to make use of
rights
4. Tradition by operation of law
Execution of a public instrument is
equivalent to delivery. But to be
effective, it is necessary that the seller
have such control over the thing sold
that,atthemomentofsale,itsmaterial
deliverycouldhavebeenmade.
GR:Thereispresumptionofdelivery
XPN:
a. Contrarystipulation;
b. When at the time of execution,
subject matter was not subject to
thecontrolofseller;
c. Seller has no capacity to deliver at
timeofexecution;
d. Such capacity should subsist for a
reasonable time after execution of
instrument.
Note: Delivery should be coupled with intention of

delivering the thing, and acceptance on the part of
the buyer to give legal effect of the act. Without
suchintention,thereisnosuchtradition.
Q: Susan invested in commodity futures

trading in OCP, which involves the buying or
selling of a specified quantity and grade of a
commodity at a future date at a price
established at the floor of the exchange. As per
terms of the trading contract, customer's orders
shallbedirectlytransmittedbyOCPasbrokerto
itsprincipal,FrankwellEnterprises,whichinturn
mustplacethecustomer'sorderswiththeTokyo
Exchange. In this case, however, there is no
evidence of such transmission. When Susan
withdrew her investment, she was not able to
recover the entire amount. She thus filed a
complaint and the trial court ruled in her favor,
saying that thecontract is aspecies of gambling
andthereforevoid.Isthecourtsrulingcorrect?
A:Yes.Atradingcontractisacontractforthesale
of products for future delivery, in which either
seller or buyer may elect to make or demand
delivery of goods agreed to be bought and sold,
but where no such delivery is actually made. In
this case, no actual delivery of goods and
commodity was intended and ever made by the
parties. In the realities of the transaction, the
parties merely speculated on the rise and fall in
thepriceofthegoods/commoditysubjectmatter
of the transaction. If Susans speculation was
correct, she would be the winner and OCP, the
loser,soOCPwouldhavetopayherthe"margin".
SALES

But if she was wrong in her speculation then she
would emerge as the loser and OCP, the winner.
OCP would then keep the money or collect the
difference from her. This is clearly a form of
gambling provided for with unmistakable
certainty under Article 2018. (Onapal Phils.
Commodities,Inc.vs.CAandSusanChua,G.R.No.
90707,Feb.1,1993)
Note: Futures Commission Merchant/Broker refers

to a corporation or partnership, which must be
registered and licensed as a Futures Commission
Merchant/Broker and is engaged in soliciting or in
accepting orders for the purchase or sale of any
commodity for future delivery on or subject to the
rules ofthe contract market andthat, in connection
with such solicitation or acceptance of orders,
accepts any money, securities or property (or
extends credit in lieu thereof) to margin, guarantee
or secure any trade or contract that results or may
resulttherefrom.
Q: Given that actual possession, control and

enjoyment is a main attribute of ownership, is
symbolicdeliverybymereexecutionofthedeed
of conveyance sufficient to convey ownership
overproperty?
A: Yes, possession is also transferred along with

ownership thereof by virtue of the deed of
conveyance. The mere execution of the deed of
conveyanceinapublicdocumentisequivalentto
the delivery of the property, prior physical
delivery or possession isnot legally required.The
deedoperatesasaformalorsymbolicdeliveryof
the property sold and authorizes the buyer or
transferee to use the document as proof of
ownership. Nothing more is required. (Sps. Sabio
v. International Corporate Bank, Inc. et. at. G.R.
No.132709,Sept.4,2001)
Q:Candeliverybeeffectedthroughacarrier?
A:
GR:Yes,ifthesellerisauthorized.Deliveryto
carrierisdeliverytothebuyer.
XPN:
1. Acontraryintentionappears
2. Implied reservation of ownership under
Art.1503,pars1,2,3.
Q:Whatarethekindsofdeliverytocarrier?
A:
1. FAS (Free Along Side) when goods are
delivered alongside the ship, there is
alreadydeliverytothebuyer
2. FOB (Free On Board) when goods are
delivered at the point of shipment,
delivery to carrier by placing the goods
onvesselisdeliverytobuyer
3. CIF(Cost,Insurance,Freight)
a. When buyer pays for services of
carrier, delivery to carrier is
delivery to buyer, carrier as agent
ofbuyer;
b. Whenbuyerpayssellertheprice
from the moment the vessel is at
the port of destination, there is
alreadydeliverytobuyer
4. COD (Collect On Delivery) the carrier
acts for the seller in collecting the
purchase price, which the buyer must
paytoobtainpossessionofthegoods.
Q: What are the sellers duties after delivery to

thecarrier?
A:
1. To enter on behalf of the buyer into
such contract reasonable under the
circumstances;
2. To give notice to the buyer regarding
necessityofinsuringthegoods.
Q:Whereistheplaceofdelivery?
A:
1. Thatagreedupon
2. Placedeterminedbyusageoftrade
3. Sellersplaceofbusiness
4. Sellersresidence
5. In case of specific goods, where they
canbefound
Q:Whenshouldtheobjectbedelivered?
A:
1. Stipulatedtime
2. Ifthereisnone,atareasonablehour.
Q: What are the effects of a sale of goods on

installment?
A:
1. Goods must be delivered in full except
whenstipulated
2. Whennotexaminedbythebuyeritis
not accepted until examined or at least
hadreasonabletimetoexamine
251

Q: When is the seller not bound to deliver the

thingsold?
A:
1. Ifthebuyerhasnotpaidtheprice;
2. Noperiodforpaymenthasbeenfixedin
thecontract;
3. A period for payment has been fixed in
the contract but the buyer has lost the
righttomakeuseofthetime.
252
CIVILLAWTEAM:
D.DOUBLESALE
Q:Whenisthereadoublesale?
A: There is double sale when the same object of

thesaleissoldtodifferentvendees.
Note:Requisites:
1. Samesubjectmatter
2. Sameimmediateseller
3. Twoormoredifferentbuyers
4. Bothsalesarevalid
Q:Whatistheruleondoublesale?

A:Firstintime,priorityinright
Note:RuleonDoubleSaleregardingimmovables:
GR:ApplyArt.1544
XPN: Sale of registered lands apply Torrens
System
Q: What are the rules according to Article 1544

oftheCivilCode?
A:
c. MovableOwnerwhoisfirsttopossess
ingoodfaith
d. Immovable
d. Firsttoregisteringoodfaith
e. No inscription, first to possess in
goodfaith
f. No inscription & no possession in
good faith Person who presents
oldesttitleingoodfaith
E.PROPERTYREGISTRATIONDECREE
Q: Ten Forty Realty purchased from Galino a

parcel of land. However, the Deed of Sale was
not recorded in the Registry of Deeds.
Subsequently, Galino sold the same property to
Cruz who immediately took possession of the
said property. Who has a better right between
TenFortyandCruz?
A:Intheabsenceoftherequiredregistration,the
law gives preferential right to the buyer who in
good faith is first in possession. The subject
property had not been delivered to Ten Forty;
hence, it did not acquire possession either
materially or symbolically. As between the two
buyers, therefore, respondent was first in actual
possession of the property. (Ten Forty Realty &
Devt. Corp. v. Cruz, G.R. No. 151212, Sept. 10,
2003)
Q: Explain the principle of prius tempore, potior

jure.
A:Knowledgebythefirstbuyerofthesecondsale
cannotdefeatthefirstbuyersrightsexceptwhen
the second buyer first registers in good faith the
secondsale.Conversely,knowledgegainedbythe
second buyer of the first sale defeats his rights
evenifheisfirsttoregister,sincesuchknowledge
taints his registration with bad faith to merit the
protection of Art. 1544 (2
nd
par.), the second
realty buyer must act in good faith in registering
hisdeedofsale.(Diaz,p.125)
Note: Where one sale is absolute and the other is a

pacto de retro transaction where the period to
redeemhasnotyetexpired,Art.1544willnotapply.
(Pineda,p.223)
Q: Juliet offered to sell her house and lot,

together with all the furniture and appliances
therein,toDehlma.Beforeagreeingtopurchase
the property, Dehlma went to the Register of
DeedstoverifyJulietstitle.Shediscoveredthat
while the property was registered in Juliets
name under the Land Registration Act, as
amendedbythePropertyRegistrationDecree,it
wasmortgagedtoElainetosecureadebtofP80,
000. Wanting to buy the property, Dehlma told
Juliet to redeem the property from Elaine, and
gave her an advance payment to be used for
purposes of releasing the mortgage on the
property. When the mortgage was released,
JulietexecutedaDeedofAbsoluteSaleoverthe
property which was duly registered with the
Registry of Deeds, and a new TCT was issued in
Dehlmas name. Dehlma immediately took
possession over the house and lot and the
movables therein. Thereafter, Dehlma went to
the Assessors Office to get a new tax
declaration under her name. She was surprised
to find out that the property was already
declared for tax purposes in the name of XYZ
Bank which had foreclosed themortgage on the
propertybeforeitwassoldtoher.XYZBankwas
also the purchaser in the foreclosure sale of the
property. At that time, the property was still
unregistered but XYZ Bank registered the
SheriffsDeedofConveyanceinthedaybookof
the Register of Deeds under Act 3344 and
obtainedataxdeclarationinitsname.
SALES

WasDehlmaapurchaseringoodfaith?
A: Yes, Dehlma is a purchaser in good faith. She

learned about the XYZ tax declaration and
foreclosure sale only after the sale to her was
registered. She relied on the certificate of title of
her predecessorininterest. Under the Torrens
System, a buyer of registered lands is not
required by law to inquire further than what the
Torrens certificate indicates on its face. If a
personproceedstobutitrelyingonthetitle,that
personisconsideredabuyeringoodfaith.
253
The priority in time rule could not be invoked

by XYZ Bank because the foreclosure sale of the
landinfavourofthebankwasrecordedunderAct
3344, the law governing transactions affecting
unregistered land, and thus, does not bind the
land.
Q:WhoasbetweenDehlmaandXYZBankhasa
betterrighttothehouseandlot?
A:BetweenDehlmaandthebank,theformerhas
abetterrighttothehouseandlot.
Q:Whoownsthemovablesinsidethehouse?
A: Unless there is a contrary stipulation in the

absolutedeedofsale,Dehlmaownsthemovables
coveredbytheDeedofSaleandherownershipis
perfectedby the execution and delivery of public
document of sale. The delivery of the absolute
deed of sale is a symbolical delivery of the house
and lot, including the contents of the house. This
is an obligation to deliver a specific thing, which
includes the delivery of the specific thing itself
and all of its accessions and accessories even
though they may not have been mentioned (Art.
1166,CC).(2008BarQuestion)
Q:Doespriorregistrationbythesecondbuyerof
a property subject of a double sale confer
ownership or preferred right in his favor over
thatofthefirstbuyer?
A: Prior registration of the disputed property by

the second buyer does not by itself confer
ownership or a better right over the property.
Article 1544 requires that such registration must
becoupledwithgoodfaith.
Knowledge gained by the first buyer of the

second sale cannot defeat the first buyer's rights
except where the second buyer registers in good
faith the second sale ahead of the first, as
providedbytheCivilCode.
Knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to
register the second sale, since such knowledge
taints his prior registration with bad faith (Art.
1544) (Uraca, et. al v. CA, G.R. No. 115158, Sept.
5,1997)
VIII.RISKOFLOSS
Q:Whenisathingconsideredlost?
A:Itisunderstoodthatthethingislostwhenit:
1. perishes,or
2. goesoutofcommerce,or
3. disappears in such a way that its
existence is unknown or cannot be
recovered.(Art.1189,2
nd
par.)
Q:Whatisdeterioration?
A: Deterioration is the lowering of the value or

character of a thing. It normally occurs by reason
ofordinarywearandtear.(Pineda,Credit,p.20)
Q:Whobearstheriskoflossordeterioration?
A:
BEFORE
PERFECTION
Res perit domino Seller is the
ownersosellerbearsriskofloss
AT
PERFECTION
Resperitdomino
Contractshallbewithoutany
effectthesellerbearstheloss
sincethebuyerisrelievedofhis
obligationunderthecontract
AFTER
PERFECTION
BUT
BEFORE
DELIVERY
TwoViews:
Paras:Buyer,except:
1. whenobjectsoldconsistsof
fungiblegoodsforapricefixed
2. whensellerisguiltyoffraud,
negligence,default,or
violationofcontractualterms;
or
3. whenobjectsoldisgeneric.
Tolentino:Seller;
Deterioration & fruits Buyer
bearsloss
AFTER
DELIVERY
Resperitdomino
Buyerbecomestheownerso
buyerbearsriskofloss
Delivery extinguish ownership vis

avis the seller & creates a new
oneinfavorofthebuyer
Q: What is the effect of the loss of the thing

subjectofthecontractatthetimeofsale?
A:
1. Totallosscontractisvoid&inexistent
2. Partial loss buyer may elect between
withdrawing from the contract or
demanding the remaining part, paying
itsproportionateprice
254
CIVILLAWTEAM:
E.WhenOwnershipisTransferred
SeeTransferofOwnership.p.247
IX.DOCUMENTSOFTITLE
Q:WhatisaDocumentofTitle?
A: A document used in the ordinary course of

businessinthesaleortransferofgoods,asproof
of the possession or control of the goods , or
authorizing or purporting to authorize the
possessorofthedocumenttotransferorreceive,
either by endorsement or by delivery , goods
representedbysuchdocument(Art.1636).
Q: What is the purpose of the Documents of

Title?
A:
1. Evidence of possession or control of
goodsdescribedtherein
2. Medium of transferring title and
possession over the goods described
therein without having to effect actual
delivery(Villanueva,2009ed.)
3. The custody of a negotiable warehouse
receipts issued to the order of the
owner,ortobearer,isarepresentation
of title upon which bona fide
purchasersforvalueareentitledtorely
,despitebreachesoftrustorviolations
of agreement on the part of the
apparent owner (Siy Cong Bieng v.
HSBC,56Phil598)
NegotiableDocumentsofTitle
Q:WhatisaNegotiableDocumentofTitle?
A: A document of title which states that the

goods referred therein will be delivered to the
bearer, or to the order of any person named in
suchdocument(Art.1509,NCC).
Q: Who may negotiate a Negotiable Document

ofTitle?
A:
1. Owner
2. Person to whom the possession pr
custodyofthedocumenthasbeen
entrustedbytheowner
a. If bailee undertakes to
deliverthegoodstosuch
person
b. If document is in such
form that it may be
negotiatedbydelivery.
NonNegotiableDocumentsofTitle
Q:WhatareNonnegotiabledocumentsoftitle?
A:
1. They are delivered only to a
specifiedperson
2. Carrierwillnotdeliverthegoodsto
any holder of the document or to
whom such document may have
beenendorsedbytheconsignee
3. Must present the deed of sale or
donationinhisfavour
Q: What are the warranties of seller of

documentsoftitle?
A:
1. GenuinessoftheDocument
2. Legalrighttonegotiateortransfer
3. No knowledge of fact which would
impair the validity or worth of the
document
4. Right to transfer Title to the goods and
merchantability or fitness for a
particular purpose, whenever such
warranties would have been implied
had the contract transfer the goods
withoutadocument.
RulesRegardingLevyandGarnishmentofGoods
Q: What does a person to whom a non

negotiable instrument has been transferred but
not negotiated, acquire as against the
transferor?
A:Heacquires:
1. Title to the goods, subject to the terms
ofanyagreementwiththetransferor;
2. Right to notify the bailee who issued
the document of the transfer thereof,
SALES

and thereby to acquire the direct
obligation of such bailee to hold
possession of the goods for him
according to the terms of the
document.
255
Q: How may the transferors creditor defeat the

aforementionedrightsofthetransferee?
A: Prior to the notification to such bailee by the

transferor or transferee of a nonnegotiable
document of title, the title of the transferee to
the goods and the right to acquire the obligation
of such bailee may be defeated by the
transferorscreditorbythelevyofanattachment
orexecutionuponthegoods.(Art.1514,NCC)
Q: If the goods are delivered to a bailee by the

ownerorbyapersonwhoseactinconveyingthe
title to them to a purchaser in good faith for
value and a negotiable instrument was issued
for them, can the said goods be attached,
garnishedorleviedupon?
A:
GR: No, the goods cannot be attached,
garnished or levied upon while they are in
thebaileespossession.
XPN:
1. When the document is first
surrendered;or
2.Whenitsnegotiationisenjoined.
Note: The bailee shall in no case be compelled

to deliver the actual possession of the goods
untilthedocumentis:
1.Surrenderedtohim;or
2.Impoundedbythecourt.
(Art.1519,NCC)
Q: What are the rights of a creditor whose

debtoristheownerofanegotiabledocumentof
title?
A: He is entitled to such aid from courts of

appropriatejurisdictionby:
1.injunction;
2.attachingsuchdocument;
3. as regards property which cannot be readily
attachedorlevieduponbyordinarylegalprocess
satisfying the claim by means allowed by law or
equity.(Art.1520,NCC)
X.REMEDIESOFANUNPAIDSELLER
A.DEFINITIONOFUNPAIDSELLER
Q:Whoisanunpaidseller?
A:Thesellerofgoodsisdeemedtobeanunpaid
sellereither:
1. when the whole of the price has not
beenpaidortendered;or
2. when a bill of exchange or other
negotiable instrument has been
received as conditional payment, and
the condition on which it was received
has been broken by reason of the
dishonor of the instrument, the
insolvencyofthebuyer,orotherwise.
Note:Itincludesanagentofthesellertowhomthe
bill of lading has been indorsed, or consignor or
agentwhohashimselfpaid,orisdirectlyresponsible
for the price, or any other person who is in the
positionofaseller.
B.REMEDIESOFUNPAIDSELLER
Q:WhataretheremediesofanUnpaidSeller?
A:
I. Ordinary
1. ActionforPrice
Exercisedwhen:
a. ownershiphaspassedtobuyer;
b. priceispayableonadaycertain
c. goods cannot readily be resold for
reasonable price and Art. 1596 is
inapplicable
2. Action for Damages In case of

wrongfulneglectorrefusalbythebuyer
toacceptorpayforthethingsold
II. Special
1. Possessory Lien Seller not bound to

deliver if buyer has not paid him the
price. It is exercisable only in following
circumstances:
a. goods sold without stipulation as
tocredit
b. goods sold on credit but term of
credithasexpired
c. buyerbecomesinsolvent
Note: When part of goods delivered, may

stillexerciserightongoodsundelivered
2. StoppageinTransitu
Requisites:ISENTU
a. Insolventbuyer
b. Seller must Surrender the
negotiabledocumentoftitle,ifany
c. Seller must bear the Expenses of
delivery of the goods after the
exerciseoftheright.
d. Seller must either actually take
possession of the goods sold or
give Notice of his claim to the
carrier or other person in
possession
e. GoodsmustbeinTransit
f. Unpaidseller
3. SpecialRighttoReselltheGoods
Exercisedwhen:
a. Goodsareperishable,
b. Stipulated the right of resale in
caseofdefault,or
c. Buyer in default for unreasonable
time
4. SpecialRighttoRescind
Requisites:
256
CIVILLAWTEAM:
a. Expressly stipulated OR buyer is in

defaultforunreasonabletime
b. Noticeneededtobegivenbyseller
tobuyer
Note: Ownership of goods already with buyer but

seller maystill rescind;ownership isdestroyedeven
withoutcourtinterventionbutinordinarysale,need
togotocourt.
Q: What are the instances when possessory lien

islost?
A:
1. Seller delivers without reserving
ownership in goods or right to possess
them
2. Buyer or agent lawfully obtains
possessionofgoods
3. Waiver
Note:Sellerloseslienwhenhepartswithgoods(but
still,stoppageintransitucanbeexercised)
Q:Whatistherightofstoppageintransitu?
A:Thesellermayresumepossessionofthegoods
at any time while they are in transit, and he will
thenbecomeentitledtothesamerightsinregard
to the goods as he would have had if he had
never parted with the possession. (Art. 1530,
NCC)
Q:Whenaregoodsconsideredtobeintransit?
A:
1. After delivery to a carrier or other
baileeandbeforethebuyerorhisagent
takesdeliveryofthem;and
2. If the goods are rejected by the buyer,
and the carrier or other bailee
continues in possession of them. (Art.
1531,par.1)
Q: When are goods deemed to be no longer in

transit?
A:
1. Afterdeliverytothebuyerorhisagent
2. Ifthebuyer/agentobtainspossessionof
the goods at a point before the
destinationoriginallyfixed;
3. Ifthecarrierorthebaileeacknowledges
thatheholdsthegoodsinbehalfofthe
buyer/hisagent;
4. If the carrier or bailee wrongfully
refuses to deliver the goods to the
buyerorhisagent.(Villanueva,p.181)
XI.PERFORMANCEOFCONTRACT
A.SALEOFPERSONALPROPERTY.
RULESONSALEOFPERSONALPROPERTY.
INSTALLMENTSALESLAW
Q:WhatistheInstallmentSalesLaw?
A: Commonly known as the Recto Law. It is

embodiedinArt.1484oftheNCCwhichprovides
for the remedies of a seller in the contracts of
saleofpersonalpropertybyinstallments.
Note: Art. 1484 of the NCC incorporates the

provisions of Act No. 4122 passed by the Philippine
Legislature on Dec. 9, 1939, known as the
"Installment Sales Law" or the "Recto Law," which
thenamendedArt.1454oftheCivilCodeof1889.
Q:TowhatdoestheRectoLawapply?
A: This law covers contracts of sale of personal

property by installments (Act No. 4122). It is also
applied to contracts purporting to be leases of
personal property with option to buy, when the
lessor has deprived the lessee of the possession
or enjoyment of the thing. (PCI Leasing and
Finance Inc. v. Giraffe X Creative Imaging, Inc.,
G.R.No.142618,July12,2007)
SALES

Q: What are the alternative remedies in case of
saleofpersonalpropertyininstallments?
A:
1. Specific Performance: Exact fulfillment
shouldthebuyerfailtopay
GR: If availed of, the unpaid seller

cannot anymore choose other
remedies;
XPN: if after choosing, it has become

impossible,rescissionmaybepursued
2. Rescission: Cancel the sale if buyer fails

topay2ormoreinstallments
Deemedchosenwhen:
a. Noticeofrescissionissent
b. Takespossessionofsubjectmatter
ofsale
c. Filesactionforrescission
3. Foreclosure: Foreclose on chattel

mortgageifbuyerfailstopay2ormore
installments
GR: Actual foreclosure is necessary to

barrecoveryofbalance
- Extent of barring effect:
purchaseprice
XPN: Mortgagor refuses to deliver

propertytoeffectforeclosure;expenses
incurredinattorneysfees,etc.
Q: When the lessor of the property chose to

deprive the lessee of the subject personal
property, can the former recover any unpaid
rentalsfromthelatter?
A: In choosing, through replevin, to deprive the

respondent of possession of the leased
equipment, the petitioner waived its right to
bring an action to recover unpaid rentals on the
saidleaseditems.
257
B.SALEOFREALPROPERTY.
RULESONSALEOFREALPROPERTY
REALTYINSTALLMENTBUYERACT
Q:WhatistheRealtyInstallmentBuyerAct?
A: Commonly known as the Maceda Law. It is

embodiedinR.A.6552whichprovidesforcertain
protection to particular buyers of real estate
payable on installments. The law declares as
"public policy to protect buyers of real estate on
installment payments against onerous and
oppressiveconditions.
Note:Thepurposeofthelawistoprotectbuyersin
installmentagainstoppressiveconditions.
Q: What are the transactions/sale covered by

theMacedaLaw?
A: The law involves the sale of immovables on

installment(MacedaLaw,R.A.6552).
1. Coverage: Residential Real Estate
(Villanueva,p.431)
2. Exclude:
a. Industriallots
b. Commercial buildings (and
commerciallotsbyimplication)
c. Saletotenantsunderagrarianlaws
Q:Whataretherightsgrantedtobuyers?
A:
1. Buyerpaidatleast2yearsinstallment
a. Pay w/o interest the balance
withingraceperiodof1monthfor
everyyearofinstallmentpayment.
Grace period to be exercised once
every5years.
b. When no payment cancelled;
buyer entitled to 50% of what he
has paid + 5% for every year but
not exceeding 90% of payments
made
Note: Cancellation to be effected 30

daysfromnotice&uponpaymentof
cashsurrendervalue.
2. Buyerpaidlessthan2yearsinstallment
a. Grace period is not less than 60
daysfromduedate
b. Cancellation if failure to pay w/in
60daysgrace
c. 30 days notice before final
cancellation
Note:buyercanstillpayw/inthe30
daysperiodwithinterest.
Q:Whataretheotherrightsgrantedtoabuyer?
A:
1. Sellorassignrightstoanother
2. Reinstate contract by updating within
30daysbeforeandcancellation
3. DeedofSaletobedonebynotarialact
4. Pay full installment in advance the

balanceofpriceanytimew/ointerest
5. Have full payment annotated in
certificateoftitle
Note: Applies to contracts even before the law was

enacted.Stipulationtothecontraryisvoid
Q:WhatarethesocalledMacedaandRecto
laws in connection with sales on installments?
Givethemostimportantfeaturesoneachlaw.
A: The Maceda Law (R.A. 6552) is applicable to

salesofimmovablepropertyoninstallments.The
mostimportantfeaturesare:
1. After having paid installments for at least

two years, the buyer is entitled to a
mandatory grace period of onemonth for
everyyearofinstallmentpaymentsmade,
to pay the unpaid installments without
interest.
Ifthecontractiscancelled,thesellershall
refund to the buyer the cash surrender
value equivalent to fifty percent (50%) of
the total payments made, and after five
years of installments, an additional five
percent(5%)everyyearbutnottoexceed
ninety percent (90%) of the total
paymentsmade.
2. In case the installments paid were less

than2years,thesellershallgivethebuyer
a grace period of not less than 60 days. If
thebuyerfailstopaytheinstallmentsdue
at the expiration of the grace period, the
seller may cancel the contract after 30
days from receipt by the buyer of the
notice of cancellation or demand for
rescissionbynotarialact.(Rillo v.CA,G.R.
No.125347June19,1997)
The Recto Law (Art.1484) refers to sale of

movablespayableininstallmentsandlimitingthe
right of seller, in case of default by the buyer, to
oneofthreeremedies:
1. Exactfulfillment;
2. Cancel the sale of two or more
installmentshavenotbeenpaid;
3. Foreclose the chattel mortgage on the
thingssold,alsoincaseofdefaultoftwo
or more installments, with no further
action against the purchaser. (1999 Bar
Question)
258
Q: Bernie bought on installment a residential

subdivision lot from DEVLAND. After having
faithfully paid the installments for 48 months,
Bernie discovered that DEVLAND had failed to
develop the subdivision in accordance with the
approved plans and specifications within the
timeframeintheplan.Hethuswrotealetterto
DEVLAND informing it that he was stopping
payment.Consequently,DEVLANDcancelledthe
sale and wrote Bernie, informing him that his
paymentsareforfeitedinitsfavor.
1. Was the action of DEVLAND proper?
Explain.
2. Discuss the rights of Bernie under the
circumstances.
3. Supposing DEVLAND had fully
developed the subdivision but Bernie
failed to pay further installments after
4 years due to business reverses.
Discuss the rights and obligations of
theparties.
A:
1. Assuming that the land is a
residential subdivision project under
P.D. No. 957 (The Subdivision and
Condominium Buyers Protective
Decree), DEVLAND's action is not
properbecauseunderSection23ofsaid
Decree,noinstallmentpaymentshallbe
forfeited to the owner or developer
when the buyer, after due notice,
desistsfromfurtherpaymentduetothe
failure of the ownerdeveloper to
develop the subdivision according to
theapprovedplansandwithinthetime
limitforcomplyingwiththesame.
2. Under the same Section of the Decree,

Bernie may, at his option, be
reimbursed the total amount paid
including amortization interests but
excluding delinquency interests at the
legal rate. He may also ask the Housing
andLandUseRegulatoryBoardtoapply
penal sanctions against DEVLAND
consisting of payment of administrative
fine of not more than P20.000.00
and/orimprisonmentfornotmorethan
20years.
3. Under R.A. No. 6552 (Maceda Law),

DEVLAND has the right to cancel the
contractbutithastorefund Berniethe
cash surrender value of the payments
on the property equivalent to 50% of
the total payments made. (2005 Bar
Question)

CIVILLAWTEAM:
SALES

XII.WARRANTIES
Q:Whatisawarranty?
A: A statement or representation made by the

seller of goods, as part of the contract of sale,
havingreferencetothecharacter,quality,ortitle,
of the goods, and by which he promises or
undertakestoinsurethatcertainfactsareorshall
beashethenrepresents.
Note:Mayeitherbeexpressorimplied.
Q:Whatistheeffectofabreachofwarranty?
A:Buyermay:
1. Refusetoproceedwiththecontract;or
2. Proceed with the contract; waive the
condition.
Note: If the condition is in the nature that it should

happen, the nonperformance may be treated as a
breachofwarranty.
Q: What are the kinds of warranties?

Distinguish.
A:
i. Express
ii. Implied
259
A.EXPRESSWARRANTIES
Q:Whatareexpresswarranties?
A: Any affirmation of fact or any promise by the

sellerrelatingtothethingifthenaturaltendency
of such affirmation or promise is to induce the
buyer to purchase the same, and if the buyer
purchasesthethingrelyingthereon.(Art.1546)
Q: What are the requisites of express

warranties?
A:AIR
1. It must be an Affirmation of fact
relatingtothesubjectmatterofsale
2. Natural tendency is to Induce buyer to
purchasesubjectmatter
3. Buyer purchases the subject matter
Relyingthereon
Q:Whatistheliabilityofthesellerforbreachof
expresswarranties?
A: The seller is liable for damages. (Villanueva, p.

249)
B.IMPLIEDWARRANTIES
Q:Whatareimpliedwarranties?
A:Warrantiesdeemedincluded inallcontracts of
salebyoperationoflaw.(Art.1547)
1. Warranty that seller has right to sell

refers to consummation stage. Not
applicable to sheriff, auctioneer,
mortgagee,pledge
2. Warrantyagainsteviction
Requisites:JPENS
a. BuyerisEvictedinwholeorinpart
fromthesubjectmatterofsale
b. FinalJudgment
c. Basis of eviction is a right Prior to
saleoractimputabletoseller
d. Seller has been Summoned in the
suit for eviction at the instance of
buyer; or made 3rd party
defendant through 3rd party
complaintbroughtbybuyer
e. Nowaiveronthepartofthebuyer
Note: For eviction disturbance in law is

requiredandnotjusttrespassinfact.
3. Warranty against encumbrances (non

apparent)
Requisites:
a. immovable sold is encumbered
with nonapparent burden or
servitude not mentioned in the
agreement
b. nature of nonapparent servitude
or burden is such that it must be
presumed that the buyer would
not have acquired it had he been
awarethereof
XPN: warranty not applicable when

nonapparent burden or servitude is
recorded in the Registry of Property
unless there is expressed warranty that
the thing is free from all burdens &
encumbrances
4. WarrantyagainstHiddenDefects

Requisites:HENNAS
a. DefectisimportantorSerious
i. The thing sold is unfit for the
usewhichitisintended
ii. Diminishes its fitness for such
use or to such an extent that
the buyer would not have

acquiredithadhebeenaware
thereof
b. DefectisHidden
c. DefectExistsatthetimeofthesale
d. BuyergivesNoticeofthedefectto
thesellerwithinreasonabletime
e. Actionforrescissionorreductionof
the price is brought within the
properperiod
i. 6 months from delivery of
thethingsold
ii. Within 40 days from the
deliveryincaseofanimals
f. There must be No waiver of
warrantyonthepartofthebuyer.
Q:Whenisimpliedwarrantynotapplicable?
A:ASAP
1. Asisandwhereissale
2. Saleofsecondhandarticles
3. Salebyvirtueofauthorityinfactorlaw
4. Sale at public auction for tax
delinquency
260
CIVILLAWTEAM:
C.EFFECTSOFWAIVEROFIMPLIEDWARRANTIES
Q:Whataretheeffectsofwaiverofanimplied
warranty?
A:
1. Seller in bad faith & there is waiver
againstevictionvoid
2. When buyer w/o knowledge of a
particular risk, made general
renunciation of warranty is not a
waiverbutmerelylimitsliabilityofseller
incaseofeviction
3. When buyer with knowledge of risk of
eviction assumed its consequences &
made a waiver seller not liable
(applicable only to waiver of warranty
againsteviction)
WARRANTYAGAINSTEVICTION
Q:Whatisawarrantyagainsteviction?
A: In a contract of sale, unless a contrary

intention appears, there is an implied warranty
onthepartofthesellerthatwhentheownership
istopass,andthatthebuyershallfromthattime
haveandenjoythelegalandpeacefulpossession
ofthething.(Art.1547,1
st
paragraph)
Q: What is covered by a warranty against

eviction?
A:Itcoversevictionbyafinaljudgmentbasedon
arightpriortothesaleoranactimputabletothe
vendor,thevendeeisdeprivedofthewholeorof
apartofthethingpurchased.
The vendor shall answer for the eviction even

though nothing has been said in the contract on
thesubject.(Art.1548,NCC)
Q: What is the effect of a breach of warranty

againsteviction?
A: The buyer shall have the right to demand the

seller:
1. Thereturnofthevaluewhichthething
sold had at the time of the eviction, be
itgreaterorlesserthanthepriceofthe
sale
2. The income or fruits, if he has been
ordered to deliver them to the party
whowonthesuitagainsthim
3. The costs of suit which caused the
eviction,and,inapropercase,thoseof
suit brought against the vendor for the
waranty
4. The expenses of contract if buyer has
paidthem
5. The damages and interests and
ornamental expenses if sale was made
inbadfaith.
Note: Vendor is liable for any hidden defect even if

heisnotaware.(CaveatVenditor)
Purchaser must be aware of the title of the vendor.

(CaveatEmptor)
Q:Whataretherightsofbuyerincaseofpartial
eviction?
A:
1. Restitution (with obligation to return
thethingw/ootherencumbrancesthan
thosewhichithadwhenheacquiredit)
2. Enforcement of warranty against
eviction(Paras,p.153andArt.1556)
WARRANTYAGAINSTHIDDENDEFECT
Q:Whatisahiddendefect?
A: A hidden defect is one which is unknown or

couldnothavebeenknowntothebuyer.(Diaz,p.
145)
SALES

Note: Seller does not warrant patent defect; Caveat
emptor(buyerbeware)
Q:Whatisaredhibitorydefect?
A: It is a defect in the article sold against which

defect the seller is bound to warrant. The vice
must constitute an imperfection, a defect in its
nature,ofcertainimportance;andaminordefect
does not give rise to redhibition. (De Leon,
Comments and Cases on Sales and Lease, 2005
ed,p.318)
Q:Whatisaredhibitorydefectonanimals?
A: If the hidden defect of animals, even in case a

professionalinspectionhasbeenmade,shouldbe
of such a nature that expert knowledge is not
sufficient to discover it, the defect shall be
consideredasredhibitory.
Q:Whenisthesaleofanimalvoid?
A:Thesaleisvoidifanimalis:
1. Sufferingfromcontagiousdiseases;
2. Unfit for the use or service for which
theywerepurchasedasindicatedinthe
contract
Q: When is a vendor responsible for hidden

defects?
A:Ifthehiddendefectswhichthethingsoldmay
have:
1. Renderitunfitfortheuseforwhichitis
intended,or
2. Diminish its fitnessfor such use to such
an extent that, had the vendee been
aware thereof, he would not have
acquireditorwouldhavegivenalower
priceforit.(Art.1561)
Q: Up to what extent does the seller warrant

againsthiddendefects?
A: The seller is responsible to the vendeefor any

hidden faults or defects in the thing sold, even
thoughhewasnotawarethereof.
Q: When is the seller not answerable for the

defectsofthethingsold?
A:
1. For patent defects or those which are
visible,or
261
2. Even for those which are not visible if
thebuyerisanexpertwho,byreasonof
his trade or profession, should have
knownthem(Art.1561),or
3. If the contrary has been stipulated, and
thevendorwasnotawareofthehidden
faults or defects in the thing sold. (Art.
1566)
Q: What is the effect of a breach of warranty

againsthiddendefects?
A: It would depend on whether the seller had

knowledge of such defect and whether there has
beenawaiverofthewarranty.
1. If the thing should be lost in

consequence of the hidden faults, and
sellerwasawareofthemheshall:
a. beartheloss,
b. returnthepriceand
c. refundtheexpensesofthecontract
withdamages
2. If the thing is lost and seller was not

awareofthehiddenfaultsheshall:
a. returnthepriceandinterest
b. reimburse the expenses of the
contract which the buyer might
have paid, but not for damages.
(Villanueva, Law on Sales,2004 ed,
pp.548549)
Q:Whataretheremediesofthebuyerincaseof
saleofthingswithhiddendefects?
A:Thevendeemayelectbetween:
1. Withdrawingfromthecontract,or
2. Demanding a proportionate reduction
of the price, with damages in either
case.
Q: Is there a waiver of warranty against hidden

defects when the lessee inspected the premises
andpushedthroughwiththecontract?
A: Yes. Under Arts. 1561 and 1653 of the Civil

Code, the lessor is responsible for warranty
against hidden defects, but he is not answerable
forpatentdefectsorthose,whicharevisible.Jon
de Ysasi admitted on crossexamination that he
inspectedthepremisesthreeorfourtimesbefore
signing the lease contract. During his inspection,
he noticed the rotten plywood on the ceiling,
which in his opinion was caused by leakingwater
or termites. Yet, he decided to go through with
the lease agreement.
Hence, respondents cannot

be held liable for the alleged warranty against
hidden defects. (Jon and Marissa De Ysasi v.
Arturo and Estela Arceo, G.R. No. 136586, Nov.
22,2001)
IMPLIEDWARRANTIESINCASEOFSALEOF
GOODS
Q: What are the specific implied warranties in

saleofgoods?
A:
1. Warrantyoffitness
GR:Noimpliedwarranty
XPN:
a. Buyer manifests to the seller the
particular purpose for which the
goodsarerequired;and
262
CIVILLAWTEAM:
b. Buyer relies upon the sellers skill

orjudgment
2. Warranty of merchantability That

goodsarereasonablyfitforthegeneral
purposeforwhichtheyaresold.
CAVEATEMPTOR
Q:Whatdoestheprincipleofcaveatemptor
mean?
A: It literally means, Let the buyer beware. The

rule requires the purchaser to be aware of the
supposed title of the vendor and one who buys
without checking the vendors title takes all the
risks and losses consequent to such failure.
(Agcaoili,p.184)
Q: In what particular sale transactions does

caveatemptorapply?
A:
1. Salesofanimals(Art.1574)
2. Doublesales(Art.1544)
3. Insheriffssales(Art.1570)
4. Taxsales(Art.1547,lastparagraph)
Note:Intheabovesales,thereisnowarrantyoftitle
or quality on the part of the seller. The purchaser
whobuyswithoutcheckingthetitleofthevendoris
assumingallrisksofeviction.
In sheriffs sales, the sheriff does not guarantee the

title to real property and it is not incumbent upon
him to place the buyer in possession of such
property.(Pinedasales,p.275)
Q: Is caveat emptor applicable in sales of

registeredland?
A: No. The purchaser of a registered land under

theTorrenssystemismerelychargedwithnotice
of the burdensand claims on the property which
are inscribed on the face of certificate of title.
(Pinedasales,p.275)
Q:Doescaveatemptorapplyinjudicialsales?
A:Yes.Thepurchaserinajudicialsaleacquiresno
higher or better title or right than that of the
judgmentdebtor.Ifithappensthatthejudgment
debtorhasnoright,interest,orlienonandtothe
property sold, the purchaser acquires none.
(Pinedasales,p.280)
D.REMEDIESINCASEOFBREACHOFWARRANTY
Q:Whataretheremediesofthebuyerincaseof
breachofwarranty?
A:
1. Accept goods & set up breach of
warranty by way of recoupment in
diminutionorextinctionortheprice.
2. Acceptgoods&maintainactionagainst
sellerfordamages
3. Refuse to accept goods & maintain
actionagainstsellerfordamages
4. Rescind contract of sale & refuse to
receive goods/return them when
alreadyreceived.
Q: Are the remedies of the buyer in case of

breachofwarrantyabsolute?
A: No. The vendee's remedies against a vendor

with respect to the warranties against hidden
defects of or encumbrances upon the thing sold
arenotlimitedtothoseprescribedinArticle1567
where the vendee, in the case of Arts. 1561,
1562, 1564, 1565 and 1566, may elect either to
withdraw from the contract or demand a
proportionate reduction of the price, with
damagesineithercase.
Thevendeemayalsoaskfortheannulmentofthe
contract upon proof of error or fraud, in which
case the ordinary rule on obligations shall be
applicable. Under the law on obligations,
responsibilityarisingfromfraudisdemandablein
all obligations and any waiver of an action for
future fraud is void. Responsibility arising from
negligence is also demandable in any obligation,
but such liability may be regulated by the courts,
accordingtothecircumstances.
The vendor could likewise be liable for quasi

delictunderArticle2176oftheCivilCode,andan
action based thereon may be brought by the
vendee.Whileitmaybetruethatthepreexisting
contract between the parties may, as a general
SALES
rule, bar the applicability of the law on quasi
delict, the liability may itself be deemed to arise
from quasidelict, i.e., the acts which breaks the
contract may also be a quasidelict. (CocaCola
Bottlers Philippines, Inc. v. CA, G.R. No. 110295,
Oct.18,1993)
263
Q: What are the instances when the buyer
cannot rescind the sale in case there is a breach
ofwarranty?
A:
1. Ifheknewofthebreachofwarranty
2. If he fails to return or offer to return
goods to seller in substantially as good
condition as they were at time
ownershipwastransferred
3. If he fails to notify the seller within a
reasonable time of his election to
rescind
E.CONDITIONVISVISWARRANTY
Q: What is the effect of nonfulfillment of a
condition?
A: If imposed on the perfection of contract
prevents the juridical relation itself from coming
intoexistence
Theotherpartymay:
1. Refusetoproceedwiththecontract
2. Proceed w/ contract, waiving the
performanceofthecondition
Q: What is the difference between a condition
andawarranty?
A:
CONDITION WARRANTY
Purportstothe
existenceofobligation
Purportstothe
performanceof
obligation
Mustbestipulatedto
formpartofthe
obligation
Neednotbestipulated;
mayformpartof
obligationbyprovision
oflaw
Mayattachitselfto
obligationofsellerto
deliverpossession&
transfer
Relatestothesubject
matteritselforto
obligationoftheseller
astothesubjectmatter
ofthesale
XIII. BREACHOFCONTRACT
A.REMEDIESOFTHESELLER
Note:seeRectoandMacedaLaw(XI.Performanceof
Contract)p.258
B.REMEDIESOFTHEBUYER
Q:Whataretheremediesofthebuyer?
A:
I. Immovablesingeneral
1. Disturbed in possession or with
reasonable grounds to fear disturbance
Suspendpayment
2. In case ofsubdivision or condo projects
Ifrealestatedeveloperfailstocomply
with obligation according to approved
plan:
a. Rescind
b. Suspend payment until seller
complies
II. Movables
1. Failure of seller to deliver Action for
specific performance without giving the
seller the option of retaining the goods
onpaymentsofdamages
2. Breach of sellers warranty The buyer
may, at his election, avail of the
followingremedies:
a. Accept goods & set up breach of
warranty by way of recoupment in
diminution or extinction or the
price.
b. Accept goods & maintain action
againstsellerfordamages
c. RefusetoAcceptgoods&maintain
actionagainstsellerfordamages
d. Rescind contract of sale & refuse
to receive goods/return them
whenalreadyreceived.
Note: When the buyer has claimed and been
grantedaremedyinanyoftheseways,noother
remedy can thereafter be granted, without
prejudice to thebuyers right torescind, evenif
previously he has chosen specific performance
when fulfillment has become impossible.
(Villanueva, p. 389 in relation with Art. 1191,
NCC)
3. Disturbed in possession or with
reasonable grounds to fear disturbance
Suspendpayment
XIV. EXTINGUISHMENTOFSALE
264
CIVILLAWTEAM:
A.CAUSESOFEXTINGUISHMENT
Q: What are the causes for extinguishment of
sale?
A:Acontractofsaleisextinguishedby:
1. Same causes as all other obligations,
namely:
a. Paymentorperformance
b. Lossofthethingdue
c. Condonation or remission of the
debt
d. Confusion or merger of the rights
ofcreditoranddebtor
e. Compensation
f. Novation
g. Annulment
h. Rescission
i. Fulfillmentofresolutorycondition
j. prescription
2. Causesstatedintheprecedingarticles;
3. ConventionalRedemption;or
4. Legalredemption
B.REDEMPTION
Q:Whatisredemption?
A: It is a mode of extinguishment wherein the
seller has the right to redeem or repurchase the
thingsolduponreturnofthepricepaid.
Q:Whatarethekindsofredemption?
A:
1. Legal
2. Conventional
Q:Shouldtherighttoredeembeincorporatedin
everycontractofsale?
A:Therightofthevendortoredeem/repurchase
must appear in the same instrument. However,
partiesmaystipulateontherightofrepurchasein
a separate document but in this case, it is valid
only between the parties and not against third
persons.(Pineda,p.333)
Q: What is the difference between preemption
andredemption?
A:
PREEMPTION REDEMPTION
Arisesbeforesale Arisesaftersale
Rescissioninapplicable
Therecanberescission
oforiginalsale
Actionisdirectedagainst
prospectiveseller
Actionisdirected
againstbuyer
C.PERIODOFREDEMPTION
Q:Whatistheperiodofredemption?
A:
1. No period agreed upon 4 years from
dateofcontract
2. When there is agreement should not
exceed 10 years; but if it exceeded,
validonlyforthefirst10years.
3. When period to redeem has expired &
there has been a previous suit on the
nature of the contract seller still has
30 days from final judgment on the
basis that contract was a sale with
pactoderetro:
Rationale: no redemption due to
erroneous belief that it is equitable
mortgagewhichcanbeextinguishedby
payingtheloan.
4. When period has expired & seller
allowed the period of redemption to
expire seller is at fault for not having
exercised his rights so should not be
grantedanewperiod
Note:Tenderofpaymentissufficientbutitisnotin
itself a payment that relieves the seller from his
liabilitytopaytheredemptionprice.
Q: When does period of redemption begin to
run?
A:
1. Right of legal preemption or
redemptionshallbeexercisedwithin30
daysfromwrittennoticebythebuyer
deed of sale not to be recorded in
Registry of Property unless
accompaniedbyaffidavitthatbuyerhas
givennoticetoredemptioners
2. When there is actual knowledge, no
need to give written notice; period of
redemption begins to run from actual
knowledge
SALES
D.EXERCISEOFTHERIGHTTOREDEEM
Q: Is written notice mandatory for the right of
redemptiontocommence?
A: Yes, the notice must be in writing stating the
executionofthesaleanditsparticulars.Itmaybe
madeinaprivateorpublicdocument.(Pineda,p.
400)
Q: Is there a prescribed form for an offer to
redeem?
A: There is no prescribed form for an offer to
redeem to be properly effected. Hence, it can
either be through a formal tender with
consignation of the redemption price within the
prescribed period. What is paramount is the
availment of the fixed and definite period within
whichtoexercisetherightoflegalredemption.
Note: Art. 1623 does not prescribe any distinctive
methodfornotifyingtheredemptioner.
265
Q: Is tender of payment necessary for
redemptiontotakeeffect?
A: Tender of payment is not necessary; offer to
redeemisenough.
Q:Whatistheeffectoffailuretoredeem?
A:Theremustbejudicialorderbeforeownership
of real property is consolidated to the buyer a
retro.
TRUSTDESONTORT
Q:Whatisatrustdesontort?
A: It is a trust created by the purchase or
redemption of property by one other than the
person lawfully entitled to do so and in fraud of
theother.
Q: Do constructive trusts arise only out of fraud
orduress?
A:No.Aconstructivetrust,otherwiseknownasa
trustexmaleficio,atrustexdelicto,atrustdeson
tort, an involuntary trust,or an implied trust, is a
trustbyoperationoflawwhicharisescontraryto
intention and in invitum, against one who, by
fraud, actual or constructive, by duress or abuse
ofconfidence,bycommissionofwrong,orbyany
form of unconscionable conduct, artifice,
concealment, or questionable means, or who in
any way against equity and good conscience,
either has obtained or holds the legal right to
property which he ought not, in equity and good
conscience, hold and enjoy. It has been broadly
ruled that a breach of confidence, although in
business or social relations, rendering an
acquisition or retention of property by one
person unconscionable against another, raises a
constructivetrust.Itisraisedbyequityinrespect
ofproperty,whichhasbeenacquiredbyfraud,or
where, although acquired originally without
fraud, it is against equity that it should be
retained by the person holding it. (Arlegui v. CA
G.R.No.126437,Mar.6,2002)
Note: "A constructive trust is substantially an
appropriate remedy against unjust enrichment. It is
raised by equity in respect of property, which has
beenacquiredbyfraud,orwhere,althoughacquired
originally without fraud, it is against equity that it
shouldberetainedbythepersonholdingit."(76Am.
Jur.2d,Sec.222,p.447citedinArleguiv.CAG.R.No.
126437,Mar.6,2002)
D.CONVENTIONALREDEMPTION
Q:Whatisconventionalredemption?
A: Seller reserved the right to repurchase thing
soldcoupledwithobligationtoreturnpriceofthe
sale, expenses of contract & other legitimate
payments and the necessary & useful expenses
madeonthethingsold
Note: Right to repurchase must be reserved at the
timeofperfectionofsale.(Pineda,p.333)
E.LEGALREDEMPTION
Q:Whatislegalredemption?
A: Also referred to as retracto legal, it is the
right to be subrogated upon the same terms and
conditions stipulated in the contract, in the place
of one who acquires the thing by purchase or by
dation in payment or by other transaction
whereby ownership is transmitted by onerous
title.
Q:Whataretheinstancesoflegalredemption?
A:
1. Sale of a coowner of his share to a
stranger(Art.1620)
2. Whenacreditorotherincorporealright
inlitigationissold(Art.1634)
3. Saleofanheirofhishereditaryrightsto
astranger(Art.1088)
4. Sale of adjacent rural lands not
exceeding1hectare(Art.1621)
5. Sale of adjacent small urban lands
bought merely for speculation (Art.
1622)
Q: Are there other instances when the right of
legalredemptionisalsogranted?
A:
1. Redemptionofhomesteads
2. Redemptionintaxsales
3. Redemptionbyjudgmentdebtor
4. Redemptioninextrajudicialforeclosure
5. Redemption in judicial foreclosure of
mortgage
Q: When does legal redemption period begin to
run?
A: The right of legal redemption shall not be
exercised except within 30 days from the notice
in writing by the prospective seller, or seller, as
the case may be. The deed of sale shall not be
recorded in the Registry of Property unless
accompanied by an affidavit of the seller that he
has given written notice thereof to all possible
redemptioners.(Art.1623,NCC)
266
CIVILLAWTEAM:
C.EQUITABLEMORTGAGE
Q:Whatisanequitablemortgage?
A:Onewhichlackstheproperformalities,formor
words or other requisites prescribed by law for a
mortgage, but shows the intention of the parties
to make the property subject of the contract as
security for a debt and contains nothing
impossibleorcontrarytolaw
Q:Whataretheessentialrequisitesofequitable
mortgage?
A:
1. Partiesenteredintoacontractofsale
2. Their intention was to secure an
existingdebtbywayofamortgage.
Q: What is the rule on the presumption of an
equitablemortgage?
A: A sale with conventional redemption is
deemed to be an equitable mortgage in any of
thefollowingcases:(Art.1602)AIRSTAR
1. Price of the sale with right to
repurchaseisunusuallyInadequate
2. Seller Remains in possession as lessee
orotherwise
3. Uponoraftertheexpirationoftheright
to repurchase Another instrument
extending the period of redemption or
grantinganewperiodisexecuted
4. Purchaser Retains for himself a part of
thepurchaseprice
5. SellerbindshimselftopaytheTaxeson
thethingsold
6. In any other case where the real
intention of the parties is that the
transactionshallSecurethepaymentof
adebtortheperformanceofanyother
obligation.
7. Art. 1602 shall also apply to a contract
purporting to be an Absolute sale. (Art.
1604)
Note: In case of doubt in determining whether it is
equitable mortgage or sale a retro (with right of
repurchase); it shall be construed as equitable
mortgage.
Remedyisreformation.
Anequitablemortgageisonewhichalthoughlacking
in some formality, or form or words, or other
requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real
propertyassecurityforadebt,andcontainsnothing
impossibleorcontrarytolaw.
Q: Does inadequacy of price constitute proof
sufficient to declare a contract as one of
equitablemortgage?
A: Mere inadequacy of the price is not sufficient.
The price must be grossly inadequate, or purely
shockingtotheconscience.(Diaz,p.186)
Q:Xtransferredthreeparcelsoflandinfavorof
Y. The transaction was embodied in two Deeds
of Absolute Sale for the price of P240, 000. The
titles of said lots were transferred to Y.
However, X failed to vacate and turn over the
purchased lots. This prompted Y to file an
ejectment suit against X. X claimed that the
transactions entered between them were not
actually sales, but an equitable mortgage. Does
the transaction involve an absolute sale or an
equitablemortgageofrealproperty?
A: It is an absolute sale. Decisive for the proper
determination of the true nature of the
transaction between the parties is the intent of
the parties. There is no conclusive test to
determinewhetheradeedabsoluteonitsfaceis
reallyasimpleloanaccommodationsecuredbya
mortgage.Todeterminewhetheradeedabsolute
in form is a mortgage in reality, the court is not
limited to the written memorials of the
transaction.Thisissobecausethedecisivefactor
in evaluating such agreement is the intention of
SALES
the parties, as shown not necessarily by the
terminology used in the contract but by all the
surrounding circumstances, such as the relative
situations of the parties at that time; the
attitudes, acts, conduct, and declarations of the
parties; the negotiations between them leading
to the deed; and generally, all pertinent facts
having a tendency to fix and determine the real
nature of their design and understanding. As
such, documentary and parol evidence may be
submittedandadmittedtoprovetheintentionof
the parties. (Sps Austriav.Sps Gonzales, G.R.No.
147321,Jan.21,2004)
Q: Ceballos was able to borrow from Mercado
certain sum of money and as security, she
executed a Deed of Real Estate Mortgage over
thesubjectproperty.Thesaidmortgagewasnot
registered. Ceballos defaulted. Thereafter, a
DeedofAbsoluteSalewasexecutedbyCeballos
and her husband whereby the mortgaged
property was sold to Mercado for the price of
P16, 500.00. Ceballos offered to redeem the
property from Mercado for the price of P30,
000.00 but the latter's wife refused since the
same was already transferred in their names by
virtue of the Deed of Absolute Sale. As a
consequence, Ceballos filed the case contending
that the Contract should be declared as an
equitable mortgage. Is the contention of
Ceballoscorrect?
267
A: No. The instances when a contract, regardless
of its nomenclature, may be presumed to be an
equitable mortgage are enumerated in Art. 1602
of the Civil Code. Here, none of those
circumstances were present. The original
transaction was a loan. Ceballos failed to paythe
loan; consequently, the parties entered into
anotheragreementtheassailed,dulynotarized
DeedofAbsoluteSale,whichsupersededtheloan
document. Ceballos had the burden of proving
that she did not intend to sell the property and
that Mercado did not intend to buy it; and that
the new agreement did not embody the true
intention of the parties. (Ceballos v. Intestate
Estate of the Late Emigdio Mercado, G.R. No.
155856,May28,2004)
Q:Eulaliawasengagedinthebusinessofbuying
and selling large cattle. In order to secure the
financialcapitalsheadvancedforheremployees
(biyaheros) she required them to surrender TCT
of their properties and to execute the
corresponding Deeds of Sale in her favor.
Domeng Bandong was not required to post any
security but when Eulalia discovered that he
incurred shortage in cattle procurement
operation,hewasrequiredtoexecuteadeedof
saleoveraparceloflandinfavorofEulalia.She
soldthepropertytohergrandnieceJocelynwho
thereafter instituted an action for ejectment
against the Spouses Bandong. To assert their
right, Spouses Bandong filed an action for
annulment of sale against Eulalia and Jocelyn
allegingthattherewasnosaleintendedbutonly
equitable mortgage for the purpose of securing
theshortageincurredbyDomengintheamount
of P70, 000.00 while employed as biyahero by
Eulalia. Was the deed of sale between Domeng
and Eulalia a contract of sale or an equitable
mortgage?
A: It is an equitable mortgage. In executing the
said deed of sale, Domeng and Eulalia never
intendedthetransferofownershipofthesubject
property but to burden the same with an
encumbrance to secure the indebtedness
incurred by Domeng on the occasion of his
employment with Eulalia. The agreement
between Dominador and Eulalia was not avoided
in its entirety so as to prevent it from producing
anylegaleffectatall.Instead,thesaidtransaction
isanequitablemortgage,therebymerelyaltering
the relationship of the parties from seller and
buyer, to mortgagor and mortgagee, while the
subject property is not transferred but subjected
toalieninfavorofthelatter.(Sps.Raymundo,et
al.v.Sps.Bandong,G.R.No.171250,Jul.4,2007)
G.DISTINGUISHEDFROM
OPTIONTOBUY
Q: On May 19, 1951, the spousessellers
executed a public instrument of absolute sale in
favor of the buyer for a consideration which is
sufficientlyadequate.Afewdaysthereafter,the
buyersexecutedinfavorofthesellersanoption
to buy within one year, the property subject of
the absolute sale, which option was extended
for a month. Prior to the expiration of said one
year period, the buyer sold said property to a
thirdperson.
If the spousessellers would file an action for
reformation of instrument where they seek
reformation of the absolute sale into one of
equitablemortgage,willsaidactionprosper?
A: No, it will not prosper. If a seller has been
granted merely an option to buy (not a right to
repurchase)withinacertainperiod,andtheprice
paidbythebuyerisadequate,thesaleisabsolute
andcannotbeconstruednorpresumedtobeone
of equitable mortgage, even if the period within
which to exercise the option has been extended.
(Villarica, et. al. v. CA, G.R. L19196, Nov. 29,
1968)
Note:SC heldthatinthiscase,therewasnosale
a retro and that the right of repurchase is not a
rightgrantedthesellerbythebuyerinaseparate
instrument. Such right is reserved by the vendor
in the same instrument of the sale as one of the
stipulationsinthecontract.
Also, once the instrument of absolute sale is
executed, the seller can no longer reserve the
right of repurchase and any right thereafter
granted the seller by the buyer cannot be a right
of repurchase but some other rights, like that of
anoptiontobuy.
268
CIVILLAWTEAM:
XV. LAWONSALEOFSUBDIVISIONAND
CONDOMINIUM(PD957)
SCOPEOFAPPLICATION
Q:Aresalesordispositionsofsubdivisionlotsor
condominiumunitspriortotheeffectivityofthe
decree exempt from compliance with the
requirementsstatedtherein?
A: No. It shall be incumbent upon the owner or
developer of the subdivision or condominium
project to complete compliance with his or its
obligations as provided in the decree within two
years from the date of effectivity of the Decree,
unless otherwise extended by the Authority or
unlessanadequateperformancebondisfiled.
Note: Failure of the owner or developer to comply
with the obligations under this and the preceding
provisions shall constitute a violation punishable
underSections38and39oftheDecree.
DEFINITIONOFTERMS
Q: How is sale or sell defined under the
Decree?
A:Shallinclude:
1. Every disposition, or attempt to
dispose,foravaluableconsideration,of
a subdivision lot, including the building
andotherimprovementsthereof,ifany,
in a subdivision project or a
condominium unit in a condominium
project;
2. contracttosell;
3. contractofpurchaseandsale;
4. exchange;
5. attempttosell;
6. optionofsaleorpurchase;
7. solicitationofasale;
8. offer to sell, directly or by an agent, or
by a circular, letter, advertisement or
otherwise;and
9. a. privilege given to a member of a
cooperative, corporation, partnership,
oranyassociationand/or
b. theissuanceofacertificateorreceipt
evidencing or giving the right of
participation in, or right to, any land in
consideration of payment of the
membershipfeeordues.(Deemedsale)
Q: How are the terms buy and purchase
definedundertheDecree?
A:Shallincludeanycontracttobuy,purchase,or
otherwise acquire for a valuable consideration a
subdivision lot, including the building and other
improvements,ifany,inasubdivisionprojectora
condominiumunitinacondominiumproject.
Q:Whatisasubdivisionproject?
A:AtractoraparceloflandregisteredunderAct
No. 496 which is partitioned primarily for
residential purposes into individual lots with or
without improvements thereon, and offered to
thepublicforsale,incashorininstallmentterms.
Note: It shall include all residential, commercial,
industrial and recreational areas as well as open
spacesandothercommunityandpublicareasinthe
project.
Q:Whatisasubdivisionlot?
A: Any of the lots, whether residential,
commercial, industrial, or recreational, in a
subdivisionproject.
Q:Whatisacomplexsubdivisionplan?
A:Asubdivisionplanofaregisteredlandwherein
a street, passageway or open space is delineated
ontheplan.
Q:Whatisacondominiumproject?
A:Theentireparcelofrealpropertydividedorto
be divided primarily for residential purposes into
condominium units, including all structures
thereon.
Q:Whatisacondominiumunit?
A: A part of the condominium project intended
for any type of independent use or ownership,
includingoneormoreroomsorspaceslocatedin
oneormorefloors(orpartofpartsoffloors)ina
SALES

buildingorbuildingsandsuchaccessoriesasmay
beappendedthereto.
Q:Definethefollowingterms:
1. Owner.
A:Registeredownerofthelandsubject
of a subdivision or a condominium
project.
2. Developer.
A: person who develops or improves
thesubdivisionprojectorcondominium
project for and in behalf of the owner
thereof.
3. Dealer.
A: any person directly engaged as
principal in the business of buying,
selling or exchanging real estate
whether on a fulltime or parttime
basis.
4. Broker.
A: any person who, for commission or
other compensation, undertakes to sell
or negotiate the sale of a real estate
belongingtoanother.
5. Salesman.
A: person regularly employed by a
brokertoperform,forandinhisbehalf,
any or all functions of a real estate
broker.
REGISTRATIONANDLICENSETOSELL
Q: Upon what agency is exclusive jurisdiction to
regulaterealestatetradeandbusinessvested?
A:NationalHousingAuthority
Q: What must a registered owner of a parcel of
landdoifhewishestoconvertsaidpropertyinto
asubdivisionorcondominiumproject?
A:Heshall:
1. Submit his subdivision plan to the
Authority which shall act upon and
approve the same, upon a finding that
the plan complies with the Subdivision
Standards' and Regulations enforceable
atthetimetheplanissubmitted.
269
2. If the conversion desired involves a
condominium project, the same
procedure shall be followed except
that,inaddition,theNHAshallactupon
and approve the plan with respect to
thebuildingorbuildingsincludedinthe
condominium project in accordance
with the National Building Code (R.A.
No.6541).
3. The subdivision plan, as so approved,
shall then be submitted to the Director
ofLandsforapproval.
4. In case of complex subdivision plans,
court approval shall no longer be
required.
5. The condominium plan as likewise so
approved, shall be submitted to the
RegisterofDeedsoftheprovinceorcity
inwhichthepropertyliesandthesame
shall be acted upon subject to the
conditions and in accordance with the
procedureprescribedinSection4ofthe
CondominiumAct(R.A.No.4726).
Q: Part of the required documentary
attachments to the applicationis a certificate of
title to the property which is free from all liens
and encumbrances. Does this bar an owner of
mortgaged property from engaging in
subdivision or condominium project while the
mortgageisinforce?
A:No.Incaseanysubdivisionlotorcondominium
unitismortgaged,itissufficientiftheinstrument
of mortgage contains a stipulation that the
mortgagee shall release the mortgage on any
subdivision lot or condominium unit as soon as
thefullpurchasepriceforthesameispaidbythe
buyer.
Q: When is a subdivision or condominium
projectdeemedtoberegistered?
A: Upon completion of the publication
requirement
Note: The fact of such registration shall be
evidencedbyaregistrationcertificatetobeissuedto
theapplicantownerordealer.
Re: Publication requirement: This is complied with
when the NHA has caused to be published a notice
of the filing of the registration statement, at the
expense of the applicantowner or dealer, in two
newspapers general circulation, one published in
EnglishandanotherinPilipino,onceaweekfortwo
consecutive weeks, reciting that a registration
statement for the sale of subdivision lots or
condominium units has been filed in the National
HousingAuthority;

Q: After issuance of the registration certificate,

maytheownerordealeralreadysellsubdivision
lotsorcondominiumunits?
A: No. He must first obtain a license to sell the
projectwithintwoweeksfromtheregistrationof
suchproject.
Q: What is the purpose of the requirement of
postingofaperformancebondsbeforealicense
tosellmaybeissued?
A: It is to guarantee the construction and
maintenance of the roads, gutters, drainage,
sewerage,watersystem,lightingsystems,andfull
development of the subdivision project or the
condominium project and the compliance by the
owner or dealer with the applicable laws and
rulesandregulations.
Q: Is a license to sell and performance bond
required in all subdivision and condominium
projects?
A: No. The following transactions are exempt
fromsaidrequirements:
1. Sale of a subdivision lot resulting from
the partition of land among coowners
andcoheirs.
2. Sale or transfer of a subdivision lot by
the original purchaser thereof and any
subsequentsaleofthesamelot.
3. Sale of a subdivision lot or a
condominiumunitbyorfortheaccount
of a mortgagee in the ordinary course
ofbusinesswhennecessarytoliquidate
abonafidedebt.
Q:Whenmayalicensetosellbesuspended?
A:
1. Uponverifiedcomplaintbyabuyerofa
subdivisionlotoracondominiumunitin
anyinterestedparty,theAuthoritymay,
in its discretion, immediately suspend
the owner's or dealer's license to sell
pending investigation and hearing of
thecase.
2. TheNHAmaymotupropriosuspendthe
license to sell if, in its opinion, any
information in the registration
statement filed by the owner or dealer
is or has become misleading, incorrect,
inadequateorincompleteorthesaleor
offering for a sale of the subdivision or
condominiumprojectmayworkortend
to work a fraud upon prospective
buyers.
Q:Whenmayalicensetosellorregistrationofa
subdivisionorcondominiumprojectberevoked?
A: The Authority may, motu proprio or upon
verified complaint filed by a buyer of a
subdivision lot or condominium unit, revoke the
registration of any subdivision project or
condominium project and the license to sell any
subdivision lot or condominium unit in said
projectbyissuinganordertothiseffect,withhis
findings in respect thereto, if upon examination
into the affairs of the owner or dealer during a
hearing, it shall appear there is satisfactory
evidencethatthesaidownerordealer:
1. isinsolvent;or
2. hasviolatedanyoftheprovisionsofthis
Decree or any applicable rule or
regulation of the Authority, or any
undertaking of his/its performance
bond;or
3. has been or is engaged or is about to
engageinfraudulenttransactions;or
4. has made any misrepresentation in any
prospectus, brochure, circular or other
literature about the subdivision project
or condominium project that has been
distributedtoprospectivebuyers;or
5. isofbadbusinessrepute;or
6. does not conduct his business in
accordance with law or sound business
principles.
Note:Wheretheownerordealerisapartnership
or corporation or an unincorporated association,
it shall be sufficient cause for cancellation of its
registrationcertificateanditslicensetosell,ifany
member of such partnership or any officer or
director of such corporation or association has
beenguiltyofanyactoromissionwhichwouldbe
cause for refusing or revoking the registration of
anindividualdealer,brokerorsalesman.
DEALERS,BROKERSAMDSALESMEN
Q: What is the duration of the registration of
dealers,brokersandsalesmen?
A: On the thirtyfirst day of December of each
year.
However, in the case of salesmen, their
registration shall also cease upon termination of
theiremploymentwithadealerorbroker.
270
CIVILLAWTEAM:
SALES

Note: Renewal of registration for the succeeding
year shall be granted upon written application
therefore made not less than thirty nor more than
sixty days before the first day of the ensuing year
and upon payment of the prescribed fee, without
the necessity of filing further statements or
information, unless specifically required by the
Authority.
All applications filed beyond said period shall be
treatedasoriginalapplications.
Q: When can there be refusal or revocation of
registrationasdealers,brokersorsalesmen?
A:Suchregistrationmayberefusedorrevokedby
theNHAif,afterreasonablenoticeandhearing,it
shall determine that such applicant or registrant
has:
1. violated any provision of this Decree or
anyruleorregulationmadehereunder;
or
2. made a material false statement in his
applicationforregistration;or
3. been guilty of a fraudulent act in
connection with any sale of a
subdivisionlotorcondominiumunit;or
4. demonstrated his unworthiness to
transact the business of dealer, broker,
orsalesman,asthecasemaybe.
Note: In case of charges against a salesman,
notice thereof shall also be given the broker or
dealeremployingsuchsalesman.
Pending hearing of the case, the Authority shall
have the power to order the suspension of the
dealer's, broker's, of salesman's registration;
provided,thatsuchordershallstatethecausefor
thesuspension.
The suspension or revocation of the registration
of a dealer or broker shall carry with it all the
suspensionorrevocationoftheregistrationofall
hissalesmen.
WARRANTIESOFTHEOWNERORDEVELOPER
Q:Inmakingadvertisements,doestheowneror
developermakewarrantiesrelativetosuch?
A:Yes.
271
1. Advertisements that may be made
through newspaper, radio, television,
leaflets, circulars or any other form
about the subdivision or the
condominium or its operations or
activitiesmustreflecttherealfactsand
mustbepresentedinsuchmannerthat
will not tend to mislead or deceive the
public.
2. The owner or developer shall
answerable and liable for the facilities,
improvements, infrastructures or other
forms of development represented or
promised in brochures, advertisements
and other sales propaganda
disseminated by the owner or
developer or his agents and the same
shall form part of the sales warranties
enforceable against said owner or
developer,jointlyandseverally.
Note: Failure to comply with these warranties
shall also be punishable in accordance with the
penaltiesprovidedforinthisDecree.
Q: Within what period must the owner or
developer construct and provide the facilities,
improvements, infrastructures and other forms
of development, including water supply and
lighting facilities, which are offered and
indicated in the approved subdivision or
condominium plans, brochures, prospectus,
printed matters, letters or in any form of
advertisement?
A:
GR: Within one year from the date of the
issuanceofthelicenseforthesubdivisionor
condominiumproject
XPN: Such other period of time as may be
fixedbytheAuthority.
ALTERATIONINAPPROVEDSUBDIVISIONPLAN
Q:Whatistheruleiftheownerdesirestomake
alterationsintheapprovedsubdivisionplan?
A:
GR: No owner or developer shall change or
altertheroads,openspaces,infrastructures,
facilities for public use and/or other form of
subdivisiondevelopmentascontainedinthe
approved subdivision plan and/or
representedinitsadvertisements
XPN: If he has obtained the permission of
the Authority and the written conformity or
consent of the duly organized homeowners
association, or in the absence of the latter,
by the majority of the lot buyers in the
subdivision.
RIGHTSANDREMEDIESOFABUYER
Q:Maypaymentmadebyabuyerbeforfeitedin
favor of the owner or developer in case the
buyer desists from further payment due to the
failureoftheownerordevelopertodevelopthe
subdivisionorcondominiumprojectaccordingto
theapprovedplanwithinthetimelimitprovided
for such? What is the buyers remedy in this
case?
A: No, such forfeiture is not allowed. Such buyer
may, at his option, be reimbursed the total
amount paid including amortization interests but
excluding delinquency interests, with interest
thereonatthelegalrate.
Q:Doesadefaultingbuyerhaveanyrightunder
theDecree?
272
CIVILLAWTEAM:
A:Yes.Therightsofthebuyerintheeventofthis
failure to pay the installments due for reasons
other than the failure of the owner or developer
to develop the project shall be governed by
RepublicActNo.6552.
Where the transaction or contract was entered
into prior to the effectivity of Republic Act No.
6552 on August 26, 1972, the defaulting buyer
shall be entitled to the corresponding refund
based on the installments paid after the
effectivity of the law in the absence of any
provisioninthecontracttothecontrary.
Q: What is the owner or developers obligation
in case the lot bought and fullypaid by the
buyerismortgaged?
A: In theeventa mortgage over the lot or unit is
outstanding at the time of the issuance of the
title to the buyer, the owner or developer shall
redeem the mortgage or the corresponding
portion thereof within six months from such
issuanceinorderthatthetitleoveranyfullypaid
lot or unit may be secured and delivered to the
buyerinaccordanceherewith.
Q: May the parties waive compliance with the
decree?
A: No. Any condition, stipulation, or provision in
contract of sale whereby any person waives
compliancewithanyprovisionoftheDecreeorof
any rule or regulation issued thereunder shall be
void.
TAKEOVERDEVELOPMENT
Q: When can there be a TakeOver
Development?
A: The NHA may take over or cause the
development and completion of the subdivision
or condominium project at the expenses of the
ownerordeveloper,jointlyandseverally,incases
where the owner or developer has refused or
failedtodeveloporcompletethedevelopmentof
theprojectasprovidedforintheDecree.
Note: The Authority may, after such takeover,
demand, collect and receive from the buyers the
installmentpaymentsdueonthelots,whichshallbe
utilizedforthedevelopmentofthesubdivision.
XVI.THECONDOMINIUMACT(RA4726)
PRELIMINARIES
Q:Whatisacondominium?
A: It is an interest in real property consisting of

separate interest in a unit in a residential,
industrial or commercial building and an
undivided interest in common, directly or
indirectly,inthelandonwhichitislocatedandin
othercommonareasofthebuilding.
Note:Itmayinclude,inaddition,aseparateinterest
inotherportionsofsuchrealproperty.
Q:Whatcomprisesarealrightincondominium?
A: The real right in condominium may be

ownership or any other interest in real property
recognized by law, on property in the Civil Code
andotherpertinentlaws.
Q:Whatisacondominiumunit?
A: It is a part of the condominium project

intended for any type of independent use or
ownership, including one or more rooms or
spaces located in one or more floors (or part or
partsoffloors)inabuildingorbuildingsandsuch
accessoriesasmaybeappendedthereto.
Q:Whatisacondominiumproject?
A: It is the entire parcel of real property divided

or to be divided in condominiums, including all
structuresthereon,
SALES

Q:Whatarecommonareas?
A: The entire project excepting all units

separatelygrantedorheldorreserved.
Q:Whatismeantbytodividerealproperty?
A: To divide the ownership thereof or other

interest therein by conveying one or more
condominiums therein but less than the whole
thereof.
Q: What is the rule as regards acquisition of

ownershipovercommonareas?
A:Transferorconveyanceofaunitorapartment,
officeorstoreorotherspacethereinshallinclude
the transfer or conveyance of the undivided
interests in the common areas or, in a proper
case, the membership or shareholdings in the
condominiumcorporation
Q: Are there any restrictions as regards

ownershipofcondominiumunitsprovidedunder
theCondominiumAct?
A:
1. Asregardsindividuals:
GR:None.
XPN: where the common areas in the

condominiumprojectareownedbythe
owners of separate units as coowners
thereof, no condominium unit therein
shall be conveyed or transferred to
personsotherthan:
1. Filipinocitizens,or
2. Corporations at least sixty
percent of the capital stock of
whichbelongtoFilipinocitizens
XPN to the XPN: in cases of hereditary

succession.
273
2. Asregardscorporations:
Where the common areas in a
condominium project are held by a
corporation, no transfer or conveyance
of a unit shall be valid if the
concomitant transfer of the
appurtenant membership or
stockholding in the corporation will
cause the alien interest in such
corporation to exceed the limits
imposedbyexistinglaws.

Note: Whenever the common areas in a
condominium project are held by a
condominium corporation, such
corporation shall constitute the
managementbodyoftheproject.
Q: What are the incidents of a condominium

grant?
A: Unless otherwise expressly provided in the

enabling or master deed or the declaration of
restrictions,theincidentsofacondominiumgrant
areasfollows:
1. The boundary of the unit granted are

the interior surfaces of the perimeter
walls, floors, ceilings, windows and
doorsthereof.
Note: The following are not part of

theunitbearingwalls,columns,
floors, roofs, foundations and
other common structural
elementsofthebuilding:
a. lobbies, stairways, hallways,

and other areas of common
use,
b. elevator equipment and shafts,
centralheating,
c. centralrefrigerationandcentral
airconditioningequipment,
d. reservoirs, tanks, pumps and
other central services and
facilities,
e. pipes, ducts, flues, chutes,
conduits,wiresandotherutility
installations, wherever located,
excepttheoutletsthereofwhen
locatedwithintheunit.
2. There shall pass with the unit, as an

appurtenance thereof, an exclusive
easement for the use of the air space
encompassed by the boundaries of the
unit as it exists at any particular time
and as the unit may lawfully be altered
orreconstructedfromtimetotime.
Note: Such easement shall be

automatically terminated in any air
spaceupondestructionoftheunitas
torenderituntenantable.
3. Common areas are held in common by

the holders of units, in equal shares,
one for each unit, unless otherwise
provided.
4. A nonexclusive easement for ingress,

egress and support through the
common areas is appurtenant to each
unit and the common areas are subject

tosucheasements.
5. Each condominium owner shall have

theexclusiverighttopaint,repaint,tile,
wax, paper or otherwise refinish and
decoratetheinnersurfacesofthewalls,
ceilings, floors, windows and doors
boundinghisownunit.
6. Each condominium owner shall have

the exclusive right to mortgage, pledge
or encumber his condominium and to
havethesameappraisedindependently
of the other condominiums but any
obligation incurred by such
condominiumownerispersonaltohim.
7. GR: Each condominium owner has also

the absolute right to sell or dispose of
hiscondominium.
XPN: If the master deed contains a
requirement that the property be first
offered to the condominium owners
within a reasonable period of time
before the same is offered to outside
parties;
Q: May common areas be divided through

judicialpartition?
A:
GR: Common areas shall remain
undivided,andthereshallbenojudicial
partitionthereof.
XPN: Where several persons own

condominiums in a condominium
project, an action may be brought by
one or more such persons for partition
thereof by sale of the entire project, as
if the owners of all of the
condominiums in such project were co
ownersoftheentireprojectinthesame
proportion as their interests in the
commonareas:
Note: However, a partition shall be

madeonlyuponashowingthat:
1. three years after damage or

destruction to the project which
renders material part thereof unit
for its use prior thereto, the
project has not been rebuilt or
repaired substantially to its state
prior to its damage or destruction,
or
2. damage or destruction to the

project has rendered onehalf or
more of the units therein
untenantable and that
condominium owners holding in
aggregatemorethanthirtypercent
interest in the common areas are
opposedtorepairorrestorationof
theproject;or
3. theprojecthasbeeninexistencein
excess of fifty years, that it is
obsolete and uneconomic, and
that condominium owners holding
in aggregate more than fifty
percent interest in the common
areas are opposed to repair or
restoration or remodeling or
modernizingoftheproject;or
4. the project or a material part

thereof has been condemned or
expropriated and that the project
is no longer viable, or that the
condominium owners holding in
aggregate more than seventy
percent interest in the common
areas are opposed to continuation
of the condominium regime after
expropriation or condemnation of
amaterialportionthereof;or
5. theconditionsforsuchpartitionby
sale set forth in the declaration of
restrictions, duly registered in
accordance with the terms of the
Act,havebeenmet.
Q: What is the rule regarding issuance of

certificate of title where the enabling or master
deed provides that the land included within a
condominium project are to be owned in
commonbythecondominiumownerstherein?
A:TheRegisterofDeedsmay,attherequestofall
the condominium owners and upon surrender of
all their "condominium owner's" copies, cancel
thecertificatesoftitleofthepropertyandissuea
new one in the name of said condominium
ownersasproindivisocoownersthereof.
Q: How are deeds, declarations or plans for a

condominiumprojectconstrued?
274
A:
1. Liberally, to facilitate the operation of
theproject
CIVILLAWTEAM:
SALES

2. Provisions shall be presumed to be
independentandseverable.
DECLARATIONOFRESTRICTIONS
Q: When should a declaration of restrictions be

registeredandwhatistheeffectofsuch?
A: The owner of a project shall, prior to the

conveyanceofanycondominiumtherein,register
a declaration of restrictions relating to such
project.
Suchrestrictionsshallconstitutealienuponeach
condominium in the project, and shall insure to
andbindallcondominiumownersintheproject.
Note: Such liens, unless otherwise provided,

may be enforced by any condominium
owner in the project or by the management
bodyofsuchproject.
Q: What should a declaration of restrictions

provide?
A:Thedeclarationofrestrictionsshallprovidefor
the management of the project by anyone of the
followingmanagementbodies:
1. acondominiumcorporation,
2. an association of the condominium
owners,
3. a board of governors elected by
condominiumowners,or
4. a management agent elected by the
owners or by the board named in the
declaration.
5. votingmajorities,
6. quorums,
7. notices,
8. meetingdate,and
9. other rules governing such body or
bodies.
Q: What may a declaration of restrictions

provide?
A: Such declaration of restrictions, among other

things,mayalsoprovide:
1. Astoanysuchmanagementbody;
a. For the powers thereof, including
power to enforce the provisions of
thedeclarationsofrestrictions;
275
b. For maintenance of insurance
policies, insuring condominium
owners against loss by fire,
casualty, liability, workmen's
compensation and other insurable
risks, and for bonding of the
members of any management
body;
c. Provisions for maintenance, utility,
gardening and other services
benefiting the common areas, for
the employment of personnel
necessary for the operation of the
building, and legal, accounting and
other professional and technical
services;
d. For purchase ofmaterials, supplies
and the like needed by the
commonareas;
e. For payment of taxes and special
assessmentswhichwouldbealien
upontheentireprojectorcommon
areas,andfordischargeofanylien
or encumbrance levied against the
entire project or the common
areas;
f. For reconstruction of any portion
or portions of any damage to or
destructionoftheproject;
g. The manner for delegation of its
powers;
h. Forentrybyitsofficersandagents
into any unit when necessary in
connection with the maintenance
or construction for which such
bodyisresponsible;
i. For a power of attorney to the
management body to sell the
entire project for the benefit of all
of the owners thereof when
partition of the project may be
authorized under Section 8 of the
Condominium Act, which said
power shall be binding upon all of
the condominium owners
regardlessofwhethertheyassume
the obligations of the restrictions
ornot.
2. The manner and procedure for

amending such restrictions:Provided,
Thatthevoteofnotlessthanamajority
ininterestoftheownersisobtained.
3. For independent audit of the accounts
ofthemanagementbody;
4. For reasonable assessments to meet
authorized expenditures, each
condominium unit to be assessed
separately for its share of such
expenses in proportion (unless
otherwise provided) to its owners
fractional interest in any common
areas;
5. For the subordination of the liens

securing such assessments to other
liens either generally or specifically
described;
6. For conditions, other than those
providedforinSections8and13ofthe
Act,uponwhichpartitionoftheproject
and dissolution of the condominium
corporationmaybemade.
Note:Suchrighttopartitionordissolution
maybeconditionedupon:
a. failure of the condominium owners
torebuildwithinacertainperiod;
b. specified inadequacy of insurance
proceeds;
c. specified percentage of damage to
thebuilding;
d. adecisionofanarbitrator;or
e. upon any other reasonable
condition.
Q: What is the duty of the Register of Deeds as

regardsthisdeclarationofrestrictions?
A:TheRegisterofDeedsshallenterandannotate
thedeclarationofrestrictionsuponthecertificate
of title covering the land included within the
project,ifthelandispatentedorregisteredunder
theLandRegistrationorCadastralActs.
POWERSOFANDRESTRICTIONSUPON
MANAGEMENTBODY
Q:Whataretherestrictionsimposedbythelaw
upon corporations which is also the
managementbodyofthecondominiumproject?
A:Therestrictionsareasfollows:
1. The corporate purposes of such a

corporationshallbelimitedtothe:
a. holding of the common areas,
either in ownership or any other
interestinrealpropertyrecognized
bylaw,
b. managementoftheproject,and
c. to such other purposes as may be
necessary,incidentalorconvenient
to the accomplishment of said
purposes.
2. The articles of incorporation or bylaws
ofthecorporationshallnotcontainany
provision contrary to or inconsistent
withthe:
a. provisionsoftheAct;
276
b. enablingormasterdeed;or
c. declaration of restrictions of the
project.
Q: May the management body may acquire and
hold, for the benefit of the condominium
owners, tangible and intangible personal
property and dispose of the same by sale or
otherwise?
A: Yes, unless otherwise provided for by the

declarationofrestrictions.
Note: The beneficial interest in such personal
property shall be owned by the condominium
owners in the same proportion as their respective
interestsinthecommonareas.
A transfer of a condominium shall transfer to the

transferee ownership of the transferor's beneficial
interestinsuchpersonalproperty.
CONDOMINIUMCORPORATIONS
Q:Whatisacondominiumcorporation?
A: A corporation specially formed for the

purpose,inwhichtheholdersofseparateinterest
shall automatically be members or shareholders,
to the exclusion of others, in proportion to the
appurtenant interest of their respective units in
thecommonareas.
Note: As regards title to the common areas,

including the land, or the appurtenant interests in
such areas, these may be held by a condominium
corporation.
Q: What is the term of a condominium

corporation?
A: Coterminus with the duration of the

condominium project, the provisions of the
CorporationLawtothecontrarynotwithstanding.
Membership
Q:Whataretherulesregardingmembershipina
condominiumcorporation?
A: Membership in a condominium corporation,

regardless of whether it is a stock or nonstock
corporation, shall not be transferable separately
from the condominium unit of which it is an
appurtenance.
Note:Whenamemberorstockholderceasestoown
a unit in the project in which the condominium
corporation owns or holds the common areas, he
shall automatically cease to be a member or
stockholderofthecondominiumcorporation.
CIVILLAWTEAM:
SALES

Q: May a condominium corporation sell,
exchange, lease or otherwise dispose of the
common areas owned or held by it in the
condominiumproject?
A:
GR:Duringitsexistence,itcannotdoso.
XPN:Ifauthorizedbytheaffirmativevoteof
allthestockholdersormembers.
Q: Is the so called appraisal right under the

Corporation Code available to stockholders or
membersofacondominiumcorporation?
A:
GR:Notavailable.Thelawprovidesthatthe
bylaws of a condominium corporation shall
provide that a stockholder or member shall
not be entitled to demand payment of his
shares or interest in those cases where such
right is granted under the Corporation Law
xxx
XPN:Ifsaidstockholderormemberconsents
to sell his separate interest in the project to
the corporation or to any purchaser of the
corporation'schoicewhoshallalsobuyfrom
the corporation the dissenting member or
stockholder'sinterest.
Note: In case of disagreement as to price, the

procedure set forth in the appropriate
provision of the Corporation Law for valuation
ofsharesshallbefollowed.
The corporation shall have two years within

which to pay for the shares or furnish a
purchaserofitschoicefromthetimeofaward.
All expenses incurred in the liquidation of the

interest of the dissenting member or
stockholdershallbebornebyhim.
DissolutionandLiquidation
Q: What is the effect of involuntary dissolution

of a condominium corporation for any of the
causesprovidedbylaw?
A:
277
1. The common areas owned or held by
the corporation shall, by way of
liquidation, be transferred proindiviso
andinproportiontotheirinterestinthe
corporation to the members or
stockholders thereof, subject to the
superior rights of the corporation
creditors.
Note: Such transfer or conveyance shall

be deemed to be a full liquidation of the
interest of such members or stockholders
inthecorporation.
2. After such transfer or conveyance, the

provisions of this Act governing
undivided coownership of, or
undivided interest in, the common
areas in condominium projects shall
fullyapply.
Q: When may voluntary dissolution of a

condominiumcorporationbeallowed?
A:Acondominiumcorporationmaybevoluntarily
dissolvedonly:
1. when the enabling or the master deed
of the project in which the
condominium corporation owns or
holdsthecommonareaisrevoked;and
2. uponashowingthat:
a. three years after damage or
destructiontotheprojectin which
the corporation owns or holds the
common areas, which damage or
destructionrendersamaterialpart
thereof unfit for its use prior
thereto, the project has not been
rebuilt or repaired substantially to
its state prior to its damage or
destruction;or
b. damage or destruction to the

project has rendered onehalf or
more of the units therein
untenantable and that more than
thirty percent of the members of
the corporation, if nonstock, or
the shareholders representing
more than thirty percent of the
capital stock entitled to vote, if a
stock corporation, are opposed to
the repair or reconstruction of the
project,or
c. theprojecthasbeeninexistencein
excess of fifty years, that it is
obsolete and uneconomical, and
thatmorethanfiftypercentofthe
members of the corporation, if
nonstock, or the stockholders
representing more than fifty
percent of the capital stock
entitled to vote, if a stock
corporation, are opposed to the
repairorrestorationorremodeling
ormodernizingoftheproject;or
d. the project or a material part

thereof has been condemned or
expropriated and that the project
is no longer viable, or that the
members holding in aggregate
more than seventy percent
interest in the corporation, if non
stock, or the stockholders
representing more than seventy
percent of the capital stock
entitled to vote, if a stock
corporation, are opposed to the
continuation of the condominium
regime after expropriation or
condemnation of a material
portionthereof;or
e. the conditions for such a

dissolution set forth in the
declaration of restrictions of the
project in which the corporation
owns or holds the common areas,
havebeenmet.
Note: action for voluntary dissolution is that under

Rule104oftheRulesofCourt.
Q: May the members or stockholders of a

condominium corporation dissolve such
corporation?
A: Yes, by the affirmative vote of all the

stockholders or members thereof at a general or
special meeting duly called for the
purpose:Provided, that all the requirements of
Section 62 of the Corporation Law are complied
with.
Q: What is the consequence of voluntary

dissolutionofacondominiumcorporation?
A:
GR:Thecorporationshallbedeemedtohold
apowerofattorneyfromallthemembersor
stockholders to sell and dispose of their
separateinterestsintheproject.
XPN: Unless otherwise provided for in the
declarationofrestrictions
Q: How is a condominium corporation

liquidated?
278
A:Liquidationofthecorporationshallbeeffected
byasaleoftheentireprojectasifthecorporation
ownedthewholethereof,subjecttotherightsof
the corporate and of individual condominium
creditors.
Q: What should the Court do if, in an action for

partition of a condominium project or for the
dissolution of condominium corporation on the
ground that the project or a material part
thereof has been condemned or expropriated,
the Court finds that the conditions provided for
intheCondominiumActorinthedeclarationof
restrictionshavenotbeenmet?
A: The Court may decree a reorganization of the

project,declaringwhichportionorportionsofthe
project shall continue as a condominium project,
the owners thereof, and the respective rights of
said remaining owners and the just
compensation,ifany,thatacondominiumowner
may be entitled to due to deprivation of his
property.
Note: Upon receipt of a copy of the decree, the

RegisterofDeedsshallenterandannotatethesame
onthepertinentcertificateoftitle.
Assessment,NoticethereofandLienCreated
Q: If real property has been divided into

condominiums, how will it be assessed for
taxationpurposes?
A: Each condominium separately owned shall be

separatelyassessed,forpurposesofrealproperty
taxation and other tax purposes to the owners
thereof and the tax on each such condominium
shallconstitutealiensolelythereon.
Q: Who should pay for an assessment upon any

condominium made in accordance with a duly
registereddeclarationofrestrictions?
A: It is an obligation of the owner thereof at the

timetheassessmentismade.
Q: What are the rules as regards the notice of

assessment?
A:Thenotice:
1. is to be registered with the Register of
Deeds of the city or province where
suchcondominiumprojectislocated.
2. shallstatethefollowing:
a. amount of such assessment and
suchotherchargesthereonasmay
beauthorizedbythedeclarationof
restrictions,
b. a description of the condominium
unit against which same has been
assessed,and
CIVILLAWTEAM:
SALES

279
c. the name of the registered owner
thereof.
3. Such notice shall be signed by an
authorized representative of the
management body or as otherwise
provided in the declaration of
restrictions.
Q: What is the effect if the management body

causes a notice of assessment to be registered
withtheregisterofdeeds?
A: The amount of any such assessment plus any

other charges thereon, such as interest, costs
(including attorney's fees) and penalties, as such
may be provided for in the declaration of
restrictions, shall be and become a lien upon the
condominiumassessed.
Note: Effect of payment: Upon payment of said

assessment and charges or other satisfaction
thereof, the management body shall cause to be
registeredareleaseofthelien.
Q:Whataretherulesasregardstheliencreated
incaseofunpaidassessments,etc?
A:
GR: Such lien shall be superior to all other
liens registered subsequent to the
registrationofsaidnoticeofassessment
XPNs:
1. realpropertytaxliensaresuperior;
2. whendeclarationofrestrictionsprovide
for the subordination thereof to any
otherliensandencumbrances.
Q: What is the rule as regards enforcement of

thelien?
A: Such liens may be enforced in the same

manner provided for by law for the judicial or
extrajudicial foreclosure of mortgages of real
property.
Q: Can the management body bid in the

foreclosure sale based on the lien for unpaid
assessments?
A:
GR: No, the management body shall have
powertobidatforeclosuresale.
XPN: Unless otherwise provided for in the

declarationofrestrictions,
Note: The condominium owner shall have the

samerightofredemptionasincasesofjudicialor
extrajudicialforeclosureofmortgages.
Q: What are the rules as regards labor
performedorservicesormaterialsfurnished?
A:
1. If with the consent of or at the request
ofacondominiumownerorhisagentor
hiscontractororsubcontractor:
GR: it shall not be the basis of a lien
against the condominium of any other
condominiumowner
XPN: such other owners have expressly
consented to or requested the
performanceofsuchlabororfurnishing
ofsuchmaterialsorservices.
Note: Such express consent shall be

deemed to have been given by the
owner of any condominium in the
case of emergency repairs of his
condominiumunit.
2. If performed or furnished for the

commonareasandifdulyauthorizedby
themanagementbodyprovidedforina
declarationofrestrictionsgoverningthe
property: shall be deemed to be
performed or furnished with the
express consent of each condominium
owner.
Q: How may an owner of any condominium

removehiscondominiumfromalienagainsttwo
ormorecondominiumsoranypartthereof?
A: By payment to the holder of the lien of the

fraction of the total sum secured by such lien
whichisattributabletohiscondominiumunit.

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SALES

Q: Distinguish a conditional sale from an

A: Where the obligation of either party to a

2. Natural elements those that are

A: The contract of sale is void. One of the

Q: Is there a formal requirement for the validity

XPN: Under Statute of Frauds, the following

Note: Statute of Frauds applies only to executory

Q: What are the 3 stages involved in the

A: A contract granting a privilege in one person,

A: It is a preparatory contract in which one party

UST GOLDEN NOTES 2011

Note: However, even though the option was not

Q: What is the effect of acceptance and

A: If the offer had already been accepted and

A: It is a right of first priority, all things and

A: Yes. It is a settled principle in civil law that

Q: In a 20year lease contract over a building,

b. The action to rescind the sale and to

If a particular form is required under the Statute of

A: Yes. Like other rights, the right of first refusal

In a right of first refusal,while the object may be

UST GOLDEN NOTES 2011

A: Policitation is defined as an unaccepted

Q: Is there a legal bond already created in the

A: None. In negotiation (policitation) stage, the

Q: Severino executed two deeds when he sold

Q: What is the effect of Severinos and Henrys

A: None. The nonappearance of the parties

Note: Contracts are obligatory in whatever form

A: A sale by auction is perfected when the

Q: Does the seller have the right to bid in an

A: Yes. The seller has the right to bid provided

A: A sale of foreign exchange is considered

A: It takes place by the delivery of the thing

Q: A and PDS Development Corp. executed a

Note: A grace period granted the buyer in case of

Q: What are the characteristics of a contract of

XPN: Aleatory In some contracts of

Q: Is a contract of sale identified as such based

A: No. Contracts are not defined by the parties

Q: What are the factors to be considered in

Q: Distinguish a contract to sell from a contract

Q: Having agreed to sell property which they

UST GOLDEN NOTES 2011

Note: Contracts of sale entered by such legally

1. Where necessaries are sold and

Q: May a capacitated person file an action for

A: No. He is disqualified from alleging the

Q: In a defective contract, where such defect

Q: Who are those relatively incapacitated to

Note: Under Art. 1490 of the NCC, spouses cannot

a. When a separation of property was

XPN: Even when the property

3. Between Common Law Spouses also

In CalimlimCanullas v. Fortun, the

But when the registered property has

Q: Atty. Leon G. Maquera acquired his clients

A: No. Article 1491 (5) of the New Civil Code

Q: What are the requisitesof a proper objectof

A: Their contention is without merit. There is no

2. Future Goods goods to be

Note: Sale of future goods is valid only as an