Civ2 (Sale, Lease, Agency Notes)

SALES
Articles / Laws to Remember: 1458, 1467, 1477

transfer of ownership, 1505, 559 who can transfer
xxx, 1504, 1544, 1484 Recto Law, R.A. 6552,
1602, 1606, 1620, 1623, Redeption xxx
Q: A obliged himself to deliver a certain thing
to B. Upon delivery, B would pay a sum of
money to A. Is that a contract of sale?
A! "ot necessari#$. %&en if there is an o'#i(ation to
de#i&er, if there is no o'#i(ation to transfer
ownership, it wi## not 'e a contract of sa#e. )t a$
'e a contact of #ease.
Memorize: Art. 1458
Note: *a#e is a contract, so the (enera# princip#es
in o'#icon are app#ica'#e to sa#e '+t note that there
are pro&isions which are contrar$.
Characteristics of Contract of Sale (COS)
1. Consensal (1!"#) , -.* is consens+a#, it is
perfected '$ ere eetin( of the inds of the
parties as to the o'/ect and price.
Note: 0here is 1 specia# #aw which re1+ires a
partic+#ar for for the &a#idit$ of a contract of sa#e ,
in that sa#e, it can 'e said that 2ind of sa#e is a
fora# contract 3 -att#e Re(istration 4ecree. )n a
sa#e of #ar(e catt#e, the #aw pro&ides that the
contract of sa#e of #ar(e catt#e +st 'e! in a p+'#ic
instr+ent, re(istered and a certificate of tit#e
sho+#d 'e o'tained in order for the sa#e to 'e &a#id.
5+t otherwise, the other contracts are perfected '$
ere consent or ere eetin( of the inds.
$. %rinci&al , sa#e is a principa# contract, it can
stand on its own. )t does not depend on other
contracts for its existence and &a#idit$.
'. (ilateral (1!#)) , necessari#$ in a -.*, 'oth
parties wi## 'e o'#i(ated. )t is not possi'#e that on#$
1 part$ is o'#i(ated 'eca+se a contract of sa#e is
essentia##$ onero+s.
!. Oneros (1'#*) , -.* is essentia##$ onero+s.
.therwise, it a$ 'e another contract or an$ other
act #i2e it a$ 'e a donation if there is no
copensation for the transfer of ownership to the
other part$.
#. Commtati+e ($*1*) , eanin( there is
e1+i&a#enc$ in the &a#+e of the prestation to 'e
perfored '$ 'oth parties. "ora##$, the thin( so#d
wo+#d 'e e1+a# to the price paid '$ the other part$
6'+$er7.
%xception! a contract of sa#e which is an a#eator$
contract #i2e sa#e of hope. )n sa#e of hope, the
o'#i(ation of 1 part$ wi## arise +pon the happenin(
of a certain e&ent or condition.
Example Sale of Hope: *a#e of a #otto tic2et, 8-*.
wi## ha&e the o'#i(ation to pa$ $o+ on#$ if $o+ (ot a##
the 4 or 6 n+'ers which are drawn
Another Example of Aleatory: )ns+rance
,. Nominate (1!#))
Classification of Contract of Sale
1. As to Natre of Sb-ect Matter
a. 9o&a'#e
'. )o&a'#e
Q: hy there is a need to determine?
A! 5eca+se soe concepts wi## app#$ if the o'/ect
is o&a'#e or soe #aws wi## app#$ if the o'/ect is
io&a'#e.
Examples: :nder the *tat+te of ;ra+ds, $o+ ha&e
to deterine if the o'/ect if o&a'#e or io&a'#e
in order that stat+te of fra+ds wi## app#$. 0he Recto
#aw wi## app#$ if the o'/ect is o&a'#e. 0he 9aceda
#aw wi## app#$ if the o'/ect is rea#t$. Artic#e 1544 or
4o+'#e *a#e wi## re1+ire $o+ to deterine the
nat+re of the s+'/ect atter.
$. As to Natre
a. 0hin(
'. Ri(ht
Q: hy there is a need to determine?
A! Re#e&ant in the ode of de#i&er$
.istinctions
8a(e 1 ;a$e 9arie -. 9artine< , -hato -a'i(as , =essica A. Lope< , 4ian Rosapapan
"o&e'er 2008
CIVIL LAW REVIEW
II
1. 4eed of A'so#+te *a#e 64A*7 &s. -onditiona#
*a#e 6-*7 &s. -ontract to *e## 6-0*7
2. 4ation in 8a$ent 64)87 &s. -.*
3. -ontract for a 8iece of >or2 6-8>7 &s. -.*
4. 5arter &s. -.*
5. A(enc$ to *e## 6A0*7 &s. -.*
.ee/ of Absolte Sale (.AS) +s. Con/itional
Sale (CS) +s. Contract to Sell (C0S)
.AS , se##er does not reser&e his tit#e o&er the
thin( so#d and th+s, +pon de#i&er$ of the thin(,
ownership passes re(ard#ess of whether or not the
'+$er has paid.
CS ? condition@s are iposed '$ the se##er 'efore
ownership wi## pass. "ora##$, the condition is the
f+## pa$ent of the price. )n -*, ownership
a+toatica##$ passes to the '+$er fro the oent
the condition happens. 0here is no need for
another contract to 'e entered into.
B!: "eceipt was issued by A to B. #he receipt$s
tenor %&ate of the receipt ''' "eceived from B
the sum of ()*,+++.++ as partial payment for
the car ''' the balance to be paid at the end of
the month ''',. -ontract to .ell?
*A! "o. )t does not pertain to a -0* 'eca+se in a
-0* ownership is reser&ed '$ the se##er despite
de#i&er$ to the '+$er. 0he '+$er does not ac1+ire
ownership. 0his is an A'so#+te *a#e.
Q: In a -#., upon the happening of the
condition/s imposed by the seller, would
ownership automatically pass to buyer?
A! "o. >hi#e a -0* is considered a specia# 2ind of
conditiona# sa#e, it is a pec+#iar 2ind of sa#e
'eca+se despite the happenin( of the condition
and act+a# de#i&er$, the '+$er does not
a+toatica##$ ac1+ire ownership. )n -0*, if
condition@s happen, the ri(ht of the '+$er is to
cope# the se##er to exec+te a fina# deed of sa#e.
*o ownership does not a+toatica##$ pass.
.ation in %a1ment (.2%) +s. COS
.2% (1$!#) , where'$ propert$ is a#ienated to the
creditor. )t is pro&ided that the #aw on sa#es sha##
(o&ern s+ch transaction. )t is specifica##$ pro&ided
that the pre?existin( o'#i(ation +st 'e in one$. )f
not in one$ and there is 4)8, it wi## not 'e
(o&erned '$ the #aw on sa#es '+t '$ the #aw on
no&ation 'eca+se practica##$ there is a chan(e in
the o'/ect of the contract.
Example 1: )f A owes 5 8100,000.00 instead of
pa$in( 8100,000, he offers 5 and 5 accepts the
car of A as an e1+i&a#ent perforance 3 this is
4)8 and wi## 'e (o&erned '$ the #aw on sa#es.
Example 2: )f the pre?existin( o'#i(ation is to
de#i&er a specific horse '+t instead of de#i&erin( the
horse, the de'tor to#d his creditor and the creditor
accepted, that he wi## instead de#i&er his car 3 it is
sti## 4)8 '+t it wi## not fa## on 1245 '+t on no&ation
'eca+se there is a chan(e in the o'/ect of the
o'#i(ation which wo+#d extin(+ish the o'#i(ation.
Note: A (+ide to distin(+ish one concept fro
another is to 2now the nat+re, re1+isites and
effects.
1. As to Natre
.2% , a specia# for of pa$ent
COS ? it is a contract
$. As to Re3isites
.2% , with a pre?existin( o'#i(ation
COS , not a re1+ireent
'. As to 4ffect
.2% , to extin(+ish the o'#i(ation either who##$ or
partia##$.
COS , o'#i(ation wi## arise instead of 'ein(
extin(+ished.
Contract for a %iece of 5or6 (C%5) +s. COS
B!: A team if bas0etball players went to a store
to buy shoes and out of the 1+ members, * of
them were able to choose the shoes. #hey
agreed to pay the price upon delivery. #he
other 2 members were able to choose but the
shoes were not available at that time but they
are normally manufactured. #he last member
could not find shoes that could fit his 13 inches
feet and therefore he has to order for such 0ind
of shoes. hat transactions were entered into
by these players?
*A! 1467 3 the first 2 transactions in&o#&in( a tota#
of 9 p#a$ers wo+#d 'e considered a -.* 'eca+se
the shoes which the$ ordered are 'ein(
an+fact+red or proc+red in the ordinar$ co+rse of
'+siness for the (enera# ar2et. Aowe&er, the #ast
transaction which wi## 'e an+fact+red on#$
'eca+se of the specia# order of the p#a$er and is
not ordinari#$ an+fact+red for the (enera# ar2et
wi## 'e considered a -8> which is 2nown as the
9assach+setts r+#e.
9assach+setts r+#e , r+#e in deterinin( whether
the contract is a -.* or a -8>.
(arter +s. COS
Q: A obliged himself to deliver a determinate
car with a mar0et value of (4*+,+++.++. B
obliged himself to deliver his watch and
(1*+,+++.++ in cash. hat 0ind of contract?
A! ;irst, $o+ ha&e to consider the intention of the
parties. 0he$ a$ want this transaction to 'e
considered as a sa#e or 'arter and that wi## pre&ai#.
"o&e'er 2008
5+t if the intention of the parties is not c#ear fro
their a(reeent then the nat+re of the contract wi##
depend on the &a#+e of the watch. )f the &a#+e of
the watch is (reater than 8150,000 then this is
'arter. )f the &a#+e of the watch is e1+a# or #ess
than 8150,000 then this is sa#e. 0he &a#+e of the
car is irre#e&ant. >hat is on#$ re#e&ant is the &a#+e
of the thin( 6watch7 in re#ation to the cash to 'e
(i&en '$ one of the parties.
A7enc1 to Sell (A0S) +s. COS
B!: A gave B the e'clusive right to sell his
maong pants 5he has his own brand of maong
pants6 in Isabela. It was stipulated in the
contract that B has to pay the price of maong
within 7+ days from delivery to B. It was
stipulated that B will receive 4+8 commission
5discount6 on sale. #he maong pants were
delivered to B. 9owever, before B could sell the
goods, the store was burned without fault of
anyone. -an B be compelled to pay the price?
;ro the wordin(s of the pro'#e $o+ a$ ha&e
an idea that this is an a(enc$ to se##. )f this is an
A0*, the fact that the a(ent has not $et so#d the
aon( pants when the$ were '+rned wi## not res+#t
in a #ia'i#it$ on his part, there 'ein( no ne(#i(ence
on his part 'eca+se with the de#i&er$ of the thin(
fro the principa# to the a(ent, ownership does not
pass. :nder the princip#e in the -i&i# -ode , res
perit doino , it wi## 'e the se##er 6owner7 who wi##
'ear the #oss. 5+t if this transaction is sa#e then
with the de#i&er$ of the aon( pants to 5,
ownership passed to 5 'eca+se he did not reser&e
ownership o&er the pants despite the fact that the
other part$ has not paid the price. *o when the
pants were '+rned, it wo+#d now 'e 5 as the owner
who wi## 'ear the #oss.
*A! 0his is exact#$ the case of 8iro7a +s.
%arsons. Artic#e 1466 , in constr+in( a contract
containin( pro&isions characteristics of 'oth a -.*
and A0*, $o+ ha&e to (o into the essentia# c#a+ses
of the who#e instr+ent. )n this pro'#e, one of the
c#a+ses B5 has to pa$ the price within 30 da$sC.
0hat wo+#d a2e the contract -.* and not A0*
'eca+se in 30 da$s fro de#i&er$, whether or not 5
has a#read$ so#d those pants to other persons, he
is a#read$ o'#i(ed to pa$ a price. 0hat is not an
A0*. 5ein( a -.*, therefore, after ha&in( 'een
de#i&ered, ownership passed to the '+$er and
hence +nder res perit doino r+#e, the '+$er 'ears
the #oss and therefore he can 'e cope##ed to pa$
the price.
4ssential 4lements of a Contract of Sale
1. Consent of the Contractin7 %arties
$. Ob-ect or Sb-ect Matter , which is a
deterinate thin( or ri(ht
Note: *er&ice cannot 'e the s+'/ect atter of sa#e.
'. Case or Consi/eration , as far as se##er is
concerned, it is the price in one$ or the
e1+i&a#ent of the pa$ent of the price.
CONS4N0 O9 0:4 CON0RAC02N; %AR024S
A. No consent of one or both of the &arties
3 the contract is &oid. :nder the #aw on sa#es, it is
a fictitio+s contract where the si(nat+re of one of
the parties was for(ed. "ora##$, the se##erDs
si(nat+re is for(ed. )f the si(nat+re of the se##er is
for(ed, that wo+#d 'e a fictitio+s contract. 0he
a##e(ed se##er wi## not ha&e participation in the
exec+tion of the contract. 5+t another 2ind of
contract reco(ni<ed in the -i&i# -ode is a si+#ated
contract.
*i+#ated , parties to this contract act+a##$ wo+#d
ha&e participation. 0he$ wo+#d &o#+ntari#$ si(n in
the deed of sa#e. Aowe&er, the$ do not intend to 'e
'o+nd at a## or the$ a$ intend to 'e 'o+nd to
another contract '+t the$ exec+ted a deed of sa#e.
0h+s, the #aw wo+#d ratif$ these contracts
considerin( there is a si+#ated sa#e.
<in/s of Simlate/ Contracts
1. A'so#+te#$ *i+#ated , the$ do not intend to 'e
'o+nd at a##.
Q: hy would they enter into this 0ind of sale?
A! 6a7 0o defra+d creditors. 0he de'tor wo+#d se##
his reainin( assets to a2e it appear that he has
no ore assets which a$ 'e reached '$ his
creditors.
6'7 App#icants for residenc$ a'road wo+#d
nora##$ 'e re1+ired to present certificate of tit#e
o&er parce#s of #and so that the app#icant wi##
appear to ha&e assets. 0herefore, hindi a( 0"0
$+n( app#icant. 0hese app#icants wo+#d nora##$
as2 his 'rother or sister or friends na 2+nwari that
#and wo+#d 'e so#d to the. 0he$ wi## ha&e the
propert$ re(istered in their nae. 0he$ wi## present
the tit#e to the %'ass$. 5+t act+a##$ the parties do
not intend to 'e 'o+nd. 0a2e note that this a$ 'e
a root of a &a#id tit#e as far as 3
rd
persons are
concerned. 0hese 3
rd
persons who re#ied on the
transfer certificate of tit#e in the nae of the se##er
e&en if that se##er is not the owner 'eca+se the sa#e
is si+#ated a$ ac1+ire ownership.
2. Re#ati&e#$ *i+#ated , sa#e where the$ act+a##$
intended another contract which nora##$ wo+#d 'e
a donation.
Q: hy would they e'ecute a deed of sale
instead of e'ecuting a deed of donation?
A! 6a7 0o inii<e tax #ia'i#ities. 4onorDs tax is
hi(her than capita# (ains tax or fina# incoe tax
and doc+entar$ stap tax.
6'7 0o circ+&ent the pro&isions on #e(ities
and co##ation +nder s+ccession. 0his a$ 'e
"o&e'er 2008
1+estioned if $o+ can pro&e that there was no
consideration.
(. 2f consent was 7i+en
3 )f consent was (i&en, it does not necessari#$
ean that the -.* is &a#id. 0he consent a$ 'e
(i&en '$ an incapacitated person or one with
capacit$ to (i&e consent. )f (i&en '$ an
incapacitated person, consider the nat+re of the
incapacit$. )t a$ 'e!
a. A'so#+te )ncapacit$ , the part$ cannot
(i&e consent to an$ and a## contracts.
'. Re#ati&e )ncapacit$ , the part$ is
prohi'ited fro enterin( soeties with
specific persons and soeties o&er
specific thin(s.
<in/ of Ca&acit1
1. =+ridica# -apacit$ , it is the fitness to 'e the
s+'/ect of #e(a# re#ations. )f a part$ to a sa#e has no
/+ridica# capacit$, the contract is &oid. "ote that a##
nat+ra# #i&in( persons ha&e /+ridica# capacit$. %&en
if he is a 1 da$ o#d 'a'$, he has /+ridica# capacit$.
0he 'a'$ can 'e the s+'/ect of donation. %&en if
he is concei&ed, he has pro&isiona# persona#it$.
Example: .ne exap#e of a part$ to a sa#e witho+t
/+ridica# capacit$ wo+#d 'e a corporation not
re(istered with the *%-. 0he contract entered '$
this corporation is a &oid contract 'eca+se one of
the parties has no /+ridica# capacit$ to enter into
that contract.
2. -apacit$ to Act , it is the power to do acts with
#e(a# effects. )f the incapacit$ on#$ pertains to
capacit$ to act, the contract wo+#d nora##$ 'e
&oida'#e. >itho+t capacit$ to act or there are
restrictions with oneDs capacit$ to act s+ch as
inorit$, insanit$, deaf +te and does not 2now
how to write and ci&i# interdiction.
Note: :nder R.A. 6809 64ece'er 19897 there is
no ore creat+re 2nown as B+neancipated
inorC. 5efore 1989, the a(e of a/orit$ was 21.
C. 2f both &arties are inca&acitate/
3 not on#$ &oida'#e '+t +nenforcea'#e.
Q: hat if one of the parties in a -:. is a
minor and the minor actively misrepresented
as to his age?
A! 0he *- said that the inor wi## 'e 'o+nd to s+ch
contract +nder the princip#e of estoppe#. Acti&e
isrepresentation, can 'e seen fro the deed
itse#f. )n a deed of sa#e, nora##$ after the nae,
the words Bof a(eC were stated. )f the inor si(ned
that contract, he wi## 'e 'o+nd. )f no stateent in
the deed of sa#e as to his a(e, in one case, the fact
he isrepresented to the notar$ p+'#ic when he
appeared 'efore the notar$ p+'#ic for the
notari<ation of the doc+ent and he was as2ed '$
the notar$ p+'#ic as to his a(e and he a(ain
isrepresented, he wi## 'e 'o+nd to s+ch contract.
Att1. =ribe>s Comment: %stoppe# is not a (ood
(ro+nd 'eca+se the inor is not aware.
Sale of Necessaries
)n sa#e of necessaries s+ch as food, c#othin( and
edicine to a inor, the inor has to pa$ a
reasona'#e price. 0his contract is not &oida'#e. 0he
sa#e of necessaries wi## 'ind the inor and he wi##
'e cope##ed to pa$ not rea##$ the contract price
'+t on#$ to reasona'#e price.
Relati+e 2nca&acit1 (Articles 1!?* an/ 1!?1)
1. *a#e 'etween spo+ses , it is &oid except!
a. 0he spo+ses exec+ted a arria(e
sett#eent and in the arria(e sett#eent
the$ a(reed for a cop#ete separation of
propert$ re(ie. 0hen the$ can se## to
each other.
'. )f no arria(e sett#eent, the$ a$ ha&e
o'tained /+dicia# dec#aration of separation
of propert$. After that, the$ can se## to each
other.
2. 0hose entioned in Artic#e 1491
a. A (+ardian cannot '+$ the propert$ of the
ward. 0he (+ardian is not act+a##$
prohi'ited fro enterin( into an$ and a##
contracts. )t is /+st that he cannot 'e the
'+$er of a propert$ of his ward.
'. An a(ent cannot '+$ witho+t the consent
of the principa# a propert$ which he was
s+pposed to se## or adinister.
c. 0he exec+tors and adinistrators of the
estate cannot '+$ a propert$ which is part
of the estate.
d. 8+'#ic officers, /+d(es, their staff, c#er2 of
co+rt, steno(raphers and #aw$ers are
prohi'ited fro '+$in( those properties
which are the s+'/ect of #iti(ation d+rin(
the pendenc$ of the case.
Q: hat is the status of the contracts under
12;1?
A! 8rof. 0o#entino , &oida'#e
=+stice Eit+( F 8rof. 5a&iera , &oid
8rof. 8ineda F 8rof. de Leon , the first 3
are &oida'#e and the #ast 3 are &oid.
0he 'etter answer is &oid 'eca+se these persons
are prohi'ited fro enterin( into these contracts.
:nder Artic#e 1409, if the contract is prohi'ited, it is
&oid.
.iscssion of %rof. .e Leon>s Answer
0he first 3 are &oida'#e 'eca+se these contracts
a$ 'e the s+'/ect of ratification. )f $o+ wi## read
"o&e'er 2008
his disc+ssion, he 'ased his disc+ssion in the case
of R+'ias &s. 5ati##er wherein the (+ardian 'o+(ht
the propert$ of his ward. *o the contract is &oida'#e
'eca+se if the ward 'ecoes of a(e, he can enter
a -.* o&er the thin( to his (+ardian and that sa#e
wo+#d 'e a &a#id sa#e. 68#s. read the f+## text of 8rof.
4e LeonDs coent7
Att1. =ribe: )t is correct that it is a &a#id sa#e. 5+t
does that ean that the sa#e ratified the 1
st
contractG ) disa(ree 'eca+se ratification +nder the
-i&i# -ode has the effect of c#eansin( the contract
fro a## its defects fro the &er$ 'e(innin( as if the
contract was entered into d+rin( the first
a(reeent that the a(reeent was &a#id fro the
&er$ start. )n fact, the *- said in "ubias vs.
Batiller BratificationC 61+ote and 1+ote7, 'eca+se
the effect of the second contract wi## not retroact to
the first contract. )t wi## on#$ 'e &a#id fro the tie
the second contract was entered into. After a##,
there is no ratification in that sense +nder the -i&i#
-ode. 0h+s, since it does not retroact to the first,
the second contract is &oid. .therwise, if &oida'#e
then it can 'e ratified. 0he defect on the first
contract wo+#d ha&e 'een c#eansed with the
exec+tion of the second contract.
2. A#iens are prohi'ited fro ac1+irin( '$ p+rchase
pri&ate #ands , 0a2e note Bac1+irin(C which eans
'+$in( not se##in(. 0he$ can se##.
%xceptions @ when a#iens can '+$!
a. ;orer nat+ra# 'orn ;i#ipino citi<en. :nder
the -onstit+tion the$ are a##owed to '+$
sa## #and which the$ can +se for
residentia# p+rpose.
'. Another wa$ of ac1+irin( is '$ s+ccession
'+t this is not a sa#e
.. 4+en if consent was 7i+en b1 one with
ca&acit1 to 7i+e consent bt if the consent is
+itiate/
3 &oida'#e. ;)E:9
4. 2f the &art1 7a+e sch consent in the name of
another withot athorit1 of that &erson or no
athorit1 of law
3 +nenforcea'#e. 0a2e note a$ 'e a+thori<ed '$
the person or '$ #aw.
Example of authorized by law: notar$ p+'#ic has
the ri(ht to se## in p#ed(e 'eca+se he has the
a+thorit$ to se## +nder the #aw.
O(@4C0 OR S=(@4C0 MA004R
0he re1+isites in sa#e as to thin( wo+#d a#ost 'e
the sae as the re1+isites of contracts in (enera#.
1. 0he thin( +st 'e within the coerce of en
Examples: sa#e of a na&i(a'#e ri&er is &oid, sa#e of
a cada&er is &oid '+t donation of a cada&er is
a##owed, sa#e of h+an or(ans is &oid, thin(s which
are not appropriated #i2e air is &oid '+t if
appropriated it can 'e the o'/ect of a &a#id sa#e.
2. 0he thin( +st 'e #icit , not contrar$ to #aw
Examples: sa#e of prohi'ited dr+(s or sha'+ is
&oid, sa#e of ari/+ana is &oid, sa#e of wi#d f#owers
or wi#d ania#s is &oid
3. 9+st 'e deterinate
Q: .ale of a car without agreement as to the
features for (1<. :n the other hand, another
transaction would be a sale of <itsubishi
=ancer, 4++), >.= and color blac0 for (1<. Are
these 4 transactions, valid sale?
5oth wo+#d pertain to (eneric thin(. :nder the #aw,
a thin( is considered deterinate on#$ when it is
partic+#ar#$ desi(nated or ph$sica##$ se(re(ated
fro a## others of the sae c#ass. 5oth transactions
pertain to (eneric so 'oth transactions are &oidG
A! "o. 0he first transaction is &oid. 0he second
transaction is &a#id 'eca+se Artic#e 1460 re1+ires
that the re1+ireent of the #aw that a thin( sho+#d
'e deterinate wo+#d 'e s+fficient#$ cop#ied with
if the thin( which is the o'/ect of the sa#e is capa'#e
of 'ein( ade deterinate witho+t a need of a
new or f+rther a(reeent.
Example: *a#e of 1 (a##on 9ino#a p+re cocon+t oi#.
0ho+(h (eneric, it is &a#id +nder Artic#e 1460.
R=L4S AS 0O O(@4C0 O9 COS
Q: A obliged himself to deliver and transfer
ownership over the palay that will be harvested
from a specific parcel of rice land in <ay 4++?.
hat if by <ay 4++?, no palay was harvested?
a. hat is the status of the sale?
b. <ay the seller %A, be held liable for
damages for failure to comply with his
obligation?
A!
a. A#wa$s consider that in a -.* there are on#$
3 re1+isites. As #on( as these 3 were cop#ied,
there is a &a#id sa#e. )n fact, '$ express pro&ision of
#aw, sa#e of thin(s ha&in( potentia# existence
6eptio rei sperati7 is &a#id.
'. "ot necessari#$ 'eca+se there are exc+ses to
non?perforance s+ch as pesti#ence, t$phoon,
f#ood and therefore his fai#+re to cop#$ is an
exc+se. 5+t if the reason of the se##er is 'eca+se of
his ne(#i(ence, he cannot find s+pport +nder Art.
1174.
Sale of :o&e (4m&tio S&ei)
Example: *a#e of a #otto tic2et
Q: Assuming the sale of a lotto tic0et happened
the day after it was drawn, what is the status of
the sale?
A! )t wi## depend whether the tic2et is a winnin( or
#osin( tic2et. >hat the #aw pro&ides is that the sa#e
"o&e'er 2008
of a &ain hope is a &oid sa#e. )f the tic2et is a
winnin( tic2et, it is not a &ain hope hence, it is a
&a#id sa#e.
Q: hy would a person sell a winning tic0et?
A! Ae a$ need the one$ iediate#$. 8aran(
disco+nted $+n( tic2et. "ana#o n( 819, i'e'enta
n$a n( 8990,000 'eca+se he needs the one$
iediate#$.
Q: .ale of a land to B with a right to repurchase
within 1 year which A delivered. :n the 7
rd
month, B sold the land to -. 9owever, on the ;
th
month, A offered to repurchase the land.
5a6 hat is the status of the sale between A
and -?
5b6 ho will have a better right over the land?
5.ale with a right to repurchase6

A! 6a7 5e (+ided '$ the fact that a -.* is a
consens+a# contract. 0he ere eetin( of the
inds as to the o'/ect and the price, then there is a
&a#id and perfected sa#e. Aence, this is a &a#id sa#e
e&en if the o'/ect of the sa#e is a sa#e with a ri(ht to
rep+rchase. Artic#e 1465 pro&ides that thin(s
s+'/ect to a reso#+tor$ condition a$ 'e the o'/ect
of a -.*.
Att1. =ribe: 9as taan( sa'ihin , since the
ownership thereof is s+'/ect to a reso#+tor$
condition. Aindi naan $+n( thin( is the s+'/ect of
reso#+tor$ condition, it is the ownership o&er the
thin(.
)f A exercises the ri(ht to rep+rchase and s+ch
wo+#d 'e a &a#id exercise of s+ch ri(ht then the
ownership of 5 wo+#d 'e extin(+ished. 0he
exercise of the ri(ht is considered a reso#+tor$
condition as to the ownership of 5. 0he fact that
the o'/ect of the sa#e is s+'/ect to a rep+rchase wi##
not affect the &a#idit$ of the sa#e.
6'7 As a r+#e, it wo+#d 'e A as a se##er a retro
'eca+se he has the ri(ht to rep+rchase ass+in(
his rep+rchase is &a#id. - a$ ha&e a 'etter ri(ht if
he can c#ai that he is an innocent p+rchaser for
&a#+e. Example: a$'e the ri(ht to rep+rchase was
not annotated at the 'ac2 of the tit#e of the #and
and he has no act+a# 2now#ed(e. )f that is the
case, - a$ ha&e a 'etter ri(ht.
SAL4 O9 R2;:0 / ASS2;NM4N0 O9 R2;:0
Assi(nent of ri(ht is not necessari#$ a sa#e. )f
there is a &a#+a'#e consideration for the
assi(nent, it is a sa#e. )f there is no &a#+a'#e
consideration, it a$ 'e a donation or dacion en
pa(o.
Examples of right: credit, shares of stoc2
Re3isite of a ri7ht 3 the on#$ re1+ireent is that
the ri(ht +st not 'e intransissi'#e
Q: hy or when a right would not be
transmissible?
A! )f it is intransissi'#e '$ nat+re or '$ stip+#ation
or '$ pro&ision of #aw.
;.R.: As a r+#e, ri(hts and o'#i(ations arisin( fro
contracts are transissi'#e.
4Ace&tions:
1. 2ntransmissible b1 Natre , Examples: ri(ht as
a #e(itiate chi#d cannot 'e so#d. An$ contract
where the persona# 1+a#ifications has 'een
considered .
$. 2ntransmissible becase of Sti&lation ,
Example: 0he parties stip+#ated in a #ease contract
that the ri(ht to s+'#ease cannot 'e transferred if it
is prohi'ited '$ the #essor.
'. 2ntransmissible becase of Law , Example: )n
partnership, the ri(ht in specific partnership
propert$ witho+t a## the partners a2in( the
assi(nent cannot 'e &a#id#$ assi(ned.
Q: .ale of a right, also perfected by mere
consent?
A! Hes. 0o 'ind 3
rd
persons, it +st 'e in a p+'#ic
instr+ent. Recorded in the Re(istr$ of 8ropert$.
CA=S4 OR %R2C4 C4R0A2N 2N MON4B OR 20S
48=2CAL4N0
Q: A deed of sale was entered into by A and B.
#he price agreed upon was 1< yen.
5a6 <ay that be a valid sale?
5b6 -an the seller compel the
buyer to pay in yen?
A! 6a7 Hes, it is &a#id. 5asis is Artic#e 1458
'eca+se the on#$ re1+ireent of the #aw is Bin
one$C. %&en =apanese $en is in one$. 0he #aw
states that it a$ not e&en 'e in one$, it a$ 'e
Be1+i&a#entC #i2e proissor$ notes whether or not
ne(otia'#e or #etters of credit.
6'7 )f the contract was entered into toda$,
$es it is &a#id 'eca+se of R.A. 8183 which repea#ed
R.A. 529 in 1996. )f -.* was entered 'efore R.A.
8183, the se##er cannot cope# e&en tho+(h the
contract is &a#id. 0he pa$ent has to 'e ade in
8hi#ippine one$.
-onsider the date of the sa#e. )f parties fai#ed to
stip+#ate as to which c+rrenc$, it has to 'e in
8hi#ippine c+rrenc$.
Q: -an there be a valid payment in (1+,+++ @ (1
coins?
A! Hes.
Q: -an you compel the seller to accept?
A! "o. :nder the 8hi#ippine #aw, 81 wi## ha&e #e(a#
tender power on#$ +p to 81,000. Ae a$ accept
'+t he cannot 'e cope##ed.
"o&e'er 2008
Note: 81, 85, 810 +p to 81,000
#ess than 81 +p to 8100
%rice Mst be Certain
Q: .ale of shares of stoc0s but there was no
date as to the value of the share, valid?
A! 0he &a#+e of the shares as to what date is
ateria# 'eca+se the &a#+e of the shares chan(es
a#ost e&er$da$ dependin( on the shares. *hares
of copanies who are acti&e in tradin( wo+#d
chan(e e&er$ now and then. )n fact, e&en if the
date as to the &a#+e of the shares has 'een fixed
'+t the tie was not considered, a$'e the
openin( or the c#osin( in a partic+#ar exchan(e
wo+#d affect the &a#idit$ of the sa#e. ;or exap#e, in
the openin(, the &a#+e of the share is 850 '+t in
the c#osin( it is 839. *o a(ain, it has to 'e certain.
Q: If you will fi' the price by considering the
tuition fee of a student per unit, would that be a
certain price?
A! "o 'eca+se different schoo#s wo+#d ha&e
different t+ition fees and e&en in a certain schoo#,
fees per co##e(e are different.
Q: ho can fi' the price?
A! 617 0he 'est wa$ is for the parties to a(ree as to
the price. 627 0he$ a$ a(ree that one of the wi##
fix the price.
Q: <ay the sale be perfected if the agreement
of the parties was for one of them to fi' the
price?
A! Hes, it a$ 'e perfected on#$ if the price fixed '$
the part$ who was as2ed to fix the price was
accepted '$ the other part$. )f not accepted, there
was no eetin( of the inds.
Note: 0he perfection wi## on#$ 'e considered at the
tie of the acceptance of the price fixed '$ the
other part$ not fro the tie of the first a(reeent
of the parties.
Q: hat if a 7
rd
person was as0ed to fi' the
price A A and B agreed that B will fi' the price,
may the sale be void?
A! Hes, the sa#e a$ 'e &oid if the third person
does not want to fix the price or +na'#e to fix the
price. Aence, there was no eetin( of the inds.
Q: If the 7
rd
person fi'ed the price but it was too
high or too low or maybe there was fraud
committed by the 7
rd
person or he was in
connivance with one of the parties, may the
sale be void?
A! "o, 'eca+se the reed$ of the other part$ is to
(o to co+rt for the co+rt to fix the price.
Q: .ale of a car, the price of the car is (1,
valid?
A! Hes, it is &a#id. )t can 'e a &a#id sa#e. Lesion or
(ross inade1+ac$ of the price does not as a r+#e
in&a#idate a contract +n#ess otherwise specified '$
#aw.
%xception! when otherwise pro&ided '$ #aw.
Example: Artic#e 1381 , when the (+ardian se##s
the propert$ of the ward and there is #esion of ore
than 25I or ore than J of the &a#+e of the thin(.
0a2e note that the '+$er +st not 'e the (+ardian
otherwise 1491 wi## app#$ 3 &oid. 5+t if the
(+ardian so#d it to another person there 'ein(
#esion of ore than J #i2e when the &a#+e of the
propert$ is 8100,000 was so#d for 865,000, the
contract is rescissi'#e.
Note: :nder the #aw on sa#es, if there is (ross
inade1+ac$, it a$ ref#ect &itiation of consent so
the *- wo+#d nora##$ en/oin the #ower co+rts to
'e warned of the possi'i#it$ of fra+d in case of
#esion. Lesion +st 'e pro&en as a fact. )t is not
pres+ed.
)f there is (ross inade1+ac$, it a$'e 'eca+se
act+a##$ the$ intended another contract and that
wo+#d a2e the sa#e a si+#ated sa#e and
therefore the sa#e is &oid.
Example! 0he &a#+e of the propert$ is 819 '+t on#$
810,000 was written in the contract 'eca+se the$
intended it to 'e a donation 3 &oid.
02M4 O9 0:4 %4R94C02ON O9 0:4
CON0RAC0
Action Sale
A+ction sa#e is perfected +pon the fa## of the
haer or an$ other c+stoar$ anner. 0h+s,
'efore the fa## of the haer in an a+ction sa#e,
the 'idder e&en if he has a#read$ ade a 'id, he
can sti## withdraw the 'id as #on( as he wo+#d do
that 'efore the fa## of the haer. .therwise, 6if
after the fa## of the haer7, there is a#read$ a
perfected sa#e.
Q: -an the auctioneer withdraw the goods
before the fall of the hammer?
A! As a r+#e, $es 'eca+se the sa#e has not 'een
perfected at the oent +n#ess the 'iddin( or
a+ction has 'een anno+nced to 'e witho+t reser&e.
Note: 5efore perfection, there is one contract
which a$'e perfected. 5efore perfection eanin(
in the ne(otiation sta(e 3 this contract is 2nown
as the option contract.
O&tion Contract
.ancheC vs. "igos
;acts! 9rs. Ri(os offered to se## her #and to
*anche< for a certain price. Ri(os (a&e *anche< 2
"o&e'er 2008
$ears within which to decide. 6Note: 0he optionee
or proisee or offeree is not 'o+nd to p+rchase '+t
he has the option to '+$ or p+rchase7. )n this case,
*anche< has the option. 5efore the #apse of 2
$ears, *anche< to#d Ri(os that he is '+$in( and
offered the price a(reed +pon '+t Ri(os ref+sed
c#aiin( that she was not 'o+nd '$ the written
option a(reeent 'eca+se no option one$
6consideration7 was (i&en '$ *anche<. Accordin(
to Ri(os, the option contract is &oid.
Ae#d! *ince *anche< accepted the offer and
decided to '+$ within the period 'efore the offer
was withdrawn, a perfected -.* was created e&en
witho+t option one$. )n this case, there was no
option contract 'eca+se it was ere#$ an option
a(reeent. 0herefore, there was ere#$ an offer
on the part of Ri(os and once the offer was
accepted 'efore it was withdrawn, re(ard#ess of
whether option one$ was (i&en and in this case
no option one$ was (i&en, a perfected -.* was
created.
Note: )'a pa( a$ option one$
Q: 4 years within which to decide A assuming
there was option money, before the offeree
could decide to buy, the offeror withdraw on
the 3
th
month.
5a6 -an the offeree on the 1+
th
month
say %I would li0e to buy,?
5b6 -an the buyer compel the seller to
sell?
A! 6a7 "o.
6'7 "o, an action for specific perforance wi##
not prosper 'eca+se when he said he wi## '+t there
was not ore offer to 'e considered. "a?withdraw
na eh.
Q: If the offeree files an action for damages,
may that action prosper there being option
money given?
A! Hes, 'eca+se with the option one$, an option
contract is perfected, the offeror is 'o+nd to (i&e
the offeree, 2 $ears within which to decide and
fai#+re to that he is #ia'#e not 'ased on perfected
-.* '+t on perfected contract of option.
O&tion Mone1 (OM) +s. 4arnest Mone1 (4M)
.9 is not part of the price whi#e %9 is part of the
price and at the sae tie, it is a proof of the
perfection of the contract.
Q: -an the parties themselves agree that there
would be a perfected -:. and then the :<
would be treated as part of the price?
A! 0he *- said that this is 'indin( 'etween the
parties. 0ho+(h it is an .9, it can 'e considered
as part of the price as #on( as it is stip+#ated.
>itho+t stip+#ation, the .9 cannot 'e considered
as partia# pa$ent 'eca+se it is a consideration for
the option and therefore not part of the price.
Q: ith !<, does it mean that there is already a
perfected -:.?
A! "ot necessari#$. :nder the #aw, it is on#$ a proof
of the perfection of the sa#e. )n fact, there a$ not
'e a perfected sa#e e&en if there was %9 (i&en,
'ein( ere#$ a part of the p+rchase price or tota#
contract price. 0he parties a$ not ha&e act+a##$
a(reed as to the tota# price, therefore, e&en if the$
a(reed that a certain ao+nt is part of the price,
the$ ha&e not a(reed on the tota# price or if the$
a(reed on the tota# price, the$ ha&e not a(reed on
the o'/ect of the sa#e. *o no perfected -.*. %9
(oes into on#$ 1 of the essentia# e#eents, that is
not the on#$ e#eent in -.*. 0hat is on#$ a proof of
the perfection of the contract. 0a2e note, a proof
does not necessari#$ esta'#ish a fact, it a$ not 'e
s+fficient to esta'#ish a fact.
Q: ith a perfected -:., does it mean it is
already enforceable?
A! "ot necessari#$. "ote that +pon perfection, the
parties a$ cope# the other part$ to perfor their
respecti&e o'#i(ations. 5+t the perfection is s+'/ect
to the fora#ities prescri'ed '$ #aw for that
contract. 0herefore, e&en +nder 1475, the
perfection of the contract is s+'/ect to the
pro&isions of #aw on the fora#ities of -.* #i2e the
stat+te of fra+ds. 0here a$ 'e eetin( of the
inds '+t if it is not in the for prescri'ed '$ #aw, it
a$ 'e +nenforcea'#e.
;.R.: A -.* a$ 'e in an$ for. Artic#e 1483
pro&ides that a -.* a$ 'e in writin(, part#$ in
writin( xxx. 0his pro&ision is exact#$ the sae as
Artic#e 1356 in contracts which pro&ides that
contracts a$ 'e o'#i(ator$ in whate&er for the$
a$ ha&e 'een entered into pro&ided a## the
essentia# re1+isites are present. 5+t then a(ain
e&en Artic#e 1356 /+st #i2e Artic#e 1475 wo+#d
pro&ide for exceptions.
4Ace&tions: 0he #aw a$ re1+ire a partic+#ar for
for its &a#idit$. 0he -att#e Re(istration 4ecree is an
exap#e ? where the #aw itse#f pro&ides for a
partic+#ar for for the &a#idit$ of the sa#e. 5+t the
#aw a$ re1+ire partic+#ar for for its enforcea'i#it$
of the sa#e and that wo+#d 'e 1403 or the stat+te of
fra+ds. -oncrete#$, the sa#e of a parce# of #and if
not in writin( is &a#id '+t +nenforcea'#e. )t is not
&oid. "ote that the price of the #and is irre#e&ant if
io&a'#e.
Example: 5efore, the sa#e of a #and for 8300 is
&a#id and enforcea'#e e&en if not in writin(. 5+t
present#$, it has to 'e in writin( to 'e enforcea'#e.
0he price is sti## irre#e&ant.
"o&e'er 2008
)f the o'/ect of the sa#e is o&a'#e, $o+ ha&e to
consider not the &a#+e of the thin( '+t the price
a(reed +pon. 0he &a#+e a$ 'e different fro the
price. Ho+ can se## a thin( worth 81,000 for 8400
'+t the #aw pro&ides for the price. )f the price is at
#east 8500 and the sa#e is not in writin(, it wi## 'e
+nenforcea'#e.
Q: .ale of a watch (2*+, not in writing, may it
be unenforceable?
A! )t a$ 'e +nenforcea'#e if '$ the ters of s+ch
a(reeent, the o'#i(ation therein is not to 'e
perfored within 1 $ear. )f the$ a(reed that the
watch wi## 'e de#i&ered 2 $ears after and the
pa$ent wi## a#so 'e ade +pon de#i&er$, it wo+#d
'e +nenforcea'#e.

(aredes vs. !spino
;acts! 8aredes was a prospecti&e '+$er. %spino
owns a #and in 8a#awan. 8aredes is fro "orthern
L+<on. 0heir ne(otiation was thr+ #etters and
te#e(ras. %spino sent a #etter to 8aredes statin(
that he and his wife a(reed to se## the #and to
8aredes, that the deed of sa#e wi## 'e exec+ted
+pon the arri&a# of 8aredes in 8a#awan. >hen
8aredes arri&ed, %spino said he is no #on(er
interested in se##in(. 8aredes fi#ed a case to
cope# %spino to se## the #and. %spino contended
that the contract is +nenforcea'#e 'eca+se it is not
in writin(. Ae contended that +nder the stat+te of
fra+ds it is +nenforcea'#e. Ais contention was
s+stained '$ the tria# co+rt.
Ae#d! 0his contract is no #on(er co&ered '$ the
stat+te of fra+ds 'eca+se there was a #etter. Artic#e
1403 pro&ides that a note or eorand+ si(ned
'$ the part char(ed wo+#d 'e s+fficient to ta2e that
contract o+t of the operation of the stat+te of
fra+ds. )n this case, the defendant wrote a #etter
with his si(nat+re on it. 0he #etter too2 that contract
o+t of the operation of the stat+te of fra+ds and
therefore he a$ 'e cope##ed to exec+te the fina#
deed of sa#e.
R2;:0S AN. O(L2;A02ONS O9 0:4 C4N.OR
)n a deed of sa#e 64.*7, there can 'e
h+ndreds of o'#i(ations of the &endor '+t those
o'#i(ations wo+#d 'e 'eca+se of the stip+#ation.
5+t there are on#$ few o'#i(ations iposed '$ #aw.
0he 3 ost iportant!
1. 0o transfer ownership
2. 0o de#i&er
3. 0o warrant the thin(
0here are other o'#i(ations!
4. .'#i(ation to ta2e care of the thin( so#d
with the di#i(ence of a (ood father of a
fai#$ prior to de#i&er$.
5. ;ro the tie of the perfection +p to the
tie of de#i&er$ then there wo+#d 'e
o'#i(ation to pa$ for the expenses for the
exec+tion and re(istration of the sa#e and
o'#i(ation to pa$ the capita# (ains tax
wo+#d 'e on the se##er as a r+#e.
6. .'#i(ation to de#i&er the fr+its which is
re#ated to the o'#i(ation to de#i&er the thin(
O(L2;A02ON 0O .4L2C4R 0:4 9R=20S
B!: A sold a mango plantation to B but they
stipulated that delivery will be after the signing
of the deed of sale. After the e'piration of the 3@
month period, B demanded for the delivery.
#he vendor was able to deliver 1 month after
the date when he was supposed to deliver the
mango plantation. &uring this period, the
vendor harvested mango fruits and sold them
to B. #he vendor was able to deliver only after
the other fruits were harvested and sold to D.
-an B recover the mango fruits from D during
the 3
th
month period?
*A! 4eterine first whether 5 is entit#ed to the
fr+its 'eca+se if he is not entit#ed, then he cannot
reco&er the fr+its. )s he entit#ed to the fr+its after 6?
onth period d+rin( the 1?onth period prior to
de#i&er$G Hes, in fact, +nder 1537, the fr+its of the
thin( so#d fro the tie of perfection sha## pertain
to the '+$er.
Q: &oes it mean that the fruits from the time of
perfection shall pertain to the buyer?
A! Aindi naan. 1537 sho+#d 'e considered in
re#ation to 1164. :nder 1164, the fr+its sha## pertain
to the creditor on#$ fro the tie the o'#i(ation to
de#i&er the thin( arises. 0h+s, 5 is entit#ed to the
fr+its on#$ fro the tie of the expiration of the 6?
onth period. 4i 'a a$ a(reeent si#a that the
an(o p#antation wi## 'e de#i&ered on#$ after 6
onthsG :pon the arri&a# of this period, the
o'#i(ation to de#i&er the thin( arose, therefore, 5,
consistent with 1164 and 1537 wi## ha&e the ri(ht to
the fr+its.
Q: -an he recover the fruits from B?
A! "o. :nder 1164, 2
nd
para(raph, the '+$er or the
creditor wi## ha&e no rea# ri(ht o&er the fr+its after
the de#i&er$ of the thin(.
Q: hat is the remedy of the buyer?
A! 0he reed$ is to (o after the se##er for se##in(
these fr+its na hindi naan s$a entit#ed. 0he '+$er
is a#read$ entit#ed a#tho+(h a(ain he wi## ha&e no
rea# ri(ht o&er the fr+its +nti# the de#i&er$ of the
thin( to hi.
O(L2;A02ON 0O 0A<4 CAR4 O9 0:4 0:2N;
;.R.: 0he thin( so#d sho+#d 'e deterinate
'eca+se if (eneric 61460, 2
nd
para(raph7 then there
is nothin( to 'e ta2en cared of. )t wi## 'ecoe
deterinate on#$ +pon de#i&er$.
"o&e'er 2008
4Ace&tions: 0here are sa#es transactions wherein
the &endor wo+#d not ha&e this o'#i(ation!
a. -onstr+cti&e de#i&er$ ? 're&i an+ ,
0here wo+#d 'e no o'#i(ation on the
part of the se##er to ta2e care of the
thin( fro the tie of perfection
'eca+se at the tie of perfection, the
'+$er was a#read$ in possession of
the thin(. 9a$'e he 'orrowed the
thin(. Example: he 'orrowed the car
and he decided to '+$ it , the thin(
was a#read$ in his possession.
'. BKa#iwaanC an( 'entahan 3 +pon
perfection a$ de#i&er$ na then there
is nothin( to 'e ta2en cared of.
O(L2;A02ON 0O %AB 4D%4NS4S / 0AD4S
0hese o'#i(ations a$ 'e the s+'/ect of
stip+#ation. 5$ a(reeent, it wo+#d 'e the '+$er
who wi## pa$ xxx "ora##$, dito hindi nat+t+#o$ an(
sa#e dahi# hindi a(2as+ndo 2+n( sino
a('a'a$ad n( tax.
O(L2;A02ON 0O 0RANS94R O5N4RS:2%
B!: <ay a person sell something which does
not belong to him? ould the sale be valid?
ould the buyer acEuire ownership over the
thing sold, if seller does not own the thing?
*A! Hes. .wnership o&er the thin( so#d is not an
essentia# re1+isite for the sa#e to 'e &a#id. 5+t if the
se##er does not own the thin(, he a$ ha&e a
pro'#e on his o'#i(ation to transfer ownership.
0he pro'#e wo+#d 'e whether or not the '+$er
wo+#d ac1+ire ownership o&er the thin( so#d if the
person who so#d the thin( is not the owner.
Q: ho can transfer ownership by way of
sales?
A! .n#$ those who ha&e the ri(ht to se##.
Q: ho would have the right to sell and
therefore they can transfer ownership by way
of sale?
A! ;irst, is the owner. %&en if he is not the owner,
he a$ ha&e the ri(ht to se## 'eca+se!
617 Ae was (i&en the a+thorit$ '$ the
owner. Example: A(ent
627 Ae a$ 'e the owner '+t he a$
ha&e the a+thorit$ of the #aw to se##,
2nown as B*tat+tor$ 8ower to *e##C
6Artic#e 15057. Examples: "otar$
p+'#ic in p#ed(e, #i1+idators, (+ardians
and recei&ers.
637 0hose who ha&e the a+thorit$ of the
co+rt. Example: *heriff. Note: it is as
if the$ ha&e the a+thorit$ of #aw
'eca+se not e&en the /+d(e can
&a#id#$ se## soethin( if it is not
consistent with the #aw.
Q: <ay a buyer acEuire ownership over the
thing sold if the seller has no right to sell?
A! 0he answer '$ wa$ of exception is $es. 5+t the
7eneral rle here is +nder 1505 , the '+$er
ac1+ires no 'etter tit#e than what the se##er had. )f
the se##er is neither the owner nor does he ha&e
the a+thorit$ to se##, the '+$er ac1+ires no 'etter
tit#e than what the se##er had. )f his ri(ht is on#$ as a
#essee that is the ost that can 'e transferred to
the '+$er. )f he has no tit#e then no tit#e can 'e
transferred to the '+$er.
4Ace&tions: 6>hen the '+$er can ac1+ire a 'etter
tit#e than what the se##er had. %&en if the se##er
does not ha&e the ri(ht to se##, the '+$er a$
ac1+ire ownership o&er the thin( so#d 'eca+se the
#aw so pro&ides and not 'eca+se the se##er was
a'#e to transfer ownership to the '+$er.7
1. 5$ %stoppe#
2. %stoppe# '$ 4eed
3. %stoppe# '$ Record
4. *a#e '$ an Apparent .wner
5. "e(otia'#e 4oc+ent of 0it#e
6. 8+rchases fro a 9erchantDs *tore xxx
1. (1 4sto&&el , '$ the princip#e of estoppe#, a
person is prec#+ded fro den$in( that another
person has a+thorit$ to se## 'eca+se of his acts.
A#so 2nown as B%stoppe# in 8aisC which is a 2ind of
e1+ita'#e estoppe# 'eca+se of the acts @
representation of the owner, he a$ not #ater on
den$ the a+thorit$ of the 3
rd
person.

$. 4sto&&el b1 .ee/
B!: A and B co@owners of land sold 5sale is
verbal6 to B their land. B subseEuently sold the
land to D. ould D be considered to have
acEuired ownership over the land?
*A! :nder 1434 which is considered as B%stoppe#
'$ 4eedC 6technica# estoppe#7 , when the se##er
who was not the ownerat the tie of the sa#e,
ac1+ires ownership, a+toatica##$, ownership
passes to the '+$er '$ operation of #aw. Aowe&er,
Artic#e 1434 re1+ires de#i&er$ to the '+$er. And
+nder the facts, 1434 wo+#d not app#$ 'eca+se!
a7 0here was no showin( there was
pa$ent
'7 "o showin( that there was de#i&er$ of
the #and to L.
)t cannot 'e said that '$ operation of #aw, H
#i2ewise ac1+ired ownership '$ wa$ of estoppe# '$
deed.
'. 4sto&&el b1 Recor/
Furisprudence: *a#e '$ nephew of the owner of
the #and. *ince the nephew co+#d not de#i&er the
#and, the '+$er s+ed the nephew for estafa. ;or the
acc+sed to 'e ac1+itted, he as2ed his +nc#e to
testif$ that he act+a##$ had the a+thorit$ to se##.
"o&e'er 2008
>hen the +nc#e testified in co+rt, the nephew is
ac1+itted. After ac1+itta#, the '+$er deanded fro
the +nc#e the de#i&er$ of the #and. 0he +nc#e
ref+sed, c#aiin( that Bsa totoo #and, ) did not
a+thori<ed $ nephewC.
Q: -ase was filed against the uncle, would that
action prosper?
A! *- said $es 'eca+se he cannot 'e a##owed now
to c#ai that his nephew was not a+thori<e to se##
after he testified in co+rt that he (a&e s+ch
a+thorit$.
0his is estoppe# '$ record which is considered a
technica# estoppe#.
!. Sale b1 an A&&arent Owner
A. ;actorDs Act
5. Recordin( Laws
-. An$ other pro&ision of #aw ena'#in( the apparent
owner of the (oods to dispose of the as if he was
rea##$ the owner.
A. ;actorDs Act
;actor is an o#d nae for a(ent. %&en if
a(ent has no ri(ht to se##, a third person a$
ac1+ire ownership 'eca+se he a$ re#$ on the
power of attorne$ as written.
Example! *pecia# 8ower of Attorne$ 6*8A7 , a(ent
was a+thori<ed to se## a car. Aowe&er, in a &er'a#
instr+ction when the *8A was de#i&ered, the
principa# a+thori<ed the a(ent to se## that car to 1 of
the e'ers of a certain or(ani<ation '+t the
a(ent did not se## that car to one of the e'ers of
a certain or(ani<ation.
Q: ould the buyer acEuire ownership?
A! Hes. Artic#e 1900 pro&ides that so far as 3
rd
persons are concerned, the$ on#$ ha&e to re#$ on
the *8A as written, e&en if a(ent has no a+thorit$
or ri(ht to se##.
5. Recordin( Laws
Most coon 1+estion in the 'ar exa
<apalo vs. <apalo
;acts! 0he e#der 'rother, 9i(+e# 9apa#o, donated
ha#f of his #and to his $o+n(er 'rother, 9axio
9apa#o, 'eca+se the #atter wi## (et arried. 5+t
instead of the $o+n(er 'rother as2in( his e#der
'rother to si(n a deed of donation o&er that #and,
he as2ed his e#der 'rother and the #atterDs spo+se
to si(n a 4eed of *a#e o&er the entire parce# of
#and. Ae was a'#e to ha&e the entire propert$
re(istered in his nae. ;ew $ears after, he so#d the
#and to the "arcisos. .'&io+s#$, he does not ha&e
the ri(ht to se## the other ha#f. 0he "arcisos
c#aied that the$ are '+$ers in (ood faith fro an
apparent owner 'eca+se the entire propert$ was in
the nae of 9axio.
Q: &id the Garcisos acEuire ownership?
A! *- *aid 3 no, 'eca+se the #aw re1+ires that
the sa#e +st not on#$ 'e a sa#e '$ an apparent
owner '+t the '+$er +st 'e a '+$er in (ood faith.
0he '+$ers here were in 'ad faith 'eca+se 'efore
the$ 'o+(ht the #and, the$ went to the ho+se of
9i(+e# and as2ed hi whether he wo+#d a##ow
9axio to se## the entire #and. *- said the$ are in
'ad faith.
B!: #he owner of a parcel of land covered by
an :-# mortgaged the land to a creditor. #he
owner delivered the :-# to the creditor. #he
mortgagee forged the signature of the owner in
a deed of sale. 9e was able to register the
property in his name. 9e sold the land to a
third person who had no 0nowledge of the
transaction. &id the mortgagee acEuire
ownership?
*A! "o. A for(ed deed is a &oid instr+ent and
cannot con&e$ a &a#id tit#e to the '+$er '+t +nder
the #aw the for(ed deed a$ act+a##$ 'e the root of
a &a#id tit#e +nder the B9irror 8rincip#eC , when the
'+$er 'o+(ht it fro the ort(a(ee in whose nae
the propert$ was re(istered and re#ied on the 0-0,
then if he 'o+(ht the propert$ in (ood faith, he wi##
'e considered the owner +nder Artic#e 1505 in
re#ation to 8.4. 529. Ae 'o+(ht the #and re#$in( on
the 0-0 and 'o+(ht the #and in (ood faith then he
wo+#d ha&e a 'etter ri(ht than the rea# owner.
Q: hen a buyer may be considered a buyer in
good faith?
A! 5$ the ere fact that he had no 2now#ed(e at
the tie of the exec+tion of the deed does not
necessari#$ ean that he is in (ood faith. 0he #aw
f+rther re1+ires that he +st ha&e f+##$ paid witho+t
2now#ed(e of the defect in the tit#e of the se##er. *o
if after exec+tion he is in (ood faith '+t 'efore
pa$ent he is in 'ad faith then he is in 'ad faith.
B!: A, the owner of a parcel of land entrusted
to his cler0 the #-# of the land for safe0eeping.
#his cler0 instead forged the signature in the
&:. with him as the buyer. #hereafter, he was
able to have the property registered in his
name. #hen he sold the land to a third person.
&id the cler0 acEuire title over the land? -an
the owner of the land have the property
registered in his name?
*A! 0he 3
rd
person 'ein( in (ood faith, he is
considered to ha&e ac1+ired ownership o&er the
thin( so#d e&en if the se##er had no ri(ht to se##. 5$
wa$ of exception 'eca+se the '+$er 'o+(ht it fro
an apparent owner. An apparent owner who
disposed the thin( as if it was owned '$ hi.
#. Ne7otiable .ocment of 0itle
)f (oods are co&ered '$ a ne(otia'#e
doc+ent of tit#e and it was thereafter ne(otiated.
"o&e'er 2008
)f the '+$er 'o+(ht it in (ood faith and for &a#+e, he
wi## 'e protected +nder the #aw. Ae wi## ac1+ire
ownership e&en if the se##er did not ha&e the ri(ht
to se##.
Example: 0he se##er a$ ha&e ac1+ired tit#e '$
&io#ence. 5in+('o( n$a $+n( owner n( (oods.
8ero 2+n( ne(otia'#e doc+ent of tit#e $an and
proper#$ ne(otiated, #a#o na 2+n( 'earer doc+ent
of tit#e, then the '+$er a$ ac1+ire ownership e&en
if the se##er has no ri(ht to se##.
,. %rchases from a Merchant>s Store / Mar6ets
/ 9airs
.un Brothers vs. Helasco
;acts! *+n 5rothers was the owner of a
refri(erator. *+n 5rothers was en(a(ed in the
'+siness of se##in( refri(erator. *+n 5rothers so#d a
ref to Lope< on insta##ent 'asis. As stip+#ated,
*+n 5rothers reser&ed ownership +nti# f+##
pa$ent. Lope< on#$ paid 8300 o+t of 81,500. 0he
'a#ance to 'e paid on insta##ent. Lope< then so#d
the ref to Ee#asco.
Q: ould Helasco acEuire ownership?
A! "o 'eca+se Artic#e 1505 pro&ides that the '+$er
ac1+ired no 'etter tit#e than what the se##er had.
Aowe&er, Ee#asco was the owner of a store. .n the
next da$, Ee#asco so#d the ref to Ko Kan( -h+ who
paid in f+##. >hen *+n 5rothers #earned this
transaction, it fi#ed an action to reco&er the ref fro
Ko Kan( -h+.
Q: -an .un Brothers recover the ref from Io
Iang -hu by reimbursing the price?
A! *- *aid no. Artic#e 1505 pro&ides that the
ownership of the '+$er who 'o+(ht the thin( fro
a erchantDs store and he 'o+(ht it in (ood faith is
a'so#+te in character. Artic#e 559 does not app#$
'eca+se *+n 5rothers was not +n#awf+##$ depri&ed
of the ref and the ref was neither #ost. 559 wi##
app#$ if the owner was +n#awf+##$ depri&ed
6Example: the thin( was #ost or sto#en7. :nder 559
he can reco&er '$ rei'+rsin( the '+$er who
'o+(ht the thin( in (ood faith. Ae has to
rei'+rse.
B!: #he painting owned by J was stolen from
her and later she noticed the painting in the
room of B. hen as0ed how he acEuired the
painting, B said he bought it from a gallery
auction. -an the owner J recover the painting
from B?
*A! 0he first consideration here is the nat+re of the
(a##er$ a+ction. )s it a p+'#ic sa#e or notG *oe
s+((ested answers of the :8 Law -enter wo+#d
c#ai that a (a##er$ a+ction is not a p+'#ic sa#e.
Att1. =ribe: ) can a(ree that soe (a##er$ a+ctions
are pri&ate , B'$ in&itationC. 0h+s, in that a+ction )
wo+#d definite#$ a(ree, hindi $an p+'#ic sa#e.
)f it is not a p+'#ic sa#e then the owner who was
+n#awf+##$ depri&ed can reco&er that propert$ e&en
witho+t rei'+rseent. )f the a+ction sa#e is
considered a p+'#ic sa#e, he can reco&er as #on( as
he is wi##in( to rei'+rse the '+$er of the price
paid in that sa#e. Artic#e 559 is app#ica'#e 'eca+se
the owner was +n#awf+##$ depri&ed.
B!: J lost her diamond ring in a hold@up. =ater
on, this ring was an obKect of a public sale of
one pawnshop. -an J recover the ring from the
buyer in that public sale?
*A! Hes, Artic#e 559 pro&ides that e&en if the '+$er
is in (ood faith so #on( as the owner is wi##in( to
rei'+rse the '+$er of the price paid in that sa#e.
Note: A(ain in 1505, there is no ri(ht to reco&er as
#on( as the '+$er 'o+(ht it in (ood faith fro a
erchantDs store, there can 'e no reco&er$ as a
atter of ri(ht.
Q: 9ow transfer of ownership is effected?
A! :nder the #aw, as far as thin(s are concerned, it
is effected '$ de#i&er$!
6a7 Act+a#
6'7 -onstr+cti&e
0here can 'e no transfer of ownership witho+t
de#i&er$.
Q: Is it correct to say that every time there is
delivery, the buyer acEuires ownership upon
delivery?
A! "ot necessari#$. 0his is not an a'so#+te r+#e.
0here are 2inds of sa#e where despite de#i&er$ the
'+$er does not ac1+ire ownership +pon de#i&er$!
617 -onditiona# *a#e , ownership is reser&ed '$
the se##er s+ch that despite de#i&er$,
ownership does not pass.
Q: .o when would the buyer acEuire
ownership in conditional sale?
A! "ot +pon de#i&er$ '+t +pon the happenin( of
the condition which is nora##$ the f+## pa$ent
of the price.
627 *+n 5rothers -ase
637 *a#e on 0ria# @ *a#e on *atisfaction @ *a#e on
Appro&a# , +pon de#i&er$, e&en if there is
act+a# de#i&er$ there is no transfer of
ownership at the tie of de#i&er$.
Q: hen would the buyer acEuire
ownership?
A! ;ro the oent he si(nifies his acceptance
or appro&a# of the thin(.
Q: hat if he did not signify his acceptance
or approval? <ay he be considered to have
"o&e'er 2008
accepted and therefore ownership may be
considered to have passed to him?
A! Hes. 2 *cenarios!
6a7 0here a$ 'e a period a(reed +pon '$ the
parties within which the '+$er wo+#d ha&e to
decide. %&en if he fai#ed to si(nif$ his
acceptance '$ the ere #apse of the period,
he is deeed to ha&e accepted 6ip#ied#$
accepted7 hence, ownership passes to hi.
6'7 %&en 'efore the #apse of the period, he a$
'e considered to ha&e accepted if he did an
act wherein he wo+#d 'e considered to ha&e
adopted the transaction then ownership
passed to hi.
Example: %&en if he has 10 da$s within
which to decide '+t on the 2
nd
da$, he so#d
the car to another. .'&io+s#$, he is deeed
to ha&e accepted the thin( 'eca+se he did
an act which is inconsistent with the
ownership of the se##er #i2e he donated or
destro$ed the thin(.
6c7 )f there is no period a(reed +pon, the #aw
sa$s if he did not si(nif$ his acceptance he
wi## 'e considered to ha&e accepted after the
#apse of a reasona'#e tie. Reasona'#e tie
wi## depend on the circ+stances of the
sa#e, p+rpose of the sa#e, nat+re of the thin(
so#d. Example: 8erisha'#e (oods.
Sale or Retrn
Q: :wnership passes upon delivery?
A! Hes. Aowe&er, the '+$er is (i&en the ri(ht to
re&est the tit#e 'ac2 to the se##er nora##$ within a
certain period. Example: -#a+ses in s+'scription
a(a<ine which sa$s that $o+ can ret+rn within 30
da$s witho+t pa$ent.
B!: A car was sold for (1*+,+++. ()*,+++ paid
upon the e'ecution of &:.. #he balance
payable on a monthly basis. ()*,+++ was paid.
#he car was delivered to the buyer. 9owever,
before he could pay the balance, the car was
destroyed due to a fortuitous event or was
burned ''' -an he still be compelled to pay the
balance?
*A! Hes. :pon the de#i&er$ of the car to the '+$er,
there 'ein( no retention of ownership '$ the se##er.
6Note: >a#a sa facts na na?retain n( se##er and
ownership7. 0herefore, ownership passed to the
'+$er. :nder the princip#e of res perit doino ,
Artic#e 1504 , the owner 'ears the #oss and hence
it can 'e cope##ed to pa$ the price.
;.R.: Res perit doino , 1504.
Note! 4eterination of when ownership passed is
iportant 'eca+se if at the tie of the #oss, the
'+$er is not $et the owner, as a r+#e, the '+$er wi##
not 'ear the #oss #i2e in sa#e on appro&a# and he
has 10 da$s within which to decide and the thin(
was #ost thro+(h a fort+ito+s e&ent within the 10?
da$ period witho+t fa+#t on his part, the se##er wi##
'ear the #oss.
4Ace&tions:
1. =awyers$ -ooperative vs. #abora
;acts! 0his pertains to a sa#e of Aerican
=+rispr+dence to Att$. 0a'ora. )t was a sa#e on
insta##ent 'asis. :pon de#i&er$ or on the da$ the
'oo2s were de#i&ered to the office of Att$. 0a'ora,
the entire '#oc2 where Att$. 0a'oraDs office was
#ocated 6in "a(a -it$7 was '+rned. 0he office
inc#+din( the 'oo2s was '+rned. Att$. 0a'ora
ref+sed to pa$ the 'a#ance. Law$ersD -ooperati&e
fi#ed a case. 0wo defenses were raised '$ Att$.
0a'ora! 617 Res perit doino , there was a
stip+#ation in the contract that Law$ersD
-ooperati&e wi## retain ownership o&er the 'oo2s
+nti# f+## pa$ent. >hen the 'oo2s were #ost, no
f+## pa$ent so Att$. 0a'ora was not $et the owner.
Aence, Law$ersD -ooperati&e sho+#d 'ear the #oss.
Q: Is this argument correct?
A! *- *aid no. A#tho+(h there was a stip+#ation
that Law$ersD -ooperati&e retains ownership o&er
the 'oo2s +nti# f+## pa$ent, there was another
stip+#ation in the contract which states that the ris2
of #oss sha## pertain to the '+$er fro the tie the
'oo2s are de#i&ered whate&er a$ 'e the ca+se of
the #oss.
*o with that stip+#ation, that is one of the
exceptions.

$. 0itle was reser+e/ b1 the seller onl1 to
secre the &a1ment of the &rice b1 the b1er
Q: But even assuming that there was such no
stipulation under the contract, would Atty.
#abora have to bear the loss?
A! Hes 'eca+se it wo+#d fa## into the other
exceptions +nder 1504 that when the tit#e was
reser&ed '$ the se##er on#$ to sec+re the pa$ent
of the price '$ the '+$er, then '$ #aw, ris2 of #oss
wi## a#read$ 'e with the '+$er. 0his tit#e of the se##er
is 2nown as B*ec+rit$ 0it#eC and therefore '$ #aw
xxx the '+$er wi## 'ear the #oss.
'. .ela1 in the .eli+er1
>hen there is de#a$ in the de#i&er$ d+e to
the fa+#t of one of the parties, whoe&er was at fa+#t
wi## 'ear the #oss. "ote that either '+$er or se##er
a$ 'e at fa+#t.
Example 1: 0he '+$er and the se##er a$ ha&e
a(reed that the (oods are to 'e o'tained '$ the
'+$er at the wareho+se of the se##er on a specific
date. .n the date a(reed +pon, the se##er
deanded the '+$er to (et the (oods. 4espite
s+ch, the '+$er fai#ed to (et the (oods. .n the next
da$, the wareho+se was destro$ed d+e to
fort+ito+s e&ent.
Q: ho is the owner at that time?
"o&e'er 2008
A! 0he se##er '+t there was de#a$ on the part of the
'+$er hence +nder 1504 it is the '+$er who wi##
'ear the #oss.

Example 2: 0he se##er hise#f a$'e the one at
fa+#t. 0h+s, he is in de#a$ in de#i&erin( the (oods to
the '+$er.
Q: hy would this be an e'ception to the res
perit domino rule?
A! An( preise dito, the ownership has a#read$
passed to the '+$er '+t the (oods are sti## with the
se##er. -an this happen? Hes, 'eca+se of
constr+cti&e de#i&er$. )f there was constr+cti&e
de#i&er$, ownership passes to the '+$er '+t
ph$sica# possession is sti## with the se##er. 0he$
a$ ha&e a(reed this tie that the se##er wi## 'e the
one to de#i&er the (oods to the '+$er at a certain
date. >hen the date arri&ed, despite deand fro
the '+$er, there was no de#i&er$ on the part of the
se##er. %&en if the (oods are destro$ed the next da$
d+e to fort+ito+s e&ent, ta2e note an( owner a$
an( '+$er na '+t who will bear the loss? 0he
se##er 'eca+se he was in de#a$ in de#i&erin( the
(oods.
.O=(L4 SAL4 (AR02CL4 1#!!)
B!: J sold a registered parcel of land to " who
did not register the sale. #hereafter, J sold the
very same parcel of land to - who registered
and obtained a new #-# in his name. ho
would have a better right?
*A! Att1. =ribe: ) f+##$ a(ree with the :8 Law
-enterDs answer. )t depends on whether or not -
re(istered the sa#e in (ood faith. Re(istration is
on#$ one of the re1+ireents (ood faith is e1+a##$
an iportant re1+ireent.
Note: )n 1544 6do+'#e sa#e7, as to which r+#e
app#ies wi## depend on the thin( so#d if o&a'#e or
io&a'#e.
Q: If the thing is sold twice, who would have
the better right?
A! )f o&a'#e, the '+$er who first too2 possession
in (ood faith wi## ha&e the 'etter ri(ht. )f
io&a'#e, the '+$er, who first re(istered in (ood
faith, wi## ha&e the 'etter ri(ht. )f there was no
re(istration, it wi## 'e the first who too2 possession
in (ood faith. )f no possession in (ood faith, the
'+$er who has the o#dest tit#e in (ood faith.
%&en the 1
st
'+$er is re1+ired to 'e in (ood faith.
.'&io+s#$, the first '+$er wo+#d ha&e the o#dest
tit#e. H+n( (ood faith ditto o'&io+s#$ wo+#d not
pertain to a'sence of 2now#ed(e of the 2
nd
sa#e
2asi s$epre 1
st
'+$er s$a. Ae is nonethe#ess
re1+ired to ha&e 'o+(ht the thin( in (ood faith.
Nood faith eans that he had no 2now#ed(e of the
defect of the tit#e of the se##er.
5arnin7: Please be careful when you recite you
register the sale not the land!
B!: If a thing is sold to 4 or more persons,
what would be the effect of:
5a6 #he first buyer who registered the sale
with 0nowledge of the 4
nd
sale.
5b6 #he second buyer who first registered
the sale with 0nowledge of the prior sale.
ho would have a better right?
*A! 6a7 )n the first scenario , the first '+$er who
re(istered the sa#e with 2now#ed(e of the second
sa#e would that ma0e him a registrant in bad
faith? "o. H+n( 2now#ed(e wo+#d pertain to the
2now#ed(e of the prior sa#e in order for hi to 'e a
'ad faith re(istrant. %h +na naan s$an( '+$er eh
so e&en if he re(istered, it wo+#d not a2e hi a
'ad faith re(istrant.
6'7 )n the second scenario , the '+$er there is
in 'ad faith. Ae has 2now#ed(e of the prior sa#e.
Aence, he has no ri(ht.
Q: If a person bought a thing without
0nowledge of the prior sale, does that mean he
is a registrant in good faith?
A! "ot necessari#$ 'eca+se fro the sa#e he a$
ha&e ac1+ired 2now#ed(e prior to the re(istration.
>hat is re1+ired '$ #aw is not 'ein( a '+$er in
(ood faith '+t a re(istrant in (ood faith. 8weden(
at the tie of the sa#e xxx the '+$er had no
2now#ed(e na na(2a'entahan na pa#a n+n( +na
'+t after 2 onths n+n( a(papare(ister na, the
'+$er had the 2now#ed(e of the prior sa#e and
therefore he wi## 'e a re(istrant in 'ad faith.
Bautista vs. .ioson
;acts! 0he owner A so#d a re(istered #and to 5 who
did not re(ister and neither did 5 ta2e ph$sica#
possession 'eca+se after the sa#e the$ exec+ted a
#ease a(reeent in which 5 was now the #essor. A
contin+ed to 'e in possession of the #and. After the
sa#e and the contract of #ease, A so#d the #and to -,
this tie - too2 ph$sica# possession.
-an he do that? Hes. Kasi #essee s$a eh, hence,
he can transfer possession to the 2
nd
'+$er.
ho between B and - would have a better
right? 5- did not also register the sale6
*- *aid that 5 wo+#d ha&e a 'etter ri(ht 'eca+se
when he exec+ted a #ease a(reeent with A, he is
in contep#ation of #aw in possession which is #e(a#
possession o&er the thin( and th+s a2in( hi a
possessor in (ood faith. Ka$ -, ph$sica#
possession n(a pero pan(a#awan( possession
#an(. H+n( #e(a# possession was with 5.
Note: 0his decision was critici<ed 'eca+se soe
a+thors said that it sho+#d 'e act+a# possession '+t
the *- said that #e(a# possession wo+#d s+ffice.
"o&e'er 2008
-arumba vs. -A
;acts! *a#e of #and to 5 who too2 ph$sica#
possession '+t did not re(ister. Ae is the first
'+$er. Aowe&er, the se##er 6A7 is a /+d(ent de'tor
in one case to a certain creditor naed -. 0he #and
'ecae the s+'/ect of an exec+tion sa#e. 0he
'+$er 'ecae - who re(istered the sa#e.
Q: ho would have a better right between -
and B 5- had no 0nowledge of the sale6?
A! *- *aid 3 5 'eca+se this #and was not
re(istered +nder the 0orrens *$ste. 1544 wo+#d
not app#$ to +nre(istered #ands.
Q: 9ow would you 0now that the land is
registered under the #orrens .ystem?
A! 8a( a$ .-0 or 0-0 na. 8ero 2+n( i'an(
doc+ents #an( #i2e tax dec#aration, it is not
considered re(istered.
Q: But - registered the sale, does it mean that
it is registered under the #orrens .ystem?
A! "o 'eca+se there are a#so s$stes of
re(istration of sa#e of #and in which the #ands are
sti## considered as +nre(istered #ands. *a i'an(
#i'ro. Aindi #i'ro +nder the 0orrens *$ste.
Q: If 1*22 will not apply, who has the better
right?
A! 5 'eca+se there was de#i&er$ to hi which was
act+a# de#i&er$ and hence +nder the (enera# r+#es
on de#i&er$, ownership passes to the '+$er and
when ownership ha&e passed to the '+$er, when
the propert$ was so#d in an exec+tion sa#e, ano
ma0u0uha ng buyer sa e'ecution sale? >a#a.
Ae ere#$ steps into the shoes of the /+d(ent
de'tor at the tie of the sa#e then he did not
ac1+ire ownership '$ &irt+e of that sa#e.
O(L2;A02ON 0O .4L2C4R 0:4 O(@4C0 O9
0:4 SAL4
4eterine the s+'/ect atter if it is a thin(
or a ri(ht 'eca+se there are different odes of
de#i&er$ as to thin( and as to ri(ht.
0hin7s
<in/s of /eli+er1 of thin7s as a conse3ence of
sale 6nown as Etra/itionF G n/er the law:
1. Act+a# 4e#i&er$ @ 9ateria# 4e#i&er$ @ 8h$sica#
4e#i&er$ @ Rea# 4e#i&er$ , the thin( is in the
possession and contro# of the &endee. 0a2e note
Bcontro#C. 0a2e note Bto the &endeeC.
Q: hat if the thing was delivered to a 7
rd
person?
A! =+rispr+dence , *- said 3 $es, there a$'e
act+a# de#i&er$ if the third person has a+thorit$ to
recei&e fro the &endee. 0h+s, a2in( hi an
a(ent of the &endee and that wo+#d sti## 'e act+a#
de#i&er$.
Note: 8hi#ippine #aw does not on#$ re1+ire act+a#
de#i&er$ , constr+cti&e de#i&er$ a$ res+#t in
transfer of ownership.
2. -onstr+cti&e , '$ the exec+tion of a p+'#ic
instr+ent if the contrar$ intention does not appear
on the doc+ent. 5$ the ere exec+tion of the
p+'#ic instr+ent that is e1+i&a#ent to de#i&er$.
Aence, ownership passes to the '+$er.
IuenCle L .treiff vs. <ac0e L -handler
;acts! 0he ori(ina# owner here *tan#e$ and
Nriffindor 6paran( Aarr$ 8otter 7 and the propert$
in&o#&ed here are fixt+res of a sa#oon. 9ac2e and
-hand#er are /+d(ent creditor of *tan#e$ and
Nriffindor. 5eca+se of a /+d(ent in fa&or of 9ac2e
and -hand#er, the sheriff #e&ied +pon these
properties which was sti## in the possession of
*tan#e$ and Nriffindor. 0he properties +nder
exec+tion were 1+estioned '$ K+en<#e and *treiff.
K+en<#e and *treiff c#aied that these thin(s were
so#d to the prior to the #e&$. )f the$ c#aied that
the properties were so#d to the, the properties
sho+#d 'e in their possession. 0a2e note that
*tan#e$ and Nriffindor were sti## in possession of
the (oods ph$sica##$. Aence, there was no act+a#
de#i&er$.
Ae#d! )n order that ownership wo+#d pass, it has to
'e in a p+'#ic instr+ent if that wo+#d 'e '$
constr+cti&e de#i&er$.
Note: 0he exec+tion of a p+'#ic instr+ent a$ 'e
e1+i&a#ent to act+a# de#i&er$ if the contrar$ intention
does not appear on the 4.*. Kasi pweden(
notari<ed '+t it is c#ear in the contract that
ownership wi## not pass +nti# f+## pa$ent of the
price then that is not e1+i&a#ent to de#i&er$. 0he
intention is c#ear.
<in/s of Constrcti+e .eli+er1
1. 4e#i&er$ of the Ke$s , of the p#ace where the
(oods are #ocated #i2e a wareho+se.
8rof. 4e Leon! this a#so ca##ed as s$'o#ic de#i&er$.
2. 5$ 9ere -onsent or A(reeent of the 8arties ,
if at the tie of the sa#e, possession to the (oods
cannot 'e transferred to the '+$er. 0here +st 'e
a reason wh$ it cannot 'e transferred at the tie of
the sa#e. 0his is a#so 2nown as tradition #on(a
an+.
Example 1: 0he thin( was the s+'/ect atter of a
#ease with a 3
rd
person +nti# the expiration of the
#ease, the thin( cannot 'e de#i&ered.
"o&e'er 2008
Example 2: 0he thin( was the s+'/ect atter of
coodat+. As a r+#e, period of coodat+
has to 'e respected.
3. 5re&i 9an+ , this is a 2ind of constr+cti&e
de#i&er$ 'eca+se the '+$er was a#read$ in
possession of the thin( so#d at the tie of the
perfection of the sa#e so he wi## contin+e to 'e in
possession after the sa#e, no #on(er as a #essee
'+t this tie as the owner. *o dati #essee #an( s$a
that is wh$ he was in possession or a$'e
depositar$ #an( s$a or a$'e he was the a(ent at
the tie prior to the sa#e.
4. -onstit+t+ 8ossessori+ , the se##er wi##
contin+e to 'e in the possession of the thin( after
the sa#e '+t no #on(er as an owner '+t in another
capacit$ #i2e #essee.
Bautista vs. .ioson
5eca+se a #ease a(reeent was entered into '$
the '+$er and se##er after the sa#e then the '+$er
'ecae the #essor and the se##er 'ecae #essee.
0herefore, the #essee wo+#d contin+e with the
possession no #on(er as an owner.
Q: hat if pursuant to their agreement the
seller delivered the goods to a common carrier.
Upon delivery of the goods to a common
carrier, would that result in transfer of
ownership immediately? 5#his is important
because in case the goods were destroyed
even due to a fortuitous event while in transit,
who will bear the loss?6
A! )f de#i&er$ to a coon carrier is de#i&er$ to the
'+$er, then ownership passes to the '+$er +pon
de#i&er$ to the coon carrier. 0hat is the (enera#
r+#e.
4Ace&tions!
617 )f stip+#ated in the 4.* that despite de#i&er$
to coon carrier ownership wi## not pass to
the '+$er 'eca+se ownership wi## pass +pon
f+## pa$ent.
627 %&en if 4.* does not pro&ide for s+ch
stip+#ation, the se##er a$ ha&e o'tained a
'i## of #adin( which pro&ides that the (oods
are de#i&era'#e to the se##er hise#f or the
a(ent of the se##er.
Ri7hts
<in/s of .eli+er1 of 2ncor&oreal %ro&ert1 /
8asi G 0ra/ition:
1. %xec+tion of 8+'#ic )nstr+ent
2. 8#acin( the 0it#e of .wnership in the 8ossession
of Eendee , a ri(ht wo+#d nora##$ 'e co&ered '$
a certificate.
Example: de#i&er$ of the certificate of shares of
stoc2s.
3. :se '$ the Eendee of Ais Ri(hts with the
EendorDs -onsent
Example: *a#e of shares of stoc2s 3 the &endee
a$ not a#wa$s ha&e the ri(ht to exercise his ri(hts
+nder the shares of stoc2s. -oncrete#$, if there is a
stoc2ho#dersD eetin(, the 'oo2s of the corporation
wi## 'e c#osed for 30 da$s 'efore the eetin(.
0h+s, if the sa#e occ+rred when the 'oo2s are
a#read$ c#osed, no one wi## 'e reco(ni<ed except
those re(istered owners. *o if $o+ are the '+$er of
those stoc2s, $o+ can on#$ +se $o+r ri(ht with the
consent of the &endor.
R=L4S ON SAL4 AS 0O 8=AN020B / 8=AL20B
O9 0:4 0:2N; SOL.
Q: In a sale involving 1,+++ pairs of shoes with
a specific design as agreed upon. #he seller
delivered 1,4++ pairs of shoes instead of only
1,+++. -an the buyer reKect everything?
A! "o. Ae has the ri(ht to re/ect on#$ the excess.
Re/ect the 200 '+t he can 'e cope##ed to accept
the 1,000.
Q: hat if instead of 1,+++, ?++ was only
delivered?
A! 0he '+$er cannot 'e cope##ed to recei&e 800
'eca+se partia# perforance is non?perforance.
Ho+ cannot cope# the creditor to accept partia#
f+#fi##ent as a r+#e 'eca+se 617 it can 'e a s+'/ect
of a stip+#ation that there can 'e partia# de#i&er$.
Other 4Ace&tions:
627 >hen o'#i(ation pertains to o'#i(ation which
is part#$ #i1+idated and part#$ +n#i1+idated. 0he
de'tor can cope# the creditor to accept the
portion which was a#read$ #i1+idated.
637 >hen the o'#i(ation is s+'/ect to different
ters and conditions.
Q: #he shoes per pair is (1,+++. #he seller only
delivered ?++ pairs out of 1,+++ pairs. #he
buyer accepted. It turned out that the seller can
no longer deliver the balance 54++ pairs6. 9ow
much can the buyer be compelled to pay? ?++
' (1,+++?
A! "ot necessari#$. Ho+ ha&e to a2e a distinction
as to whether the '+$er was aware that the se##er
co+#d no #on(er de#i&er the 'a#ance or when he
accepted, he was not aware. )f he was aware that
the se##er co+#d no #on(er de#i&er the 'a#ance then
he can 'e cope##ed to pa$ at the contract rate so
800 x 81,000 O 8800,000. )f he had no 2now#ed(e,
he can 'e cope##ed to pa$ on#$ the fair &a#+e. ;air
&a#+e si(+ro non 8700 each instead of 81,000.
Q: #he obligation to deliver 1,+++ cavans of
<ilagrosa rice. Instead of delivering 1,+++
cavans of <ilagrosa, the seller delivered 1,1++
"o&e'er 2008
cavans of both <ilagrosa and Burmese rice.
<ay the buyer reKect everything?
A! Hes, if the (oods are indi&isi'#e. 9eanin( each
sac2 of rice, 9i#a(rosa and 5+rese rice were
ixed. Aowe&er, if it is c#ear that per sac2 it is
9i#a(rosa rice and the 100 sac2s, it is c#ear that
those are 5+rese rice that wo+#d not 'e
considered as indi&isi'#e. Ae can 'e cope##ed to
accept 1,000 sac2s 9i#a(rosa and he has the ri(ht
to re/ect 100 sac2s 5+rese rice.
SAL4 O9 R4AL0B
Q: .ale of a parcel of land. (rice agreed upon
is (1<. <ore or less 1++ sEm. #he actual area
delivered by the seller was only ;* sEm. hat
are the remedies of the buyer?
A! 617 *pecific perforance , wo+#d 'e a reed$ if
the se##er is sti## in the position to de#i&er the
'a#ance. *i(+ro $+n( 2ata'in( #+pa sa se##er din,
hence, he can afford to (i&e additiona# 5 s1.
627 Q: If specific performance is not possible, is
proportional reduction a remedy?
A! )t depends on whether the sa#e is considered as
a sa#e with a stateent of an area of a rate of a
certain eas+re or if it is a #+p s+ sa#e.
6a7 )f #+p s+ , e&en if the area de#i&ered is
#ess than the area stated in the 4.*, there
is no ri(ht to deand for the proportiona#
red+ction of the price. Q: (ero pag
sumobra A 14+ sEm na deliver, can the
seller demand for the increase of the
price? A! )f #+p s+ sa#e, no.
6'7 )f the sa#e was 'ased at a rate of a certain
price per +nit of eas+re #i2e it was so c#ear
in the contract that the #and is 'ein( so#d at
810,000 per s1 so 810,000 per s1 x 100
O 819, the reed$ of proportiona# red+ction
of the price or accion 1+anti inoris is
app#ica'#e.
637 Q: Under the facts, ;* sEm was delivered,
would rescission be a remedy?
A! As a r+#e no 'eca+se rescission wo+#d on#$ 'e
a reed$ if the area #ac2in( is ore than 10I of
that area a(reed +pon. *o 2+n( 100 s1, dapat 11
s1 or 15 s1 an( 2+#an(, so o+t of 100 2+n( 85
#an( an( na?de#i&er, then rescission is a atter of
ri(ht.
Q: But 0ung ;* lang ang na@deliver meaning
the area lac0ing is less than 1+8, may
rescission be a remedy?
A! Hes, '$ wa$ of exception
(a) )f the '+$er can pro&e that he wo+#d not
ha&e 'o+(ht the thin( or #and hand he
2nown that is #ess than 100 s1. )t is a
atter of proof.
0his is consistent with a characteristic of rescission
+nder 1191, that in order for rescission to prosper ,
the 'reach +st 'e a f+ndaenta# 'reach. K+n(
2+#an( #an( n( 5s1 @ 10 s1 at a#a2i $+n( area,
there can 'e no rescission as a atter of ri(ht.
6'7 0he other one is e&en if the entire area was
de#i&ered as stated, proportiona# red+ction @
rescission a$ 'e a reed$ if a part of the
#and de#i&ered is of inferior 1+a#it$ than that
stip+#ated '$ the parties.
Example: *a#e of rice fie#d, it t+rned o+t
a'o+t 20I of the #and is swap, so hindi
pwede tanian. Aence, proportiona#
red+ction is possi'#e if he sti## wo+#d want
the #and or rescission wo+#d 'e a reed$
'eca+se the area of inferior 1+a#it$ is ore
than 10I of the tota# #and area +n#ess he
can pro&e that he wo+#d not ha&e 'o+(ht the
#and had he 2nown a portion of the #and is of
inferior 1+a#it$.
%LAC4 O9 .4L2C4RB
Read 1524, 1525 and 1198
0he se##er de#i&ered the (oods to the p#ace of
'+siness of the '+$er. )f the '+$er ref+ses to
recei&e the (oods, the '+$er wi## 'e considered in
de#a$ and therefore wi## 'e #ia'#e to the se##er
'eca+se of +n/+st ref+sa#.
Q: <ay the buyer be considered in delay for his
refusal to accept if there is no place stipulated
in the contract?
A! )t depends on the 2ind of thin(. 4eterine if it is
deterinate or (eneric. )f the thin( is deterinate,
the #aw pro&ides that it wi## 'e the p#ace where the
thin( is #ocated at the tie of the perfection of the
contract.
Q: hat if the obKect of the sale is a generic
thing?
A! *e##erDs p#ace of '+siness or residence.
Note: )f there is no stip+#ation when to 'e
de#i&ered, the se##er cannot 'e cope##ed to de#i&er.
Q: hat if at the time of the perfection of sale,
though the thing is determinate, it was on
board a ship while in transit. here will be the
place of delivery?
A! 4ependin( on the shippin( arran(eent a(reed
+pon '$ the parties.
9.O.(. , ;ree on 5oard
C.2.9. , -ost, )ns+rance, ;rei(ht
;...5. and -.).; are r+#es of pres+ption which
wo+#d ha&e to (i&e wa$ to the rea# intention of the
parties. *o after a##, the ;...5. or -.).;.
"o&e'er 2008
arran(eents do not rea##$ deterine the p#ace of
de#i&er$, the$ on#$ a2e r+#es of pres+ption.
*o in a -.).;. arran(eent, it is on#$ pres+ed that
the p#ace of de#i&er$ is the port of ori(in.
)n a ;...5. destination, it is on#$ pres+ed that the
point of destination is the p#ace of de#i&er$.
Q: hat really determines the place of
delivery?
A! .- said this indication as to the intention of the
parties as to the p#ace of de#i&er$ is the anner
and p#ace of pa$ent. )f there is an a(reeent as
to where and how the price is to 'e paid that wo+#d
'e the p#ace considered for p+rposes of de#i&er$
and therefore for transfer of ownership.
-oncrete#$, in one case which was -.).;.
arran(eent , it was stip+#ated that the se##er can
deand the pa$ent of the price +pon the arri&a#
of the (oods at the port of destination.
6*+pposed#$, in -.).;. arran(eent, the p#ace of
de#i&er$ is the port of ori(in7. .- said the p#ace of
de#i&er$ 'eca+se of the stip+#ation is the port of
destination. )t is where the pa$ent is to 'e ade.
Q: hat was the purpose of fi'ing the delivery
arrangement as a -.I.J. but the place of delivery
is the port of destination?
A! .- said the -.).;. arran(eent a$ ha&e 'een
a(reed +pon on#$ to fix the price. Example: 0he$
fixed the price for 829 that wo+#d inc#+de the
frei(ht, ins+rance or cost '+t sti## the p#ace of
de#i&er$ is the port of destination.
)n another case, ;...5. destination so
'ased on the pres+ption the p#ace of de#i&er$ wi##
'e the port of destination xxx the se##er wo+#d ha&e
to 'ear a## the expenses for the de#i&er$ of the
(oods +p to the port of destination. Aowe&er, it was
stip+#ated in the contract that the se##er a$
deand for the pa$ent of the price '$ ere
presentation of the 'i## of #adin( 65.L7.
Q: here do you get the B:=?
A! At the port of ori(in. Aence, e&en in the port of
ori(in he can a#read$ present the 5.L to the '+$er
and hence cope# the '+$er to pa$ the (oods.
A(ain .- ruled in that stip+#ation, the p#ace of
de#i&er$ is the port of ori(in. And the p+rpose of the
;...5. arran(eent, it was on#$ a(reed +pon in
order to fix the price eanin( that the se##er wi## sti##
ha&e to 'ear the expenses for the transportation of
the (oods +p to the destination a#tho+(h the '+$er
can a#read$ 'e cope##ed to pa$ the price e&en at
the port of ori(in.
*o consider a#wa$s the anner and p#ace
of pa$ent which is deterinati&e as to the p#ace
of de#i&er$.
Read 1582
Obli7ations which cannot be 5ai+e/:
1. .'#i(ation to transfer
2. .'#i(ation to de#i&er
Obli7ation which can be 5ai+e/:
1. .'#i(ation to warrant the thin(
<in/s of 5arranties n/er the Law:
1. %xpress
2. )p#ied
1. 4A&ress , an$ affiration of fact or an$ proise
'$ the se##er re#atin( to the thin(, the nat+ra#
tendenc$ is to ind+ce to p+rchase the thin(.
Re3isites:
6a7 0here is an affiration of fact
6'7 0he fact +st pertain to the thin( either to
the 1+a#it$, character or tit#e of the thin(
An$ other atter a$ not 'e considered as an
express warrant$.
0he +se of the words @ terino#o(ies is not
conc#+si&e as to whether or not there is an express
warrant$.
Example: B) (+arant$ @ warrant$ $o+ that $o+ wi## 'e
happ$ if $o+ '+$ this car at 8100,000C3 this does
not res+#t in an express warrant$
A(ain, if the affiration of fact pertains to the
1+a#it$ of the thin(, it is an express warrant$.
Example: 0hese 10 sac2s of ferti#i<er wo+#d res+#t
in 200 ca&ans of rice.
0he stateent of the se##erDs opinion is not as a
r+#e considered an express warrant$.
Example: B0his is the 'est piPa c#othC 3 it a$ t+rn
o+t that there are 'etter piPa c#oth.
As #on( as the se##er is not an expert on that fie#d,
that wo+#d 'e treated ere#$ as an opinion and
there can 'e no #ia'i#it$ for 'reach of an express
warrant$.
B!: %A, sold a land to B for (1< in Antipolo.
As agreed upon (1++,+++ will be paid upon the
signing of the &:.. #he balance will be paid
within 7+ days from the time the occupants
5sEuatters6 of the land are evicted. It was so
stipulated that if within 3 months, the sEuatters
have not yet been evicted, the seller should
return the (1++,+++. Another stipulation states
A within the 3@month period, the value of the
"o&e'er 2008
land doubled. &espite the filing of an eviction
suit by the seller and the lapse of the 3@month
period, the sEuatters were still occupying the
land. #he seller offers to return the (1++,+++ to
the buyer. #he buyer refused to accept the
(1++,+++ and told the seller %never mind even
if the sEuatters are still there. I will still buy the
land,. .o the buyer offered to pay the balance
(;++,+++ and demanded that a &:. be
e'ecuted by the seller. #he seller refused to
accept the (;++,+++. hat he did is to file an
action to rescind the contract. ould the action
prosper?
*A! 2 answers!
617 )f the answer is 'ased on rescission, the
action wi## not prosper 'eca+se rescission a$ on#$
'e in&o2ed '$ the a((rie&ed part$. 0he se##er is not
an a((rie&ed part$.
627 Aowe&er, +nder 1645 if the o'#i(ation is
s+'/ect to the happenin( of a certain condition,
Att1. =ribe! Act+a##$, here the perforance of the
o'#i(ation is s+'/ect to the happenin( of the
condition.
)f the condition did not happen, the '+$er wo+#d
ha&e 3 options!
6a7 "ot to proceed with the contract, which is
rescission.
6'7 Ae a$ wai&e the condition 6e&iction of the
s1+atters7 and proceed with the sa#e 3 this was
the reed$ chosen '$ the '+$er in this case.
6c7 Ae can treat the non?happenin( of the condition
as a 'reach of warrant$ and c#ai daa(es.
.'&io+s#$, the '+$er chose option 6'7 and therefore
the se##er cannot rescind the contract.
$. 2m&lie/ ,
%rof. .e Leon: 'eca+se of this ip#ied warrant$, it
cannot 'e said that 8hi#ippine #aw does not adopt
ca&eat eptor B'+$er 'ewareC. 6;a$eDs -a&eat !
8#ease chec2 the 'oo2 of 8rof. 4e Leon re(ardin(
this stateent. 0han2s 7
%&en if there is no stip+#ation as to these
warranties, the #aw itse#f wo+#d pro&ide for these
warranties and hence if there are hidden defects
he wo+#d ha&e reedies +nder the #aw or e&en if
he was depri&ed of the thin( he 'o+(ht he wo+#d
ha&e a reed$ a(ainst the se##er. Aence, it is not
correct to sa$ that 8hi#ippine #aw has adopted
ca&eat eptor. 5+t there are certain instances
when there wo+#d 'e no s+ch ip#ied warrant$
a(ainst hidden defects. 0here a$ 'e warrant$ as
to tit#e or a(ainst e&iction '+t there is no warrant$
a(ainst hidden defects +nder certain
circ+stances.
5arrant1 A7ainst 4+iction / 0itle
Q: If the seller was able to transfer ownership
to the buyer may the seller nonetheless be held
liable for breach of warranty against eviction?
A! Hes. 0hese are 2 different o'#i(ations! the
o'#i(ation to transfer ownership and the o'#i(ation
to warrant the thin(.
Example: 0his warrant$ a(ainst e&iction wo+#d
inc#+de the warrant$ that the '+$er fro the
oent of the sa#e ha&e and en/o$ the #e(a# and
peacef+# possession o&er the thin( so#d.
Ae a$ 'e depri&ed of the thin( '$ a 3
rd
person
e&en if he wo+#d not #ose ownership.
Q: hen would this happen?
A! 9a$'e the 3
rd
person has a 'etter ri(ht to the
possession of the thin(. 9a$'e there was a #ease
a(reeent entered into which has to 'e respected
'$ the '+$er.
Note: A contract of #ease a$ #ast for 99 $ears.
Q: If there is a claim or a 7
rd
person claims a
right over the thing bought, does it mean that
the seller will already be liable for breach of
warranty against eviction?
A! "o 'eca+se there are re1+isites which +st 'e
cop#ied with.
Re3isites:
1. 0here has to 'e fina# /+d(ent depri&in( hi of
s+ch thin( either who##$ or partia##$. )n other words,
a case was fi#ed '$ a 3
rd
person a(ainst the '+$er
which res+#ted in a fa&ora'#e decision as to the
p#aintiff res+#tin( in the depri&ation of the propert$
'$ the '+$er.
Note: ;or the se##er to 'e #ia'#e, he +st ha&e
'een notified of this case a(ainst the '+$er. )n fact,
he sho+#d 'e ip#eaded as a co?defendant in the
action 'eca+se!
6a7 0he se##er sho+#d ha&e an opport+nit$ to
defend his tit#e.
6'7 0he se##er wo+#d nora##$ ha&e the
2now#ed(e of the defenses as to the
propert$ which is so#d. )f there is one
person who can ediate the c#ai of the
p#aintiff 'etween the se##er and the '+$er
nora##$ it wo+#d 'e the se##er.
Q: If there is a decision in favor of the plaintiff
57
rd
person6 against the buyer in the trial court,
is it reEuired that the buyer should appeal in
order for him to be able to hold the seller
liable?
A! "o 'eca+se the part$ who sho+#d appea# if he is
interested sho+#d 'e the se##er. )f he does not want
to 'e he#d #ia'#e, he sho+#d appea# the case +p to
the *-. )f the decision 'ecoes fina#, he a$ 'e
he#d #ia'#e for 'reach of warrant$.
"o&e'er 2008
2. 4epri&ation +st 'e either!
62.17 5ased on a 3
rd
personDs prior ri(ht o&er
the thin( prior to the sa#e or
62.27 5ased on an act after the sa#e '+t
ip+ta'#e to the &endor.
-oncrete#$, the reason for the depri&ation a$'e
'eca+se of non , pa$ent of rea# propert$ taxes
'$ the se##er and not the '+$er.
Example: )f #and was so#d in an exec+tion sa#e
'eca+se of the fai#+re of the se##er to pa$ rea#
propert$ taxes 3 this can 'e the 'asis of #ia'i#it$
for 'reach of warrant$.
(ase/ on an Act after the Sale bt 2m&table to
the Cen/or
Example: 0here was a first sa#e to A and then a 2
nd
sa#e to 5. :nder the #aw on do+'#e sa#e, 5 ha&e a
'etter ri(ht if this is a sa#e in&o#&in( io&a'#e, if
he was the first one who re(istered the sa#e in
(ood faith.
0he first '+$er e&en if he was in possession a$'e
e&icted fro s+ch propert$ '$ the 2
nd
'+$er
'eca+se the 2
nd
'+$er wo+#d ha&e a 'etter ri(ht.
0his is 'ased on an act of the &endor after the sa#e
or after the 1
st
sa#e hence, there can 'e a #ia'i#it$
for 'reach of warrant$ a(ainst e&iction.
Q: If during the sale a 7
rd
person was already
occupying the land by way of adverse
possession so in an open, continuous ''' for )
years under the color of title. But after the sale,
the buyer did nothing. And hence, the
occupants claiming a right or ownership was
able to complete the prescriptive period of a
minimum of 1+ years. #hus, if a 7
rd
person
would be able to deprive this buyer of
ownership over the thing because of
acEuisitive prescription, can the buyer hold the
vendor liable for breach of warranty?
A! "o 'eca+se it was his fa+#t that the 3
rd
person
was a'#e to cop#ete the period for ac1+isiti&e
prescription. Aad he done soethin( to interr+pt
the r+nnin( of the prescripti&e period then he
wo+#d not ha&e 'een depri&ed of the ownership of
the thin(.
3. 0here sho+#d 'e no &a#id wai&er
4. 0he action to ho#d the &endor #ia'#e sho+#d 'e
fi#ed within the period prescri'ed '$ #aw.
Q: If indeed the seller can be held liable for
breach of warranty against eviction, what will
be the e'tent of liability of the vendor?
A! 0he &endor can 'e he#d #ia'#e for the &a#+e of
the thin( at the tie of the e&iction, incoe or
fr+its, cost of s+it, expenses of the contract and
daa(es and interest.
4aa(es a$ on#$ 'e c#aied if the se##er is a
se##er in 'ad faith. As #on( as he so#d the thin( in
(ood faith, he cannot 'e he#d #ia'#e for daa(es
re(ard#ess of whether there was a wai&er or not. )n
fact, if there is a wai&er '+t the &endor is in 'ad
faith, the wai&er is &oid and hence he can 'e he#d
#ia'#e for e&er$thin( +nder the #aw. )f there was no
wai&er and the &endor is in 'ad faith, a(ain he wi##
not on#$ 'e #ia'#e for expenses xxx '+t a#so for
daa(es, cost of s+it xxx e&er$thin(Q
Q: If the seller was aware of the defect of his
title at the time of the sale, hence, he is a seller
in bad faith?
A! "ot necessari#$. Ae a$ 'e aware '+t he
infored the '+$er of s+ch defect in the tit#e and
hence he cannot 'e considered 'ad faith &endor.
%&en if he did not infor the '+$er '+t if the '+$er
was a#read$ aware of the defect.
Q: hy would a buyer buy a thing if the title of
the seller has defect?
A! 9a$'e 'eca+se the '+$er needs the thin( for
his '+siness.
)f ) a the &endor and ) 2now there is a defect in
$ tit#e, ) wi## as2 the &endee to exec+te a wai&er.
Q: #hus, if there is such a waiver and assuming
the vendor acted in good faith, can the vendor
be held liable for breach of warranty?
A! )t depends on the 2ind of wai&er.
(a) )f wai&er consiente , the '+$er exec+ted a
wai&er witho+t 2now#ed(e of the defect in
the tit#e of the se##er. A#so, the &endor does
not 2now of the defect. 0he on#$ #ia'i#it$ of
the &endor for 'reach of warrant$ a(ainst
e&iction is the &a#+e of the thin( at the tie
of e&iction.
(b) )f the wai&er is intentionada , when the
&endee exec+ted the wai&er with
2now#ed(e in the defect of the tit#e of the
se##er, hence, he 2new of the possi'i#it$ of
'ein( e&icted and nonethe#ess 'o+(ht the
thin( the &endee cannot ho#d the &endor
#ia'#e.
5ARRAN0B A;A2NS0 :2..4N .494C0S
Re3isites:
1. 0he defect +st exist at the tie of the sa#e. )f
the defect started after the sa#e there can 'e no
s+ch #ia'i#it$.
2. 0he defect +st 'e hidden. )f the defect is
patent and the '+$er nonethe#ess 'o+(ht the thin(
then he can no #on(er ho#d the se##er #ia'#e.
"o&e'er 2008
)f the se##er is not aware of the hidden defects, he
can 'e he#d #ia'#e. )f he was aware, his #ia'i#it$ wi##
'e (reater 'eca+se that a2es hi a 'ad faith
se##er.
Q: !ven if there is such a hidden defect, is it
possible that the vendee cannot hold the
vendor liable despite the fact that there was
hidden defect even if he was not informed
because maybe the seller was not aware?
A! Hes, he a$ not 'e a'#e to ho#d the se##er #ia'#e
if he is an expert on the thin(. Ae is expected to
2now the defect.
3. 0he defect +st res+#t in the thin( 'ein( +nfit for
the p+rpose of the '+$er or at #east it diinish the
fitness of the thin( s+ch that the '+$er wo+#d not
ha&e 'o+(ht it at the price had he 2nown of s+ch
defect.
Q: If the thing which has a hidden defect was
lost or destroyed, can the vendee hold the
vendor liable for this breach of warranty? &oes
it matter if the loss was due to a fortuitous
event or maybe the loss was due to the fault of
the buyer himself, nonetheless, can he hold the
vendor liable?
A! Hes. 0he &endee can ho#d the &endor #ia'#e for
'reach of warrant$ a(ainst hidden defects e&en if
the thin( was #ost d+e to fort+ito+s e&ent or d+e to
the fa+#t of the &endee hise#f 'eca+se of the
hidden defects. 5+t of co+rse, if the ca+se of the
#oss was the defect itse#f, the #ia'i#it$ is (reater than
if the ca+se of the #oss was a fort+ito+s e&ent or
fa+#t of the '+$er.
)f there wo+#d 'e a pro'#e here as to the extent of
the #ia'i#it$ of the &endor, he sho+#d first consider
the ca+se of the #oss, a$'e it was #ost d+e to the
defect itse#f or #ost thro+(h fort+ito+s e&ent or #ost
thro+(h the fa+#t of the &endee. After that, he
sho+#d deterine whether the &endor was aware of
the defects or he was not aware. A(ain, if he was
aware, daa(es a$ 'e reco&ered. )f he was not
aware, he a$ not 'e he#d #ia'#e for daa(es
+n#ess he can on#$ 'e he#d #ia'#e for interest.
)f the defect was the ca+se of the #oss, the &endor
wo+#d 'e #ia'#e for the ret+rn of the price, not on#$
the price #ess &a#+e '+t a#so to ref+nd the
expenses and daa(es 'eca+se the &endor was
aware of the defects.
)f the &endor was not aware of the defects, he
cannot 'e he#d #ia'#e for daa(es '+t he wo+#d
on#$ 'e he#d #ia'#e for the price.
Q: #he price may be higher or lower than the
value of the thing?
A! Hes. )t does not atter. )t a$ 'e hi(her or
#ower. 0he thin( a$ depreciate or appreciate or
a$'e the thin( was so#d at a price #ess than the
&a#+e and therefore at the tie of the #oss, the
&a#+e is sti## (reater than the price '+t he is on#$
o'#i(ed to ret+rn the price.
)f the ca+se of the #oss of the thin( was a fort+ito+s
e&ent, he can on#$ 'e he#d #ia'#e for the price #ess
&a#+e.
Example: )f price is 8100,000 and the &a#+e at the
tie of the #oss is 880,000. Ae can 'e he#d #ia'#e
for 820,000 68100,000 ? 80,000 O 820,0007
Q: 9ow would defect be proven if the thing was
lost or destroyed due to fortuitous event?
A! )t is a atter of proof. 0he proof a$ ha&e 'een
o'tained a#read$ prior to #oss. 8weden( pina ,
exaine na n$a sa expert so eron na s$an(
e&idence of the defects prior to the #oss.
If the cause of the loss was fortuitous event or
fault of the vendee and the buyer was not
aware of the defects, is it possible that the
vendor may not be liable even for a single
centavo?
A! Hes, in this scenario 'eca+se he on#$ had the
o'#i(ation to ret+rn the price #ess &a#+e at the tie
of the #oss. )f it happens that the &a#+e is (reater
than the price, the &endor has no #ia'i#it$ e&en
there is hidden defect.

ANB C:AR;4 OR NON G A%%AR4N0
4NC=M(RANC4 NO0 .4CLAR4. OR <NO5N
0O 0:4 (=B4R
Q: ould there be an encumbrance over an
immovable which is a form of easement or
servitude?
A! An exap#e of this is a road ri(ht of wa$.
Q: If the buyer bought the land which turned
out to have a road right of way in favor of a 7
rd
person, can he claim breach of warranty
against any charge or non A apparent
encumbrance?
A! .f co+rse there are re1+isites!
617 0he enc+'rance or easeent or '+rden or
the road ri(ht of wa$ has to 'e non ,
apparent.
Q: <ay a road be non@apparent?
A! Hes, #i2e in r+ra# areas. )n r+ra# areas, $+n(
road ri(ht of wa$ (a p+ti2 #an( $an and
nora##$ the road wi## on#$ 'e +sed '$ the person
ha&in( this ri(ht d+rin( har&est period. Aar&est
period is once e&er$ 6 or 3 onths. )n the
eantie, d+rin( the 3 or 6 , onth period, p+ro
co(on $an and hence the road a$'e non ,
apparent.
"o&e'er 2008
)f it is apparent, no #ia'i#it$.
Q: If the encumbrance is non A apparent does
that necessarily mean that the vendor can be
held liable?
A! "o 'eca+se the enc+'rance a$ 'e 2nown to
the '+$er. 0his #ia'i#it$ wo+#d arise on#$ if the
enc+'rance is not 2nown to the '+$er.
Q: If he was not aware of this encumbrance
and the encumbrance is non A apparent,
vendor will now be liable?
A! "ot $et 'eca+se the enc+'rance a$ 'e
re(istered or annotated at the 'ac2 of the tit#e ,
ne(#i(ence of the &endee so he cannot ho#d the
&endor #ia'#e.
Q: If there is an encumbrance, what are the
remedies of the buyer?
A! 6a7 Ae can see2 for the red+ction of the price.
Q: -an he rescind the contract?
A! 6'7 Hes '+t the #aw re1+ires that the action for
rescission +st 'e fi#ed within 1 $ear fro the date
of the contract. )f after 1 $ear, no ore rescission.

6c7 )f he 'ecae aware ore than a $ear, he
a$ fi#e an action for daa(es, 5+t the #aw
re1+ires that the action for daa(es has to 'e fi#ed
within 1 $ear a#so '+t fro the tie of the
disco&er$ of enc+'rance. )f he fi#ed it for
exap#e, after 2 $ears fro disco&er$ , no
reco&er$ of daa(es.
5ARRAN0B O9 8=AL20B
%rof. .eleonH %rof. Cit7H %rof. (a+iera: there is
another warrant$ which is 5ARRAN0B O9
8=AL20B which inc#+des!
617 >arrant$ of ;itness
627 >arrant$ of 9erchanta'i#it$
0o soe a+thors the warrant$ of 1+a#it$ is
considered +nder the warrant$ of hidden defects.
Att1. =ribe: ) cannot a(ree that the warrant$ of
1+a#it$ is in the warrant$ of hidden defects. ) a(ree
with 8rof. 4e Leon, 8rof. Eit+( and 8rof, 5a&iera
that there is a warrant$ of 1+a#it$.
5ARRAN0B O9 920N4SS 9OR A %AR02C=LAR
%=R%OS4
0he thin( 'o+(ht a$ not act+a##$ ha&e an$ defect
and for 1 i##ion '+$ers it wo+#d 'e fit for their
p+rpose. Aowe&er, it a$ not 'e fit for the p+rpose
of 1 '+$er and if a## the re1+isites for this warrant$
are present, then he a$ ho#d the se##er #ia'#e for
'reach of warrant$ of fitness for a partic+#ar
p+rpose a#tho+(h there is no hidden defect '+t it is
not fit for the p+rpose of the '+$er.
)n order for the se##er a$ 'e he#d #ia'#e!
1. 0he '+$er has to infor the se##er of the
partic+#ar p+rpose for which the thin( is to
'e +se and
2. 0he se##er anifested that the thin( wo+#d
'e fit for the p+rpose and the '+$er re#ied
on s+ch representation of the se##er.
Note: )f the thin( is so#d +nder the trade nae
there can 'e no warrant$ of fitness for a partic+#ar
p+rpose.
5ARRAN0B O9 M4RC:AN0A(2L20B
)t pertains to the fact that it is fit for the (enera#
p+rpose. )f the thin( was so#d '$ description or '$
sap#e, it is considered that there is s+ch a thin(
as warrant$ of erchanta'i#it$.
SAL4 O9 AN2MALS 520: .494C0S G R=L4S:
1. 0he defect is a redhi'itor$ defect , it is s+ch 2ind
of defect that e&en '$ exaination of expert it
cannot 'e disco&ered.
Q: If one of the animals has redhibitory defect,
can the buyer rescind the entire contract
pertaining to all the animals?
A! ;.R.! "o. Ae can on#$ rescind the contract
pertainin( to the ania# with redhi'itor$ defect. Ae
cannot rescind the entire contract pertainin( to a##
ania#s.
4Ace&tion: )f he can pro&e that he wo+#d not ha&e
'o+(ht the others had he 2nown the defect of one
then he can rescind the entire contract.
Q: ho has the burden of proof that he would
not have bought the others had he 0nown of
the defect of one?
A! "ora##$, it wo+#d 'e the '+$er. 5+t the #aw
+nder certain circ+stances wo+#d pro&ide for this
pres+ption that it is pres+ed that he wo+#d ha&e
'o+(ht the others had he 2nown of the defect of
one.
Examples! Ae 'o+(ht the ania#s in teas or in
pairs then the pres+ption arises.
? Lo&e 'irds 6An( (a #o&e 'irds, 2apa(
naata$ $+n( isa #ater on aata$ din
$+n( isa. 9insan n(a (s+icide pa s$a
pa( a( isa na #an( s$a. )++nto( n$a +#o
n$a sa ca(e n$a. 7
? *#ed(e do(s 6*a (a co+ntries na a$
n$e'e BsnowC a$ (a s#ed(e do(s.
Kai#an(an pa( 'ini#i an( (a do(s, tea
si#a. 9a$ #eader pa n(a si#a eh at
s++s+nod si#a sa #eader ni#a 7
Q: If the animal which was bought, died of a
disease within 1+ days, the disease e'isting at
"o&e'er 2008
the time of the sale, may he still have a remedy
under the law?
A! Hes, if the disease t+rned o+t to 'e a conta(io+s
disease. )n fact, +nder the #aw, the sa#e is &oid. )f
he has a#read$ paid, he can reco&er what he paid
'eca+se the sa#e is &oid.

)f the disease +s not conta(io+s, +nder the #aw he
wo+#d on#$ ha&e a reed$ if the ania# died within
3 da$s.
2nstances whether there wol/ be no warrant1
a7ainst hi//en /efects an/ therefore ca+eat
em&tor ma1 be in+o6e/:
1. *a#e which is an Bas is where isC sa#e which
eans as it is fo+nd, where it is fo+nd xxx 'aha#a
2a sa '+ha$ o if $o+ want to '+$ the thin( and
$o+ cannot #ater on c#ai that there were hidden
defects. 6;a$e! p#s. research the cop#ete eanin(
of Bas is where isC sa#e. Att$. :ri'e wi## as2 the
eanin(. 7
Q: -an there be a claim of breach of warranty
against eviction?
A! Hes 'eca+se the se##er wo+#d ha&e or wo+#d sti##
warrant the tit#e o&er the (oods.
2. *a#e of 2
nd
hand ites
3. *a#e of ania#s in fairs
4. *a#e in p+'#ic a+ction
Note! 0here wo+#d sti## 'e warrant$ a(ainst
e&iction.
Note: R+#es on warrant$ a#so app#$ to /+dicia# sa#e.
Q: In sale by authority of law or in e'ecution
sale, can there be breach of warranty against
eviction?
A! Hes. 0he /+d(ent de'tor and not the sheriff
sha## 'e #ia'#e.
0he #aw wo+#d specifica##$ exept certain persons
fro #ia'i#it$ for 'reach of warrant$ #i2e sheriff,
a+ctioneer, ort(a(ee, p#ed(e and other persons
who se## '$ &irt+es of an a+thorit$ of #aw #i2e notar$
p+'#ic 'eca+se the$ are not rea##$ se##in( for
these#&es, the$ are se##in( on 'eha#f of another
person.
R2;:0S AN. O(L2;A02ONS O9 0:4 C4N.44
1. .'#i(ation to accept the thin( de#i&ered.
2. .'#i(ation to pa$ the price 6if warranted,
with interest7
1. Obli7ation to acce&t the thin7 /eli+ere/
Q: If the buyer received the goods delivered,
does it mean that he already accepted?
A! "o 'eca+se recei&in( is pre#iinar$ to
acceptin(. )n fact, this is consistent to the ri(ht
pro&ided '$ #aw to the '+$er which is the ri(ht of
inspection or the ri(ht of exaination. 0hereafter,
he a$ re/ect the (oods if defecti&e.
Q: hen will he be considered to have
accepted?
A! 617 >hen he intiated his acceptance to
the se##er.
627 %&en if he did not intiate his
acceptance or re/ection, he wi## 'e deeed to ha&e
accepted if he did an act which is inconsistent with
the ownership of the se##er. A(ain, if he p#ed(ed the
thin( to another that is an act of ownership or if he
so#d or donated the thin(.
637 )f he did not do an$thin( '$ ere #apse
of a reasona'#e tie, he wi## 'e deeed to ha&e
accepted the thin(. >hat is reasona'#e tie wo+#d
depend on the circ+stances s+rro+ndin( the sa#e.
Q: hat if after an e'amination or before the
e'amination, the buyer refused to accept and
informed the seller but the goods are already in
his place? hat if the goods were lost or
destroyed in the possession of the buyer even
due to fortuitous event, who will bear the loss?
A! )t wi## depend on the reason of the re/ection. )f
there is a /+st ca+se for the re/ection, then the
se##er wi## ha&e to 'ear the #oss 'eca+se there wi##
'e no transfer of ownership and he cannot 'e
cope##ed to pa$ the price. Aowe&er, if the reason
for the re/ection is +n/+stified, ownership passes to
the '+$er '$ operation of #aw then he wi## ha&e to
'ear the #oss +nder the res perit doino r+#e.
$. Obli7ation to &a1 the &rice
Q: hen?
A! 617 As stip+#ated
627 )f there is no stip+#ation, it wo+#d 'e at
the tie and p#ace of de#i&er$.
Q: If the delivery was made a year ago but the
payment of the price was made today, would
the buyer be liable for the interest from the
time of delivery up to the time of payment?
A! ;.R. "o. 4Ace&tions:
617 *tip+#ation , the &endor a$ on#$ a(ree
for the pa$ent of the price for a certain
tie on#$ 'eca+se there wi## 'e interest.
627 %&en if there is no stip+#ation , if the thin(
de#i&ered prod+ces fr+its or incoe.
Example 1: 0he o'/ect of sa#e is a rice #and.
)san( taon na sa '+$er $+n( rice #and i'i(
sa'ihin he har&ested twice a#read$. 0he '+$er
sho+#d 'e #ia'#e to pa$ interest.
Example 2: Apartent +nit. K+ita na $+n(
'+$er sa renta#s.
"o&e'er 2008
637 %&en if no fr+its, he a$ 'e #ia'#e for
interest if he is in de#a$. 0his de#a$ wo+#d
start fro the tie there is /+dicia# or
extra/+dicia# deand.
A -.* is a 'i#atera# contract res+#tin( in reciproca#
o'#i(ations +nder 1169 fro the oent one of the
parties in reciproca# o'#i(ation perfored his
o'#i(ation and the other part$ has not e&en witho+t
deand, the other part$ wo+#d 'e in de#a$ and
therefore #ia'#e for interest and daa(es.
5+t in this pro&ision, in order for the '+$er to 'e
considered in de#a$ there +st 'e /+dicia# or
extra/+dicia# deand. 0his artic#e sho+#d 'e
constr+ed to ean that there was a period fixed for
the pa$ent of the price. "a2a#a(a$ sa a(reeent
Btoda$ an( sa#e, after 1 $ear pa$entC. :pon the
expiration of the 1 $ear period, there has to 'e
/+dicia# or extra/+dicia# deand which is different
fro 1169 when the *- interpreted to ean that
the o'#i(ation is a#read$ d+e and deanda'#e at
the tie of the perfection of the contract. Aence,
no need for deand an$ore.
Ri7ht to 2ns&ect or 4Aamine
0his ri(ht a$ not 'e present in a## -.* 'eca+se
$o+ can wai&e the ri(ht of inspection. :pon
de#i&er$ and recei&in( the (oods, if $o+ a(ree that
$o+ are deeed to ha&e accepted , no ore ri(ht
to inspect.
)n -...4. arran(eent, the de#i&er$ wi## not 'e
ade +nti# pa$ent has a#read$ 'een ade '$ the
'+$er so in that scenario, he has to pa$ first e&en
'efore de#i&er$. 0his is a sa#e transaction where the
'+$er wo+#d ha&e no ri(ht of exaination prior to
acceptance.
Example
0he arran(eent 'etween a inin(
copan$ and "A8.-.R in the sa#e of coa#.
"A8.-.R wi## ha&e no ri(ht to inspect pre#iinar$
to acceptance, the$ wi## a#wa$s accept. 5+t after
acceptance, that there wo+#d 'e exaination of the
1+a#it$ of the coa# not for the p+rpose of re/ectin(
'+t for the p+rpose of fixin( the price. *o this is not
a ri(ht of exaination prior to acceptance. 0his is
on#$ an exaination for fixin( the price.
MAC4.A LA5
B!: hat is the <aceda =aw? >ive its essential
features.
A! R.A. 6552 BRea#t$ )nsta##ent 5+$er 8rotection
ActC.
Rea#t$ , o'/ect of the sa#e is rea#t$ 6not rea#
estate7. *pecifica##$, residentia# +nit and not
coercia# or ind+stria#.
Q: 9ow about a condominium unit?
A! )t is co&ered '$ the 9aceda Law as #on( as it is
residentia# in character.
Q: .ale on credit, does it mean that the sale will
be covered by the <aceda =aw?
A! "o. 0here is s+ch a sa#e on credit which is on a
strai(ht ter 'asis.
Example 1
19 , down pa$ent of 500,000 toda$ and the
'a#ance to 'e paid at the end of the $ear 3 not
co&ered '$ 9aceda Law
Example 2
300,000 toda$, the 'a#ance of 700,000 to 'e paid
on 10 e1+a# onth#$ insta##ents 3 co&ered '$ the
9aceda Law
A## the pro&isions +nder the 9aceda Law are for
the 'enefit of the '+$er.
Q: Is it correct to say that in this law, the buyer
cannot invo0e this law if he has not yet paid for
at least 4 years?
A! "o. %&en if he has on#$ paid for a onth, there
wi## 'e ri(hts a#read$ of s+ch '+$er +nder the
9aceda Law. )f he has paid at #east 2 $ears, he
wo+#d ha&e 'etter ri(hts.
Q: If he has paid less than 4 years of
installment, what are his rights?
A! 617 0he (race period , he has a ini+
of 60 da$s (race period 6the se##er can (i&e hi
ore7. 4+rin( the 60?da$ (race period, he can se##
his ri(hts +nder the contract, he can assi(n his
ri(hts, he can +pdate his acco+nt, he can pa$ the
'a#ance.
627 0he ri(ht to reco&er a portion of what
he has paid , cash s+rrender &a#+e 6-*E7. 0his
-*E is a ini+ of 50I of what he has tota##$
paid. 0his inc#+des insta##ent pa$ents, deposit,
downpa$ent , e&er$ ao+nt paid , 50I of that.
)t can 'e hi(her dependin( on the n+'er of $ears
that he has a#read$ paid.
Aence, if he has paid on#$ twice, he a$
'e entit#ed to -*E if the pa$ent is on ann+a#
pa$ents not onth#$.
Q: #he minimum of *+8 @ when higher?
A! 2 $ears , 50I 8 $ears , 60I
7 $ears ? 55I 9 $ears , 65I
10 $ears , 70I
%&er$ $ear thereafter, additiona# 5I.
Q: hat if it is 4+ years A 1++8?
"o&e'er 2008
A! "o. :pto 90I on#$. *o if 15 $ears or 16 $ears,
sti## it is 90I.
Q: ould the amount recoverable be bigger?
A! Hes. 90I depends on the tota# ao+nt paid.
90I pa din pero a#a2i an( 'ase.
B!: Ayce bought a condo unit for 1+<. 7<
downpayment. #he balance of )< payable in 3+
eEual monthly payments. Ayce religiously paid
until the 23
th
installment. :n the 2;
th
installment, she offered to update her account.
#he seller >erard said %I have already
cancelled the sale,. Is this cancellation valid?
A! "o. :nder the 9aceda Law, if $o+ ha&e paid a
ini+ of 2 $ears, $o+ are entit#ed to 30 da$s for
e&er$ $ear of pa$ent. :nder the facts, she has
paid 3 $ears. Aence, she is entit#ed to 90 da$s
(race period. "+n( na( defa+#t s$a n+n( 47
th
,
a(start pa #an( $+n( (race period. .n the 48
th
insta##ent , she was on#$ 30 da$s in defa+#t. 49
th
insta##ent , 60 da$s in defa+#t. *he was &er$
+ch within the 90?da$ (race period when she
decided to +pdate her acco+nt.
Q: hat if the installment period is for 1*
years. #he buyer defaulted on the 7
rd
year.
Under the law, she is entitled to a minimum
grace period of 3+ days. #hereafter, she was
able to update. But on the *
th
year, she
defaulted again. 9ow many days is her grace
period?
A! "one. 0he defa+#t +st 'e once for e&er$ 5?$ear
#ifetie of the contract.
Q: If there is a stipulation for the forfeiture of
the payment made A %the buyer will lose the
house and lot and he will not recover anything
because all his payments will be treated as
rentals, A is this a valid clause?
A! "o, the preise of co+rse if he has a#read$ paid
for 2 $ears 'eca+se '$ #aw he is entit#ed to 50I
-*E.
Q: %Upon failure to pay 1 or more installments
without need of notice, the seller would have
the right to cancel the sale, A is this automatic
cancellation clause valid?
A! Eoid. 0here has to 'e notice to the '+$er '+t
ore than that if the '+$er is a#read$ entit#ed to the
-*E, the cance##ation wi## ta2e effect on#$ +pon f+##
pa$ent of the -*E.
Q: Are the remedies under the <aceda =aw
alternative? -an the buyer be able to e'ercise 4
or more remedies all at the same time?
A! Hes, reedies +nder the 9aceda Law are
c++#ati&e.
R4M4.24S 9OR (R4AC: O9 CON0RAC0
R4M4.24S O9 AN =N%A2. S4LL4R
(AR02CL4 1#$,)
1. Ri(ht to retain the thin( in his possession
6possessor$ #ien @ withho#d de#i&er$7
2. Ri(ht of stoppa(e in transit+ @ ri(ht to
res+e possession of the (oods
3. Ri(ht of Resa#e
4. Ri(ht to Rescind
Q: Are there other remedies aside from Article
1*43?
A! Hes, the se##er a$ opt to fi#e an action for
specific perforance or action for daa(es.
Q: Under 1*43, who may be considered an
unpaid seller? If the buyer has already paid
;+8 of the price, may the seller invo0e these
remedies?
A! Hes, 'eca+se an +npaid se##er is one who has
not 'een f+##$ paid of the price.
Q: <ay a person who was not a party to the
sale be able to claim any of these remedies?
A! Hes, 'eca+se a se##er need not on#$ pertain to a
part$ to the contract. A person who is in the
position of the se##er is act+a##$ a se##er +nder the
#aw.
Q: ho would be in the position of the seller?
A! 0he assi(nee or heirs of the se##er or the a(ent
to who the 'i## of #adin( was indorsed '$ the
se##er.
Q: In unpaid seller, are his remedies
alternative?
A! "ot necessari#$, 'eca+se in fact '$ express
pro&ision of the #aw, the ri(ht of resa#e and the ri(ht
to rescind a$ on#$ 'e exercised if the se##er has
possessor$ #ien. 8a( wa#a na s$an( #ien, he can no
#on(er exercise the ri(ht of resa#e or ri(ht to
rescind so c++#ati&e to that extent. 5+t if there
are 2 reedies that a#ternati&e and cannot exist at
the sae tie, these are the ri(ht of stoppa(e in
transit+ and possessor$ #ien 'eca+se a re1+isite in
order for the se##er to ha&e a ri(ht of stoppa(e in
transit+ is that the se##er +st ha&e a#read$ parted
possession o&er the (oods.
S&ecific Reme/ies
1. Ri7ht to retain the thin7 in his &ossession
(&ossessor1 lien / withhol/ /eli+er1)
Q: hy is it called possessory lien?
A! 5eca+se there is another #ien in the #aw. 0his is
the #ien +nder the r+#es on conc+rrence and
preference of credit. 0his is the #ien of the se##er for
the price of the thin( so#d if the thin( has a#read$
'een de#i&ered to the '+$er and the '+$er 'ecae
inso#&ent. >hi#e the thin( is in the possession of
the '+$er there is s+ch a #ien '+t that is not the #ien
"o&e'er 2008
+nder 1526. 1526 a(ain is the ri(ht to retain the
(oods in his possession , the possessor$ #ien.
Q: hen would the seller have this possessory
lien? Is it reEuired that the buyer should be
insolvent?
A! )t is not re1+ired that the '+$er sho+#d 'e
inso#&ent '+t this is one of the instances when the
#ien a$ 'e in&o2ed when the '+$er is inso#&ent.
Other 2nstances 5here Seller Ma1 2n+o6e
%ossessor1 Lien
1. >hen there is no stip+#ation as to the
credit
2. .r there a$ 'e a stip+#ation as to the
period of credit '+t the period has a#read$
expired.
5hen wol/ the Seller be Consi/ere/ to ha+e
Lost his Lien
1. )f he wai&es his ri(ht
2. )f the '+$er #awf+##$ o'tained possession
o&er the (oods
3. >hen the thin( is de#i&ered to a coon
carrier and the se##er did not prefer his
ownership and possession o&er the
(oods.
)f $o+ ree'er the disc+ssion on de#i&er$ , the
r+#e here is de#i&er$ to the coon carrier is
de#i&er$ to the '+$er and therefore when the se##er
de#i&ered the (oods to a coon carrier as a r+#e
he #oses his #ien o&er the (oods. 0he preise of
that is that he did not preser&e his possession o&er
the (oods.
Att1. =ribe>s Comment: >ith d+e respect to this
artic#e, the artic#e sa$s Bif he did not reser&e his
ownership or possession o&er the (oodsC. ) donDt
thin2 that phrase ownership is acc+rate 'eca+se it
does not atter +nder the #aw re(ard#ess of
whether ownership has passed to the '+$er, the
se##er wo+#d ha&e the ri(ht to exercise an$ of these
4 reedies, notwithstandin( ownership has passed
pwede pa s$an( a(2aron n( possessor$ #ien. )n
fact, '$ express pro&ision of #aw e&en if he is on#$
ho#din( the thin( as a 'ai#ee, he wi## sti## ha&e
possessor$ #ien, hence, ownership is irre#e&ant
e&en if the se##er did not reser&e ownership, with or
witho+t reser&ation he a$ or he a$ not 'e
deeed to ha&e #ost his #ien. 8ero 2+n( na reser&e
n$a an( 2an$an( possession, definite#$, he wi## not
'e considered to ha&e #ost his #ien 2asi if +nder the
'i## of #adin( de#i&era'#e to the se##er then he wi##
not 'e considered to ha&e #ost his #ien th+s there is
no need for hi to exercise the ri(ht of stoppa(e in
transit+.
Q: If the seller opted to file an action to compel
the buyer to pay the price and the court
decided in favor of the seller. #he court ordered
the buyer to pay the price. -an the buyer tell
the seller to deliver the goods so that he will
pay the price? -an the seller now be compelled
to deliver because there was a final Kudgment
in his favor?
A! "o, the &er$ specific pro&ision of the #aw , /+st
'eca+se there is a fina# /+d(ent in fa&or of the
p#aintiff, that wo+#d not ean he wi## #ose his #ien
o&er the (oods.
Att1. =ribe>s Comment: 0his is a &er$ reasona'#e
r+#e 'eca+se is there an ass+rance that the '+$er
wi## pa$ e&en with co+rt orderG
$. Ri7ht of sto&&a7e in transit / ri7ht to
resme &ossession of the 7oo/s
Re3isites:
1. )nso#&enc$ of the '+$er is an essentia#
re1+isite
2. 0he se##er +st ha&e parted possession
o&er the (oods
3. 0he (oods +st 'e in transit
Q: .hould the debtor be insolvent already at
the time of the perfection of the sale?
A! "o, as #on( as at the tie the ri(ht is in&o2ed,
he is inso#&ent. 0he inso#&enc$ a$ happen a da$
'efore or 2 da$s 'efore 'asta at the tie the ri(ht
is in&o2ed, the '+$er is inso#&ent.
Q: 9ow is the right e'ercised?
A! 617 5$ o'tainin( act+a# possession of the (oods
627 5$ ere notice to the coon carrier.
Q: If such notice was sent to the common
carrier but the common carrier refused to
deliver the goods bac0 to the seller, is the
common carrier liable?
A! "ot necessari#$, if the (oods are co&ered '$ a
ne(otia'#e doc+ent of tit#e, the coon carrier
can 'e cope##ed to de#i&er the (oods p+rs+ant to
the exercise of the ri(ht of stoppa(e in transit+
'ac2 to the se##er on#$ if after the ne(otia'#e
doc+ent of tit#e is s+rrendered to the coon
carrier. )t sho+#d 'e a ne(otia'#e doc+ent of tit#e.
0his is a protection to the coon carrier. Kasi if
not ne(otia'#e, pwede $+n i?ne(otiate sa 3
rd
person
who a$ p+rchase the (oods in (ood faith and for
&a#+e. 0hat 3
rd
person wo+#d ha&e a 'etter ri(ht
2a$sa sa owner or se##er.
Q: If the seller validly e'ercised the right of
stoppage in transitu, what is the effect?
A! Ae wi## 'e considered to ha&e re(ained his
possessor$ #ien.
"o&e'er 2008

Q: In a scenario where the seller still has
possessory lien, he may have invo0ed the right
of stoppage in transitu so he regained
possessory lien, in the meantime, the buyer
sold the same goods to another person, so
tatlo na A the seller, the buyer and the 7
rd
person. -an this 4
nd
buyer compel the seller to
deliver the goods to him as the 4
nd
buyer?
A! As a r+#e no 'eca+se the se##erDs #ien o&er the
(oods wi## not 'e affected '$ the disposition ade
'$ the '+$er of the (oods to a 3
rd
person. Ae wi##
retain his possessor$ #ien. 2 exceptions!
1. )f the se##er assented to the disposition
2. %&en if he did not (i&e his consent to the
sa#e, he wi## #ose his possor$ #ien if!
a. the (oods are co&ered '$ a
ne(otia'#e doc+ent of tit#e
'. the ne(otia'#e doc+ent of tit#e
was propert$ ne(otiated to a 3
rd
person in (ood faith and for &a#+e.
"ot ne(otiation to a donee.
'. Ri7ht of Resale
Q: hen would the seller have this right?
A! 617 )f the (oods are perisha'#e
627 0he ri(ht is express#$ reser&ed in the
contract
637 0he '+$er has 'een in defa+#t for an
+nreasona'#e tie
Note: )n order to exercise this ri(ht, he +st ha&e
at the sae tie possessor$ #ien.
Q: If necessary for the validity of resale that the
seller should send a notice of the intention to
resell to the buyer which means that if there is
no notice of the intention to resell and then the
resale will be void. Is that correct? Is it correct
to say that for the resale to be valid, there
should be notice to the buyer of the date, time
and place of resale?
A! 0he answers to 'oth 1+estions 3 "o. 0he$ are
not necessar$ for the &a#idit$ of the resa#e.
Q: .o what is the relevance of these notices?
A! ;irst, the notice of the intention to rese## wi## on#$
'e re#e&ant if the (ro+nd re#ied +pon '$ the se##er is
that the '+$er has 'een in defa+#t for an
+nreasona'#e tie. Kasi fro the notice a2i2ita
how #on( the '+$er has 'een in defa+#t. *econd,
as to the notice of the date, tie and p#ace of
resa#e, this is not necessar$ for the &a#idit$ of
resa#e '+t a$ 'e re#e&ant in deterinin( whether
the sa#e was a (ood faith sa#e. 0his is re#e&ant as a
conse1+ence of resa#e, if there is sti## a 'a#ance.
;or exap#e, the tota# contract price is 8100,000.
0he '+$er did not pa$ a sin(#e centa&o. .+t of the
resa#e, an( proceeds #an( 860,000. .o may
balance pang (2+,+++, can the buyer be
compelled to pay the deficiency? Hes, '+t if the
sa#e is not a (ood faith sa#e, he a$ not 'e
re1+ired to pa$ the 'a#ance. hy? hat has the
letter got to do with good faith? 5eca+se if a
#etter was sent, then the '+$er co+#d ha&e 'een
present and co+#d ha&e deterined for hise#f
whether in fact an act+a# sa#e cond+cted and there
were act+a# 'idders in that sa#e. Kasi pweden(
(awa (awa #an( n( se##er na 2+nwari a$ '+i#i.
0a2e note +nder the #aw, the resa#e a$ 'e a
pri&ate sa#e. 0he on#$ #iitation here is that the
se##er cannot '+$ direct#$ or indirect#$.
Q: hat if there was an e'cess? !'ample A out
of the 1++0 price the buyer paid 4+0. balance
?+0. hat if in the e'ercise of the right of
resale, the seller was able to sell it at 17+0?
<ay the buyer be able to recover at least the
amount that he paid?
A! "o, 'eca+se +nder the #aw, the se##er wi## not 'e
responsi'#e for an$ profit that wi## deri&e fro the
resa#e. 6*ee Artic#e 15337
Q: ould there be unKust enrichment?
A! "one, 'eca+se it was precise#$ the fa+#t of the
'+$er ? his fai#+re to pa$ that the se##er exercised
the ri(ht of resa#e.
!. Ri7ht to Rescin/
>o+#d on#$ 'e a&ai#a'#e +nder 2 instances na
2apareho n( resa#e. 4i 'a resa#e 3 instances? an(
di #an( present sa rescission $+n( perisha'#e
(oods. So the 7ron/s in rescission are:
a. 0he ri(ht is express#$ reser&ed
b. 0he '+$er has 'een in defa+#t for an
+nreasona'#e tie
Note: )n resa#e, *- said ? if the ownership of the
thin( has a#read$ 'een transferred to the '+$er, in
order for the se##er to exercise the ri(ht of resa#e.
.hould he first rescind the contract?
A! "o, he can iediate#$ se## the (oods 'eca+se
the effect of the resa#e is to terinate the
ownership of the 1
st
'+$er and that ownership
wo+#d 'e &ested +pon the 2
nd
'+$er '$ operation of
#aw, hindi na 2ai#an(an a(?rescind.
)n rescission, this cannot 'e exercised for cas+a#
'reach. 8aran( 1191.
.ong Jo vs 9awaiian
;acts! 0he '+$er fai#ed to pa$ aro+nd 20 da$s fro
the tie the o'#i(ation to pa$ 'ecoe d+e.
Ae#d! 0he *- said, that it not a serio+s 'reach of
his o'#i(ation to pa$ which wo+#d entit#e the se##er
"o&e'er 2008
the ri(ht to rescind the contract. 0he n+'er of
da$s wo+#d depend on the circ+stances
s+rro+ndin( the sa#e. )n *on( ;o, the sa#e pertains
to o#asses@ s+(ar.
R4C0O LA5
? pro+#(ated to protect the '+$er
? pertains to the ri(ht of the '+$er
? if $o+ ana#$<e the #aw, it on#$ pro&ided 3
reedies
? pertains to o&a'#e on insta##ents
Q: Assuming this is a sale of diamond ring fro
1< payable in 1+ eEual annual. 1++0 each year
payable Fan 1 each year. #he buyer was able to
pay 1
st
and 4
nd
installment. 9e failed to pay the
7
rd
installment. &espite demand, the buyer
failed to pay. -an the seller cancel the sale?
A! "o, +nder the Recto Law, cance##ation of the
sa#e and the forec#os+re of ort(a(e a$ on#$ 'e
in&o2ed if the '+$er has fai#ed to pa$ 2 or ore
insta##ents. )f the '+$er fai#ed to pa$ on#$ 1
insta##ent the on#$ reed$ a&ai#a'#e to the se##er
is exact f+#fi##ent eanin( specific perforance.
Q: If after 4 months 5despite demand the buyer
failed to pay6 the seller filed an action to
recover a sum of money how much shall be
recovered by the seller? 0a2e note +nder the
facts he on#$ paid 2 insta##ents and hence the
'a#ance 8002. -an the seller recover the ?++0?
A! As a r+#e none 'eca+se in a sa#e in insta##ents,
this is act+a##$ an o'#i(ation to pa$ with a period.
%&er$ tie the period wo+#d arri&e on#$ then the
o'#i(ation wi## 'ecoe d+e and deanda'#e. An(
na(i(in( d+e and deanda'#e #an( $+n( 3
rd
insta##ent. 0he 4
th
insta##ent wi## 'e d+e on#$
another $ear and so on. >hat he can reco&er is
on#$ 1002 which 'ecae d+e on the third
insta##ent. 0hat is the (enera# r+#e. 5$ wa$ of
exception he a$ 'e a'#e to reco&er 8002 or
e&er$thin( if there is a c#a+se 2nown as
acce#eration c#a+se. K+n( sa 9aceda Law &oid
an( acce#eration c#a+se, sa Recto Law &a#id.
5eca+se nora##$ sa Recto Law, a#iit #an(
'ine'enta so there can 'e an acce#eration c#a+se
wherein that wo+#d a2e the entire 'a#ance d+e
and deanda'#e and therefore he can 'e
cope##ed to pa$ the entire 8002.
Q: #his time 7
rd
installment default sya. After
few months he was able to pay the 7
rd
installment. Ga0abayad sya ng 2
th
, 3
th
. :n the
)
th
he defaulted again. ould cancellation now
be a remedy? 5Ga0a@dalawang default na sya
eh6
A! "o, +nder the Recto Law he sho+#d ha&e fai#ed
to pa$ 2 or ore insta##ents eanin( 2
consec+ti&e insta##ents. Aindi sina'i n( 'atas ?
Cfai#ed to pa$ twiceC.
Q: If he failed to pay the 7
rd
and 2
th
then
cancellation would now be a remedy. .o what if
the seller opted to cancel the sale 5this is
rescission di ba?6 and the effect of cancellation
di ba mutual restitution and hence the buyer
should return the thing delivered to him and
the seller should return the amount he received
as payment. ould the seller really be obliged
to return the entire 4++0 51
st
and 4
nd
installment6?
A! "o, +nder the #aw, he is a##owed to retain a
reasona'#e s+ which a$ 'e considered as a
for of renta#. %xap#e 2+n( $+n( car an( 'ini#i, 2
$ears na n$an( (ina(ait, hence #aspa( na $+n.
Q: &espite the cancellation of sale which
normally result in mutual restitution, may the
seller this time be able to retain everything
which he received?
A! Hes, if there is a forfeit+re c#a+se except if
retainin( e&er$thin( wo+#d 'e +nconsciona'#e.
>hat is +nconsciona'#e wo+#d depend a(ain on
the circ+stances s+rro+ndin( the sa#e. %xap#e
2002 is not +nconsciona'#e for 4andin( -o/+anco.
5+t if the sa#e is a sa#e of achiner$ where the
'+$er is a poor farer? 2002 is +nconsciona'#e.
;ina##$ instead of cance##ation another reed$ is
forec#os+re of ort(a(e.
Q: Buyer bought a car and to secure the
payment of the price, he mortgaged his
diamond ring. #he buyer failed to pay 4 or more
installments 57
rd
and 2
th
installments6. If the
seller foreclosed the mortgage and it turned
out there was still a deficiency, if payable
amount is *++0 and in the foreclosure sale the
proceeds was only 7++0. <ay an action for the
recovery of balance prosper?
A! Hes, 'eca+se +nder the facts what was 'o+(ht
was not the one ort(a(ed. ;or 1484 6Recto Law7
to app#$, where there can 'e no reco&er$ of the
deficienc$ of the forec#os+re, the thin( 'o+(ht +st
'e the sae thin( ort(a(ed.
B!: Buyer bought a car to secure the
fulfillment of the obligation he mortgaged the
car but the buyer gave another security. 9e
as0ed his brother to mortgage his brother$s
house and lot. #he seller agreed. #he buyer
failed to pay 4 or more installments. #he seller
foreclosed the mortgage but there is a
deficiency. .o the seller filed an action for the
Kudicial foreclosure of the "!<. <ay that action
prosper?
"o&e'er 2008
A! "o, the forec#os+re of the 2
nd
ort(a(e is in fact
a deficienc$ /+d(ent. 0he on#$ p+rpose of the
forec#os+re is to reco&er the deficienc$ and that is
prohi'ited +nder the Recto Law.
4D02N;=2S:M4N0 O9 SAL4
)nc#+des the ordinar$ ca+ses of extin(+ishent of
o'#i(ation!
1. 8a$ent
2. "o&ation
3. Loss of the thin(, etcR
=n/er the law on sales
1. 0he exercise of the ri(ht of resa#e wi##
res+#t in the extin(+ishent of the 1
st
sa#e.
0he ownership of the 1
st
'+$er wi## 'e
terinated and s+ch ownership wi## 'e
&ested to the 2
nd
'+$er.
2. Rescission or cance##ation wi## extin(+ish
-.*
3. Redeption either con&entiona# or #e(a#

<in/s:
A. -on&entiona# ? it is 'eca+se the ri(ht to
rep+rchase is express#$ reser&ed in the contract
and th+s this ri(ht a$ on#$ arise in 1 2ind of
contract. 0his is a sa#e with a ri(ht to rep+rchase or
a pacto de retro sa#e.
5. Le(a#? a$ 'e exercised '$ co?owners or '$
owners of ad/acent #ot
A. Con+entional
)f there was no stip+#ation as to the ri(ht of
redeption then no ri(ht of redeption
Q: In the e'ercise of this right, how much
would have to be offered by the seller in order
to redeem the property? ould the price paid
by the buyer be sufficient in order to
repurchase the same?
A! "ot necessari#$, +nder the #aw, the ao+nt
which has to 'e offered '$ the se##er a retro in the
exercise of the ri(ht of redeption are! 617 price
paidS 627 the expenses inc+rred '$ the &endee for
the exec+tion of the contractS 637 necessar$ and
+sef+# expenses inc+rred '$ the '+$er.
Example
)n the sa#e of #and, in order to preser&e the #and
which is #ocated 'eside the ri&er, the '+$er a$
ha&e p+t +p a wa## in order that it a$ not erode.
0he expenses inc+rred '$ the '+$er wi## 'e
considered as necessar$ expenses for the
preser&ation of the thin( so#d and s+ch expenses
ha&e to 'e rei'+rsed '$ the se##er, in the ri(ht of
the se##er to rep+rchase the thin( so#d.
;rowin7 frits
Example
Q: In a mango plantation, there may be fruits at
the time of redemption. #he value of the fruits
is 1++0. -an the seller be compelled to pay for
the value of the fruits?
A! 0he answer wi## depend on whether there are
fr+its at the tie of the sa#e. )f there were fr+its at
the tie of the sa#e, the se##er wi## on#$ 'e o'#i(ed
to pa$ for the fr+its at the tie of redeption if at
the tie of the sa#e, the '+$er paid for the price of
the &a#+e of the fr+its.
*o a(ain, there were fr+its at the tie of
redeption, whether or not the se##er wo+#d ha&e to
pa$ for the fr+its at the tie of redeption wo+#d
depend on whether or not there were fr+its at the
tie of the sa#e. 0a2e note that the sa#e a$ ha&e
'een 2 $ears 'efore that or 3 $ears 'efore that '+t
if at the tie of the sa#e there were fr+its and the
'+$er paid for the &a#+e of these fr+its, it is
reasona'#e that the se##er wo+#d a#so ha&e to pa$
for the &a#+e of the fr+its at the tie of rep+rchase.
5+t if at the tie of the sa#e, there were fr+its '+t
the '+$er did not pa$ for the &a#+e of the fr+its then
the se##er sho+#d not #i2ewise 'e cope##ed to pa$
for the &a#+e of the fr+its at the tie of redeption.
0here were no fr+its at the tie of the sa#e '+t
there were fr+its at the tie of redeption.
Q: If a -:. was entered into in 4++1 and there
were no fruits at the time of the sale. 9owever,
at the time of redemption April 1, 4++* there
were fruits. #he value of which is 1++0. 9ow
much can the seller be compelled to pay for
these fruits?
A! :nder the #aw, the se##er can 'e cope##ed to
pa$ for the &a#+e of the fr+its in proportion to the
period in which the '+$er was in co+nted fro the
anni&ersar$ date of this contract. H+n( anni&ersar$
date a$ e&er$ =an 1. H+n( anni&ersar$ date this
$ear =an 1, 2005, fro =an 1, 2005 +p to Apri# 1,
2005 ? the '+$er wo+#d 'e in possession for 3
onths o+t of 12 onths is J of the entire $ear.
#herefore, how much can the seller be
compelled to pay? 25,000 , J of the &a#+e. 0he
#on(er the '+$er is in possession of the (oods, the
'i((er the ao+nt which has to 'e paid '$ the
se##er.
Att1. =ribe>s Comment: )t is reasona'#e. )f the
'+$er has 'een in possession for a #on(er period
of tie then he wo+#d ha&e tend ore for the
preser&ation of the thin( or fr+its. )n fact, if the date
of redeption period is =+#$ 1 and the se##er wo+#d
ha&e to pa$ 50I in proportion to the period when
the '+$er was in possession co+nted fro the
anni&ersar$ date.
"o&e'er 2008
%erio/ in con+entional re/em&tion
B!: Ariel sold a land to Fessica for 1+0 with a
right to repurchase e'pressly agreed upon
between the parties. Because they were
friends, they did not provide for a period within
which the seller may e'ercise the right to
repurchase. But again, there was a reservation
of the right to repurchase only that the parties
failed to fi' the period.
a. hen should the seller a retro
e'ercise the right to
repurchase?
b. If the seller failed to
repurchase within the period
agreed upon or the period
prescribed by law, what will be
your advice to the buyer in
order to protect the buyer
more?
A! 6a7 0he period is 4 $ears. :nder the #aw, if
there is a ri(ht of redeption '+t the parties fai#ed
to pro&ide for s+ch a period, the #aw itse#f sa$s that
ri(ht a$ 'e exercised on#$ within 4 $ears.
Aowe&er, if the parties stip+#ated as to the period
within which the ri(ht a$ 'e exercised #i2e 20
$ears, the #aw pro&ides, it cannot exceed 10 $ears
and hence the 20?$ear period wi## 'e red+ced.
Aindi naan &oid $+n( 20 $ears tota##$, it wi## /+st
'e red+ced to 10 $ears 'eca+se the #aw pro&ides
that it sho+#d not exceed 10 $ears.
6'7 0o fi#e an action for the conso#idation of
the tit#e.
Q: In a sale with a right to repurchase,
ownership passes when? Upon the e'piration
of the period to repurchase?
A! "o, it fo##ows the (enera# r+#e in sa#e that
ownership passes to the '+$er +pon the de#i&er$
as a r+#e.
Q: .o what will be the effect of the e'piration of
the period for repurchase without the seller
e'ercising such a right? :r even if he did
e'ercise it was not valid e'ercise of a right, li0e
for e'ample: a total amount which should have
offered *++0. 9e only offered to pay 7++0.
9ence, the buyer can refuse and therefore the
right to repurchase was not validly e'ercised.
#hus, assuming there was no e'ercise of the
right to repurchase what is the effect on the
ownership of the buyer?
A! 5+$ers ri(ht or ownership o&er the thin(
'ecoes a'so#+te. 4+rin( the period he has
ownership '+t his ownership is s+'/ect to a
reso#+tor$ condition which is the &a#id exercise of
the ri(ht to rep+rchase. )f the ri(ht to rep+rchase,
his ownership wi## 'e terinated.
Q: ould this be correct @ that upon the lapse
of the period without the seller having
e'ercised the right to repurchase the
ownership of the buyer becomes absolute? Is
this true also in sale of immovable? :r true
only in sale of movable?
A! )t does not atter, it is tr+e in e&er$ -.* with a
ri(ht to rep+rchase. ;ro the oent '$ the fact
that the se##er was not a'#e to exercise the ri(ht to
rep+rchase within the period pro&ided '$ #aw, the
ownership of the '+$er 'ecoes a'so#+te.
Q: #he law reEuires for an action for
consolidation of title, is this necessary in order
the buyer to acEuire ownership or at least to
acEuire absolute ownership?
A! "o, this action is on#$ necessar$ if he wo+#d
want the propert$ to 'e re(istered in his nae. )n a
sa#e of io&a'#e with a ri(ht to rep+rchase and
the period for rep+rchase has a#read$ expired
witho+t the se##er exercisin( s+ch ri(ht, the '+$er
can on#$ ha&e the propert$ re(istered in his nae
'$ fi#in( s+ch an action with the co+rt. 0h+s, in
order to protect hi f+rther a(anda $+n( action
for conso#idation of tit#e 2a$sa naan the thin( wi##
'e so#d '$ the se##er to another person.
Q: Assuming you are a lawyer, a client as0ed
you to e'amine a document which is
denominated as a &:. with a right to
repurchase and that client was the seller was
the seller a retro 5he would have the right to
repurchase6. 9owever, upon e'amination of the
terms and conditions of the contract, it appears
that the right has long e'pired. #hus, the client
as0ed, may I still be able to recover this parcel
of land which is the subKect matter of this
contract?
A! -onsider the possi'i#it$ that the c#ient a$
reco&er. As2 the c#ient of the circ+stances
s+rro+ndin( the exec+tion of that doc+ent. As2
hi B>h$ did $o+ exec+te this 4.*GC )f the answer
is B2asi po att$. na(2a +tan( a2o sa 2an$a 1502
tapos sa'i n$a instead of exec+tin( a ort(a(e
a(reeent, 4.* with a ri(ht to rep+rchaseC.
An$wa$, fro the 4.* with a ri(ht to rep+rchase,
he a$ appear to 'e protected. Kasi if he owes
that person 19 and if he is (i&en in the de't a
period of 1 $ear within which to pa$ in the 4.*
with a ri(ht to rep+rchase, he wo+#d a#so ha&e 1
$ear within which to rep+rchase. 4i'a paran(
pareho #an(G 5+t instead of ort(a(e he was
as2ed to si(n a 4.*. )f that is the case, c#ear#$ $o+
can conc#+de that this is not an honest to
(oodness sa#e with a ri(ht to rep+rchase. Ho+ can
treat this transaction ere#$ as an e1+ita'#e
ort(a(e. Aence, he a$ sti## 'e a'#e to reco&er
what was the s+'/ect atter of that transaction.
"o&e'er 2008
Q: hy would the creditor as0 his debtor to
sign a &:. with a right to repurchase instead
of a mortgage to secure the fulfillment of his
obligation?
A! 0o ens+re that the propert$ wi## 'e owned '$ hi
a+toatica##$ +pon the expiration of the period
within which to rep+rchase and the se##er a retro
fai#ed to exercise the ri(ht to rep+rchase which wi##
not happen in a ort(a(e. 0here is a princip#e in
ort(a(e 2nown as pact+ coissori+. :pon
the defa+#t of the de'tor the ort(a(ee, cannot
&a#id#$ appropriate the thin( for hise#f. .wnership
wi## not a+toatica##$ pass '$ ere defa+#t of the
principa# de'tor 'eca+se pact+ coissori+ is
&oid 'eca+se the reed$ of the creditor is to ha&e
the propert$ so#d in a forec#os+re sa#e not to
appropriate the thin(. *o to a&oid those
re1+ireents sa ort(a(e, an( (a(awin n( se##er@
creditor is to ha&e the de'tor si(n a 4.* with a
ri(ht to rep+rchase 'eca+se the oent the
de'tor fai#ed to rep+rchase within the period,
a'so#+te ownership (oes to the creditor who is in
that sa#e the '+$er 6creditor7 a retro. >a#a na
s$an( 2ai#an(an (awin.
)f the instr+ent is a 4.* with a ri(ht to
rep+rchase it a$ act+a##$ 'e considered as an
e1+ita'#e ort(a(e '$ /+st exainin( the ters
and conditions of that contract. 0here are certain
instances when the #aw itse#f pro&ides for a
pres+ption that this is an e1+ita'#e ort(a(e
+nder 1602.
B!: hat are those instances?
1. 0he price is (ross#$ inade1+ate.
Example: )f the &a#+e of #and is 19, the
price stated in the 4.* is 1002 which is
(ross#$ inade1+ate. Ka$a 1002 $+n 2asi
an( +tan( n$a ta#a(a 1002.
Q: But is this presumption conclusive?
A! "o, this is ere#$ a disp+ta'#e pres+ption. )n
fact, the *- wo+#d s+stain the &a#idit$ of a sa#e with
a ri(ht to rep+rchase despite the (ross inade1+ac$
of price 'eca+se soehow it wo+#d 'e
ad&anta(eo+s to the se##er a retro. )n the exercise
of the ri(ht to rep+rchase, it is ore ad&anta(eo+s
if the price is sa## 'eca+se he can easi#$ coe +p
with that ao+nt and rep+rchase the thin(.
2. )f the &endor a retro wo+#d contin+e to 'e
in the possession of the thin( after the
sa#e, which is +n+s+a# 'eca+se if indeed
this is a sa#e then the &endee sho+#d 'e in
possession after the sa#e.
Note: 0his is on#$ a disp+ta'#e pres+ption.
Q: hat if there was a stipulation in the -:.
that the seller will shoulder the capital gains
ta'? ould the presumption that this is an
eEuitable mortgage will arise?
A! "o, the pres+ption wi## on#$ arise if the se##er
'o+nd hise#f to pa$ the tax on the thin( not the
capita# (ains tax. 0hat wo+#d 'e the rea# propert$
tax.
Att1. =ribe>s Stor1: Aindi a2o a(a#in( sa tax.
*a'i ni =+stice Eit+(, he was o+r re&iewer, 2+n(
s$a raw an( exainer, he wo+#d on#$ as2
1+estions on (enera# princip#es on taxation wa#a
+n( reedies or proced+re. "aniniwa#a a2o 2a$
=+stice Eit+(, it t+rned o+t $+n( (a 1+estions
ta#a(an( (enera# princip#es 2a$a na2a?t$a'a a2o.
Ae Ae Ae Ae
An$wa$, +nder the #aw on taxation it is the se##er
who has the o'#i(ation to pa$ the capita# (ains tax
+n#ess otherwise a(reed +pon with the '+$er wo+#d
ha&e to pa$ the tax. 0he pres+ption that this is an
e1+ita'#e ort(a(e wi## on#$ arise if the se##er
'o+nd hise#f to pa$ on the tax of the thin( e&en
after the sa#e. Kasi hindi s$a owner, wh$ sho+#d he
pa$ for the tax on the thin(G
Note: 8res+ptions +nder 1602 wo+#d arise
re(ard#ess of whether the sa#e is denoinated as a
sa#e with a ri(ht to rep+rchase or a 4.*. )t doesnDt
atter. %&en if it is a 4.* if there is do+'t as to
whether or not it is an e1+ita'#e ort(a(e. )t has to
'e reso#&ed as an e1+ita'#e ort(a(e.
Q: "emedy of seller a retro?
A! Reforation 'eca+se the contract as written did
not ref#ect the rea# intention of the parties. 0he rea#
intention is to sec+re the f+#fi##ent of the o'#i(ation
of the &endor a retro 6de'tor7.
(. Le7al Re/em&tion
Q: ho have the right to redeem?
A! 2 (ro+ps
1. -o?owners
2. .wners of ad/acent #ots 6o'/ect is #ot7
? consider if r+ra# or +r'an #and
CoIowners
Q: -o@owners of what thing, movable or
immovable?
A! )t does not atter.
Q: A, B, -, & co@owners of land. & donated his
interest in the land to B. would A, B, -, have the
right to redeem?
A! "o, in #e(a# redeption, the a#ienation '$ a co?
owner +st 'e '$ onero+s tit#e 6sa#e, dacion en
pa(o, 'arter7. 0his act 6donation7 is (rat+ito+s act.
Aence, no ri(ht of redeption.
"o&e'er 2008
Q: hat if B sold his interest in the land to &.
would A and - have the right to redeem?
A! "o, 'eca+se for A and - to ha&e the ri(ht to
redde, the a#ienation sho+#d 'e in fa&or of a 3
rd
person.
Q: hat if B sold his interest in the land to B. A,
&, -, wanted to redeem. <ay they be able to
e'ercise the right of redemption? All of them?
A! Hes. A## of the.
Q: Is this the same rule in adKacent lots?
A! "o, in ad/acent #ots, there can 'e so an$
owners dependin( on how it is 'i(. 0he owner with
the sa##est #and area wo+#d ha&e the ri(ht to
redee.
Q: hat if the owners of adKacent lots would
have eEual area?
A! 0he first one who anifested his desire to
redee.
As to Co I owners
B!: =and owned by spouses was sold by the
spouses to their three sons in 7 different deeds
of sale. In each &:. the specific area was
already described. After the e'ecution of the
&:., these children would actually harvest
only their respective area. #hey wanted to have
their respective share registered in their own
name. #hey filed a petition for the cancellation
of the title of their parents for that property to
be divided, they submitted their individual
&:.. But the petition was denied by the
register of &eeds because they failed to submit
a subdivision plan. #he "& cancelled the #-#
in the name of the parents issued another #-#
in the name of the 7 children in one #-#. :ne
of the children sold the land to a 7
rd
person.
-an the 4 other brothers redeem as co@
owners?
A! "o, 'eca+se +nder the facts, the$ are no #on(er
co?owners. A 0-0 is not conc#+si&e as to the ri(hts
of the parties to a certain propert$. 8weden(
apparent#$ co ? owners si#a '+t in rea#it$ there has
a#read$ 'een a participation of the propert$, $+n
#an( hindi pa na2a?ref#ect sa 0-0. )n fact, a
propert$ a$ 'e re(istered in a person who is not
the owner 2asi na ? for(e #an( $+n( si(nat+re n(
rea# owner. 0h+s, the re1+ireent of the #aw that
the co?owner wo+#d ha&e the ri(ht to redee is not
present therefore, there wo+#d 'e no ri(ht of
redeption.
Q: A, B, - co@owners. A$s share M. B$s share M.
-$s share N. B sold his interest in the land to B.
9owever, A and - both wanted to redeem. 5As
co@owners they may have the right to redeem6.
If they cannot agree on the portion of the share
of B which will be redeemed by both of them @
what would be the final sharing?
A! - wi## ha&e 2@3, A wi## ha&e 1@3 'eca+se the$ wi##
ha&e the ri(ht to redee in proportion to their
share in that propert$. "ote! the$ a$ stip+#ate as
to the sharin(.
Q: hat if in the &:. e'ecuted between B and
B, the price stated in &:. was 7<. 9ence, A
and - can be compelled to redeem by paying
7<?
A! "ot necessari#$, +nder the #aw, if the price stated
in this sa#e is +nconsciona'#e, the redeptioners
can on#$ 'e cope##ed to pa$ the reasona'#e
&a#+e. An( posi'#en( &a#+e co+#d on#$ 'e 19 pero
an( na2a#a(a$ sa 4.* 39. Is it possible that B
did not pay 7<? Hes. hy would they do that?
0he reason for that is to pre?ept A and - fro
exercisin( the ri(ht of redeption. 0o disco+ra(e
the fro redeein( the propert$ 2asi 2+n( +ra
$an the$ can easi#$ exercise the ri(ht of
redeption.
0he #aw protects the redeptioners ? if the price is
+nconsciona'#e ? the$ a$ pa$ reasona'#e &a#+e.
Q: hat if the value is 7< but &:. stated 1<
but B actually paid 7< 51< was stated to
reduce ta' liability6. 9ow much A and - can be
compelled to pay?
A! &oromal vs -A
Ae#d! 0he co?owners can on#$ 'e cope##ed to pa$
the price stated in the deed of sa#e. 0he tria# co+rt
s+stained the c#ai of the '+$er that the$ 'e
rei'+rsed the act+a# ao+nt paid 'eca+se
accordin( to the tria# co+rt that wo+#d 'e iora# to
pa$ on#$ the ao+nt stated in the contract. *- said
it was ore iora# $+n( (ina(awa n( parties to
pa$ on#$ a sa## ao+nt where in fact the rea#
ao+nt paid is a +ch hi(her ao+nt. 5eca+se
the on#$ p+rpose of this is to defra+d the
(o&ernent.
Owners of A/-acent Lots
9a2e a distinction 'etween a sa#e of an +r'an #and
and sa#e of r+ra# #and.
Sale of =rban lan/
Re3isites:
1. 0he #and is so sa## and p+rchased on#$
for spec+#ation
)f that is the case, then the ad/acent #ot owners
wo+#d ha&e the ri(ht not on#$ ri(ht of redeption
'+t a#so of ri(ht of pre?eption. 6Artic#e 16227
"o&e'er 2008
4ito sa r+ra# wa#a ri(ht of pre?eption eanin(
e&en 'efore the perfection of the sa#e, the ad/acent
#ot owners wo+#d a#read$ ha&e the ri(ht to redee
'$ wa$ of pre?eption. 30 da$s a#so 30 da$s fro
notice of s+ch intention to se##.
5+t in r+ra# #ands and a#ienation is '$ onero+s
tit#e. Another re1+isite! the #and which was the
o'/ect the sa#e +st not 'e (reater than 1 hectare.
A#so, for the owners to ha&e the ri(ht of
redeption, the '+$er fro who the propert$ wi##
'e redeeed +st ha&e another r+ra# #and.
Another re1+isite ? the #and so#d and the #and
of redeptioner +st not 'e separated '$ 'roo2s,
ri&ers in order that these #ot owners wo+#d ha&e the
ri(ht to redee.
B!: .isters A and B co@owners of land. B sold
her interest in the land to B a 7
rd
person. B sent
a notice to the sister of the seller, the other co@
owner informing her of such sale and giving
her copy of the &:.. &espite notice, A did
nothing. After that, B reEuested for the
annotation of the sale in the title of that
property in the "&. "& sent another notice to
A. A did not do anything. After so many
months, B wanted the property to be
partitioned. A then give notice to B that she is
e'ercising the right to redeem. &oes A have the
right to redeem? "ight of redemption must be
e'ercise within 7+ days from what?
A! 0he co?owner sti## has the ri(ht to redee.
:nder 1623, the 30?da$ period wo+#d start to r+n
on#$ fro the tie the co?owner recei&ed fro the
&endor. .ino nagbigay ng notice from the facts?
:na, $+n( &endee pan(a#awa $+n( R4. so hindi
$+n( &endor ad na('i(a$. *o 30?da$ period has
not started to r+n. Aence, he sti## has the ri(ht to
redee.
Att1. =ribe: :nder the facts, she recei&ed 2
notices, not on#$ written notices '+t a#so copies of
the 4.*. :nder the princip#e of estoppe#, she
cannot c#ai that she sti## has 30 da$s. )n fact, in a
decision of *- in&o#&in( a sa#e of a co?owner share
which sa#e was faci#itated '$ the other co?owner.
5+t the #atter c#aied he can sti## redee 'eca+se
he did not recei&e notice. *- said s$a an( na(?
faci#itate n( sa#e so wh$ he co+#d not 'e (i&en
notice, hence he had 2now#ed(e of the sa#e. 0his is
sti## consistent in the case of 4oroa#. )f $o+
consider the pro&ision #itera##$ it sa$s B30 da$s fro
the tie of notice in writin( is (i&en '$ the &endor
to the co?ownerC. An( na2a#a(a$ sa 'atas, notice in
writin(. 9ence, apparently even a letter written
by the vendor would suffice and hence the 7+
day period would start to run? *- said! "o, the
co?owner sho+#d 'e (i&en a cop$ of the 4.* and it
is on#$ fro that oent that the 30?da$ period wi##
start to r+n. 0his is a (ood r+#in( ? not an$ ordinar$
notice '+t a cop$ of the 4.* 'eca+se in
redeption, the redeptioner is s+pposed to 'e
s+'ro(ated +nder the sae ters and conditions
as the '+$er. Aow wo+#d he 2now the ters and
conditions of the sa#e if he is not (i&en a cop$ of
the 4.*. *o he +st ha&e a cop$.
"o&e'er 2008
LEASE
Notes:
Read the 4efinition of Lease +nder Artic#es
1643, 1644, 1713.
-onsider a#so on ;ora#ities! Artic#es 1647,
1724 in re#ation to 1403 on *tat+te of ;ra+ds
and 1403, 1878 on A(enc$ to Lease.
Assi(nent and *+'#ease! Artic#es 1649, 1650
)p#ied new #ease or tacita rec+nd+cion!
Artic#e 1670 "important#
Ri(hts and .'#i(ation of the Lessor and
Lessee! Artic#es 1673, 1678, 1680, 1723 "ta$e
note se%eral &uestions in the bar ha%e
appeared under these pro%isions#
8eriod of the Lease if the parties fai#ed to
;ixed the 8eriod! Artic#es 1682, 1687
Ri(hts of 0hird 8erson! Artic#e 1729 "ex: rights
of owner of materials against the owner of the
building#
Note: 0he first thin( to consider in #ease is to
consider the 2ind of #ease.
<in/s of Lease:
1. Lease of 0hin(s
2. Lease of >or2 or *er&ice
3. Lease of Ri(ht
Note: :nder the #aw, +nder 1642 on#$ #ease of
thin(s and wor2 or ser&ice are entioned.
Note: )n #ease of *er&ice, there are fo+r 647 of the
'+t three 637 wi## not 'e co&ered '$ -i&i# Law, which
are Ao+seho#d *er&ice and -ontract of La'or
6co&ered '$ La'or Law7, and -ontract of -arria(e
6co&ered '$ -oercia# Law7. 0he on#$ 2ind of
Lease of *er&ice that wi## 'e disc+ss +nder the -i&i#
Law is the -ontract for a 8iece of >or2.
.efinition:
Q: If a party, binds himself to give another the
enKoyment or use of thing, does that ma0e the
contract one of lease of things?
A! "o, the ost iportant distinction here with that
of coodat+ is that in #ease, it +st 'e for a
price certain, otherwise if there is no &a#+a'#e
consideration for the +se or en/o$ent of the thin(
it wi## 'e coodat+.
Q: If in the agreement one of the parties binds
himself to render service, for price certain
would that be a lease of service?
A! "ot necessari#$, 'eca+se it a$ a#so 'e a
contract of a(enc$, where a person 'inds hise#f
to render ser&ice for another person it a$ 'e a
contract of a(enc$, th+s +nder 1644, in order for
the contract to 'e considered as #ease of ser&ice,
there +st 'e no re#ation of principa# and a(ent
existin( 'etween the parties.
.istin7ish a Contract for %iece of 5or6 from
Contract of A7enc1
Jrensel vs. <ariano :chaco
;acts! 9ariano as2ed 9erit to constr+ct an edifice
for hi and a(reed that 9erit was to s+pp#$ not
on#$ La'or '+t a#so 9ateria#s. 9erit 'o+(ht the
ateria#s fro ;rense#, howe&er the price of the
ateria#s reain +npaid so ;rense# deanded
pa$ent fro 9ariano, the (ro+nd re#ied +pon '$
;rense# is that 9erit was an a(ent of 9ariano
therefore, for fai#+re to pa$ the price, ;rense# c#ai
that 9ariano can 'e he#d #ia'#e for the price of
ateria#.
Ae#d! )t is not a contract of a(enc$, since fro the
ters and condition of the contract it appears that
the contro# of 9ariano o&er 9erit does not (o into
the anner and ethod of perforance of the
o'#i(ation '+t on#$ (oes into the res+#t of the
prod+ct and therefore it cannot 'e considered an
A(enc$ -ontract.
Note: )n A(enc$, the contro# of the principa# o&er
the a(ent is so per&asi&e that the principa# can
contro# not on#$ the res+#t '+t a#so the anner and
ethod of the perforance of the o'#i(ation which
is not present in this case and therefore 9erit was
not considered an a(ent of 9ariano.
Q: As to the relationship of the ta'i driver with
his operator, is this a contract of lease?
A! *- r+#ed that this is in fact a #ease '+t not a
#ease of thin(, '+t #ease of ser&ice specifica##$ an
ep#o$ent contract, this is 'eca+se of the contro#
of the operator o&er the taxi dri&er, as to when,
what tie the dri&e operates the &ehic#e.
Q: As to safety deposit bo'es does this involve
lease of things?
A! "o, in the #atest decision of the *-, it
considered the contract as specia# 2ind of deposit.
0his cannot 'e considered a #ease of thin(s
'eca+se the #essee has no contro# o&er the safet$
deposit 'ox. )n fact he cannot e&en enter the 'an2
"o&e'er 2008
where the safet$ deposit 'oxes are #ocated if it not
a 'an2in( ho+r, #i2e when the 'an2 is c#ose so he
cannot enter therein.
Note: A(ain, to distin(+ish #ease contract fro
other #e(a# re#ationship $o+ ha&e to consider the
characteristic of the contract. 0he 'est wa$ to
ree'er the 2inds of contract is to 2now '$ heart
what are the rea# contract 6+t++, coodat+,
deposit, p#ed(e7 and fora# contract 6antichresis,
donation7. Aside fro that it a$ 'e safe to
consider as a r+#e a## the other contract as
consens+a# contract, where no partic+#ar for is
re1+ired except in exceptiona# case! e.(. sa#e of
#ar(e catt#e.
As a r+#e #ease, therefore is a consens+a#
contract '$ ere eetin( of the ind as to the
o'/ect and to the consideration the contract is
perfected.
A contract of #ease of thin(s is essentia##$
onero+s. )n fact in one case decided '$ the *-,
in&o#&in( an a(reeent 'etween the 5+rea+ of
Ania# )nd+str$ and 9r. 5a(tas, where 3 '+##s
were de#i&ered '$ the 5+rea+ to 5a(tas for
'reedin( p+rpose. 0here was a period a(reed
+pon for one 617 $ear, after the #apse, despite
deand for the ret+rn of the '+## 5a(tas fai#ed to
do so, thereafter he died and so his estate was
re1+ired to de#i&er to de#i&er the 3 '+## '+t on#$ the
2 were ret+rned and the third '+## co+#d not 'e
ret+rned a##e(ed#$ on the (ro+nd that the said '+##
died in a crossfire 'etween the A+2'a#ahap and
the A;8, so the c#ai was fort+ito+s e&ent.
-#aiin( that the a(reeent was
coodat+ it was ar(+ed that since there was
no transfer of ownership in coodat+, then the
ris2 of #oss wo+#d sti## pertain to the 5+rea+.
*- r+#ed that this cannot 'e
coodat+, 'eca+se there was stip+#ation for
the pa$ent of 'reedin( fee that has to 'e paid '$
5a(tas, it cannot 'e coodat+ '+t a #ease of
thin(, 'eca+se there was a copensation to 'e
paid for the +se of the '+##. A(ain a contract of
#ease of thin(s is essentia# onero+s.
Note: Lease of thin(s is not essentia##$ persona#.
9eirs of Jausto &imaculangan vs. IA-
Ae#d! :pon the death of parties #i2e death of
#essee, the contract is not there'$ terinated. 0he
heirs of the #essee a$ contin+e to occ+p$ the
preises '$ &irt+e of the #ease 'eca+se it is not
extin(+ish +pon death of #essee.
Characteristic of Lease of thin7s
1. -onsens+a# -ontract
2. .nero+s 6essentia##$ onero+s7
3. 5i#atera#
4. "oinate
5. 8rincipa#.
4ssential Re3isites of Contract of Lease
1. Consent
Note: As a contract a(ain, $o+ ha&e to (o into the
essentia# re1+isite of contract in (enera# which
wo+#d 'e app#ica'#e a#so to #ease.
5+t specifica##$ as to consent in sa#e, there
are peop#e who are prohi'ited fro enterin( in
specific 2ind of #ease, those entioned in 1490,
1491. >hen spo+ses are prohi'ited fro se##in( to
each other sii#ar#$ the$ are a#so prohi'ited fro
enterin( in contract of #ease as spo+ses.
As 1491 is a#so app#ica'#e to #ease, hence
the (+ardian cannot #ease propert$ of the ward as
+ch as the a(ent cannot #ease the propert$ of the
principa# which he is s+ppose to adinister.
$. Ob-ect
Q: In lease of things, may a consumable thing
be the subKect matter of lease?
A! "ora##$ when a cons+a'#e thin( is +se in
accordance with its nat+re it is cons+ed, as a r+#e
therefore cons+a'#e thin(s cannot 'e the s+'/ect
atter of #ease of thin(s. 0he exception is, when
the +se of the thin(s is on#$ for exhi'ition, or when
the$ are accessor$ to an ind+stria# esta'#ishent
then it a$ 'e a s+'/ect of #ease.
'. Case
Lease of thin( , the consideration for the #essor is
the pa$ent of renta#
Lease of wor2 or ser&ice ? it is the copensation to
'e paid '$ the other part$
Lease of ri(ht , it is the pa$ent of ro$a#ties which
is the ca+se and consideration of the one #easin(
the ri(ht to another
9ORMAL2024S
Lease of *er&ice , there is no partic+#ar for
re1+ired '$ #aw for the &a#idit$ of the #ease not
e&en for the enforcea'i#it$ as a r+#e.
&onald &y vs. -A
;acts! 0he 'rother of 4$ had a pro'#e in one of
the casino in Las Ee(as, so he as2 Att$. 9+t+c to
he#p which when reso#&e Att$. 9+t+c now
deanded for his Att$. ;ees.
"o&e'er 2008
.ne of the defenses raised '$ 4$ was that
there was no written contract 'etween the parties
and therefore he is not entit#ed to Att$. ;ees.
Ae#d! 4oc+entar$ fora#is is not an essentia#
e#eent in the contract. )n fact the contract a$
'e express or ip#ied. 0h+s, the a'sence of a
written contract wi## not prec#+de a findin( that
there was a professiona# re#ationship which erit
attorne$Ds fees for professiona# ser&ice rendered.
Lease of 0hin(s , certain pro&ision of the #aw
which re1+ires certain fors to 'e enforcea'#e.
:nder 1403, *tat+te of ;ra+d, when there
is a contract of #ease o&er an io&a'#e and it is
for ore than a $ear, the contract of #ease +st 'e
in writin( in order for it to 'e an enforcea'#e
contract.
)n 1878, if a person is a+thori<ed to #ease
an io&a'#e propert$ of another for ore than 1
$ear, that person or a(ent sho+#d ha&e specia#
power of attorne$.
Note: the pro'#e in #ease wo+#d nora##$ 'e a
co'ination of an a(enc$ and #ease.
B!: here a principal appointed an agent
granting him unlimited and general
management over his properties withholding
no power from him and authoriCing the agent
to act as may deemed appropriate. ith this
>(A the agent entered in a contract of sale and
two 546 contracts of lease. #he first lease
pertains to a parcel of land in Ialoo0an for 2
years and rental to be paid annually for 3+0 a
year. 9e also lease a certain land in Q- but
they did not fi'ed the period of lease but they
agreed on payment of rentals on monthly basis
rate of 70 per month. #hese contracts were
entered into while the principal was in the
hospital. "ule on the validity and binding
effects of the contracts upon the principal.
A! 0he pro'#e pertains to 'oth #ease and a(enc$.
Aowe&er in the pro'#e itse#f there was no
stateent if the #ease a(reeent itse#f was in
writin(.
As s+((ested answer, in the first #ease,
since it was for 4 $ears and in&o#&e as #ease o&er
an io&a'#e and pertains to an act +nder 1878,
then the a(ent sho+#d ha&e a specia# power of
attorne$ and +nder the facts he was on#$ (i&en a
(enera# power of attorne$, hence since ared on#$
'$ N8A, the contract is +nenforcea'#e as a(ainst
the principa#.
)n the second #ease, the a(ent
represented the principa# did not fix the period of
the #ease '+t on#$ fixed the onth#$ renta# of 32,
therefore +nder 1687, this wi## 'e constr+ed as a
onth to onth #ease. *ince on#$ onth to onth,
in&o#&e ere#$ acts of adinistration therefore not
re1+ire *8A therefore the second #ease wi## 'e
&a#id and 'indin( +pon the principa#.
B!: Agreement for the repair of a private plane
and for a certain sum of money, however
additional wor0 was reEuested by a person
who has the authority of a duly recogniCe
representative of the owner of the plane and
the reEuest was merely verbal, when the
additional wor0 was completed, the one who
rendered the wor0 demanded additional
payment, the defense raise was under 1)42 in
order that a claim for additional payment for
the additional wor0, the agreement for the
additional wor0 must be in writing and the
changes should be authoriCed in writing.
A! 0he s+((ested answer of :8 wi## s+stain the
defense 'eca+se of 1724S s+ch chan(e not 'ein(
a+thori<ed in writin(, the re1+est was ere#$
&er'a# then the c#ai a$ not prosper.
Att$. :ri'e a(rees ore in the a#ternati&e
answer where in pro&ides that, the person who
re1+ested tho+(h &er'a# was the a+thori<ed
representati&e of the owner, and this is (i&en
a#read$ as a fact. )f the defense wo+#d 'e s+stain
+nder 1724 then there wi## 'e +n/+st enrichent on
the part of the p#ane owner.
1724 wo+#d (i&e the proprietor the ri(ht to
raise the defense that testion$ a$ not 'e
aditted pertainin( to a chan(e in the p#ans
'eca+se it was on#$ &er'a# chan(e, '+t the
oent the fact is esta'#ished a#read$, $o+ can no
#on(er in&o2e 1724 '+t $o+ can raise it as a
defense if there is a witness that is 'ein(
presented in the effect that there was re1+est or
additiona# chan(e '$ in&o2in( 1724, the additiona#
chan(e not 'ein( in writin( then no person a$
testif$ as to s+ch fact.
5+t in the pro'#e (i&en it was entioned
as a fact, that the &er'a# re1+est was ade '$ a
person a+thori<ed '$ the p#ane owner. A(ain the
'etter answer is the a#ternati&e answer, that, for the
owner to 'e a'#e to raise the defense +nder 1724,
wo+#d constit+te +n/+st enrichent after he act+a##$
re1+ested for s+ch chan(e thr+ an a(ent.
R2;:0S AN. O(L2;A02ONS O9 0:4 L4SSOR
As to necessar$ repairs of the thin( #ease,
this is an o'#i(ation of the #essor, +nder the #aw the
#essor is o'#i(e to a2e the necessar$ repairs.
"o&e'er 2008
>onCales vs. <ateo
0his in&o#&ed a contract of #ease o&er a coc2pit. )t
was stip+#ated in the contract that Ban( #ahat n(
2ai#an(an( (a(awin sa 'aha$ sa'+n(an a$
ipa(a(awan( #ahat ni Ninoon( Non<a#es 6#essee7
sa 2an$an( sari#in( +2o#, na an( saahan a$
wa#an( sinasa(otC. )n other words the #essee,
'o+nd to do the necessar$ repairs, so when the
coc2pit co##apsed the #essee was he#d #ia'#e, e&en
if the #essor +nder the #aw has the o'#i(ation to
a2e the necessar$ repairs it is sti## s+'/ect to
stip+#ation of the parties.
B!: A lease contract was entered into between
A and B over a parcel of land for a period of 1*
years wherein the lessee conducted his
business where he constructed a 7 storey bldg
for 7++, +++. Upon the lapse of the 1* year
period the parties not having been able to
agree on the e'tension of the lease, the lessor
demanded the lessee to vacate the premises.
=essee refuse to vacate until he is reimburse
the 7++, +++ and arguing that since he is a
builder in good faith he therefore has the right
to retain the thing until he is reimbursed. hat
are the rights and obligation of the lessor and
lessee? -an the lessee be considered a builder
in good faith in the first place?
A! "o, he cannot 'e considered a '+i#der in (ood
faith as he was ere#$ a #essee and he is not
c#aiin( ownership o&er the parce# of #and when he
constr+cted the '+i#din( therefore he has no ri(ht
of retention. )n fact +nder the #aw the #essor has
the option of appropriatin( the ipro&eent or
re1+irin( the #essee to &acate the preises and
reo&e the ipro&eent. 5+t if he decides to
appropriate the ipro&eent for hise#f he has to
pa$ 50I of the expense inc+rred '$ the #essee
'eca+se it is a +sef+# ipro&eent. )f the #essor
decides not to appropriate, the #essee a$ reo&e
the ipro&eent e&en if that wo+#d ca+se daa(e
to the #and as #on( as there is no +nnecessar$
daa(e ca+se to the #and.
B!: Instead of building it was a chapel that is
constructed by the lessee, will the same rule
apply?
A! -onsider a#so as +sef+# ipro&eent '$ the :8
Law -enter.
Note: )f the ipro&eent howe&er is an
ornaenta# ipro&eent and the #essor wants to
appropriate the sae, he has to pa$ for the &a#+e
of the ipro&eent not ere#$ 50I '+t the &a#+e
of the ipro&eent itse#f.
B!: (ertain to construction of a building, where
an architect was authoriCed aside from
designing of the building also to supervise the
wor0 of the contractor. hen completed it was
delivered to the owner however within 1*
years, it collapse because of the earthEua0e
due to faulty construction, and it was the only
building that collapse no other building. hat
are the rights of the owner against the architect
and contractor? -an the owner demand the
reconstruction of the building considering that
the cost of the construction of the building has
tripled from the time of construction up to the
time of collapse?
A! :nder 1723, the owner can ho#d the architect
and contractor so#idari#$ #ia'#e. 5eca+se the
architect not ere#$ desi(ned the '+i#din( '+t a#so
s+per&ise the constr+ction hence +nder 1723, the$
are so#idari#$ #ia'#e.
:nder 1167, in o'#i(ation to do, if what has
'een poor#$ done a$ 'e +ndone at the expense
of the de'tor, in fact he can ha&e another person to
do the wor2 at the expense of the de'tor.
"otwithstandin( that the cost trip#ed he a$ &a#id#$
do so.
:nder the present practices in the rea#
estate '+siness this a$ no #on(er happen. 0he
#ia'i#it$ of the architect and contractor nora##$ a$
not happen 'eca+se the standard practice
nowada$s the architect wo+#d 'e tota##$ separated
fro the contractor. As of now there wo+#d 'e a
pro/ect constr+ction ana(er that wo+#d represent
the owner in s+per&isin( the wor2 of the contractor
and no #on(er the architect.
R2;:0S AN. O(L2;A02ONS O9 0:4 L4SS44
Note: 0wo 627 fa&orite artic#es are 1649 pertainin(
to assi(nent of #ease, and 1650 on s+'#ease.
8: 0he 3estion in the (ar ma1 be as sim&le as
ma1 a lessee sblease the &ro&ert1 withot the
consent of the lessor an/ what are the
res&ecti+e liabilities of the lessee an/
sblesseeJ
A! Artic#es 1649 and 1650 wo+#d te## +s that a
#essee a$ not assi(n his ri(ht on the #ease
witho+t the consent of the #essor howe&er he a$
s+'#ease the propert$ in who#e or in part e&en
witho+t the 2now#ed(e of the #essor as #on( as he
was not prohi'ited fro s+'#easin( the preises.
B!: In the contract the lessee was prohibited
from assigning the lease in one 516 floor of the
building but what the lessee did is sublease the
property, would that sublease bind the lessor?
A! Hes. Ae was on#$ prohi'ited was assi(n the
#ease '+t was not prohi'ited fro s+'#easin( the
preises. )n fact the #essor need not prohi'it the
"o&e'er 2008
#essee fro assi(nin( 'eca+se +nder the #aw he is
prohi'ited fro assi(nin( his interest as a #essee
witho+t the consent of the #essor. )f there is a
stip+#ation which +st 'e state in the contract is
the prohi'ition to s+'#ease the preises in order to
'ind the #essee.
:#tiate#$ therefore the pro'#e here is if
there is a contract entered into '$ the #essee with a
third person in&o#&in( his ri(hts as a #essee, wo+#d
that contract in&o#&e assi(nent of the #ease or
ere#$ s+'#easeG
<alacat vs. .alaCar
;acts! 0he #essor entered in a contract with the
#essee for a period of 20 $ears fro 1947 to =+ne
1, 1967. howe&er d+rin( the #ease period, the
#essee entered into a(reeent with third person
witho+t consent of the #essor, thereafter the #essor
1+estion the &a#idit$ of the contract on the (ro+nd
that this was entered witho+t his consent and
c#aiin( that this was an assi(nent of #ease, &oid
therefore he can reco&er the propert$ fro the s+'?
#essee. 4oes the contract in&o#&e assi(nent of
#ease or ere#$ s+'#ease.
Ae#d! >hether the contract is assi(nent of #ease
or s+'#ease, wo+#d depend on whether there was
a'so#+te transfer of ri(hts fro the #essee to the
third person, s+ch that he desist hise#f fro the
#ease contract and his persona#it$, res+#tin( now in
two 627 persons the #essor and the assi(nee, and
the #atter is now con&erted in to the new #essee.
Aowe&er if the #essee retains interest no atter
how sa## in the contract of #ease then it wi## 'e
treated on#$ as s+'#ease.
*o a(ain, in an assi(nent of #ease there
has to 'e an a'so#+te transfer of interest '$ the
#essee of his ri(hts and he disassociated hise#f
fro the contract howe&er if there is re&ersionar$
interest retained '$ hi then it wi## considered
ere#$ as s+'#ease.
)n this contract, the *- ere#$ treated it as
a s+'#ease and therefore &a#id e&en witho+t the
consent of the #essor, 'eca+se, first the contract
was with a period that wo+#d #ast on#$ +nti# 9a$ 31,
1967, +pon the terination of the contract, there
wo+#d sti## 'e one 617 da$ in the #ease a(reeent,
therefore this #essee wi## 'e re&erted 'ac2 to his
ri(hts, since he sti## has +nti# =+ne 1, so this ade it
ere#$ as s+'#ease.
0here were other stip+#ations in the
contract which ade the to conc#+de that this is
ere#$ a s+'#ease. Li2e, in the contract, there was
a prohi'ition '$ the #essee +pon L fro c+ttin( the
trees on that #and wito+t the consent of the #essee,
so wh$ wo+#d he prohi'it L fro c+ttin( the trees if
he wo+#d consider hise#f fro 'ein(
disassociated fro the #ease contract. )n other
words, he sti## inter&ened in the contract with
respect to the s+'/ect #andC.
0here was stip+#ation a#so as to pa$ent
of taxes. )f the contract was rea##$ in&o#&e
assi(nent of the #ease, he sho+#d ha&e nothin( to
do an$ore with the propert$. Ae wo+#d ha&e
disassociated hise#f fro the ori(ina# contract of
#ease s+ch that, the parties that wo+#d reain
'o+nded '$ the contract was on#$ 'etween the
#essor and the assi(nee.
Jrensel vs. <ariano :chaco
)n this case, the theor$ of ;rense# that
9erit was ere#$ an a(ent was not s+stained '$
the *-. *- s+stained that theor$ that the
re#ationship of 9erit and 9ariano was that of a
ep#o$er or a principa# an contractor in a contract
of piece of wor2. #hus, can the supplier of the
material, Jrensel, recover from the employer in
a contract of piece of wor0? 0here appears to
'e no pri&it$ of contract. 0here wo+#d 'e pri&it$ of
contract 'etween the owner of the edifice 9ariano
and 9erit in their constr+ction a(reeent. And it
wo+#d 'e 9erit and ;rense# in the contract of sa#e.
*o 9ariano has no pri&it$ with the se##er of the
ateria# ;rense#. 0h+s as a r+#e, there wo+#d 'e
no ca+se of action. )n fact *- disiss the case
fi#ed '$ ;rense#. A#tho+(h in fairness, the *- r+#ed,
in the a'sence of ateria# ens #ien the action
a$ not prosper.
#his case was decided in 1;3+, if the
action was filed today, may the action of
Jrensel prosper? Hes, +nder the theor$ of +n/+st
enrichent, incorporated +nder Artic#e 1729, that
the s+pp#ier of ateria# a$ reco&er s+ch ao+nt
owin( to hi '$ the contractor to the extent that
the owner of the edifice is sti## inde'ted to the
contractor.
;or exap#e the owner of ateria# is
c#aiin( 3 i##ion, '+t the owner of the edifice is
sti## inde'ted to the contractor for 5 i##ion and the
pro/ect has 'een cop#eted, the s+pp#ier a$
reco&er fro the owner of the edifice hise#f
instead of c#aiin( fro the contractor.
A(ain, on the 'asis of +n/+st enrichent
princip#e, since the owner of the edifice rea##$ owes
the contractor and this #ia'i#it$ of the contractor
a$ not exc+se '$ the fact that he a#read$ paid the
contractor, if the pa$ent was ade in ad&ance. )f
his o'#i(ation was not d+e and $et he paid the
contractor the s+pp#ier of the ateria#, can sti##
reco&er the price of the ateria# fro the owner of
the edifice.
"o&e'er 2008
0he #ia'i#it$ of the owner a$ not a#so 'e
exc+se '$ the fact that the contractor wai&ed his
c#ai a(ainst the owner.
:#tiate#$ e&en if the owner has a#read$
f+##$ paid the contractor at the tie it is a#read$ d+e
and deanda'#e he a$ sti## 'e he#d #ia'#e to the
s+pp#ier of the ateria# if he did not deand for the
de#i&er$ of a constr+ction 'ond which wo+#d
answer for the c#ais of the #a'orer and s+pp#iers
of ateria#s.
B!: #his pertains to the lease of fishpond. #he
agreement was for five 5*6 years however after
one 516 year period of the lease, the lessee
demanded from the lessor for 5a6 reduction of
the price and 5b6 e'tension of the lease for
another 1 year because he was only able to
harvest half of what is normally being
harvested in the fishpond due to unlawful
elements from the area, e'torting money from
those leasing the property in that area.
A! )f we are to consider the re#e&ant pro&ision on
this atter, the #aw pro&ides that red+ction of renta#
a$ on#$ 'e deanded '$ the #essee if he
har&ested #ess than ha#f of what nora##$ wo+#d 'e
har&ested in that propert$. "ora##$ it can a#read$
'e said that he is no #on(er entit#ed to the red+ction
'eca+se +nder the facts, he was a'#e to reco&er
one ha#f. At an$ rate e&en if he was on#$ a'#e to
har&est #ess than one ha#f this wo+#d not entit#e hi
to red+ction of renta#s, 'eca+se +nder the #aw, this
a$ on#$ 'e c#aied if it was d+e to extra ordinar$
;% e&ent as oppose to ere#$ an ordinar$ ;%.
*tor is an ordinar$ ;%, what co+#d 'e considered
as an extra ordinar$ ;% e&ent is pesti#ence,
+n+s+a# f#ood.
0h+s, the presence ere#$ of +n#awf+#
e#eent a$ 'e considered as extra ordinar$ ;%
+nder the #aw and a$ not 'e considered as a
'asis for the c#ai of red+ction of the renta#.
As to c#ai of extension of the #ease,
a(ain for the sae reason, e&en if there is a ;% in
contract of #ease of thin(, the happenin( of which
wo+#d not (i&e the #essee the ri(ht to ha&e the
contract extended that wo+#d on#$ res+#t to
s+spension of the #ease d+rin( the happenin( of
the ;%. Example, war as ;% wo+#d on#$ ha&e the
#ease s+spended and the #essee a$ 'ot 'e
cope##ed to pa$ the renta#s d+rin( that period '+t
wo+#d not (i&e the #essee the ri(ht to extend the
#ease contract.
04RM2NA02ON O9 0:4 L4AS4
B!: A building was constructed by A, for this B
gave A * million pesos with the agreement that
B will be the lessee of the entire building for a
period of 1+ years for 1,+++ rentals a month.
9owever, on the *
th
of the agreement the entire
building was burned due to J! without fault of
anyone. A reconstructed the building, Kust
before the building is completed, B notified A
of his intent to continue the lease, as to
complete the 1+ year period. A refuse, is A
Kustified in refusing B$s offer to continue the
lease?
A! Hes. Ae was /+stified 'eca+se '$ the destr+ction
of the #ease d+e to ;% the #ease contract was
terinated so it can no #on(er 'e contin+ed.
B!: &iscuss the effect of death of lessee,
lessor, agent and principal.
A! )n a #ease of thin(, death of the #essee does not
terinate the contract. A contract of #ease is not
essentia##$ a persona# contract therefore +pon the
death of the #essee, it a$ 'e contin+ed +nti# the
expiration of period of the #ease '$ the heirs.
6-ase! Aeirs of 4iac+#an(an &s. )A-7
2M%L24. N45 L4AS4
Note: .ne of the ost fa&orite in the 'ar exa.
B!: #he Euestion in the bar could be as simple
as under what circumstance would an implied
new lease or tacita recunducion arise?
A! :nder the #aw, the on#$ re1+ireent is that
1. 0he #ease period has expired and
2. 0he #essee contin+es to 'e in possession of the
#ease for at #east 15 da$s fro the tie of the
expiration of the #ease and
3. "o notice to the contrar$ fro the #essor and the
#essee.
(4: %ertain to contract of lease entere/ into for
&erio/ of ' 1ears @an 1H )1 & to 1?)!. Rentals
were &ai/ on monthl1 basis. 2t was sti&late/
that the lessee has the o&tion to b1 &ro&ert1
at a certain &rice within a certain &erio/ (o&tion
to b1). .es&ite the la&se of the ' 1ear &erio/H
the lessee /i/ not eAercise the o&tionH bt
contine/ to be in &ossession of the &ro&ert1
an/ &a1in7 the monthl1 rentals an/ the lessor
acce&tin7 the same. 0his contine/ ntil @ne
1?)! when the lessee state/ that he wol/ now
b1 the &ro&ert1 in accor/ance with the o&tion
to b1. 0he lessor refseH calimin7 there was
no more o&tion. 5as the lessor correctJ Hes.
as it correct to say that there was e'tension
of the lease under the facts?
A! Hes, there was an extension 2nown was ip#ied
new #ease. Aowe&er, with the ip#ied new #ease it
does not ean that a## the ters and condition of
"o&e'er 2008
the contract in the ori(ina# #ease contin+e a#so.
;irst as to the ter, +nder the #aw, the ter of the
renewed #ease wo+#d not 'e the ter a(reed +pon
'+t on#$ 'e of a period dependin( on the anner
the renta#s are paid. )f the pa$ent is on ann+a#
'asis, the renewa# wo+#d on#$ 'e for a $ear and if
onth#$ pa$ent of renta# is ade, the ip#ied
new #ease wo+#d on#$ #ast for 30 da$s.
As to the option, it was renews, *- he#d,
in an ip#ied new #ease, on#$ those ters and
conditions which are (erane in a contract of
#ease are deeed renewed as to the rest #i2e
option to '+$, wi## not 'e considered renewed.
%&en in the facts of the case itse#f, it was stip+#ated
that the option a$ 'e exercise within the period
a(reed +pon 63 $ears7.
AGENCY
4efinition 1868, 1874 and 1878 ? fora#ities
5eca+se a for is re1+ired for the &a#idit$ or for
the enforcea'i#it$ of the contract entered '$ the
a(ent?1878, 1874
1892 ? pertain to appointent of the s+'stit+te?
effect? a$ the a(ent nonethe#ess 'e he#d #ia'#e for
"o&e'er 2008
the #oss that inc+rred '$ the principa# as the res+#t
of the appointent of the s+'stit+te.
.ther pro&isions pertain to the ri(ht and o'#i(ations
of coission a(ent or ore iportant#$ the
(+arant$ coission a(ent , 1907 ? 1908
4ffect of /eath ?1919, 1930 and 1931
%ither of the a(ent or principa#
Re&ocation ? 2ind of a(enc$ ? a(enc$ co+p#ed with
interest ? 1927
B!: A as0ed her best friend to B buy for her
certain items in a grocery store. Is there a
nominate contract created between A and B?
A! 5etter answer, if 5 a(reed to the re1+est of A,
an a(enc$ re#ationship has 'een created, a
noinate contract has 'een created.
A#ternati&e Answer! ) can a(ree with the answer
(i&en '$ the :8 Law -enter that a #ease of ser&ice
a$ ha&e 'een created so #on( as there was no
principa# a(enc$ created or existin( 'etween A and
5, a#tho+(h fro the facts hindi ito #ease of ser&ice,
'estfriend eh, (ood possi'i#it$, so thatDs wh$ ) can
a(ree with the a#ternati&e answer of the :8 Law
-enter the a'sence of principa# a(enc$
re#ationship a$ res+#t in a #ease of ser&ice.
Q: I$m sure all of you or most of you must have
been a pro'y in a baptismal or wedding
ceremony, but also you may have as0 by a
politician to represent in gathering because
probably he may be in another gathering in
another place, so if you$ve been a pro'y in a
wedding ceremony or baptismal ceremony,
actually accepted the reEuest of the real
ninong or ninang then it mean an agency
relationship created between you and the
actual ninong or ninang? :r if you have
accepted the reEuest of the politician were for
you to deliver the speech in a gathering would
that result an agency relationship?
A! )n 'oth instances, no. )t a$ appear +nder the
definition of a(enc$ +nder 1868, that there is s+ch
an a(enc$ re#ationship 'eca+se as defined, a
contract of a(enc$ at first 'ind hise#f to render
soe ser&ice or to do soethin( in representation
or on 'eha#f another with the consent or a+thorit$
of the #atter. *o, 2+n( prox$ 2a that wo+#d fa## +nder
1868 di 'a '+t the definition has 'een critici<ed '$
soe a+thors, one of the is =+stice Re$es, that
the definition of a contract of a(enc$ +nder 1868
does not contep#ate socia# and po#itica#
representation, hindi 2asaa an( socia#
representation, po#itica# representation in order to
ha&e a contract of a(enc$ +nder the "ew -i&i#
-ode, the p+rpose of the a(enc$ +st 'e the
exec+tion of the /+ridica# act, the a(ent +st as2 or
'ind hise#f to exec+te a /+ridica# act, eanin( the
act that wi## 'e exec+ted '$ the a(ent on 'eha#f of
the principa# sho+#d either create, odif$ or
extin(+ish a #e(a# re#ationship 'etween the
principa# and a third person.
-oncrete#$ if the a(ent was a+thori<ed to
'+$, the act ? the contract entered into '$ the a(ent
with the third person wo+#d create a #e(a#
re#ationship 'etween the principa# and the third
person, that wo+#d 'e a se##er?'+$er re#ationship,
so it is a /+ridica# act.
.n the other hand, if the a(ent is
a+thori<ed to pa$ an inde'tedness of the principa#
to a certain person or to a 'an2 and he in fact paid
the said ao+nt, the res+#t of the act is the
extin(+ishent of the existin( #e(a# re#ationship,
the #e(a# re#ationship wo+#d 'e the de'tor?creditor
re#ationship 'etween the principa# and third person,
which wo+#d 'e extin(+ished '$ the act of the
a(ent 2nown as pa$ent.
A(ain therefore for a contract of a(enc$ to
arise the s+'/ect atter or the o'/ect of the
contract +st 'e the exec+tion of the /+ridica# act,
ere socia# or po#itica# representati&e wo+#d not
res+#t to a contract of a(enc$.
Q: If a contract well first if the instrument is
titled or denominated as with agency does it
mean that there is an agency relationship
between the parties entered into a contract?
A! "ot necessari#$, a(ain the contract is not the
what parties want to ca## it to 'e, '+t rather how the
#aw wi## consider s+ch contract if it is the #aw
deterines the nat+re of the contact dependin( on
the stip+#ation of the parties.
Q: But what if the agency was used by the
parties in the stipulation? &oes it mean that it
is a contract of agency?
A! "ot necessari#$, in Quiroga vs. (arsons the
word a(enc$ appeared a'o+t 3 ties in the
contract '+t the word a(enc$ does not pertain to a
contract of a(enc$ '+t it pertains to another
concept of the word a(enc$. Ho+ can +se the word
a(enc$ se&era# ties in another concept #i2e it a$
'e an instr+enta#it$ #i2e a tra&e# a(enc$, sec+rit$
a(enc$, or e&en a (o&ernent a(enc$, '+t their is
no a(enc$ re#ationship or it a$ pertain to
exc#+si&e ri(ht to se## in a partic+#ar territor$ di'a,
so there is an exc#+si&e he is considered an
exc#+si&e a(enct to se## a partic+#ar 'rand in the
pro&ince of )#oi#o, there is act+a##$ no a(enc$
re#ationship created, it is done on#$ in an exc#+si&e
ri(ht to se## a partic+#ar 'rand @ prod+ct in a territor$
.
"o&e'er 2008
.istin7ishin7 Contact of A7enc1 from other
Contract an/ other Le7al Relationshi&
-onsider the characteristics of a contract of a(enc$
as a contract and as a #e(a# re#ationship '+siness
or(ani<ation.
C:ARAC04R2S02CS O9 A CON0RAC0 O9
A;4NCB
Q: "eal? Jormal?
A! 4efinite#$ it is not a rea# contract and a#so not a
fora# contract.
1. Consensal ? conc#+de that it is consens+a#
contract. )t is perfected '$ ere eetin( of the
inds as to the o'/ect and consideration of the
contract.
$. %rinci&al ? hy it is a preparatory contract?
0his is a distinct feat+re of a(enc$ sii#ar to
partnership, the$ are 'oth preparator$ contracts,
the$ can stand on their own donDt depend on an$
other contract for their &a#idit$, which eans that
e&en if the a(ent did not enter into another
contract, which eans he did not perfor their
o'#i(ation it doesnDt ean that the contract of
a(enc$ is &oid, he a$ 'e he#d #ia'#e to s+ch other
contract for not perforin( his o'#i(ations, this is
an a(enc$ in pro'#es pertainin( to a(enc$, $o+
sho+#d a#wa$s consider the facts that nora##$, 2
contracts in&o#&ed, $o+ ha&e to dea# with the
re1+isite of 'oth contracts, in order to ena'#e to
reach the correct conc#+sion, this is the principa# ?
a(ent with the contract of a(enc$ and second
contract wi## 'e the contract entered into '$ the
a(ent with the third person, this other contract a$
'e a #ease, sa#e, or an$ other contract an act ade
'$ the a(ent.
As of 8rincipa# contract, it can stand on its own
e&en if the a(ent did not enter into another contract
Q: Gow, is this contract similar to sale as to
cause, in that it is also essentially an onerous
contract?
A! "o, '+t it is pres+ed to 'e for copensation,
pres+ed to 'e onero+s, howe&er it a$ 'e
deeed (rat+ito+s. Nrat+ito+s a#so different fro
partnership, 'eca+se partnership is essentia##$
onero+s, a partner wi## a#wa$s ha&e to contri'+te
soethin(, now after this a noinate contract ?
co+tati&e contract.
As distin(+ished fro other #e(a# re#ation, $o+
ha&e to (o into the feat+re of a contract of a(enc$,
how it is createdG 0hen $o+ wi## 2now, for exap#e
that is different fro other #e(a# re#ationships,
which are created '$ operation of #aw #i2e,
ne(otior+ (estio, a(enc$ and ne(otior+ (estio
a$ 'e sii#ar in the sense that there is
representation in its #e(a# re#ationship '+t the$ can
'e distin(+ished as to their anner of creation in
that a(enc$ is created '$ ere a(reeent of the
parties, ne(otior+ (estio created '$ operation of
#aw.
A featre of a7enc1 which is &ecliar is
re&resentation.
"o representati&e in a contract ? he cannot 'e
considered as an a(ent.
Gielson vs. =epanto <inning 5=<6
Ae#d! >hi#e there was a c#ai '$ L9 that there is
an a(enc$, the *- r+#ed that not a contract of
a(enc$. "ie#son has no power of representation to
'ind L9 with third person e&en it has power to '+$
certain ites he sti## has to o'tain or see2 the
opinion or appro&a# of the 5.4 of the L9 in order
to '+$ certain ites, which eans he is not rea##$
an a(ent as to their has no ri(ht of representation.
(t a featre which wol/ ma6e a7enc1 similar
to &artnershi&
)t is 'ased on tr+st and confidence that there are
fid+ciar$ o'#i(ations of an a(ent as +ch as there
are fid+ciar$ o'#i(ations of a partner +n#i2e in sa#es
or other #e(a# re#ationships which are not 'ased on
tr+st and confidence.
Another +er1 im&ortant featre of A7enc1 is the
manner of termination.
0his is +n+s+a# for a contract that it can 'e
terinated at wi## '$ the principa# a(ent, as2i
sino. )f the terination was ade '$ the principa#, it
is ca##ed re&ocation. if ade '$ the a(ent it is
ca##ed withdrawa#.
<ariano -ase
0o extend the contract of one part$ o&er another ?
in a(enc$ the principa# has a#ost f+## contro# of the
a(ent, he can (i&e specific instr+ctions to the
a(ent, on how the o'#i(ations are to 'e perfored,
the anner of the o'#i(ations, the reedies
perfored, with who, where it is to 'e perfored,
#ahat, that wo+#d 'e the extent of the contro# of the
principa# o&er the a(ent.
5+t as he#d in the case of contro# of one part$
o&er another which on#$ (oes into the res+#t, it
cannot 'e considered as a contract of a(enc$ '+t it
a$ 'e considered a contract for a piece of wor2.
Another im&ortant featre as to effect of
/eli+er1 of the thin7
)f there is a transfer of ownership +pon de#i&er$
of one part$ to the other part$, that is not a contract
of a(enc$. )n a contract of a(enc$, when the
principa# de#i&ers the thin( to the a(ent, on#$
"o&e'er 2008
possession is transferred to the a(ent, ownership
is retained '$ the principa# 6owner7 in fact in
a(enc$ to se##, an a(ent who was not a'#e to se##
he has the ri(ht to ret+rn the (oods to the se##er.
>hether there was a stip+#ation as to there
wo+#d 'e no transfer of ownership despite the
de#i&er$ of the (oods fro one part$ to another,
and ownership of the (oods, first part$ wi## on#$ 'e
terinated +pon the sa#e of the (oods to a third
person, despite another stip+#ation statin( that
there is no a(enc$ re#ationship created 'etween
the parties. 0he *- r+#ed act+a##$ principa# a(ent
an( re#ationship ni#a.
$ conce&ts similar in a7enc1 an/ &artnershi&
5oth of the are '+siness or(ani<ations, 'oth are
'ased on tr+st and confidence, there wo+#d 'e
nora##$ a representation, howe&er the &er$
iportant distinction 'etween the two ? in
partnership, there is a /+ridica# persona#it$ created
separate and distinct fro that of the indi&id+a#
partner. )n a(enc$, despite the perfection of a
contract of a(enc$, wa#a si#a pa rin, the on#$
persona#ities wo+#d 'e that persona#it$ of the
principa# and the persona#it$ of the a(ent.
Some athors wol/ classif1 contract of
a7enc1 into three:
1. Act+a# a(enc$
2. Apparent @ .stensi'#e
3. %stoppe#
1. 4sto&&el
Iang -ase
;acts! ;#ores appears to ha&e f+## contro# in a
resta+rant 6>ashin(ton -afT7 owned '$ Kan( and
in the adinistration of the resta+rant he 'o+(ht
certain ites fro 9ac2 ? ites needed for
resta+rant. 5+t a portion @ price was not paid '$
;#ores. *o 9ac2 6se##er7 went after the owner of the
resta+rant. 0he on#$ defense raised '$ the owner
was that ;#ores was not his a(ent.
0a6e note: )t is &er$ diffic+#t to pro&e act+a#
a(enc$, 'eca+se an a(reeent 'etween 2
persons, eh 2+n( &er'a# #an( an( a(reeent d+n,
how wo+#d $o+ 'e a'#e to pro&eG
Ae#d! 0he owner of the resta+rant can 'e he#d
#ia'#e '$ estoppe# 'eca+se he c#othed ;#ores with
f+## power as if he had the a+thorit$ to '+$ those
ites necessar$ for the adinistration of the
resta+rant. Aside fro that, 9ac2 was a'#e to
pro&e pieces of e&idence ? #i2e in the #ease
a(reeent o&er the '+i#din( where the resta+rant
was #ocated and coes the owner of the resta+rant
as #essee and ;#ores si(ned as an a(ent of the
#essee with a## these the *- r+#ed that the owner of
the resta+rant is #ia'#e +nder the 8rincip#e of
%stoppe#.
$. A&&arent / Ostensible
"allos -ase
;acts! Letter was sent '$ 5 to L, inforin( L that A
has the a+thorit$ to enter into a contract with L
specifica##$ to o'tain (oods fro L, #i2e copra,
a'aca which (oods wi## 'e so#d '$ A. After the sa#e
a portion can 'e ded+cted as a coission and
the rest to 'e de#i&ered to L. After a certain period,
the (oods o'tained '$ A fro L reained +npaid.
)n other words, A wi## (et the (oods fro L. A did
not de#i&er the proceeds of the sa#e. L deanded
pa$ent fro 5. 0he defense of 5 was as of that
oent fro that certain period he has a#read$
re&o2ed the a+thorit$ of the a(ent and therefore 'e
'o+nd '$ an$ contract entered into '$ A in
representation of 5 with 3
rd
person. Is the claim of
B tenable?
"o, 1873 so far as 3
rd
person are concerned, this
notice iton( #etter n$a 2a$ L reain in f+## force and
effect +nti# it is rescinded in the sae anner it
was (i&en.
Q: hat if B was able to prove that he posted
the notice in <anila Bulletin @ notice of fact of
revocation of A. If there was such publication
of notice, would the ruling of the .- be
different?
A! "o, sti## the sae 6Artic#e 18737
6*ee phraseo#o($ of 18737
Q: hat if in this problem he had actual
0nowledge of the revocation even if he did not
receive the letter eh under 1?)7 he should be
sent a letter in order that the revocation of
authority of A will be effective as to third
person?
A! )f the 3
rd
person has act+a# 2now#ed(e of the
re&ocation, it is 'ad faith on his part to contin+e
transactin( with the a(ent. 0he a(ent actin( on
'eha#f of the principa# and th+s he sho+#d not 'e
a##owed to reco&er.
8wede na'asa $+n( p+'#ication, infored '$
phone, te#ephone con&ersation '+t it is &er$ hard to
pro&e 'eca+se the word of the principa# is a(ainst
the 3
rd
person.
As far as 3
rd
person are concerned the$ wo+#d
ha&e the ri(ht to 'e#ie&e that the a(enc$ has the
a+thorit$ +nti# the$ ha&e recei&e a notice in the
sae anner that he recei&ed notice as to the
a+thorit$ of the a(ent.
"o&e'er 2008
Q: In agency by estoppel / apparent agency, is
there really an actual agency e'isting?
A! )t does not atter, the principa# can 'e he#d
#ia'#e +nder the 8rincip#e of %stoppe# 'eca+se it is
&er$ hard to pro&e the existence of the act+a#
a(enc$. )t can on#$ 'e the principa# in estoppe# that
can 'e he#d #ia'#e. =+st #i2e in apparent @ ostensi'#e
a(enc$ sa totoo #n( it is possi'#e that he did not
re&o2e the a+thorit$ pwede pa din di'a, pweden(
2+nwari nire&o2e na ni$a /+st to a&oid #ia'i#it$ to 3
rd
person '+t that is a atter or a c#ai that he
a#read$ re&o2ed. 8ati (a #etter, ha#i'awa e&en
ass+in( the principa# he#d a #etter to the a(ent
that #etter can 'e easi#$ denied 2+nwari, pinada#a
n$a 3 onths a(o pero n(a+n #n( pinada#a ni#a(a$
n$a #n( +n( date n+n( +nan( panahon. 0h+s, it
on#$ protects 3
rd
person. 0h+s, 1873 is inc#+ded in
the #aw in a(enc$.
'. Actal A7enc1
0he #aw itse#f c#assifies act+a# a(enc$ into , as to
anner of creation, express or ip#ied. 0here is no
pro'#e with express a(enc$.
A. %xpress A(enc$ ? it is a 2ind of a(enc$
wherein the consent of 'oth parties is
express#$ (i&en.
5. )p#ied A(enc$ ? were the consent of one
of the parties was on#$ ip#ied#$ (i&en on
the part of principa#.
&ela (ena vs. 9idalgo
;acts! 4e#a 8ena a+thori<ed Aida#(o to adinister
his properties in the 8hi#ippines, Ae has to #ea&e
the co+ntr$. Aida#(o ana(ed the properties of
4e#a 8ena, after a whi#e he has to #ea&e the
co+ntr$ a#so and (o to *pain for hea#th reasons.
*o he appointed another person, another Aida#(o
to adinister said properties of 4e#a 8ena and
wrote a #etter to 4e#a 8ena inforin( hi of the
appointent of another person to rep#ace hi as
the adinistrator of his propert$. 4e#a 8ena
recei&ed a #etter, he did not re/ect the appointent,
he did not 1+estion the acts of the new
adinistrator. After a whi#e he died and his heirs
64e#a 8ena heirs7 fi#ed an action a(ainst Aida#(o
6the 1
st
a(ent7 for acco+ntin(, daa(es etcetera for
the period after the appointent of the other a(ent.
)ss+es! 617 >ho was then the a(ent d+rin( the
periodGS 627 -an the 1
st
a(ent 'e he#d #ia'#e after
the appointent of another adinistratorG
Ae#d! ;ro the si#ence of the principa#, d+e to his
inaction, d+e to his fai#+re to rep+diate the acts of
the s+'stit+te, he is there'$ deeed ip#ied#$
consented to the appointent of another person as
the new a(ent, therefore ip#ied a(enc$ was
created.
0his (oes to ip#ied a(enc$ pertainin( to the
principa# 'eca+se of the si#ence of the principa#,
'eca+se of #ac2 of action of principa#, 'eca+se of
fai#+re to rep+diate the acts of another principa#, na
a#a n$an( was actin( on his 'eha#f.
Q: 9owever, is this rule applicable also to the
agents or to the other party? -oncretely, if a
person was as0ed to administer the property of
another or to sell the property, and he said
nothing @ by his silence, by his inaction, may
he be deemed to have accepted agency?
A! "ot necessari#$, th+s +nder the #aw, $o+ ha&e to
a2e distinction to deterine the scenario +nder
which the said appointent was ade, o2ieQ 0he
#aw wo+#d sa$ when the 2 parties are a'sent, and
when the 2 parties are present.
>hen 2 parties are a'sent ? 1 is in 9ani#a and the
other is in -e'+.
>hen 2 parties are present ? present in the sae
roo
(A) $ &ersons &resent I &resent in the same
conference hall
Q: hen both parties are within the same
conference hall, A said to B that he would sell
his 5B6 parcel of land in -agayan &e :ro -ity
but that B did not react, he Kust stared at the
spea0er, na0atingin lng sya, he said nothing,
by his silence would have deemed the agency?
A! "o.
Q: But if B delivered a special power of
attorney to A, sabi nya %9ere is the .(A, I am
authoriCing you to sell my parcel of land in
-agayan &e :ro -ity,. #he .(A was accepted
by B but he said nothing, basta tinanggap na
lng nya, deemed impliedly consented to that
agency?
A! Hes.
(() 2f $ &ersons are in /ifferent &laceH one in
Manila an/ the other one in Ceb
Q: hat if A was in <anila B in -ebu. A as0ed B
to be his agent to sell a parcel of land and B
did not say anything, wala lng, is B considered
to have impliedly consented as an agent?
A! "o.
Q: But this time again a .(A was sent by A
5<anila6 through &9= to B 5-ebu6 which was
accepted / received by B, now he did nothing
"o&e'er 2008
by his inaction, by silence he is deemed to
have accepted the agency?
A! "ot necessari#$, it wi## depend on the nat+re of
the '+siness of 5, 2+n( an( ne(os$o, a(ain +nder
the facts in the *pecia# 8ower of Attorne$ he was
a+thori<ed to se## the parce#s of #and of A, if 5 was
in the '+siness of pi((er$ @ po+#tr$ a$ wa#an(
2ina#aan $an sa se##in( of a parce# of #and. Ae wi##
not 'e considered to ha&e ip#ied#$ accepted the
a(enc$. Aowe&er, if 5 is a rea# estate 'ro2er,
ta#a(an( (an+n $+n( ne(os$o n$a di 'a, '+$in(
and se##in( parce#s of #and, then and on#$ then on
his si#ence, he is deeed to ha&e ip#ied#$
consented to the a(enc$.
COM%4NSA02ON O9 0:4 A;4N0
Q: As to the compensation in a contract of
agency consider again if agency is gratuitous
or onerous?
A! A(enc$ is pres+ed to 'e for copensation. )f
that principa# is c#aiin( that the a(ent a(reed to
render ser&ice witho+t copensation the '+rden is
on hi 6the principa#7 to pro&e that in fact it is
(rat+ito+s 'eca+se the #aw pres+es that it is for
copensation. 5+t there is one other re#e&ance in
this distinction ? for exap#e, d+e to the ne(#i(ence
of the a(ent the principa# s+ffered daa(es in the
ao+nt of 1002. )t was act+a##$ pro&en that the
a(enc$ was (rat+ito+s. 0he a(enc$ in other words
sa a'o(ado, pro 'ono or #i're an( ser'is$o nan(
a(ent, may the agent be held liable?
A! .f co+rse sa a'o(ado e&en if pro 'ono $an if he
ca+sed daa(e to the principa# or c#ient d+e to his
ne(#i(ent acts, he can 'e he#d #ia'#e. Aowe&er,
+nder the #aw if the contract of a(enc$ is (rat+ito+s
in character, the co+rt a$ iti(ate the #ia'i#it$ of
the a(ent, dahi# (rat+ito+s.
Att1. =ribe>s Comment: ) definite#$ a(ree with the
pro&ision. As to this, the on#$ reco(nition of h+an
nat+re, pa( wa#an( swe#do ahirap (tra'aho, in
fact, ahirap (+isin( sa +a(a. 5+ti na #n(
na+na an( swe#do sa2in ditto sa re&iew 2a$a
(anado a2o a(sa#ita
Article 1?*? ? 0he #ia'i#it$ of the a(ent for ca+sin(
daa(e to the principa# d+e to his ne(#i(ence or
e&en 'ad faith or fra+d coitted a(ainst the
principa# a$ 'e iti(ated if the a(enc$ is
(rat+ito+s in character.
B!: hat is the scope of authority of the agent
@ whether it only pertains to the acts of
administration or acts of strict dominion?
A! :nder Artic#e 1877, if the a(enc$ is in (enera#
ter this on#$ coprises acts of adinistration.
%&en if the principa# 'eho#ds power to the a(ent or
it is stated that the a(ent a$ exec+te an$ act as
a$ 'e deeed appropriate, that wi## sti## 'e an
a(enc$ pertainin( to act of adinistration.
9ORM O9 A CON0RAC0 O9 A;4NCB
As to for, the #aw is c#ear that it a$ 'e ora#
howe&er, the law may reEuire a particular form
or specific form for what? for the validity of
agency? Is there a law which reEuires a
particular form for the validity of the agency?
A! >a#a, there is no s+ch for.
Q: Is there a particular form reEuired by law for
the agency to be enforceable?
A! At #east one, +nder the stat+tes of fra+ds , if in
the ters or a(reeent if it is not to 'e perfored
within 1 $ear, it sho+#d 'e in writin( otherwise, it is
+nenforcea'#e. 0he effect of the a(enc$ if the
a+thorit$ of the a(ent it is not in writin( wo+#d (o
into the contract entered into '$ the a(ent with the
3
rd
person. 1874 and 1878 ? fora#ities.
R48=2S204S O9 A CON0RAC0 O9 A;4NCB
%ssentia# re1+isites of a contract of a(enc$ are #i2e
an$ other contract ? there are 3 essentia# e#eents!
617 consent of the contractin( partiesS 627 as
entioned a whi#e a(o, the o'/ect of a contact of
a(enc$ is the exec+tion of the /+ridica# actS 637 as to
ca+se, as far as the principa# is concerned it is the
ser&ice to 'e rendered '$ the a(ent and as to the
a(ent, it is the copensation to 'e paid '$ the
principa# or it a$ /+st 'e #i'era#it$ in (rat+ito+s
contract.
"allos -ase
Ae#d! 0he *- en+erated the essentia# e#eents
or the a##e(ed essentia#s e#eents of a contract of
a(enc$!
1. -onsent
2. %xec+tion of the /+ridica# act ? s+'/ect
atter
3. Acts within the scope of a+thorit$
4. 0he acts +st 'e in representation of
the principa#
Att1. =ribe>s Comment: 0hese are a##e(ed#$ the
essentia# e#eents. A(ain, soe a+thors wo+#d
disc+ss in their 'oo2s that these are the essentia#
e#eents. >ith d+e respect to the ponente of this
case, ed$o a#i a#i an( en+eration, first there
was nothin( entioned a'o+t the ca+se or
consideration as a contract, a contract wi## ne&er
&a#id#$ ha&e a ca+se or consideration. >e##, it a$
'e #i'era#it$, pwede naan ca+se $an '+t there
+st ha&e a ca+se. 0hat the a(ent act within the
scope and that the a(ent +st act in
representation are not essentia# e#eents of a
contract of a(enc$. 0he$ are act+a##$ o'#i(ations of
the a(ent which eans the$ ha&e a#read$
perfected the contract of a(enc$. "o o'#i(ation wi##
"o&e'er 2008
arise 2+n( &oid $+n( 2ontrata 2+n( wa#a pan( &a#id
contract. *o the essentia# e#eents are on#$ those
e#eents necessar$ for the &a#idit$ of the contract.
.nce the contract is &a#id then the o'#i(ations wi##
arise.
Q: If the agent acted outside the scope of his
authority, does it mean that the contract of
agency is void?
A! .f co+rse not. Ae can 'e he#d #ia'#e for actin(
o+tside the scope of his a+thorit$ or if he acted not
in representation of the principa#.
Q: &oes it mean that there was no agency at
all?
A! .f co+rse not. 0here is a contract of a(enc$.
:nder the r+#e, there are conse1+ences if the
a(ent did not act in representation of the principa#.
%AR024S 2N A CON0RAC0 O9 A;4NCB
Noin( to the consent of the parties, 1
a+thor a$ c#ai that there are 3 parties in a
contract of a(enc$ that is tota##$ wron(Q
0here are on#$ 2 parties in a contract of
a(enc$ the principa# and the a(ent. Aowe&er, in
pro'#es in&o#&in( a(enc$, nora##$, there are
three persons in&o#&ed. 0he third person with
who the a(ent transacted is no #on(er part of the
concept a(enc$. 0he contract entered into 'etween
the principa# and the a(ent is the contract of
a(enc$. 5+t when the a(ent entered into another
contract, it a$ 'e a sa#e, #ease or other contract
and the 3
rd
person is not a part$ to this contract.
0he 3
rd
person is a part$ to a 2
nd
contract.
A(ain the parties are the principa# and the
a(ent. 0he$ a$ 'e ca##ed in other naes the
principa# a$ a#so 'e ca##ed the ep#o$er,
constit+ent, chief. 0he a(ent a$ 'e ca##ed
attorne$?in?fact, prox$, representati&e.
1. Consent of the Contractin7 %arties
Q: hat if the principal authoriCed an agent
who was then 13 years old to sell a house and
lot, giving him a .pecial (ower of Attorney.
(ursuant to his mandate, the agent 5minor6
sold the house and lot to B, a 7
rd
person,
thereafter B filed an action to annul the
contract of sale on the ground that the agent is
minor at the time of the sale, will the action
prosper?
A! )t wi## not prosper. .n 2 (ro+nds!
(1) )n that contract of #ease entered into '$
the a(ent and the third person or the
contract of sa#e 'etween the third person
and the a(ent, whi#e A is considered as
the se##er '+t on#$ actin( on 'eha#f of the
principa# sti## the rea# part$ in the contract
is the principa# and not the a(ent
(2) 0he other reason is +nder the r+#es in
contracts , )n ann+#ent of contract, on#$
the incapacitated person has the ri(ht to
ha&e the contract ann+##ed, the part$ in
the contract who is not otherwise
incapacitated has no ri(ht to instit+te an
action for ann+#ent.
%ither (ro+nd wo+#d 'e a &a#id (ro+nd to
disiss the case.
$. Ob-ect of the Contract of A7enc1
As to the o'/ect of the contract of a(enc$ we ha&e
entioned a#read$ that this is the exec+tion of
/+ridica# act.
Q: Is it correct to say that any act which a
person can lawfully do, he can delegate to a 7
rd
person or to an agent?
A! "ot a##. 0here are acts which are considered
p+re#$ persona# acts. 0his he a$ not de#e(ate to
an a(ent , #i2e the exec+tion of an affida&it, $o+
cannot as2 soe'od$ to si(n on her 'eha#f in an
affida&it or e&en in s+ccession $o+ cannot
de#e(ate the exec+tion of a wi## to a 3
rd
person,
note that it is exec+tion not draftin( of the wi##. Ho+
can as2 soe'od$ to si(n for $o+, +nder certain
circ+stances, '+t the exec+tion per se cannot 'e
#eft to a 3
rd
person, it is a p+re#$ persona# act.
Q: #he right to vote may be delegated to
another person?
A! 0he answer is ? it depends. Eotin( in nationa# @
#oca# e#ection cannot at #east 'e &a#id#$ de#e(ated.
>e## it a$ 'e de#e(ated, a$ ha&e 'een
de#e(ated '$ other peop#e, pero pa( nah+#i 2a, pa(
'ad 2a, 2+#on( 2a sa'i ni =o2er 5+t in a
corporation, as for corporation can there be a
valid delegation of the right to vote? Hes. )n a
stoc2ho#dersD eetin(, this cannot happen '+t in a
5.4Ds eetin(, in a 5.4 eetin( it is the persona#
presence of the 4irector which wi## 'e co+nted for
the p+rposes of 1+or+ '+t for p+rposes of &otin(,
$o+ can as2 soe'od$ to o'ser&e d+n sa
proceedin(s. 0he e'ers of the 5oard wo+#d
nora##$ not exc#+de $o+ as an o'ser&er, as a
representati&e of the other 5.4.
5+t o'&io+s#$ if the person hise#f cannot #awf+##$
do, cannot de#e(ate an$one #i2e if the a(ent cannot
'+$ a parce# of #and in the 8hi#ippines, he cannot
a#so de#e(ate s+ch acts to another person that is
&oid sa#e.
9ORM O9 CON0RAC0 O9 A;4NCB
"o&e'er 2008
As entioned ear#ier, a(enc$ a$ 'e ora#. )t
doesnDt atter if the contract of a(enc$ wo+#d 'e
&a#id '+t the parties e&en if it is '$ &er'a#
a(reeent, an$ effect in the &er'a# a+thori<ation,
the a(reeent 'etween the a(ent and the principa#
if it was on#$ &er'a# wi## on#$ 'e in the contract
entered into '$ the a(ent. -oncrete#$, +nder 1874,
if the a(ent was a+thori<ed to se## a parce# of #and
and his a+thorit$ is not in writin(, the sa#e itse#f is
&oid +nder 1874, howe&er, if for exap#e, the a(ent
was a+thori<ed to se## a car and his a+thorit$ is not
in writin(, what is the status of the sale? ould
that be valid and enforceable against the
principal?
A! "o, it is +nenforcea'#e +nder 1878. .an yung
car sa 1?)?? )t fa##s +nder the #ast para(raph of
1878 ? an$ other act of strict doinion wo+#d
re1+ire specia# power of attorne$. *o 1878 wo+#d
en+erate cases, acts of contracts where the #aw
re1+ires the a+thorit$ of the a(ent in writin(, it
sho+#d ha&e a *pecia# 8ower of Attorne$, otherwise
the contract entered into '$ the a(ent is
+nenforcea'#e a(ainst the 8rincipa#.
Q: -oncretely, the agent was authoriCed to
administer a rice land. In the administration of
the rice land, he had to buy fertiliCer, if he paid
the sellers of fertiliCer without .pecial (ower of
Attorney, would the payment be binding
against the principal?
A! Hes 'eca+se that pa$ent is on#$ considered as
an act of adinistration.
Q: 9owever, 0ung na@harvest na ung palay then
he used the proceeds of the palay to pay the
indebtedness of his principal with a certain
ban0 5(GB6 without .(A, would that payment
be valid and binding as against the principal?
A! "o 'eca+se that wo+#d fa## +nder the first
para(raph of 1878 , to a2e s+ch pa$ent not in
the atter of acts of adinistration witho+t *8A.
Other Acts / Contracts which Re3ire a S%A
1. %nterin( into a coproise a(reeent
with *8A. Ae cannot s+'it the atter to
the ar'itrator witho+t another *8A, those
are 2 and separate distinct powers ? the
power to s+'it atters in the ar'itrator
and the power to coproise.
B!: #he agent of the principal entered into a
contract of lease 5without .(A6 with B and the
period of lease is for 7 years. ould the
contract of lease be valid and enforceable as
against the principal?
A! )t depends on the o'/ect of the #ease. )f this
#ease in&o#&es io&a'#e #i2e a parce# of #and, for
a period of 3 $ears witho+t a *8A, would that be
valid and Binding?
:nahin natin +n( car, if it wo+#d 'e a car for 3
$ears witho+t *8A, e&en if it is for 3 $ears this
wo+#d 'e a &a#id and 'indin( contract of #ease as
a(ainst the principa#. Aowe&er, if this is an
immovable li0e a parcel of land, would this be
valid and binding against the principal? )t
depends on whether in this contract of #ease if the
principa# is the #essor or the #essee. :nder Artic#e
1878, this contract is +nenforcea'#e as a(ainst the
principa# on#$ if! 617 in the contract of #ease the
principa# is the #essorS 627 the o'/ect is io&a'#e
and 637 the period is ore than 1 $ear. 0a2e note of
the 3 re1+ireents.
:nder 1878, it is to #ease the propert$ of the
principa# to another. 0herefore, if the principa# is the
#essee *8A is not re1+ired, 2asi an( '+rden wa#a
naan sa principa#, d+n sa #essor, 2c propert$ n(
#essor $an di 'aG 0h+s, the #aw on#$ re1+ired the
*8A if the principa# is a #essor, and the #ease
contract in&o#&es io&a'#e propert$ and the
period is ore than 3 $ears.
Q: =ease contract was entered into by A in
representation of B, with B as the lessor, the
period of lease of a parcel of land is 7 years. A
has a .(A. <ay this contract be unenforceable
as against the principal?
A! Hes, it is possi'#e if this #ease is not in writin(.
0his tie +nder the *tat+te of ;ra+ds. Kanina an(
disc+ssion natin a$ +nder 1878 '+t if $o+
ree'er the *.;, a #ease o&er io&a'#e
propert$ for ore than 1 $ear +st 'e in writin( to
'e enforcea'#e 6Artic#e 14037.
0here is an a+thor a(ain who wo+#d c#ai that a
8ower of attorne$ a$ 'e ora#. Ae is rea##$
wron(. A power of Attorne$ '$ its nat+re is in
writin(, '$ definition it is a written a+thorit$. )t
cannot 'e ca##ed a power of attorne$ if it is not in
writin(, in fact, if $o+ consider the specific pro&ision
in the a(enc$ a## this pro&isions pertain to a power
of attorne$ in a written instr+ent. ;or example'
Artic#e 1871, pertains to the de#i&er$ of a power of
attorne$S 1872 refers to transitta# of a power of
attorne$S 1900 ? power of attorne$ is writtenS 1902?
presentation of a power of attorne$.
.'&io+s#$ in a power of attorne$, $o+ cannot do
that if it is ere#$ a &er'a# a+thori<ation. 9ow can
a third person demand the presentation of a
power of attorney if that alleged power of
attorney is verbal? 5$ its nat+re, it is in writin(.
Q: ould that power of attorney be valid and
binding as against the principal if it is not in a
public instrument?
"o&e'er 2008
A! Hes, e&en if a power of attorne$ is on#$ in a
pri&ate instr+ent, the power of attorne$ is &a#id
and 'indin( a(ainst the principa#. 0he #aw does not
re1+ire that it +st 'e in a p+'#ic instr+ent.
FimeneC vs. "abot
;acts! =iene< was the owner of certain parce#s of
#and in 8an(asinan. Ae was then in the pro&ince of
"orth L+<on when he sent a #etter to his sister
as2in( his sister to se## one of his parce#s of #and.
>ith that #etter, the sister indeed so#d one of his
parce#s of #and to Ra'ot. Aowe&er, the sister did
not reit the proceeds of the sa#e, 'in+#sa #n( n$a,
so when =iene< went 'ac2 to 8an(asinan, he
deanded the propert$, $+n a$ na 2a$ Ra'ot na,
so he fi#ed an action a(ainst Ra'ot, the defense
raised '$ hi is that the #etter wo+#d not 'e
s+fficient a power of attorne$ to 'ind hi as a
principa# in the sa#e of the parce#s of #and.
Ae#d! A #etter s+ffices as a power of attorne$. >hen
$o+ sent a #etter to $o+r 'rothers or sisters $o+ do
not notari<e s+ch #etter.
O(L2;A02ONS O9 0:4 A;4N0
1. 0o carr$ o+t the a(enc$.
2. )n carr$in( o+t the a(enc$, there are 2
o'#i(ations of the a(ent!
6a7 0o act within the scope of a+thorit$
6'7 0o act in 'eha#f of the principa# or in
representation of the principa#.
3. 0o render an acco+nt of his transactions and to
de#i&er to the principa# whate&er he a$ ha&e
recei&e p+rs+ant to an a(enc$ e&en if it not owin(
to the principa#.
1. %rimaril1H the obli7ation of the a7ent is to
carr1 ot the a7enc1. 2f he faile/ to carr1 otH he
ma1 be hel/ liable.
Q: .hould he carry out the agency after the
death of the principal?
A! As a r+#e no, 'eca+se there is no one to 'e
represented. )n fact +nder 1919, the a(enc$ is
extin(+ished '$ the death of the principa#.
Aowe&er, the #aw pro&ides for an exception ? if
de#a$ wo+#d ipair dan(er for an a#read$ 'e(an
'+t then +nfinished contract, he sho+#d contin+e to
carr$ o+t the a(enc$. A(ain, if it wo+#d ca+se
dan(er.
Q: But if he did not carry out agency, he may
not be held liable?
A! As a r+#e, he is #ia'#e for not carr$in( o+t the
a(enc$.
Q: .o what is the e'ception?
A! 8rofessor de Leon (a&e an example of this, if
the a(ent was a+thori<ed to '+$ a specific car fro
a specific person. >hen the a(ent was a'o+t to
'+$ the car, he was infored '$ the se##er that
there is a defect in the 'ra2e s$ste of the car.
"onethe#ess, witho+t inforin( the principa# he
'o+(ht the car. )f daa(e was ca+sed to the
principa# 'eca+se of the defecti&e 'ra2e s$ste
and a c#ai is fi#ed a(ainst the a(ent, can the
agent invo0e that he merely carried out the
agency? "o, here the #aw is &er$ c#ear that he
sho+#d not carr$ o+t a(enc$ if it wo+#d res+#t in #oss
@ daa(e in the principa#.
Another Example
An a(enc$ to '+$ a parce# of #and 'efore the 9t.
8inat+'o er+ption. 4+rin( that tie, a(ents a## o&er
L+<on, wi## '+$ a parce# of #and not on#$ in 9etro
9ani#a '+t a#so in 8apan(a and *o+th
-ALA5ARU." '+t if the a(ent was (i&en a+thorit$
and he 'o+(ht parce#s of #and iediate#$ after
the er+ption soewhere in 8orac @ 5aco#or
8apan(a, +2han( $o+ can 'e he#d #ia'#e for
'+$in( those parce#s of #and. #hat it would be a
valid sale?
A! Hes, that wo+#d 'e a &a#id and 'indin( sa#e as
far as the 3
rd
person is concerned. )f na2ita naan
na p+ro #ahar, na2ita o pa 'ini#i o pa, the a(ent
can 'e he#d #ia'#e 'eca+se the act definite#$ wo+#d
res+#t in #oss or daa(e to the principa# at #east for
a'o+t 15 $ears.
$. 2n carr1in7 ot the a7enc1H there are $
obli7ations of the a7entH he shol/ alwa1s
remember:
6'7 0o act in 'eha#f of the principa# or in
representation of the principa#.
Q: 9ow would you 0now if the agent was acting
within the scope of authority?
A! Ho+ wi## 'e (+ided '$ the power of a+thorit$. )n
fact, as a 3
rd
person, $o+ can deand the power of
attorne$, so that $o+ wi## 2now whether in fact he
had a+thorit$ to enter into a contract. 5+t sa totoo
#n( there are soe *8As which wo+#d 'e s+'/ect of
the case +p to the *- pertainin( to the scope of
a+thorit$ of the a(ent.
=inal vs. (uno
Q: as (uno authoriCed to sell the land or
merely authoriCe to administer the land?
A! 0here was a dissentin( opinion.
Att1. =ribe: 9as a(a#in( an( dissentin( opinion.
*a phraseo#o($ n( a+thorit$ ni 8+no he was on#$
to '+$, to se##, etcRin the adinistration of #and, so
the '+$in( and se##in( sho+#d not 'e constr+ed as
a separate a+thorit$ fro the adinistration and
sho+#d 'e constr+ed as a '+$in( and se##in( in
re#ation to the adinistration. )f $o+ ha&e to
"o&e'er 2008
adinister a parce# of #and, $o+ ha&e to '+$ so
an$ thin(s, #a#o na 2apa( a(ric+#t+ra# #and $an.
Ho+ ha&e to '+$ too#s, ferti#i<ers, and therefore $o+
ha&e the a+thorit$ to '+$. &o you have to
authority to sell? Hes, the prod+cts of that #and.
Ho+ ha&e the a+thorit$ to se## pero +n( (inawa ni
8+no, 'inenta n$a iso $+n( #and. >hen the
case reached the *-, the a/orit$ of the decision
was , he has the a+thorit$ to se## +nder the power
of a+thorit$.
.ne of the 'ases of the *- in the
conc#+sion that there was a power to se## a#so
'eca+se the fact that the a(ent acted in (ood faith,
that is an incredi'#e ar(+ent, '$ the mere
allegation that the agent acted in good faith he
already acted within the scope of the his
authority? 8aran( a#a'o $+n( da#awan( $+n.
%&en if ) wo+#d c#ai that ) tho+(ht ) a a+thori<ed,
does it mean therefore that I was authoriCed?
0hose are 2 different thin(s ? 'e#ie&in( in (ood faith
that $o+ ha&e the a+thorit$ is different fro in fact
ha&in( the a+thorit$.
"onethe#ess, a(ain, as a r+#e $o+ can 'e
(+ided '$ the power of attorne$ '+t e&en if witho+t
the power of attorne$ or despite the fact there was
a specific andate of the power of attorne$, $o+
sho+#d 'e (+ided '$ specific pro&isions of #aw
whether the act is within the scope of $o+r
a+thorit$. ;or example: 1881 ? the a(ent a$ do
s+ch acts as a$ 'e cond+ci&e for the
accop#ishent of the p+rpose of a(enc$. 0his
partic+#ar pro&ision has 'een cited '$ the *- in the
case of <ac0 vs. Iang, if a person who is an
a(ent has the a+thorit$ to ana(e the resta+rant,
necessari#$, he +st ha&e the a+thorit$ to
p+rchase ites for the ana(eent of the
resta+rant ? the act of '+$in( these ites, #i2e
p#ates, these are reasona'#e and necessar$ for the
accop#ishent of the a(enc$.
Another Artic#e which wo+#d he#p $o+ in
deterinin( if the act is within the scope of the
a+thorit$ is Artic#e 1882.
Example of this, the principa# a+thori<ed his a(ent
to se## his car, a specific car for 3002. 0he a(ent
so#d the car for 400K. )t is possi'#e for the principa#
to sa$ that $o+ acted o+tside the scope of
a+thorit$, (a#it pa c$a 3002 na 'ine'enta pero 4002
na'enta. 0echnica##$, $es, the a(ent indeed a$ 'e
considered to ha&e or a$ 'e c#aied to ha&e
acted o+tside or in excess of his a+thorit$ 'eca+se
he to#d to se## the car for 3002.
Q: hat is the reason that the principal would
claim that the agent acted outside the scope of
his authority?
A! 9an$ reasons! for exap#e he as2ed to '+$
soe'od$ to se## his car 'eca+se he expected s+
one$ to arri&e fro a'road to '+$ a 'rand new
car '+t wa#a napornada, di 'ini(a$ n( 2apatid $+n(
pera. 0herefore, if the car wi## 'e so#d wa#a na
s$an( 2otse and it is an exc+se that the a(ent
acted o+tside the scope of his a+thorit$ '+t the
coon reason wo+#d 'e 'eca+se the principa#
a#read$ ta#2ed to soe'od$ e#se which wi## rea##$
'+$ the car for 4002. >hen $o+ a$ choose this
1G 5eca+se d+n sa isa, wa#an( coission di 'a
sa 1 a$ coission. Ae a$ not reco(ni<e this
contract.
Artic#e 1882 ? the #iits of the a(entDs
a+thorit$ sha## not 'e considered exceeded sho+#d
it ha&e 'een perfored in a anner ore
ad&anta(eo+s to the principa# than that specified
'$ hi. *o +nder the #aw, that the act is deeed
not in extent of his a+thorit$, e&en on its face
paran( in excess, the #aw wi## consider it as not in
excess ere#$ 'eca+se it is ad&anta(eo+s to the
principa#.
Ho+ distin(+ish these transactions fro an
a(enc$ to se## 100 2i#os of an(oes and there is a
specific instr+ction that the an(oes wi## 'e so#d 30
pesos per 2i#o. )f $o+ so#d the an(oes for 50
pesos, 30 #an( 'inenta 50 pesos per 2i#o an(
nan($ari o+t of 100 2i#os sisenta #n( an( na'enta,
60 sisenta, 70 sitenta, so instead of 30 pesos per
2i#o he so#d 50 per 2i#o. Act+a##$, this is a &io#ation
of the instr+ctions of the principa# 2a$a si(+ro di
#ahat na'enta +n( (a an((a 'inenta n$a with a
+ch hi(her price.
Another Artic#e 1879 ? the #aw specifica##$
pro&ides that the specia# power to se## exc#+des the
power to ort(a(e. %&en if the a(ent was
a+thori<ed to se##, he cannot ort(a(e that witho+t
another power of attorne$, as +ch as the power
to ort(a(e does not inc#+de the power to se## as
entioned a whi#e a(o the power to coproise
does not a+thori<e for the s+'ission to
ar'itration.
Q: 9owever, if the principal authoriCed the
agent to borrow money without the authority of
the principal can the agent himself be the
lender?
A! 0he #aw pro&ides $es, as #on( as the interest
rate wi## 'e the ar2et rate, so the a(ent a$ 'e
the #ender.
Q: #he agent was authoriCed to lend money of
the principal, may the agent himself be the
borrower of the money without the consent of
the principal?
"o&e'er 2008
A! 0his tie hindi na pwede. Ae a$ 'e a (ood
a(ent to #end the one$ to other person '+t he
a$ not 'e a (ood de'tor. 0h+s, the #aw wo+#d
protect the principa# in that case.
5+t a#so, 'e (+ided '$ the decision of the *- as to
the extent of the a+thorit$ of the a(ent. ;or
exap#e in the case of Insular &rug vs. (GB
;acts! 0he a(ent here was a+thori<ed to co##ect
s+s of one$ inc#+din( chec2s fro the c#ient of
)ns+#ar. *o a$ a(ent an( )ns+#ar. Ae did co##ect
the s+s of one$ and the chec2s, and the
chec2s were pa$a'#e to )ns+#ar '+t instead of
de#i&erin( the chec2s in the )ns+#ar, he encashed
the chec2 or deposited the chec2s in his acco+nt in
8"5.
)ss+e! 4oes the a+thorit$ to co##ect the chec2s
inc#+des the power to indorse the chec2s or e&en
the power to encashed the chec2G
Ae#d! "o, the power to co##ect does not inc#+de the
power to indorse or the power to encash the
chec2s. *o 2asa#anan n( 8"5 2+n( 'a2it ni#a
tinan((ap +n( chec2 witho+t the proper
indorseent saanta#an( an( pa$ee a$ )ns+#a.
Aindi naan si a(ent.
Att1. =ribe: )n fact, the one$ in&o#&ed here is
18,000 and ) wo+#d sti## ree'er na 8hi#ippine
Reports pa iton( case. 0he a(ent 69r. ;oster7
coitted s+icide when that fra+d was coitted.
*a'i n+n( isan( na('asa for s+re ahead pa sa
a2in, encirc#e n$a 18,000, (a(o naan ito 18,000
#n( a#iit #n( an( ao+ntR. 5+t there was another
(+$, s++nod d+n sa isa, sina(ot n$a, as (a(o
2a 1932 pa eto ehR
Q: #he obligation to act on behalf of the
principal @ If the agent acted for himself and did
not disclose his principal, would that 7
rd
person
has a cause of action against the principal?
A! "o.
Q: ould that principal have a cause of action
against the 7
rd
person?
A! >a#a din. 5+t there is an exception in this r+#e if
the o'/ect in&o#&ed in the contract entered into '$
the a(ent and the 3
rd
person 'e#on(s to the
principa# ? the #aw (rants @ (i&es a ca+se of action
to the 3
rd
person a(ainst the principa# and &ice?
&ersa. )t is 'eca+se of the possi'#e co##+sion
'etween the principa# and the a(ent di 'a, so that
sasa'ihin n( principa# a#a 2o $an( 2otse na $an
sira sira na a2ina 6a$ 2ato27. 0h+s, in act+a#
case the *- said, the &ehic#e has a B2noc2C , *-
decicion $anQ Aehehehehe Kasi a$ 2ato2 an(
2otse, the principa# wo+#d a(ree with the a(ent /+st
to se## it '$ $o+rse#f in $o+r own nae so that if
there wo+#d 'e a cop#aint the 3
rd
person has no
ca+se of action a(ainst e and the principa#. 5+t to
a&oid s+ch possi'i#it$ the #aw wo+#d (rant a ca+se
of action to the 3
rd
person if the o'/ect of the
contract 'e#on(s to the principa#.
B!: A authoriCed B to borrow sum of money
from any ban0 and he also authoriCed B to
mortgage a specific parcel of land to secure
that loan. hat B did, he borrowed money for
himself from a certain ban0 without disclosing
his principal. =ater on, he defaulted. -an the
ban0 go after the principal?
A! .f co+rse no, the contract is 'etween the a(ent
and the 'an2 on#$. 0he principa# has nothin( to do
with the contract. :nder the facts, the a(ent
'orrowed for hise#f.
Aowe&er, if $o+ ha&e read the s+((ested
answer, a$ 2
nd
para(raph ? to the effect that the
'an2 can at #east forec#ose the ort(a(e the$ can.
)f $o+ ree'er the 1+estion, di tinatanon( n(
exainer can the 'an2 (o after the principa# as far
as the thin( is concerned. 0he on#$ 1+estion
pertains to the pa$ent of #oan.
Another thin( in the s+((ested answer
which is tota##$ wron( ? +nder the facts, the
principa# a+thori<ed the a(ent to ort(a(e the
propert$ for the #oan that wi## 'e o'tained '$ the
a(ent in the nae of the principa#. )f indeed he
ort(a(ed the #and for a #oan in his nae, would
that mortgage be valid?
A! 4efinite#$ not. )f he ort(a(ed it as a ort(a(or
the ort(a(e is &oid. 0he #aw re1+ires that the
ort(a(or +st 'e the a'so#+te owner of the thin(
ort(a(ed. .n other hand, e&en if the a(ent
ort(a(ed the thin( on 'eha#f of the principa#, the
principa# is the ort(a(or. ould that be a valid
and binding mortgage as against the principal?
A! A#so not. Ais a+thorit$ to ha&e the propert$
ort(a(ed to sec+re a #oan, not to sec+re an$
other personDs #oan and that therefore it cannot 'e
within the a+thorit$ of the a(ent and therefore an$
forec#os+re of s+ch ort(a(e wi## not prosper.
Q: If the agent acted within the scope of his
authority and in representation of the principal,
who will be bound in such contract?
A! Aside fro the 3
rd
person, it wi## 'e the principa#
'eca+se a(ain the a(ent is ere#$ representin(
the principa#.
Q: 9owever, is it possible for the agent himself
to be bound in such contract or be held liable
under such contract?
"o&e'er 2008
A! Hes. )f he express#$ 'inds hise#f to that
contract, wh$ he wo+#d do thatG A(ent #an( naan
s$a, when he wo+#d 'ind hise#f persona##$ @
express#$G )n the &er$ nat+re of the a(enc$ the 3
rd
person act+a##$ 2nows that it is the a(ent and not
the principa#. An( na2i2ita #an( n( 3
rd
person sa
pa#en(2e eh +n( na(titinda 'a2a +n( principa#
nasa espana. 0herefore, the 3
rd
person to who a
thin( is offered for sa#e for exap#e the a(enc$ to
se##, the 3
rd
person wi## sa$ that B) wi## '+$ that if $o+
a#so 'ind $o+rse#f as one of the se##ersC 'eca+se )
donDt 2now the principa#. %h an( a(ent (+sto
2+ita, si(e na din di 'a. Ae wi## 'ind hise#f
persona##$ in the contract as a se##er and not as an
a(ent.
0he a(ent a$ 'e he#d #ia'#e in the
contract e&en if he acted within the scope, acted in
representation of the principa#, he acted ne(#i(ent#$
or in 'ad faith di 'a.
Artic#e 1909 is consistent a#so on the #aw
on o'#i(ations that e&er$ person who is (+i#t$ of
fra+d, ne(#i(ence, etc.. wi## 'e he#d #ia'#e for
daa(es.
5+t aside fro these 2 scenarios, of co+rse, the
a(ent a$ 'e he#d #ia'#e if he acted 'e$ond the
scope of a+thorit$. A#so, if he acted 'e$ond the
scope of his a+thorit$, howe&er, he a$ not 'e he#d
#ia'#e +nder s+ch contracts and +nder certain
circ+stances!
6a7 0he principa# ratified ? then the principa#
wi## 'e he#d #ia'#e and 'e 'o+nd on s+ch
contract.
6'7 %&en if the principa# did not ratif$, if the 3
rd
person was notified of the fact that the
a(ent was in excess of his a+thorit$ or
e&en if he was not notified, he was aware
of the fact that the a(ent was in excess of
his a+thorit$, the a(ent wi## not 'e he#d
#ia'#e 'eca+se +nder 1898 that contract is
&oid. *o this contract 'ein( &oid, the third
person cannot ho#d hi #ia'#e for actin(
within the scope of a+thorit$.
'. One im&ortant obli7ation of an a7ent is to
ren/er an accont of his transactions an/ to
/eli+er to the &rinci&al whate+er he ma1 ha+e
recei+e &rsant to an a7enc1 e+en if it not
owin7 to the &rinci&al.
)n fact, an$ stip+#ation exeptin( hi fro this
o'#i(ation to render an acco+ntin( is &oid.
&omingo vs. &omingo
;acts! 0he re#ationship 'etween the principa# and
the a(ent was not entioned in this case '+t the
a(ent 4oin(o was a+thori<ed to se## a propert$ of
the principa# 4oin(o '+t in p+rs+ant to this
a+thorit$, he introd+ced a perspecti&e '+$er to the
principa# .scar de Leon. .scar, /+st an$ other
prospecti&e '+$er wanted the price to 'e #owered.
*o he was as2in( that the price 'e #owered. 4+rin(
the ne(otiation, this .scar de Leon 'id 1,000 to the
a(ent, which ao+nt the a(ent did not disc#ose to
the principa#. Aowe&er, a$ &io#ation na n(
o'#i(ation an( a(ent. 0he principa# on the other
hand, soehow to on#$ accoodate the deand
of the prospecti&e '+$er, na2aisip n( paraan, what
he did, he had an a(reeent with the prospecti&e
'+$er that 2+nwari the sa#e wo+#d no #on(er p+sh
thro+(h so the$ ha&e this draa that the
prospecti&e '+$er was expectin( one$ fro
a'road and therefore the principa# wo+#d ha&e a
reason to the a(ent na hindi na at+t+#o$ an(
a(enc$ and therefore ) a re&o2in( $o+r a+thorit$
as an a(ent.
0hereafter, the a(ent disco&ered that
soethin( is wron( with what happened. Ae went
to the re(ister of deeds and he disco&ered that in
fact a sa#e was exec+ted 'etween 4oin(o and
.scar de Leon. 0he a(ent deanded for his
coission. 9a$ s+' a(ent pa s$a dahi#
inintrod+ce c$a 2a$ .scar, did the action
prosper?
Ae#d! "o, the *- r+#ed that for the fai#+re of the
o'#i(ation to de#i&er to the principa# for whate&er he
a$ ha&e recei&ed p+rs+ant to the a(enc$, e&en if
that is not on#$ to the principa#, that is a 'reach of
fid+ciar$ re#ation which res+#ted in not (i&in( the
a(ent his coission. But is the 1,+++
important? .upposedly, parang 1+,+++ ang
marereceive nya as commission?
A! 0he answer wo+#d 'e $es 'eca+se wh$ wo+#d
the prospecti&e '+$er (i&e 1,000 sa a(entG hindi
dahi# aha# n$a an( a(entGQ 0hat wo+#d 'e
'eca+se he wanted the a(ent to contin+e with the
principa# to #ower the price of the thin( which wo+#d
'e so#d, which is inconsistent with the interest of
the principa#. As an a(ent of the principa#, he is
s+pposed to protect the interest of the principa# not
to #ower the price to 'e paid '$ the '+$er. )f on#$ for
this the *- wi## not disiss the case. )n fact,
(inawa pa s$an( #ia'#e for the share of the s+'?
a(ent.
Obli7ation to /eli+er to the &rinci&al what he
ma1 ha+e recei+e
)n fact this o'#i(ation is so serio+s. )f the a(ent
wo+#d fai# to perfor this o'#i(ation, he a$ 'e
iprisoned.
U. vs. "eyes
;acts! 0he a(ent was a+thori<ed to co##ect s+s of
one$ for con&enience of the principa#. 9ore or
#ess 800 #an( $+n or 800V is the ao+nt to 'e
co##ected. "ow he was a'#e to co##ect on#$ 500
instead of 800. Ae c#aied that he is entit#ed to
"o&e'er 2008
20I as a coission 620I of 800 is 1607. *o hee
on#$ reitted 340 to the principa#, 'eca+se of that
the principa# deanded a (reater ao+nt than the
340. A criina# cop#aint was fi#ed 6for estafa7.
Ae#d! Re(ard#ess of the coission whether 10I
or 20I, the a(ent was not entit#ed to retain 160
'eca+se e&en if 20I the 20I of the 500 and he is
not entit#ed to the 20I of 800. 0he coission
sho+#d 'e 'ased on the act+a# ao+nt he co##ected
not the tota# ao+nt which he is s+pposed to
co##ect. And 'eca+se of his fai#+re to de#i&er 400 to
the principa# he was con&icted.
Obli7ation to ren/er an accontin7
Q: #he principal authoriCed the agent to sell a
car for 7++0, the description of the car was
mentioned in the .(A. 9owever, before the
agent would sell the car, the principal called
him by phone and instructed him to sell the car
in Q- to a member of IB( chapter. Instead of
selling the car in Q- to an IB( member, he sold
the car in <anila to a person not 0nown by the
principal for 7++0.
516 -an the principal recover the car from the
buyer if that car is already delivered to the
buyer?
546 Any remedy provided by the law to the
seller or to the principal?
A! 617 )t depends, if that '+$er has no 2now#ed(e of
that instr+ction of the principa# then he has a## the
ri(ht to retain the car and that sa#e wi## 'e &a#id and
'indin( as a(ainst the principa#. As pro&ided +nder
Art. 1900 so far as 3
rd
persons are concerned the$
on#$ re#$ on the *8A as written. 0he$ ha&e no
o'#i(ation to in1+ire on the specia# instr+ctions
ade '$ the principa# which are not entioned in
the *8A, eh wa#a naan d+n sa *8A na it wi## 'e
so#d to an )58 e'er chapter in W-.
627 0o (o after the a(ent for daa(es, if there is
an$ daa(e s+stained '$ hi for his fai#+re to
fo##ow the instr+ctions of the principa#.
Article 1)?) ? if the a(ent acted o+tside the scope
of his a+thorit$ and this was 2nown to the 3
rd
person the contract is &oid. 0a2e note '$ the
specific pro&ision of the #aw this contract is &oid
and s+'/ect to ratification. 0his is on#$ the &oid
contract which can 'e ratified +nder Artic#e 1898.
Q: Is it possible that the agent be held liable to
the 7
rd
person even if the 7
rd
person was aware
of the fact that the agent was in e'cess or
outside his authority?
A! Hes, if the a(ent proised to o'tain the
ratification of the principa# and fai#ed to o'tain the
ratification. "a(2wento s$a sa 3
rd
person
C$o+ 2now ) was actin( in excess of $ a+thorit$,
'+t donDt worr$ ) wi## (et the ratification of $
principa#C. )f he fai#ed to (et the ratification of the
principa# he wi## 'e he#d #ia'#e not 'eca+se of the
contract itse#f is &oid '+t 'eca+se of fai#+re to (et
the ratification of the principa#. )f the principa#
ratifies the contract, he cannot 'e he#d #ia'#e e&en
if it is a &oid contract 'eca+se the principa# is
'o+nd to the contract.
A%%O2N0M4N0 O9 S=(S020=04
Another possi'#e o'#i(ation of an a(ent a$ res+#t
fro an appointent of s+'stit+te
B!: B appoints D as his agent to sell his 5B6
products in -ebu -ity. -an D appoint sub@
agent? And if he does what are the effects of
this appointment?
A! Hes, the a(ent a$ appoint a s+'stit+te or s+'?
a(ent, if the principa# does not prohi'it hi in doin(
so. 5+t he sha## 'e responsi'#e for the acts of the
s+'stit+te 6'eca+se he was not (i&en a+thorit$ '$
the principa#7 especia##$ if one appointed t+rns to
'e incopetent or inso#&ent.
Att1. =ribe: )s this correctG
9+2han( a#i. 9+2han( conf+sed an( sa(ot. An(
tanon( s+'?a(entG -an H appoint s+'?a(entG Hes,
the a(ent a$ appoint s+'stit+te or s+'?a(ent
which eans apparent#$ there is no distinction
'etween a s+'?a(ent and s+'stit+te. >ith d+e
respect to the answer of the :8 Law -enter,
8rofessor de Leon is rea##$ (ood on this atter, a
s+'?a(ent is &er$ +ch different fro a s+'stit+te.
)f it is in rep#aceent 62apa#it7 that is a
s+'stit+te which eans that the a(ent wo+#d 'e
disassociatin( hise#f fro the a(enc$ 6Aa#is na
s$a or #a#a'as na s$a n( 8i#ipinas etc.7 and
soe'od$ e#se +st ta2e o&er his f+nctions.
An a(ent who appoints a s+'?a(ent wi##
contin+e to 'e an a(ent in that a(enc$ re#ationship.
Ae does not disassociate hise#f fro the
re#ationship. Ae is sti## the a(ent and therefore a##
the ri(hts and o'#i(ations wo+#d sti## 'e there e&en
if he appointed a s+'?a(ent. 5+t if the a(ent
appointed a s+'stit+te, the answer wi## depend on
Art 1892.
K+n( an( tanon( a$ s+'stit+te and d+rin(
the ana(eent of the '+siness '$ the s+'stit+te,
#osses were inc+rred '$ the principa#, as2 isan(
taon pa #n( an( s+'stit+te 29 was inc+rred '$ the
principa#, may the principal hold the agent
liable? Iba ung can the principal hold the
substitute liable?
A! 0he first thin( $o+ ha&e to consider is if he was
prohi'ited in appointin( a s+'stit+te or not. )f he
was prohi'ited he wi## 'e he#d #ia'#e 'eca+se he
appointed 1 despite the prohi'ition. )n fact, +nder
"o&e'er 2008
the #aw a## acts of the s+'stit+te appointed, if it is
a(ainst the prohi'ition, s+ch acts are &oid. )f he
was not prohi'ited +nder the #aw, he sha## 'e
responsi'#e for the acts of the s+'stit+te +nder
certain circ+stances. 0a2e note that the operati&e
word here is responsi'#e and not #ia'#e. Ho+ a$
'e responsi'#e ? there are conse1+ences.
)f he was not prohi'ited there are 2
scenarios!
617 "ot prohi'ited '+t he was neither (i&en the
power to appoint or
627 Ae was not prohi'ited precise#$ 'eca+se he
was (i&en the power to appoint.
K+n( he was not prohi'ited he '+t he a#so #ac2s
the power to appoint, an( scenario dito wa#a #n(
naention sa *8A so nothin( was entioned in
the *8A re(ardin( the appointent of the
s+'stit+te. An( i'i( sa'ihin n+n he was not
prohi'ited and he was neither (i&en the power to
appoint. If that is the case will he be liable
necessarily because of losses which were
incurred by the principal?
A! Aindi naan. )f the s+'stit+te acted within the
scope of a+thorit$ in representation of the principa#
and the s+'stit+te acted in (ood faith with the
di#i(ence of a (ood father of the fai#$,
nonethe#ess #osses were inc+rred '$ the principa# ?
(wede bang mangyari un? Hes, an( ne(os$o a$
ne(os$o 2ahit na napa2a(a#in( o pan(
ne(os$ante 2+n( pa#+(i na ta#a(a ne(os$o, there
are forces 'e$ond the contro# of e&er$ person. 0o
'e fact+a# a'o+t this 2apa( n(coconstr+ct n( LR0
ha#i'awa sa A+rora 'o+#e&ard, d+rin( the
constr+ction sta(e i#an( taon $an 2 or 3 $ears, sa
tingin nyo 0ung may restaurant pa dyan buhay
pa ba? >a#a na 2a2ain d$an p+ro a#i2a'o2 na.
As #on( as he acted within the scope of his
a+thorit$, in representation of the principa# and he
acted with (ood faith, the a(ent cannot 'e he#d
#ia'#e. Ae is responsi'#e for the acts of the
s+'stit+te and if the s+'stit+te acted within the
scope of a+thorit$ di 'a. 0his is consistent to the
princip#e of a(enc$ ? that the a(ent is not the
ins+rer of the s+ccess of the '+siness of the
principa#. .therwise, wa#a na a(?a?a(ent dahi#
2apa( na#+(i #ia'#e s$a.
Aowe&er, if in the ana(eent of the
'+siness of the principa# #osses were inc+rred
'eca+se the s+'stit+te isappropriated the incoe
of the '+siness or acted with (ross ne(#i(ence,
(a once a wee2 #n( n$a dinada#aw an( '+siness,
if that is the case, the a(ent wi## 'e responsi'#e for
the acts of the s+'stit+te and he a$ 'e he#d #ia'#e
for the #osses inc+rred '$ the principa# 'eca+se the
s+'stit+te acted ne(#i(ent#$, o+tside the scope of
the a+thorit$ and in 'ad faith.
Aowe&er, if the a(ent was (i&en the power
to appoint, there a$ 'e 2 scenarios!
617 0he person to 'e appointed as the s+'stit+te
a$ ha&e 'een desi(nated or 627 the person to 'e
appointed was not desi(nated.
*a'i n( principa# , Bo2 $o+ can appoint a
s+'stit+te '+t if $o+ wi## appoint a s+'stit+te,
appoint 8edroC. If the agent appointed (edro,
would he be held liable for the losses incurred
by the principal coC of the acts of (edro?
A! Aindi naan. 0he s+'stit+te was desi(nated
'eca+se the principa# said that he sho+#d appoint
8edro 2a$a inaapoint n$a si 8edro '+t this sho+#d
'e s+'/ected to the pro&ision of a(enc$ that he
sho+#d not carr$ o+t the a(enc$ if s+ch wo+#d
anifest #oss or daa(e to the principa#.
Example
At the tie of the appointent, the a(ent was at
that tie f+##$ aware that the person was
notorio+s#$ incopetent. Ae sho+#d ha&e at #east
infored the principa# that the s+'stit+te is
notorio+s#$ incopetent. )f he fai#ed to do so
ha&in( the opport+nit$ to in1+ire, then he can 'e
he#d #ia'#e.
)f the person to 'e appointed was not
desi(nated, he wi## on#$ 'e #ia'#e if the s+'stit+te
t+rns o+t to 'e notorio+s#$ incopetent or
inso#&ent. 6Artic#e 18927.
L2A(2L2024S O9 $ OR MOR4 A;4N0S
Q: If the principal appointed 4 or more agents
for a certain transaction, what would be the
nature of their liability? -an they be held liable
Kointly or solidarily?
A! A(ents can on#$ 'e he#d /oint#$ #ia'#e +n#ess the$
express#$ 'o+nd these#&es so#idari#$.
5+t in fact, e&en if the$ 'o+nd these#&es so#idari#$
and daa(e was inc+rred '$ the principa# d+e to
the act of one of the a(ents, it is sti## possi'#e that
the$ a$ not 'e he#d so#idari#$ #ia'#e despite that
there is an express a(reeent, if that a(ent who
ca+sed daa(e to the principa# acted o+tside the
scope of his a+thorit$.
Commission A7ent
A+thori<ed to se## and he wo+#d ha&e a coission
as to the price.
Q: If the agent sold a refrigerator on credit
without the consent of the principal A pag on
credit, he can still sell it at a higher price. Iung
normally 1+0 ang sabi ng principal, he may be
able to sell it at 1*0 pero 2 gives. If payable
every other month, the ne't day after the sale,
"o&e'er 2008
the principal having been informed of the sale,
he demanded for the proceeds of the sale. -an
the agent be compelled to pay or deliver the
proceeds of the sale 0ahit hindi pa nya na@
collect?
A! Hes, he can 'e cope##ed to de#i&er the
proceeds as if it was so#d on a cash 'asis 'eca+se
he so#d it on credit witho+t the consent of the
principa#.
Q: 9ow much would the commission agent
deliver if he was able to sell it at 1*0, payable in
2 months but under the agreement of the
principal and the commission agent, it should
be sold only at 1+0? 5Assuming that the
agent$s commission is 1+86
A! Ae sho+#d de#i&er 9,000 to the principa# 610,000
x 10I O 1,000 coission... 10,000 , 1,000 O
9,0007
Q: hat if 2 months after, he have already
collected 1*0, can the principal claim %di ba
you only gave me ;0 which is based on the 1+0
price but you were able to sell it at 1*0, so I
should get ;+8 of the 1*0,. Is that a valid
claim?
A! "o, +nder the #aw, if the coission a(ent so#d
the thin( on credit witho+t the consent of the
principa#, he is entit#ed to an$ profit which he wo+#d
deri&e fro s+ch o'#i(ation.
Q: If he was obliged to collect or sell 1+
refrigerators but he was able to sell only 1
refrigerator, can he be held liable for not selling
the remaining refrigerator?
A! "ora##$, he wo+#d 'e 'eca+se that is fai#+re to
cop#$ with his o'#i(ations as an a(ent. 5+t he has
a defense , exercise of the di#i(ence re1+ired. )f
there was no #aw or stip+#ation, it wi## 'e di#i(ence
of a (ood father of a fai#$. 0he fact that he was
a'#e to pro&e that he exercised the di#i(ence of a
(ood father of a fai#$ xxx nonethe#ess, he was not
a'#e to se##, he can no #on(er 'e he#d #ia'#e. A(ain,
he is not the ins+rer of the s+ccess of the principa#.
B!: #he agent was authoriCed to sell 4+ units
of refrigerator. 9e received in addition to his
commission, a guaranty commission. 9e was
able to sell the refrigerators and received his
guaranty. 9owever, the buyer failed to pay the
price of these refrigerators. #he principal
demanded from the agent the money which he
could have delivered to the principal as a
guaranty commission agent. #he defense
raised by the agent is that he has no obligation
to collect the price. #he agent said that his only
obligation is to sell the refrigerator. Is that
correct?
A! "o, as he recei&ed a (+arant$ coission, he
is 2nown as a (+arant$ coission a(ent. Ae is
a#so 2nown as Bde# credere a(entC and as s+ch, he
'ears the ris2 of co##ection.
O(L2;A02ONS O9 0:4 %R2NC2%AL
617 0o cop#$ with the o'#i(ations which the a(ent
a$ ha&e contracted within the scope of his
a+thorit$ and in representation of the principa#.
627 .'#i(ation to ad&ance the one$ necessar$ for
the accop#ishent of the p+rpose of the a(enc$.
637 .'#i(ation to Rei'+rse
(1) 0o com&l1 with the obli7ations which the
a7ent ma1 ha+e contracte/ within the sco&e of
his athorit1 an/ in re&resentation of the
&rinci&al.
0his is the ain o'#i(ation of the principa#.
)f the a(ent acted o+tside the scope of his
a+thorit$, the principa# a$ not 'e 'o+nd to s+ch
contract. 5+t e&en if the a(ent acted 'e$ond or
o+tside the scope of his a+thorit$, the principa# a$
'e 'o+nd if!
1. Ae ratified
2. Ae contri'+ted to decei&e the 3
rd
person
into 'e#ie&in( that the a(ent acted o+tside
the scope of his a+thorit$ 6estoppe#7. 0he
principa# and the a(ent wi## 'e so#idari#$
#ia'#e.
3. >hen the 3
rd
person co+#d not ha&e 2nown
of the #iitations on the power of the a(ent
6Example! Eer'a# #iitation7
Article 1?** , the third person wi## on#$ ha&e to
re#$ on the power of attorne$ as written.
($) Obli7ation to a/+ance the mone1 necessar1
for the accom&lishment of the &r&ose of the
a7enc1.
0he principa#, +n#ess otherwise stip+#ated or +n#ess
the he is a#read$ inso#&ent, +st ad&ance the
one$. %&en if the a(ent 'o+nd hise#f to
ad&ance, if the principa# is a#read$ inso#&ent, he
need not ad&ance the s+ of one$ 2asi wa#a n(
a(?re?rei'+rse sa 2an$a.
(') Obli7ation to Reimbrse
N.R.! 0he principa#
%xc! 1918
a. )f the a(ent is actin( in contra&ention of
the instr+ctions of the principa#.
Example! Ae so#d ites in -e'+ instead in
-a(a$an.
Aowe&er, if the principa# wants to a&ai# of
the 'enefits deri&ed '$ the a(ent, the
principa# wi## 'e o'#i(ed to rei'+rse.
'. A(ent was at fa+#t
"o&e'er 2008
05O OR MOR4 %R2NC2%ALS A%%O2N04. AN
A;4N0
Q: An agent was appointed to a single and
common transaction and damage was incurred
by the agent. hat is the nature of the liability
of the principals?
A! *o#idar$.
Q: Ayce was authoriCed to lease a specific
property 5warehouse6. .he entered into a lease
contract with &ian. 9owever, the principal
5-hato6 also entered into a contract of lease
over the same property with another person
named >erard. hich contract will be
recogniCed?
A! 5ased on priorit$ in tie, priorit$ in ri(ht. 0he
prior date sho+#d pre&ai#. 0a2e note that this is a
#ease of propert$.
)n sa#e, priorit$ in tie is not app#ica'#e. *ee Artic#e
1544 6do+'#e sa#e7.
Q: hat if the person filed an action for
damages against both principal and agent, who
will be liable?
A! N.R.! 0he principa#
%L-.! )f a(ent acted in 'ad faith
6incopati'#e contracts7
MO.4S O9 4D02N;=2S:2N; A;4NCB
% , xpiration of the period
4 , eath, ci&i# interdiction, insanit$
> , ithdrawa#
A , ccop#ishent of p+rpose
R , e&ocation
4 , isso#+tion of the entit$
Q: Is this enumeration e'clusive?
A! "o, the other odes of extin(+ishin( o'#i(ations
are e1+a##$ app#ica'#e to a(enc$. Example! +t+a#
dissent, #oss of the thin( d+e to fort+ito+s e&ent.

B!: Ariel authoriCed Fessica to sell a pendant
with a diamond valued at *0. hile Fessica was
on her way home, 4 persons snatched the bag
containing the pendant. #hus, Fessica was not
able to sell the pendant. Ariel sued Fessica.
Fessica raised the defense that robbery is a
fortuitous event and therefore he cannot be
held liable for the loss of the pendant. Ariel
claimed that before Fessica could invo0e
fortuitous event, there has to be conviction of
the perpetrators of the crime and even though
this is a fortuitous event, there was negligence
on the part of Fessica in wal0ing alone with
that pendant. &ecide.
A! 0he case is identica# to Austria vs. -A. As to
the contention of Arie#, con&iction is not re1+ired.
8reponderance of e&idence is s+fficient. =essica
cannot 'e he#d #ia'#e 'eca+se wa#2in( a#one is not
a ne(#i(ent act.
Att1. =ribe>s Comment: 0he answer is erroneo+s.
)n the case of A+stria which was decided on =+ne
10, 1971, the incident happened in the 60Ds. 0he
*- said, we cannot consider the a(ent ne(#i(ent in
(oin( hoe a#one. *- said that if the incident
happened toda$ 6referrin( to $ear 19717, the a(ent
can 'e he#d #ia'#e for conc+rrin( ne(#i(ence,
considerin( the crie rate.
%roblem Areas in 4Atin7ishment
B!: hat is the effect of the death of the
agent?
A! N.R.! 0he a(enc$ is extin(+ished 6Artic#e 19197.
%L-.! Artic#e 1930 , if the a(enc$ was constit+ted
for the 'enefit of 'oth parties or for the 'enefit of a
third person who accepted the 'enefit, then that
a(enc$ sha## contin+e e&en after the death of the
a(ent.
B!: ( authoriCed A to sell a land 512 hectares6.
In 1;*+, before A could sell, ( died. After (
died, in 1;*2, the heirs sold the land to B. In
1;*3, A sold it to D. ho has a better right?
A! )f A has no *8A, this sa#e is &oid +nder Artic#e
1874. L wo+#d ha&e a 'etter ri(ht. )f there was a
*8A, it depends if A has 2now#ed(e of the death of
8 or if he was in (ood faith. )f A has 2now#ed(e of
the death, L has a 'etter ri(ht. )f H is in 'ad faith
6he 2nows of the death of 87, L has a 'etter ri(ht.
:nder Artic#e 1931, the act of an a(ent after the
death of the principa# wi## 'e &a#id if he had no
2now#ed(e of the death of the principa# and the
third person is in (ood faith.
Q: hat if A has no 0nowledge and D is in good
faith?
A! 0his wi## 'e incopati'#e contracts. App#$ Artic#e
1544.
"allos vs. Jeli'
;acts! 0he a(ent was a 'rother of his two sisters.
Ae was a+thori<ed to se## the #and. 0he 'rother
so#d the #and on#$ after the death of one of the
sisters. Ae so#d it to ;e#ix. 0he adinistrator of his
sister fi#ed an action to reco&er the propert$.
)ss+e! >hat is the effect of the death of one of the
principa#sG
Ae#d! As to the s+r&i&in( sisterDs portion, it is &a#id
and 'indin(. 5+t as to the deceased sister 6Artic#e
19197, the a+thorit$ of a(ent was terinated after
the death. 5+t if a(ent has no 2now#ed(e of the
death , it is &a#id. 5+t o'&io+s#$, the 'rother had
2now#ed(e of the death of her sister.
"o&e'er 2008
Note: -i&i# interdiction , accessor$ pena#t$ 6ore
than 12 $ears pena#t$7
Re+ocation
)t is an act of the principa#. 0he principa# can
re&o2e the a+thorit$ of the a(ent at wi## at an$ tie.
Q: ould this be correct if the parties agreed
for the period of agency? -an the agent hold
the principal liable for breach of contract?
A! Baretto vs. .ta. <aria , the principa# can
re&o2e an$tie e&en when there is a period a(reed
+pon 'eca+se a(enc$ is 'ased on tr+st and
confidence.
Q: If he has the power to revo0e, may the
principal be held liable?
A! Hes 'eca+se e&en in the exercise of a ri(ht, it
+st 'e exercised in (ood faith. )f there is a'+se of
ri(ht, the #ia'i#it$ wo+#d 'e +nder the pro&isions on
h+an re#ations.
&omingo vs. &omingo
0he reason of the principa# is that in order for hi
to a&oid pa$ent of coission, that re&ocation is
a 'ad faith re&ocation. Aowe&er, in this case, the
a(ent is a#so in 'ad faith.
B!: A sold a land to B at 1++<. #hey agreed
that it will be paid in 1+ years. #he seller
reserved title over the land. In order for B to
pay the price, A constituted B as his agent for
the development of the land A subdividing the
land, constructing houses and selling the
house and lot. (roceeds to be delivered to the
seller who is also the principal as payment of
the price in the sale of land. 9owever, in the *
th
year, the principal revo0ed the authority of the
agent. as the revocation valid?
A! "ot &a#id, 'eca+se this is an a(enc$ which is
co+p#ed with interest. Aere, 617 a 'i#atera# contract
depends +pon the a(enc$ and 627 the a(enc$ is
the eans of f+#fi##in( an o'#i(ation which has
a#read$ 'een contracted.
Att1. =ribe: X2 is correct '+t X1 is not app#ica'#e to
the pro'#e. An( as app#ica'#e is the case of
-ollongco vs. -laparol.
;acts! -#aparo# was the owner of a nai# factor$ and
he needed additiona# capita#. -o##on(co offered to
ad&ance the one$ needed '$ -#aparo# on#$ on
the condition that he wi## 'e constit+ted as a(ent
for soe aspects of the '+siness 6exap#e! a(ent
for ad&ertiseent7.
Ae#d! ;ro that arran(eent, it is c#ear that a
'i#atera# contract depends +pon the a(enc$.
5i#atera# contract which is the contract of #oan. Ae
wo+#d not ha&e ad&anced that one$, had he not
'een constit+ted as an a(ent '$ -#aparo#. 0hese
contracts are considered a(enc$ co+p#ed with
interest.
Note: 0he *- said that for an a(ent to c#ai that
the a(enc$ is co+p#ed with interest and hence
cannot 'e re&o2ed '$ the principa#, the interest
+st not 'e the +s+a# copensation of the a(ent
which is coission and +st 'e stated in the
*8A.
Q: If agency coupled with interest A possible
that it could be revo0ed?
A! *- said in -o##on(co , Hes, if the re&ocation
was with a /+st ca+se. )n the case of -o##on(co,
there was a /+st ca+se 'eca+se the a(ent
coitted acts contrar$ to the interest of the
principa#. -o##on(co attepted to as2 the
s+perintendent of the factor$ to destro$ the
achiner$ '$ po+rin( acid. A(ent a#so sent
dero(ator$ #etters to 'an2s where -#aparo# app#ied
for a #oan. 0he a(entDs oti&e is 'eca+se he had
an a(reeent with another person 69r. *o7 that
the$ wanted to ta2e o&er the '+siness of -#aparo#.

"o&e'er 2008
Partnership
B!: -hato, using all his savings in the total
amount of 4,+++, decided to establish a
restaurant. Jaye, however, gave 2,+++ as
%financial assistance, with the agreement that
Jaye will have 448 share of the profits of the
business. After 44 years, Jaye filed an action to
compel -hato to deliver to her the share in the
profits claiming that she was a partner. -hato
denied that Jaye was her partner. Is Jaye a
partner of -hato?
A! Hes, ;a$e was a partner in the '+siness
'eca+se there was a contri'+tion of one$ to a
coon f+nd and there was an a(reeent to
di&ide the profit aon( these#&es.
Att1. =ribe>s Comment: ) do not a(ree with the
answer. )Dd rather a(ree with the a#ternati&e
answer. >AHG )n the a#ternati&e answer as can 'e
seen fro the facts, ;a$e (a&e 4,000 on#$ as a
financia# assistance. )t was not a contri'+tion to a
coon f+nd. As s+ch, she act+a##$ 'ecae a
creditor of -hato. 0herefore, she did not contri'+te
to a coon f+nd.
Q: hat about the stipulation that Jaye will
have 448 share of the profits?
A! 0he #aw on partnership is &er$ c#ear that a
sharin( in the profits does not necessari#$ res+#t in
a partnership contract 'eca+se the sharin( of the
profits a$ on#$ 'e a wa$ of copensatin( the
other person, in fact that can 'e a ode of
pa$ent of the #oan. Kasi $+n( #oan, s+pposed#$
pwede pa$a'#e e&er$ onth with a fixed ao+nt.
5+t as a(anda an( a(reeent na ito, 22I of
the profits, so that if wa#an( profit sa isan( taon,
wa#a +nan( 'a$ad. Y4i 'a thatDs reasona'#e
a(reeent. .n#$ 2+n( a$ profit, sa2a #an(
'a'a$aran. K+'a(a, friend#$ #oan ito. 0he sharin(
in the profits as express#$ pro&ided '$ #aw does not
necessari#$ res+#t in a partnership contract. 0h+s, it
can 'e said that rea##$ ;a$e was not a partner '+t
is act+a##$ a creditor of -hato.
.492N202ON O9 %AR0N4RS:2%
Q: hat if two or more persons agreed to put
up a partnership but they never intended to
divide the profits among themselves, would
that still be considered a valid partnership
contract?
A! Hes, +nder the second para(raph of the artic#e,
two or ore persons can for a partnership for the
exercise of a profession.
%artnershi& +s. CoIownershi&
-onsider the essentia# feat+res!
Creation:
8artnership is o'&io+s#$ created '$ a(reeent. -o?
ownership a$ 'e created '$ a(reeent, '+t it
a$ a#so 'e created '$ operation of #aw. )n fact, '$
express pro&ision of the #aw, the fact that there is
co?ownership does not necessari#$ ean that there
is a partnership existin( 'etween two persons.
Example! 0wo persons a$ inherit a propert$ fro
their father or other, and +nder the #aw, the$ a$
'e considered as co?owners of the sae propert$.
%r&ose:
8artnership! either to di&ide profits or exercise a
profession.
-o?ownership! -oon en/o$ent of the thin( or
ri(ht owned in coonS ere#$ to en/o$ the
propert$, th+s the$ a$ ha&e different p+rposes.
A &er$ iportant feat+re of partnership in re#ation to
co?ownership! it has a /+ridica# persona#it$,
separate and distinct fro the indi&id+a# partner
which is o'&io+s#$ not present in co?ownership. )n
co?ownership, the$ ha&e their respecti&e
persona#ities and no new persona#it$ wi## 'e
created.
%owers of the Members:
8artnership! :n#ess otherwise a(reed +pon, each
partner is an a(ent of the other partners and of the
partnership.
-o?ownership! As a r+#e, a co?owner cannot act as
an a(ent of the other co?owners +n#ess otherwise
a(reed +pon 'etween the co?owners.
8R.;)0*!
-o?owner! 9as a#a2i an( profits, as a#a2i an(
interest. 5+t not necessari#$ in partnership,
'eca+se the sharin( in the profits a$ 'e
stip+#ated +pon '$ the parties. 8ero 2+n( wa#an(
stip+#ation, it a$ 'e 'ased on the capita#
contri'+tion.
Q: ill death e'tinguish co@ownership?
A! "o, Kapa( naata$ an( isan( co?owner, his
heirs wi## 'e the co?owners of the s+r&i&in( co?
owners at pweden( t+#o+?t+#o$ #an( $an. Aowe&er
in partnership, if it is a (enera# partnership, if one
of the partners dies, the partnership is disso#&ed.
4SS4N02AL 4L4M4N0S O9 %AR0N4RS:2%
Li2e an$ other contract, it sho+#d ha&e the three
essentia# re1+isites!
1.7 -onsent
2.7 .'/ect! to en(a(e to a #awf+# acti&it$,
whether a '+siness or profession.
3.7 -a+se or consideration! the proise of
each partner to contri'+te one$, propert$
or ind+str$
Note! ;ro the definition a#one, it can 'e 2nown
that a contract of partnership is essentia##$
"o&e'er 2008
onero+s?each partner has to contri'+te either
propert$, one$ or ind+str$. >a#an( free rider sa
partnership.
1. Consent of the contractin7 &arties:
0he r+#es in contract wo+#d 'e e1+a##$ app#ica'#e
'+t, /+st #i2e in sa#es and #ease, there are persons
who are prohi'ited fro enterin( into a contract of
partnership!
1.7 *po+ses!
B!: <ay the spouses enter into a limited
partnership to engage in a realty business, with
the wife as a limited partner?
A! Hes, 'eca+se spo+ses are on#$ prohi'ited,
+nder the "ew -i&i# -ode, to enter into a +ni&ersa#
partnership. 0herefore, if the$ for a #iited
partnership, the$ can constit+te on#$ 8hp100,000
each, and that wi## not 'e a +ni&ersa# partnership
'eca+se that wo+#d 'e a partic+#ar partnership.
2.7 -orporations!
B!: -an a corporation enter into a contract of
partnership with an individual? -an a
corporation enter into a contract of partnership
with another corporation?
A! 0o these two 1+estions, the answer is no.
R+#ed '$ the *+pree -o+rt in the -ase
of #uaCon, whi#e a corporation a$ enter into a
/oint &ent+re, it cannot &a#id#$ enter into a contract
of partnership. :nder the -orporation -ode, the
'+siness of the corporation is s+pposed to 'e
(o&erned '$ the 'oard of directors, and if s+ch a
corporation wi## enter into a contract of partnership,
the other partners a$ 'ind the corporation in
certain acti&ities witho+t the consent of the 'oard of
directors. Another reason is that the properties r
in&estents of the stoc2ho#ders a$ 'e exposed to
a ris2 not contep#ated '$ the stoc2ho#ders.
3.7 0hose persons who are prohi'ited fro
(i&in( each other an$ donation or ad&anta(e
cannot enter into a :")E%R*AL partnership!
a.7 those (+i#t$ of ad+#ter$ or conc+'ina(e
at the tie of the exec+tion of the contract 'eca+se
it wo+#d 'e eas$ to circ+&ent the pro&ision on
donation if the$ wo+#d enter into a +ni&ersa#
partnership, 2asi pwedeDn( $+n( parao+r an( na?
contri'+te #an( 8hp10.00, whi#e $+n( isa an( na?
contri'+te 8hp10 9i##ion, howe&er, pa(datin( n(
sharin(, 2a'a#i(taran. H+n( parao+r, 90I, whi#e
$+n( na(?contri'+te n( 8hp10 9i##ion, 10I #an( n(
profit. )n fact, sa disso#+tion, pweden( (an+n din
an( a(reeent. 0hat wo+#d 'e a circ+&ention of
the pro&ision on donation.
.ther persons prohi'ited are those
entioned in Art. 1739, those persons entioned
in the #aw on donation.
$. Ob-ect of %artnershi&:
0o en(a(e in a #awf+# acti&it$.
Q: If the obKect is to engage in a lawful activity,
necessarily the partnership is valid?
A! "o. 0here are specific '+siness acti&ities
wherein the #aw wo+#d re1+ire partic+#ar '+siness
or(ani<ation which a$ en(a(e in s+ch '+siness
acti&it$, specifica##$ the -orporation -ode which
pro&ides that on#$ corporation a$ en(a(e in
ins+rance and 'an2in( '+siness, therefore there
can 'e no partnership en(a(in( in s+ch '+siness!
'an2in( and ins+rance.
'. Case of %artnershi&
0he proise of each partner to contri'+te either
one$, propert$ or ind+str$.
Q: hat would be the effect if either the cause
or the obKect of the partnership is illegal or if
the partnership has an unlawful cause or
obKect?
A! 0he contract of partnership is &oid and +nder the
#aw, when the contract is &oid, it prod+ces no #e(a#
effects whatsoe&er, therefore, action to cope# a
part$ to the contract to distri'+te the profits wi##
ne&er prosper. )n fact, +nder the #aw on
partnership, the *tate wi## confiscate the profits of
s+ch i##e(a# partnership.
Q: ill an action to compel a partner to render
an accounting prosper?
A! "o. An$ action to enforce a &oid contract wi##
ne&er prosper.
Q: <ay a party to such void contract at least be
able to recover what he contributed or
delivered pursuant to that void contract?
A! As a r+#e, no, 'eca+se of the in pari de#icto r+#e
+nder Artic#e 1411.
%L-%80)."*! Artic#e 1411, 1412, 1414,1415 and
1416. :nder these circ+stances, a part$ to a &oid
contract a$ 'e a'#e to reco&er what he
contri'+ted.
Att1. =ribe! ) wo+#d a#wa$s consider one of these
pro&isions as a &er$ practica# one!
)n a contract that is &oid, it is so pro&ided that a
part$ to s+ch contract a$ reco&er what
contri'+ted if he rep+diated the contract 'efore the
cons+ation of the contract and 'efore daa(e
is inc+rred '$ a third person.
9ORMAL2024S:
Q: If the agreement of the parties to a contract
of partnership was only a verbal agreement,
"o&e'er 2008
would that be a valid and binding contract?
ill there be a Kuridical personality created?
A! As a r+#e, $es. %&en if +nder Art. 1772, the #aw
pro&ides that e&er$ contract of partnership, ha&in(
a capita# of ore than 8hp3,000 or ore, sha## 'e
in a p+'#ic instr+ent and +st 'e re(istered with
the *%-.
0he 2
nd
para(raph of Art. 1772 pro&ides
that despite fai#+re to cop#$ with the re1+ireents
in the precedin( para(raph, this is witho+t
pre/+dice to the #ia'i#it$ of the partnership and the
indi&id+a# partners to third persons. ;ro that
artic#e a#one, it is c#ear that despite non?cop#iance
with the re1+ireents of the #aw as to for, there is
a partnership created, 'eca+se this is witho+t
pre/+dice to the #ia'i#it$ of the partnership 62+n(
a$ partnership7. 5+t ore direct#$, Art. 1768, the
#aw pro&ides, the partnership has a /+ridica#
persona#it$ separate and distinct fro that of each
if the partners, e&en in case of fai#+re to cop#$
with the re1+ireents of Art. 1772, par.1.
After a##, a &er'a# partnership contract is &a#id and
'indin( 'etween the parties.
Q: Is there a partnership agreement which
would reEuire a particular form for the validity
of the partnership agreement?
A! Hes. 0here is on#$ one scenario here! if one of
the contractin( parties proised to contri'+te an
io&a'#e, there has to 'e an in&entor$ of s+ch
io&a'#e and si(ned '$ the contractin( parties. )f
there is no in&entor$, the #aw is &er$ c#ear, the
partnership is &oid.
Q: hat if there was an agreement to
contribute an immovable and there was an
inventory signed by all the partners, however,
the partnership agreement itself was not put
into writing, what is the status of that
partnership contract?
Att$. :ri'e! ) a(ree with the position of 8rofessors
A('a$ani and 5a+tista that, despite Art. 1771, as
#on( as there is an in&entor$ of s+ch io&a'#e,
the partnership a(reeent is &a#id and 'indin( and
the /+ridica# persona#it$ wi## 'e created.
hy?! As r+#ed '$ the *- consistent#$, #i2e in the
case of &auden@9ernaeC vs. delos Angeles, for a
contract to 'e &oid for non?cop#iance with the
re1+ireents of the #aw as to for, the #aw itse#f
+st pro&ide for the n+##it$ of the contract. )f the
#aw on#$ re1+ired a for, '+t the #aw itse#f did not
pro&ide for the n+##it$ of the contract, if the parties
fai#ed to cop#$ with that for, then that for is not
necessar$ for the &a#idit$. )t a$ 'e necessar$ for
the enforcea'i#it$ of the contract or (reater efficac$
of that contract. 0h+s, in partnership, it is said that
this re1+ireent as to for wi## on#$ 'e necessar$
for the (reater efficac$, 2asi 2ai#an(an na2a?
re(ister sa *%-. 0hat is apparent#$ the on#$ reason
wh$ the #aw wo+#d re1+ire a partic+#ar for in
partnership where there is an io&a'#e
contri'+ted '$ one of the contractin( parties.
Att1. =ribe: 0he position of 8rof. A('a$ani is we##?
s+pported '$ the *-.
A partnership has a /+ridica# persona#it$
which is separate and distinct. 0his is consistent
with the B#e(a# person theor$,C as opposed to the
partnership in the :nited *tates which adheres to
the Ba((re(ate theor$C which states that their
partnership has n /+ridica# persona#it$ separate and
distinct fro the contractin( parties.
Conse3ences: se&arate an/ /istinct
&ersonalit1
1.7 )t can own its propertiesS
2.7 )t can s+e and 'e s+edS
3.7 )t a$ 'e fo+nd (+i#t$ of an act of
inso#&enc$S
4.7 )t a$ 'e disso#&ed for coittin( an
act of inso#&enc$.
-oncrete#$, in the case of -ampos@"ueda vs.
(acific -ommercial
;acts! 0he partnership here fi#ed a petition for the
disso#+tion of the partnership, '+t one of the
creditors opposed the petition for disso#+tion on the
(ro+nd that there was no showin( that the
indi&id+a# partners are a#read$ inso#&ent.
Ae#d! 0he so#&enc$ or inso#&enc$ of the indi&id+a#
partners is irre#e&ant as to the petition of the
disso#+tion of the partnership. 0he partnership
itse#f, ha&in( a separate and distinct persona#it$
a$ 'e disso#&ed or a$ coit acts of inso#&enc$
re(ard#ess of the so#&enc$ or inso#&enc$ of the
partners.
Act+a##$, if one of the partners in a (enera#
partnership is inso#&ent, there is a#read$ disso#+tion
of the partnership '$ operation of #aw, if the sae
'e pro&en.
CLASS292CA02ON O9 %AR0N4RS:2%:
As to the o'/ect of the partnership is on#$ to
deterine whether a person a$ enter s+ch
partnership, there is a need to distin(+ish whether
a partnership is a :")E%R*AL or 8AR0)-:LAR
partnership.
$ <in/s of =ni+ersal %artnershi&:
1.7 :ni&ersa# 8artnership of 8ropert$
2.7 :ni&ersa# 8artnership of 8rofit
:nder the #aw, if the partners a(reed to for a
+ni&ersa# partnership, howe&er, the$ fai#ed to state
what 2ind of +ni&ersa# partnership, it sha## 'e
treated ere#$ as a +ni&ersa# partnership of profit,
"o&e'er 2008
eanin(, it sha## coprise on#$ the res+#t of their
wor2 and ind+str$. )n +ni&ersa# partnership of
propert$, the partners are deeed to ha&e
contri'+ted a## their propert$, not #itera##$ a##, for
there soe properties which are exept fro
exec+tion and +nder the #aw a$ not 'e
considered as ha&in( 'een contri'+ted '$ the
partners.
04RM O9 %AR0N4RS:2%
Q: If the partners failed to fi' a period, does it
mean that the partners agreed a partnership at
will and may be dissolved at any time without
any liability so long as they acted in good
faith?
A! "o, 'eca+se a partnership a$ 'e a partnership
for a partic+#ar +nderta2in( e&en if no period was
fixed '$ the parties.
)n one case, a partner, disso#&ed a
partnership, c#aiin( it to 'e a partnership at wi##,
the partnership 'ein( in&o#&ed in a 'ow#in(
'+siness. 0he *- r+#ed that e&en if the partners
fai#ed to fix a period, the partnership cannot 'e
considered as a partnership at wi## 'eca+se there
was a stip+#ation in the partnership a(reeent that
the de't of the partnership sha## paid o+t of the
profits that wi## 'e o'tained '$ the 'ow#in(
'+siness. 0h+s, after a##, it cannot 'e disso#&ed at
wi##, for the de'ts wi## ha&e to 'e paid. 0herefore,
the *- r+#ed that the said partnership is a
partnership for a partic+#ar +nderta2in(.
CLASS292CA02ON O9 %AR0N4RS:
Accordin( to the #ia'i#it$ of the partners!
1.7 Nenera#
2.7 Liited
0his c#assification is re#e&ant on#$ in #iited
partnership.
)n (enera# partnership, partners are
(enera# partners and the$ are #ia'#e for partnership
o'#i(ations +p to their persona# propert$. %ach one
of the has the ri(ht to participate in the
ana(eent of the partnership +n#ess otherwise
a(reed +pon '$ the partners.
)n #iited partnership, whi#e a #iited
partner cannot 'e he#d #ia'#e +p to his persona#
propert$, the #ia'i#it$ of a #iited partner wi## on#$ 'e
+p to his capita# contri'+tion. Ae a#so wo+#d not
ha&e the ri(ht to participate in the ana(eent of
the '+siness of the partnership.
;.R.! A #iited partner cannot 'e he#d persona##$
#ia'#e for partnership o'#i(ations.
4DC: )nstances when a #iited partner a$ 'e
he#d #ia'#e +p to his persona# propert$!
1.7 )f he participates in the ana(eent of
the '+siness of the partnership.
2.7 )f his s+rnae appears in the fir nae.
%xcept! a.7 e&en if a #iited partnerDs
nae appears in the fir nae, if the
s+rnae of a (enera# partner is the sae
as that of the #iited partner. '.7 s+ch
s+rnae was a#read$ in the fir nae
prior to his entr$ in the partnership.
3.7 >hen he is a (enera# partner and a #iited
partner in the sae partnership at the
sae tie.
ho? A person who is 'oth a (enera# and
#iited partner at the sae tie and in the
sae partnership wo+#d ha&e a## the ri(hts
and o'#i(ations of a (enera# partner,
howe&er, he wo+#d ha&e a ri(ht as to his
contri'+tion as a(ainst the other partners,
which he wo+#d not ha&e, had he not 'een
a #iited partner. >hen it coes to
di&ision of assets +pon disso#+tion he has
the priorit$ as a #iited partner. 0hat is the
on#$ ed(e, otherwise, he has a## the ri(hts
and o'#i(ations of the (enera# partner.
4.7 >hen there is fai#+re to cop#$
s+'stantia##$ as to the fora#ities
prescri'ed '$ #aw in the foration of a
#iited partnership.
:nder the #aw, if there is a fai#+re
to cop#$ s+'stantia##$ with the fora#ities
for the creation of a #iited partnership,
that a(reeent wi## 'e &a#id aon( the
partners, howe&er, a## of the can 'e
treated as (enera# partners '$ third
persons. 0herefore, a third person, in this
scenario, can ho#d a #iited partner #ia'#e
+p to his persona# properties. 0he #iited
partnerDs reed$ is to see2
rei'+rseent fro his other partners.
As to the contribtion:
1.7 -apita#ist
2.7 )nd+stria#
Q: An industrial partner, may be a general
partner?
A! Hes. A capita#ist partner a$ either 'e an
ind+stria# or (enera# partner.
Q: <ay an industrial partner be a limited
partner?
A! "o. A #iited partner can on#$ contri'+te one$
or propert$. Ae cannot contri'+te ser&ice.
"o&e'er 2008
Q: But can a partner be both capitalist and
industrial?
A! Hes, he can contri'+te 'oth one$ and ind+str$.
Ae can 'e 'oth capita#ist and ind+stria# and there
wi## 'e conse1+ences to that.
B!: A and B formed a partnership to operate a
car repair shop. A contributed money, B
contributed industry. hile the car repair shop
was already in operation, A operated a coffee
shop beside the car repair shop. B also
operated a car accessories store on the other
side of the shop. <ay these partners engage in
those business activities?
A! As far as A is concerned, he can &a#id#$ en(a(e
in s+ch '+siness 'eca+se the #aw wo+#d on#$
prohi'it hi fro en(a(in( in a sii#ar acti&it$. As
far as 5, an ind+stria# partner, is concerned, he
cannot en(a(e in an$ '+siness acti&it$ witho+t an$
express a+thorit$ or (rant '$ the partnership for
hi to en(a(e in s+ch '+siness. 0h+s, if A did not
(i&e his consent, 5 cannot &a#id#$ en(a(e in A"H
'+siness, not on#$ sii#ar '+siness, for 5, as
ind+stria# partner, is s+pposed to (i&e his tie in
the said partnership '+siness.
2ncomin7 %artner:
Q: AB- (artnership is composed of A, B and -.
#hereafter, & became a member of the
partnership. .i' months after &$s entry as a
member, a certain obligation, 7 <illion became
due and demandable. Jor this partnership
obligation, can & be held liable?
A! As was pro&ided in the facts, the 3 9i##ion
'ecae d+e and deanda'#e. 0h+s, this o'#i(ation
a$ ha&e 'een inc+rred after 4Ds entr$ or 'efore
his entr$, a#tho+(h it 'ecae d+e after his entr$ or
adission to the partnership.
)f the o'#i(ation is inc+rred after his entr$,
there is no 1+estion that, if he is a (enera# partner,
he can 'e he#d #ia'#e +p to his persona# properties.
Q: If this obligation is incurred prior to his
entry as a partner, can he be held liable?
A! Hes. As a r+#e, he a$ 'e he#d #ia'#e, '+t on#$ to
the extent of partnership propert$ which wo+#d
inc#+de his capita# contri'+tion, +n#ess there is a
stip+#ation to the contrar$. %&en if the o'#i(ation
was inc+rred prior to his entr$, howe&er, if in the
partnership a(reeent, he a(reed to 'e 'o+nd '$
those o'#i(ations, then he can 'e he#d #ia'#e e&en
to the extent of his persona# propert$, tho+(h he is
a new partner.
Q: B is indebted to AB- (artnership which may
be limited. #he same debtor of the partnership
is also a debtor of one of the partners. #he debt
to the partnership is 1++,+++, while the debt to
the partner is *+,+++. B delivered 7+,+++ to A.
.hould this 7+,+++ be distributed in proportion
to the debts to the partnership and to A,
meaning, 4+,+++ will go to the partnership and
1+,+++ will go to A.
A! )f A is a #iited partner, there sha## 'e no
distri'+tion in proportion to the credit of these two
creditors. 0he #aw which re1+ires that pa$ent 'e
distri'+ted in proportion to the two credits wi## on#$
app#$ if the partner to who the ao+nt is
de#i&ered is a ana(in( partner. )f he is a #iited
partner, nora##$, he wo+#d not ha&e an$
participation in the ana(eent of the partnership
'+siness. 0h+s, if he is a #iited partner, then he
can ha&e the ri(ht t recei&e e&er$thin( he recei&ed.
Q: Assuming that A is in fact a managing
partner and he received the 7+,+++ from B, is it
possible still for A to retain everything which
he received?
A.! Hes, if this de't is a#read$ d+e and
deanda'#e. )n this scenario, the de't is not $et
d+e and deanda'#e. *+ch de't 9:*0 'e d+e
and deanda'#e in order for the #aw on the
proportiona# distri'+tion to app#$ to 'oth de'ts.
Q: A is a managing partner and both debts are
due and demandable. 7+,+++ was delivered to
A. Is it possible for the partnership to have the
right to the entire 7+,+++?
A! )f A receipted the ao+nt in the nae of the
partnership. 5$ specific pro&ision of the #aw, if the
ana(in( partner who recei&ed s+ch ao+nt,
receipted the sae in the nae of the partnership,
the partnership wi## 'e entit#ed to the entire ao+nt.
Q: If A, as managing partner, and both debts
being due and demandable, he received the
amount of (hp7+,+++ and receipted the same in
his own name, may he be entitled to retain
everything?
A! Hes, if LDs de't to A is ore onero+s and L
chose to ha&e this ao+nt paid to this de't. :nder
the #aw, the de'tor has the ri(ht to choose to pa$
the de't which is ore onero+s. A(ain, the preise
is the de't to A is ore onero+s than the de't to
the partnership.
)f A, as ana(in( partner, recei&ed the sae
ao+nt, receipted in the nae of the partnership,
'oth de'ts are d+e and deanda'#e and are of the
sae '+rden, there wi## 'e a proportiona#
distri'+tion of the ao+nt, 20,000 wi## (o to the
partnership, and 10,000 wi## (o to A, the de't to the
partnership 'ein( 100,000 and the de't to A 'ein(
50,000.
%RO%4R0B R2;:0S
' Ma-or &ro&ert1 ri7hts of a &artner:
"o&e'er 2008
1.7 Ri(ht in specific partnership propert$S
2.7 )nterest in the partnershipS and
3.7 0he ri(ht of the partner to participate in the
ana(eent of the '+siness of the partnership.
%ro&ert1 ri7hts consi/ere/ as minor:
1.7 Ri(ht to ha&e access to the 'oo2s of the
partnershipS
2.7 R(ht to deand for a fora# acco+ntin(.
Q: -an a partner demand for a formal
accounting at any time?
A! "o. 0he #aw wi## on#$ (i&e a ri(ht to a fora#
acco+ntin( +nder &er$ specific circ+stances.
hy? 5eca+se a partner a#read$ has access to
the 'oo2s, th+s, it a$ 'e +nnecessar$ to deand
for a fora# acco+ntin( at an$ tie.
Ri7ht in s&ecific &artnershi& &ro&ert1:
:nder the #aw, a partner is a co?owner
with the other partners as to specific partnership
propert$. A(ain, he is a co?owner with his partners
and ".0 with the partnership o&er specific
partnership properties.
Q: 9ow could a person be a co@owner of a
property owned by another if he is not a co@
owner of that other person? #he owner is the
partnership. 9ow can a partner be a co@owner
of that property if he is not a co@owner with the
partnership?
A! .ther a+thors wo+#d sa$ that the pro'#e with
this pro&ision is that it was copied fro the :nifor
8artnership Act of the :nited *tates, where a
partnership has no separate and distinct
persona#it$, th+s a2in( the ere#$ co?owners.
5+t, in fairness with the -ode coission,
the 2
nd
sentence wo+#d te## $o+ that this co?
ownership has its own incidence. )n other words,
this is no ordinar$ co?ownership +nder the propert$
#aw. 0hatDs wh$ soe a+thors wo+#d ca## it co?
ownership s+i (eneris.
Q: -oncretely, in property law, if two persons
are co@owners of a parcel of land, can a co@
owner sell his interest over the parcel of land
without the consent or even 0nowledge of the
other co@owner? ould that be a valid
assignment of interest?
A! Hes. Aowe&er, in specific partnership propert$,
there can 'e no &a#id assi(nent of interest '$ one
partner. 0he assi(nent of interest of a specific
partnership propert$ wo+#d on#$ 'e &a#id if a## the
partners wo+#d #i2ewise assi(n their interests.
Q: <ay a creditor of a co@owner of a parcel of
land levy upon such portion of the land interest
over that land owned by the debtor / co@owner?
A! Hes, there can 'e s+ch &a#id #e&$.
Q: In partnership, can a creditor of a partner
levy upon the rights of the partner over a
specific partnership property?
A! 0hat is not possi'#e. .n#$ partnership creditors
can #e&$ +pon partnership assets or partnership
propert$. 0his is different in the partnerDs interest in
the partnership for this interest in the partnership
can 'e &a#id#$ assi(ned '$ one of the partners
e&en witho+t the consent or 2now#ed(e of the other
partners.
2nterest in the %artnershi&
*ip#$ p+t, this is a partnerDs share in the profit
and s+rp#+s. >hate&er is his share in the profit or
s+rp#+s is his interest in the partnership.
Q: hat would be the share of a partner in a
partnership?
1.7 *tip+#ation. ;or instance, in a partnership
of 3 persons, the$ can a(ree that one
a$ ha&e 95I of the profits, whi#e the 2
other partners a$ ha&e 5I of the sae
respecti&e#$.
Q: hat if, in such agreement, one of the
partners was e'cluded in sharing in the
profits?
A! *+ch stip+#ation is &oid. 0a2e note that on#$ s+ch
stip+#ation is &oid and not the who#e partnership
a(reeent.
Q: #hus, if the stipulation as to the sharing of
the profits is void, or that there is no
stipulation with this regard, what would be the
sharing in the profits of the partners?
A! )t wi## depend on their capita# contri'+tion.
Q: hat if one of the partners is an industrial
partner?
A! 5$ express pro&ision of the #aw, he sha## 'e
(i&en his share '$ deterinin( the &a#+e of the
ser&ice rendered. 0h+s, deterine first the &a#+e of
the ser&ice rendered, (i&e the sae to the
ind+stria# partners, then the 'a#ance wi## 'e
distri'+ted to the capita#ist partners in accordance
to their capita# contri'+tion.
B!: A, B and - are partners. In their
partnership agreement, they agreed in the
eEual sharing of the profits. #hereafter, -
assigned his whole interest in the partnership
to B. B now demanded that he be allowed to
participate in the management of the business
of the partnership and also his share in the
profits in the business of the partnership. Are
the claims f B valid?
"o&e'er 2008
A! As to LDs c#ai t participate in the ana(eent
of the '+siness, he has no s+ch ri(ht as an
assi(nee. 5$ express pro&ision of the #aw, an
assi(nee has no ri(ht to participate in the
ana(eent of the '+siness of the partnership,
+n#ess otherwise a(reed +pon. Ae wi## not e&en
ha&e the access to the 'oo2s of the partnership.
Ais on#$ ri(ht wo+#d 'e to recei&e whate&er the
assi(nin( partner a$ recei&e as share in the
profits and in the s+rp#+s.
Q: If profits were declared, for instance, in the
amount of 73+,+++, would the assignee have
the right to share in the profits?
A! Hes. L is entit#ed to share of 8hp120,000, since
the a(reeent is e1+a# sharin( of profits.
Ri7ht to &artici&ate in the mana7ement of the
bsiness of the &artnershi&
B!: , B, D and O formed a partnership. and
B contributed industryP D contributed *+,+++P O
contributed 4+,+++. In a meeting, the partners
unanimously agreed to designate and B as
managing partners, such appointment having
no stipulation as to their respective duties nor
was there any statement that neither can act
without the consent of the other. #hereafter, 4
persons applied for two positions: 1.6 as
secretaryP and 4.6 as an accountant. As far as
the secretary is concerned, it was and B who
appointed the secretary, opposed by and O.
#he accountant was appointed by concurred
by O, which was opposed by B and D. hose
appointment would bind the partnership?
A! 0his ana(eent arran(eent is 2nown as
/oint ana(eent. An$ ana(in( partner a$
exec+te acts which are ere#$ acts of
adinistration e&en if opposed '$ a## the other
partners, 2+n( a(?isa #an( s$a. 5+t, if there are
two or ore ana(in( partners, the$ ha&e to
decide '$ a a/orit$ &ote.
Q: Is the appointment of the secretary an act of
administration?
A! Hes.
Q: ould it bind the partnership?
A! Hes, e&en if opposed '$ the other partners, the
capita#ist partners, the #atter wo+#d not ha&e an$
ri(ht for this is ere#$ an act of adinistration we##?
within the powers of a ana(in( partner.
Q: ith regard to the accountant, ta0e note that
the appointment by was opposed by another
managing partner. 9ow will this tie be
resolved?
A! :nder the #aw, this wi## 'e reso#&ed '$ a## the
partners with the contro##in( interest. 0he partners
with contro##in( interest wi## pre&ai#.
Q: In this case, who has the controlling
interest?
A! H. 0he deterination as to who has contro##in(
interest depends on the capita# contri'+tion. 0h+s,
an ind+stria# partner is exc#+ded in s+ch cases. )n
this case, it is o'&io+s that 50,000 is ore than the
capita# contri'+tion, and 'eca+se H opposed to the
appointent, s+ch appointent wi## not 'ind the
partnership.
.ther ana(eent arran(eents are pro&ided in
Artic#es 1800, 1801, 1802, 1803.
0B%4S O9 MANA;4M4N0:
1.7 *o#idar$ 9ana(eent!
?witho+t specification as to each otherDs
d+ties or witho+t stip+#ation that one of the sha##
act witho+t the consent of a##.
2.7 =oint 9ana(eent!
?two or ore ana(in( partners with the
stip+#ation that none of the sha## act witho+t the
consent of a## others. 0he incapacit$ of one of the
partners, or his a'sence wi## not 'e a &a#id (ro+nd
not to o'tain his consent to a contract. )t has to 'e
'$ +nanio+s consent, +n#ess, in o'tainin( his
consent 6he is a'sent or incapacitated7 it wo+#d
res+#t in irrepara'#e daa(e to the partnership,
then the consent of the a'sent or incapacitated
ana(in( partner a$ 'e dispensed with. 0his is
a#so 2nown as ana(eent '$ consens+s.
3.7 )f there was ana(eent arran(eent
a(reed +pon 'etween the partners, each partner is
considered as an a(ent of the partnership.
)nto these arran(eents, if on#$ one partner is
appointed as a ana(er, he can exec+te an$ acts
of adinistration e&en if opposed '$ a## the other
partners.
Q: In a partnership of which the business is
into buying and selling cars, the managing
partner decided to buy a vintage <ercedes
BenC, to the opposition of the other partners
for they consider it bad investment, will the
decision or the act of the managing partner in
buying the said car bind the partnership?
A! Hes, 'eca+se s+ch act is ere#$ an act of
adinistration. 0he pro'#e is, if the ana(in(
partner contin+es to not consider the sentients of
the other partners, he a$ 'e reo&ed as a
ana(in( partner.
"o&e'er 2008
Q: #he Euestion now is, can he be easily be
removed?
A! "o. 0he re1+ireents for the reo&a# of a
ana(in( partner wo+#d depend on whether he
was constit+ted as s+ch in the artic#es of
partnership or he was ere#$ appointed as
ana(in( partners after the constit+tion of the
partnership.
)f he was constit+ted as a ana(in(
partner in the artic#es f partnership, he can on#$ 'e
&a#id#$ reo&ed +nder two conditions!
1.7 0here has to 'e /+st ca+seS and
2.7 '$ those partners ha&in( contro##in(
interests.
A'sent one of these conditions, he cannot 'e
&a#id#$ reo&ed. )n fact, e&en if there is /+st ca+se,
if the ana(in( partner contro#s 51I of the
partnership, he can ne&er 'e reo&ed.
Aowe&er, if he was appointed as a
ana(in( partner on#$ after the constit+tion of the
partnership, he can 'e &a#id#$ reo&ed e&en
witho+t /+st ca+se, so #on( as it was done '$ those
partners ha&in( contro##in( interests.
O(L2;A02ONS O9 0:4 %AR0N4RS AMON;
0:4MS4LC4S AN. AS 0O 0:4 %AR0N4RS:2%
AN. 2N CAS4 O9 NONI%4R9ORMANC4 O9
0:4 O(L2;A02ON
' Obli7ations of the &artners:
1.7 0o a2e (ood his proised contri'+tionS
2.7 ;id+ciar$ d+tiesS and
3.7 0o participate in the #osses inc+rred '$ the
partnership '+siness.
1. 0o ma6e 7oo/ his &romise/ contribtion:
A. Mone1:
)n order to 2now the reedies that a$ 'e
a&ai#ed of '$ the non?defa+#tin( partners and the
partnership, it +st 'e 2nown first what was
proised '$ the partner, whether he proised to
contri'+te one$, propert$ or ind+str$.
)f the partner proised to contri'+te
one$, for instance, the partners a(reed to
contri'+te 1 9i##ion with 4 partners, witho+t an
a(reeent as to respecti&e ao+nt to 'e
contri'+ted, the #aw pro&ides that the$ wi## ha&e to
share e1+a##$. 0h+s, in this exap#e, 1 9i##ion wi##
ha&e to 'e di&ided into 4 or the respecti&e
contri'+tion wi## 'e 250,000. )f one partner fai#ed to
a2e (ood his proised contri'+tion which is a
s+ of one$, he can 'e he#d #ia'#e '$ the non?
defa+#tin( partners +p to the ao+nt proised p#+s
interest. )f no rate was stip+#ated '$ the parties, it
wi## 'e the #e(a# rate of 12I, 'eca+se this is
for'earance in one$. Aside fro pa$in( the
interest, which is +n+s+a#, not on#$ wi## that
defa+#tin( part$ 'e he#d #ia'#e to pa$ interest, he
wi## a#so 'e #ia'#e to pa$ daa(es.
"ora##$, in o'#i(ations in&o#&in( one$,
in case of daa(e inc+rred '$ another part$, the
#ia'i#it$ wi## on#$ 'e pa$ent of interest. )n
partnership, not on#$ wi## he 'e #ia'#e to pa$
interest, '+t a#so of daa(es.
Reme/ies that ma1 be in+o6e/ b1 the nonI
/efaltin7 &artners:
1.7 *pecific perforance ? the other partners
can cope# hi to a2e (ood his
proised contri'+tion.
2.7 4isso#+tion ? a$ 'e an option '$ the
non?defa+#tin( partners, if that is the on#$
ao+nt that the$ are expectin( for the
partnership.
Q: -an a non@defaulting partner rescind the
partnership agreement?
A! )n a *- decision, it he#d that rescission is not a
reed$ of the non?defa+#tin( partners. :nder the
#aw, the defa+#tin( partners are treated as a de'tor
of the partnership '$ specific pro&ision of the #aw.
0herefore, the *- he#d that pro&ision pre&ai#s o&er
the (enera# r+#e in o'#i(ations and contracts +nder
Art. 1191, wherein rescission a$ 'e a reed$ in
case of serio+s 'reach.
(. %ro&ert1:
)f a partner proised to contri'+te
propert$, it +st 'e deterined as to what was
rea##$ contri'+ted! was it the propert$ itse#f or the
+se of the propert$.
)f it was the ownership of the propert$ that
was contri'+ted then he wo+#d ha&e the o'#i(ation
to de#i&er and transfer ownership, aside fro that,
+nder the #aw, he wo+#d ha&e the o'#i(ation to
warrant the thin(.
Before the delivery of the thing to the
partnership, who will bear the loss? 0he partner
wi## 'ear the #oss. 0he partnership wi## 'ear the #oss
when the thin( is a#read$ in its possession
)f what was contri'+ted was ere#$ the
+se of the propert$, the ris2 of #oss wi## 'e with the
contri'+tin( partner for there was no transfer of
ownership in this case. :nder the res perit doino
r+#e, e&en if possession of the thin( is with the
partnership, so #on( as there is no fa+#t on the part
of the partnership, then the contri'+tin( partner?
owner wi## 'ear the #oss.
%L-%80)."*!
1.7 >hen the thin( contri'+ted is f+n(i'#eS
"o&e'er 2008
2.7 or it cannot 'e 2ept witho+t
deterioratin(S
3.7 )f contri'+ted '$ the partner to 'e so#dS
and
4.7 >hen it has an appraised &a#+e of s+ch
propert$.
)n a## these circ+stances, it is the partnership
which wi## 'ear the #oss if the thin( was #ost or
destro$ed whi#e in the possession of the
partnership.
A(ain, if the contri'+tin( partners fai#s to a2e
(ood his proise to contri'+te propert$, he wi## 'e
treated as a de'tor of the partnership, th+s specific
perforance wi## #i2ewise 'e a reed$.
C. 2n/str1
)f a partner fai#s to render ser&ice as
proised, wi## specific perforance 'e a reed$G
Ans.! 4efinite#$ not. )t wo+#d 'e a &io#ation of his
ri(hts a(ainst in&o#+ntar$ ser&it+de. 0he reed$
wo+#d 'e to deand for the &a#+e of the ser&ice
p#+s daa(es. )t can 'e easi#$ done 'eca+se there
is an ind+str$ rate.
$. 9i/ciar1 .ties:
0he d+t$ to o'ser&e +tost (ood faith, honest$,
fairness, inte(rit$ in 'ein( with each other. 0his
d+t$ coences e&en d+rin( the ne(otiation
sta(e.
0est to /etermine whether there was a +iolation
of this /t1:
>hether the partner has an ad&anta(e hise#f at
the expense of the partnership. )f he has s+ch
ad&anta(e at the expense of the partnership, then
there is a 'reach of the fid+ciar$ d+t$. 0here need
not 'e a proof of e&i# oti&e so #on( as he has this
ad&anta(e at the expense of the partnership.
0his d+t$ #asts, nora##$, +nti# the
terination of the partnership.
Q: <ay a partner may be held liable for breach
of fiduciary duty even after the termination of
the partnership?
A! Hes. 0he *- he#d that e&en if the act of a
partner was ade after the terination of the
partnership, if the fo+ndation of that act was ade
d+rin( the existence of the partnership that can sti##
'e considered as a 'reach of fid+ciar$ d+t$. )n
other words, pina(handaan na n$a $+n act d+rin(
the existence of the partnership, howe&er, it was
exec+ted on#$ after the terination of the
partnership.
'. %artici&ate in the Losses:
Q: hat will be the share of the partner in the
losses incurred in the partnership?
A! -onsider first whether there was a stip+#ation as
to #osses or there was no stip+#ation.
)f there was a stip+#ation as to #osses, the
first scenario wo+#d pertain to, for instance, A, 5
and - a(reed to share 50I, 30I and 20I of the
#osses. 0his wi## 'e a &a#id and 'indin( stip+#ation
aon( the partners.
Q: ould this still be a valid stipulation if one
of them is an industrial partner?
Att1. =ribe: Hes, this wo+#d sti## 'e a &a#id
stip+#ation. )f the ind+stria# partner a(reed to share
in the #osses, then who are we to den$ hi thatG
Q: hat if in the stipulation regarding losses,
one or more of the partners is e'cluded in
sharing with the same, what will be the status
of the stipulation?
A! )t depends on who was exc#+ded. )f the
exc#+ded partner is a capita#ist partner, that
stip+#ation is definite#$ &oid, 100I.
)f the partner exc#+ded is an ind+stria#
partner, it depends. As aon( the partners, this
stip+#ation is &a#id, howe&er, this is &oid aon(
third persons. )n other words, despite the
stip+#ation aon( partners, in exc#+din( the
ind+stria# partner in sharin( in the #osses, the
creditors of the partnership can sti## ho#d s+ch
ind+stria# partner #ia'#e for his contract+a#
o'#i(ations. 0he reed$ of the ind+stria# partner, if
he#d #ia'#e, is to (o after his partners, for the
a(reeent is &a#id aon( these#&es.
Q: hat if there is no stipulation as to the
sharing of the losses, or that the stipulation in
void?
0he first scenario is, there is an
a(reeent as to profits. )f there is an a(reeent as
to profits, then the sharin( in the profits wi## 'e the
sae 'asis in the sharin( of the #osses which is a
&er$ reasona'#e r+#e. 0h+s, for instance, if A, in the
a(reeent, is entit#ed to 90I, 5?I and -?5I,
then it wo+#d a#so 'e reasona'#e that A share 90I
of the #oss, 5F- 5I of the #oss respecti&e#$.
0he #ast scenario, there is no stip+#ation as to
#osses and there is a#so no stip+#ation as to profits.
)n this case, it wo+#d depend on their capita#
contri'+tion. 0heir share in the #osses wo+#d
depend on their capita# contri'+tion.
#hus, in this scenario, would the industrial
partner share in the losses?
A! >a#a, 2asi wa#a s$an( capita# contri'+tion.
"o&e'er 2008
Note: :nder Art. 1816, e&en if he is exc#+ded '$
the partners@partnership in sharin( in the #osses,
that is a &oid stip+#ation as to third persons and
can sti## ho#d the ind+stria# partner #ia'#e as to the
contract+a# o'#i(ation of the partnership.
Q: If indeed a partner, assuming that the assets
of the partnership are not sufficient to cover
the obligations of the partnership, what would
be the nature of the obligation of the partner?
ould the partners be held solidarily liable? :r
would they only be held Kointly liable?
A! )t wo+#d depend on the nat+re of the #ia'i#it$. ;or
contract+a# o'#i(ations, as a r+#e, the partners
wo+#d on#$ 'e /oint#$ #ia'#e, +n#ess the$ 'o+nd
these#&es so#idari#$, for contract+a# o'#i(ations.
Aowe&er, +nder Art. 1824, if the o'#i(ation arose
fro a tort+o+s act or a wron(f+# act +nder Arts.
1822 and 1823, for exap#e, whi#e in the
perforance of his o'#i(ation, a partner recei&ed a
s+ of one$ fro one of its c#ients which s+ of
one$ was isappropriated that partner, s+ch
partner wi## 'e he#d so#idari#$ #ia'#e with his partners
and with the partnership. A#so, if a s+ of one$
was de#i&ered, e&en if it was de#i&ered to the
partnership, howe&er, one of the partners
isappropriated the sae, a## the partners wi## 'e
considered so#idari#$ #ia'#e aon( these#&es and
with the partnership.
)n the United (ioneers >eneral
-onstruction -ase, the creditor fi#ed a co##ection
s+it ip#eadin( the 5 (enera# partners. 4+rin( the
pendenc$ of the case, the creditor as2ed for the
disissa# of the action as a(ainst one of the
partners. :#tiate#$, the co+rt decided in fa&or of
the p#aintiff. Ass+in( the ao+nt which was fo+nd
to 'e the #ia'i#it$ of the partnership was
8hp100,000, the co+rt r+#ed that the partnership
wi## ha&e to pa$ the said ao+nt and in case that
the assets of the partnership wi## not 'e s+fficient to
co&er this inde'tedness, the partners wi## 'e #ia'#e
to pa$ e1+a##$. *o, na(in( iss+e $+n( Be1+a##$,C
eanin( si#an( apat na #an(G for the case as
a(ainst one of the partners was disissed. )f the
ao+nt of the o'#i(ation is 100,000, sho+#d the$ 'e
#ia'#e 25,000 each or 20,000 each inc#+din( the 5
th
partnerG
0he *- +#tiate#$ he#d, in this case, that
the #ia'i#it$ of the partners is on#$ /oint, therefore,
the condonation of the #ia'i#it$ of one partner wi##
not increase the #ia'i#it$ of the other partners. %&en
if the partnership has no assets reainin(, each
partner sha## on#$ 'e he#d #ia'#e +p to his share in
the partnership inde'tedness. 0h+s, if the de't is
100,000 and there is no a(reeent as the share in
the #osses, the$ ha&e to share in the #osses,
e1+a##$ into 20,000, $+n( apat na #an( na
defendants, 2asi $+n( isa, condoned na $+n(
o'#i(ation.
O(L2;A02ONS O9 %AR0N4R R4: '
R.
%4RSONS
Q: hen would a contract entered into by a
partner bind the partnership?
!'.: If a partner went to a furniture shop to buy
furniture the of which is (hp1++,+++, and such
amount remained unpaid, can the seller
demand payment from the partnership?
A! )t depends as to whether the contract was
entered into in the nae of the partnership, for the
acco+nt of the partnership, +nder its si(nat+re, '$
a partner who is a+thori<ed to enter into that
contract to 'ind the partnership. 0h+s, in this
exap#e, if in the a(reeent the '+$er was the
partner hise#f and not the partnership, that
partner sho+#d 'e he#d #ia'#e, for the f+rnit+re was
not 'o+(ht in the nae of the partnership.
0he pro'#e, if the contract wo+#d 'e 'indin( in the
partnership, then wo+#d 'e, whether the partner
who represented the partnership had the a+thorit$
to 'ind the partnership.
"ora##$, if a partner wo+#d enter into a
contract, a partnership reso#+tion is not necessar$.
>hether or not a contract wo+#d 'ind the
partnership wo+#d depend on the nat+re of the act
of s+ch partner and the nat+re of the '+siness of
the partnership.
Q: -oncretely, if a partner bought a complete
set of .-"A in the name of the partnership and
signed by that partner, would that contract bind
the partnership for the set was bought in the
name of the partnership?
A! )t wo+#d depend on the nat+re of the act and the
nat+re of the '+siness of the partnership. )n this
exap#e, the partner 'o+(ht the set of *-RA, pero
naan, and '+siness n( partnership a$ resta+rant,
hindi naan ata na i?'ind n$a an( partnership to
s+ch contract, an( ne(os$o ni#a resta+rant.
Q: But the seller would raise the defense,
%hindi 0o naman alam na restaurant yung
business, e ang nagrepresent ng partnership si
Atty. AB-, so a0ala law firm., Is that a valid
defense?
A! "o. 0he *- wo+#d te## that the third part$
contractin( with the partnership has the o'#i(ation
to 2now at #east the nat+re of the '+siness of the
partnership. )n fact, he can deand for the
presentation of the artic#es of partnership in order
for the third part$ to 2now the nat+re of the
'+siness of the partnership. ;or, if this tie, the
partnership is a #aw office, and the partner 'o+(ht
a set of *-RA, that act of '+$in( a set of *-RA wi##
'e considered apparent#$ for carr$in( the '+siness
"o&e'er 2008
of the partnership the +s+a# wa$. 0herefore, that
contract wi## 'ind the partnership.
Q: !ven if he had no authority from the
partners?
A! Hes.
Q: !ven if there was a resolution among
partners that he should not be the one who will
enter into the contract? Jor instance, A,B,-,&,
and ! did decide to buy the set, but designated
A to buy the same and not !, but the ! bought
the .-"A, would that contract bind the
partnership?
A! Hes, as #on( as the third person was not aware
of that a(reeent of the partnership 'eca+se s+ch
act is an act apparent#$ for carr$in( on the
'+siness of the partnership the +s+a# wa$. *o, if
the partnership is a #aw office, '+t the partner
'o+(ht certain thin(s for a resta+rant, then s+ch
act is not apparent#$ for carr$in( on the '+siness
the +s+a# wa$, th+s s+ch act wo+#d re1+ire the
consent of the partners in order to 'ind the
partners.
:nder Artic#e 1818, there are certain acts which
#aw re1+ires the +nanio+s consent of the
partners for s+ch a contract or act to 'ind the
partnership, #i2e, disposin( the (oodwi## of the
partnership or to contest a /+d(ent a(ainst the
partnership or reno+nce a c#ai of the partnership.
.2SSOL=02ONH 52N.2N; =% AN.
04RM2NA02ON
0hese are three different concepts. :pon
disso#+tion of the partnership, it is ".0 4%%9%4
disso#&ed. )t wi## sti## ha&e to (o thro+(h the process
of windin( +p of the affairs of the '+siness of the
partnership 'efore the partnership itse#f wi## 'e
terinated.
Q: hen would there be a dissolution of a
partnership?
A! :nder the #aw, there wi## 'e a disso#+tion if there
is a chan(e in the re#ation of the partners ca+sed
'$ an$ of the partners ceasin( to 'e associated in
the carr$in( on of the '+siness of the partnership.
0hat wi## res+#t in the disso#+tion of the partnership.
A(ain, if one of the partners ceased to 'e
associated in the carr$in( on of the '+siness of the
partnership, that wi## res+#t in the disso#+tion of the
partnership.
Q: <ay there be a dissolution even if none of
the partners ceased to be associated with the
carrying on of the business of the partnership
despite the definition of dissolution under Art.
1?4??
A! Hes. .ne scenario is the adission of a new
partner. >ith the adission of a new partner, +nder
Art. 1840, the partnership is disso#&ed.
Q: hat is the effect of the dissolution?
A! A(ain, it wi## not res+#t in the terination, it wi##
on#$ start the windin( +p process, effecti&e#$, this
wi## terinate the a+thorit$ of a## partners to 'ind
the partnership, %L-%80, if that act is necessar$
for the windin( +p of the partnership or necessar$
to cop#ete a '+siness which was then 'e(an '+t
was not $et finished at the tie of the disso#+tion of
the partnership.
CA=S4S O9 0:4 .2SSOL=02ON
1.7 %xtra/+dicia#S
2.7 =+dicia#.
4Atra-/icial cases:
1.7 Eo#+ntar$S
2.7 )n&o#+ntar$.
=+dicia# ca+ses are necessari#$ &o#+ntar$ 'eca+se
it is '$ app#ication.
:nder &o#+ntar$ ca+ses wo+#d fa##, the
ca+se of the disso#+tion a$ res+#t on the &io#ation
of the a(reeent or it a$ 'e witho+t &io#ation of
the partnership a(reeent. -oncrete#$, the
expiration of the period wo+#d 'e &o#+ntar$,
extra/+dicia# '+t witho+t &io#ation of the a(reeent.
0he fixin( of the ter is an a(reeent of the
parties therefore, it is &o#+ntar$.
0erination of a definite ter or a
partic+#ar +nderta2in(! &o#+ntar$ '+t witho+t
&io#ation.
5$ the wi## of one of the partners! the
partnership a$ 'e disso#&ed witho+t #ia'i#it$ on
the part of the partner, if the partnership is a
partnership at wi## and he disso#&ed the partnership
in (ood faith. 0hose are the two re1+ireents, in
order for a partner to 'e a'#e to disso#&e the
partnership witho+t #ia'i#it$ on his part. A(ain, in an
express wi## of an$ partner who acted in (ood faith,
when no definite ter or partic+#ar +nderta2in( is
specified, which eans, a(ain that a partnership is
a partnership at wi##.
B!: A, B and - agreed to form a partnership for
a period of five years. After 4 years of
business, - assigned his whole interests to
(hilip. #he two other partners, realiCing that
they would not be able to deal with (hilip,
decided to dissolve the partnership. (hilip, not
0nowing of the dissolution done by the 4
partners, filed a petition for the dissolution of
the partnership with the court. as the
"o&e'er 2008
partnership dissolved by the act of the two
partners? <ay the action filed by (hilip to
dissolve the partnership prosper?
A! As a#read$ entioned, '$ the express wi## of a##
the partners who ha&e not assi(ned their interest is
a ca+se for the disso#+tion of the partnership.
0herefore, the 2 partners &a#id#$ disso#&ed the
partnership '$ ere wi## of the partners.
Q: As far as (hilip was concerned, will his
petition prosper, even assuming that no
dissolution was made by the 4 partners?
A! "o. >ith the assi(nent of the interest of a
partner to another person that does a2e the
assi(nee a partner of the partnership witho+t the
consent of the other partners, therefore, he has no
persona#it$ to fi#e a petition for the disso#+tion of
the partnership.
%xp+#sion of an$ partner in (ood faith, it
a$'e 'eca+se the (ro+nds for exp+#sion was
a(reed +pon '$ the partners and one of the
partners &io#ated s+ch a(reeent, th+s he a$ 'e
expe##ed in (ood faith, therefore it a$ 'e &o#+ntar$
and witho+t &io#ation.
)n contra&ention, 'eca+se one of the
partners a$ disso#&e a partnership, e&en if the
partnership has a fixed period or it is a partnership
for a partic+#ar +nderta2in( and that partic+#ar
+nderta2in( has not $et 'een cop#eted, that
wo+#d 'e in contra&ention of the a(reeent of the
partners.
2NCOL=N0ARB CA=S4S:
Q: If one of the partners in a partnership was
elected a .enator, would this dissolve the
partnership by operation of law?
A! "o.
Q: !ven if it is a partnership of lawyers or a law
office?
A! "o.
:nder the -onstit+tion, these e#ected officia#s are
prohi'ited on#$ fro appearin( 'efore tri'+na#s and
not fro pri&ate pratice.
Q: If a lawyer was appointed in the cabinet, for
instance as (residential =egal -ounsel, would
that result in the dissolution of the partnership
by operation of law?
A! Hes. :nder the -onstit+tion, -a'inet *ecretaries
are prohi'ited fro pri&ate practice of their
profession.
-#assic ex.! 0he ;ir 6-arpio Ei##ara<a -r+< Law7
0his a#so inc#+des appointent in the /+diciar$.
Q: hat if the law partner was elected as
governor of his province will it result in the
dissolution of the partnership?
A! Hes. :nder the Loca# No&ernent -ode, chief
exec+ti&es are a#so prohi'ited fro the pri&ate
practice of their profession.
Q: hat if the partner who died is a partner in a
limited partnership? ould that dissolve
automatically the partnership?
A! )t depends as to who is the partner.
)f he is a (enera# partner, as a r+#e, it
disso#&es the partnership, +n#ess there was an
a(reeent in the artic#es of partnership that the$
wo+#d contin+e with '+siness of the partnership
e&en after the death of the partner. .r e&en witho+t
s+ch a(reeent in the artic#es of partnership, if the
s+r&i&in( partners decide to contin+e with the
'+siness of the partnership, then the partnership is
not deeed disso#&ed e&en if the partner who died
is a (enera# partner.
)f the partner who died is a #iited partner,
that does not res+#t in the disso#+tion of the
partnership. )n fact, the exec+tor or adinistrator of
the estate of the deceased #iited partner wi## the
ri(ht to choose or to appoint a s+'stit+te #iited
partner in the said partnership.
)nso#&enc$ or ci&i# interdiction of an$ partner wi##
res+#t in the disso#+tion of the partnership.
@/icial Cases: ;ron/s:
1.7 )nsanit$ or incapacit$!
?0he co+rts re1+ire that it sho+#d 'e
peranent in characterS and
?s+ch incapacit$ or insanit$ +st affect the
perforance of s+ch partner of his o'#i(ations
with respect to the partnership '+siness. )n
other words, 2+n( wa#a s$an( pa2ia#a sa
ana(eent n( '+siness n( partnership,
insanit$ or incapacit$ is not a &a#id (ro+nd.
2.7 Nross iscond+ct!
a.7 wron(f+# exp+#sionS
'.7 if one partner wo+#d ref+se to a##ow
another partner in the ana(eent of the
partnership '+siness, if he has s+ch ri(ht to
participate in the ana(eent S
c.7 if the ana(in( partner wo+#d ref+se to
distri'+te the profits of the partnership when there
is s+ch o'#i(ation to distri'+te the profitsS
d.7 isappropriation of the incoe of the
partnership '+siness.
Note! )f a #iited partner 'ecoes a #iited partner
in another partnership, that is not a &a#id (ro+nd to
fi#e a petition for the disso#+tion of the partnership.
"o&e'er 2008
Liited partners has nothin( to do with the
ana(eent of the partnership '+siness, th+s,
there is no conf#ict of interest.
Note: 0he fact that the partnership inc+rred #osses
for the past three $ears is not necessari#$ a (ro+nd
for disso#+tion.
Aowe&er, e&en if the partnership inc+rred
#osses once and it can 'e shown '$ the partners
that there is no prospect for reco&er$, it can 'e a
&a#id (ro+nd for the fi#in( of the petition for the
disso#+tion of the partnership.
Q: Quarrels among partners, valid ground?
A! "ora##$, no. Aowe&er, if s+ch 1+arre#s (i&e rise
to dissension aon( the partners, affectin( the
cond+ct of the '+siness of the partnership, this can
a#so 'e a &a#id (ro+nd, fa##in( +nder Bother
circ+stancesC which wo+#d render the disso#+tion
e1+ita'#e.
Q: Upon the dissolution of the partnership, and
there were assets left, how will these be
distributed? #o whom these assets be given?
A! As far as partnership assets are concerned!
1.7 8artnership creditors who are not
partners.
2.7 8artnership creditors
3.7 )f there are reainin( assets, to the
capita#ist partnersS
4.) %xcess ? profits 'ased on their a(reeent
as to profits.
Q: hat if, in their agreement, (artner A
contributed 1++,+++P (artner B, *+,+++P (artner
-, industrial partner. #he total assets of the
partnership is 1 <illion at the time of
dissolution, however, there were partnership
creditors obligation of which amounted to
;++,+++. ould the industrial partner have a
share in that 1 <illion asset?
A.! "o. *ince the ao+nt of the o'#i(ation is
8hp900,000, the reainin( 8hp100,000 sho+#d 'e
(i&en 'ac2 to the capita#ist partners for their capita#
contri'+tion.
Q: Assuming that there was no agreement as
their share in the losses, also there was no
agreement as to their share in the profits, what
if one of the partners became insolvent, will the
other partner$s liability be increased?
A! "o, 'eca+se their #ia'i#it$ is =.)"0.
Q: Jor instance A, a partner is insolvent, his
assets being 1++,+++. A is indebted B and D.
#he partnership also has its creditors. #o
whom shall this 1++,+++ be given?
A.! )t sho+#d 'e (i&en to the separate creditors of
the indi&id+a# partner.
;or a #iited partnership to 'e fored, there has to
'e at #east one #iited partner and one (enera#
partner.
;or the esta'#ishent of a #iited
partnership, the #aw re1+ires certain fora#ities.
-oncrete#$, +nder Art. 1844, there has to 'e a
certificate si(ned and sworn to '$ the contractin(
parties which has to 'e fi#ed with the *%-. *o #on(
as there was s+'stantia# cop#iance with the
fora#ities re1+ired '$ #aw, a #iited partnership
wi## 'e &a#id and 'indin(.
Q: hat if there was no substantial compliance
as to these formalities?
A! %&en if there was no s+'stantia# cop#iance, the
a(reeent wi## 'e &a#id and 'indin( aon(
these#&es. As to third persons, a## of the a$ 'e
he#d #ia'#e as (enera# partners, as if a## of the are
(enera# partners. 0h+s, e&en a #iited partner a$
'e he#d #ia'#e e&en +p to his persona# properties.
TRUST
"o&e'er 2008
$ <2N.S:
1.7 %xpressS
2.7 )p#ied.
2m&lie/ 0rst: $ <in/s:
1.7 Res+#tin( tr+stS
2.7 -onstr+cti&e tr+st
0he c#assification of tr+st into two 2inds
6express and ip#ied7 and ip#ied tr+st into two
2inds 6res+#tin( and constr+cti&e7 wo+#d 'e re#e&ant
in two concepts!
1.7 App#ica'i#it$ of the paro#e e&idence
r+#eS and
2.7 8rescription, specifica##$, ac1+isiti&e
prescription.
Note: An express tr+st o&er an io&a'#e a$ not
'e pro&en '$ paro#e e&idence. 0his eans that
ip#ied tr+st o&er an io&a'#e a$ 'e pro&en '$
paro#e e&idence or express tr+st o&er a o&a'#e,
a$ 'e pro&ed '$ paro#e e&idence.
4D%R4SS 0R=S0
Q: <ay an e'press trust over an immovable be
proven by mere testimony of the witness?
ASHes, if the #aw$er of the other part$ did not o'/ect
to the presentation of the witness.
B!: In an agreement between A and B, a
property of A was to be registered in the name
of B, with an agreement the B will reconvey the
property to A$s son upon the graduation of the
said son 5A$s son6. #his agreement was entered
into in 1;?+. #he property was in fact
registered in the name of B the following yea,
1;?1. In 1;?4, A died. In 1;?7, A$s son
graduated. &espite that fact, B did not
reconvey the property. 9e had no 0nowledge of
this agreement until 1;;7, when accidentally,
the son of A discovered such instrument
pertaining to the agreement of A and B. #hus,
he demanded that the land be conveyed to him.
B refused raising the defense of prescription.
Is this claim tenable?
A! 4efinite#$ not. 0his pertains to an express tr+st.
)n an express tr+st, tr+stee wi## 'e ho#din( the
propert$ on#$ in the nae of the 'eneficiar$ or the
cest+i 1+e tr+st, therefore, he cannot ac1+ire the
said propert$ '$ ac1+isiti&e prescription +n#ess
there wo+#d 'e ad&erse possession o&er the
propert$.
Q: hen would there be adverse possession?
A! )t a$ on#$ start with rep+diation. >itho+t
rep+diation, the period for ac1+isiti&e prescription
wi## not start to r+n. *+ch act of rep+diation sho+#d
'e ade 2nown to the 'eneficiar$.
2M%L24. 0R=S0
Resltin7 0rst:
B!: A and B, brother and sister respectively,
inherited two identical parcels of land. Jor
purposes of convenience, B, sister of A, agreed
to have the land registered in the name of A.
9owever, when the parcels of land were
registered in the name of A, A sold one of the
parcels of land to a buyer in good faith and for
value. -an B recover the land from the buyer?
hat would be the remedy of B?
A! 0his 1+estion c#ear#$ pertains to a res+#tin( tr+st.
0his is specifica##$, Art. 1451 of the "--.
5 cannot reco&er the #and fro the '+$er.
As disc+ssed in *a#es, a '+$er who had 'o+(ht the
propert$ fro a se##er who has no ri(ht to se##, '+t
he has apparent a+thorit$ to se##, who appears to
'e the owner and the '+$er 'o+(ht the propert$ in
(ood faith, he wi## ac1+ire ownership o&er the thin(
e&en if the se##er has no ri(ht to se##.
5Ds reed$ wo+#d 'e to (o after her
'rother for 'reach of tr+st in se##in( the propert$
witho+t her consent.
B!: A property was bought by a father and was
registered in the name of his illegitimate
daughter. #he illegitimate daughter occupied
the said parcel of land and constructed a
house where she and her husband and their
children lived. .everal years thereafter, her
father died. #he other heir of her father 5his
legitimate children6 demanded for the delivery
of the said property to the estate for
distribution to the other heirs, claiming that a
trust relationship was established between the
father and the illegitimate child. Is this a valid
claim?
A! :nder the #aw, there is no pres+ption as to
tr+st re#ationship +nder 1448, 'eca+se the donee
in this sit+ation is a chi#d, e&en if i##e(itiate, of the
father. 0herefore, it a$ 'e a donation as pro&ided
+nder Art. 1448.
Q: -an the other heirs recover that property?
A! )t depends, considerin( that it is a donation, if
the donation is inofficio+s. )f the sae 'e
inofficio+s, the other heirs a$ deand for the
ret+rn of the propert$ or at #east the &a#+e of the
propert$.
Res+#tin( tr+st inc#+des Artic#es 1448, 1451, 1449,
1450,1452,1453,1454.
Constrcti+e 0rst:
"o&e'er 2008
B!: A applied for the registration of a parcel of
land in his name. 9owever, he was called in
Gew Dor0 to be a chef in a hotel. .o, he as0ed
his cousin to follow up his application for
registration of land while he was in Gew Dor0.
Instead of ensuring the registration of the
property in the name of A, he had the property
registered in his 5cousin6 name. After which, he
sold the property to a thi2rd person who
bought the land relying on the #-#. hen A
returned to the (hils., he learned of what his
cousin had done. <ay A recover the parcel of
land from the 7
rd
person who bought the
property in good faith and for value?
A! "o.
Q: =et$s assume that the remedy here is
conveyance, the cousin has not yet been able
to sell the property to the 7
rd
person, however
the same in registered in the name of the
cousin. If the cousin would raise the defense
that the action was filed more than one year
from the time of registration of the property in
his name, is that claim tenable?
A! :ntena'#e. 0he one $ear period pro&ided '$ #aw
is re#e&ant on#$ if the action fi#ed is for the re?
openin( of the re(istration case 'eca+se of fra+d.
0h+s, if the action is for recon&e$ance, it does not
atter of the one $ear period has a#read$ #apsed.
".5.! Art. 1456, 1455.
Q: In constructive trust, may the trustee
acEuire the property by prescription by mere
lapse of time, without repudiation?
A! Hes, 'eca+se fro the &er$ start, he was
a#read$ c#aiin( ownership o&er the thin(. )'a don
sa res+#tin( tr+st or express tr+st. >hen this tr+st
was constit+ted, the tr+stee was ho#din( the
propert$ in the nae of another person. 8ero sa
constr+cti&e tr+st, iton( pinsan at $+n( a'o(ado in
one case, wo+#d 'e c#aiin( ownership o&er the
propert$, ri(ht fro the &er$ start and therefore
witho+t need of rep+diation, $+n( prescripti&e
period wi## start to r+n in a constr+cti&e tr+st.
Credit transactions
Q: hy credit transactions?
A! 5eca+se these transactions a## in&o#&ed credit
eanin( there is a 'e#ief in the capacit$ of one of
the parties to perfor his o'#i(ation in the f+t+re.
"o&e'er 2008
Note: -redit transactions an( tawa( '+t the$ are
not a## contracts. 0here can 'e #e(a# re#ationship
e&en witho+t an a(reeent , exap#es , #e(a#
p#ed(e, /+dicia# deposit. 5+t the others are
contracts , there are contract+a# deposit and
p#ed(e '$ a(reeent.
0ransactions:
A. Kinds of Loans
1. 9+t++
2. -oadat+
5. Kind of 4eposits
1. =+dicia#
2. %xtra/+dicia#
-. N+arant$
4. *+ret$ship
%. Rea# N+arant$ , fa&orite in the 'ar exas
1. 8#ed(e
2. -hatte# 9ort(a(e 6-97
3. Rea# %state 9ort(a(e 6R%97
4. Antichresis
9ocs on the followin7 &ro+isions:
1933, 1962, 2047, 2132, 2140
.'#i(ations of the 'ai#ee , 1942
.'#i(ations of depositar$ ? 1979
Ri(ht to deand for interest , 1956
Re1+isites of p#ed(e and ort(a(e ? 2085
8act+ -oissori+ , 2088
)ndi&isi'i#t$ 8rincip#e
Ri(ht to reco&er the deficienc$ @ excess , 2115
Mtm +s. Commo/atm
1. - , a thin( is de#i&ered to the 'ai#ee for the +se
of the propert$ and therefore ownership is not
transferred.
9 , a cons+a'#e thin( is de#i&ered and therefore
ownership thereof is transferred to the 'ai#ee or
'orrower.
2. 9 , on#$ cons+a'#es are the o'/ect
- , a$ 'e io&a'#es 6ho+se, rice fie#d7
=sfrct +s. Commo/atm
1. : , is a ri(ht to en/o$ the propert$ which eans
that the +s+fr+ct+ar$ wi## not on#$ ha&e the ri(ht to
possess '+t he wo+#d ha&e the ri(ht to the fr+its of
the thin(.
- , no ri(ht to the fr+its '+t on#$ ri(ht to +se the
thin( '+t it a$ 'e express#$ stip+#ated that he can
a#so +se the fr+its.
Consensal +s. Real Contracts
1. - , are perfected '$ ere consent th+s +pon
eetin( of the inds as to the o'/ect and the
ca+se there is a#read$ a perfected contract
R- , are perfected +pon de#i&er$ of the thin( which
is the o'/ect of the contract.
4Aam&les of Real Contracts
1316 , -oodat+, deposit and p#ed(e
9+t++ 6eori<e these 4 exap#es7
Note: 8erfection is s+'/ect to the fora#ities of the
#aw. %&en if the contract has a#read$ 'een
perfected, the contract a$ 'e +nenforcea'#e
'eca+se it is not in the for prescri'ed '$ #aw for
the enforcea'i#it$ of the contract. %xap#e ,
contract of sa#e 6s+'/ect to the pro&isions of the
stat+te of fra+ds7

Note: 0here are different r+#es in +t++ and
coodat+. 0here are a#so different r+#es in
/+dicia# and extra/+dicia# deposit. 5+t a## these are
principa# contracts. A## the other credit transactions
are accessor$ contracts , (+arant$, s+ret$ship,
p#ed(e, -9, R%9, antichresis , the$ depend on
other contracts for their existence or their &a#idit$.
6eori<e7
Note! An accepted proise to #oan is consens+a#.
Sara +s. .(% , when the #oan app#ication of
*a+ra was accepted or appro&ed '$ the 'an2,
there was a#read$ a perfected contract '+t it is not
+t++. *- said, it is perfected consens+a#
contract of #oan 'eca+se the #oan itse#f wi## on#$ 'e
perfected +pon the de#i&er$ of the ao+nt to the
'orrower. :nti# the ao+nt is de#i&ered, there is no
perfected +t++ rather there was on#$ a
perfected consens+a# contract of #oan. 0h+s, with
that perfected contract, the 'orrower can a#read$
deand for the de#i&er$ of one$. 0hat is his ri(ht
'+t +nti# then the +t++ itse#f wi## not $et 'e
perfected. Nan+n din sa coodat+, (an+n din
sa deposit.
Commo/atm
)t is essentia##$ (rat+ito+s contract. )f there is
copensation, it is not coodat+. )n the case
of Re&blic +s. (a7tas, *- said it is #ease not
coodat+ 'eca+se there was an o'#i(ation to
pa$ 'reedin( fee.
Loan
Loan is nora##$ (rat+ito+s 6+tan( o sa friend
o7 +n#ess there is an express stip+#ation in
writin(. 0a2e note +nder Artic#e 1956, a creditor in a
contract of +t++ cannot deand for interest
+n#ess it was express#$ stip+#ated in writin(. 0a2e
note that we are ta#2in( here a 2ind of interest
2nown as copensator$ interest for the +se of the
one$. *o if $o+ 'orrowed one$ in =an+ar$
pa$a'#e at the end of the $ear, d+rin( that period,
the creditor a$ 'e entit#ed to an interest 2nown as
"o&e'er 2008
copensator$ interest '+t after the o'#i(ation
'ecae d+e and there was deand for the
pa$ent nonethe#ess the 'orrower fai#ed to pa$,
this tie there wi## 'e a #ia'i#it$ to pa$ interest '$
wa$ of daa(es not copensator$ interest. And
this 2ind of interest 6daa(es7 need not 'e in
writin(. 0his interest '$ wa$ of daa(es is the
effect of de#a$ 'eca+se of the fai#+re to pa$ despite
deand when the o'#i(ation was a#read$ d+e, he
wi## 'e #ia'#e for daa(es. )n onetar$ o'#i(ations,
the #ia'i#it$ for daa(es is in the for of interest.
)n onetar$ o'#i(ations, if there was a stip+#ation
that there is #ia'i#it$ to pa$ interest '+t the interest
rate was not fixed, it wi## 'e the #e(a# rate that can
'e in&o2ed 612I7 , #oan or for'earance of one$.
)f there is a stip+#ation #i2e 6I per onth or 72I
per ann+, the *- r+#ed in Solamon +s. CAH that
a#tho+(h the +s+r$ #aw has a#read$ 'een
s+spended and therefore apparent#$ the parties
can stip+#ate an$ interest rate is not tr+e. 0he
interest rate a(reed +pon a$ 'e +nconsciona'#e
and therefore the *- wi## stri2e down the stip+#ation
and the interest wi## 'e the #e(a# rate. 0he *- had
str+c2 down interest a'o&e 60I per ann+. 5e#ow
50I per ann+, the *- a##owed this interest.
0here is sti## no decision if what is the stat+s if the
interest is 'etween 50I to 60I per ann+
Commo/atm
)n coodat+, the o'/ect is o&a'#e or
io&a'#e. :s+a##$, it is non?cons+a'#e 'eca+se
the &er$ thin( 'orrowed sho+#d a#so 'e the &er$
thin( that sho+#d 'e ret+rned. )f it is cons+a'#e it
wi## 'e cons+ed in accordance with its nat+re. 5+t
the #aw pro&ides for exception, if the p+rpose of the
coodat+ is not for cons+ption , exap#es ,
for disp#a$ or exhi'it , then there can 'e a &a#id
coodat+ o&er a cons+a'#e ite. 5+t it is non
, f+n(i'#e 'eca+se it cannot 'e rep#aced with a
sii#ar 2ind. 0he &er$ thin( 'orrowed sho+#d 'e the
sae thin( that sho+#d 'e ret+rned.
B!: " upon reEuest loaned his passenger
Keepney to J to enable to bring his wife from
#arlac to (>9 for treatment. :n the way bac0
to #arlac after leaving his wife in (>9, people
stopped the passenger Keepney and " allowed
them to ride accepting payments from them
Kust as in the case of ordinary passenger
Keepney. As he was crossing Bamban, #arlac,
there was an on rush of lahar from <t.
(inatubo. #he Keep was wrec0ed. hat do you
call the contract that was entered into by " and
J? Is J obliged to pay " for the use? Is J liable
to " for the loss of the Keep?
*A! 0his is coadat+. )n coadat+, it is
essentia##$ (rat+ito+s 6no pa$ent7. 0a2e note the
/eep was #ost d+e to a fort+ito+s e&ent. )f $o+ fo##ow
the (enera# r+#e +nder 1174, he sho+#d not 'e he#d
#ia'#e. 5+t '$ express pro&ision of the #aw in
coodat+, the 'orrower is #ia'#e. :nder 1942,
when the 'orrower de&otes the thin( to other
p+rpose not a(reed +pon 6the p+rpose is to 'rin(
the wife to the hospita#7, the 'orrower is #ia'#e e&en
if the #oss is d+e to fort+ito+s e&ent.
Note: 5ai#or need not 'e the owner hise#f
'eca+se there is no o'#i(ation to transfer
ownership.
B!: < borrowed B$s truc0. &uring a fire that
bro0e out in <$s garage, < had time to save
only 1 vehicle and < saved his car instead of
B$s truc0. Is he liable for the loss of B$s struc0?
*A! Hes. 0his is an exception to the res perit
doino r+#e. )t wo+#d a#so fa## +nder 1942 that he
chose to sa&e his thin( when he had the
opport+nit$ to sa&e one of two thin(s, the other
'ein( a 'orrowed ite.
H+n( i'a , if $o+ 2ept it #on(er, it is consistent with
de#a$ +nder 1165 ? in an o'#i(ation to de#i&er a
deterinate thin( and the thin( was #ost d+e to a
fort+ito+s e&ent, that de'tor wi## sti## 'e #ia'#e for the
#oss if he was in de#a$.
Re&blic +s. (a7tas
Ae#d! %&en if this is coadat+ +nder Artic#e
1942, it wi## 'e the 'ai#ee or the 'orrower who wi##
'ear the #oss.
.e&osit
0he sae r+#e in deposit , in deposit, ownership
does not pass to the depositar$. 0h+s, +nder the
res perit doino r+#e, it wi## 'e the depositor who
wi## 'ear the #oss if the thin( was #ost d+e to a
fort+ito+s e&ent. )n ro''er$, the depositor wi## 'ear
the #oss +n#ess there is ne(#i(ence on the part of
the depositar$ or if it is stip+#ated that the
depositar$ wi## 'e #ia'#e. 6)f $o+ are the depositar$,
deand for a hi(her renta# so $o+ ha&e one$ to
pa$ for ins+rance7
)f he +ses it witho+t copensation, he wi## 'e #ia'#e
'eca+se in deposit the p+rpose of the de#i&er$ is
for safe2eepin(, the depositar$ is not s+pposed to
+se the thin(. *o if he +ses the thin(, he wi## 'e
#ia'#e for the #oss of the thin(.
Loan
0here is a specia# 2ind of coodat+ 2nown as
precari+. %recarim , in this 2ind of
coodat+ the 'ai#or has the ri(ht to deand for
the ret+rn of the thin( at wi## at an$ tie.
Q: hen would there be a precarium?
"o&e'er 2008
A! 0here wo+#d 'e a precari+ if there was no
stip+#ation as to d+ration nor the +se of the thin(
+n#ess there is a c+sto. *o no a(reeent as to
period or no a(reeent as to partic+#ar +se then
the 'ai#or wo+#d ha&e the ri(ht to deand the thin(
at an$ tie or the +se of the thin( is ere#$
to#erated.
;ro this r+#e, $o+ sho+#d 'e a'#e to conc#+de that
e&en if coadat+ is essentia##$ (rat+ito+s, if
there was a period a(reed +pon as a r+#e the 'ai#or
sho+#d respect the period. Ae cannot deand for
the ret+rn of the thin( /+st 'eca+se there is no
pa$ent. 5+t there are exceptions!
1. %&en if there was a period, he can
deand for the ret+rn if there is an +r(ent
need on the part of the 'ai#or. 5+t in that
scenario, the coadat+ is not
extin(+ished, it is on#$ s+spended. After
the 'ai#or ha&e +sed the thin(, he sho+#d
ret+rn the thin( to the 'ai#ee so the #atter
co+#d finish the period.
2. >hen the 'ai#ee coitted an act of
in(ratit+de. 0he (ro+nds wi## 'e sii#ar to
donation.
.e&osit
Q: Are chec0ing accounts, savings account,
dollar accounts irregular deposits?
A! "o. 0he$ are not deposits +nder the #aw
'eca+se the$ are (o&erned '$ the r+#es on
+t++ 6#oan7. 0he 'an2 is the de'tor. *- ca##ed
these deposits Bin the nat+re of irre(+#ar depositsC
'+t not irre(+#ar deposits 'eca+se the 'an2s +se
the one$ that is wh$ it is in the nat+re of irre(+#ar
deposits.
2rre7lar .e&osits , these are deposits where the
depositar$ has the ri(ht to +se the thin( 'eca+se
nora##$ in an ordinar$ deposit, the depositar$ has
no ri(ht to +se 'eca+se the p+rpose is
safe2eepin(. 5+t if he has the ri(ht to +se, that
deposit a$ 'e ca##ed an irre(+#ar deposit, the
#iitation of the #aw is that the +se +st not 'e the
principa# p+rpose 6the principa# p+rpose sho+#d 'e
the safe2eepin(7.
Examples! -ar was de#i&ered to $o+ as depositar$.
K+n( pwede o (aitin araw araw sa pa(hatid
s+ndo sa (a ana2 o, hindi ito deposit, +2han(
coodat+ ito 2+n( wa#an( 'a$ad for the +se.
5+t if the de#i&er$ is for safe2eepin( '+t the
depositor a##owed $o+ to +se the car for an
occasion , that is an irre(+#ar deposit 'eca+se the
depositar$ has the ri(ht to +se the thin( with the
perission of the depositor.
Another scenario where the depositar$ wo+#d ha&e
the ri(ht to +se and therefore the deposit is an
irre(+#ar deposit ? when the preser&ation of the
thin( deposited de#i&ered to depositar$ re1+ires the
+se of the thin( #i2e +sin( the car to preser&e it.
B!: #he parties in a contract of loan of money
agreed that the yearly interest rate is 148 and
it can be increased if there is a law that would
authoriCe the increase of interest rates.
.uppose the lender would increase the rate by
*8 to be paid by the borrower without a law
authoriCing such increase. ould the lender$s
action be Kust and valid? hat is the remedy of
the borrower?
*A! "ot &a#id 'eca+se '$ the a(reeent of the
parties, the increase in the rate wi## on#$ 'e ade if
there is a #aw that wo+#d a+thori<e the increase.
.- -ase: 0here can 'e no &a#id increase witho+t a
#aw a+thori<in( it '+t in this case the 5an(2o
*entra# iss+ed a reso#+tion increasin( the
axi+ rate. 0he *- said the 'an2s cannot
increase the interest rates 'eca+se a 9onetar$
5oard Reso#+tion is not the sae as a #aw. )t a$
ha&e the effect of a #aw '+t that is not a #aw and
therefore that co+#d not 'e a 'asis.
CR4.20 0RANSAC02ONS
8iz
1. 4eposit is a rea# contract , 0R:%
"o&e'er 2008
-redit 0ransaction notes is
incop#ete. Refer to $o+r
2. A contract of deposit is not co&ered '$ the stat+te of fra+ds , ;AL*%
3. )f deposit has 'een ade '$ capacitated person, if perfected with another who is not a
depositor sha## on#$ ha&e an action to reco&er the thin( deposited whi#e it is sti## in the
possession of the depositar$ ? ;AL*%
4. 4epositar$ is o'#i(ed to 2eep the thin( safe#$ and to ret+rn it to the depositor , ;AL*%
5. )f deposit with a third person is a##owed, the depositar$ sha## not 'e #ia'#e for the #oss ,
;AL*%
6. 0he depositar$ cannot a2e +se of the thin( deposited witho+t the express perission
of the depositor , ;AL*%
7. >hen depositar$ has perission to +se the thin( deposited the contract #oses the
concept of deposit and 'ecoes a #oan ? ;AL*%
8. 4epositar$ cannot deand that the depositor pro&e his ownership of the thin( deposited
, 0R:%
9. 0he thin( deposited +st 'e ret+rned to the depositor e&en tho+(h there is a specified
period or tie for s+ch , ;AL*%
10. 0he deposit of effects ade '$ tra&e#ers of inns is a necessar$ deposit , 0R:%
11. -ontracts of #oan and deposit are essentia##$ (rat+ito+s , ;AL*%
12. 0he 'ai#or in coodat+ ac1+ires the +se of the thin( #oaned witho+t copensation
'+t not the fr+its, if there is a stip+#ation to the contrar$, the contract ceases to 'e
coodat+
13. 5ai#ee sha## not 'e #ia'#e for #oss of thin( if it sho+#d 'e thro+(h fort+ito+s e&ent. ,;AL*%
14. A contract of deposit is a consens+a# contract, th+s xxx to de#i&er arise. , ;AL*%
15. An esca#ation c#a+se is &oid if there is no de?esca#ation c#a+se , ;AL*% 6tr+e on#$ if
#oans in 'an2s7
16. >hi#e a s+ret$ +nderta2es to pa$ if the principa# does not pa$, the (+arantor on#$ 'inds
hise#f to pa$ if the principa# cannot pa$. 0he one is the ins+rer of the de't, the other is
the ins+rer of the so#&enc$ of the de'tor. , 0R:%
17. N+arant$ is essentia##$ (rat+ito+s. , ;AL*%
18. A (+arant$ a$ 'e constit+ted to (+arant$ the perforance of a &oida'#e contract. ?
0R:%
19. A (+arant$ a$ a#so 'e (i&en as sec+rit$ for f+t+re de'ts, the ao+nt of which is not $et
2nown. , 0R:%
20. 0he (+arantor cannot 'e cope##ed to pa$ the credit +n#ess the #atter has exha+sted a##
the properties of the de'tor and has resorted to a## the #e(a# reedies a(ainst the de'tor.
? ;AL*%
"o&e'er 2008

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