SALES

Contract of Sale. By the contract of sale one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing and the other to pay
therefore a price certain in money or its equivalent.
Contract of Sale Contract to Sell
Title over the property passes to the buyer
upon delivery unless there is a contrary
agreement
Ownership is retained by the seller whether or
not there is delivery. Ownership passes to the
buyer only upon full payment of the price
Non-payment of the purchase price is a
negative resolutory condition, meaning the sale
becomes ineffective upon the happening of
such condition
The payment in full is a positive suspensive
condition, meaning, if the purchase price is not
paid, the obligation to deliver and to transfer
ownership on the part of the seller does not
become effective
After delivery of the obective, the seller loses
ownership over it. !nless, the contract is set
aside, he cannot recover the obect
"hether there is delivery or not, the seller
retains the ownership of the obect. #f the seller,
due to non-payment of the price is ousting the
buyer from the property, he $seller% is not
rescinding the contract of sale but is precisely
enforcing it.
Pactum Reservatii Domini Contract to Sell
&onditional 'ale there is already a contract of
sale
No contract to sale only, a preparatory contract
There is already delivery but ownership retain
by seller
No delivery yet. No sale yet
'pecific (erformance)*escission No specific performance)rescission+no
contract yet
(ayment completes the transaction (ayment will not complete transaction
Phases or Stages of A contract of Sale
,. Preparation, conception or generation+the period of negotiation and bargaining, ending at
the moment of agreement of the parties
-. Perfection or Birth of the Contract
.. Consummation or death+which is the fulfilment or performance of the terms agreed upon
Characteristics or Features of Contract of Sale (NBCC!P"
,. Nominate+#t has a specific name given by law.
-. Bilateral+both parties are obliged to fulfil reciprocal obligations to one another.
.. &onsensual+#t is perfected by mere consent
/. &ommutative+The thing sold is equivalent of the price paid
0. Onerous+The thing sold is conveyed in consideration of the purchase price and the purchase
price is paid in consideration of the conveyance of the thing.
1. (rincipal+#ts e2istence does not depend upon the e2istence and validity of another contract
#lements of Contract of Sale
,.3ssential 3lements+necessary for the validty of the sale.
a. 4eeting of the minds of the seller and the buyer
b. Obect which is certain and determinate
c. (rice certain
-. Natural 3lements+those which are inherent in the contract and are deemed to e2ist in the
contract of sale in the absence of clear contrary agreement.
a. "arrant against eviction
b. "arranty against hidden defects
.. Accidental 3lements+4ay or may not e2ist depending on the stipulations of the parties li5e
conditions, payment of interest, place and time of payment.
1
SALES
Object Must be Licit or Lawful. There are two kinds of illicit things:
a. Illicit per sewhen by its nature it is heinous, immoral or wrongful
b. Illicit per accidenswhen it is prohibited by law
When is a thing determinate?
a. When it is particularly designated or physically segregated from all others of the same
class.
b. The thing is capable of being made determinate, at the time the contract is entered into,
w/o the necessity of a new or further agreement between the parties.
#mptio rei speratae$a sale of an e2pected thing subect to the condition that the thing will come
to e2istence. #f the thing did not come into e2istence, the contract is not effective and the buyer
has no obligation to pay the price. (resumption is in favor of this 5ind of sale, because it is more
in 5eeping with the commutative character of a sale.
#mptio spei$a sale of a hope or e2pectancy. The contracting parties intended that contract of
sale to e2ist at all events, whether or not the e2pected thing will come into e2istence such that the
buyer will have to pay the purchase price, such that the contract becomes aleatory in nature.
#mptio rei speratae vs. #mptio spei
#mptio rei speratae #mptio spei
'ale of a thing having a potential e2istence 'ale of a mere hope or e2pectancy
The uncertainty is with regard the quantity and
quality but not with regard the e2istence of the
thing
The uncertainty is with regard the e2istence of
the thing
The contract deals with a future thing The contract deals with a present thing+the
hope or e2pectancy
The sale is subect to the condition that the
thing should e2ist, so that if it does not, there is
no contract for lac5 of an essential requisite
The sale produces effects eventhough the thing
itself does not come into e2istence, since the
subect matter is the hope itself
Future Goods that may be subject of a contract of sale
,. 6oods to be manufactured yet
-. 6oods to be acquired by the seller after the perfection of contract of sale
.. 6oods that depends upon a contingency that may or may not happen
Purchase of an Undivided hare in !ecific Mass of Fungible Goods" #ules$
,. #f the aliquot part purchased from the seller is more than the whole undetermined mass after it
had been weighed or measured, then the buyer becomes the owner of the entire mass.
-. #f the aliquot part purchased is less than the whole undetermined mass, the purchaser will
become the co-owner of the whole mass in the proportion in which the number, weight or
measure of what had been purchased bears to the number, weight or measure of the mass or
stoc5.
2
SALES
Sale vs. Agenc%
SA&# A'#NC(
The buyer pays for the price of the
goods)property purchased
The agent does not pay for the price. 7e
merely accounts for the proceeds of the sale.
The buyer becomes the owner of the
goods)property purchased
The agent does not become the owner of the
goods)property delivered to him for sale.
Buyer cannot return the goods)property when
the sale is defective
The agent returns the goods)property if he was
not able to sell the same
The seller warrants the goods)property sold The agent does not ma5e any warranty as long
as he acts within his authority and in the name
of the principal
The seller has full freedom to enter into any
terms or conditions on the contract of sale
The agent must follow the instructions of the
principal
Contract for a Piece of )or*$The article sold is specially manufactured and upon the special
order of the customer. Article is not sold in the ordinary course of business. $'ee. &oncrete
Aggregates vs. &TA%
Contract for a piece of +or* Contract of Sale
The thing transferred is one not in e2istence
and w)c never would have e2isted but for the
order of the party desiring to acquire it
The thing transferred is one which would have
e2isted and would have been the subect of
sale to some other person, even if the order
had not been given
The services dominate the contract eventhough
there is a sale of goods involved
The primary obective of the contract is a sale
of the manufactured item8 it is a sale of goods
eventhough the item is manufactured by labor
furnished by the seller and upon previous order
of the customer
Not w)in the 'tatute of 9rauds 6overnable by the 'tatute of 9rauds
Rules if Consideration is partl% ,one% and Partl% 'oods
,. :etermine the intention of the parties.
-. #f intention could not be determined, consider the value of the thing given;
a. #f value of the thing more than value of the money, it is BA*T3*
b. #f value of the thing less than value of the money, it is 'A<3
c. #f both values are the same, 'A<3
,one% #-change.
#f local currency is e2changed for foreign currency+there is purchase and sale.
#f the local currency is e2changed with other denominations of the local currency also,
there is barter $'ame rule if 9oreign &urrency e2changed in the (hilippines for another
foreign currency%
PR.C#
the sum stipulated as the equivalent of the thing sold and also every incident ta5en into
consideration for the fi2ing of the price, which was agreed upon by both parties.
Rules if there is no specific amount stipulated as purchase price
,. #t is still certain if it is determinable by ma5ing reference to another thing which is itself certain
-. #t is still certain if determination is entrusted to the udgment of a specified person or persons
.. By reference to certain fact or facts $such as in Art. ,/=-+when the price is fi2ed is that which
the thing sold would have on a definite day or a particular e2change%
3
SALES
#ffect if /
rd
Person fi-ed the price
General ule: #t is binding upon the parties
!"ceptions:
,. "hen the .
rd
person acts in bad faith
-. "hen the .
rd
person disregards the specific instructions or the procedure mar5ed out by
the parties
#ffect +hen the price is not fi-ed 0% the /
rd
person designated
,. #f the .
rd
person refuses or cannot fi2 the price, the contract shall become ineffective, unless
the parties subsequently agree upon the price
-. #f the .
rd
person is prevented from fi2ing the price by the fault of the seller or buyer, the party
not in fault may obtain redress against the party in fault.
#ffect of 'ross .nade1uac% of Price. No effect.
#-ceptions2 $meaning, sale is set aside%
,. #f consent is vitiated, such as >#49! $>iolence, #ntimidation, 4ista5e, 9raud, !ndue influence%
-. #f the parties intended a donation or some other act or contract
.. #f the price is so low as to be shoc5ing to the conscience
#ffect of Simulated Price. 'ale is void, unless it could be shown that the parties intended a
donation or some other act of liberality.
Price imulated% No price to support a contract of sale, such that neither party had any
intention that the amount will be paid+void
Price is False% there is a real price not declared+contract is valid, but the underlying deed
is subect to reformation to indicate the real price upon which the minds of the parties have met.
)hen Price Cannot 0e determined, effect2 'ale is inefficacious. $,/=/%
#s appropriation of the thing delivered in an inefficacious contract allowed? @es, buyer must
pay a reasonable price to that part delivered. $*easonable price is generally the mar5et price at
the time and place fi2ed by the contract or by law for the delivery of the goods%
P#RF#C3.!N !F C!N3RAC3 !F SA&#. 4eeting of the minds upon the thing and price.
#ffect2 (arties may reciprocally demand performance
R4&#S !N A4C3.!N SA&#S
,. 3ach lot is subect of a separate contract of sale
-. Auction sale is perfected when the auctioneer announces its perfection by the fall of the
hammer or in other customary manner.
A (ending announcement;
Any bidder may retract his bid
Auctioneer may withdraw the goods, unless auction is w)o reserve
.. A right to bid may be reserved e2pressly by or on behalf of the seller, unless otherwise
provided by law or stipulation
/. Notice is essential for the seller or his representative to be able to bid.
&y%bidders or !uffers$ persons employed by auctioneer who will bid w/o being bound but
whose bids will ha#e a tendency to induce or pro#oke higher bids from interested buyers, thus
misleading the latter because of the inflated bid price.
$$It is the secrecy of the puffing and not the authori%ed bidding by the seller which makes it
fraudulent.
!P3.!N C!N3RAC3. A (rivilege e2isting in one person, for which he had paid a consideration,
which gives him the right to buy, certain merchandise or property from another person at anytime
within the agreed period at a fi2ed price. #n case of breach of promise to buy or to sell, inured
party can only see5 damages. $'ee Art. ,/=B%
4
SALES
3est to Determine +hether a Contract is A contract of Sale or An !ption. "hether or not the
agreement could be specifically enforced. #f such stipulation could be independently enforced
from the contract, then such stipulation is an option.
#ARN#S3 ,!N#( vs. !P3.!N ,!N#(
#arnest ,one% !ption ,one%
#t is part of the purchase price #t is given as a distinct consideration for an
option contract which gives the buyer a specific
period within which to purchase the thing
#t is given only when there is already a
perfected sale
#t is given at a time when the sale had not yet
been perfected. "hat had been perfected only
is the option contract
"hen it is given, the buyer is bound to pay the
balance of the agreed purchase price
3ven if option money is paid by the would-be-
buyer he is not bound to buy the thing
#f the sale does not materialiCe, the earnest
money paid must be returned, unless a
contrary agreement had been stipulated
#f the buyer decides not to buy the thing, he
cannot recover the option money he paid as
consideration for the contract of option
&!SS, D#3#R.!RA3.!N !F 35.N'
B#F!R# P#RF#C3.!N. No contract to tal5 about. "ould-be-seller bears the loss.
A3 35# 3.,# !F P#RF#C3.!N !F C!N3RAC3 !F SA&#$678/
Acontract without any effect; it never came to e2istence. Tthere could be no contract of sale
without a thing to be sold. "ould-be-seller bears the loss.
AF3#R P#RF#C3.!N B#F!R# D#&.9#R(.
.. ,/DE Applicability, correlate to; $9ungibles sold independently and for a single price
covered by the law%
5
'rt" (()*. !#ery person obliged to gi#e something is also obliged to take care
of it with the proper diligence of a good father of a family, unless the law or the
stipulation of the parties re&uires another standard of care
'rt" (()+" The creditor has a right to the fruits of the thing from the time the
obligation to deli#er it arises. 'owe#er, he shall ac&uire no real right o#er it
until the same has been deli#ered to him.
'rt" (()," When what is to be deli#ered is a determinate thing, the creditor, in
addition to the right granted him by (rticle ))*+, may compel the debtor to
make the deli#ery.
If the thing is indeterminate or generic, he may ask that the obligation be
complied with at the e"pense of the debtor.
If the obligor delays, or has promised to deli#er the same thing to two or more
persons who do not ha#e the same interest, he shall be responsible for any
fortuitous e#ent until he has effected the deli#ery
'rt" (-)-" (n obligation which consists in the deli#ery of a determinate thing
shall be e"tinguished if it should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable e#en for fortuitous e#ents, the
loss of the thing does not e"tinguish the obligation, and he shall be responsible
for damages. The same rule applies when the nature of the obligation re&uires
the assumption of risk.
SALES
... ,0E/ Applicability. (rinciple of *es (erit :omino. >endor bears ris5 of loss until ownership
is transferred by delivery.
32ceptions; a% "here delivery of goods has been made but ownership is retained by
the seller merely to secure performance of buyerFs obligation
b% "here actual delivery is delayed through fault of the buyer.
Sale of 'oods B% Description where a seller sells a thing as being of a certain 5ind verbally
describing them and the buyer simply relies on the sellerFs descriptions of the things, not 5nowing
whether the sellerFs representations are true or not.
Sale 0% Sample "here the seller warrants that the bul5 of goods being sold correspond with the
sample or samples e2hibited not only in 5ind but also in quality and character.
Sale 0% Description and Sample "here the seller has to satisfy the requirements in sale by
description and sample. There are two-fold warranty here; $a% the goods purchased matched with
the description and $b% the goods also matched in 5ind, quality and character with that of the
sample or samples e2hibited to the buyer or his representative
R#C3! &A) (AR3. 67:7"
'!!licability$ ,ales of -ersonal -roperty in Installments and .eases of -ersonal -roperty w/
/ption to 0uy
#emedies$
1)2 !"act fulfillment of the obligation, should the #endee fail to pay3
142 5ancel the sale, should the #endee6s failure to pay co#er two or more installments3
172 8oreclose the chattel mortgage on the thing sold, if one has been constituted, should the
#endee6s failure to pay co#er two or more installments. In this case, he shall ha#e no further
action against the purchaser to reco#er any unpaid balance of the price. (ny agreement to the
contrary shall be #oid.
The stipulation that the instalments or rents shall not be returned to the vendee or
lessee shall be valid as long as it is not unconscionable. $,/D1%
AR3. 67:8.
3+o ;inds of .ncapacit%2
,. Absolute #ncapacity- (arty cannot bind himself in any case.
-. *elative #ncapacity- &ertain (ersons under certain circumstances cannot buy certain
property.
AA 4inors in contract for necessaries must pay reasonable price.
Necessaries$those things which are needed for sustenance, dwelling, clothing and medical
attendance, in 5eeping with the financial capacity of the family of the incapacitated person.
AR3. 678<. Prohi0ition against 5us0and and )ife. #-ceptions.
Rationale2 P.D
a. To avoid Pre=udice to .
rd
(ersons
b. To prevent one spouse from unduly influencing the other.
c. To avoid by indirection the violation of the prohibition against donations.
)ho ma% assail illegalit%>
a. &reditors prior to the sale
b. 7eirs of either spouse.
AA 3ither spouse may not assail illegality because they are parties thereto.
6
SALES
AA A spouse designated as agent of the other spouse may sell the latterFs e2clusive property.
AR3. 6786. Persons Relativel% .ncapacitated to Bu%. (PA'#?!"
,. Public Officers and employees+(roperty Of 'tate.
-. Agents+(roperty of (rincipal unless with consent.
.. 'uardian+(roperty of "ard.
/. #2ecutors and administrators+3state
0. ?ustices, Gudges, (rosecuting Attorneys, &ler5s and employees of court+(roperty)*ights
under litigation.
1. !thers disqualified by law. $!". $aliens who are dis&ualified to purchase pri#ate agricultural
lands3 $an unpaid seller ha#ing a right of lien or ha#ing stopped the goods in transitu, who is
prohibited from buying the goods either directly or indirectly in the resale of the same at a public
or pri#ate sale w/c he may make. (rt. )977, par.92
Rationale2 9iduciary relationship
Status of Sale2 >oidable $,-.%8 >oid $/-1%
AR3. 678@. 678< and 6786 Applica0le to &egal Redemption, Compromises and
Renunciations.
AR3. 678/. &oss of !0=ect Before Sale. Complete and Partial &oss.
Partial &oss Rules2
,. >endee may withdraw from the contract
-. :emand the remaining part, paying its price in proportion to the total sum agreed upon
AR3. 6787. &ossASu0stantial Deterioration of Specific 'oods +ithout sellerBs *no+ledge.
,. Buyer may avoid the sale or
-. 4ay treat sale as valid w) respect to the e2isting goods
AR3. 678C. !0ligations of 9endor. (3D)P"
,. 3ransfer Ownership $not waivable%
-. Deliver $not waivable%
.. )arrant Obect $waivable and may be modified%
/. Preserve Thing from perfection to delivery $Art. ,,1.%
0. Pay for the e2ecution and registration of the sale unless there is a contrary agreement
AA32ecution sales do not require the delivery of thing since a one year period of redemption is
available to seller.
AR3. 678D. Deliver% 3ransfers !+nership.
AR3. 678E. Control and Possession necessar% in Deliver%.
#-ception2 Art. ,/=D. 'tipulation as to full payment of price.
Deliver% a mode of acquiring ownership as a consequence of a contract of sale by virtue of
which actually or constructively the obect is placed in the control and possession of the vendee.
;.NDS !F D#&.9#R(
,. Actual or *eal. $,/B=%
-. <egal or &onstructive
a. <egal 9ormalities $,/BD%8 e2ecution of public instrument.
b. 'ymbolical Tradition $,/BD par -%- 5eys delivered.
c. Traditio <onga 4anu- by mere consent )agreement. #f the movable sold cannot yet be
transferred to the possession of the buyer at the time of the sale. $,/BB%
7
SALES
d. Traditio Brevi 4anu- if the buyer had already the possession of the obect even before the
purchase. $lessee becomes owner%
e. Traditio constitutum possessorium- possession as owner changed. $Owner becomes
lessee%
.. Huasi-Tradition- :elivery of *ights, credits or incorporeal property made by;
a. 32ecution of public instrument
b. (lacing titles of ownership in the hands of a lawyer.
c. Allowing the buyer to ma5e use of the rights $,0E,%
AR3. 678:. Constructive deliver%.
*equirements;
,. 'ellerFs &ontrol.
-. 'ellerFs &ontrol transferred to buyer.
.. #ntention to deliver for ownership.
AR3. 6788. 3raditio &onga and Brevi ,anu
AR3. 6C<<. 3raditio Constitutum Possessorium.
AR3. 6C<6. Deliver% of .ncorporeal Propert%. (Constructive and Fuasi3radition"
AR3. 6C<@.
3ransaction on Sale or Return. 'ubect to *esolutory &ondition.
:ifference with GDeliver% +ith option to purchaseH Ownership is transferred in 'ale or
*eturn
3ransaction on Approval or 3rialASatisfaction. 'ubect to 'uspensive &ondition.
*ules;
,. *is5 of loss to seller until the sale becomes absolute. $32ceptions; Buyer in default8 Buyer
agreed to bear the loss%
-. Buyer must give goods a trial e2cept when it is evident that it cannot perform the wor5
intended.
.. (eriod of signifying acceptance commences to run only when all the parts essential for
operation has been delivered.
/. A provision that a .
rd
person must satisfy approval is valid but he must be in 6ood faith.
0. 6enerally the 'ale and :elivery to an e2pert buyer is not a sale on approval)trial.
Sale or Return vs. Sale on Approval
Basis Sale or Return Sale on Approval
&ondition 'ubect to *esolutory
condition
'ubect to suspensive
condition
(remise #t depends upon the will of the
buyer
#t depends upon the suitability,
quality or character of the
goods
Transfer of ownership Ownership immediately
passes to the buyer on
delivery
Ownership does not
immediately pass to the buyer.
#t passes only upon approval
or satisfaction of the buyer
duly manifested after trial
*evesting of ownership in the
owner
Ownership is revested in the
seller if the buyer so decides
There is no revesting of
ownership because it is
retained by the seller until the
sale becomes absolute
*is5 of loss or deterioration The ris5 rests on the buyer
before the revestment of
ownership
The ris5 remains in the seller
while the goods are on trial
8
SALES
Art. 6C</ R#S#R9A3.!N !F P!SS#SS.!N !R !)N#RS5.P B( 35# S#&&#R )5#N
SP#C.F.C '!!DS AR# S5.PP#D.
,. "hen a contrary intention appears by the terms of the contract.
-. "hen the goods are shipped, and by the bill of lading$BO<% the goods are deliverable to the
seller or his agent, or to the order of the seller or of his agent.
32ception; 9orm of bill of lading not conclusive if for security purposes only.
.. "hen the goods are shipped and by the BO< the goods are deliverable to the order of the
0u%er or of his agent, but possession of the B!& is retained by the seller or his agent.
/. "here bill of lading is sent forward to the buyer with 0ill of e-change attached and the buyer
did not pay the bill of e2change.
#FF#C3 !F B4(#RBS !B3A.N.N' P!SS#SS.!N !F B.&& !F &AD.N' ).35!43
5!N!R.N' 35# DRAF3.
AA #f the BO< provides that the goods are deliverable to the buyer or to the order of the buyer or is
indorsed in 0lan* or is indorsed to the 0u%er 0% the consignee named therein, a purchaser in
'F for value of the BO< or goods from the buyer will o0tain the o+nership in the goods
although the BO3 has not been honored.
;inds of Deliver% to the Carrier
,. C...F. (Cost, .nsurance, Freight"+signify that the price fi2ed covers not only the costs of the
goods, but the e2pense of the freight and the insurance to be paid by the seller
-. F.!.B. (Free on Board"$goods are to be delivered free of e2pense to the buyer to the point
where they are 9.O.B. The point of 9.O.B. $either at point of shipment or the point of destination%
determines when the ownership passes.
AC.F and F!B merely ma5e rules of presumption.
.. C.!.D. (Collect on Deliver%"+the carrier acts for the seller in collecting the purchase price,
which the buyer must pay to obtain possession of the goods.
AR3. 6C<C. SA&# B( A P#RS!N N!3 35# !)N#RA).35!43 A435!R.3( !F !)N#R.
'eneral Rule; Buyer acquires no better title to the goods than the seller had.
#-ceptions2 S!&9A,
,. "here the sale is sanctioned by statutory or udicial authority. $'ee Art. 00B%
-. "here the owner of the goods is by his conduct, precluded from denying the sellerFs authority
to sell.
.. "here the law enables the owner to dispose of the goods as if he were the true owner thereof.
AAA 9actorFs Acts $Agency%8 *ecording <aws $(: ,0-B, *A /,.1-<and Transportation and
Traffic &ode, *evised Administrative &ode%8 N#<8 "arehouse *eceipts <aw.
/. "here the seller has a voidable title which has not been avoided at the time of the sale.
0. "here seller subsequently acquires title.
1. "here the sale is sold at merchantFs stores, fairs or mar5ets.
AR3. 6C<D. SA&# B( !N# 5A9.N' A 9!.DAB&# 3.3&#B4(#R ACF4.R#S '!!D 3.3&#.
,. Bought before the title of seller has been avoided.
-. in 69 for value
.. without notice of the sellerFs defect of title.
AR3. 6C<E. D!C4,#N3S !F 3.3&#.
.ocument of /itle of Goods0includes any bill of lading, dock warrant, &uedan, or warehouse
receipt or order for the deli#ery of goods, or any other document used in the ordinary course of
business in the sale or transfer of goods, or authori%ing or purporting to authori%e the possessor
of the document to transfer or recei#e, either by indorsement or by deli#ery, goods represented
by such document.
9
SALES
Nature and function2
,. *eceipts of, or orders upon, a bailee of goods represented.
-. 3vidence of transfer of title and possession of goods and contract between the parties.
Some Forms of Documents of 3itle
). &ill of Lading- #t is a contract or receipt for the transport of goods and their delivery to the
person named therein, to order or to bearer. #t usually involves three persons; the carrier, the
shipper and the consignee.
4. .oc1 Warrant: it is an instrument gi#en by dock owners to an importer of goods warehoused
on the dock as a recognition of the importers title to the said goods, upon production of the bill of
lading.
7. 2uedan% a warehouse receipt for commodities or goods such as sugar, tobacco, rice or hemp
;. Warehouse #ecei!t0( receipt wherein it is stated that certain goods were recei#ed by the
bailee to be deli#ered to the bearer or to the order of any person named in such receipt or to a
specified person
9. Letter of 3redit0it is nothing more than a commitment by the issuer that the party in whose
fa#or it is issued and who can collect upon it will ha#e his credit against the applicant of the letter
duly paid in the amount therein specified.
Classes of Documents of 3itle2
,. Negotiable- those by the terms of which the bailee underta5es to deliver the goods to the
bearer and those by the terms of which the bailee underta5es to deliver the goods to the order of
a specified person.
-. Non Negotiable- those by the terms of which the goods covered are deliverable to a specified
person.
AR3. 6C<:. N#'!3.A3.!N !F N#'!3.AB&# D!C4,#N3 B( D#&.9#R(.
,. "here by the terms the carrier, warehouseman or other bailee underta5es to deliver the goods
to the bearer.
-. "here by the terms the carrier, warehouseman or other bailee underta5es to deliver the goods
to a specified person and such person or subsequent indorsee has indorsed it in blan5 or to
bearer.
"here negotiable document of title the goods are deliverable to bearer or where a
negotiable document of title has been indorsed in blan5 or to bearer, any holder may indorse
the same to himself or to any specified person, and in such case the document shall thereafter
be negotiated only by the indorsement of such indorsee.
AR3. 6C<8. N#'!3.A3.!N !F N#'!3.AB&# D!C4,#N3 B( .ND!RS#,#N3.
#ndorsement is made by the person to whose the goods are deliverable. #t may be in blan5, to
bearer or to a specified person.
AR3. 6C6<. N#'!3.AB&# D!C4,#N3S !F 3.3&# ,AR;#D GN!NN#'!3.AB&#H
-No effect on negotiability. The obligations of carrier,warehouseman, or bailee not limited.
AR3. 6C66. 3RANSF#R !F N!NN#'!3.AB&# D!C4,#N3.
-Though non-negotiable may be transferred but transferee acquires rights under ,0,/. 3ven if
document indorsed transferee has no additional rights.
AR3. 6C6@. P#RS!NS )5! ,A( N#'!3.A3# A D!C4,#N3.
,. By the owner thereof
-. By any person to whom possession or custody has been entrusted by the owner, if bailee
underta5es to deliver the goods to the order of the possessor of the document O* document is in
such form that it may be negotiated by delivery at the time it is entrusted.
10
SALES
AR3. 6C6/. R.'53 !F P#RS!N 3! )5!, D!C4,#N3 5AS B##N N#'!3.A3#D.
,. The title of the person negotiating the document over the goods covered by the document.
-. The title of the person$depositor or owner% to whose order by the terms of the document the
goods were to be delivered.
.. The direct obligation of the bailee $warehouseman or carrier% to hold possession of the goods
for him, as if the bailee had contracted with him.
AR3. 6C67. R.'53S !F P#RS!N 3! )5!, D!C4,#N3 5AS B##N 3RANSF#RR#D.
Applicability; $a% Transferee of Negotia0le document of title not duly negotiated $b%transferee of a
nonnegotia0le document.
Rights ac1uired2
,. Title to the goods as against the transferor.
-. The right to notify the bailee of the transfer thereof.
.. The right, thereafter to acquire the obligation of the bailee to hold the goods for him.
AA*ights not absolute. They are subect to the terms of any agreement with the transferor.
AABefore Notification the bailee is not bound to the transferee whose right may be defeated by a
levy of an attachment or e2ecution upon the goods by the creditor of the transferor or by a
notification to such bailee of the subsequent sale of the goods.
AR3. 6C6C. 3RANSF#R !F !RD#R D!C4,#N3 ).35!43 .ND!RS#,#N3.
#ights of transferee$
,. The right to the goods as against the transferor.
-. The right to compel the transferor to indorse the indorsement.
AAAscertain the intention if contrary appears as to necessity of negotiation.
AR3. 6C6D. )ARRAN3.#S !N SA&# !F D!C4,#N3S B( 35# 3RANSF#R!R. (indorsement
Adeliver%" ('R.3"
,. That the document is 'enuine
-. That he has legal Right to negotiate or transfer it.
.. The he has no 5nowledge of fact which would .mpair the validity or worth of the document.
/. That he has the right to transfer the 3itle to the goods and goods are merchantable or fit for a
particular purpose.
AR3. 6C6E. .ND!RS#R N!3 '4ARAN3!R. T73*39O*3 NOT <#AB<3 9O* BA#<33F'
9A#<!*3 O* (*3>#O!' #N:O*'3*'.
AR3. 6C6:. )5#N N#'!3.A3.!N N!3 .,PA.R#D B( FRA4D, ,.S3A;#, D4R#SS, &!SS,
35#F3, !R C!N9#RS.!N. !R 35#R# )AS BR#AC5 !F D43( !F 3RANSF#R!R.
--#f the transferee paid value, without notice of such factors, therefore in 6ood 9aith
AR3. 6C68. A33AC5,#N3 !R &#9( 4P!N '!!DS C!9#R#D B( A N#'!3.AB&#
D!C4,#N3 N!3 A&&!)#D, )5.&# .N P!SS#SS.!N !F BA.&## 4N&#SS D!C4,#N3 B#
F.RS3 S4RR#ND#R#D !R .3S N#'!3.A3.!N PR!5.B.3#D B( 35# C!4R3.
AR3. 6C@<. CR#D.3!RBS R#,#D.#S !N PR!5.B.3.!N !N A33AC5,#N3A&#9(. #nunction
or T*O.
AR3. 6C@6.
A. P&AC# !F D#&.9#R( !F '!!DS
,. Agreement.
-. !sage of trade.
.. 'ellerFs place of business
11
SALES
/. 'ellerFs residence.
0. 'pecific 6oods; (lace where goods are at the time of contract 5nown to parties.
B. 3.,# !F D#&.9#R( !F '!!DS
,. Agreement.
-. No time fi2ed, within a reasonable time.
C. D#&.9#R( !F '!!DS A3 35# P!SS#SS.!N !F 35.RD P#RS!NS. I'eller is relieved if
.
rd
person ac5nowledges to be the bailee of the buyer.
D. Demand or tender of deliver% effective if made at a reasona0le hour.
#. Seller 0ears the e-penses incidental to putting goods in delivera0le state.
AR3. 6C@@
A. D#&.9#R( !F '!!DS &#SS 35AN 35# F4AN3.3( C!N3RAC3#D.
,. Buyer may reect.
-. Buyer may accept by paying;
a. price at the contract rate if he 5new that no more were to be delivered
b. fair value $reasonable mar5et value% of the goods if he did not 5now that the seller is going
to be guilty of breach of contract.
B. D#&.9#R( !F '!!DS ,!R# 35AN F4AN3.3( C!N3RAC3#D
,. Accept and reect e2cess.
-. Accept all- <iable for all of them.
C. D#&.9#R( !F '!!DS ,.J#D ).35 !35#RS
,. Accept in accordance with the contract and reect the rest.
-. Accept all.
AA #f goods are indivisible the buyer may reect the whole of the goods.
AA *ules may be controlled by usage or agreement.
AR3. 6C@/. D#&.9#R( !F '!!DS 3! 35# CARR.#R is D#&.9#R( 3! 35# B4(#R-
45ce!tions$ ,0E. $,% $-% $.% and when &ontrary intention appears.
eller6s duty after delivery to carrier"
,. To enter on behalf of buyer into such contract reasonable under the circumstances. $#f seller
omits this buyer may decline to treat delivery to carrier, delivery to him, if goods were
lost)damaged%
-. To give notice to buyer regarding necessity to insure goods while in transit if under
circumstances it is usual to insure. $ris5 during transit is borne by him if he fails%
AR3. 6C@7. N! D43( 3! D#&.9#R .F 9#ND## 5AS N!3 PA.D !R N! P#R.!D F!R
PA(,#N3 F.J#D .N 35# C!N3RAC3.
AR3. 6C@C. 4NPA.D S#&&#R.
,. "hen the whole of the price has not been paid or tendered.
-. "hen a BO3 or other Negotiable #nstrument has been received as conditional payment but
was dishonored or the buyer became insolvent.
I'ellerJ- includes agent of the seller to whom the BO< has been indorsed8 or a consignor or agent
who has himself paid or is directly responsible for the price.
12
SALES
AR3. 6C@D. R#,#D.#S !F AN 4NPA.D S#&&#R. K&S RR)L
,. A lien on the goods or right to retain them for the price while he is in possession of them8
-. *ight of stopping the goods in transitu after he has parted with the possession of them8
.. *ight of Resale
/. *ight to Rescind
0. *ight of +ithholding the delivery when ownership has not yet passed to buyer.
AR3. 6C@E. )5#N 4NPA.D S#&&#RBS P!SS#SS!R( &.#N ,A( B# #J#RC.S#D. KS#.L
,. 'ales without stipulation as to credit.
-. 32piration of term of credit.
.. #nsolvency of the buyer.
AR3. 6C@:. &.#N !N 35# R#,A.ND#R )5#N 35#R#BS PAR3 D#&.9#R(, 4N&#SS .N3#N3
3! )A.9# 35# &.#N !R R.'53 !F R#3#N3.!N.
AR3. 6C@8. )5#N 4NPA.D S#&&#R &!S#S P!SS#SS!R( &.#N. KDP)L
,. Deliver% to agent or bailee of buyer.
-. Possession by buyer or his agent.
.. )aiver of lien.
MMM "hen unpaid seller becomes udgment creditor he does not lose his lien.
AR3. 6C/<. R#F4.S.3#S F!R 35# #J#RC.S# !F R.'53 !F S3!PPA'# .N 3RANS.34
,. The seller must be unpaid $,0-0%
-. The buyer must be insolvent
.. The goods must be in transit $,0.,%
/. The seller must either actually ta5e possession of the goods sold or give notice of his claim to
the carrier. $,0.-.,%
0. The seller must surrender the negotiable document of title, if any, issued by the carrier or
bailee. $,0.-.-%
1. The seller must bear the e2penses of delivery of the goods after the e2ercise of the right.
AR3. 6C/6. )hen 'oods are in transit
,. after the delivery to a carrier or other bailee and before the buyer or his agent ta5es delivery of
them
-. if the goods are reected by the buyer, and the carrier or other bailee continues in possession
of them.
)hen 'oods No longer in 3ransit (after deliver% to 0u%erAagent"
,. if the buyer or his agent obtains possession of the goods at a point before the destination
originally fi2ed.
-. if the carrier or bailee ac5nowledges to hold the goods on behalf of the buyer
.. if the carrier or bailee wrongfully refuses to deliver the goods to the buyer.
AAA 6oods delivered to a ship, freight, train, truc5 or airplane chartered by the buyer+
circumstantial whether they are in possession of the carrier or as agent of the buyer.
AAA (art of :elivery made to buyer or agent+remainder may be stopped in transitu, unless there
is showing an agreement with buyer to give up possession of the whole of goods.
AR3. 6C/@. )A(S !F #J#RC.S.N' 35# R.'53 3! S3!P.
,. Ta5ing actual possession of the goods
-. giving notice of his claim to the carrier or bailee.
13
SALES
--Notice to be effectual must be given in such time and circumstance that the principal by the
e2ercise of reasonable diligence may prevent a delivery to the buyer.
--*edelivery necessary according to directions of seller.
--#f goods are covered by negotiable document of title carrier or bailee has no obligation to
deliver to seller unless document is cancelled.
AR3. 6C//. )5#N R#SA&# .S A&&!)AB&#
"here seller has either a right of lien or a right of stoppage in transitu and under the following
cases; PRD
,. "here the goods are perisha0le in nature
-. "here the right to resell is e-pressl% reserved in case the buyer should ma5e a default
.. "here the buyer dela%s in the pa%ment of the price for an unreasonable time.
AR3. 6C/7. )5#N 35# S#&&#R ,A( R#SC.ND
,. "here the right to rescind is e2pressly reserved in case the buyer should ma5e a default
-. "here the buyer delays in the payment of the price for an unreasonable time.
AR3. 6C/C. #FF#C3 !F SA&# !F '!!DS S4B?#C3 3! &.#N !R S3!PPA'# .N 3RANS.34.
). Where Goods not co#ered by negotiable document of title.+'eller can give no larger right than
he has. Also with a buyer who sold goods to another.
4. Where Goods co#ered by negotiable document of title+'ellerFs lien cannot prevail against the
rights of a purchaser for value in 69 to whom the document is indorsed.
Article 6C/D+*ight to "ithhold delivery of thing sold by the vendor in case the vendee lose the
right to ma5e use of the term, as provided in Art. ,,BD; (.F.9A"
,. "hen after the obligation has been contracted vendee becomes insolvent, unless he
gives a guaranty or security for the price
-. "hen he does not furnish to the vendor the guaranties or securities which he has
promised
.. "hen by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory
/. "hen the vendee violates any underta5ing, in consideration of which the vendor agreed
to the period
0. "hen the vendee attempts to abscond
Article 6C/E+>endor is bound to deliver the thing sold and its accessions and accessories in the
condition in which they were upon the perfection of the contract. All fruits pertain to vendee from
the day on which the contract was perfected.
Article 6C/:+<oss, :eterioration or #mprovement of Obect before its delivery governed by
Article ,,DB.
,. #f the thing is lost w)o the fault of the seller, the obligation shall be e2tinguished
-. #f the thing is lost through the fault of the seller, he shall be obliged to pay damages8 it is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such
a way that its e2istence is un5nown or it cannot be recovered.
.. "hen the thing deteriorates w)o the fault of the seller, the impairment is to be borne by the
buyer
/. #f it deteriorates through the fault of the seller, the buyer may choose b)w rescission or
fulfilment with indemnity in either case
0. #f the thing is improved by its nature, or by time, the improvement shall inure to the benefit
of the buyer
1. #f it is improved at the e2pense of the seller, he shall have no other right than that granted
to the usufructuary
14
SALES
Article 6C/8+"hat delivery includes? #t includes the placing in the control of the vendee all that
is stated in the contract in conformity with the following rules;
a. ale OF #4'L 4/'/4 by unit of measure or number; The vendor must deliver all that
may have been stated in the contract. #f it is not possible to deliver all, the vendee may choose
between;
<A&K#N6)'4A<<3* A*3A O* N!4B3*
,. (roportional reduction of the price or
-. *escission of the contract provided the lac5 in area is at least ,),E of the area stated
in the contract
The above rules are applicable also in case there is no lac5 in area but the quality is
not the same as specified in the contract. *escission shall ta5e place only if inferior
value of the thing sold e-ceeds ,),E of the price.
But if the vendee would not have bought the immovable had he 5nown of its smaller
area or inferior quality he may rescind the sale.
6*3AT3* A*3A O* N!4B3* $,0/E%
>endee may accept the area stated in the contract and reect the e2cess O*
>endee may accept the whole but must pay for the same at the contract rate
No *ight of *escission since the vendee is not preudiced at all.
The Above *ules $Art. ,0.B and ,0/E shall be applicable to udicial sales%
b. ale of #4'L 4/'/4 by lum! sum1)9;42; There should be no increase or decrease of
the price, although there be a greater or lesser area or number than that stated in the contract.
*ule applicable to 'ale of two or more immovables for a single price.
"hat if the area or number of the immovable is stated together with its boundaries?
Then the vendor is bound to deliver all that is included w)in the BO!N:A*#3',
although the same e2ceeds the area or number specified in the contract. The
BO!N:A*#3' prevail because it contains the real and true area of the land.
"hat if the vendor cannot deliver all that is included w)in the designated
boundaries? >endee has the option to;
a. *educe the price in proportion to the deficiency in the area O*
b. *escind the contract for breach of stipulations.
PR#SCR.P3.!N !F AC3.!NS for rescission or e2action of proportionate reduction of the
purchase price against the vendor under Art. ,0.B and ,0/-; 'i2 4onths from the day of
delivery. L,0/.M
D!4B&# SA&# (6C77"
'eneral Rule2 9#*'T #N T#43, (*#O*#T@ #N *#67T
Applica0ilit% of 'eneral Rule2 Only when the requisites in Article ,0// are not present
Re1uisites for D!4B&# SA&# to #J.S3 (9!CS"
,. Two or more sales transactions must constitute valid sales
-. Two or more sales transactions must pertain to the same obect or subect matter
.. Two or more buyers at odds over the rightful ownership of the subect matter must each
represent conflicting interests
/. Two or more buyers must each have brought from the very same seller
#ules of Preference of Ownershi!
15
SALES
Movable or Personal Pro!erty: Owner is the one who is in first possession in good faith.
7mmovable
,. 9irst to register in good faith
-. No inscription, first to possess in good faith
.. No inscription and no possession in good faith+(erson who presents oldest title in good
faith
)hat is R#'.S3RA3.!N> #t is any entry made in the boo5s of the *egistry, including both
registration in its ordinary and strict sense, and cancellation, annotation, and even the marginal
notes. #t is the entry which records solemnly and permanently the right of ownership and other
real rights.
CAS#S )5#R# AR3.C&# 6C77 CANN!3 B# .N9!;#D
,. "hen the earlier transaction is a pacto de retro sale of an unregistered land and the
subsequent conveyance is a donation of the land in favor of another by the vendor a retro. The
vendee a retro has the better right over the donee. The donor had nothing more to donate
because of failure to repurchase the property.
-. "here one of the deeds of sale is a forgery.
.. "here one sale is absolute and the other is a pacto de retro where the period to redeem has
not yet e2pired.
/. "here one of the sales is subect to a suspensive condition which condition was not complied
with and the other is an absolute sale. 3ven if the conditional sale was made prior to the
absolute sale.
0. "here one transaction is a sale and the other a mortgage
1. "here one claim is based on prescription and the other is on sale
=. "here the subect land is not registered under (: ,0-B
D. #n a contract to sell, there being no previous sale of the property.
Article ,0// applicable to :ouble :onations as provided by Art. =//.
C!ND.3.!NS AND )ARRAN3.#S
Article 6C7C.
"hat are the options of a party to a contract of sale subect to a condition, when such
condition was not fulfilled by the other party?
a. *efuse to proceed with the contract O*
b. "aive performance of the condition and proceed with the contract
"hat if the condition agreed upon is in the nature of a promise that it should happen? Then
the non-fulfillment of such condition is considered a breach of warranty.
Article 6C7D. )ARRAN3(.
--#t is a collateral underta5ing in a sale of either real or personal property, e2press or implied,
that if the property sold does not possess certain incidents or qualities, the purchaser may either
consider the sale void or claim damages for breach of warranty.
45!ress Warrantyany affirmation of fact or any promise by the seller relating to the thing if
the natural tendency of such affirmation or promise is to induce the buyer to purchase the same
and if the buyer purchases the thing relying thereon.
Affirmation of the value of the thing or statement of the sellerFs opinion is not warranty,
unless the seller made such affirmation or statement as an e2pert and it was relied upon
by the buyer.
16
SALES
7m!lied WarrantyIt is inherent in a contract of sale and presumed to e"ist although nothing
has been mentioned about it.
7m!lied Warranties in 3ontracts of ale 8(,+9:
,. #mplied warranty as to the right of the seller to sell at the time when ownership has to pass.
$"arranty against eviction%
-. #mplied warranty against hidden defects or faults or charge or encumbrances un5nown to the
buyer
.. #mplied warranty as to fitness and merchantability
/. "arranty against encumbrances or non-apparent servitudes $,01E%
3ases where im!lied warranty is not a!!licable
,. 'ale made by a sheriff, auctioneer, mortgagee, pledge or other person professing to sell by
virtue of authority in fact or law $,0/=% $The udgment debtor is responsible here for eviction%
-. 'ale under Ias is and where isJ+this carries no warranty as to the quality or wor5able
condition of the goods and the buyer ta5es them as they are. 7owever, such condition does not
include those that could not be discovered by a physical e2amination of the goods sold.
.. 'ale of second hand articles does not carry any warranty as to the condition, adaptation,
fitness or suitability for purposes for which they have been purchased.
/. 'ale of property sold at public auction for ta2 delinquency. There is no warranty on the part of
the 'tate as to the title of the owner.
)ARRAN3( A'A.NS3 #9.C3.!N+The seller guarantees that he has the right to sell the thing
sold and to transfer ownership to the buyer who shall not be disturbed in his legal and peaceful
possession thereof.
4viction0( <udicial process by #irtue of which the #endee is depri#ed of the ownership of the
whole or part of the thing he purchased by final <udgment or by an act imputable to the #endor.
#lements (D9?S)"
,. >endee is deprived in whole or in part of the thing purchased
-. The deprivation is by virtue of a final udgment $,00=%
.. The =udgment is based on a prior right to the sale or an act imputable to the vendor
/. The vendor was summoned in the suit for eviction at the instance of the vendee $,00D%
0. No +aiver of warranty by the vendee
9ailure of the vendee to appeal does not relieve vendor from responsibility L,0/BM
3ffect of (rescription)Adverse (ossession $,00E%
,. (rescription consummated before sale+>endee can claim warranty against eviction
$deprivation is based on right prior to sale%
-. (rescription consummated after sale+>endee cannot claim warranty against eviction
#f (roperty is sold for non-payment of ta2es due and not made 5nown to the vendee
before the sale, vendor is liable for eviction $,00,%
Gudgment debtor is responsible for eviction in udicial sales unless otherwise decreed in
udgment $,00-%
Any stipulation e2empting vendor from responsibility for eviction is void if he acted in
bad faith $,00.%
;inds of )aiver in eviction (6CC7" IApplicable to total eviction only.
17
SALES
,. 5onscientethe wai#er is #oluntarily made by the #endee w/o the knowledge and assumption
of the risks of e#iction. 1=endor shall only be liable to pay the #alue w/c the thing sold had at the
time of the e#iction2
-. Intencionadathe wai#er is made by the #endee w/ knowledge of the risk of e#iction and
assumption of its conse&uences. 1=endor here shall not be liable2
Rights of 9endee in case of eviction (6CCC"
To demand to the vendor the following (9.C#D"
,. 9alue which the thing sold had at the time of eviction, be it greater or less than the price of
the sale.
-. .ncome or fruits, if vendee was ordered to deliver them to the party who won the suit
against him
.. Costs of the suit which caused the eviction, and those suit brought against the vendor for
warranty
/. #2penses of the contract, if the vendee paid them
0. Damages and interests and ornamental e2penses, if the sale was made in bad faith.
A *escission is not a remedy in case of Total eviction because rescission contemplates that the
one demanding it is able to return whatever he has received under the contract. 'ince the vendee
can no longer restore the subect-matter of the sale to the vendor, rescission cannot be carried
out.
Rights of Action of 9endee in case of Partial #viction (6CCD"
,. 3nforce the vendorFs liability for warranty against eviction O*
-. :emand the rescission of the contract of sale w) obligation to return the thing w)o other
encumbrances than those w)c it had when acquired
Applicability; A part of the thing sold of such importance was lost because of eviction,
that the vendee would not have bought it w)o said part.
'ame rules apply to a case where two or more things are ointly sold for a lump sum or
for separate price for each, when the vendee would not have bought one w)o the other.
)arrant% against encum0rances or nonapparent servitudes (6CD<"
Re1uisites2
,. #mmovable sold is encumbered with non-apparent burden or servitude not mentioned in the
agreement
-. Nature of non-apparent servitude or burden is such that it must be presumed that the buyer
would not have acquired it had he been aware thereof.
Remedies of the vendee
,. *escission of the contract O*
-. #ndemnity
"arranty is not applicable if non-apparent servitude is recorded in the *egistry of
(roperty, unless there is an e2press warranty that the thing is free from all burdens and
encumbrances.
(rescription of actions for rescission of damages; ")in , year from the e2ecution of
contract
#f what was chosen was rescission but was not filed w)in , year, vendee may still sue for
damages w)in one year from the discovery of burden or servitude.
18
SALES
)ARRAN3( A'A.NS3 5.DD#N D#F#C3S
#e;uisites$ 8<7P'==:
,. :efect must be hidden. Nit cannot be discovered by an ordinary inspection or
e2amination.
-. :efect must be important or grave. Na% defect renders the thing sold unfit for the use for
w)c it is intended8 b% diminishes its fitness for the use intended, to such an e2tent that the
vendee would not have acquired if he had been aware thereof or would have given a lower
price for it.
.. :efect must be present at the time of the e2ecution of the sale.
/. Action for rescission or reduction of price must be filed w)in the prescriptive period.
0. No waiver of the warranty against hidden defects.
1. Notice by the vendee to the vendor within a reasonable time.
R#D5.B.3!R( D#F#C3S+an imperfection or defect of such nature as to engender a
certain degree of importance
R#D5.B.3.!N--claim against the seller of a product in which the buyer demands a full
refund or a reduction of the purchase price due to a hidden defect that prevents the product
from performing the tas5 for which it was purchased.
Art. 6CD@+#mplied "arranty or &ondition as to quality or fitness of goods
Applicability; 6oods+all chattel personal but not things in action or money of legal
tender, this includes growing fruits or crops
6. .,P&.#D )ARRAN3( !F F.3N#SS.
6eneral *ule; there is no implied warranty of fitness
32ceptions; a% Buyer e2pressly ma5es 5nown the particular purpose or by implication8
b% Buyer relies upon the sellerFs s5ill or udgment
@. .,P&.#D )ARRAN3( !F ,#RC5AN3AB.&.3(. Applies when goods are bought by
description.
A 4erchantability+quality and condition of goods that a reasonable man would after a
full e2amination accept the same under the circumstances of the case, in the performance
of his offer to buy, whether for his own use or for resale.
--fitness for the general purpose for which they are sold.
There is no warranty as to fitness for particular purpose in a contract of sale of a
specified article under its patent or other trade name unless there is a contrary
stipulation. $,01.%
A warranty as to quality or fitness for a particular purpose may be attached to a contract
by usage or trade in place of e2ecution. $,01/%
4erchantability of goods in sale by sample is implied. :efect should not be apparent on
reasonable e2amination of the sample for the vendor to be liable $,010%
>endor is liable eventhough not aware of hidden defects, unless there is a contrary
stipulation and he is in good faith $,011%
3aveat >enditor>.et the ,eller 0eware? >endor is liable eventhough not aware of hidden
defects
3aveat 4m!tor0>.et the 0uyer 0eware? *equires the purchaser to be aware of the
supposed title of the vendor and one who buys without chec5ing the vendorFs title ta5es all the
ris5s and losses consequent to such failure.
19
SALES
Remedies of Bu%er (6CDE"
,. Accion *edhibitoria+action see5ing withdrawal from the contract
-. Accion quanti minores or estimatoria+action for proportionate reduction in the price
Nature of *emedies; Alternative8 both with damages
&oss of 3hing Sold due to 5idden Defects (6CD:"
9endor in Bad Faith 9endor in 'ood Faith
Bears the loss :oes not bear the loss
4ust return the price 4ust return the price with interest
4ust refund e2penses of the contract 4ust refund e2penses of the contract
(ay damages Not obliged to pay damages
&oss of 3hing Sold +A 5idden defects through fortuitous event or vendeeBs fault (6CD8"
A >endee may demand price paid less value of the thing at the time of loss plus damages if
vendor acted in bad faith.
"arranties against hidden defects, merchantability and fitness are applicable to udicial
sales but udgment debtor is not liable for damages, because the latter is only forced to
sell and therefore did not ta5e part in the conduct of the sale and determination of price
which precludes possibility of bad faith $,0=E%
(rescription of Actions; 1 4onths from delivery of thing $,0=,%
?oint Sale of t+o or more animals (6CE@"
"here one suffers redhibitory defect this shall not affect others
32ception; #f the buyer would not have purchased the sound animals w)o the defective
ones. #n such case, sale may be rescinded.
(resumption of 32ception; #f a team, yo5e or pair or set is bought even if a separate price
has been fi2ed for each
The following rules shall be applicable to oint sale of two or more things $,0=.%
A There is no warranty against hidden defects of animals sold at fairs or at public auctions or of
livestoc5 sold as condemned.$,0=/% ationale: (nimals are not bought because of their &uality or
capacity for work3 and in such circumstance defects are clearly known to buyer.
)hen is Sale of Animals 9oid> $,0=0%
,. "hen suffering from contagious diseases
-. #f use or service for which they are acquired has been stated in the contract and they are found
to be unfit
*emedy; :eclaration of Nullity of &ontract
Redhi0itor% defect of Animals$such defect that even in case of professional inspection it is of
such nature that even e2pert 5nowledge is not sufficient to discover it.$,0=1%
(rescription of *edhibitory Actions in defective animals+/E days from delivery$,0==%
>endor is liable if animal should die w)in . days after its purchase, if cause of death
e2isted at time of contract $,0=D%
Animal should be returned in the condition in which it was sold and delivered if sale was
rescinded. >endee is answerable for any inury due to his negligence and not arising
from redhibitory defect $,0=B%
20
SALES
Remedies of Bu%er in Sale of Animals +A Redhi0itor% defect (6C:<"
,. Accion *edhibitoria+action see5ing withdrawal from the contract
-. Accion quanti minores or estimatoria+action for proportionate reduction in the price
9orm of sale of large cattle shall be governed by special laws. $,0D,%
Article 6C:@. Primar% !0ligations of the 9endee;
a. To accept the delivery of the thing
b. To pay the purchase price simultaneously upon the delivery of the thing unless a period or
term has been agreed upon.
3O&3(T#ON TO '#4!<TAN3#T@ O9 A&T'; if parties agreed, such as in sale by
instalments.
(ayment shall be made at the stipulated time and place of delivery. #f there is no stipulation
at the time and place of delivery of the thing.
AAA The failure of the vendee to pay the price after delivery if ownership had been transferred,
does not cause the ownership to revert bac5 to the seller until and unless the bilateral contract of
sale is first rescinded. L&hua 7oi vs. KapunanM
Article 6C:/.
Rules in case of Contract of Sale of goods to 0e delivered in stated instalments.
Two instances contemplated;
a. 'eller ma5es defective deliveries in one or more instalments+Buyer may reect the
defective portion and accept the good ones
b. Buyer refuses w)o ust cause to ta5e delivery or pay one or more instalments+determine
whether breach is material to warrant refusal to proceed with the entire contract of sale. "hen the
breach is severable the inured party can see5 damages or compensation but not to rescind the
whole contract.
Article 6C:7. Bu%erBs Right to e-amine goods.
a. :elivery w)o previous e2amination; The buyer is not deemed to have accepted the same
unless he had a reasonable opportunity of e2amining them for the purpose of finding out whether
they conform with the specifications agreed upon.
b. Tender of :elivery by the seller; #f seller tenders delivery, he should give the buyer if the latter
requested, the reasonable opportunity of e2amining the goods to determine whether they conform
with the contract.
)hen right of e-amination not allo+ed>
a. #f there is an e2press stipulation to the contrary
b. "hen the goods are deliveres Icollect on deliveryJ, the buyer cannot e2amine the goods
unless he pays first the price. 32ception; 7e need not pay the price if there is a contrary
agreement or the e2amination is permitted by usage of trade at the place of delivery.
Article 6C:C. Signs or #vidence of Acceptance 0% the 0u%er of 'oods delivered to him.
(CPR"
a. "hen he communicates with the seller e2pressly manifesting his acceptance thereof.
b. "hen he performs an act in relation to the goods inconsistent with the ownership of the
seller. 32amples; $a% continuous possession and use of goods $b% reselling the goods $c%
mortgaging the goods
c. "hen after the lapse of a reasonable time following the delivery, he retains the goods w)o
complaining to the seller or w)o intimating that he has reected them.
21
SALES
Article 6C:D. Acceptance of 'oods.
4ere Acceptance does not necessarily discharge the seller from liability for the breach of
any promise or warranty. 7owever to ma5e the seller liable the buyer must notify the seller w)in a
reasonable time about the breach of promise or warranty.
-urpose of @otice: To insulate the seller from belated claims of defects and to allow him to
ma5e urgent investigation on the validity of claims.
Article 6C:E. #ffects of ?ustifia0le refusal to accept deliver% 0% the 0u%er
,. Buyer has no duty to return the goods to the seller but must notify the seller of his refusal
to accept the goods. $*is5 of <oss here is on the seller%
-. Buyer may voluntarily constitute himself as depositary of the goods, but he will be liable
for damages if he does not fulfil the duties of a depositary as required by law. $*is5 of loss is on
the buyer%
Article 6C::. #ffect of 4n=ustifia0le Refusal to accept goods 0% the 0u%er; Title or ownership
passes to him from the time goods were placed at his disposal.
32ceptions; a. #f there is contrary agreement
b. #f the seller reserves ownership as security for payment of the price L,0E. P
,0-.M
Article 6C:8. )hen vendee is 0ound to pa% interest $period b)w date of delivery and date of
payment% after delivery;
a. if the parties stipulated
b. if the thing sold and delivered produces fruits or income
c. if the vendee is in default, from the time demand is made upon him either uidicially or
e2tra-udicially.
Article 6C8<. )hen can the vendee suspend pa%ment of the price (total or remaining">
,. #f he is disturbed in his possession or ownership of the thing brought
-. #f he has a well-grounded fear that his possession or ownership would be disturbed by a
vindicatory action or foreclosure of mortgage.
.ength of suspension: "hile the danger or disturbance e2ists.
Situations +here vendee cannot suspend pa%ment despite presence of distur0ance
(SSS3P"
,. "hen the vendor has given security for the return of the price
-. "hen the parties have stipulated
.. "hen the vendor has succeeded in eliminating the danger or disturbance
/. #f disturbance is mere act of trespass
0. #f vendee has fully paid the price
AAOther causes for suspension; non-compliance by vendor of certain conditions8 warranty of
eviction
Article 6C86. .mmediate rescission in sale of immova0les, if the vendor has reasonable
ground to fear the loss of the immovable.
AA >endor however has the alternative of compelling specific performance if the ground to
fear loss does not e2ist.
Article 6C8@. #-ception to the general rule on rescission in case of sale of immova0les.
22
SALES
General ule on escission: The court may fi2 the period of payment when there is ust
cause.
!"ception: &ourt is not allowed to grant a new period. Once there is a udicial demand by
notarial act received by the vendee, the court may not grant him a new term. The reason is that
the vendee already enoyed the advantage of paying beyond the time originally fi2ed in the
contract, during the time when no demand for rescission either udicially or e2tra-udicially has
ta5en place.
AArt. ,0B- Not applicable in;
,. 'ales by instalments where parties have laid down the procedure to be followed in the
event the vendee failed to fulfill his obligation
-. A mere promise to sell where the title remains with the vendor until full payment of the
price.
Article 6C8/. Automatic Rescission of sale of mova0les. Conditions for applica0ilit%;
,. if the vendee upon the e2piration of the period fi2ed for the delivery of the thing
purchased, refused to receive it w)o ustifiable cause
-. if he failed to pay the price unless granted a longer period w)in w)c to pay.
*eason why udicial or notarial act not required; (ersonal things do not generally 5eep a stable
price in the mar5et, any delay in their disposal may preudice the vendor.
Actions for 0reach of contract of sale of goods
Article 6C87. Actions availa0le to vendor when there is breach of contract of sale on the part of
the vendee; (PDR"
,. Action for payment of the price of the goods L,0B0M
-. Action for damages due to wrongful neglect and refusal to accept and pay for the goods
L,0B1M
.. Action for rescission if buyer has repudiated the contract or has manifested his inability to
perform his obligation L,0B=M
Actions availa0le to the vendee, in case of breach by the vendor (SDR"
,. Action for specific performance in case of failure of the vendor to deliver the goods L,0BDM
-. Action for damages for breach of warranty but accepting the goods L,0BBM
.. Action for rescission for breach of warranty where the vendee may validly refuse acceptance of
the goods, or even if the goods had already been received, he may return them L,0BB par. /M
Article 6C8C. Action for collection of price, availa0le in the follo+ing cases; (!PR"
,. "hen the ownership of the goods has passed to the buyer and he wrongfully neglects or
refuses to pay for the price according to the terms of the contract
-. "hen the price is payable irrespective of delivery or transfer of title, on a certain day and the
buyer wrongfully neglects or refuses to pay such price.
:efense of Buyer; 7e may establish the fact that the seller has at anytime before udgment,
manifested his inability not to comply with the contract
.. "hen the goods cannot readily be resold for a reasonable price and the buyer refuses to
receive the goods when offered for delivery e2cept when ,0B1 par. / is applicable $there is notice
of stopping the contract%, with notification that the seller is holding them as bailee for the buyer
Article 6C8D. Damages for nonacceptance of goods.
Measure of damages$
,. As a rule; estimated loss directly and naturally resulting in the ordinary course of events from
the buyerFs breach $no available mar5et%
23
SALES
-. "hen there is available mar5et; IdifferenceJ between contract price and mar5et or current price
at the time when the goods ought to have been accepted or if not time has been fi2ed at the time
of refusal $#f there are special circumstances establishing pro2imate damages of a different
amount than the IdifferenceJ described then liability is based on the pro2imate damages%
(ro2imate :amages; refer to damages other than unrealiCed profits
A #e!udiation of the contract or notice of sto!!ing the contract? such as in the case of a
sale where goods are to be manufactured" Buyer here shall be liable for the cost of;
,. labor performed
-. e2penses for materials used before receiving the notice of repudiation for stoppage
.. unrealiCed profits
Article 6C8E. )hen seller ma% rescind contract in case there is no deliver% %et
,. "hen buyer repudiated the contract
-. "hen the buyer has manifested his inability to perform his obligations
.. "hen the buyer has committed a breach of the contract
A Notice must be given to the buyer to totally rescind the contract.
Article 6C8:. Remed% of 0u%er in Contract to deliver specific goods; 'pecific (erformance
w)o giving the seller option to retain the goods on payment of damages.
Article 6C88. Remedies of 0u%er +hen seller commits 0reach of +arrant%.
,. #ecou!ment+whereby the buyer accepts the goods but he sets up against the seller the
reduction or e2tinction of the purchase price.
-. 'ction for damages+whereby the buyer may $a% accept the goods but w) damages or $b%
refuse to accept the goods for the breach of warranty but also with damages.
.. #escission+whereby the buyer see5s the cancellation of the sale and as a consequence
there will be restoration on both sides.
MMSituations +hen 0u%er cannot choose or elect rescission (;NR"
,. #f he *nows of the breach of warranty when he accepted the goods w)o protest
-. #f he fails to notify the seller w)in a reasonable time of the election to rescind
.. #f he fails to return or offer to return the goods to the seller in substantially the same condition
as they were at the time the ownership was transferred to him.
#-tinguishment of Sales
Art. 6D<< Causes for #-tinguishing Sales
,. Ordinary &auses+causes which e2tinguish ordinary contracts such as;
a. (ayment
b. <oss of the things
c. Novation
d. 4erger of rights of creditor and debtor
e. *escission
f. 9ulfillment of resolutory condition
g. (rescription
-. 'pecial &auses+refer to conventional redemption and legal redemption
C!N9#N3.!NA& R#D#,P3.!N.
Art. 6D<6. #e;uisites #4>%3#
a. The vendor reserves the right to repurchase the thing sold
24
SALES
b. 7e shall shoulder the e2penses of the contract and other legitimate payments made by
the buyer.
c. 7e shall pay the value of the necessary and useful e2penses made on the thing incurred
by the buyer
d. 7e shall comply with other stipulations agreed upon.
e. 7e shall return the price of the sale
Characteristics of Conventional Redemption K#AR RPRL
a. #t begins to e-ist at the time of the perfection of the contract. $#t becomes a mere promise
to sell if stipulated upon after the sale had been consummated%
b. #t is an accidental stipulation because it is a right created by the parties
c. #t is reciprocal when the right to redeem is e2ercised. $both vendor and vendee has
obligations with each other%
d. #t gives rise to a real right when properly registered because it affects third persons.
e. #t is potestative as its e2ercise depends upon the sole will of the vendor.
f. #t is a resolutor% condition because when it is fulfilled, the ownership of the vendee over
the thing is e2tinguished
PAC3! D# R#3R! SA&# vs. ,!R3'A'#
PAC3! D# R#3R! SA&# ,!R3'A'#
Ownership is consolidated in the vendee if
vendor does not repurchase w)in time agreed
upon
9ailure of mortgagor to pay his obligations on
time does not deprive him of his interest in the
property
No obligation on the part of the vendee to
foreclose
4ortgagee must foreclose if he wants to secure
a perfect title
>endor has no more right to redeem after
e2piration of period to redeem
4ortgagor may redeem before foreclosure and
even after, w)in one year from registration of
the sale in e2tra-udicial foreclosure. #n udicial
foreclosure redemption may be made before
confirmation of the sale by the court.
>endee may alienate property 4ortgagee cannot alienate property
>endee becomes automatically the owner in
case of vendorFs failure to redeem
4ortgagee does not automatically become
owner, there must be foreclosure sale first
>endee is entitled to reimbursement for
necessary and useful e2penses
4ortgagee is not entitled to reimbursement for
improvements he made
Art. 6D<@$Presumption of #1uita0le ,ortgage. (.P#R3!D"
,. "hen the price of a sale with right to repurchase is unusually inadequate
-. "hen the vendor remains in possession as lessee or otherwise
.. "hen upon or after the e2piration of the right to repurchase another instrument e2tending
the period of redemption or granting a new period is e2ecuted.
/. "hen the purchaser retains for himself a part of the purchase price
0. "hen the vendor binds himself to pay the ta2es on the thing sold.
1. #n any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.
=. "hen there is doubt as to whether contract is (acto de retro or an equitable mortgage
4;uitable Mortgageone which lacks the proper formalities, form of words or other re&uisites
prescribed by law for a mortgage, but howe#er shows the intention of the contracting parties to
make the property sub<ect of the contract as security for a debt and contains nothing impossible
or contrary to law.
3onse;uences of .eclaration of Pacto de #etro ale as an 4;uitable Mortgage 8P/F#:
,. The repurchase price paid by the vendor is considered the principal of the loan.
-. 3itle remains in the vendor or if the title has already been transferred to the vendee, the same
must be revested into the vendor by a deed of reconveyance.
25
SALES
.. Any money fruits or other benefits received thereafter by the vendee are considered interests
on the loan.
/. #f the vendor does not redeem on time the remedy of the vendee is to foreclose the mortgage.
Art. 6D</$.n case of dou0t, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.
ationale: .east transmission of rights.
$(lthough in conflict with (rt. )7*A, where it pro#ides that if the contract is onerous, the
doubt shall be settled in fa#or of the greatest reciprocity of interests, (rt. )B+7 is the e"ception.
This is <ustified by the condemnation of pactum commissorium 1which is a stipulation that creditor
automatically becomes owner of a property upon non:payment by the debtor2
Art. 6D<7+Art. ,1E- also applicable to contract purporting to be an absolute sale
Art. 6D<C+>endor may as5 for reformation of instrument in cases referred to in ,1E- P ,1E/
Art. 6D<D$3ime to redeem in conventional redemption
,. #f there is a period agreed upon then this shall be observed, but this should not e2ceed
,E years
-. #f there is no period agreed upon, the redemption shall be e2ercised within / years from
the date of contract.
.. #f an action +as 0rought 0% the seller claiming that the contract was an equitable
mortgage but later on proven that it was (acto de retro 'ale, he is given .E days from the time
final udgment was rendered to repurchase.
Art. 6D<E$?udicial !rder is re1uired for the registration of the consolidation of ownership of a
real property in the vendee by failure of the vendor to redeem.
ationale: To accord the #endor the ma"imum safeguards for the protection of his legal
rights under the true agreement of the parties.
Art. 6D<:$3he vendor ma% e-ercise his right of redemption against ever% possessor
whose right is derived from the vendee, even if the second contract does not mention of the right
of redemption.
Art. 6D<8$9endee is su0rogated to the vendorBs rights and actions
As owner, vendee may;
a. transfer his rights to a .
rd
person
b. mortgage the property
c. enoy the fruits thereof
d. recover the property against every possessor
e. perform other acts of ownership
Art. 6D6<$Creditors of the vendor must e-haust first all the other properties of vendor
before they could e2ercise the right of redemption against the vendee.
Art. 6D66$Applica0ilit%.
,. The vendee entered a Pacto de Retro Sale of a part of an undivided immovable.
-. The vendee later acquired the whole of the property.
.. The vendor in the I(acto de *etro 'ale of a partJ wishes to e2ercise his right of redemption
over the part.
#f the abovementioned are present the vendee may compel the vendor in the (acto de *etro 'ale
of a part to redeem the whole property.
ationale: 5o:ownership is not fa#ored, because the co:owners are reluctant to make
impro#ements on the property due to the state of instability in its ownership.
26
SALES
Art. 6D6@$?oint Pacto de Retro Sale 0% Co!+ners or Co5eirs of an 4ndivided
.mmova0le.
3ach &o-Owner)&o-7eir can e2ercise right of redemption with respect to their share
Art. 6D6/+#n the case referred to in Art. ,1,-, vendee ma% demand that all the vendors or
coheirs come to an agreement upon the repurchase of the whole thing, if they failed to do so
vendee cannot be compelled to accept partial redemption.
Art. 6D67$Separate Sales of Shares of Coo+ners of an undivided immova0le.
3ach vendor may e2ercise their right of redemption independently and the vendee
cannot compel any of them to redeem the whole property
Art. 6D6C$.f the vendee dies and propert% is left to several heirs, the action for redemption
can only be brought to each of them independently with respect to their share, whether or not the
property is still undivided or already partitioned.
Art. 6D6D$!0ligations of the 9endor a Retro if he desires to redeem
a. *eturn to the vendee the price of the sale
b. 7e shall shoulder the e2penses of the contract and other legitimate payments made by
the buyer.
c. 7e shall pay the value of the necessary and useful e2penses made on the thing incurred
by the buyer
Art. 6D6E$Rule in case there is no agreement on the sharing of the fruits of the propert%.
,. #f there are fruits at the time of the sale and the vendee paid them, he shall be reimbursed
by the vendor.
-. "here there are no fruits at the time of the sale but there are e2isting at the time of
redemption, the vendee shall be entitled to the fruits gathered for one year rec5oned from the last
anniversary of the date of the effectivity of the contract of sale.
Art. 6D6:$3he vendor +ho recovers the thing shall receive it free from all charges or
mortgages constituted by the vendee, but shall respect the lease contract constituted on the
property in good faith and in accordance with the customs of the place.
&#'A& R#D#,P3.!N (6D68"
--is the right to be subrogated upon the same terms and conditions stipulated in the contract, in
the place of one who acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title.
Art. ,1-E+A co-owner of a thing may e2ercise the right of redemption when the shares of all the
other coo+ners or an% of them are sold to a /
rd
person. #f the price of alienation is grossly
e2cessive, redemptioner shall pay only a reasonable price.
--#f two or more co-owners desire to e2ercise right of redemption they may only do so in
proportion to their share.
Art. 6D@6$Redemption 0% ad=acent o+ner of rural lands. #e;uisites$ 8#'/O:
,. The adacent lands involved must be rural land.
-. The rural land alienated and to be redeemed must not e2ceed one hectare in area
.. The alienation must be made in favor of a third person, not in favor of another adacent owner
/. The two lands involved must not be separated by broo5s, drains, ravines, roads and other
servitudes for the benefit of other estates.
0. The vendee or grantee must already be an owner of a rural land. #f he does not own any,
redemption is not allowed.
27
SALES
#f two or more adoining owners desire to e2ercise the right of redemption at the same time, the
one with a smaller area shall be preferred. #f both have same area, the one who first requested.
Art. 6D@@+Applicability; Piece of 4r0an &and +hich is so small and so situated that a maor
portion cannot be used for any practical purpose w)in a reasonable time, having bought merely
for speculation and is about to resold.
A,peculationmeans buying or selling with e"pectation of profiting by a rise and fall in price.
*ights recogniCed by Article ,1--.
6. Right of Preemption+the right of an adacent owner to purchase the property before it
is sold to a third person or before the proected sale to a .
rd
person is consummated.
@. Right of Redemption+the right of an adacent owner to redeem the property after the
sale had been perfected and consummated.
Preemption Redemption
Arises before sale Arises after sale
No *escission because no sale as yet e2ists There can be rescission of the original sale
The action is directed against the prospective
seller
Action is directed against the buyer
A Preference when two or more owners of adoining lands wish to e2ercise the right of
redemption or pre-emption; To the owner whose intended use is best ustified.
Art. 6D@/$Period of &egal Preemption or Redemption.
4ust be e2ercised within .E days from the notice in writing by the prospective
vendor.
The deed of sale e2ecuted by the vendor is not registered if not accompanied by an
affidavit that he has given the required written notice.
The right of redemption of co-owners is superior to the right of adoining owners.
.nstances of &egal Redemption under the Civil Code (C54RC"
,. 'ale of a co-owner of his share to a stranger $,1-E%
-. 'ale of an heir of his hereditary rights to a stranger $,EDD%
.. 'ale of adacent small urban lands bought merely for speculation $,1--%
/. 'ale of adacent rural land not e2ceeding one hectare $,1-,%
0. "hen a credit or other incorporeal right in litigation is sold $,1./%
.nstances of &egal Redemption under special la+s (35#?A"
,. *edemption in ta2 sales
-. *edemption of homesteads
.. A right of redemption in cases of e2tra-udicial foreclosures
/. An equity of redemption in cases of =udicial foreclosures
0. *edemption by an agricultural tenant of land sold by the landowner
ASS.'N,#N3 !F CR#D.3S AND !35#R .NC!RP!R#A& R.'53S
'ssignment of 3redit0an agreement whereby credits, rights or actions pertaining to a person
1called assignor2 are transferred by him to another 1called assignee2 either onerously or
gratuitously who ac&uires the power to enforce the same against the debtors.
@ature of (ssignment of 5redits and other incorporeal rights: 'as all the elements of a contract of
sale: 1)2 consent 142 /b<ect which is the credit, right , action assigned and 172 consideration which
is the price paid for the assignment, or liberality of the assignor if the assignment is gratuitous.
28
SALES
.istinction between 3ontract of ale and 'ssignment of 3redits
Basis Contract of Sale Assignment of Credits
Obect (roperty &redit, incorporeal rights or
rights of action
4anner of :elivery of Obect #t need not be through public
instrument
#t must be through a public
instrument $,1-0%
'ubect obligated The whole world A definite third person
Ownership when transferred Transfer of ownership need
not be upon delivery of the
thing. The parties may agree
that ownership be transferred
only after full payment $,/=D%
Ownership is transferred upon
delivery of the documents
evidencing the credit or
incorporeal rights
&onsideration #t is always a requisite #t is not always a requisite.
Action may be maintained by
the assignee based on his title
even if there is no
consideration.
.istinction between .ation in Payment and 'ssignment of 3redits
Basis Dation in Pa%ment Assignment of Credits
Nature #t is an alienation of property of
a debtor in satisfaction of a
debt in money
The alienation of credits or
rights, need not be in
satisfaction of debtorFs debt
Obect :eterminate property &redits, incorporeal rights or
rights of action
3ffect Obligation is e2tinguished Obligation is not e2tinguished
&onsent of debtor is not necessary for the assignment. 7e is therefore released from
the obligation if he pays the creditor before having 5nowledge of the assignment $,1-1%
'cope of Assignment; All accessory rights, such as guaranty, mortgage, pledge or
preference $,1-=%
Art. 6D@: )hat the Assignor of the Credit )arrants> (#&S"
,. The e2istence of the credit at the time of the assignment
-. The legality of the credit unless he sold the thing as IdoubtfulJ, meaning, he is not sure of the
validity of his acquisition of the thing sold which fact he has disclosed to the assignee
.. The solvency of the debtor, if e2pressly stipulated or if the insolvency of the debtor was prior to
the sale and of common 5nowledge
Scope of &ia0ilit% in case of 0reach of +arrant%
,. #n good faith; Assignor shall pay $a% consideration of price which he received from the
assignee8 $b% e2penses of the contract $c% other legitimate e2penses occasioned by the
assignment
-. #n bad faith; 'ame liabilities as in above but with damages
Art. 6D@8 Duration of the &ia0ilit% of the Assignor in 'ood Faith (in case there is no
agreement"
,. One year from the date of the assignment of the credit if the period of payment of the credit has
already e2pired
-. One year after maturity of the credit if the period of payment has not yet e2pired
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SALES
Art. 6D/< Sale of .nheritance (5ereditar% Rights" +ithout specification of things.
--'eller shall only be answerable for his character as an heir. 7e warrants the fact of his heirship
in the estate of the decedent. #f it turns out that he is not an heir, then he is liable for the breach of
warranty.
Sale of 5ereditar% Rights$presumes the e2istence of a contract or deed of sale between the
parties
)aiver of 5ereditar% Rights$a mode of e2tinction of ownership, where there is intentional
relinquishment of a 5nown right with 5nowledge of its e2istence and intention to relinquish it in
favor of other persons who are co-heirs in the succession
&umpSum Purchase of the +hole of certain rights, rents or products (6D/6"
>endor warrants the legitimacy of the whole of the rights, rents or products but not the
various parts of which the whole is composed of.
32ception; #f the vendee is evicted from the whole or the part of the greater value $more
than half% of the credits in which case warranty stays.
Art. 6D/@+#f vendor profited from the fruits or received anything from the inheritance sold he
must restore it by paying the vendee, unless there is a contrary stipulation.
Art. 6D//+Charges and de0ts on the estate paid 0% the vendor must be reimbursed by the
vendee, unless there is a contrary stipulation.
Assignment of Credit or right in &itigation. (6D/7"
debtor is given the right to e2tinguish the obligation by reimbursing the assignee; (P.?"
a. The price paid for the credit or right
b. #nterest on the said price from the time the day it was paid
c. ?udicial costs incurred by the assignee
"hen is credit or right in litigation? 9rom the time the complaint concerning the same is
answered.
(rescriptive (eriod; .E days from the date the assignee demands payment from debtor
#-ceptions to the Right of #-tinguishment 0% the de0tor (6D/C"
Assignments or sales made to; (CCP"
a. A co-heir or co-owner of the right assigned
b. A creditor in payment of his credit
c. The possessor of a tenement or piece of land which is subect to the right in litigation
assigned.
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