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SALES AND OTHER SPECIAL CONTRACTS Borrowing of a Tractor (3) Sale of land through
Articles 1458 – 1637 Subject: an agent. — The
Bailey authority of the agent
CHAPTER 1 Commodatum must be in writing;
(gratuitous; no valuable otherwise, the sale is
NATURE OF CONTRACT OF SALE
consideration) vs contract void. (Art. 1874.)
of lease (delivery is not (4) Contract of
Article 1458. [Definition of Contract of Sale] By the contract of sale, antichresis. — The
essential)
1. one of the contracting parties obligates himself to transfer the amount of the principal
ownership of and to deliver a determinate thing, and the and of the interest must
Onerous: with valuable
2. other to pay therefore a price certain in money or its equivalent. be specifi ed in writing.
consideration
Contract of deposit (Art. 2134.)
A contract of sale is either absolute or conditional. (5) Stipulation to pay
(involves personal
property; delivery for the interest. — It must be in
Real Obligation Personal Obligation purpose of safekeeping writing; otherwise,
 TO GIVE  TO DO, or NOT TO DO and for the purpose of no interest is due. (Art.
 In case of non-compliance can  a specific performance cannot perfection) 1956.)
file an action for specific be ordered in a personal (6) Contract of
partnership. — If
performance obligation to do because this immovables are
may amount to involuntary contributed, it
servitude which, as a rule, is must be in a public
prohibited under our instrument to which shall
Constitution. be attached a signed
inventory of the
Consensual Real Solemn immovable property
1. subject matter or object 1. subject matter or object 1. subject matter or contributed. (Arts. 1771,
object 1773.)
2. cause or consideration 2. cause or consideration 2. cause or consideration (7) Transfer or sale of
3. consent or meeting of 3. consent or meeting of 3. consent or meeting of large cattle. — It must be
minds minds minds registered (so it must be
4. Delivery of the object 4. Delivery of the object in a public instrument)
5. Requires certain and a certifi cate of
formalities transfer secured. (Act No.
1147, Sec. 22.)
Examples Examples Examples
(8) Negotiable
Contract of Sale: Car Pawnshop: (1) Contract of
instruments. — They
Contract of Loan Donation
must be in writing. (Act
Commodatum, Mutuum - must be in public
No.
Contract of Pledge instrument
2031, Sec. 1.)
- subj matter should - must accepted by
be delivered required donee
for the purpose of - must be PHASES or STAGES of a CONTRACT of SALE
perfection communicated to the Preparation, Perfection or birth of Consummation or
donor the contract death of the contract
conception or
BPI Case (2) Donation of
- payment of interest Personal Property generation
- above P50,000 must Period of negotiation Have come to a definite Fulfillment or
be in writing and bargaining agreement or there is a performance of the terms
- P50,000 or less is for meeting of minds agreed upon in the
delivery regarding the terms contract
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Upon concurrence of the
essential elements of a
contract:
1. consent, object and
consideration
(Consensual
contract)
2. with delivery (Real
contract)
3. using a specific form
to contain the
agreements (Solemn
contract)
Contract of sale – NOT A MODE TO ACQUIRE OWNERSHIP, merely
gives rise to obligations.
Delivery – through which the buyer acquires the real right of ownership
over the thing sold. The execution of a deed of sale is NOT a conclusive
presumption of delivery of possession of a piece of real estate. Such only
gives rise to a prima facie presumption of delivery.
CHARACTERISTICS or FEATURES of CONTRACT of SALE
1. Bilateral  Fulfillment of reciprocal obligations.
o arise from same cause, the parties are
reciprocally debtors and creditors
o Power to rescind is implied (in case of breach
of contract)
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance
with Articles 1385 and 1388 and the Mortgage Law.
o neither party incurs in delay if the other does
not comply or is not ready to comply in a
proper manner with what is incumbent upon
him.
o Once the thing and the fruits are delivered,
then he acquires a real right over them;
ownership retroacts to the day of the
execution
 Seller will deliver and transfer, and buyer to pay a
price for a determinate thing.
2. Consensual  Contract is perfected by mere consent
 Meeting of the minds as to the offer and
acceptance thereof on the subject matter, price
and terms of payment
3. Commutative  Thing sold is equivalent price paid
 [opposite of Aleatory where consideration is not
equivalent to what to be received, e.g., lotto ticket
vis winning prize]
4. Onerous  Having legal obligation to undertake something
before payment is made, e.g., execution of a deed
of sale before full payment
 Contract of sale applies the doctrine of greatest
reciprocity of interest [gratuitous contract applies
the doctrine of least transmission of right]
5. Principal  Its existence does not depend on the existence
and validity of other contract
 Extinguishment of the principal extinguishes the
accessories, e.g., mortgages, surety, guarantee,
antichresis
6. Nominate  It has a specific name given by law
DISTINCTION
Absolute Sale Conditional Sale
There is NO condition imposed and  When sale is made subject to a
ownership passes to the vendee certain contingency or
upon delivery of the thing subject of condition.
the sale  Ownership is not to vest in the
buyer until the happening of the
condition.
There is NO stipulation in the deed
 That the property sold is
reserved until FULL PAYMENT
is made
 Giving the vendor the right to
UNILATERALLY resolve the
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contract the moment the buyer PAROLE EVIDENCE
fails to pay on agreed period. When the terms of an agreement have been reduced to writing
“Contract OF Sell” – ownership is “Contract TO Sell” – ownership is (WToARW), no other agreement is accepted except the contents of the
transferred to the seller upon retained by the seller, whether or contract (noAAeCoC.
delivery unless there is a contrary not there is delivery, until full [a party may present evidence to modify, explain
agreement, e.g., FAILURE TO PAY payment or faithful compliance with or add to the terms of the agreement if he puts in issue in his pleading]
CONSIDERATION the other terms and conditions, Exceptions:
e.g., LACK OF CONSIDERATION 1. An intrinsic ambiguity, mistake or imperfection in the written
[condition imposed on the agreement
performance of an obligation –> [condition imposed on the 2. The failure of the written agreement to express the true intent and
failure to comply gives option to perfection of contract -> failure to agreement of the parties
refuse to proceed or waiver the comply results in failure of a 3. The validity of the written agreement
condition] contract] 4. The existence of new agreement after the execution of the written
agreement
 Nonpayment – negative  Full payment – positive
resolutory condition (Art 1185); suspensive condition (Art RA No. 6552 (The Maceda Rule)
o makes sale ineffective; 1184); nonpayment is not REALTY INSTALLMENT BUYER PROTECTION ACT (RIBPA)
extinguishes the transaction breach; does not make 1. A contract to sell real property on installment basis, the provisions of
o seller may rescind or exact obligation to deliver and RA No. 6552 must be taken into account insofar as the rights of the
fulfillment (Art 1191) transfer effective parties in cases of default are concerned.
CONDITIONAL SALE CONTRACT TO SELL 2. It does not apply to industrial and commercial real property.
Whatever the condition, upon Upon happening of the event, 3. RA 6552
happening, ownership is transferred ownership is not yet transferred; a a. not only recognizes the right of the seller to cancel the contract
AUTOMATICALLY new agreement is required – a new upon nonpayment
contract of sale b. It also provides for the rights of the buyer in case of such
cancellation.
ELEMENTS of CONTRACT of SALE
Essential Elements Natural Elements Accidental Elements Where the buyer has paid
Necessary for the Inherent in the for the purpose of LESS THAN TWO YEARS MORE THAN TWO YEARS
validity of the sale; contract; deemed to clarifying, restricting, 1. The seller gives the buyer a 1. The seller gives the buyer,
absence of any renders exist in the contract of or modifying legal grace period of NOT LESS WITHOUT ADDITIONAL
sale VOID. (Art 1318) sale effects; not nec. to THAN 60 DAYS WITHOUT INTEREST, the rate of ONE-
perfect a contract (Art INTEREST from the date the MONTH grace period PER
1306 – AUTONOMY) installment became due YEAR of installment payments
1. Consent – meeting 1. Warranty against 2. If the buyer fails to pay at the made. To be exercised every
of the minds (seller eviction (Art 1548) expiration of the grace period, 5 years of the life of the
to delivery; buyer to 2. Warranty against the seller may cancel the contract
pay); includes hidden defects contract AFTER 30 DAYS 2. If contract is cancelled, the
manner of payment (Art 1561) from receipt of the seller shall return 50% of the
2. Object – certain a. notice of cancellation total payments made (cash
and determinate (NoC) or the surrender value), and
3. Consideration – b. demand for rescission of 3. After 5 years of installment, an
Price certain or its the contract by notarial additional 5% per year, but not
equivalent act (DfRoCbNA). exceeding 90% of total
3. Notice to vacate payments made.
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JURAT
Unilateral Act
Affidavit, sworn statements,
verification, certification
“Subscribed and sworn to
before me…”
KINDS of SALE
1. nature of subject matter
2. value of things
exchanged
3. whether the object or
tangible or intangible
4. validity or defect of the
transaction
4. the seller may cancel the
contract AFTER 30 DAYS
from receipt of the
a. notice of cancellation or
the
b. demand for rescission of
the contract by notarial
act, and
c. Full payment of the cash
surrender value.
5. Notice to vacate
ACKNOWLEDGEMENT
2 or more parties
Conveyances, lease, mortgage,
deed
Manila} S.S.
RP }
 sale of real property
 sale of personal property
 commutative sale
 aleatory sale
 sale of property (corporeal) – chose in
possession
 sale of a right (incorporeal), e.g.,
copyright, trademark, goodwill - chose
in action
 valid -
 rescissible – wards suffered lesion;
absentees suffered lesion; accion
pauliana, things under litigation [remedy
of last resort; mutual restitution] – with
damages
 voidable – incapable of giving consent;
vitiated consent [susceptible of
RATIFICATION, with PRESCRIPTION]
 unenforceable – no legal authority (Art
1317); statute of frauds [susceptible of
RATIFICATION,
 void – contrary to L,M,GC,PO, & PP;
absolutely simulation; cause or object
nonexistent ab initio; outside commerce
o man; impossible service; intention
cannot be ascertained; [CANNOT BE
RATIFIED, DOES NOT PRESCRIBE] –
pari delicto (in equal fault) – one who
seeks equity and justice must come to
court with clean hands.
5. legality of the object  sale of a licit object
 sale of an illicit object
6. presence or absence of  absolute
conditions  conditional
7. wholesale or retail 
8. Proximate inducement  Sale by description
to the sale  Sale by sample
 Combo
9. when the price is  cash sale
tendered  sale on the installment plan
SALE DATION IN PAYMENT (Art 1245)
1. there is no pre existing credit 1. there is pre existing credit
2. gives rise to obligation 2. extinguishes obligation
3. cause of consideration: 3. cause of consideration:
payment of money (seller); acquisition of property being
acquisition of property (buyer) offered as payment (creditor);
extinguishment of debt (person
offering dation in payment)
4. greater freedom in the price 4. lesser freedom in determining
price
5. payment ends obligation of the 5. dation in payment either fully or
buyer partially extinguishes debt
(depends on the agreement)
DATION IN PAYMENT (Art 1245) CESSION (Art 1255)
1. one creditor 1. 2 or more creditors
2. Not all properties are conveyed 2. All properties are conveyed
3. Debtor may be solvent or 3. Only when Debtor is insolvent
insolvent
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4. Creditor becomes the owner 4. Creditors do not become the
owners The sale of vain hope and expectancy is void.

SALE WITHOUT CONSENT (INVOLUNTARY) Application:

1. When sale is subjected to EXPROPRIATION 1. Future fruits expected to be harvested
2. In case of ORDINARY EXECUTION 2. Wine expected to be produced from existing vineyard
3. In case of JUDICIAL FORECLOSURE sale 3. All forthcoming chicks from a poultry farm
4. In case of EXTRAJUDICIAL FORECLOSURE sale 4. Sugar expected to be harvested from sugar cane plantation
5. Expected goodwill of a business enterprise

Article 1459. The thing must be licit [within the commerce of man] and the vendor Emptio Rei Sperati (ERS) Emptio Spei (ES)
must have a right to transfer the ownership thereof AT THE TIME IT IS the sale of an expected thing the sale of the hope itself
DELIVERED.  If the expected thing in (a) does  it does not matter whether the
not materialize, the sale is not expected thing materialized or
THING: Licit, existing goods, future goods, contingency, potential effective. not; what is important is that the
existence, resolutory condition hope itself validly existed.
RIGHTS – can also be the objects of sale, not only THINGS. They are  deals with a future thing –– that  deals with a present thing — for
either tangible or intangible.. but not SERVICES which are not determinate which is expected; certainly the hope or expectancy
things and where no ownership can be transferred
already exists
Example: Sale of a valid sweepstakes
Intangible Rights – either transmissible or intransmissible
ticket. Whether the ticket wins or
not, the sale itself is
Transmissible Rights – can be Intransmissible Rights – cannot
valid.
transferred be transferred; cannot be subject of
1. Right if Usufruct a contract
Art. 1347. All things which are not outside the commerce of men, including
2. Right of Redemption 1. Right of suffrage
future things, may be the object of a contract. All rights which are not
3. Assignment or sale of credit 2. Right to hold a public
position intransmissible may also be the object of contracts.
3. Right to support
4. Marital rights No contract may be entered into upon future inheritance except in cases
expressly authorized by law.

All services which are not contrary to law, morals, good customs, public order
Classification of Illicit Things
or public policy may likewise be the object of a contract.
Illicit Per se – heinous, immoral and Illicit Per Accidens – prohibited by
wrongful law
Article 1462. The goods which form the object of the contract of sale may be
Nemo dat quod non habet – nobody can dispose of a thing which does either
not belong to him [Kinds of Goods]
1. Existing goods, owned or possessed by the seller, or
Article 1461. Things having a potential existence may be the object of the 2. Goods to be manufactured, raised, or acquired by the seller after the
contract of sale. perfection of the contract of sale, in this title called “future goods”.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the There may be a contract of sale of goods, whose acquisition by the seller
condition that the thing will come into existence. depends upon a contingency which may or may not happen.
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Goods, defined – all chattels personal but not things in action or money RESOLUTORY CONDITION – a SUSPENSIVE CONDITION – the
of legal tender in the Phils.; includes growing fruits or crops. Real Property condition which is uncertain, the happening of which causes the
is not included. happening or fulfillment of which obligation to ARISE. May or may
EXTINGUISHES a subsisting not happen. [suspensive period –
Future Goods, examples: obligation will surely happen]
1. Goods to be manufactured – subscription [a piece of work –
custom-made, not readily saleable to the public] 1. A property subject to reserva troncal may be sold
2. Copra from specific coconut 2. A usufruct that may end when the naked owner becomes a lawyer
3. Realty expected to acquire may be sold.
4. Goods acquisition of which is dependent on a contingency which
may or may not happen (promise to get a car after passing the Article 1466. In construing a contract containing provisions characteristic of
bar) both the contract of sale and of the contract of the agency to sell, the essential
clauses of the whole instrument shall be considered.
Article 1463. The sole owner of the thing may sell an undivided interest therein.
DISTINCTIONS
 A co-owner can alienate his share or a portion of his share. SALE AGENCY
 Selling a property to a dead person – a seller cannot do so, because 1. The buyer pays for the goods 1. The agent does not pay; merely
a dead person has no civil personality or juridical capacity. accounts for the proceeds of
the sale
Article 1464. In the case of fungible goods, there may be a sale of an undivided 2. The buyer becomes the owner 2. The agency does not
share of a specific mass, though the seller purports to sell and the buyer to buy
a definite number, weight or measure of the goods in the mass, and though the 3. Buyer cannot return when sale 3. The agent can return if goods
number, weight, or measure of the goods in the mass is undetermined. By such is defective are not sold
a sale the buyer becomes the owner in common of such a share of the mass as 4. The seller warrants the goods 4. The agent does not make any
the number of weight or measure bought bears to the number, weight or warranty; should always act
measure of the mass. If the mass contains less than the number, weight or within his authority and in the
measure bought, the buyer becomes the owner of the whole mass and the name of the principal
seller is bound to make good the deficiency from goods of the same kind and 5. The seller has full freedom to 5. The agent must follow the
quality, unless a contrary intent appears.
enter into any terms instructions of the principal
PRIMORDIAL TEST: Intention of the parties.
If aliquot part purchased from the If aliquot part purchased from the
 If “agent” intends to acquire ownership of the goods upon delivery to
seller is MORE than the whole seller is LESS than the whole
him, the contract is one of SALE.
undetermined mass, the buyer now undetermined mass, the buyer will
 If the “principal” remains the owner and has the right to control the
owns the entire mass become co-owner of the entire
sales, fix the price and terms, demand and receive proceeds minus
mass
the agent’s commission, there is AGENCY.
“A” purchased 200 cavans of the “A” purchased ¼ of the stock of
SALE ON CONSIGNMENT:
stock of palay in the warehouse. It palay in the warehouse. The exact
turned out the entire mass is only number of which is unknow. “A”  A sale of goods through a dealer or agency. Title to the goods does
180 cavans. “A” now owns the now co-owns up to the extent that not pass to the consignee
entire mass. The seller is response he bought.  A contract where
to supply the deficiency. o the goods are received by consignee for sale,
o the overprice being his commission,
o with the obligation to remit the proceeds of the within the
Article 1465. Things subject to a resolutory condition maybe the object of the period agreed upon, or return to the consignor the goods if
contract of sale. unsold
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Article 1467. A contract for the delivery at a certain price of an article which the 3. While name of the contract If the value of If the value of
vendor in the ordinary course of his business manufactures or procures for the maybe presumptive of the the thing is the thing is
general market, whether the same is on hand at the time or not, is a contract of intention, this can be rebutted MORE than the EQUAL or
sale, but if the goods are to be manufactured specially for the customer and
by subsequent acts of the value of the LESS than the
upon his special order, and not for the general market, it is a contract for a
piece of work. parties. money or its value of the
equivalent money by any
CONTRACT FOR THE DELIVERY OF AN ARTICLE amount
CONTRACT OF SALE CONTRACT FOR A PIECE OF
WORK
SALE BARTER
Consideration is price in money or its Consideration is another thing
Goods are manufactured or Goods manufactured for customer
equivalent
procured in the ordinary course of upon his special order.
Prescription period – 6 months Prescription period – 10 years
his business
May be included in the Statutes of Not included in the Statutes of
For the general market, whether the Specifically for customer
Fraud Fraud – enforceable
same is on hand or not
Prescription period – 6 months Prescription period – 10 years
May be included in the Statutes Not included in the Statutes of Article 1469. In order that the price may be considered certain,
of Fraud Fraud – enforceable 1. it shall be sufficient that it be so with reference to another thing certain;
or
 The fact that the object were made by the seller only when the 2. that the determination thereof be left to the judgment of a specified
customers placed their orders, does not alter the nature of the contract of person or persons; or,
sale, for it only accepted such orders as called for the employment of 3. [by reference to certain fact or facts – Art 1472]
such materials as it ordinarily manufactured or was in a position
Should such person or persons be unable or unwilling to fix it, the contract shall
habitually to manufacture such.
be inefficacious, unless the parties subsequently agree upon the price.
 When each product or system executed is always UNIQUE and could
not mass-produce the product because of its very nature, such is a If the third person or persons acted in bad faith or by mistake, the courts may fix
contract for a piece of work. the price.

Article 1468. If the consideration of the contract consists partly in money, and Where such third person or persons are prevented from fixing the price or terms
partly in another thing, the transaction shall be characterized by the manifest by fault of the seller or the buyer, the party not in fault may have such remedies
intention of the parties. If such intention does not clearly appear, it shall be against the party in fault as are allowed the seller or the buyer, as the case may
considered a barter if the value of the thing given as a part of the consideration be.
exceeds the amount of the money or its equivalent; otherwise it is a sale.
 The certainty of the price is an essential element of the contract of sale.
BARTER – is a contract where one of that parties binds himself to give one thing in  Where the figures are mere estimates, the transaction lacks the
consideration of the other’s promise to give another thing. requisites essential for the perfection of the contract.
RULES TO FOLLOW PRICE – signifies the sum stipulated as the equivalent of the thing sold
FIRST RULE Second Rule and also every incident taken into consideration for the fixing of the price
1. determine the intention of the 1. if the intention of the parties put to the debit of the buyer and agreed to by him.
parties could not be determined,
2. when name of the contract is consider the value of thing given REQUISITES for a valid price [CeMoRe]
different from their manifest as part of the consideration. 1. Certain or ascertain at the time of perfection
intention, the latter shall Barter Sale
2. In Money or its equivalent
prevail.
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a. e.g. of equivalent = letters of credit
b. if price is partly in money… (1468)
c. if intention does not clearly appear… (1468)
3. Real when buyer has an intention to pay and the seller has an
expectation to receive the price.
Article 1470. Gross inadequacy of price does not affect a contract of sale, except
as it may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract.
GENERAL RULE: The inadequacy of the price is not sufficient to set aside a
sale unless it is grossly inadequate or purely shocking to the conscience. The
standard to use to determine if price is shocking to the conscience if one
suffers a lesion by more than ¼ of the value of thing sold.
EXCEPTIONS:
1. If consent is vitiated such as by fraud, mistake, violence, intimidation
or undue influence. VOIDABLE
Article 1338. There is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to
enter into a contract which, without them, he would not have agreed to.
Article 1331. In order that mistake may invalidate consent, it should refer
to the substance of the thing which is the object of the contract, or to
those conditions which have principally moved one or both parties to
enter into the contract.
Mistake as to the identity or qualifications of one of the parties will vitiate
consent only when such identity or qualifications have been the principal
cause of the contract.
A simple mistake of account shall give rise to its correction.
Article 1335. There is violence when in order to wrest consent, serious
or irresistible force is employed.
There is intimidation when one of the contracting parties is compelled by
a reasonable and well-grounded fear of an imminent and grave evil upon
his person or property, or upon the person or property of his spouse,
descendants or ascendants, to give his consent.
Article 1337. There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice. The following circumstances shall be
considered: the confidential, family, spiritual and other relations between
the parties, or the fact that the person alleged to have been unduly
influenced was suffering from mental weakness, or was ignorant or in
financial distress.
2. If the parties intended a donation to some other act or contract
provided it does not prejudice other persons and is not contrary to
law, morals, good customs, public order or public policy.
3. If the price is so low as to be shocking to the conscience, the sale
shall be set aside
a. Inadequacy would make the contract of sale rescissible where a
contract was entered into by the guardian of a ward or a
representative of an absentee, without the court’s approval, and
the owner suffers lesion by more than ¼ of the value of the thing
sold. [STANDARD USED TO DETERMINE IF PRICE IS
SHOCKING TO CONSCIENCE.]
 Time to determine the inadequacy – the price obtained at the time of
the execution of the contract, and not the price obtaining thereafter
 Inadequacy of price must be proved by sufficient evidence.
 DONOR’S LIBERALITY – may justify gross inadequacy of price
RESCISSIBLE CONTRACTS
Article 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are
the object thereof;
Article 1471. If the price is simulated, the sale is void, but the act may be shown
to have been in reality a donation, or some other act or contract.
Article 1345. Simulation of a contract may be absolute or relative. The former
takes place when the parties do not intend to be bound at all; the latter, when the
parties conceal their true agreement.
Article 1346. An absolutely simulated or fictitious contract is void. A relative
simulation, when it does not prejudice a third person and is not intended for any
purpose contrary to law, morals, good customs, public order or public policy binds
the parties to their real agreement.
Article 1409. The following contracts are inexistent and void from the beginning:
(2) Those which are absolutely simulated or fictitious;
Article 1353. The statement of a false cause in contracts shall render them void, if
it should not be proved that they were founded upon another cause which is true
and lawful. (1276)
SALE DONATION
Onerous Gratuitous
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Perfected by mere consent Must comply with the formalities
required by law
 Devoid of consideration – the sale is nonexistent and VOID.
 When price is appeared to be made when it is otherwise – the
contract is VOID.
 Very low price – sale is fictitious.
 ACTION TO INVALIDATE A VOID SALE DOES NOT PRESCRIBE.
 ACCION PAULIANA – contracts in fraud of creditors = CULPABLE
INSOLVENCY
Art. 1472. The price of securities, grain, liquids, and other things shall also be
considered certain,
 when the price fixed is that which the thing sold would have on a definite
day, or
 in a particular exchange or market, or
 when an amount is fixed above or below the price on such day, or
 in such exchange or market, provided said amount be certain. (1448)
the price is made in reference to another thing, or when the price fixed is the
price of the commodity on a definite day, or in a particular exchange or
market, or when the amount fixed is above or below the price on such day,
exchange or market.
Art. 1473.
 The fixing of the price can never be left to the discretion of one of the
contracting parties.
 However, if the price fixed by one of the parties is accepted by the other,
the sale is perfected. (1449a)
Art. 1474.
 Where the price cannot be determined in accordance with the preceding
articles, or
 in any other manner, the contract is inefficacious.
 However, if the thing or any part thereof has been delivered to and
appropriated by the buyer
 he must pay a reasonable price therefor.
 What is a reasonable price is a question of fact dependent on the
circumstances of each particular case. (n)
For example, the reasonableness of a price may be determined on the basis
of a company’s balance sheet showing the book value or fair market value of
its shares.
Art. 1475. [OFFER]
 The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
 From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
(1450a)
 Being a consensual contract, the COS is perfected when there is a
meeting of minds.
 REQUISITES:
1. Capacity
2. Offer and acceptance
3. No vitiation of consent
General rule:
Offer may be withdrawn at any time without even communicating such
withdrawal to the interested buyer.
Exception:
When the offer has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such
withdrawal.
Exception to the exception: [Art. 1479]
Cannot be withdrawn within a certain period if offer is founded upon a
consideration. [Option Contract (Art. 1324)]
Formalities for Perfection
Under the Statute of Frauds, the sale of:
(a) real property (regardless of the amount)
(b) personal property — if P500 or more must be in writing to be enforceable.
(Art. 1403, No. 2, Civil Code [Statute of Frauds]).
If orally made, it cannot be enforced by a judicial action, except if it
has been completely or partially executed, or except if the defense
of the Statute of Frauds is waived. (Art. 1405).
[NOTE: Also in writing should be sales which are to be performed only after
more than one year (from the time the agreement was entered into) —
regardless as to whether the property is real or personal, and regardless of the
price involved.]
Unenforceable Contracts
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given
no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party charged, or by his agent;
10
evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from
the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of
another;
(c) An agreement made in consideration of marriage, other than a mutual
promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price
not less than five hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them, of
such things in action or pay at the time some part of the purchase
money; but when a sale is made by auction and entry is made by the
auctioneer in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the purchasers and
person on whose account the sale is made, it is a sufficient
memorandum;
(e) An agreement of the leasing for a longer period than one year, or for the
sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article
1403, are ratified by the failure to object to the presentation of oral evidence
to prove the same, or by the acceptance of benefit under them.
Forms of Contracts
Art. 1357. If the law requires a document or other special form, as in the acts and
contracts enumerated in the following article, the contracting parties may compel
each other to observe that form, once the contract has been perfected. This right
may be exercised simultaneously with the action upon the contract. (1279a)
Art. 1358. The following must appear in a public document:
1. Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of
real property or of an interest therein a governed by Articles 1403, No. 2, and
1405;
2. The cession, repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains;
3. The power to administer property, or any other power which has for its object
an act appearing or which should appear in a public document, or should
prejudice a third person;
4. The cession of actions or rights proceeding from an act appearing in a public
document.
All other contracts where the amount involved exceeds five hundred pesos must
appear in writing, even a private one. But sales of goods, chattels or things in
action are governed by Articles, 1403, No. 2 and 1405.
Prescription of Actions
Art. 1144. The following actions must be brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the subject
of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner. Until
such announcement is made, any bidder may retract his bid; and the
auctioneer may withdraw the goods from the sale unless the auction has
been announced to be without reserve.
(3) A right to bid may be reserved expressly by on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction is subject to a right
to bid on behalf of the seller, it shall not be lawful for the seller to bid
himself or to employ or induce any person to bid at such sale on his behalf
or for the auctioneer, to employ or induce any person to bid at such sale on
behalf of the seller or knowingly to take any bid from the seller or any
person employed by him. Any sale contravening this rule may be treated as
fraudulent by the buyer.
May the seller bid? If so, under what conditions, if any? Yes, provided:
(a) such a right to bid was reserved;
(b) and notice was given that the sale by auction is subject to a right to bid on
behalf of the seller. (Art. 1476, pars. 3 and 4).
May the seller employ others to bid for him? Yes, provided he has notified the
public that the auction is subject to the right to bid on behalf of the seller. “by-
bidders” or “puffers.”
Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
Kinds of Delivery
1. Actual or Real (Art. 1497) – where physically the property changes hands.
2. Legal or Constructive (Arts. 1498-1501) – where physical transfer is implied:
a. Traditio simbolica –make use of a token symbol to represent the thing
delivered, e.g., key to house;
b. Legal formalities –the delivery is made through the execution of a public
document; except when:
i. there is no intention to deliver, when there is stipulation to contrary,
execution does not produce effect of delivery; and
11
ii. third party claiming rights over the property, when at the time of
execution of instrument, subject matter was not subject to control of
the seller.
c. Traditio longa manu – movable property is delivered by mere consent by
the contracting parties if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, e.g., pointing out of the
car;
d. Traditio brevi manu – the vendee already has the possession of the thing
sold by virtue of another title as when the lessor sells the thing leased to
the lessee;
e. Traditio constitotum possessorium – the vendor continues in possession
of the property sold not as owner but in some other capacity (e.g., as
tenant of the vendee).
3. Quasi-Traditio (Art. 1501) – delivery of rights, credits or incorporeal real
property, made by placing the titles of ownership in the hands of the vendee or
lawyer, by execution of a public instrument, or by allowing the vendee to use
his rights as new owner with the consent of the vendor.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass
to the purchaser until he has fully paid the price.
if delivered, the ownership may still be with the seller till full payment of the
price is made, if there is a stipulation to this effect. The stipulation is usually
known as pactum reservati dominii and is common in sales on the installment
plan. [Contract To Sell]
Art. 1479.
 A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
 An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promisor
 if the promise is supported by a consideration distinct from the price. (1451a)
Para 1 Para 2
Both parties make a promise. Only one party makes a promise,
and the other party does not return
the promise yet.
 Policitacion – void; no contract
 The acceptance of a unilateral promise to sell must be plain, clear, and
unconditional. Therefore, if there is a qualified acceptance with terms
different from the offer, there is no acceptance, that is, there is no promise
to buy and there is no perfected sale.
 If no period has been stipulated, the court will fix the term.
Art. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something
paid or promised. [Option Contract]
Art. 1480. Any injury to or benefit from the thing sold,
 after the contract has been perfected,
 from the moment of the perfection of the contract
 to the time of delivery,
shall be governed by Articles 1163 to 1166, and 1262.
This rule shall apply to the sale of fungible things,
 made independently and
 for a single price, or
 without consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according
to weight, number, or measure,
 the risk shall not be imputed to the vendee until they have been weighed, counted, or
measured, and delivered,
o unless the latter has incurred in delay.
Art. 1163. Every person obliged to give 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 requires another standard of care.
Art. 1164. The creditor has a right to the fruits of the thing from the time
the obligation to deliver it arises. However, he shall acquire no real right
over it until the same has been delivered to him.
Art. 1165. When what is to be delivered is a determinate thing, the creditor,
in addition to the right granted him by Article 1170, may compel the debtor
to make the delivery.
Art. 1166. The obligation to give a determinate thing includes that of
delivering all its accessions and accessories, even though they may not
have been mentioned.
Art. 1262. An obligation which consists in the delivery of a determinate
thing shall be extinguished if it should be lost or destroyed without the fault
of the debtor, and before he has incurred in delay. (This means that the
obligation of the seller to deliver is extinguished, but the obligation to pay is
not extinguished.)
Who Bears the Risk of Loss?
(a) If the object has been lost before perfection, the seller bears the loss.
Reason: There was no contract, for there was no cause or consideration.
Being the owner, the seller bears the loss. This means that he cannot demand
payment of the price.
12
(b) If the object was lost after delivery to the buyer, clearly the buyer  if the bulk of the goods delivered do not correspond with the description or the
sample, and
bears the loss.
 if the contract be by sample as well as by description, it is not sufficient that the bulk
(Res perit domino — the owner bears the loss.) of goods correspond with the sample if they do not also correspond with the
(c) If the object is lost after perfection but before delivery. description.
Here the buyer bears the loss, as exception to the rule of res perit domino. The buyer shall have a reasonable opportunity of comparing the bulk with the description
or the sample.
Art. 1480 (pars. 1 and 2) clearly, states that injuries between perfection
and delivery shall be governed by Art. 1262, among others. Sale by description –– where seller Sale by sample — that where the
EXTINGUISHMENT OF OBLIGATIONS sells things as being of a certain kind, seller warrants that the bulk (not the
Loss of the Thing Due the buyer merely relying on the major part or the majority of the
Art. 1262. (This means that the obligation of the seller to deliver is seller’s representations or goods but the goods themselves) of
extinguished, but the obligation to pay is not extinguished.) descriptions. Generally, the buyer the goods shall correspond with the
has not previously seen the goods, or sample in kind, quality, and
Art. 1269. The obligation having been extinguished by the loss of the even if he has seen them, he believes character. Only the sample is
thing, the creditor shall have all the rights of action which the debtor (sometimes erroneously) that the exhibited. The bulk is not present,
may have against third persons by reason of the loss. [Thus, the description tallies with the goods he and so there is no opportunity to
buyer, who is the creditor as to the object, has the right to proceed has seen. examine or inspect it.
against the wrongdoer for damages. He is given this right, instead of Sale by description and sample –– must satisfy the requirements in both,
the vendor, only because he is still being made liable for the price. It and not in only one.
would be absurd to grant him this right against wrongdoers unless
he has been prejudiced in some way. Clearly then, it is he (the vendee Art. 1482.
or buyer) who bears the loss.]  Whenever earnest money is given in a contract of sale,
(d) Since the buyer gets the benefits during the intervening period, it is clear  it shall be considered as part of the price and as proof of the perfection of
that he must also shoulder the loss. the contract. (1454a)
1. If the object sold consists of fungibles sold for a price fixed according
to weight, number, or measure. (Here, if there has been no delivery Earnest Money – paid in advance of the purchase price agreed upon by
yet, the seller bears the loss, unless the buyer is in mora accipiendi.) the parties in a contract of sale, given by the buyer to the seller, to bind the
(Last par., Art. 1480, Civil Code). latter to the bargain
2. If the seller is guilty of fraud, negligence, default, or violation of OPTION MONEY EARNEST MONEY
contractual term. (Arts. 1165, 1262, 1170, Civil Code). Separate and distinct consideration Part of the purchase price
3. When the object sold is generic because “genus does not perish” from the purchase price
(genus nunquam perit). (NOTE: The unfortunate effect of Art. 1504 Given when sale is not yet Given only when there is already a
on the question of the risk of loss is discussed under said article.) perfected sale
 Res Perit Domino – the thing perishes with the owner When given, the would-be buyer is When given, the buyer is bound to
 Fungibles – are personal property which may be replaced with equivalent not required to buy, but may even pay the balance
things. forfeit it depending on the terms of
the options
Grantee of option is still undecided Buyer manifests his earnest desire
If the object is lost after perfection but before delivery. Here whether or not to buy or sell the to buy the property
the buyer bears the loss, as exception to the rule of res perit property
domino.
Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable
statute, a contract of sale may be made
 in writing, or
Art. 1481. In the contract of goods by description or by sample, the contract may be
rescinded  by word of mouth, or
 partly in writing and partly by word of mouth, or
13
 may be inferred from the conduct of the parties.
(1) Statute of Frauds
For a complete discussion of the pertinent parts of the Statute of Frauds, see
comments under Art. 1475.
(2) If Sale Is Made Thru an Agent
The sale of a piece of land or interest therein when made thru an agent is void
(not merely unenforceable) unless the agent’s authority is in writing. (Art. 1874,
Civil Code). This is true even if the sale itself is in a public instrument, or even
registered. (NOTE: “Interest therein” refers to easement or usufruct,
for example.)
(3) Effect if Notary Public is Not Authorized
If the deed of sale of land is notarized by a notary public whose authority had
expired, the sale would still be valid, since for validity of the sale, a public
instrument is not even essential.
Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold,
a. if one has been constituted, should the vendee’s failure to pay cover two or more
installments.
i. In this case, he shall have no further action against the purchaser
to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
Requisites Before Art. 1484 May Be Applied
(a) there must be a contract
(b) the contract must be one of sale (absolute sale, not a pacto de retro
transaction, where redemption is effected in installments)
(c) what is sold is personal property (sale of real property in installments is
governed by RA 6552 –– the Maceda Law –– which took effect on the date of
its approval, Sept. 14, 1972).
(d) the sale must be on the installment plan (an installment — is any part or
portion of the buying price, including the down payment)
NOTE — If the sale is for cash or on straight terms (here after an initial payment,
the balance is paid in its totality at the time specified, say, two months or three
months later — this is also considered a cash sale), Art. 1484 does not apply.
Art. 1485. The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
Art. 1486. In the cases referred to in the two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar
as the same may not be unconscionable under the circumstances.
As a general rule, it is required that a case of rescission or cancellation of the
sale requires mutual restitution, that is, all partial payments of price or “rents”
must be returned.
However, by way of exception, it is valid to stipulate that there should be NO
returning of the price that has been partially paid or of the “rents” given,
provided the stipulation is not unconscionable.
Art. 1487. The expenses for the execution and registration of the sale shall be borne by
the vendor, unless there is a stipulation to the contrary.
Who Pays for Expenses in Execution and Registration
Observe that as a rule the seller pays for the expenses of:
(a) the execution (of the deed) of sale;
(b) its registration.
(NOTE: There can, however, be a contrary stipulation.)
Art. 1488. The expropriation of property for public use is governed by special laws.
Essential Requisites for Expropriation
(a) taking by competent authority
(b) observance of due process of law
(c) taking for public use
(d) payment of just compensation
The “just compensation” is the market value (the price which the property will
bring when it is offered for sale by one who desires but is not obliged to sell it,
and is bought by one who is under no necessity of having it) PLUS the
consequential damages, if any, MINUS the consequential benefits, if any.
Chapter 2
CAPACITY TO BUY OR SELL
Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter
into a contract of sale, saving the modifi cations contained in the following articles.
Where necessaries are sold and delivered to a minor or other person without capacity to
act, he must pay a reasonable price therefor. Necessaries are those referred
to in Article 290.
COMMENT:
(1) Incapacity to Buy May Be Absolute or Relative
(a) Absolute incapacity —when party cannot bind himself in any case.
(b) Relative incapacity —when certain persons, under certain circumstances,
cannot buy certain property.
14
(NOTE: Among people relatively incapacitated are
those mentioned in Arts. 1490 and 1491, Civil Code.) Art. 6. Rights may be waived, unless the waiver is contrary to law, public
order, public policy, morals, or good customs, or prejudicial to a third
(2) Purchase By Minors person with a right recognized by law.
When minors buy, the contract is generally voidable, but in the case of Art. 1270. Condonation or remission is essentially gratuitous, and requires
necessaries, “where necessaries are sold and delivered to a minor or other the acceptance by the obligor. It may be made expressly or impliedly.
person without capacity to act, he must pay a reasonable price therefor. One and the other kind shall be subject to the rules which govern
Necessaries are those referred to in Art. 290.” (Art. 1489, par. 2). inofficious donations. Express condonation shall, furthermore, comply with
the forms of donation.
Art. 290. Support is everything that is indispensable for sustenance,
dwelling, clothing and medical attendance, according to the social position of
the family. Support also includes the education of the person entitled to be
supported until he completes his education or training for some profession,
trade or vocation, even beyond the age of majority.

Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under Article 191.

(1) Reason Why Generally a Husband and Wife Cannot Sell to Each Other
To avoid prejudice to third persons; to prevent one spouse from unduly
influencing the other; to avoid by indirection the violation of the prohibition
against donations.

Art. 1491.

(1) Persons Relatively Incapacitated to Buy

This article refers to relative incapacity.
(2) Reason for the Law
Public policy prohibits the transactions in view of the fiduciary relationship
involved.

(3) Purchase Thru Another

(4) Purchase By Agent for Himself

(5) Purchase By Attorney

Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal
redemption, compromise and renunciations.

1) Cross-Reference
Refer to the following articles.
(a) legal redemption (Art. 1619, Civil Code);
(b) compromises (Art. 2028, Civil Code);
(c) renunciation (Arts. 6 and 1270, Civil Code)
15
Chapter 3 General Rule: the buyer merely acquires the seller’s rights
EFFECTS OF THE CONTRACT WHEN THE THING
SOLD HAS BEEN LOST Exemptions:
1. When the owner of the goods by his conduct precluded from denying the
Art. 1493. seller’s authority
2. Para 1-3 of Art 1505

CHAPTER 4
OBLIGATIONS OF THE VENDOR 1. Seller must be the owner at the time of delivery – NDQNH
SECTION 1. - General Provisions 2. Effects if the seller is not the owner at the time of delivery
a. Doctrine that forged document could be the basis of a valid title
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale.
The main purpose of the Torrens system is to avoid possible conflicts of
title to real estate and to facilitate transactions relative thereto by giving
Obligations of Vendor the public the right to rely upon the face of a Torrens certificate of title and
to dispense with the need of inquiring further, except when the party
(a) to transfer ownership (cannot be waived)
concerned has actual knowledge of facts and circumstances that should
(b) to deliver (cannot be waived)
impel a reasonably cautious man to make such further inquiry.
(c) to warrant the object sold (this can be waived or modified since warranty is
Where innocent third persons, relying on the correctness of the certificate
not an essential element of the contract of sale)
of title thus issued, acquire, rights over the property, the court cannot
(d) to preserve the thing from perfection to delivery, otherwise he can be held
disregard such rights and order the total cancellation of the certificate. The
liable for damages
effect of such an outright cancellation would be to impair public confidence
Art. 1505. Art. 559. The possession of movable
in the certificate of title, for everyone dealing with property registered
Subject to the provisions of this Title, property acquired in good faith is under the Torrens system would have to inquire in every instance as to
where goods are sold by a person who is equivalent to a title. Nevertheless, one whether the title has been regularly or irregularly issued by the court.
not the owner thereof, and who does not who has lost any movable or has been Every person dealing with registered land may safely rely on the
sell them under authority or with the unlawfully deprived thereof may recover
consent of the owner, the buyer acquires it from the person in possession of the
correctness of the certificate of title issued therefor and the law will in no
no better title to the goods than the seller same. way oblige him to go beyond the certificate to determine the condition of
had, unless the owner of the goods is by If the possessor of a movable lost or property.
his conduct precluded from denying the which the owner has been unlawfully It has been consistently ruled that a forged deed can legally be the root of
seller's authority to sell. deprived, has acquired it in good faith at
Nothing in this Title, however, shall a public sale, the owner cannot obtain its a valid title when an innocent purchaser for value intervenes. A deed of
affect: return without reimbursing the price paid sale executed by an impostor without the authority of the owner of the land
(1) The provisions of any factors' act, therefor. sold is a nullity, and registration will not validate what otherwise is an
recording laws, or any other invalid document. However, where the certificate of title was already
provision of law enabling the
apparent owner of goods to dispose transferred from the name of the true owner to the forger and, while it
of them as if he were the true owner remained that way, the land was subsequently sold to an innocent
thereof; purchaser, the vendee had the right to rely upon what appeared in the
(2) The validity of any contract of sale certificate and, in the absence of anything to excite suspicion, was under
under statutory power of sale or
under the order of a court of no obligation to look beyond the certificate and investigate the title of the
competent jurisdiction; vendor appearing on the face of said certificate.
(3) Purchases made in a merchant's The Torrens Act, in order to prevent a forged transfer from being
store, or in fairs, or markets, in registered, erects a safeguard by requiring that no transfer shall be
accordance with the Code of
Commerce and special laws. (n) registered unless the owner's certificate of title is produced along with the
instrument of transfer.
he rule of law and justice that should apply in this case is that as between
two innocent persons, one of whom must suffer the consequences of a
16
breach of trust, the one who made it possible by his act of confidence 4. Sale in merchant stores fairs or markets
must bear the loss.
TEST TO DETERMINE WHICH IS APPLICABLE
b. Doctrine that person dealing with registered land can rely on the title 1505 559
i. Mirror doctrine
Ground Breach of trust Unlawful deprivation (stolen) or
The Mirror Doctrine Lost of property (forgetting or
leaving a thing behind is not
The general rule is that a purchaser may be considered a purchaser in good lost)
faith when he has examined the latest certificate of title. Who has Buyer in good faith and for Original or true owner
An exception to this rule is when there exist important facts that would create better right value
suspicion in an otherwise reasonable man to go beyond the present title and General rule in cases where a sale is made indicates that the one who has
to investigate those that preceded it. not by owner and was made lost any movable or has been
without authority, the buyer lawfully deprived thereof, may
Thus, it has been said that a person who deliberately ignores a significant acquires no better right than recover it from the person in
fact which would create suspicion in an otherwise reasonable man is not an that of the seller possession of the same,
innocent purchaser for value. A purchaser cannot close his eyes to facts without reimbursement
which should put a reasonable man upon his guard, and then claim that he Exemptions SOLM buyer acquired the property
1. sale is sanctioned by 1. in good for value at a
acted in good faith under the belief that there was no defect in the title of the
statutory or judicial public sale (thus, the
vendor as has been held in other cases, if the buyer fails to take the ordinary authority possessor shall be entitled
precautions which a prudent man would have taken under the 2. owner is estopped to reimbursement) or .
circumstances, specially in buying a piece of land in the actual, visible and 3. law enables the owner to 2. at a merchant’s store
public possession of another person, other than the vendor, constitutes gross dispose of the goods as if
negligence amounting to bad faith. he were the true owner,
Factor’s Acts, Recording
In this connection, it has been held that where, the land sold is in the Laws
possession of a person other than the vendor, the purchaser is required to go 4. sale is sold at merchant’s
store, fairs or markets
beyond the certificate of title to make inquiries concerning the rights of the
actual possessor. Failure to do so would make him purchaser in bad faith.
Examples Who has Ruling and remedy
One who purchases real property which is in the actual possession of the better
another should, at least make some inquiry concerning the right of those in right?
possession. The actual possession by a person other than the vendor K – owner of necklace K No unlawful deprivation, but A
should, at least put the purchaser upon inquiry. He can scarcely, in the D – K’s bf who sold acquires right by virtue of Art. 559
absence of such inquiry, be regarded as a bona fide purchaser as against her necklace to A possession in good faith and for
such possessors. (Lucena vs. CA, G.R. No. 77468, August 25, 1999). A – acquired necklace value is equivalent to title.
in GF and FV
Being a corporation engaged in the business of buying and selling real K – owner of stolen A There was unlawful deprivation. Art.
estate, it was gross negligence on its part to merely rely on the seller’s necklace 559 applies. As such he may
assurance that the occupants of the property were mere squatters A – acquired necklace recover provided that he reimburses
considering that it had the means and the opportunity to investigate for itself from a public auction A
the accuracy of such information. (Amancio, et al. vs. CA, et al., G.R. No. Sun burst – seller of a C No unlawful deprivation. Art 1505
152627, September 16, 2005). refrigerator system applies, but including among the
A – buyer of the exemption that buyer acquires to
ii. Banking institutions system who resold it better rights than the seller.
3. Order of the Court to a merchant store
17
B – the merchant store Acquiring a thing from merchant’s
C – bought the system store.
from B.
A – owner of H&L C Art. 1505 applies. Mirror doctrine or
B – secretary of A who Innocent purchaser in good GF and
holds the TCT of the FV (an operative act by virtue of PD
H&L; undertook a 1529 – Property Registration Act)
deed of sale
C – buyer in GF and
FV
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Art. 1526
Possessory Lien
The possessory lien is lost after the seller loses possession but his lien (no longer
possessory) as an unpaid seller remains; hence, he is still a preferred creditor
with respect to the price of the specific goods sold. His preference can only be
defeated by the government’s claim to the specific tax on the goods themselves.
Although the seller’s possessory lien is in the nature of a legal pledge, and
although the rule in legal pledges is that in case of a public auction of the thing
pledged, there can be no recovery of the deficiency, notwithstanding a contrary
stipulation, still under Art. 1533, should he properly makes a resale of the
property, he may still recover the deficiency, for the law says “he may recover
from the buyer damages for any loss occasioned by the breach of the contract of
sale.”
Art. 1532
(2) To whom Notice is Given
Notice is given either:
(a) to the person in actual possession of the goods;
(b) or to his principal.
(3) Effects of the Exercise of the Right
After the exercise of the right of stoppage in transitu, the consequential effects
are:
1. the goods are no longer in transitu;
2. the contract of carriage ends; instead, the carrier now becomes a mere
bailee, and will be liable as such;
3. the carrier should not deliver anymore to the buyer or the latter’s agent;
otherwise, he will clearly be liable for damages;
4. the carrier must redeliver to, or according to the directions of, the seller.
(Art. 1532, 2nd paragraph, 1st sentence).
Art. 1533
(1) Right of Resale
This article deals when the right of RESALE exists:
(a) perishable goods
(b) express stipulation
(c) unreasonable default
(2) Right, Not Duty, to Resell
The article confers on the seller a right to resell (to enforce his lien after title
has passed) but does not impose upon him the duty to resell.
[NOTE: The article does not apply where title to goods has not passed.
(3) Meaning of Perishable
Goods are perishable if they are of a nature that they deteriorate rapidly.
(4) Defi ciency or Excess in the Price
Note that the defi ciency in the price may be obtained as damages. This happens
when the resale price is lower than the original selling price.
Indeed, the resale is similar to a foreclosure of a lien held to secure the payment
of the purchase price. On the other hand, any excess in the price goes to the
seller.
Art. 1534
(1) Right to Rescind the Transfer of Title
(a) This Article refers to the right to rescind the transfer of title and to resume the
ownership in the goods.
(b) This applies in case there has been:
1) express stipulation or reservation;
2) unreasonable default.
(c) Note that damages may be recovered for the breach of contract.
(d) What should be done in order to rescind the transfer of title?
ANS.: There must be notice to the buyer or there must be an overt act showing
an intention to rescind.
(2) Effect of Replevin Suit
When the seller brings a replevin suit (recovery of personal property), there is
an implied rescission of the sale of the goods sought to be recovered.
If ownership is claimed over the property, and it is subsequently offered to a
third person, these facts can be presented to indicate an intention to rescind.
Art. 1535
Effect if Buyer Has Already Sold the Goods
(a) Generally, the unpaid seller’s right of LIEN or STOPPAGE IN TRANSITU
remains even if the buyer has sold or otherwise disposed of the goods.
(b) Exceptions:
1) When the seller has given his consent thereto.
2) When the purchaser or the buyer is a purchaser for value in good faith of a
negotiable document of title.
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Art. 1511 iii. If there is exclusivity [only, exclusive, solely,
particularly] as to stipulation
Art. 1512
3.
Art. 1513

Art. 1514

Art. 1515

Art. 1516

Art. 1518

Art. 1519

Art. 1520

Art. 1521

https://cdizonblog.wordpress.com/2017/04/25/article-1378/

How to determine jurisdiction

1. Subject matter
a. Personal property
b. Real property

Kind of Property Within Metro Manila Outside Metro Manila

Personal Property Above RTC Above RTC
P400,000 P300,000
Below MTC Below MTC
P400,000 P300,000
Real Property Above RTC Above
P50,000 P20,000
Below MTC Below
P50,000 P20,000

How to determine the venue

2. Subject matter
a. Personal action – other than real action
b. Real action – title, possession of teal property, interest
i. Residence of the plaintiff
ii. Residence of the defendant at the option of the plaintiff