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CONTRACT OF SALE – is a contract whereby one of the party undertakes to deliver/transfer ownership of a
determinant thing and the other, to pay a price certain in money or its equivalent.
Essential Elements
1. Consent
2. Object – must be determinate, useful, legal and possible
3. Cause/ Consideration – refers to price certain in money or its equivalent
“A contract may be absolute (not subject to any condition) or conditional (subject to condition.)”
Contract to Sell – if the sale is subject to a condition such as the full payment of price
Contract of Agency – a person binds himself to render some service or to do something in representation or on
behalf of another with the consent or authority of the latter
Contract for a piece of work – the contractor binds himself to execute a piece of work for the employer. The
contractor may either employ his labor or skill or also furnish the material.
Contract of Barter/ Exchange – one of the parties binds himself to give one thing in consideration of the other’s
promise to give another thing.
The fixing of the price cannot be left to the discretion of one of the contracting parties.
OPTION MONEY – reservation fee, what you paid is the time or the option to buy, not compelled to
buy
EARNEST MONEY – down payment, part of the purchase price
Necessaries—those things which are needed for sustenance, dwelling, clothing and medical attendance,
in keeping with the financial capacity of the family of the incapacitated person.
** Minors in contract for necessaries must pay reasonable price.
** Either spouse may not assail illegality because they are parties thereto.
** A spouse designated as agent of the other spouse may sell the latter’s exclusive property.
Chapter 4
Section 1 – General Provision
1. To transfer ownership of a determinate thing 4. To take care of the thing with proper diligence
3. By delivery in any other manner signifying an agreement that the possession is transferred to the vendee
Delivery is an indispensable requisite to transfer ownership and must be made with intention of delivering the
thing sold.
The delivery must be made to the vendee or his authorized representative.
Tradition – is a derivative mode of acquiring ownership by virtue which one who has the right and intention to
alienate a corporeal thing, transmits it by virtue of a just title to one who accepts them.
Importance: To enable the vendee to enjoy and make use of the property purchased.
Actual Delivery
1. There is an actual delivery when the thing sold Is placed in the control and possession of the vendee
2. Actual or manual delivery of an article sold is not always essential to passing of title thereto.
Symbolic Tradition – to effect delivery, the parties make use of a token symbol to represent the thing delivered.
Public Instrument – It is one which is acknowledged before a notary public or any authorized to administer oath,
by the person who executed the same.
Rule: The execution of such applies to, movable as well as immovable property.
Exception: If it appears from the document or it can be inferred therefrom that it was not the intention of the parties to
make delivery, no tradition can be deemed to have taken place.
Traditio Longa Manu – takes place by mere consent or agreement of the contracting parties as when the vendor
merely points to the thing sold which shall be at the control and disposal of the vendee.
Traditio Brevi Manu – happens when the vendee has already the possession of the thing sold by virtue of
another title as when the lessor sells the thing leases to the lessee.
Traditio constitutum possessorium – takes place when the vendor continues in possession of the property sold
not as owner but in some other capacity.
Quasi-traditio – when delivery is in case of incorporeal things.
1. By execution of public instrument
2. If no delivery, by placing of the titles of ownership in the possession of the vendee
3. Allowing the vendee to use his rights as new owner w/ consent of vendor.
Exception
2. In the cases provided in the 2nd and 3rd paragraph of article 1523
3. In cases provided in the 2nd, 3rd and last paragraph of article 1503.
2. Where ownership would have passes but for the form of the bill of lading
Where goods are shipped and bill of lading is deliverable, but possession of the bill of lading is retained by
seller/agent, the possession of goods remains on the seller.
The effect of such is controlling, as it does the possession of the goods and the later cannot obtain the goods
without the bill.
1. Delivery conditional
Risk of loss
Res perit domino – if the thing is lost by fortuitous event, the risk id borne by the owner opf the thing at the time of the
loss.
Exception:
1. Where seller reserves the ownership of the goods to secure the performance of the buyer of his obligations, buyer
assumes the risk of loss.
2. Where actual delivery has been delayed through the fault of either, risk is at the party at fault.
1. Where the owner of goods is, by his conduct, precluded from denying the seller’s authority to sell
2. Where the law enables the apparent owner to dispose of the goods as if he were the true owner
5. Where the seller has a voidable title which has not been avoided at the time of the sale
In sale by one having voidable title, buyer can acquire such if:
Document of title – Includes any bill of lading, dock warrant, “quedan”, or warehouse receipt or any other document
used in the ordinary course of business as proof of the possession or control of the goods.
1. Refers to goods and not to money. They are receipts of bailee, or orders upon bailee
2. Evidence of transfer of title and possession of goods and contract between the parties
Classes
1. By the owner
2. By the person whom the possession or custody is entrusted by the owner
1. Title of the person negotiating the document over the goods covered
2. Title of the person to whose order were to be delivered over such goods
3. Direct obligation of the bailee to hold possession of the goods
A person warrants
1. The indorser will pay the instrument if the party primarily liable fails to do so.
2. The indorsement of a document of title amounts merely to a conveyance by the indorser, not a contract of
guaranty.
Place of delivery
1) Where there is agreement, express or implied, the place of delivery is that agreed upon
2) If no agreement, determined by usage of trade
3) If no agreement and prevalent usage, the seller’s place of business
4) In any other case, the seller’s residence
5) In case of specific goods, which knowledge of both is to some other place, that is the place.
Time of delivery
1) No time fixed, seller is bound to send the goods to buyer within a reasonable time
2) Provides time, time is essence and correct performance was offered
3) If contract does not specify and delivery is made within reasonable time, time is not of the essence.
Hour of delivery
Delivery of seller
1) When he delivers quantity of goods less than contracted, the buyer may reject. But when he accepts with
knowledge of seller not going to perform in full, he must pay for them at the contracted rate.
2) When he delivers quantity of goods larger than contracted, the buyer may accept the goods and rejects the rest.
If he accepts the whole, he must pay for them at the contracted rate.
3) When he delivers goods mixed with goods of a different description, the buyer may accept and reject the rest.
4) If the subject matter is indivisible, the buyer may reject the whole
1) To enter on behalf of buyer into such contract reasonable under the circumstances
2) To hive notice to buyer regarding necessity to insure goods.
Definition of Terms
1) COD (Collect on Delivery) – carrier acts for the seller in collecting the purchase price
2) FOB (Free on Board) – Goods to be delivered free of expense
3) CIF (Cost Insurance and Freight) – Price fixed not only cost of goods but also freight and insurance
4) FAS (Free Alongside Vessel) – Seller pays all the charges and bears risk until goods are placed alongside overseas
vessel and w/in reach of its loading tackle.
5) Ex-Factory, Ex-warehouse – price quoted applies only at the point of origin
6) Ex Dock – seller quotes price including cost of goods on the dock.
Unpaid seller – one who has not been paid or tendered the whole price or who has received a bill of exchange or other
negotiable instrument as conditional payment and the condition on which it was received has been broken by reason of
the dishonor of the instrument.
1) After delivery to a carrier or other bailee and before the buyer takes delivery of them
2) If the goods are rejected by the buyer, and carrier continues in possession
1) Goods not covered by negotiable document of title – goods are subject to legal lien
2) Goods covered by negotiable document of title – lien cannot prevail
1) After obligation has contracted, he becomes insolvent, unless he gives guaranty or security for debt
2) He does not furnish to the creditor the guaranties or securities which he has promised
3) He has impaired such guaranties and securities after establishment, and through fortuitous event they
disappear, unless he immediately gives new ones equally satisfactory.
4) When vendee violates any undertaking in consideration of the agreement
5) Vendee attempts to abscond
1) If the thing is lost w/out fault of debtor, the obligations shall be extinguished.
2) If thing lost through vendors fault, he shall pay damages
3) When thing deteriorates w/out fault of debtor, impairment is borne by creditor.
4) When thing deteriorates in fault of debtor, the creditor may choose between rescission of obligation and its
fulfillment, with indemnity for damages
5) If thing is improved by its nature or by time, it shall inure to the benefit of the creditor
6) If thing is improved at the expense of debtor, he has no right
1) If property is movable, ownership shall be acquired by who first take possession in good faith
2) If property is immovable:
a) Vendee who first register the sale to the Registry of Property
b) In absence of registration, vendee who first takes possession in good faith
c) In absence of both, one who presents the oldest title in good faith.
Section 3 – Conditions and Warranty
Article 1545.
What are the options of a party to a contract of sale subject to a condition, when such condition was not fulfilled
by the other party?
What if the condition agreed upon is in the nature of a promise that it should happen?
--It is a collateral undertaking in a sale of either real or personal property, express 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.
Express Warranty—any 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 seller’s opinion is not warranty, unless the seller
made such affirmation or statement as an expert and it was relied upon by the buyer.
Implied Warranty—It is inherent in a contract of sale and presumed to exist although nothing has been mentioned
about it.
1. Implied warranty as to the right of the seller to sell at the time when ownership has to pass. (Warranty against
eviction)
2. Implied warranty against hidden defects or faults or charge or encumbrances unknown to the buyer
1. Sale made by a sheriff, auctioneer, mortgagee, pledge or other person professing to sell by virtue of authority in
fact or law (1547) (The judgment debtor is responsible here for eviction)
2. Sale under “as is and where is”—this carries no warranty as to the quality or workable condition of the
goods and the buyer takes them as they are. However, such condition does not include those that could not be
discovered by a physical examination of the goods sold.
3. Sale 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.
4. Sale of property sold at public auction for tax delinquency. There is no warranty on the part of the State as to the
title of the owner.
WARRANTY AGAINST EVICTION—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.
Eviction—A judicial process by virtue of which the vendee is deprived of the ownership of the whole or part of the
thing he purchased by final judgment or by an act imputable to the vendor.
Elements (DVJ-SW)
4. The vendor was summoned in the suit for eviction at the instance of the vendee (1558)
Failure of the vendee to appeal does not relieve vendor from responsibility [1549]
1. Prescription consummated before sale—Vendee can claim warranty against eviction (deprivation is based
on right prior to sale)
If Property is sold for non-payment of taxes due and not made known to the vendee before the sale,
vendor is liable for eviction (1551)
Judgment debtor is responsible for eviction in judicial sales unless otherwise decreed in judgment (1552)
Any stipulation exempting vendor from responsibility for eviction is void if he acted in bad faith (1553)
1. Consciente—the waiver is voluntarily made by the vendee w/o the knowledge and assumption of the risks of eviction.
(Vendor shall only be liable to pay the value w/c the thing sold had at the time of the eviction)
2. Intencionada—the waiver is made by the vendee w/ knowledge of the risk of eviction and assumption of its
consequences. (Vendor here shall not be liable)
1. Value which the thing sold had at the time of eviction, be it greater or less than the price of the sale.
2. Income or fruits, if vendee was ordered to deliver them to the party who won the suit against him
3. Costs of the suit which caused the eviction, and those suit brought against the vendor for warranty
5. Damages and interests and ornamental expenses, if the sale was made in bad faith.
* Rescission 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. Since the vendee can no longer restore the subject-matter
of the sale to the vendor, rescission cannot be carried out.
2. Demand 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.
Same rules apply to a case where two or more things are jointly sold for a lump sum or for separate price for
each, when the vendee would not have bought one w/o the other.
Requisites:
1. Immovable sold is encumbered with non-apparent burden or servitude not mentioned in the agreement
2. 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.
Warranty is not applicable if non-apparent servitude is recorded in the Registry of Property, unless there
is an express warranty that the thing is free from all burdens and encumbrances.
Prescription of actions for rescission of damages: W/in 1 year from the execution of contract
If what was chosen was rescission but was not filed w/in 1 year, vendee may still sue for damages w/in one year
from the discovery of burden or servitude.
Requisites: (HIPANN)
a) defect renders the thing sold unfit for the use for w/c it is intended;
b) diminishes its fitness for the use intended, to such an extent that the vendee would not have
acquired if he had been aware thereof or would have given a lower price for it.
4. Action for rescission or reduction of price must be filed w/in the prescriptive period.
REDHIBITORY DEFECTS—an imperfection or defect of such nature as to engender a certain degree of importance
REDHIBITION--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 task for which it was purchased.
Applicability: Goods—all chattel personal but not things in action or money of legal tender, this includes growing
fruits or crops
* Merchantability—quality and condition of goods that a reasonable man would after a full examination 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. (1563)
A warranty as to quality or fitness for a particular purpose may be attached to a contract by usage or trade in
place of execution. (1564)
Merchantability of goods in sale by sample is implied. Defect should not be apparent on reasonable
examination of the sample for the vendor to be liable (1565)
Vendor is liable eventhough not aware of hidden defects, unless there is a contrary stipulation and he is in
good faith (1566)
Caveat Venditor—“Let the Seller Beware” Vendor is liable eventhough not aware of hidden defects
Caveat Emptor—“Let the Buyer Beware” Requires the purchaser to be aware of the supposed title of the
vendor and one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure.
Does not bear the loss Must return the price with interest
Must return the price Must refund expenses of the contract
Must refund expenses of the contract Not obliged to pay damages
Pay damages
Loss of Thing Sold w/ Hidden defects through fortuitous event or vendee’s fault (1569)
* Vendee may demand price paid less value of the thing at the time of loss plus damages if vendor acted in bad
faith.
Warranties against hidden defects, merchantability and fitness are applicable to judicial sales but judgment
debtor is not liable for damages, because the latter is only forced to sell and therefore did not take part in the
conduct of the sale and determination of price which precludes possibility of bad faith (1570)
Prescription of Actions: 6 Months from delivery of thing (1571)
Where one suffers redhibitory defect this shall not affect others
Exception: If the buyer would not have purchased the sound animals w/o the defective ones. In such case, sale may
be rescinded.
Presumption of Exception: If a team, yoke or pair or set is bought even if a separate price has been fixed for each
The following rules shall be applicable to joint sale of two or more things (1573)
* There is no warranty against hidden defects of animals sold at fairs or at public auctions or of livestock sold as
condemned.(1574) Rationale: Animals are not bought because of their quality or capacity for work; and in such
circumstance defects are clearly known to buyer.
2. If use or service for which they are acquired has been stated in the contract and they are found to be unfit
such nature that even expert knowledge is not sufficient to discover it.(1576)
1. To accept delivery
2. To pay the price of the thing sold
3. To bear the expenses for the execution and registration of the sale and putting the goods in a deliverable state
2 modes of acceptance
1. Expressed – when the buyer expressly intimates to the seller that he has accepted the goods
2. Implied – either
` a. when the buyer does any act inconsistent with the sellers ownership such as when the buyer
uses the goods
b.when the buyer after a lapse of time retains the goods without intimating his rejection.
RIGHT OF INSPECTION:
G/R: “ the buyer is entitled to a fair opportunity to inspect or examine the articles tenderes to determine
whether it conforms with to the contract.
G/R: “ the buyer is not bound to receive delivery of the goods in installments except if stipulated or agreed by the
parties.”
G/R: “ The seller is not discharge from liability in damages or other legal remedy for breach of any promise or warranty
except:
Within a reasonable time, the buyer did not give notice to the seller of the breach
EX: when you bought mobile phones , you cannot return it after the allowed time to return it
Justifiable acceptance
- Where the goods are not of the kinds and quality agreed upon
a. Immovable
1. If he has good reasons to fear the loss of the property and its price
b. Movable
1. If the buyer without lawful cause, refuses to accept the delivery and pay the price
WHEN VENDEE MAY STILL PAY EVEN THOUGH SALE IS RESCINDED BY SELLER
If the seller has stipulated that he shall rescind the sale ,upon failure of price but he haven’t given his demand
for rescission
CHAPTER 6
ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS
In cases where the buyer or seller commits breach of the contract, the injured party is given remedies or
actions
This provision does not apply to sale of immovable property. It is governed by the Maceda Law
Measure of damages : difference between the contract price and the market price
3. Rescission of Contract
When the buyer has repudiated the contract of sale
When the buyer
1. Specific performance
When the seller should ovulate his obligation to make delivery
2. Rescission or damages for breach of warranty
a. Remedies of buyer for breach of warranty by seller
1. Accept the goods and set up the seller’s breach to reduce or extinguish the price
2. Accept the goods and maintain an action for damages
3. Refuse to accept the goods and maintain an action for the damages
4. Rescind the contract of sale recover the price
b. When rescission not allowed
1. Buyer accepted the goods knowing of the breach of warranty without protest
2. If he fails to notify the seller within a reasonable time of his election to rescind
3. If he fails to return or offer to return the goods in substantially as good condition as they were at the
time of transfer of ownership to him.
c. Rights and oblogations of buyer in case of rescission
1. To return the goods
2. To recover the price
3. Right to hold the goods as bailee if the seller refuses the return of the goods
4. Right to lien on the goods for any portion of the price already paid
CHAPTER 7
EXTINGUSHMENT OF SALE
1. COMMON – those causes which are also the means of extinguishing all other obligations
2. SPECIAL – causes which are recognized by law on sales
3. EXTRA SPECIAL – conventional and legal redemption
(1) When the price of a sale with right to repurchase is unusually inadequate
(2) When the vendor remains in possession as lessee or otherwise
(3) When another instrument is executed extending the period of redemption with
(4) When the purchaser retains for himself a part of the purchase price
(5) When the vendor binds himself to pay the taxes on the thing sold
(6) In any other case where it may be fairly inferred that the real intention of the partoes is that the
transaction shall secure the payment of a debt or the performance of any other obligation
RIGHT OF VENDEE
G/R “the vendee may transfer or alienate his right to a third person, mortgage the property, enjoy the fruits thereof,
recover the property against every possessor and perform all other acts of ownership.
DEFINITION: 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
Conventional redemption, bases on stipulation of the parties, while legal redemption, based on law
(1) There must be a co- ownership (4) Sale must be before partition
(2) There must be alienation of all or of any of the (5) The right must be exercised within the period
shares of the other co-owners provided
(3) Sale must be to a third person (6) The vendee must be reimburses for the price of the
sale
(1) Both the land must be rural (5) The vendee must already must own some rural land
(2) Lands are adjacent (6) The rural land sold must not be separated by brooks,
drains, ravines roads and other apparent servitudes
(3) There must be land must be an alienation
LEGAL REDEMPTION AND PRE EMPTION OF ADJACENT OWNERS (URBAN LANDS) (art. 1622)
Land is urban
The one exercising the right must be an adjacent owner
The piece of land sold must be so small and so situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time
Such urban land was bought by its owner merely for speculation
About to resold, or that its resale has been perfected
The law prefers whose intended use of the lands appears best justified.