San Beda College of Law

SALES & LEASE

Course Outline
Atty. Maria Zarah R. Villanueva-Castro

I. CONTRACT OF SALE, CONCEPTS (NCC 1458)

A. Characteristics (consensual, bilateral, onerous, commutative, nominate,

principal)

B. Essential requisites/Perfection

C. Sale as distinguished from other contracts

1. Barter (NCC, 1638 & 1468)
2. Donation
3. Contract for piece of work (NCC, 1467)
4. Agency to Sell (NCC 1466)
5. Lease

D. Kinds of sale
1. Absolute
2. Conditional
3. Contract to sell as distinguished from contract of sale (NCC 1466)

CASES: Pulumbarit, Sr. vs. Court of Appeals,772 SCRA 244, G.R. Nos. 153745-46 October 14,
2015; Akang vs. Municipality of Isulan, Sultan Kudarat Province, 699 SCRA 745, G.R. No. 186014
June 26, 2013; Quiroga vs. Parsons, 38 Phil 501; CIR vs. Arnoldus Carpentry, 159 SCRA 199; Heirs
of Fausto C. Ignacio vs. Home Bankers Savings and Trust Company, 689 SCRA 173, G.R. No.
177783 January 23, 2013; Far East Bank and Trust Company vs. Philippine Deposit Insurance
Corporation, G.R. No. 172983, July 22, 2015)

II. OBJECT OF SALE (NCC 1306)

A. Subject matter must be licit (NCC 1459)

B. Subject matter must be determinate (NCC 1460)

C. Sale of things having potential existence (NCC 1461)

D. Sale of hope or expectancy (NCC 1461)

1. emptio rei speratae
2. emptio spei

E. Sale of existing and future goods (NCC 1462)

F. Sale of undivided interest

G. Sale of fungible goods (NCC 1464)

H. Sale of things subject to resolutory condition (NCC 1465)

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(CASE: Department of Agrarian Reform, Quezon City vs. Carriedo, 781 SCRA 301, G.R. No.
176549 January 20, 2016)

III. PRICE

A. Certainty of price (NCC 1469)

B. Who may determine price (NCC 1469, 1473-74)

C. Effect of gross inadequacy of price (NCC 1470)

D. Effect where price is simulated (NCC 147; CASE: Payongayong vs. CA, 430 SCRA
210)

E. Certainty of price of securities, grains, liquids, etc. (NCC 1472)

F. Effect of failure to determine price (NCC 1474)

G. Meeting of minds as to price

(CASES: Mapalo vs. Mapalo, 17 SCRA 114; Swedish Match vs. Court of Appeals, 20 October 2004)

IV. FORMATION/PERFECTION OF CONTRACT OF SALE (NCC 1475)

A. Option contract (NCC 1479

- distinguished from contract of sale
- Right of first refusal vs. option to purchase

B. Mutual promise to buy and sell (NCC, 1479)

C. Status of advertisements (NCC 1325 & 1326)

D. Acceptance by letter or telegram (NCC 1319)

E. Perfection of sale by auction (NCC 1476)

F. Earnest money (NCC 1482); distinguished from option money

G. Form of Sales (NCC 1483, 1874, 1581, 1403[2,a,d,e])

(CASES: Limson vs. CA, 357 SCRA 209; San Miguel Properties vs. Huang, 336 SCRA 2000; Atkins,
Kroll & Co. vs. Cua Hian Tek, 102 Phil 948; Sanchez vs. Rigos, 45 SCRA 368; Ang Yu Asuncion vs.
CA, December 2, 1994; Bible Baptist Church vs. CA, 26 November 2004; Osmeña III vs. Power
Sector Assets and Liabilities Management Corporation, 771 SCRA 559, G.R. No. 212686
September 28, 2015)

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V. PARTIES TO A CONTRACT OF SALE (NCC 1327, 1489)

A. Sale involving a minor (NCC 1489)

B. Sale between spouses (NCC 1490);

C. Special incapacity
1. Guardians, agents, and administrators
2. Judges
3. Lawyers
4. Public officers and employees (NCC 1491-92)

(CASES: Fullido vs. Grilli, 785 SCRA 278, G.R. No. 215014 February 29, 2016; Melecio Domingo v.
Spouses Genaro Molina and Elena Molina, substituted by Ester Molina, G.R. No. 200274, April
20, 2016)

VI. OBLIGATIONS OF THE SELLER

A. Preservation of the object of sale (NCC 1163)

B. Transfer of ownership and delivery of the object

1. Concept of delivery or tradition

a. Ways of effecting delivery (NCC 1496-1501)

(1) actual or real (NCC 1497)

(2) constructive or legal (NCC 1498-1501)

(i) public instrument
(ii) traditio longa manu
(iii) tradition brevi manu
(iv) traditio constitutum possessorium
(v) quasi-traditio

(3) special rules on:

(i) Contract of sale or return (NCC 1502)
(ii) Contract of sale on trial or approval (NCC 1502)
(iii) Sale of specific goods with reserved title (NCC
1503)
(iv) Delivery to carrier on behalf of the buyer (NCC
1503) (Shipping terms: [C.O.D; F.O.B.; C.I.F.])
(v) When person selling is not the owner (NCC 1505)
(vi) Seller’s title is voidable (NCC 1506)

b. When obligation to deliver arises (NCC 1524)

c. Other rules on delivery:

(1) Sale of real property by unit of measure or number

(NCC 1539-41)

(2) Sale of real estate made for a lump sum (NCC 1542)

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 d. Rules in case of double sale (NCC, 1544)

CASES: Banzon vs. Cruz, 45 SCRA 475; EDCA Publishing vs. 184 SCRA 614; Phil. Suburban
Development Corp. vs. Auditor General, 63 SCRA 397; Rosaroso vs. Soria, 699 SCRA 232, G.R. No.
194846 June 19, 2013; Skunac Corporation vs. Sylianteng, 723 SCRA 625, G.R. No. 205879 April
23, 2014; Manigque-Stone vs. Cattleya Land, Inc., 802 SCRA 173, G.R. No. 195975 September 5,
2016; Spring Homes Subdivision Co., Inc. vs. Tablada, Jr., 815 SCRA 114, G.R. No. 200009
January 23, 2017; Edu vs.Gomez, 129 SCRA 601; Duran vs. IAC, 138 SCRA 489

C. Delivery of fruits and accessories (NCC 1537)

D. Payment of expenses for execution and registration (NCC 1487)

E. Conditions and Warranties

1. Condition; concept (NCC 1545)

2. Warranty

(1) express warranty (NCC 1546)

(2) implied warranties (NCC 1547)

(i) warranty on seller’s title; liability in case of

eviction (NCC, 1548-1559
(ii) warranty against hidden defects of, or encumbrances upon the
thing sold; vendor’s responsibility in case of breach (NCC 1560 –
1561, 1566)
(iii) quality or fitness of goods (NCC 1562)

--merchantability and fitness distinguished

--rule in case of sale under a patent or trade name
(NCC 1563)
--effect of usage of trade (NCC 1564)
--rule in case of goods sold by sample (NCC 1565)

(vi) alternative remedies of buyer to enforce the warranties under

1561, 1562, 1564, 1565 & 1566; prescriptive period (NCC 1567
& 1571)
(vii) loss of thing sold due to hidden defects (NCC 1568- 69)
(viii) applicability of warranty on judicial sales (NCC 1570)
(ix) prescriptive period of action (NCC 1571)
(x) rule on sale of animals (NCC 1572-1581)

(CASES: JM Tuazon & Co., Inc. vs. CA, 94 SCRA 413; Escaler vs. CA, 138 SCRA 1; Moles vs. IAC, 169
SCRA 777; Nutrimix Feeds Corporation vs. CA, 25 October 2004)

VII. DOCUMENTS OF TITLE

A. Concept & functions

B. Common forms of documents of title

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 1. dock warrant
2. bill of lading
3. warehouse receipt
4. quedan

C. Classes of documents of title

1. Negotiable documents of title (NCC 1508-11)

a. how negotiation is made

b. who may negotiate (NCC 1512)
c. rights of person to whom document has been negotiated (NCC 1513;
1519)
d. transfer of order document without indorsement (NCC 1515)

2. Indorser not a guarantor (NCC 1517)

3. Negotiation not impaired by fraud, mistake, etc (NCC 1518)

4. Non-negotiable documents of title (NCC 1510)

- rights of person to whom document has been transferred (NCC 1514)

5. Warranties of a person negotiating or transferring document (NCC 1516)

6. Rules on levy/garnishment of documents of title

VIII. RIGHTS AND OBLIGATIONS OF THE VENDEE

A. Principal obligations of the vendee: (NCC 1582)

1. No obligation to accept delivery by installments (NCC 1583)

2. Modes of manifesting acceptance (NCC 1585)
3. Effect of a wrongful refusal to accept (NCC 1588)
4. Liability for interest (NCC 1589)

B. Rights of the vendee:

1. Right to examine the goods before delivery (NCC 1584)

2. Acceptance not a bar to action for damages (NCC 1586)
3. No obligation to return goods wrongfully delivered (NCC 1587)
4. Right to suspension of payment of price (NCC 1590)
5. When rescission of sale of real property may be made (NCC 1591-92)
6. Rescission in case of sale of movable thing (NCC 1593)

(CASES: Arra Realty Corporation vs. Spouse Arguelles, 20 September 2004; Laforteza vs.
Machuca, 333 SCRA 643; Vda. De Mistica vs. Naguiat, 418 SCRA 73; Fedman Development
Corporation vs. Federico Agcaoili, G. R. No. 165025; August 31, 2011; See also pertinent
provisions of RA 6552)

IX. ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

A. Available remedies on the part of the seller:

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 1. Action for payment of price (NCC 1595)
2. Action for damages in case of non-acceptance of goods (NCC 1596)
3. Action for rescission of contract (NCC 1597)
4. Unpaid Seller
a. Concept (NCC 1525)
b. Remedies of an unpaid seller (NCC 1526-1535)
(1) Lien on the goods
(2) Right of stoppage in transitu
(3) Right of resale
(4) Right to rescind

B. Available remedies on the part of the buyer:

5. Action by buyer for specific performance (NCC 1598)
6. Action by buyer for rescission or damages for breach of warranty (NCC
1599)
7. Rule in case of sale by description or by sample (NCC Article 1481)

C. Recto Law (Sale of Movables on Installments) (NCC 1484-86)

CASES: Levi Hermanos, Inc. vs. Gervacio, 69 Phil 52; Zayas vs. Luneta Motor Company, 117 SCRA
726; Tajanlangit vs. Southern Motors, Inc. 101 Phil 606; Cruz vs. Filipinas Investment & Finance
Corp., 23 SCRA 791; PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc., 527 SCRA
405, G.R. No. 142618 July 12, 2007)

X. RISK OF LOSS (NCC 1174, 1493-94; 1504, 1538, 1189)

XI. EXTINGUISHMENT OF SALE (NCC 1600)

A. Common Causes
B. Special Causes
C. Extra-special Causes
1. Conventional redemption (NCC 1601 to 1616)
a. Definition
b. Distinguished from option to purchase
c. Period of redemption (NCC 1606)
d. Effect when no redemption is made
e. Equitable mortgage (NCC, 1602-06)
f. Right of the parties to the fruits of the land (NCC 1617)
g. Right of vendor a retro as to charges/encumbrances (NCC 1618)

2. Legal Redemption; concept and instances (NCC 1619-1623)

CASES: Cebu State College of Science and Technology (CSCST) vs. Misterio, 759 SCRA 1, G.R. No.
179025 June 17, 2015 Catangcatang vs. Legayada, 84 SCRA 51; Alonzo vs. IAC, 150 SCRA 259;
Lee Chuy Realty Corporation vs. Court of Appeals, December 4, 1995; Anecita Gregorio v.
Crisologo Vda. De Culig, G.R. No. 180559; January 20, 2016)

XII. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS (NCC 1624 to 1635)

A. Concept
B. Excluded Cases of Assignment (NCC, 1635)

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 C. Perfection (NCC, 1624-25; CASE: C&C Commercial Corporation vs. PNB, 175 SCRA 1)
D. Effects of Assignment (NCC, 1626-27)
E. Warranties of Assignor (NCC, 1628-29)
F. Special Rules
1 1. Assignment/Sale of Inheritance (NCC, 1630-33)
2 2. Assignment of Incorporeal Right under Litigation (NCC, 1634)
G. Right of Repurchase (NCC, 1634-35)

(CASE: Liam vs. United Coconut Planters Bank, 793 SCRA 383, G.R. No. 194664 June 15, 2016)

XIII. LEASE

A. Concept and Scope (NCC, 1642-44)

1. Distinctions:
a. lease and sale
b. lease of things and lease of services
c. lease of services and contract for piece of work
d. lease of services and agency

2. Lease of consumable goods (NCC, 1645)

B. Lease of Rural and Urban Lands

1. Disqualifications of lessee (NCC, 1646 in relation to 1490-91)

2. Recording of lease (NCC, 1647-48)
3. Assignment of lease (NCC, 1649)
a. Sublease
- distinguished from assignment of lease
b. right of lessee to sublease (NCC, 1650)
c. obligations of sublessee (NCC, 1651-52)

4. Obligations of the Lessor

a. General obligations (NCC, 1654)
b. Warranties of lessor (NCC, 1653)
c. Alteration of the thing leased (NCC, 1661)
d. Useful improvements and ornamental expenses (NCC 1678)

5. Obligations of the Lessee

a. General Obligations (NCC, 1657)
b. Urgent Repairs (NCC, 1662)
c. Trespass made by a third person (NCC, 1663-64)

6. Remedies of a party in case of failure of the other to comply with his

obligation/s
a. Rescission (NCC, 1659)
b. Remedies of lessee
(1) when the thing leased is totally or partially destroyed (NCC, 1655)
(2) when the lessor fails to make repairs (NCC, 1658)
(3) dangerous condition of the thing leased for habitation (NCC, 1660)
(4) Return of the thing leased (NCC 1665-66)
(5) Liability for loss or deterioration of the thing leased (NCC 1667-68)

c. Remedies of the Lessor

(1) Ejectment; grounds (NCC 1673)

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 d. Termination of lease by the purchaser of the leased land (NCC 1676-77)
e. See also RA 9161 (Rental Reform Act of 2001)

8. Expiration of lease (NCC 1669)

a. Implied new lease (NCC 1670 & 1672)
b. Rule in case of continued possession over lessor’s objection
(NCC 1671)
c. Duration of rural lease (NCC 1682)

9. Obligation of outgoing/incoming lessee or lessor (NCC 1683)

(CASE: Malasarte vs. CA, 178 SCRA 310; Chua Tee Dee vs. CA, GR 135721, 27 May 2004;
Tagbilaran Integrated Sellers Association vs. CA, 444 SCRA 193; Spouses Ricardo and Elena C.
Golez v. Meliton Nemeño, G.R. No. 178317, September 23, 2015; Golez vs. Nemeño, 771 SCRA
306, G.R. No. 178317 September 23, 2015)

1) Anecita Gregorio v. Crisologo Vda. De Culig (redemption)

G.R. No. 180559; January 20, 2016;
2) Nolasco, et. al. v. Cuerpo, et. al. (Rescission)
G.R. No. 210215; December 9, 2015

3) Moldex Realty vs. Flora Saberon, G.R. 176289, April 8, 2013

4) Spouses Domingo

Marcelino Repuela and Cipriano Repuela vs. Estate of the Spouses Otillo Larawan and Juliana Bacus, G.R.
No. 219638; December 07, 2016 (equitable mortgage)

Arcaina vs. Ingram, G.R. No. 196444; February 15, 2017 (lump sum sale)

Philippine Steel Coating Corp. vs. Eduard Quiñones, G. R. No. 194533; April 19, 2017 (warranty)

Anecita Gregorio v. Crisologo Vda. De Culig

G.R. No. 180559; January 20, 2016;

Nolasco, et. al. v. Cuerpo, et. al. (Rescission)

G.R. No. 210215; December 9, 2015

Moldex Realty vs. Flora Saberon, G.R. 176289, April 8, 2013

Spouses Domingo vs. Sps Manzano GR 201883, Nov 16 2016

Delta Dev and Management Services vs. Angeles Catherine Enriquez G.R. 168646, Jan 12, 2011

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Marcelino Repuela and Cipriano Repuela vs. Estate of the Spouses Otillo Larawan and Juliana
Bacus, G.R. No. 219638; December 07, 2016 (equitable mortgage)

Arcaina vs. Ingram, G.R. No. 196444; February 15, 2017 ;

Sps Castro vs. Amparo Palenzuela GR 184698, 21 Jan 2013

Philippine Steel Coating Corp. vs. Eduard Quiñones, G. R. No. 194533; April 19, 2017;