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CHAPTER 10: REMEDIES OF

PARTIES FOR BREACH OF


CONTRACT OF SALE

SHARED LIAHONA B.
VISTA
SUBJECT MATTER: MOVABLES (IN
GENERAL)
Caveat emptor is a Latin term that means "let
the buyer beware." Similar to the phrase "sold as is,"
this term means that the buyer assumes the risk that
a product may fail to meet expectations or have
defects. In other words, the principle of caveat
emptor serves as a warning that buyers have no
recourse with the seller if the product does not meet
their expectations.
Example
A consumer who purchases a coffee mug and later
discovers that it has a leak is stuck with
thedefective product. Had they inspected the mug
prior to the sale, they may have changed their mind.
REMEDIES OF UNPAID SELLER
>Any man may not take law in his own hands, must seek remedy
through courts

Exception:
1. DOCTRINE OF SELF HELP (Article
429)
The owner or lawful possessor of a thing has the right to exclude
any person from the enjoyment and disposal thereof. For this
purpose, he may use such force as may be reasonably necessary
to repel or prevent an actual or threatened unlawful physical
invasion or usurpation of his property.

Forexample,ifapersonbuysashipfinancedbyamortgage, the
mortgage company may repossess the ship if the buyer fails to
make the mortgage payments. If the buyer is present when the
ship is being taken away and the buyer objects to the
repossession, the mortgage company breaches the peace if it can
repossess the ship only through violence or the threat of a
violence. In such a case, the mortgage company would be forced
to file a suit in court to repossess the ship.
UNPAID SELLER
"Unpaid seller" means a person who has sold
the goods for a price but price has not been
paid to him.

2. SPECIAL REMEDIES
Rights Of Unpaid Seller
(1)A right of posessory lien
(2)A right of stoppage in transitu
(3)A right of resale of the goods
(4)A right to rescind
Unpaid seller's lien (Possessory security)
The seller's lien is a right to retain the goods until the whole of
the price has been paid or tendered.

Exercisable only in the following circumstances:


a. goods are sold without stipulation as to credit
b. goods are sold on credit but the term of credit has expired
c. buyer becomes insolvent
Instances when possessory lien is lost:
d. seller delivers the goods to a carrier for transmission to the
buyer without reserving ownership in the goods or right to
possess them
b. buyer or agent lawfully obtains possession of goods
c. waiver

Example :
Cardo sells the goods to Ador for 100 pesos. Ador pays 50 pesos
and promises to pay the remaining 50 pesos after two months.
Cardo has a right of lien on the goods.
STOPPAGE IN TRANSITU
>when the buyer of the goods become
insolvent, the unpaid seller who has
parted with the possession of the goods
has the right of stopping them in
transitu, that is to say, he may resume
possession of the goods as long as
they are in the course of transit, and
may retain them until payment or
tender of the price
Goods are in transit
>From the time the goods are delivered to the carrier for
purpose of transmission to buyer
>Goods are rejected by the buyer & the carrier continues to
possess them

When goods are no longer in transit


>Reached point of destination
>Before reaching destination, buyer met seller along the way
>Goods are supposed to have been delivered to buyer but
carrier refused

Example :
Cardo agreed to sell 100 bales of cotton to Ador but the
delivery will be made in two stages. Onyok, the carrier delivers
50 bales first. Later on Cardo came to know that "Y" has
become insolvent. Cardo can stop the delivery of the bales in
transit.
SPECIAL RIGHT TO RESELL THE GOODS
An unpaid seller is considered the owner of the goods until he
is not paid by the buyer. So he has a right to sell his goods
subject to few conditions.

Requisites:
1. goods are perishable
2. stipulated the right of resale in case buyer defaults in
payment
3. buyer is in default for unreasonable time

Example :
Cardo sells one horse to Ador on credit. Ador does
not pay. Cardo can resell the horse to other
persons.
SPECIAL RIGHT TO RESCIND
why is it special?
Ownership is already with the buyer but the seller may still
rescind; ownership is destroyed even without court intervention

Requisites:
1. Expressly stipulated
2. Buyer is in default for unreasonable time
>Notice needed to be given by seller to buyer

Many people encounter rescissions when dealing with


insurance companies, as insurers have the right to rescind
customers insurance policies in certain circumstances. For
example, an insurance company can cancel your policy if it
discovers that you intentionally listed false information on your
application for insurance.
REMEDIES OF THE BUYER
When Seller fails to deliver, buyer may seek Specific
Performance without giving the seller the option to retain goods
on payment of damages or Rescind the sale

Rescission refers to the termination or cancellation of a


contract.

Damages
Any breach caused by the seller allows the buyer to claim
damages for any loss caused by the breach. The buyer in this
case must show that the losses incurred have resulted directly
from the breach of the contract.

Specific Performance
The court can have the power to order that a specific
performance is carried by a party to a contract. This means that
the court can order that a specific action be carried out in the
event of a breach.
IMMOVABLES (IN GENERAL)
REMEDIES OF SELLER
1. Anticipatory breach
>if the seller has reasonable grounds to fear the loss of the
immovable sold & its price he may immediately sue for the
rescission of the sale

Example:
Cardo owns a large fleet of classic cars and decides to sell one of
the cars to Ador. Cardo and Ador enter into a contract in which
Ador agrees to purchase the car for 150,000 pesos to be paid on
January 1st. On December 29th, Ador calls Cardo to say he will
not be able to come up with the entire purchase price of 150,000
pesos by the set date. Since direct communication took place,
John can reasonably determine that Bob is in anticipatory
repudiation, or will breach the contact, releasing him from his
duty to hold the vehicle. John can now sell the car to another
party, or file a lawsuit against Bob for breaching the contract.
2. Non payment of price
>The failure of the buyer to pay the price in full within a fixed
period does not, by itself, bar the transfer of the ownership or
possession, much less dissolve the sale. On failure of the
buyer to pay the price, the seller has the option to rescind the
sale upon judicial or notarial demand

Example:
Cardo owns a large fleet of classic cars and decides to sell
one of the cars to Ador. Cardo and Ador enter into a contract
in which Ador agrees to purchase the car for 150,000 pesos
to be paid on January 1st. On January 1st, Ador paid Cardo
50,000 pesos saying that he will pay the balance on January
10. Not able to come up with the entire purchase price of
150,000 pesos by January 10, Cardo sued Ador for rescission
of the contract.
REMEDIES OF BUYER
SUSPEND PAYMENT
>Should the buyer be disturbed in the possession or ownership of the
thing acquired, or should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of a mortgage, the
buyer may suspend the payment of price until the seller has caused the
disturbance of danger to cease, unless the seller gives security for the
return of the price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the buyer shall be bound to
make the payment.

Example:
Cardo sold a parcel of land to Ador for 1 million pesos to be paid on or
before December 25. Ador paid the 500,000 pesos on November 1.
On November 5, Benny, who claims to be the real landowner
attempted to oust Ador out of the land.

In this case, Ador has the right to suspend payments to Cardo until he
cause the disturbance to cease.
RESCIND
>In case of subdivision or condo projects, if the real estate
developer fails to comply with obligation according to
approved plan he may suspend payment or rescind the
contract

Example:
Cardo bought a subdivision unit from Benny for 800,000 pesos
on the condition that he should reside on it immediately. As the
unit is uninhabitable, petitioner vacated the area after 1 day
and refused to pay further installments until respondent make
it habitable.

In this case, Ador has the right to suspend payments to Benny or


rescind the sale.
End of presentation

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