civil review2 sales to trust
TRANSCRIPT
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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20081
SALES
Articles / Laws to Remember: 1458, 1467,
1477 transfer of ownership, 1505, 559 whocan transfer xxx, 1504, 1544, 1484 Recto
Law, R.A. 6552, 1602, 1606, 1620, 1623,Redemption xxx
Q: A obliged himself to deliver a certain
thing to B. Upon delivery, B would pay a
sum of money to A. Is that a contract ofsale?A: Not necessarily. Even if there is an
obligation to deliver, if there is no obligationto transfer ownership, it will not be a
contract of sale. It may be a contact of
lease.
Memorize:Art. 1458
Note: Sale is a contract, so the generalprinciples in oblicon are applicable to salebut note that there are provisions which are
contrary.
Characteristics of Contract of Sale (COS)
1. Consensual (1475) COS isconsensual, it is perfected by mere meetingof the minds of the parties as to the object
and price.
Note: There is 1 special law which requiresa particular form for the validity of a contract
of sale in that sale, it can be said that kindof sale is a formal contract ! CattleRegistration Decree. In a sale of large
cattle, the law provides that the contract of
sale of large cattle must be: in a publicinstrument, registered and a certificate oftitle should be obtained in order for the sale
to be valid. But otherwise, the other
contracts are perfected by mere consent ormere meeting of the minds.
2. Principal sale is a principal contract, it
can stand on its own. It does not depend onother contracts for its existence and validity.
3. Bilateral (1458) necessarily in a COS,both parties will be obligated. It is notpossible that only 1 party is obligated
because a contract of sale is essentiallyonerous.
4. Onerous (1350) COS is essentially
onerous. Otherwise, it may be another
contract or any other act like it may be a
donation if there is no compensation for thetransfer of ownership to the other party.
5. Commutative (2010) meaning there is
equivalency in the value of the prestation tobe performed by both parties. Normally, thething sold would be equal to the price paid
by the other party (buyer).
Exception: a contract of sale which is analeatory contract like sale of hope. In sale ofhope, the obligation of 1 party will arise
upon the happening of a certain event orcondition.
Example Sale of Hope:Sale of a lotto ticket,PCSO will have the obligation to pay youonly if you got all the 4 or 6 numbers which
are drawn
Another Example of Aleatory:Insurance
6. Nominate (1458)
Classification of Contract of Sale1. As to Nature of Subject Matter
a. Movableb. Immovable
Q: Why there is a need to determine?A: Because some concepts will apply if theobject is movable or some laws will apply if
the object is immovable.
Examples:Under the Statute of Frauds, you
have to determine if the object if movable or
immovable in order that statute of frauds willapply. The Recto law will apply if the object
is movable. The Maceda law will apply if the
object is realty. Article 1544 or Double Salewill require you to determine the nature of
the subject matter.
2. As to Nature
a. Thing
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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20082
b. Right
Q: Why there is a need to determine?
A: Relevant in the mode of delivery
Distinctions
1. Deed of Absolute Sale (DAS) vs.Conditional Sale (CS) vs. Contract to Sell
(CTS)2. Dation in Payment (DIP) vs. COS
3. Contract for a Piece of Work (CPW) vs.COS4. Barter vs. COS
5. Agency to Sell (ATS) vs. COS
Deed of Absolute Sale (DAS) vs.Conditional Sale (CS) vs. Contract to Sell(CTS)
DAS seller does not reserve his title overthe thing sold and thus, upon delivery of the
thing, ownership passes regardless of
whether or not the buyer has paid.
CS - condition/s are imposed by the seller
before ownership will pass. Normally, the
condition is the full payment of the price. InCS, ownership automatically passes to thebuyer from the moment the condition
happens. There is no need for anothercontract to be entered into.
BE: Receipt was issued by A to B. Thereceipts tenor Date of the receipt xxxReceived from B the sum of P75,000.00
as partial payment for the car xxx the
balance to be paid at the end of themonth xxx. Contract to Sell?SA: No. It does not pertain to a CTS
because in a CTS ownership is reserved bythe seller despite delivery to the buyer. The
buyer does not acquire ownership. This is
an Absolute Sale.
Q: In a CTS, upon the happening of the
condition/s imposed by the seller, would
ownership automatically pass to buyer?A: No. While a CTS is considered a special
kind of conditional sale, it is a peculiar kindof sale because despite the happening ofthe condition and actual delivery, the buyer
does not automatically acquire ownership.
In CTS, if condition/s happen, the right ofthe buyer is to compel the seller to executea final deed of sale. So ownership does not
automatically pass.
Dation in Payment (DIP) vs. COS
DIP (1245) whereby property is alienatedto the creditor. It is provided that the law on
sales shall govern such transaction. It isspecifically provided that the pre-existing
obligation must be in money. If not in moneyand there is DIP, it will not be governed bythe law on sales but by the law on novation
because practically there is a change in the
object of the contract.
Example 1: If A owes B P100,000.00instead of paying P100,000, he offers B and
B accepts the car of A as an equivalentperformance ! this is DIP and will be
governed by the law on sales.
Example 2:If the pre-existing obligation is todeliver a specific horse but instead of
delivering the horse, the debtor told his
creditor and the creditor accepted, that hewill instead deliver his car ! it is still DIPbut it will not fall on 1245 but on novation
because there is a change in the object ofthe obligation which would extinguish the
obligation.
Note: A guide to distinguish one conceptfrom another is to know the nature,
requisites and effects.
1. As to Nature
DIPa special form of payment
COS - it is a contract
2. As to Requisites
DIP with a pre-existing obligation
COS not a requirement
3. As to Effect
DIP to extinguish the obligation eitherwholly or partially.
COS obligation will arise instead of beingextinguished.
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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20083
Contract for a Piece of Work (CPW) vs.COSBE: A team if basketball players went to
a store to buy shoes and out of the 10
members, 5 of them were able to choose
the shoes. They agreed to pay the price
upon delivery. The other 4 memberswere able to choose but the shoes were
not available at that time but they arenormally manufactured. The last member
could not find shoes that could fit his 16
inches feet and therefore he has to orderfor such kind of shoes. What
transactions were entered into by these
players?
SA: 1467!the first 2 transactions involvinga total of 9 players would be considered aCOS because the shoes which they ordered
are being manufactured or procured in theordinary course of business for the general
market. However, the last transaction which
will be manufactured only because of thespecial order of the player and is notordinarily manufactured for the general
market will be considered a CPW which is
known as the Massachusetts rule.Massachusetts rule rule in determiningwhether the contract is a COS or a CPW.
Barter vs. COS
Q: A obliged himself to deliver adeterminate car with a market value ofP250,000.00. B obliged himself to deliverhis watch and P150,000.00 in cash. What
kind of contract?
A: First, you have to consider the intentionof the parties. They may want thistransaction to be considered as a sale or
barter and that will prevail. But if theintention of the parties is not clear from their
agreement then the nature of the contract
will depend on the value of the watch. If the
value of the watch is greater than P150,000then this is barter. If the value of the watch
is equal or less than P150,000 then this is
sale. The value of the car is irrelevant. Whatis only relevant is the value of the thing
(watch) in relation to the cash to be given byone of the parties.
Agency to Sell (ATS) vs. COS
BE: A gave B the exclusive right to sellhis maong pants (he has his own brandof maong pants) in Isabela. It was
stipulated in the contract that B has to
pay the price of maong within 30 days
from delivery to B. It was stipulated that
B will receive 20% commission(discount) on sale. The maong pants
were delivered to B. However, before Bcould sell the goods, the store was
burned without fault of anyone. Can B be
compelled to pay the price?From the wordings of the problem you may
have an idea that this is an agency to sell. If
this is an ATS, the fact that the agent has
not yet sold the maong pants when theywere burned will not result in a liability onhis part, there being no negligence on his
part because with the delivery of the thingfrom the principal to the agent, ownership
does not pass. Under the principle in the
Civil Code res perit domino it will be theseller (owner) who will bear the loss. But ifthis transaction is sale then with the delivery
of the maong pants to B, ownership passed
to B because he did not reserve ownershipover the pants despite the fact that the otherparty has not paid the price. So when the
pants were burned, it would now be B asthe owner who will bear the loss.
SA: This is exactly the case of Quiroga vs.Parsons. Article 1466 in construing acontract containing provisions
characteristics of both a COS and ATS, you
have to go into the essential clauses of thewhole instrument. In this problem, one ofthe clauses B has to pay the price within 30
days. That would make the contract COSand not ATS because in 30 days from
delivery, whether or not B has already sold
those pants to other persons, he is already
obliged to pay a price. That is not an ATS.Being a COS, therefore, after having been
delivered, ownership passed to the buyer
and hence under res perit domino rule, thebuyer bears the loss and therefore he can
be compelled to pay the price.
Essential Elements of a Contract of Sale
1. Consent of the Contracting Parties
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2. Object or Subject Matter which is adeterminate thing or rightNote:Service cannot be the subject matter
of sale.
3. Cause or Consideration as far as
seller is concerned, it is the price in
money or the equivalent of the payment ofthe price.
CONSENT OF THE CONTRACTING
PARTIES
A. No consent of one or both of theparties
! the contract is void. Under the law on
sales, it is a fictitious contract where the
signature of one of the parties was forged.Normally, the sellers signature is forged. Ifthe signature of the seller is forged, that
would be a fictitious contract. The allegedseller will not have participation in the
execution of the contract. But another kind
of contract recognized in the Civil Code is asimulated contract.
Simulated parties to this contract actually
would have participation. They wouldvoluntarily sign in the deed of sale.However, they do not intend to be bound at
all or they may intend to be bound toanother contract but they executed a deed
of sale. Thus, the law would ratify thesecontracts considering there is a simulatedsale.
Kinds of Simulated Contracts
1. Absolutely Simulated they do not intendto be bound at all.
Q: Why would they enter into this kind ofsale?A: To defraud creditors
2. Relatively Simulated sale where they
actually intended another contract whichnormally would be a donation.
B. If consent was given! If consent was given, it does not
necessarily mean that the COS is valid. Theconsent may be given by an incapacitatedperson or one with capacity to give consent.
If given by an incapacitated person,
consider the nature of the incapacity. It maybe:
a. Absolute Incapacity the party
cannot give consent to any and all
contracts.
b. Relative Incapacity the party is
prohibited from entering sometimeswith specific persons and sometimes
over specific things.
Kind of Capacity1. Juridical Capacity it is the fitness to bethe subject of legal relations. If a party to a
sale has no juridical capacity, the contract is
void. Note that all natural living persons
have juridical capacity. Even if he is a 1 dayold baby, he has juridical capacity. Thebaby can be the subject of donation. Even if
he is conceived, he has provisionalpersonality.
Example:One example of a party to a salewithout juridical capacity would be acorporation not registered with the SEC.
The contract entered by this corporation is a
void contract because one of the parties hasno juridical capacity to enter into thatcontract.
2. Capacity to Act it is the power to do
acts with legal effects. If the incapacity onlypertains to capacity to act, the contractwould normally be voidable. Withoutcapacity to act or there are restrictions with
ones capacity to act such as minority,
insanity, deaf mute and does not know howto write and civil interdiction.
Note: Under R.A. 6809 (December 1989)there is no more creature known as
unemancipated minor. Before 1989, the
age of majority was 21.
C. If both parties are incapacitated
!not only voidable but unenforceable.
Q: What if one of the parties in a COS isa minor and the minor actively
misrepresented as to his age?A: The SC said that the minor will be boundto such contract under the principle of
estoppel.
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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20085
Atty. Uribes Comment:Estoppel is not agood ground because the minor is not
aware.
Sale of Necessaries
In sale of necessaries such as food, clothingand medicine to a minor, the minor has to
pay a reasonable price. This contract is notvoidable. The sale of necessaries will bind
the minor and he will be compelled to paynot really the contract price but only toreasonable price.
Relative Incapacity (Articles 1490 and
1491)1. Sale between spouses it is void except:
a. The spouses executed a marriage
settlement and in the marriagesettlement they agreed for a
complete separation of property
regime. Then they can sell to eachother.
b. If no marriage settlement, they may
have obtained judicial declaration of
separation of property. After that,they can sell to each other.
2. Those mentioned in Article 1491a. A guardian cannot buy the property
of the ward. The guardian is notactually prohibited from entering intoany and all contracts. It is just thathe cannot be the buyer of a property
of his ward.
b. An agent cannot buy without theconsent of the principal a propertywhich he was supposed to sell or
administer.c. The executors and administrators of
the estate cannot buy a property
which is part of the estate.
d. Public officers, judges, their staff,clerk of court, stenographers and
lawyers are prohibited from buying
those properties which are thesubject of litigation during the
pendency of the case.
Q: What is the status of the contracts
under 1491?
A: Prof. Tolentino voidableJustice Vitug & Prof. Baviera voidProf. Pineda & Prof. de Leon the
first 3 are voidable and the last 3 are
void.
The better answer is void because these
persons are prohibited from entering intothese contracts. Under Article 1409, if the
contract is prohibited, it is void.
3. Aliens are prohibited from acquiring bypurchase private lands Take noteacquiring which means buying not selling.
They can sell.
Exceptions / when aliens can buy:
a. Former natural born Filipino citizen.Under the Constitution they areallowed to buy small land which they
can use for residential purpose.b. Another way of acquiring is by
succession but this is not a sale
D. Even if consent was given by one withcapacity to give consent but if the
consent is vitiated
!voidable. FIVUM
E. If the party gave such consent in the
name of another without authority of thatperson or no authority of law
! unenforceable. Take note may beauthorized by the person or by law.Example of authorized by law:notary publichas the right to sell in pledge because he
has the authority to sell under the law.
OBJECT OR SUBJECT MATTERThe requisites in sale as to thing would
almost be the same as the requisites ofcontracts in general.
1. The thing must be within the commerce
of men
Examples:sale of a navigable river is void,sale of a cadaver is void but donation of a
cadaver is allowed, sale of human organs is
void, things which are not appropriated likeair is void but if appropriated it can be the
object of a valid sale.
2. The thing must be licit not contrary to
law
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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20086
Examples:sale of prohibited drugs or shabuis void, sale of marijuana is void, sale of wildflowers or wild animals is void
3. Must be determinate
Read Article 1460
RULES AS TO OBJECT OF COS
Q: A obliged himself to deliver andtransfer ownership over the palay that
will be harvested from a specific parcel
of rice land in May 2008. What if by May2008, no palay was harvested?
a. What is the status of the sale?
b. May the seller A be held liable for
damages for failure to comply withhis obligation?
A:
a. Always consider that in a COS thereare only 3 requisites. As long as these 3
were complied, there is a valid sale. In fact,
by express provision of law, sale of thingshaving potential existence (emptio reisperati) is valid.
b. Not necessarily because there are
excuses to non-performance such aspestilence, typhoon, flood and therefore hisfailure to comply is an excuse. But if the
reason of the seller is because of hisnegligence, he cannot find support under
Art. 1174.
Sale of Hope (Emptio Spei)Example:Sale of a lotto ticket
Q: Sale of a land to B with a right torepurchase within 1 year which A
delivered. On the 3rd month, B sold theland to C. However, on the 9 thmonth, Aoffered to repurchase the land.
(a) What is the status of the sale
between A and C?
(b) Who will have a better right over theland?
(Sale with a right to repurchase)
A: (a) Be guided by the fact that a COS is a
consensual contract. The mere meeting ofthe minds as to the object and the price,then there is a valid and perfected sale.
Hence, this is a valid sale even if the object
of the sale is a sale with a right torepurchase. Article 1465 provides thatthings subject to a resolutory condition may
be the object of a COS.
Atty. Uribe: Mas tamang sabihin since
the ownership thereof is subject to a
resolutory condition. Hindi naman yungthing is the subject of resolutory condition, it
is the ownership over the thing.If A exercises the right to repurchase and
such would be a valid exercise of such rightthen the ownership of B would beextinguished. The exercise of the right is
considered a resolutory condition as to the
ownership of B. The fact that the object of
the sale is subject to a repurchase will notaffect the validity of the sale.
(b) As a rule, it would be A as a seller a
retro because he has the right torepurchase assuming his repurchase is
valid. C may have a better right if he can
claim that he is an innocent purchaser forvalue. Example: maybe the right torepurchase was not annotated at the back
of the title of the land and he has no actual
knowledge. If that is the case, C may have abetter right.
SALE OF RIGHT / ASSIGNMENT OFRIGHT
Assignment of right is not necessarily asale. If there is a valuable consideration forthe assignment, it is a sale. If there is novaluable consideration, it may be a donation
or dacion en pago.
Examples of right:credit, shares of stock
Requisite of a right ! the onlyrequirement is that the right must not be
intransmissible
G.R.: As a rule, rights and obligations
arising from contracts are transmissible.Exceptions:
1. Intransmissible by Nature
2. Intransmissible because of Stipulation3. Intransmissible because of Law
CAUSE OR PRICE CERTAIN IN MONEYOR ITS EQUIVALENT
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Q: A deed of sale was entered into by Aand B. The price agreed upon was 1Myen.
(a) May that be a valid sale?
(b) Can the seller compel the
buyer to pay in yen?
A: (a) Yes, it is valid. Basis is Article1458 because the only requirement of the
law is in money. Even Japanese yen is inmoney. The law states that it may not even
be in money, it may be equivalent likepromissory notes whether or not negotiableor letters of credit.
(b) If the contract was entered into
today, yes it is valid because of R.A. 8183
which repealed R.A. 529 in 1996. If COSwas entered before R.A. 8183, the sellercannot compel even though the contract is
valid. The payment has to be made inPhilippine money.
Consider the date of the sale. If parties
failed to stipulate as to which currency, ithas to be in Philippine currency.
Price Must be Certain
Q: Who can fix the price?A: (1) The best way is for the parties to
agree as to the price. (2) They may agreethat one of them will fix the price.
Q: May the sale be perfected if theagreement of the parties was for one ofthem to fix the price?
A: Yes, it may be perfected only if the price
fixed by the party who was asked to fix theprice was accepted by the other party. If notaccepted, there was no meeting of the
minds.
Note:The perfection will only be considered
at the time of the acceptance of the price
fixed by the other party not from the time ofthe first agreement of the parties.
Q: What if a 3rdperson was asked to fixthe price A and B agreed that X will fix
the price, may the sale be void?A: Yes, the sale may be void if the thirdperson does not want to fix the price or
unable to fix the price. Hence, there was nomeeting of the minds.
Q: If the 3rdperson fixed the price but it
was too high or too low or maybe there
was fraud committed by the 3rdperson or
he was in connivance with one of theparties, may the sale be void?
A: No, because the remedy of the otherparty is to go to court for the court to fix the
price.
Note: Lesion or gross inadequacy of the
price does not as a rule invalidate a contract
unless otherwise specified by law.
Exception: when otherwise provided by law.Example:Article 1381.
Note: Under the law on sales, if there isgross inadequacy, it may reflect vitiation of
consent so the SC would normally enjoin
the lower courts to be warned of thepossibility of fraud in case of lesion. Lesionmust be proven as a fact. It is not
presumed.
If there is gross inadequacy, it maybebecause actually they intended anothercontract and that would make the sale a
simulated sale and therefore the sale isvoid.
Example: The value of the property is P1Mbut only P10,000 was written in the contractbecause they intended it to be a donation !void.
TIME OF THE PERFECTION OF THECONTRACT
Auction SaleAuction sale is perfected upon the fall of the
hammer or any other customary manner.
Thus, before the fall of the hammer in an
auction sale, the bidder even if he hasalready made a bid, he can still withdraw
the bid as long as he would do that before
the fall of the hammer. Otherwise, (if afterthe fall of the hammer), there is already a
perfected sale.
Q: Can the auctioneer withdraw the
goods before the fall of the hammer?
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A: As a rule, yes because the sale has notbeen perfected at the moment unless thebidding or auction has been announced to
be without reserve.
Note: Before perfection, there is one
contract which maybe perfected. Beforeperfection meaning in the negotiation stage
! this contract is known as the optioncontract.
Option ContractSanchez vs. Rigos
Facts: Mrs. Rigos offered to sell her land to
Sanchez for a certain price. Rigos gave
Sanchez 2 years within which to decide.(Note:The optionee or promisee or offereeis not bound to purchase but he has the
option to buy or purchase). In this case,Sanchez has the option. Before the lapse of
2 years, Sanchez told Rigos that he is
buying and offered the price agreed uponbut Rigos refused claiming that she was notbound by the written option agreement
because no option money (consideration)
was given by Sanchez. According to Rigos,the option contract is void.Held: Since Sanchez accepted the offer and
decided to buy within the period before theoffer was withdrawn, a perfected COS was
created even without option money. In thiscase, there was no option contract becauseit was merely an option agreement.Therefore, there was merely an offer on the
part of Rigos and once the offer was
accepted before it was withdrawn,regardless of whether option money wasgiven and in this case no option money was
given, a perfected COS was created.Note:Iba pag may option money
Q: 2 years within which to decide
assuming there was option money,
before the offeree could decide to buy,the offeror withdraw on the 6thmonth.
(a) Can the offeree on the 10th
month say I would like tobuy?
(b) Can the buyer compel theseller to sell?
A: (a) No.
(b) No, an action for specific performancewill not prosper because when he said hewill but there was not more offer to be
considered. Na-withdraw na eh.
Q: If the offeree files an action for
damages, may that action prosper therebeing option money given?
A: Yes, because with the option money, anoption contract is perfected, the offeror is
bound to give the offeree, 2 years withinwhich to decide and failure to that he isliable not based on perfected COS but on
perfected contract of option.
Option Money (OM) vs. Earnest Money(EM)OM is not part of the price while EM is part
of the price and at the same time, it is aproof of the perfection of the contract.
G.R.: A COS may be in any form. Article1483 provides that a COS may be in writing,partly in writing xxx. This provision is exactly
the same as Article 1356 in contracts which
provides that contracts may be obligatory inwhatever form they may have been enteredinto provided all the essential requisites are
present. But then again even Article 1356just like Article 1475 would provide for
exceptions.Exceptions: The law may require aparticular form for its validity. The CattleRegistration Decree is an example - where
the law itself provides for a particular form
for the validity of the sale. But the law mayrequire particular form for its enforceabilityof the sale and that would be 1403 or the
statute of frauds. Concretely, the sale of aparcel of land if not in writing is valid but
unenforceable. It is not void. Note that the
price of the land is irrelevant if immovable.
Example:Before, the sale of a land for P300
is valid and enforceable even if not in
writing. But presently, it has to be in writingto be enforceable. The price is still
irrelevant.
If the object of the sale is movable, you
have to consider not the value of the thing
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but the price agreed upon. The value maybe different from the price. You can sell athing worth P1,000 for P400 but the law
provides for the price. If the price is at least
P500 and the sale is not in writing, it will be
unenforceable.
Paredes vs. Espino
Facts: Paredes was a prospective buyer.Espino owns a land in Palawan. Paredes is
from Northern Luzon. Their negotiation wasthru letters and telegrams. Espino sent aletter to Paredes stating that he and his wife
agreed to sell the land to Paredes, that the
deed of sale will be executed upon the
arrival of Paredes in Palawan. WhenParedes arrived, Espino said he is no longerinterested in selling. Paredes filed a case to
compel Espino to sell the land. Espinocontended that the contract is
unenforceable because it is not in writing.
He contended that under the statute offrauds it is unenforceable. His contentionwas sustained by the trial court.
Held: This contract is no longer covered by
the statute of frauds because there was aletter. Article 1403 provides that a note ormemorandum signed by the part charged
would be sufficient to take that contract outof the operation of the statute of frauds. In
this case, the defendant wrote a letter withhis signature on it. The letter took thatcontract out of the operation of the statute offrauds and therefore he may be compelled
to execute the final deed of sale.
RIGHTS AND OBLIGATIONS OF THE
VENDORIn a deed of sale (DOS), there can
be hundreds of obligations of the vendor but
those obligations would be because of the
stipulation. But there are only few
obligations imposed by law. The 3 mostimportant:
1. To transfer ownership
2. To deliver3. To warrant the thing
There are other obligations:4. Obligation to take care of the thing
sold with the diligence of a good
father of a family prior to delivery.
5. From the time of the perfection up tothe time of delivery then there wouldbe obligation to pay for the expenses
for the execution and registration of
the sale and obligation to pay the
capital gains tax would be on the
seller as a rule.6. Obligation to deliver the fruits which
is related to the obligation to deliverthe thing
OBLIGATION TO DELIVER THE FRUITSBE: A sold a mango plantation to B but
they stipulated that delivery will be after
the signing of the deed of sale. After the
expiration of the 6-month period, Bdemanded for the delivery. The vendorwas able to deliver 1 month after the date
when he was supposed to deliver themango plantation. During this period, the
vendor harvested mango fruits and sold
them to X. The vendor was able todeliver only after the other fruits wereharvested and sold to Y. Can B recover
the mango fruits from Y during the 6th
month period?SA: Determine first whether B is entitled tothe fruits because if he is not entitled, then
he cannot recover the fruits. Is he entitled tothe fruits after 6-month period during the 1-
month period prior to delivery? Yes, in fact,under 1537, the fruits of the thing sold fromthe time of perfection shall pertain to thebuyer.
OBLIGATION TO TAKE CARE OF THETHING
G.R.:The thing sold should be determinate
because if generic (1460, 2nd paragraph)then there is nothing to be taken cared of. It
will become determinate only upon delivery.
Exceptions: There are sales transactions
wherein the vendor would not have thisobligation:
a. Constructive delivery - brevi
manu There would be noobligation on the part of the
seller to take care of the thingfrom the time of perfectionbecause at the time of
perfection, the buyer was
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already in possession of thething. Maybe he borrowed thething. Example:he borrowed the
car and he decided to buy it
the thing was already in his
possession.
OBLIGATION TO PAY EXPENSES /
TAXESThese obligations may be the
subject of stipulation. By agreement, itwould be the buyer who will pay xxxNormally, dito hindi natutuloy ang sale dahil
hindi magkasundo kung sino magbabayad
ng tax.
OBLIGATION TO TRANSFEROWNERSHIP
BE: May a person sell something whichdoes not belong to him? Would the sale
be valid? Would the buyer acquire
ownership over the thing sold, if sellerdoes not own the thing?SA: Yes. Ownership over the thing sold is
not an essential requisite for the sale to be
valid. But if the seller does not own thething, he may have a problem on hisobligation to transfer ownership. The
problem would be whether or not the buyerwould acquire ownership over the thing sold
if the person who sold the thing is not theowner.
Q: Who would have the right to sell and
therefore they can transfer ownership by
way of sale?A: First, is the owner. Even if he is not theowner, he may have the right to sell
because:(1) He was given the authority by
the owner. Example:Agent
(2) He may be the owner but he
may have the authority of the lawto sell, known as Statutory
Power to Sell (Article 1505).
Examples: Notary public inpledge, liquidators, guardians
and receivers.(3) Those who have the authority of
the court. Example: Sheriff.
Note: it is as if they have the
authority of law because noteven the judge can validly sellsomething if it is not consistent
with the law.
Q: May a buyer acquire ownership over
the thing sold if the seller has no right tosell?
A: The answer by way of exception is yes.But the general rulehere is under 1505
the buyer acquires no better title than whatthe seller had. If the seller is neither theowner nor does he have the authority to
sell, the buyer acquires no better title than
what the seller had. If his right is only as a
lessee that is the most that can betransferred to the buyer. If he has no titlethen no title can be transferred to the buyer.
Exceptions:(When the buyer can acquire abetter title than what the seller had. Even if
the seller does not have the right to sell, the
buyer may acquire ownership over the thingsold because the law so provides and notbecause the seller was able to transfer
ownership to the buyer.)
1. By Estoppel2. Estoppel by Deed3. Estoppel by Record
4. Sale by an Apparent Owner5. Negotiable Document of Title
6. Purchases from a Merchants Storexxx
1. By Estoppel by the principle ofestoppel, a person is precluded from
denying that another person has authority to
sell because of his acts. Also known asEstoppel in Pais which is a kind ofequitable estoppel because of the acts /
representation of the owner, he may notlater on deny the authority of the 3 rdperson.
2. Estoppel by Deed
BE: A and B co-owners of land sold (saleis verbal) to X their land. X subsequently
sold the land to Y. Would Y be
considered to have acquired ownershipover the land?
SA: Under 1434 which is considered asEstoppel by Deed (technical estoppel) when the seller who was not the ownerat
the time of the sale, acquires ownership,
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automatically, ownership passes to thebuyer by operation of law. However, Article1434 requires delivery to the buyer. And
under the facts, 1434 would not apply
because:
a) There was no showing there was
paymentb) No showing that there was delivery
of the land to X.It cannot be said that by operation of law, Y
likewise acquired ownership by way ofestoppel by deed.
3. Estoppel by Record
Jurisprudence: Sale by nephew of the
owner of the land. Since the nephew couldnot deliver the land, the buyer sued thenephew for estafa. For the accused to be
acquitted, he asked his uncle to testify thathe actually had the authority to sell. When
the uncle testified in court, the nephew is
acquitted. After acquittal, the buyerdemanded from the uncle the delivery of theland. The uncle refused, claiming that sa
totoo land, I did not authorized my nephew.
Q: Case was filed against the uncle,would that action prosper?A: SC said yes because he cannot be
allowed now to claim that his nephew wasnot authorize to sell after he testified in court
that he gave such authority.This is estoppel by record which isconsidered a technical estoppel.
4. Sale by an Apparent Owner
A. Factors ActB. Recording LawsC. Any other provision of law enabling the
apparent owner of the goods to dispose ofthem as if he was really the owner.
A. Factors Act
Even if agent has no right to sell, a thirdperson may acquire ownership because he
may rely on the power of attorney as
written.
B. Recording Laws*most common question in the bar exam
Read: Mapalo vs. Mapalo
5. Negotiable Document of TitleIf goods are covered by a negotiable
document of title and it was thereafter
negotiated. If the buyer bought it in good
faith and for value, he will be protected
under the law. He will acquire ownership
even if the seller did not have the right tosell.
Example:The seller may have acquired titleby violence. Binugbog nya yung owner ng
goods. Pero kung negotiable document oftitle yan and properly negotiated, lalo nakung bearer document of title, then the
buyer may acquire ownership even if the
seller has no right to sell.
6. Purchases from a Merchants Store /Markets / Fairs
Sun Brothers vs. VelascoFacts: Sun Brothers was the owner of a
refrigerator. Sun Brothers was engaged in
the business of selling refrigerator. SunBrothers sold a ref to Lopez on installmentbasis. As stipulated, Sun Brothers reserved
ownership until full payment. Lopez only
paid P300 out of P1,500. The balance to bepaid on installment. Lopez then sold the refto Velasco.
Q: Would Velasco acquire ownership?
A: No because Article 1505 provides thatthe buyer acquired no better title than whatthe seller had. However, Velasco was theowner of a store. On the next day, Velasco
sold the ref to Ko Kang Chu who paid in full.
When Sun Brothers learned this transaction,it filed an action to recover the ref from KoKang Chu.
BE: F lost her diamond ring in a hold-up.
Later on, this ring was an object of a
public sale of one pawnshop. Can F
recover the ring from the buyer in thatpublic sale?
SA: Yes, Article 559 provides that even if
the buyer is in good faith so long as theowner is willing to reimburse the buyer of
the price paid in that sale.
Note: Again in 1505, there is no right to
recover as long as the buyer bought it in
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good faith from a merchants store, therecan be no recovery as a matter of right.
Q: How transfer of ownership is
effected?
A: Under the law, as far as things are
concerned, it is effected by delivery:(a) Actual
(b) ConstructiveThere can be no transfer of ownership
without delivery.
Notes:
(a) There may be a period agreed upon
by the parties within which the buyer
would have to decide. Even if he failedto signify his acceptance by the merelapse of the period, he is deemed to
have accepted (impliedly accepted)hence, ownership passes to him.
(b) Even before the lapse of the period,
he may be considered to haveaccepted if he did an act wherein hewould be considered to have adopted
the transaction then ownership passed
to him.Example: Even if he has 10 dayswithin which to decide but on the 2nd
day, he sold the car to another.Obviously, he is deemed to have
accepted the thing because he did anact which is inconsistent with theownership of the seller like he donatedor destroyed the thing.
(c) If there is no period agreed upon, the
law says if he did not signify hisacceptance he will be considered tohave accepted after the lapse of a
reasonable time. Reasonable time willdepend on the circumstances of the
sale, purpose of the sale, nature of the
thing sold. Example: Perishable
goods.
Sale or Return
Q: Ownership passes upon delivery?A: Yes. However, the buyer is given the
right to revest the title back to the sellernormally within a certain period. Example:Clauses in subscription magazine which
says that you can return within 30 dayswithout payment.
BE: A car was sold for P150,000. P75,000
paid upon the execution of DOS. The
balance payable on a monthly basis.
P75,000 was paid. The car was deliveredto the buyer. However, before he could
pay the balance, the car was destroyeddue to a fortuitous event or was burned
xxx Can he still be compelled to pay the
balance?SA: Yes. Upon the delivery of the car to the
buyer, there being no retention of ownership
by the seller. (Note: Wala sa facts na na-
retain ng seller and ownership). Therefore,ownership passed to the buyer. Under theprinciple of res perit domino Article 1504
the owner bears the loss and hence it canbe compelled to pay the price.
G.R.:Res perit domino 1504.Note: Determination of when ownershippassed is important because if at the time of
the loss, the buyer is not yet the owner, as a
rule, the buyer will not bear the loss like insale on approval and he has 10 days withinwhich to decide and the thing was lost
through a fortuitous event within the 10-dayperiod without fault on his part, the seller will
bear the loss.Exceptions:1. Read Lawyers Cooperative vs.Tabora
2. Delay in the DeliveryWhen there is delay in the delivery
due to the fault of one of the parties,
whoever was at fault will bear the loss. Notethat either buyer or seller may be at fault.
Example 1: The buyer and the seller may
have agreed that the goods are to beobtained by the buyer at the warehouse of
the seller on a specific date. On the date
agreed upon, the seller demanded thebuyer to get the goods. Despite such, the
buyer failed to get the goods. On the nextday, the warehouse was destroyed due tofortuitous event.
Q: Who is the owner at that time?
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A: The seller but there was delay on the partof the buyer hence under 1504 it is thebuyer who will bear the loss.
Example 2: The seller himself maybe the
one at fault. Thus, he is in delay in
delivering the goods to the buyer.Q: Why would this be an exception to the
res perit domino rule?A: Ang premise dito, the ownership has
already passed to the buyer but the goodsare still with the seller. Can this happen?Yes, because of constructive delivery. If
there was constructive delivery, ownership
passes to the buyer but physical possession
is still with the seller. They may have agreedthis time that the seller will be the one todeliver the goods to the buyer at a certain
date. When the date arrived, despitedemand from the buyer, there was no
delivery on the part of the seller. Even if the
goods are destroyed the next day due tofortuitous event, take note ang owner ayang buyer na but who will bear the loss?
The seller because he was in delay in
delivering the goods.
DOUBLE SALE (ARTICLE 1544)BE: F sold a registered parcel of land to
R who did not register the sale.Thereafter, F sold the very same parcelof land to C who registered and obtaineda new TCT in his name. Who would have
a better right?
SA: Atty. Uribe: I fully agree with the UPLaw Centers answer. It depends onwhether or not C registered the sale in good
faith. Registration is only one of therequirements good faith is equally an
important requirement.
Note: In 1544 (double sale), as to whichrule applies will depend on the thing sold if
movable or immovable.
Q: If the thing is sold twice, who would
have the better right?A: If movable, the buyer who first tookpossession in good faith will have the better
right. If immovable, the buyer, who first
registered in good faith, will have the betterright. If there was no registration, it will bethe first who took possession in good faith.
If no possession in good faith, the
buyer who has the oldest title in good faith.
Even the 1stbuyer is required to be in good
faith. Obviously, the first buyer would havethe oldest title. Yung good faith ditto
obviously would not pertain to absence ofknowledge of the 2nd sale kasi syempre 1st
buyer sya. He is nonetheless required tohave bought the thing in good faith. Goodfaith means that he had no knowledge of
the defect of the title of the seller.
Warning:Please be careful when you recite you register the sale not the land.
Read: Bautista vs. Sioson
Carumba vs. CA
Facts: Sale of land to B who took physicalpossession but did not register. He is thefirst buyer. However, the seller (A) is a
judgment debtor in one case to a certain
creditor named C. The land became thesubject of an execution sale. The buyerbecame C who registered the sale.
Q: Who would have a better right
between C and B (C had no knowledge ofthe sale)?A: SC Said !B because this land was notregistered under the Torrens System. 1544
would not apply to unregistered lands.
OBLIGATION TO DELIVER THE OBJECT
OF THE SALEDetermine the subject matter if it is a
thing or a right because there are different
modes of delivery as to thing and as to right.
ThingsKinds of delivery of things as a
consequence of sale known as
tradition under the law:1. Actual Delivery / Material Delivery /
Physical Delivery / Real Delivery the thingis in the possession and control of thevendee. Take note control. Take note to
the vendee.
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Q: What if the thing was delivered to a 3rdperson?A: Jurisprudence SC said ! yes, there
maybe actual delivery if the third person has
authority to receive from the vendee. Thus,
making him an agent of the vendee and that
would still be actual delivery.
Note: Philippine law does not only requireactual delivery constructive delivery may
result in transfer of ownership.
2. Constructive by the execution of a
public instrument if the contrary intention
does not appear on the document. By the
mere execution of the public instrument thatis equivalent to delivery. Hence, ownershippasses to the buyer.
Kuenzle & Streiff vs. Macke & Chandler
Facts: The original owner here Stanley and
Griffindor (parang Harry Potter !) and theproperty involved here are fixtures of asaloon. Macke and Chandler are judgment
creditor of Stanley and Griffindor. Because
of a judgment in favor of Macke andChandler, the sheriff levied upon theseproperties which was still in the possession
of Stanley and Griffindor. The propertiesunder execution were questioned by
Kuenzle and Streiff. Kuenzle and Streiffclaimed that these things were sold to themprior to the levy. If they claimed that theproperties were sold to them, the properties
should be in their possession. Take note
that Stanley and Griffindor were still inpossession of the goods physically. Hence,there was no actual delivery.
Held: In order that ownership would pass, ithas to be in a public instrument if that would
be by constructive delivery.
Kinds of Constructive Delivery1. Delivery of the Keys of the place where
the goods are located like a warehouse.
Prof. De Leon: this also called as symbolicdelivery.
2. By Mere Consent or Agreement of theParties if at the time of the sale,
possession to the goods cannot be
transferred to the buyer. There must be areason why it cannot be transferred at thetime of the sale. This is also known as
tradition longa manu.
Example 1: The thing was the subject
matter of a lease with a 3rdperson until the
expiration of the lease, the thing cannot bedelivered.
Example 2: The thing was the subject
matter of commodatum. As a rule, period ofcommodatum has to be respected.
3. Brevi Manu this is a kind of constructive
delivery because the buyer was already in
possession of the thing sold at the time ofthe perfection of the sale so he will continueto be in possession after the sale, no longer
as a lessee but this time as the owner. Sodati lessee lang sya that is why he was in
possession or maybe depositary lang sya or
maybe he was the agent at the time prior tothe sale.
4. Constitutum Possessorium the seller
will continue to be in the possession of thething after the sale but no longer as anowner but in another capacity like lessee.
Bautista vs. Sioson
Because a lease agreement was enteredinto by the buyer and seller after the salethen the buyer became the lessor and theseller became lessee. Therefore, the lessee
would continue with the possession no
longer as an owner.
RightsKinds of Delivery of Incorporeal Property/ Quasi Tradition:
1. Execution of Public Instrument
2. Placing the Title of Ownership in thePossession of Vendee a right would
normally be covered by a certificate.
Example:delivery of the certificate of sharesof stocks.
3. Use by the Vendee of His Rights with theVendors Consent
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Example: Sale of shares of stocks ! thevendee may not always have the right toexercise his rights under the shares of
stocks. Concretely, if there is a
stockholders meeting, the books of the
corporation will be closed for 30 days before
the meeting. Thus, if the sale occurredwhen the books are already closed, no one
will be recognized except those registeredowners. So if you are the buyer of those
stocks, you can only use your right with theconsent of the vendor.
RULES ON SALE AS TO QUANTITY /
QUALITY OF THE THING SOLD
Q: In a sale involving 1,000 pairs ofshoes with a specific design as agreedupon. The seller delivered 1,200 pairs of
shoes instead of only 1,000. Can thebuyer reject everything?
A: No. He has the right to reject only the
excess. Reject the 200 but he can becompelled to accept the 1,000.
Q: What if instead of 1,000, 800 was only
delivered?A: The buyer cannot be compelled toreceive 800 because partial performance is
non-performance. You cannot compel thecreditor to accept partial fulfillment as a rule
because it can be a subject of a stipulationthat there can be partial delivery.
Q: The obligation to deliver 1,000 cavans
of Milagrosa rice. Instead of delivering
1,000 cavans of Milagrosa, the sellerdelivered 1,100 cavans of both Milagrosa
and Burmese rice. May the buyer rejecteverything?A: Yes, if the goods are indivisible. Meaning
each sack of rice, Milagrosa and Burmese
rice were mixed. However, if it is clear that
per sack it is Milagrosa rice and the 100sacks, it is clear that those are Burmese rice
that would not be considered as indivisible.
He can be compelled to accept 1,000 sacksMilagrosa and he has the right to reject 100
sacks Burmese rice.
SALE OF REALTY
Q: Sale of a parcel of land. Price agreedupon is P1M. More or less 100 sqm. Theactual area delivered by the seller was
only 95 sqm. What are the remedies of
the buyer?
A: (1) Specific performance would be a
remedy if the seller is still in the position todeliver the balance. Siguro yung katabing
lupa sa seller din, hence, he can afford togive additional 5 sqm.
(2) Q: If specific performance is not
possible, is proportional reduction aremedy?
A: It depends on whether the sale is
considered as a sale with a statement of an
area of a rate of a certain measure or if it isa lump sum sale.
Q: Under the facts, 95 sqm wasdelivered, would rescission be a
remedy?
A: As a rule no because rescission wouldonly be a remedy if the area lacking is morethan 10% of that area agreed upon. So
kung 100 sqm, dapat 11 sqm or 15 sqm ang
kulang, so out of 100 kung 85 lang ang na-deliver, then rescission is a matter of right.
PLACE OF DELIVERYRead 1524, 1525 and 1198
The seller delivered the goods to the placeof business of the buyer. If the buyerrefuses to receive the goods, the buyer willbe considered in delay and therefore will be
liable to the seller because of unjust refusal.
Q: May the buyer be considered in delayfor his refusal to accept if there is no
place stipulated in the contract?A: It depends on the kind of thing.Determine if it is determinate or generic. If
the thing is determinate, the law provides
that it will be the place where the thing is
located at the time of the perfection of thecontract.
Q: What if the object of the sale is ageneric thing?
A: Sellers place of business or residence.
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Note: If there is no stipulation when to bedelivered, the seller cannot be compelled todeliver.
Q: What if at the time of the perfection of
sale, though the thing is determinate, it
was on board a ship while in transit.Where will be the place of delivery?
A: Depending on the shipping arrangementagreed upon by the parties.
F.O.B. Free on BoardC.I.F. Cost, Insurance, Freight
F.O.B. and C.I.F are rules of presumption
which would have to give way to the realintention of the parties. So after all, theF.O.B. or C.I.F. arrangements do not really
determine the place of delivery, they onlymake rules of presumption.
So in a C.I.F. arrangement, it is onlypresumed that the place of delivery is theport of origin.
In a F.O.B. destination, it is only presumedthat the point of destination is the place ofdelivery.
Q: What really determines the place of
delivery?A: SC said this indication as to theintention of the parties as to the place ofdelivery is the manner and place of
payment. If there is an agreement as to
where and how the price is to be paid thatwould be the place considered for purposesof delivery and therefore for transfer of
ownership.
Read 1582
Obligations which cannot be Waived:1. Obligation to transfer
2. Obligation to deliver
Obligation which can be Waived:
1. Obligation to warrant the thing
Kinds of Warranties under the Law:
1. Express
2. Implied
1. Express any affirmation of fact or any
promise by the seller relating to the thing,
the natural tendency is to induce to
purchase the thing.
Requisites:(a) There is an affirmation of fact
(b) The fact must pertain to the thingeither to the quality, character or title
of the thing
Any other matter may not be considered as
an express warranty.
The use of the words / terminologies is notconclusive as to whether or not there is anexpress warranty.
Example:I guaranty / warranty you that youwill be happy if you buy this car at
P100,000! this does not result in an
express warranty
Again, if the affirmation of fact pertains to
the quality of the thing, it is an express
warranty.Example:These 10 sacks of fertilizer wouldresult in 200 cavans of rice.
The statement of the sellers opinion is not
as a rule considered an express warranty.Example: This is the best pia cloth ! itmay turn out that there are better pia cloth.
As long as the seller is not an expert on that
field, that would be treated merely as anopinion and there can be no liability forbreach of an express warranty.
BE: A sold a land to B for P1M in
Antipolo. As agreed upon P100,000 will
be paid upon the signing of the DOS. The
balance will be paid within 30 days fromthe time the occupants (squatters) of the
land are evicted. It was so stipulated that
if within 6 months, the squatters havenot yet been evicted, the seller should
return the P100,000. Another stipulationstates within the 6-month period, thevalue of the land doubled. Despite the
filing of an eviction suit by the seller and
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the lapse of the 6-month period, thesquatters were still occupying the land.The seller offers to return the P100,000
to the buyer. The buyer refused to accept
the P100,000 and told the seller never
mind even if the squatters are still there.
I will still buy the land. So the buyeroffered to pay the balance P900,000 and
demanded that a DOS be executed bythe seller. The seller refused to accept
the P900,000. What he did is to file an
action to rescind the contract. Would theaction prosper?
SA: If the answer is based on rescission,
the action will not prosper because
rescission may only be invoked by theaggrieved party. The seller is not anaggrieved party.
2. Implied
Prof. De Leon: because of this implied
warranty, it cannot be said that Philippinelaw does not adopt caveat emptor buyerbeware. (Fayes Caveat !: Please check
the book of Prof. De Leon regarding this
statement. Thanks !)
Even if there is no stipulation as to these
warranties, the law itself would provide forthese warranties and hence if there are
hidden defects he would have remediesunder the law or even if he was deprived ofthe thing he bought he would have aremedy against the seller. Hence, it is not
correct to say that Philippine law has
adopted caveat emptor. But there arecertain instances when there would be nosuch implied warranty against hidden
defects. There may be warranty as to title oragainst eviction but there is no warranty
against hidden defects under certain
circumstances.
Warranty Against Eviction / Title
Q: If the seller was able to transfer
ownership to the buyer may the sellernonetheless be held liable for breach of
warranty against eviction?A: Yes. These are 2 different obligations:the obligation to transfer ownership and the
obligation to warrant the thing.
Example: This warranty against evictionwould include the warranty that the buyer
from the moment of the sale have and enjoy
the legal and peaceful possession over the
thing sold.
Requisites of warranty against eviction:
1. There has to be final judgment deprivinghim of such thing either wholly or partially.
In other words, a case was filed by a 3rdperson against the buyer which resulted in afavorable decision as to the plaintiff
resulting in the deprivation of the property
by the buyer.
2. Deprivation must be either:(2.1) Based on a 3rdpersons prior right
over the thing prior to the sale or(2.2) Based on an act after the sale but
imputable to the vendor.
3. There should be no valid waiver
4. The action to hold the vendor liable
should be filed within the period prescribedby law.
WARRANTY AGAINST HIDDENDEFECTS
Requisites:1. The defect must exist at the time of thesale. If the defect started after the sale therecan be no such liability.
2. The defect must be hidden. If the defectis patent and the buyer nonetheless boughtthe thing then he can no longer hold the
seller liable.If the seller is not aware of the hidden
defects, he can be held liable. If he was
aware, his liability will be greater because
that makes him a bad faith seller.
Q: Even if there is such a hidden defect,
is it possible that the vendee cannot holdthe vendor liable despite the fact that
there was hidden defect even if he wasnot informed because maybe the sellerwas not aware?
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A: Yes, he may not be able to hold the sellerliable if he is an expert on the thing. He isexpected to know the defect.
3. The defect must result in the thing being
unfit for the purpose of the buyer or at least
it diminish the fitness of the thing such thatthe buyer would not have bought it at the
price had he known of such defect.
Q: If the thing which has a hidden defect
was lost or destroyed, can the vendeehold the vendor liable for this breach of
warranty? Does it matter if the loss was
due to a fortuitous event or maybe the
loss was due to the fault of the buyerhimself, nonetheless, can he hold thevendor liable?
A: Yes. The vendee can hold the vendorliable for breach of warranty against hidden
defects even if the thing was lost due to
fortuitous event or due to the fault of thevendee himself because of the hiddendefects. But of course, if the cause of the
loss was the defect itself, the liability is
greater than if the cause of the loss was afortuitous event or fault of the buyer.
If there would be a problem here as to theextent of the liability of the vendor, he
should first consider the cause of the loss,maybe it was lost due to the defect itself orlost through fortuitous event or lost throughthe fault of the vendee. After that, he should
determine whether the vendor was aware of
the defects or he was not aware. Again, ifhe was aware, damages may be recovered.If he was not aware, he may not be held
liable for damages unless he can only beheld liable for interest.
If the defect was the cause of the loss, the
vendor would be liable for the return of theprice, not only the price less value but also
to refund the expenses and damages
because the vendor was aware of thedefects.
If the vendor was not aware of the defects,he cannot be held liable for damages but he
would only be held liable for the price.
If the cause of the loss of the thing was afortuitous event, he can only be held liable
for the price less value.
ANY CHARGE OR NON APPARENT
ENCUMBRANCE NOT DECLARED ORKNOWN TO THE BUYER
Q: Would there be an encumbrance overan immovable which is a form of
easement or servitude?A: An example of this is a road right of way.
Q: If the buyer bought the land which
turned out to have a road right of way in
favor of a 3rd person, can he claimbreach of warranty against any charge ornon apparent encumbrance?
A: Of course there are requisites:(1) The encumbrance or easement or
burden or the road right of way has to
be non apparent.
Q: If there is an encumbrance, what are
the remedies of the buyer?
A: (a) He can seek for the reduction of theprice.
(b) Rescission - the law requires that the
action for rescission must be filed within 1year from the date of the contract. If after 1
year, no more rescission.
(c) If he became aware more than ayear, he may file an action for damages, But
the law requires that the action for damages
has to be filed within 1 year also but fromthe time of the discovery of encumbrance. Ifhe filed it for example, after 2 years from
discovery no recovery of damages.
WARRANTY OF QUALITY
Prof. Deleon, Prof. Vitug, Prof. Baviera:
there is another warranty which isWARRANTY OF QUALITY which includes:
(1) Warranty of Fitness
(2) Warranty of Merchantability
To some authors the warranty of quality isconsidered under the warranty of hiddendefects.
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and other persons who sell by virtues of anauthority of law like notary public becausethey are not really selling for themselves,
they are selling on behalf of another person.
RIGHTS AND OBLIGATIONS OF THE
VENDEE1. Obligation to accept the thing
delivered.2. Obligation to pay the price (if
warranted, with interest)
1. Obligation to accept the thing
delivered
Q: If the buyer received the goodsdelivered, does it mean that he alreadyaccepted?
A: No because receiving is preliminary toaccepting. In fact, this is consistent to the
right provided by law to the buyer which is
the right of inspection or the right ofexamination. Thereafter, he may reject thegoods if defective.
2. Obligation to pay the priceQ: When?A: (1) As stipulated
(2) If there is no stipulation, it wouldbe at the time and place of delivery.
Right to Inspect / ExamineThis may be waived.Example:C.O.D. arrangement.
MACEDA LAWStudy Maceda Law and its essentialfeatures (see book of Prof. Baviera)
Q: Are the remedies under the Maceda
Law alternative? Can the buyer be able
to exercise 2 or more remedies all at the
same time?A: Yes. Remedies under the Maceda Law
are cumulative.
REMEDIES FOR BREACH OF
CONTRACTREMEDIES OF AN UNPAID SELLER(ARTICLE 1526)
(1) Right to retain the thing in hispossession (possessory lien)
(2) Right of stoppage in transitu / right to
resume possession of the goods
(3) Right of resale
(4) Right to rescind
Q: Are there other remedies aside 1526?
A: Yes. The seller may opt to file an actionfor specific performance or an action for
damages.
Unpaid seller is one who has not been
fully paif of the price.
Note:remedies of the unpaid seller are notnecessarily alternative. The right of resaleand the right to rescind may only be
exercised if the seller has possessory lien.
POSSESSORY LIEN
Q: Why is it called possessory lien?A: because there another lien in the law.This is the lien under the rules on
concurrence and preference of credit.
Note: The buyer is not required to beinsolvent.
Q: When would the seller be considered
to have lost his lien?A:
(1) If he waives his right(2) If the buyer lawfully obtained
possession over the goods
(3) When the thing is delivered to acommon carrier and the sellerdid not prefer his ownership and
possession over the goods.
STOPPAGE IN TRANSITU
Requisites:
(1) Insolvency of the buyer(2) The seller must have parted
possession over the goods
(3) The goods must be in transit
How right is exercised:(1) By obtaining actual possession of
the goods
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(2) This may be exercised by merenotice to the common carrier
If the seller validly exercised the right of
stoppage in transitu, he will be considered
to have regained his possessory lien.
RIGHT OF RESALE
Q: When would the seller have thisright?
A:(1) If the goods are perishable(2) The right is expressly
reserved in the contract
(3) The buyer has been in
default for an unreasonable time.
Note:The seller should send a notice of the
intention to resell to the buyer.
Note:The resale may be a private sale or a
public sale. The only limitation here is thatthe seller cannot buy directly or indirectly.
RECTO LAW
Pls. read Sales by Prof. Baviera
EXTINGUISHMENT OF SALE
Pls. read Sales by Prof. Baviera
1. Payment2. Novation3. Loss of the thing
Under the law on sales
1. The exercise of the right of resalewill result in the extinguishment ofthe 1stsale. The ownership of the 1st
buyer will be terminated and suchownership will be vested to the 2nd
buyer
2. Rescission or cancellation will
extinguish COS3. Redemption
Kinds of Redemption1. Conventional
2. Legal
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LEASE
Note:
Read the Definition of Lease underArticles 1643, 1644, 1713.
Consider also on Formalities: Articles
1647, 1724 in relation to 1403 onStatute of Frauds and 1403, 1878 on
Agency to Lease.
Assignment and Sublease: Articles1649, 1650
Implied new lease or tacita recunducion:Article 1670 (important)
Rights and Obligation of the Lessor and
Lessee: Articles 1673, 1678, 1680, 1723(take note several questions in the barhave appeared under these provisions)
Period of the Lease if the parties failed
to Fixed the Period: Articles 1682, 1687
Rights of Third Person: Article 1729 (ex:rights of owner of materials against the
owner of the building)
Note: The first thing to consider in lease isto consider the kind of lease.
Kinds of Lease:1. Lease of Things
2. Lease of Work or Service
3. Lease of Right
Note: In lease of Service, there are four (4)of them but three (3) will not be covered by
Civil Law, which are Household Service andContract of Labor (covered by Labor Law),
and Contract of Carriage (covered byCommercial Law). The only kind of Leaseof Service that will be discuss under the
Civil Law is the Contract for a Piece of
Work.
Definition:
Q: If a party binds himself to giveanother the enjoyment or use of thing,does that make the contract one of lease
of things?
A: No, the most important distinction here
with that of commodatum is that in lease, it
must be for a price certain, otherwise ifthere is no valuable consideration for the
use or enjoyment of the thing it will becommodatum.
Distinguish a Contract for Piece of Workfrom Contract of Agency
Read:Frensel vs. Mariano
Note: In Agency, the control of the principalover the agent is so pervasive that theprincipal can control not only the result but
also the manner and method of theperformance of the obligation which is not
present in this case and therefore Merit was
not considered an agent of Mariano.
Q: As to the relationship of the taxi
driver with his operator, is this a contract
of lease?A: SC, ruled that this is in fact a lease butnot a lease of thing, but lease of service
specifically an employment contract, this isbecause of the control of the operator over
the taxi driver, as to when, what time thedrive operates the vehicle.
Note: Again, to distinguish lease contract
from other legal relationship you have to
consider the characteristic of the contract.The best way to remember the kinds ofcontract is to know by heart what are the
real contract (mutuum, commodatum,deposit, pledge) and formal contract
(antichresis, donation). Aside from that it
may be safe to consider as a rule all the
other contract as consensual contract,where no particular form is required except
in exceptional case: e.g. sale of large cattle.
As a rule lease, therefore is aconsensual contract by mere meeting of the
mind as to the object and to theconsideration the contract is perfected.
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Note: Lease of things is not essentiallypersonal.
Heirs of Fausto Dimaculangan vs. IAC.
Upon the death of parties like death of
lessee, the contract is not thereby
terminated. The heirs of the lessee maycontinue to occupy the premises by virtue of
the lease because it is not extinguish upondeath of lessee.
Characteristic of Lease of things
Consensual Contract
Onerous
Bilateral
Nominate
Principal.
Essential Requisites of Contract ofLease
1. CONSENT2. OBJECT
Q: In lease of things, may a consumable
thing be the subject matter of lease?A: Normally when a consumable thing isuse in accordance with its nature it is
consumed, as a rule therefore consumablethings cannot be the subject matter of lease
of things. The exception is, when the use ofthe things is only for exhibition, or when
they are accessory to an industrialestablishment then it may be a subject of
lease.
3. CAUSE
FORMALITIES
Lease of Service there is no particularform required by law for the validity of the
lease not even for the enforceability as arule.
Read:Donald Dy vs. CA
Lease of Things certain provision of thelaw which requires certain forms to beenforceable.
Note: the problem in lease would normally
be a combination of an agency and lease.
BE: Agreement for the repair of a privateplane and for a certain sum of money,however additional work was requested
by a person who has the authority of a
duly recognize representative of the
owner of the plane and the request was
merely verbal, when the additional workwas completed, the one who rendered
the work demanded additional payment,the defense raise was under 1724 in
order that a claim for additional payment
for the additional work, the agreementfor the additional work must be in writing
and the changes should be authorized in
writing
SA: The suggested answer of UP willsustain the defense because of 1724; suchchange not being authorized in writing, the
request was merely verbal then the claimmay not prosper.
RIGHTS AND OBLIGATION OF THELESSOR
As to necessary repairs of the thing
lease, this is an obligation of the lessor,under the law the lessor is oblige to makethe necessary repairs.
Read: Gonzales vs. Mateo
RIGHTS AND OBLIGATIONS OF THELESSEE
Note: Two (2) favorite articles are 1649
pertaining to assignment of lease, and 1650on sublease.
The question in the Bar may be assimple as may a lessee sublease the
property without the consent of the lessor
and what are the respective liabilities of the
lessee and sublessee.
Articles 1649 and 1650 would tell us
that a lessee may not assign his right on thelease without the consent of the lessor
however he may sublease the property inwhole or in part even without the knowledgeof the lessor as long as he was not
prohibited from subleasing the premises.
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Read: Malacat vs. SalazarFrensel vs. Mariano
TERMINATION OF THE LEASE
BE: Discuss the effect of death of lessee,lessor, agent and principal.
SA: In a lease of thing, death of the lesseedoes not terminate the contract. A contract
of lease is not essentially a personalcontract therefore upon the death of thelessee, it may be continued until the
expiration of period of the lease by the
heirs. (Case: Heirs of Dimaculangan vs.
IAC)
IMPLIED NEW LEASENote: one of the most favorite in the bar
exam.
Requisites:1. The lease period has expired and
2. The lessee continues to be in possession
of the lease for at least 15 days from thetime of the expiration of the lease and3. No notice to the contrary from the lessor
and the lessee.
BE: Pertain to contract of lease enteredinto for period of 3 years Jan 1, 81 up to1984. Rentals were paid on monthlybasis. It was stipulated that the lessee
has the option to buy property at a
certain price within a certain period(option to buy). Despite the lapse of the
3 year period, the lessee did not exercisethe option, but continued to be inpossession of the property and paying
the monthly rentals and the lessor
accepting the same. This continued until
June 1984 when the lessee stated that hewould now buy the property in
accordance with the option to buy. The
lessor refuse, claiming there was nomore option. Was the lessor correct?
Yes. Was it correct to say that there wasextension of the lease under the facts?SA: Yes, there was an extension known
was implied new lease. However, with the
implied new lease it does not mean that allthe terms and condition of the contract inthe original lease continue also. First as to
the term, under the law, the term of the
renewed lease would not be the term
agreed upon but only be of a period
depending on the manner the rentals arepaid. If the payment is on annual basis, the
renewal would only be for a year and ifmonthly payment of rental is made, the
implied new lease would only last for 30days.
As to the option, it was renews, SC
held, in an implied new lease, only those
terms and conditions which are germane in
a contract of lease are deemed renewed asto the rest like option to buy, will not beconsidered renewed. Even in the facts of
the case itself, it was stipulated that theoption may be exercise within the period
agreed upon (3 years).
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AGENCY
Definition 1868, 1874 and 1878- formalities
Coz a form is required for the validity or forthe enforceability of the contract entered bythe agent-1878, 1874
1892- pertain to appointment of the
substitute- effect- may the agentnonetheless be held liable for the loss thatincurred by the principle as the result of the
appointment of the substitute.
Other provisions pertain to the right and
obligations of commission agent or more
importantly the guaranty commission agent-1907-1908
Effect of death-1919, 1930 and 1931Either of the agent or principal
Revocation-kind of agency- agency coupledwith interest-1927
BE: A asked her best friend to B buy forher certain items in a grocery store. Isthere a nominate contract created
between A and B?
SA: Better answer, if B agreed to therequest of A, an agency relationship has
been created, a nominate contract has beencreated.
Read:Quiroga vs Parsons
Distinguishing contact of agency from othercontract and other legal relationship.
Consider the characteristics of a contract of
agency as a contract and as a legalrelationship business organization.
Read: Lepanto Mining case
Mariano case
Some authors would classify contract of
agency into three, not concepts.1. Actual agency2. Apparent / dormant
3. Estoppel
1. Estoppel
Kang case
Facts: Flores appears to have full control of
a restaurant, owned by Kang and in the
administration of the restaurant he boughtcertain items from Mack, items needed for
restaurant but a portion / price to be paid,not by Flores, so Mack ( seller ) went after
the owner of the resto. The only defenseraised by the owner was that Flores was nothis agent.
Take note: it is very difficult to prove actual
agency, because an agreement between 2
persons, eh kung verbal lang angagreement dun, how would you be able toprove, the owner of the restaurant can be
held liable by estoppel because he clothFlores with full power as if he has the
authority to buy those items necessary for
the administration of restaurant aside fromthat Mack was able to prove pieces ofevidence like in the lease agreement over
the building where restaurant was located
and comes the owner of the restaurant aslessee and Flores sign as an agent of thelessee with all this the
Held: The owner of the restaurant is liableunder the Principle of Estoppel.
2. Apparent / OstensibleQ: A letter was sent by B to X, informingX that A has the authority to enter into a
contract with X specifically to obtain
goods from X, like copra, abaca whichgoods will be sold by A, after the sale a
portion can be deducted as acommission and the restaurant to bedelivered to X. after a certain period, the
goods obtain by A from X remained
unpaid. In other words A will get the
goods from X, A did not deliver theproceeds of the sale. X demanded
payment from B. The defense of B was
as of that moment from that certainperiod he has already revoked the
authority of the agent and therefore bebound by any contract entered into by Ain representation of B with 3rdperson. Is
the claim of B tenable?
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SA: No. 1873 so far as 3rd person areconcern, this notice itong letter nya kay Xremain in full force and effect until it is
rescinded in the same manner it was given.
3 Actual agency
The law itself classify actual agency into asmanner of creation, express / implied. There
is no problem with express agency.3. Express agency-it is a kind of
agency the consent of both partieswere expressly given.
4. Implied agency- were the consent of
one parties was only impliedly given
on the part of principal- the leading
case is Dela Pena vs. Hidalgo
Q: If a person was asked to administerthe property of another to sell the
property, and he said nothing- by his
silence, by his inactions may be deemedaccept agency?A: Not necessarily. Under the law, you have
to make distinction to determine the
scenario under which the said appointmentwas made, okie! The law would say whenthe 2 parties are absent, and when the 2
parties are present.When 2 parties are absent- 1 is in Manila
and the other is in Cebu.When 2 parties are present- present in thesame room
(a) 2 persons present- present in the
same conference hall(b) If 2 persons are in different place,one in Manila and the other one in Cebu
Compensation
As to the compensation in a contract of
agency consider if the agency is gratuitous
or onerous.
Read: 1909 - the liability of the agent for
damage to the principal due to hisnegligence or even bad faith or fraud
committed against the principal may bemitigated if the agency is gratuitous incharacter.
BE: Scope of authority of the agentwhether it only pertains to the acts ofadministration or acts of anu yun
dominion?
SA: Under this provision 1877 if the agency
is comes in general term this only comprise
acts of administration even if the principalbeholds power to the agent or it is stated
that the agent may execute any act as maybe deemed appropriate. That will still be an
agency pertaining to act of administration.
As to form, the law is clear that it may be
oral however the law may require a
particular form.
ESSENTIAL ELEMENTS OF ACONTRACT OF AGENCY
Read: Rallos caseThe SC enumerated the essential elements
or the alleged essentials elements of a
contract of agency.1. Consent2. Execution of the juridical act-
subject matter
3. Acts within the scope of authority4. The acts must be in
representation of the principal
This are allegedly the essential elementagain some authors would discuss in their
books with due respect to the ponente ofthis case, medyo mali mali angenumeration, first there was nothingmention about the cause or consideration
as a contract, a contract will never validly
have a cause or consideration well it maybe liberality pwede naman cause yan butthere must have a cause if only for that the
enumeration be defective more than thatthat last 2 mention that the agent act within
the scope and that the agent must act in
representation are not essential elements of
a contract of agency they are actuallyobligations of agent which means they have
been already perfected of contract of
agency, no obligation will arise kung voidung kontrata kung wala pang valid contract,
so essential elements are only thoseelements necessarily for the validity of thecontract, once the contract is valid then the
obligations will arise even if the agent
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acted outside the scope of authoritydoes it mean that the contract of agencyis void? Of course not, he can be held
liable for acting outside the scope of
authority or if he acted not in contemplation
of the principal, does it mean that there
was no agency at all?Of course not, thereis a contract of agency. Under the rule the
consequences if the agent did not act in therepresentation of the principal.
PARTIESGoing to the consent of the parties, well 1
author claims that there are 3 parties in a
contract of agency that is totally wrong!
There are only 2 parties in a contract ofagency the principal and the agent, howeverin problems involving agency there may be
there would be normally three personsinvolve, the third persons with whom the
agent transacted, no longer part of the
concept agency, this is the agency, thecontract entered into between by theprincipal and the agent, but when the agent
entered into a contract it may be a sale,
lease or other contract and the 3rdperson isnot a party to this contract, the 3rdperson isa party to a 2nd contract, that again the
parties is the principal and the agent, theymay be called in another names the
principal- employer, constituent, chief; theagent may be called attorney-in-fact, proxy,representative.
OBJECT
As to the object of the contract of agency -this is the execution of juridical act.
FORMAgency may be oral. It does not matter, the
contract of agency would be valid but the
parties even if it is by verbal agreement,
however any effe