midterms reviewer - sales-1

JOEBELL G. PARAGGUALLB COL RMTU

SALES

SALESArticle 1458. By the contract of Sale one of the contracting party obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay thereof a price certain in money or its equivalent.

Parties involved:a. Seller or Vendorb. Buyer or Vendeec. 3rd party (only if appointed) Art 1468 / 1479. e.g. agent

Elements:a. Consentb. Determinate thing or Subject matterc. Price – in money or its equivalent

Essential Characteristics: (CBO-CPN)a. Consensual – perfected by mere consentb. Bilateral reciprocal – imposes obligations on both parties.c. Onerous – to acquire the right, valuable considerations must be given.d. Commutative – a thing of value is exchanged for an equal value.e. Principal – can stand on its own, unlike accessory contracts - (pledge, mortgage)f. Nominate – because it has its own name

3 Requisites of Consent:1. Capacity 2. Offer and Acceptance 3. Must not be Vitiated

Capacity Kinds of Incapacity

1. Absolute (1327) (MInD-CI)a. MINORb. INSANE or Dementedc. DEAF-MUTES who do not know how to writed. CIVIL Interdictione. Judicially declared INCOMPETENT

-prodigals-imbecile-absence and presumption of death-persons not of unsound mind but by reasons of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property without outside aid.

Effects: If both parties are incapacitated: UNENFORCEABLE

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If only 1 Party is incapacitated: VIODABLE If necessaries are sold and delivered to an incapacitated person: (1489)

-MUST PAY a REASONABLE PRICE therefore.

Necessaries – those which are indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation.

2. Relative (1490) (HAT)a. HUSBAND and Wife – cannot sell property to each other.

EXCEPT: 1. Separation of property in marriage settlement2. Judicial Separation of Property

b. ALIENAGE – Aliens disqualified to purchase or acquire propertyEXCEPT: if the acquisition is through hereditary succession.

c. TRUSTEESHIPEffects:

Sale between spouses: VOIDReasons:1. To protect 3rd persons who may have contracted with the spouse.2. To avoid undue advantage of the dominant spouse over the weaker spouse.3. To avoid indirect prohibition against donations between spouses.

3. Specific (1491) (AGE-PLJ)a. AGENTS – property whose administration or sale was entrusted to themb. GUARDIAN – cannot purchase property of persons under his guardianship.c. EXECUTORS and ADMINISTRATORS – property of the state or any of its

subdivisions / GOCC, the administration of which was entrusted to them.d. PUBLIC officers and Employees property of estate under their administratione. LAWYERS – property or rights in litigation in which they take part because of their

profession.f. JUSTICES, Judges, Prosecuting Attorneys, Clerks – property or rights in litigation or

levied upon on execution.Effects:

Contracts expressly prohibited by law are VOID and cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Sales by guardians, administrators, agents, violating 1491 MAY BE RATIFIED. – by a new contract - when the cause of nullity cease to exist. Ratification – valid – from date of execution of new contract and not retroactive effect.

Offer and AcceptanceGeneral rule: the Contract of Sale is perfected at the moment there is a meeting of the minds of

the parties upon the thing which is the object of the contract and the equivalent price.

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Forms of Acceptance: Unconditional Qualified acceptance = counter-offer May be express or implied

Note: Acceptance must be in accordance with the terms and conditions of the offer. There is no meeting of the minds if the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer.

Must not be vitiatedVitiate – to invalidate or make wholly or partly ineffective.

A contract where consent is given through MISTAKE, VIOLENCE, INTIMIDATION, UNDUE INFLUENCE or FRAUD is: VOIDABLE.

There is FRAUD where through insidious word or machinations of one of the parties, the other is induced to enter into a contract with, without them he would not have agreed to.

Could there be sale against the will of the owner?General Rule: NO. Because of the absence of Consent.Exceptions: (EJ-JE)

1. Expropriation – the process of exercising Eminent Domain.2. Judicial Sale – Ordinary execution of sale. After the decision has been rendered, if

insolvent, things owned is taken and sold.3. Judicial Foreclosure – public auction initiated by the court.

Note: There is a redemption period of 1 year.4. Extra Judicial Foreclosure – Public auction by banks.

3 powers of the state:1. Police Power2. Eminent Domain3. Taxation

Sale vs. Dation in Payment (DACIO EN PAGO)SALE DATION IN PAYMENT

1 .There is no pre-existing credit.2. Gives rise to obligations.3. The cause or consideration here is the price,

from the viewpoint of the seller; or the obtaining of the object, from the viewpoint of the buyer.

4. There is greater freedom in the deterioration of the price.

1. There is a pre-existing credit.2. Extinguishes obligations.3. The cause or consideration here from the

viewpoint of the person offering the dation in payment is the extinguishment of is debt; from the viewpoint of the creditor, it is the acquisition of the object in lieu of the original credit.

4. There is less freedom in determining the price.

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5. The giving of the price may generally end the obligation of the buyer.

5. The giving of the object in lieu of the credit may extinguish completely or partially the credit (depending on the agreement)

Art. 1459. Lawfulness of the Object and Right to Transfer ownership

2 Rules1. Object must be LICIT2. Vendor must have the right to transfer Ownership at the time the object is delivered.

Licit – means lawful and within the commerce of men

2 Types of ILLICIT thing:1. Per se (of its nature) (immoral)

Sale of a human flesh for human pleasure.2. Per accidens (made illegal by provisions of law)

Sale of land to an alien.Sale of illegal lottery tickets.

If the object of the sale is illicit: NULL AND VOID and cannot be ratified. Essential for seller to transfer ownership. Therefore, seller must be the owner of the subject

sold.Principle behind: “Nemo dat quad non habet” – Nobody can dispose of that which does not belong to him.

Seller need not be the owner at the time of perfection because: FUTURE THINGS OR GOODS among others may be sold.

A person who has a right over a thing although he is not the owner of the thing itself may sell such RIGHT. E.g. usufructuary

Art. 1460. Determinate thing

Determinate – it is particularly designated or physically segregated from all others of the same class.

2 Kinds of Object:1. Specific2. General

3 Requirements of Object:1. Existing, Future or Contingent2. Licit3. Determinate or Determinable

Indeterminate thing can be an object if it be determinable without any other agreement.

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Art. 1461. Sale of a vain hope or expentancy

Sale of a thing having a potential existence – future thingse.g. Sale of all rice harvest next year.

Young animals not yet in existence or still ungrown fruits.

2 Types:1. Emptio rei sperati – sale of an expected thing.2. Emptio spei – sale of the hope itself

e.g. Sale of a genuine sweepstakes ticket / Whether the ticket wins or not, the sale is valid.

Vain Hope or expectancy (without possibility) – VOID.E.g. Sale of a sweepstakes ticket already run.Unless: it be a collector’s item.

Art. 1462. Sale of Goods

2 Types of Goods1. Future 2. Existing goods.

Future goods are those still to be:1. Manufactured

e.g. Future airplane2. Raised

e.g. Young animals, whether already conceived or not at the time of perfection of the contract.

3. Acquired by seller after the perfection of the contractLand which the seller expects to buy.

4. Things whose acquisition depends upon a contingency which may or may not happen.

Art. 1463: Sale of Undivided Interest

E.g. selling an aliquot part of a property in which the seller and the buyer become co-owners of the said property.

A full owner may sell the usufruct of his land leaving the naked ownership to himself.

Art. 1464. Sale of Fungible Goods

Fungible – goods that cannot be used unless consumed.Co-ownership – if content is greater than the one being sold.Sole Ownership – if the content is lesser than the one being sold.

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Art. 1465. Sale of things subject to a Resolutory Condition.

RESOLUTORY CONDITION– fulfillment of condition extinguishes an obligation

Tacit – implied, understood without being expressly stated.

Article 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered.

Sale vs. AgencySALE AGENCY

The buyer pays for the price of the goods/property purchased

The agent does not pay for the price. He merely accounts for the proceeds of the sale.

The buyer becomes the owner of the goods/property purchased

The agent does not become the owner of the goods/property delivered to him for sale.

Buyer cannot return the goods/property when the sale is defective

The agent returns the goods/property if he was not able to sell the same

The seller warrants the goods/property sold

The agent does not make any warranty as long as he acts within his authority and in the name of the principal

The seller has full freedom to enter into any terms or conditions on the contract of sale

The agent must follow the instructions of the principal

Article 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

Contract for a Piece of Work— the article sold is specially manufactured and upon the special order of the customer. Article is not sold in the ordinary course of business.

Contract for a piece of work Contract of SaleThe thing transferred is one not in existence and w/c never would have existed but for the order of the party desiring to acquire it

The thing transferred is one which would have existed and would have been the subject of sale to some other person, even if the order had not been given

The services dominate the contract even though there is a sale of goods involved

The primary objective of the contract is a sale of the manufactured item; it is a sale of goods even though the item is manufactured by labor furnished by the seller and upon previous order of the customer

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Not w/in the Statute of Frauds Governable by the Statute of FraudsRules to determine if the contract is one of sale or a piece of work:

1. If ordered in the ordinary course of business – SALE2. If manufactured specially and not for the market – PIECE OF WORK CONTRACT

MASSACHUSETTS RULE – If specially done at the order of another – PIECE OF WORK. NEW YORK RULE - If the thing already exists, - SALE. If not – PIECE OF WORK. ENGLISH RULE – If material is more valuable – SALE. If skill is more valuable – P. of WORK.

Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale.

Sale BarterConsideration: giving of money as payment Consideration: giving of a thing

Governed by law on sales: species of the genus salesIf consideration consists party in money and partly by thing

– look at manifest intention;If intention is not clear: value of thing is equal or less than amount of money – sale

If intention is not clear: value of thing is more than amount of money – barter

Rules if Consideration is partly Money and Partly Goods1. Determine the intention of the parties.2. If intention could not be determined, consider the value of the thing given:

a. If value of the thing more than value of the money, it is BARTERb. If value of the thing less than value of the money, it is SALEc. If both values are the same, SALE

Note:Exchange of Money – SALEPESO to PESO – BARTER

Article 1469. Certainty of the Price

The price must be certain; otherwise, there is no true consent between the parties. The failure to pay the agreed price does not cancel a sale for lack of consideration, for the

consideration is still there, namely, the price.

When no specific amount is stipulated?If there is no mention of price, sale is still valid if:

1. with reference to another thing certain;2. the determination of the price is left to the judgment of a 3rd person/s

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3. Reference to a certain facts.Requisites for a Price:

1. It must be REAL2. It must be money or its equivalent3. It must be certain or ascertainable.

Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.

Ex. Selling a house and Lot by P5.00.

Effect of Gross Inadequacy of Price. No effect. Exceptions: (meaning, sale is set aside)

1. If consent is vitiated, such as VIMFU (Violence, Intimidation, Mistake, Fraud, Undue influence)

2. If the parties intended a donation or some other act or contract3. If the price is so low as to be shocking to the conscience

Article 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

2 Kinds of Simulation1. Relative – shown to have been a donation or other contract.2. Absolute – sale is VOID.

EFFECT WHERE PRICE IS SIMULATED1. The act may be shown to have been in reality a donation, or some other act or contract2. If not and neither party had any intention whatsoever that the amount will be paid

(absolutely simulated): the sale is void3. If there is a real price but what is stated in the contract is not the one intended to be paid

(only relatively simulated): the contract of sale is valid but subject to reformation

Effect of Simulated Price. Sale is void, unless it could be shown that the parties intended a donation or some other act of liberality.o Price Simulated- No price to support a contract of sale, such that neither party had any

intention that the amount will be paid—voido Price is False- there is a real price not declared—contract is valid, but the underlying deed is

subject to reformation to indicate the real price upon which the minds of the parties have met.

Article 1472. Certainty of Price of Securities, Grain, Liquids and Other things.

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If it has reference to time or location – VALID SALE. Bec with reference to another thing certain.

Reiteration of Art. 1469.Article 1473. Price cannot be left to one Party’s Discretion.

If the price fixed is accepted by the other, sale is PERFECTED.

Article 1474. Effect if Price cannot be determined.

If the price cannot be determined, Sale is VOID for the buyer cannot fulfil his duty to pay. If the buyer has made use of it, he should not be allowed to enrich himself unjustly at

another’s expense. He must pay a REASONABLE PRICE.

Article 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

PERFECTION OF CONTRACT OF SALE. Meeting of the minds upon the thing and price.Effect: Parties may reciprocally demand performance

GENERAL RULE: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price; consensual contract

Exception: When the sale is subject to a suspensive condition

REQUIREMENTS:1. When parties are face to face – when there is absolute acceptance of an offer that is

certain2. When thru correspondence or telegram – when the offer or receives or had knowledge of

the acceptance3. When the sale is subject to a suspensive condition – from the moment the condition is

fulfilled

NOTES: Qualified acceptance: mere counter-offer which needs to be absolutely accepted to give rise to perfected contract of sale. Business ads are mere invitations to make an offer except when it appears to be otherwise.

Article 1476. Sale by Auction.

Sale is PERFECTED by the fall of a hammer.Parties:

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1. Bidder – buyer2. Auctioneer – Seller3. Puffer – hired by seller to increase the amount.

Can the Seller BIDS?General Rule: NOExceptions:

1. Right to bid was reserved.2. Notice was given that the sale of auction is subject to a right to bid on behalf of the

seller.By-bidders or puffers – persons who bid in behalf of the seller.

Article 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

Ownership is transferred through delivery not by perfection. UNLESS, THERE IS STIPULATION.

Delivery – transfer of possession from one person to another.

2 Types of Delivery:1. Real or Actual – actual control and possession is transferred.2. Constructive or Legal – transfer through any other manner signifying the agreement.

Article 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.

Generally, ownership is transferred upon delivery, but even if delivered, the ownership may still be with the seller till full payment of the price is made, (IF THERE IS A STIPULATION to this effect.)

Although delivery should not be made till after payment, still if it is stipulated that payment will be made only after a certain period, delivery must be made even before payment.

Article 1479. Promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

POLICITACION – a unilateral promise to buy or to sell which is not accepted. Produces no juridical effect and creates no legal bond. This is a mere offer and has not yet been converted into a contract.

BILATERAL PROMISE – a bilateral promise to buy and sell a certain thing for a price certain gives to the contracting parties’ personal rights in that each has the right to demand from the other the fulfilment of the obligation.

UNILATERAL PROMISE – to sell must be plain, clear and unconditional.

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OPTION CONTRACT – a contract granting a person the privilege to buy or not to buy certain objects at any time within the agreed period at a fixed price.

Article 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.

This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay.

Legal consequences from point of perfection are the same in both legal systems: upon perfection of an unconditional contract of sale involving specific or determinate subject matter, the risk of loss deterioration and the benefits of fruits and improvements, were fro the account of the buyer.

WHO BEARS RISK OF LOSS/ DETERIORATION/FRUITS:

1. BEFORE PERFECTIONa. Res perit domino or the owner bears the lossb. Owner is seller so seller bears risk ofloss

2. AT PERFECTIONo Res perit dominoo Contract is merely inefficacious because loss of the thing does not affect the validity of the

saleo Seller cannot anymore comply with obligation so buyer cannot anymore be compelled

3. AFTER PERFECTION BUT BEFORE DELIVERYo Loss – confused stateo Paras: BUYERo Tolentino: SELLERo Deterioration and fruits – Buyer bears loss;

4. AFTER DELIVERYo Res perit dominoo Delivery extinguishes ownership visa-vis the seller and creates a new one in favor of the

buyer

FUNGIBLES – are personal property which may be replaced with equivalent things.

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Article 1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description.The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample.

Sale of Goods By Description- where a seller sells a thing as being of a certain kind verbally describing them and the buyer simply relies on the seller’s descriptions of the things, not knowing whether the seller’s representations are true or not.

Sale by Sample- Where the seller warrants that the bulk of goods being sold correspond with the sample or samples exhibited not only in kind but also in quality and character.

Sale by Description and Sample- Where the seller has to satisfy the requirements in sale by description and sample. There are two-fold warranty here: (a) the goods purchased matched with the description and (b) the goods also matched in kind, quality and character with that of the sample or samples exhibited to the buyer or his representative

Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.

EARNEST MONEY – called “ARRAS” is something of value to show that the buyer was really in earnest and given to the seller to bind the bargain.

Arras must be returned if merchandize cannot be delivered.

EARNEST MONEY vs. OPTION MONEYEarnest Money Option MoneyIt is part of the purchase price It is given as a distinct consideration for an

option contract which gives the buyer a specific period within which to purchase the thing

It is given only when there is already a perfected sale

It is given at a time when the sale had not yet been perfected. What had been perfected only is the option contract

When it is given, the buyer is bound to pay the balance of the agreed purchase price

Even if option money is paid by the would-be-buyer he is not bound to buy the thing

If the sale does not materialize, the earnest money paid must be returned, unless a contrary agreement had been stipulated

If the buyer decides not to buy the thing, he cannot recover the option money he paid as consideration for the contract of option

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Article 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties.FORM OF SALES

I. Form not important in validity of salea. Sale being consensual, may be oral or written, perfected by mere consent as to price

and subject matterb. If particular form is required under the statute of frauds:

- valid and binding between parties but not binding to 3rd persons - Reason: purposes of convenience only and not for validity and enforceability; cause of action is granted to sue and compel other party to execute the document

II. When form is important for validity; exception by specific provision of law;a. Power to sell a piece of land granted to an agent – otherwise VOIDb. Sale of large cattle; must also be registered with Municipal treasurer – otherwise VOIDc. Sale of land by non-Christian if not approved by Governor– VOID

III. When form is important for enforceability (STATUTE OF FRAUDS Article 1403 (2))a. A sale agreement which by its terms is not to be performed within a year from the

making thereof;b. An agreement for the sale of goods, chattels or things in action, at a price not less than P500.00;c. A sale of real property or of an interest therein.

IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS:1. When there is a note or memorandum in writing and subscribed to by party or his agent

(contains essential terms of the contract)2. When there has been partial performance/execution (seller delivers with intent to

transfer title/receives price)3. When there has been failure to object to presentation of evidence (oral)4. When sales are effected through electronic commerce

Article 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:(1) Exact fulfillment of the obligation, should the vendee fail to pay;(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the

vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.

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Article 1486. In the case referred to in the two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.

RECTO LAW – RA 4122 Instalment Sales Law. To remedy the abuses committed in connection with the foreclosure of chattel mortgages

and was meant to prevent mortgages from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment.

LEGAL INTEREST – 6% shall be applied after demand to vacate.

MACEDA LAW – RA 6552 Sale of Real Property by Installment. At least 2 years of installment paid Rights:

1. Entitled to a grace period to pay installments in case of default.2. To pay without interest, the unpaid installments due within a total grace period of

1 month for every year installments. This must be exercised only once every 5 years in the life of the contract.

3. Buyer’s Right – Opt for a refund – 50% of the total payment An additional 5% per year for every 5 years. If Less than 2 years payment:

1. To continue payment within 60 days grace period.

Article 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.

VENDOR shall pay for the execution and registration UNLESS there is STIPULATION.

Article 1488. The expropriation of property for public use is governed by special laws.

REQUISITES FOR EXPROPRIATION.1. Private property2. Private property taken by the state3. Private property taken for public use.4. Payment is of just compensation.

Article 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.

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Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290. Two Kinds of Incapacity:1. Absolute Incapacity- Party cannot bind himself in any case.2. Relative Incapacity- Certain Persons under certain circumstances cannot buy certain

property. ** Minors in contract for necessaries must pay reasonable price.Necessaries—those things which are needed for sustenance, dwelling, clothing and medical attendance, in keeping with the financial capacity of the family of the incapacitated person.

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

Prohibition against Husband and Wife. Exceptions.Rationale: PIDa. To avoid Prejudice to 3rd Personsb. To prevent one spouse from unduly influencing the other.c. To avoid by indirection the violation of the prohibition against donations.

Who may assail illegality?a. Creditors prior to the saleb. Heirs of either spouse.

** Either spouse may not assail illegality because they are parties thereto.** A spouse designated as agent of the other spouse may sell the latter’s exclusive property.

Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

(1) The guardian, the property of the person or persons who may be under his guardianship;(2) Agents, the property whose administration or sale may have been entrusted to them,

unless the consent of the principal has been given;(3) Executors and administrators, the property of the estate under administration;(4) Public officers and employees, the property of the State or of any subdivision thereof, or

of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and

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rights which may be the object of any litigation in which they may take part by virtue of their profession;

(6) Any others specially disqualified by law.

Persons Relatively Incapacitated to Buy. (PAGEJO)1. Public Officers and employees—Property of State.2. Agents—Property of Principal unless with consent.3. Guardian—Property of Ward.4. Executors and administrators—Estate5. Justices, Judges, Prosecuting Attorneys, Clerks and employees of court - Property/Rights

under litigation.6. Others disqualified by law. (Ex. *aliens who are disqualified to purchase private agricultural

lands; *an unpaid seller having a right of lien or having stopped the goods in transitu, who is prohibited from buying the goods either directly or indirectly in the resale of the same at a public or private sale w/c he may make. Art. 1533, par.5)

Rationale: Fiduciary relationshipStatus of Sale: Voidable (1-3); Void (4-6)

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

REDEMPTION – the process by which land that has been mortgaged or pledged is bought back or reclaimed.

RENUNCIATION – the abandonment of a right

COMPROMISE – an agreement between opposing parties to settle a dispute or reach a settlement in which each gives some ground, rather than continue the dispute or go to trial.

Article 1493. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect.

But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon.

Loss of Object before SALE:1. No cause or consideration2. Contract is VOID3. Seller will have to bear the loss – Res Perit Domino

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Partial Loss Rules:1. Vendee may withdraw from the contract2. Demand the remaining part, paying its price in proportion to the total sum agreed upon

Article 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale:

(1) As avoided; or(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible.

Loss/Substantial Deterioration of Specific Goods without seller’s knowledge.1. Buyer may avoid the sale or2. May treat sale as valid w/ respect to the existing goods

Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.

Obligations of Vendor. (TDWP)1. Transfer Ownership (not waivable)2. Deliver (not waivable)3. Warrant Object (waivable and may be modified)4. Preserve Thing from perfection to delivery (Art. 1163)5. Pay for the execution and registration of the sale unless there is a contrary agreement

**Execution sales do not require the delivery of thing since a one year period of redemption is available to seller.

FAILURE TO DELIVER ON TIME:1. If failed to deliver at a stipulated period

- the seller has no right to demand payment or price.- the buyer may ask for the rescission or resolution of the sale.

2. If failure to deliver on time is not the seller’s fault:- Seller may be sufficiently excused from liability if the buyer failed to supply necessary credit for the transportation of goods.

EFFECTS OF NON-DELIVERY-If seller fails to deliver and Buyer has no fault: buyer may ask for the resolution or rescission of the contract.

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EXECUTION SALEWhen property is sold at an execution sale: Judgement - debtor not required to deliver right away.

Reason: 1 year grace period within which to redeem property. Buyer should not take actual, physical possession

Reason: FORCIBLE ENTRY may be brought against him.

PERIOD OF REDEMPTIONCommence to run not from the date of the auction or tax sale but from the day the sale was

registered in the Office of the Registry of Deeds.

Article 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Ownership is transferred generally only by delivery If not delivered even if sold: buyer has only a PERSONAL right to demand its delivery

because it is delivery that transfers the real right of ownership.

Article 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

Control and Possession necessary in Delivery.Exception: Art. 1478. Stipulation as to full payment of price.

Delivery or TRADITION - a mode of acquiring ownership as a consequence of a contract of sale by virtue of which actually or constructively the object is placed in the control and possession of the vendee.

KINDS OF DELIVERY1. Actual or Real. (1497)

2. Legal or Constructivea. Legal Formalities (1498); execution of public instrument.b. Traditio Symbolica or Symbolical Tradition (1498 par 2)- “keys” delivered.c. Traditio Longa Manu- by mere consent /agreement. If the movable sold cannot yet

be transferred to the possession of the buyer at the time of the sale. (1499)d. Traditio Brevi Manu- if the buyer had already the possession the object even before

the purchase. (lessee becomes owner)e. Traditio constitutum possessorium- possession as owner changed. (Owner becomes

lessee)

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3. Quasi-Tradition- Delivery of Rights, credits or incorporeal property made by:a. Execution of public instrumentb. Placing titles of ownership in the hands of a lawyer.c. Allowing the buyer to make use of the rights (1501)

Article 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.

With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.

Requirements before ownership may be transmitted:1. Seller’s Control.2. Seller’s Control transferred to buyer.3. Intention to deliver for ownership.

Constructive Delivery – implied delivery

2 Kinds1. through Legal formalities2. through Traditio Symbolica

LEGAL FORMALITIES – applies to real and personal property since the law does not distinguish

Article 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason.

TRADITIO LONGA MANU – 1st Part

TRADITIO BREVI MANU – 2nd Part

Article 1500. There may also be tradition constitutum possessorium.

Basis is CONSENT.

Different forms of Constructive Delivery - Constructive delivery has same legal effect as actual or physical delivery

1. Traditio Longa Manu − Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering

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2. Traditio Brevi Manu − Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee)

3. Traditio Sympolica or Symbolic delivery − As to movables – ex: delivery of the keys to a car

4. Constitutum possessarium − When at the time of the perfection of the contract of sale, seller had possession of the subject matter in the concept of owner and pursuant to the contract, seller continues to hold physical possession no longer in the concept of an owner but as a lessee or any other form of possession other than in the concept of owner.

Article 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor's consent, shall be understood as a delivery.

Delivery of Incorporeal Property

1. By constructive tradition – execution of public instrument2. By Quasi-Tradition – placing of titles of ownership in the possession of the buyer, or the

use by the buyer of his rights, with the seller’s consent.

Delivery of land title deeds is equivalent to a delivery of the property itself.

INCORPOREAL - relating to property or an asset that does not have value in material form, as a right or patent.

Article 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time.

When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer:(1) When he signifies his approval or acceptance to the seller or does any other act adopting

the transaction;(2) If he does not signify his approval or acceptance to the seller, but retains the goods

without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Transaction on Sale or Return. Subject to Resolutory Condition.

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Difference with “Delivery with option to purchase”- Ownership is transferred in Sale or Return

Transaction on Approval or Trial/Satisfaction. Subject to Suspensive Condition.

Rules:1. Risk of loss to seller until the sale becomes absolute. (Exceptions: Buyer in default;

Buyer agreed to bear the loss)2. Buyer must give goods a trial except when it is evident that it cannot perform the work

intended.3. Period of signifying acceptance commences to run only when all the parts essential for

operation has been delivered.4. A provision that a 3rd person must satisfy approval is valid but he must be in Good faith.5. Generally the Sale and Delivery to an expert buyer is not a sale on approval/trial.

Sale or Return vs. Sale on ApprovalBasis Sale or Return Sale on ApprovalCondition Subject to Resolutory

conditionSubject to suspensive condition

Premise It depends upon the will of the buyer

It depends upon the suitability, quality or character of the goods

Transfer of ownership Ownership immediately passes to the buyer on delivery

Ownership does not immediately pass to the buyer. It passes only upon approval or satisfaction of the buyer duly manifested after trial

Revesting (return) of ownership in the owner

Ownership is revested in the seller if the buyer so decides

There is no revesting of ownership because it is retained by the seller until the sale becomes absolute

Risk of loss or deterioration

The risk rests on the buyer before the revestment of ownership

The risk remains in the seller while the goods are on trial

Article 1503. Reservation of Ownership despite delivery

Applies to the sale of “Specific Goods” Although delivery has been made, seller may reserve ownership till certain conditions are

fulfilled Important controlling element is INTENTION

INSTANCES when seller is still owner despite delivery:

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1. By express stipulation2. If under the Bill of Lading the goods are delivered to seller or agent or their order.3. If bill of lading, although stating that the goods are to be delivered to buyer or his agent,

is KEPT by the seller or his agent.4. When the buyer although the goods are deliverable to order or buyer, and although the

bill of lading is given to him, does not honor the bill of exchange sent along with it.

BILL OF LADING – Document issued by a carrier to a shipper, listing and acknowledging receipt of goods for transport and specifying terms of delivery.Article 1504. Risk of Loss

GENERAL RULE – Risk of Loss of SPECIFIC GOODS is borne by the seller until ownership is transferred. (Contradicts 1480)

Article 1505. Buyer acquires merely Sellers rights

GENERAL RULE: “Nemo dat quod non habet” – no one can give what he does not have.

Article 1506. Seller has only a Voidable Title

Reasons for this Provision:1. Before a voidable contract is annulled, it is considered valid.2. Where one of two innocent parties must suffer, he who placed the offender in a position

to do wrong must suffer.

Article 1521. Specifications of DeliveryArticle provides for:

1. Place of Delivery2. Time of Delivery3. Manner of Delivery

PLACE OF DELIVERY

Should the seller send the goods or should the buyer get them?Ans. DEPENDS on the ff:

1. Agreement (express or implied)2. If no agreement – get the USAGE of Trade.3. If no usage – the buyer must get them at the seller’s business place or residence.

There is sufficient delivery when a FORTUITOUS EVENT prevents delivery at the actual place agreed upon, forcing a delivery at a place near the original one.

There is sufficient delivery when the original place is changed but buyer accepted the goods without complaint so long as the seller was in good faith.

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TIME OF DELIVERY

In the absence of express agreement, the delivery by the seller must be done within a reasonable time.

REASONABLE TIME – amount of time which is fairly necessary, convenient, to do whatever is required to be done, as soon as circumstances permits.

Circumstances considered:1. Character of the Goods2. Purpose intended3. Ability of seller to produce the goods4. Transportation facilities5. Distance thru which the goods must be carried6. Usual course of business in that particular trade.

If delivery is to be made “promptly”, “at once” or asap, a reasonable time must necessarily be given.

PREMATURE delivery generally is not allowed because a term is for the benefit of both parties.

MANNER OF DELIVERY when goods are in the hands of a 3rd person.

It is essential that the 3rd person acknowledges that he holds the goods on behalf of the buyer (otherwise seller shall not yet complied with his duty to deliver)

Article 1522. Rules when there is discrepancy on the goods being delivered.

Rules when the QUANTITY IS LESS than what is agreed upon:1. Buyer may REJECT2. Buyer MAY ACCEPT what have been delivered at the contract rate.

Rules when the QUANTITY IS MORE:1. Buyer may REJECT ALL.2. Buyer may ACCEPT the goods agreed upon and REJECT THE REST.3. If he gets all, he MUST PAY for them at the contract rate.

Rules when QUALITY IS DEFFERENT:Seller delivers to the buyer the goods agreed upon MIXED with goods of a different

description:1. Buyer may ACCEPT the goods which are in accordance with the contract.2. Buyer may REJECT the rest.

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IMPLIED ACCEPTANCE – Buyer exercises acts of ownership over the excess goods.

Article 1523. Transmission of goods to the buyer

Article deals with “delivery to a carrier on behalf of the buyer”GENERAL RULE: Delivery to a carrier is delivery to buyer, if it is the duty of the seller to send the goods to the buyer.

Kinds of Delivery to Carrier1. C.I.F. (Cost, Insurance, Freight) – insurance and freight shouldered by the seller since

selling price includes them. All charges up to the place of destination must be paid by the seller.

2. F.O.B. (Free on board) a. F.O.B. at the place of shipment – buyer must pay the freightb. F.O.B. alongside (the vessel) – buyer must pay for freight or expenses from the

moment the goods are brought alongside the vessel.c. F.O.B. at the place of destination – seller must pay the freight since thecontract

states “Free on board till destination”

Article 1524. Vendor is not bound to deliver

Sale is a reciprocal contract The seller must deliver and the buyer must pay. If the buyer does not pay, the seller is not required to deliver. If PERIOD has been fixed for payment, seller must deliver the thing sold even if said period

has not yet arrived.

When is the vendor not obliged to make delivery after the perfection of the contract of sale?Ans. The vendor is not obliged to deliver in the ff. cases:

1. If the vendee has not paid him the price2. If no period for the payment has been fixed in the contract.

Buyers Remedy: File a petition in court to fix the period.3. Even if a period for such payment has been fixed in the contract – if the vendee has lost

the right to make use of the period and still refuses to pay.-additional 5 in Art. 1536

Article 1525. UNPAID SELLER – includes AGENT. If only part of the price has been paid or tendered, the seller is still an “Unpaid Seller”.

Article 1526. Rights of an unpaid seller.

4 Rights:

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1. Possessory Lien – in the nature of a pledge2. Right of Stoppage in Transitu – available id the seller has parted with the possession.3. Right of RESALE4. Right to RESCIND the sale.

Article 1527. Possessory Lien

POSSESSORY LIEN – the right of the creditor to retain possession of his debtors property until his debts has been satisfied.PLEDGE – a bailment or delivery of personal property to a creditor as security for a debt or the performance of an act.

Possessory Lien remains only so long as the goods or property is still with the vendor.

BAILMENT – temporary placement of control or possession of personal property by one person (BAILOR) into the hands of another (BAILEE) for a designated purpose upon which the parties have agreed.

Article 1528. Possessory Lien after Partial Delivery Lien may be waived EXPRESSLY or IMPLIEDLY.

Article 1529. Possessory Lien Lost

When:1. Delivery of goods to a carrier or bailee for the purpose of transmission to the buyer

without reserving ownership or right of possession.2. Buyer or his agent lawfully obtains possession of the goods.3. Waiver

Lien lost is only the possessory lien and not the lien on the price.

Article 1530. Right of Stoppage in Transitu

STOPPAGE IN TRANSITU - right of the seller of goods to stop them while on their way to the buyer and resume possession of them. (As upon the discovery of the buyer’s insolvency)

REQUISITES:1. Seller must be unpaid2. Buyer must be insolvent3. GOODS are in transit4. Seller must either:

a. Take possession of the goods sold orb. Give notice of his claim to the carrier or other person in possession.

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5. Seller must surrender the negotiable document of title, if any issued by the carrier or bailee.

6. Seller must bear the expenses of delivery of the goods after the exercise of the right.

INSOLVENCY – need not be judicially declared. It is enough that the obligation exceed a man’s asset.

Article 1531. When goods are in Transit or not.

Goods are in transit:1. After delivery to a carrier or other bailee and before the buyer or his agent takes

delivery of them from such carrier or other bailee.2. If the goods are rejected by the buyer, and the carrier or other bailee continues in

possession of them, even if the seller has refused to receive them back.

Goods are no longer in transit:1. After delivery to the buyer or his agent in that behalf.2. If the buyer or his agent obtains possession of the goods at a point before the

destination originally fixed.3. If the carrier or bailee acknowledges to hold the goods on behalf of the buyer 4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer.

Right to get back the goods exists only when the goods are still in transit. Taking the property in transit by an “Unauthorized” agent of the buyer does not extinguish

the right of stoppage in transitu. If upon arrival – buyer unjustifiably refuses to receive the goods, the goods are still in transit

and therefore, the seller may still exercise the right of stoppage.

Article 1532. How the Right of Stoppage in Transitu may be exercised.

How?1. Obtaining actual possession2. Giving notice to the claim

Given to:a. The person in actual possession of the goods.b. To his principal

There must be intent to repossess the goods.

EFFECTS:1. Goods are no longer in transitu2. The contract of carriage ends, instead, the carrier now becomes a mere bailee and will

be liable as such.

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3. The carrier should not deliver anymore to the buyer or the latter’s agents; otherwise, he will clearly be liable for damages.

4. The carrier must redeliver to, or according to the direction of the seller.

Article 1533. Right of Resale

REQUISITES:1. Perishable Goods2. Express Stipulation3. Unreasonable default

DEFAULT – failure to do something required by law.

PERISHABLE – goods are perishable when they are of a nature deteriorate rapidly.

How resale is done?1. Private or2. Public auction

Deficiency in the Price – happens when the resale price is lower than the original selling price. It can be obtained as damages.

Excess in the Price – any excess in the price goes to the seller.

Article 1534. Right to Rescind the transfer of title and to resume the ownership in the goods.

Applies when?1. There has been stipulation or reservation.2. Unreasonable default.

Damages may be recovered for breach of contract.

How done?1. There must be notice to the buyer or2. There must be an overt act showing an intention to rescind.

Effects of a Replevin Suit?When seller brings a replevin suit, there is an implied rescission of the sale of the goods

sought to be recovered. If ownership is claimed over the property, and is subsequently offered to a third person, these facts can be presented to indicate an intention to rescind.

Replevin Suit – recovery of personal property

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Article 1535. Unpaid sellers right of lien or stoppage in transitu remains even if the buyer has sold or otherwise disposed of the goods.

EXCEPTIONS:1. When the seller has given his consent thereto.2. When the purchaser or the buyer is a purchaser for value in good faith of a negotiable

document of title.

Article 1536. Vendor not bound to deliver because the buyer has lost the benefit of the term in Art. 1198.Article 1198 – Debtor shall lose every right to make use of the period: (IFIVA)

1. When after the obligation has been contracted, he becomes INSOLVENT, unless he gives a guaranty or security for the debts;

2. When he does not FURNISH to the creditor the guaranties which he has promised;3. When by his own acts he has IMPAIRED said guaranties or securities after their

establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;

4. When the debtor VIOLATE any undertaking, in consideration of which the creditor agreed to the period.

5. When the debtor attempts to ABSCOND.

ABSCOND – to absent oneself clandestinely, with the intent to avoid legal process

In case enumerated, vendor or seller is not bound to deliver.

Article 1537. Vendor bound to deliver the thing sold and its accessions and accessories.

Accessions – Fruits – everything produced by the thing (e.g. rent, crops or fruits, etc.)Accessory – attached to the principal as ornaments, etc. (e.g. jack of a car)

Implicitly reiterates the duty of the seller to PRESERVE. Naturally a Fortuitous event may excuse the seller but must be proved by him.

Article 1538. Effects of Loss, Deterioration or improvement of the thing before its delivery.

Reiterates the rule that from time of perfection to delivery, risk is borne by the buyer.

Article 1189Rules to observe in case of improvement, loss or deterioration of the thing during the pendency of the condition:

1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished;2. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages;

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3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

5. It the thing is improved by its nature, or by time, the improvement shall inure (take effect) to the benefit of the creditor;

6. If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.

Article 1539. Sale of Real Estate by the UNIT.

If the sale of real estate be made with a statement of its area, the rate of a certain price for a unit of measure or number – VENDOR is obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but should this be not possible, the VENDEE may choose to:

- A proportional reduction of the price- Rescission of the contract

provided that in the latter case, the lack in the area be not less than 1/10 of the stated. It the area is the same, same thing shall be done if any part of the immovable is not the

quality specified in the contract Rescission shall only take place at the will of the VENDEE, when the inferior value of the

thing sold exceeds 1/10 of the price agreed upon. Nevertheless, if the vendee would not have bought the immovable had he known of its

smaller area or inferior quality, he may rescind the sale. The 1/10 part referred to in this article applies to 1/10 of the area stated in the contract,

NOT to 1/10 of the true or actual area.

Examples:Absolute deed of Sale of land selling 1,000 sqm. If less:

a. 850 sqm – (1/10 more than what is missing) = RESCISSIONb. 950 sqm – (1/10 less than what is missing) = Ask for a Proportionate REDUCTION of price

Article 1540. Rule when the actually the area or number is greater.

Vendee may accept the area included in the contract and reject the rest. If Vendee accept the whole area, he must pay for the same at the contract rate.

Article 1541. Rules on Judicial Sale.

Article 1540 and 1541 applies to judicial sale.

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Article 1542. Sale for a Lump Sum.

A CUERPO CIERTO If land bought in lump sum appears MORE in lot area:

- Seller is bound to deliver the whole area as stated in the contract including the excess thereof.- If Seller fails to deliver:

- BUYER has the right to RESCIND the contract- BUYER may accept and to pay a REDUCED proportional price (2/3s)

If land bought in lump sum appears LESS in lot area:- BUYER has NO right to RESCIND the contract.- BUYER NOT ENTITLE to pay a REDUCED price.

Why? The Civil Code presumes that the buyer had in mind a determinate piece of land and that he has ascertained its area and quality before the contract was perfected. He made no objections and consented to the transaction, HE CAN BLAME NO ONE BUT HIMSELF.

What is important is the delivery of the land included in the boundaries. If this is done, there is a compliance with the contract and the greater or lesser area is immaterial.

Effect if buyer took the risk as to Quantity?If the buyer had already been in possession and control of the property before the sale, she

can be presume to have acquired a good estimate of its value or area. The buyer then cannot be heard to claim a reduction in the purchase price should the area of the property bought in lump sum be less than that stipulated in the contract. Buyer presume to have taken the risk as to quantity.

Article 1543. Prescriptive Period.

6 months

Article 1544. Rules in Case of Double Sale.

Rules:1. Personal Property – First to take possession in good faith2. Real Property –

a. First to Register in good faithb. First to take Possession in good faithc. Person with the Oldest Title (Deed of Absolute Sale) in good faith

Registration here requires actual recording in the Registry Book of the Registry of Deeds. Possession here is either actual or constructive – since the law makes no distinction.

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Title in this article means title of the sale like a deed of sale and not any other title or mode of acquiring property.

POSSESSION – holding of a thing and enjoyment of a right. Exercising of an Act of Dominion. - Control is important

Buyer in Good Faith – No actual knowledge of the defect in the title of the seller.Buyer in Bad Faith – with actual knowledge.

2 types of Possession1. Actual – Possession in Good Faith2. Constructive – Possession in Bad Faith.

Article 1545. Conditions and Warranties.

CONDITION – The happening of which may give rise or extinguish an obligation.

Types of Conditions: (RSPCMPI PNDI CAEI)1. Resolutory – fulfillment of condition extinguishes an obligation2. Suspensive – fulfillment of the condition will give rise to an obligation 3. Potestative – fulfillment of the condition depends upon the will of a party to the

obligation4. Casual – when the fulfillment of the condition depends upon chance and/or upon the

will of a third person5. Mixed – when the fulfillment of the condition depends partly upon the will of a party to

the obligation and partly upon chance and/or the will of a third person.6. Possible – when the condition is capable of realization according to nature, law, public

policy or good customs.7. Impossible – when the condition is not capable of realization according to nature, law

public policy or good customs.8. Positive – when the condition involves the performance of an act.9. Negative – when the condition involves the omission of an act.10. Divisible – when the condition is susceptible of partial realization.11. Indivisible – when the condition is not susceptible of partial realization12. Conjunctive – when there are several conditions, all of which must be realized.13. Alternative – when there are several conditions, but only one must be realized.14. Express – when the condition is stated expressly.15. Implied – when the condition is tacit.

Effects in a Contract of Sale:1. After Perfection - Buyer has 2 options:

a. Refuse to proceedb. Proceed with the contract – and waive the performance of the condition

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Article 1546. Warranties.

When is there warranty?1. If the buyer is ignorant – there is no warranty.2. If the buyer is expected to have an opinion and the seller has no special opinion, there is

no warranty.

EXPRESS WARRANTY – any affirmation of fact, or any promise by the seller relating to the thing if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon.

DEALERS TALK – cannot be considered as an express warranty. A little exaggeration is allowed by law. This is in accordance with the civil law maxim “caveat emptor” – let the buyer beware.

NO DELIBERATE LIE – Seller is not liable.

2 Kinds of Warranties:1. Express – affirmation of facts2. Implied – deemed included in the Deed of Sale under the operation of law, regardless if

there is a stipulation in the contract or not.

Article 1547. Implied Warranties against Eviction and Against Hidden Defect

2 Kinds of implied warranty?1. Warranty against Eviction2. Warranty against Hidden Defects

PRESCRIPTION – Actions based on the implied warranties prescribe in 10 years.

Article 1548. Warranty in case of Eviction

EVICTION - deprivation of the vendee in whole or in part of the thing sold by virtue of a final judgment.

REQUISITES:1. Purchaser has been deprived in whole or in part of the thing sold.2. There is Final Judgment.3. Deprivation based on a right prior to the sale effected by the Vendor.

Ex. Non payment of Real property tax.4. Vendor has been previously notified of the complain for eviction at the instance of the

purchaser.

When do we have a final judgment?

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When it is not appealable because the period to appeal had already lapsed and when the decision is final and executory.

Responsibility of the Seller1. His own acts.2. Those of his predecessors-in-interest.

Not responsible for dispossession due to:1. Acts imputable to the buyer himself2. Fortuitous Event.

Article 1549. Vendee need not appeal. If the lower court evicts the buyer, he does not need to appeal to the appellate courts before

he can sue for damages as long as the decision is final.

Article 1550. Effect if adverse possession began before sale.

ADVERSE POSSESSION – a method of gaining title to real property by the actual, open hostile, and continuous possession of it to the exclusion of its true owner for the period prescribed by law.

It is similar to prescription, another way to acquire title to real property by occupying it for a period of time.

The rule applies only when there is a reasonable opportunity to interrupt the prescription; otherwise it would be unfair.

Article 1551. Effect of Non-Payment of TaxesExample:

A has a land, the taxes on which he has not paid. A sells it to B. Later, the land is sold at public auction for the nonpayment of taxes and B is evicted. A is responsible, but only if B did not know at the time of the sale that A had not paid the taxes thereon.

Article 1552. Eviction in Case of Judicial Sale

A buyer at an execution sale acquires nothing if the judgment debtor had already assigned or transferred the property to another before the levy on execution.

A sheriff who merely adheres to the terms of a writ of execution is not liable for damage. The same is true of the buyer at the public auction

The buyer at an execution sale is a purchases in bad faith (and not for value) if he had prior knowledge of a 3rd party claim filed with the sheriff before the scheduled execution sale.

Article 1553. Effect of Stipulation waiving Liability for Eviction

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Effects:1. If the seller was in Good faith – the exemption is VALID but without prejudice to art. 1554.2. If the Seller was in Bad Faith – The stipulation is VOID.

Article 1554. Waiver by the Buyer2 kinds:

1. Waiver CONSCIENTE – waiver without the knowledge of risk of eviction.2. Waiver INTENCIONADA – waiver with knowledge of risk of eviction.

The presumption is that the waiver was one in Consciente. The waiver intencionada must be clearly proved.

EFFECTS:1. In the 1st case, value at time of eviction must be returned. REASON: Solution Indebiti or

undue payment.2. In the 2nd case, nothing need be returned. The buyer assumes the consequences.

Article 1555. What Seller must give in case of Eviction.

In case of Eviction, the vendee shall have the right to demand of the vendor the ff: (VICED)1. To return the VALUE which the thing sold had at the time of the eviction, be it greater or

less than the price of the sale;2. The INCOME or fruits, if he has been ordered to deliver them to the party who won the

suit against him;3. The COSTS of the suit which caused the eviction, and, in a proper case, those of the suit

brought against the vendor for the warranty.4. The EXPENSES of the contract, if the vendee has paid them;5. The DAMAGES and interests, and ornamental expenses, if the sale was made in Bad

faith.

Why is rescission not a remedy in case of Total Eviction?The remedy of rescission contemplates that the one demanding it is able to return whatever

he has received under the contract; and when this cannot be done, rescission cannot be carried out. It is for this reason that the law on sales does not make rescission a remedy in case the vendee is totally evicted from the thing sold, for he can no longer restore the subject matter of the sale to the vendor.

In case of partial eviction, rescission may still be allowed with respect to the subject matter that remains.

Article 1556. Rules in Case of Partial Eviction

REMEDY:1. Rescission2. Enforcement of Warranty.

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When enforcement of Warranty is the proper remedy?If the circumstance set forth in paragraph 1 (part of a thing of such importance that he would

not have bought the whole without it – is lost) the only remedy is to enforce the warranty.

Article 1557. Necessity of Final Judgment.

Warranty cannot be imposed until final judgment has been rendered whereby the vendee loses the thing acquired or part of it.

Article 1558. Necessity of Summoning the Seller in the Suit for the Eviction of the Buyer.

Reason: Object is to give vendor opportunity to show that the action against the buyer is unjust.

Article 1559. Seller must be made co-defendant with the buyer.

Rule in Registration ProceedingsThis article applies only when the buyer is the defendant, hence, when the buyer is the petitioner in a registration proceedings and he losses, the formal notice here is not a condition precedent. It is enough that he advise the seller of the application for registration and the opposition thereto.

Article 1560. Rules in Case of Non-Apparent Servitudes

SERVITUDES – refers to the Servient Estate – a right of some benefit or beneficial use out of in or over the land of another.EASEMENT – Dominant State

These are encumbrance imposed upon immovable for the benefit of another immovable belonging to a different owner.

2 Types:1. Apparent – there are external signs and/or manifestations.2. Non-Apparent – no signs

REQUISITES for Liability for Breach of Warranty against Eviction in the presence of E/S:1. Non-Apparent2. E/S must not have been mentioned in the agreement.3. Must be of such nature that it must be presumed that the vendee would not have

acquired it had he been aware thereof.

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REMEDY: (IF MADE WITHIN ONE YEAR)1. Rescission 2. Damages

REMEDY: (IF MADE AFTER A YEAR)1. Damages only.

EFFECT if burden of Easement is registered:No remedy if the burden is registered, Except if there is an express warranty that the thing is

free from all burdens and encumbrances.

Article 1561. Vendor shall be responsible for warranty against Hidden Defects.

REQUISITES to Recover Because of Hidden Defects1. Defect must be HIDDEN2. Defect must EXIST at the time the sale was made.3. Defect must ordinarily have been EXCLUDED from the contract4. Defect must BE important (renders thing unfit or considerably decreases fitness)5. ACTION must be instituted within the statute of limitations.

REDHIBITORY DEFECTS – Hidden defects.PRESCRIPTION: Inaction prescribes in 6 MONTHS.

Article 1562. Merchantable Quality

MERCHANTABLE QUALITY – a thing is fit for general purpose, and not necessarily the particular purpose for which it has been acquired.

EXAMPLE:CAR - General Purpose: for Transportation

Intended Purpose as stipulated: for RACING purposes.

Article 1563. Effect of Sale under the Patent Name or Trade Name.

NO WARRANTY as to the Fitness for any particular purpose UNLESS STIPULATED.

Article 1564. Effect of Usage of Trade.

EFFECTS:The parties are presumed to be acquainted with the usages of trade.

Article 1565. Sale by Sample

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Implied warranty of Merchantability Goods must be Merchantable. Goods must be free from any defect rendering them unmerchantable.

Article 1566. Responsibility for Hidden Defects even if the Seller was in Good Faith.

Why?Because the seller has to repair the damage done. The object of the law is reparation nut

punishment.

GOOD FAITH – consists in an honest intention to abstain from taking any unconscientious advantage of another. It is the opposite of Fraud and of bad faith, and its non-existence must be established by competent proof.

Article 1567. Remedies in Case of Hidden Defects.

In cases of articles 1561, 1562, 1564, 1565 and 1566 buyer may resort to:1. WITHDRAWAL OR RESCISSION (accion redhibitoria) plus damages2. PROPORTIONATE REDUCTION (accion quanti minores o estimatoria) – reduction in price

plus damages.

Article 1568. Effect of Loss of the thing because of Hidden Defects.

Whether the seller knew or not the defects, he is still liable. However, in case of ignorance, there will be no liability for damages.

Article 1569. Effect if Cause of Loss was a Fortuitous Event and not Hidden Defect

LOSS was due to: (not Hidden Defect)1. Fortuitous Event2. Fault of the Buyer

Article 1570. Applicability to Judicial Sales

While the preceding articles apply to judicial sales, still no liability for damages will be assessed against the judgment debtor in view of the compulsory nature of the sales.

Article 1571. Prescriptive Period.

Actions arising from the provisions of the preceding articles shall be barred after 6 MONTHS from the delivery of the thing sold.

EFFECT of mere notification:

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The buyer notifies the seller of the existence of the hidden defect, but does not sue within 6 months, the action will of course prescribe.

Article 1572. Sale of Two or More animals together.

A defect in 1 should not affect the sale of the others. True whether the price was a lump sum, or separate for each animal.

EXCEPTION – team, etc.

Article 1573. Applicability of 1572 to sale of other things.

Rule stated on Art. 1572 applies to animals, has been made applicable to other things in this article.

Article 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of livestock sold as condemned.

The fact that the livestock is condemned, MUST BE COMMUNICATED TO THE BUYER; otherwise still liable.

Article 1575. Void Sales of Animals.

2 Kinds of Void sales with respect to animals:1. Sale of animals suffering from contagious diseases2. If the use of such or service for which they are acquired has been stated in the contract,

and they are found to be UNFIT therefor.

Article 1576. Definition of Redhibitory Defect.

If the hidden defect of animals even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, is REDHIBITORY.

But if say a veterinarian through ignorance or bad faith fail to discover or disclose it, shall be liable for damages.

Article 1577. Prescriptive period.

Redhibitory action based on faults or defects of animals must be brought WITHIN 40 DAYS from date of their delivery to the buyer.

NOTES:Civil Code provides the following Prescriptive period for:

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1. 40 days – the Redhibitory action based on the frauds or defects of animals2. 6 months:

a. Breach of warranty against hidden defects; rescission of the contract because of the same; or proportionate reduction in the price because of the same.

b. Rescission or proportionate reduction in the price for sales of real estate either by the unit or for a lump sum because of failure to comply with the provisions of the contract.

Article 1578. If the animal should die within 3 days after its purchase, the vendor shall be liable if the disease which cause the death existed at the time of the contract.

Article 1579. Effect if the sale of animal is rescinded

If the sale is rescinded, the animal shall be returned in the condition in which it was sold and delivered.

Buyer liable for any injury due to his negligence.

Article 1580. Remedies of Buyer of Animals with Redhibitory defects.

REMEDIES:1. WITHDRAWAL OR RESCISSION plus damages.2. PROPORTIONATE REDUCTION of price plus damages.

PRESCRIPTIVE PERIOD: 40 DAYS from date of delivery to the buyer.

Article 1581. The form of sale of large cattle shall be governed by special laws.

OBLIGATIONS OF THE VENDEE

Article 1582. Obligations of the Buyer

Principal Obligations:1. Accept delivery2. Pay the price

If time and place is not stipulated, the payments must be made at the time and place of the delivery.

If NO TIME has been fixed for payment, Seller may require payment to be made at any time after delivery and buyer here has the duty to pay the price immediately upon demand.

If seller is forced to deviate from the provisions of the contract but the buyer consents or agrees to such, the buyer should still pay the price.

Article 1583. No delivery by installments

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REASON: Performance must generally be complete EXCEPT by express provisions.

Article 1584. Buyer right to examine the goods.

GENERAL RULE: Buyer is entitled to examine the goods prior to delivery.EXCEPT:

1. There is stipulation to the contrary2. Goods are delivered C.O.D. – unless there is an agreement or a usage of trade

permitting such examination.

Article 1585. Acceptance of Goods.

3 ways of accepting the goods:1. Express acceptance2. When buyer does an act which only an owner can do3. Failure to return after reasonable lapse of time.

Article 1586. Seller liable despite acceptance of delivery by the buyer.

REASON:To prevent afterthoughts or belated claims.

Article 1587. Effect if buyer justifiably refuses to accept the Delivery

1. Buyer has no duty to return the goods to the seller2. Mere notification to seller will suffice.3. But buyer may make himself a voluntary depository – in which case he must safely take

care of them in the meantime.

Article 1588. Effect if Buyer Unjustifiably Refuses to Accept the Delivery

GENERAL RULE: the buyer becomes the owner. EXCEPT:

1. when there is a contrary stipulation 2. when the seller reserves the ownership as a sort of security for the payment of the

price.

Article 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following 3 case:

1. Should it have been so stipulated;2. Should the thing sold and delivered produce fruits or income;

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3. Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.

DEFAULT – “MORA” called in delay

Article 1590. Buyer may suspend the payment of the Price

REQUISITES:1. When there is a well-grounded fear (fundado temor)2. The fear is because of:

a. A vindicatory action or action to recoverb. A foreclosure or mortgage

Article 1591. When seller immediately Sue for the Rescission of the Sale

The seller must have reasonable grounds to fear: (1 is appliclabe if 2 is lost)1. LOSS of the immovable property sold2. LOSS of the price

So, if the buyer is squandering his money, but the immovable property remains untouched, this article cannot be applied.

Article 1592. Rescission of Sale of Real Property

Demand maybe:1. Judicial2. Extrajudicial

Demand is not for the payment of the price BUT FOR THE RESCISSION of the contract. In rescission, there is no automatic demand. There should be a Court Intervention.

Article 1593. Rescission of Sale of Personal Property

Article applies only if the object sold has not been delivered to the buyer. If there has been delivery, other articles like Art. 1191 would be applicable. In this case

automatic rescission is not allowed. An affirmative action is necessary, the action being one to rescind judicially, if the buyer refuses to come to an amicable settlement.

ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

Article 1594. Governing Law for Actions for Breach of the Contract of Sales of Goods.

This chapter is not applicable to sale of real property.

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In case of Breach of Contract, the aggrieved party’s remedy is an ordinary action in the proper court for SPECIFIC PERFORMANCE. This is to compel payment of price as agreed upon in a contract.

Article 1595. Rules if Buyer Refuses to Pay.

EXAMPLES:1. Machines having been sold and delivered to the buyer, if the buyer refuses to pay

therefor, the seller may sue for the price.2. The seller and buyer agreed that payment would be made on July 15, although the

goods would be delivered only on July 30. On July 15, the seller may sue for the price. The buyer is allowed to refuse to pay if before the judgment in such action, he is able to prove that the seller has no intention anyway of delivering the goods on July 30.

3. Seller and buyer agreed that payment and delivery would be made on July 15. On said date, seller may offer to deliver the goods to the buyer, and if buyer refuses to receive the goods, the seller can tell the buyer that he will be holding the goods, no longer as a seller but your depository. The buyer now becomes the owner of the goods. Seller can now maintain an action for the price. This can be done if:

a. The goods cannot readily be resold for a reasonable price, andb. If the provisions of Art 1596, par 4 are not applicable.

Article 1596. Remedy of the Seller if Buyer Refuses to Accept and Pay.What actions are available to the seller?

1. Maintain an action for damages because of the non-acceptance.2. Hold the goods as Bailee for the buyer and bring an action for the price.3. Ask for the resolution of the contract for failure of the buyer to fulfill his obligations.

Article 1597. Seller may totally rescind the Contract of Sale. Applies only when the goods have not yet been delivered. Automatic rescission here requires notice thereof to the buyer.

Article 1598. Rule when Seller has Broken a Contract to Deliver Specific or Ascertained Goods. Here the seller is guilty; hence, there is no right of retention on his part even if said seller is

willing to pay damages. Note that there must be an order from the court for the specific performance. Note further that the court may make the order on the application of the buyer.

Article 1599. Remedies of the buyer if Seller commits a Breach of WarrantyRemedies:

1. Accept or keep the goods and set-up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;

2. Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;

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3. Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;

4. Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid.

5. In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.

1st paragraph enumerates the 4 remedies of the buyer. If buyer still accepted the goods despite his knowledge of the breach of warranty, the 3rd

paragraph of the article gives the effect – generally NO RESCISSION.EXTINGUISHMENT OF SALE

Article 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this title, and by conventional or legal redemption.

Sales are extinguished by:1. Same causes as in other obligations:

Payment or performance of obligation Loss of the thing due Condonation or remission of debt Confusion or merger of rights Compensation Novation Rescission Annulment

2. REDEMPTION1. Conventional2. Legal

CONVENTIONAL REDEMPTION The right which the vendor reserves to himself, to reacquire the property sold provided he returns to the vendee: 1. the price of the sale; 2. expenses of the contract; 3. any other legitimate payments made therefore and; 4. the necessary and useful expenses made on the thing sold; and 5. fulfills other stipulations which may have been agreed upon.

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A sale with conventional redemption is deemed to be an equitable mortgage in any of the following cases: (IPERTOD) 1. Unusually Inadequate purchase price; 2. Possession by the vendor remains, as lessee or otherwise; 3. Extension of redemption period after expiration; 4. Retention by the vendee of part of the purchase price; 5. Vendor binds himself to pay the Taxes of the thing sold; 6. Any Other case where the parties really intended that the transaction should secure the

payment of a debt or the performance of any obligation; or 7. When there is Doubt as to whether contract is contract of sale with right of repurchase or an

equitable mortgage.

Applies to both consummated contracts and those which are merely perfected contracts of sale.

Effects of a claim for Damages:A claim for damages which results from a breach of contract is considered a right which is inseparably annexed to every action for the fulfillment of the obligation. If, therefore, damages are not sought in the action to compel performance, it is clear that said damages cannot be recovered in an independent action.

Article 1601. Conventional Redemption shall take place when the vendor reserves right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon.

Conventional Redemption also called the right to redeem. Occurs in sales with PACTO DE RETRO Exist only when stipulated. So considered only as accidental element and neither natural nor

essential element.

EFFECT OF INADEQUACY OF PRICE:In a sale with PACTO DE RETRO, the inadequacy of price cannot be considered a ground

for rescinding the contract. The practice is to fix a relatively reduced price (but not grossly inadequate) in order to afford the vendor a retro every facility to redeem the land, unlike in an absolute sale where the vendor, in permanently giving away his property, tried to get, as compensation, its real value.

PACTO DE RETRO – Issue wherein a landowner is in need of money and basically mortgages his property with the option of buying the property back in the future.

VENDOR A RETRO – Owner of Land

VENDEE A RETRO – Money lender

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Article 1602. Contract of sale shall be presumed an equitable mortgage, in any of the following cases:

1. Price of a sale with right to repurchase is usually inadequate;2. Vendor remains in possession as lessee or otherwise;3. Upon or after the expiration of the right to repurchase, another instrument extending

the period of redemption or granting a new period is executed;4. Purchaser retains for himself a part of the purchase price;5. Vendor bids himself to pay the taxes on the thing sold;6. Any other cases where it may be fairly inferred that the real intention of the parties is

that the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.

Article talks about when a pacto de retro sale can be presumed an equitable mortgage.

EQUITABLE MORTAGE One which although lacking in some formality, form or words, or other requisites

demanded by a statute nevertheless reveals the intention of the parties to charge a real property as security for a debt, and contains nothing impossible or contrary to law.

EFFECT of stipulation providing for a renewal of the Pacto de retro.In a contract of con pacto de retro, it was agreed that after the period fixed for the

repurchase, the buyer does not become the owner but a new pacto de retro document shall be issued.

If a seller has been granted merely an option to buy (and not a right to repurchase) within a certain period, and the price paid by the buyer was adequate – sale is ABSOLUTE and cannot be construed and presumed as an equitable mortgage, even if the period within which to exercise the option is extended.

Article 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.

Article 1604. Article 1602 shall also apply to a contract purporting to be an absolute sale.

Article 1605. Remedy of Reformation.

To correct the instrument so as to make it express the true intent of the parties, reformation may be availed of.

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REMEDY OF REFORMATION – Remedy utilized by court to correct a written instrument so that it conforms to the original intent of the party to such an instrument.

Article 1606. Time within which to redeem

Redemption Period

1. if there is an agreement: period agreed upon cannot exceed 10 years 2. if no agreement as to the period: 4 years from the date of the contract 3. the vendor who fails to repurchase the property within the period agreed upon may, however,

exercise the right to repurchase within 30 days FROM the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase

This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with right to repurchase; not to cases where the transaction is conclusively a pacto de retro sale. Example: Where a buyer a retro honestly believed that he entered merely into an Equitable Mortgage, not a pacto de retro transaction, and because of such belief he had not redeemed within the proper period.

NOTE: Tender of payment is sufficient to compel redemption, but is not in itself a payment that relieves the vendor from his liability to pay the redemption price

Express agreement means TIME. It cannot refer to the right to redeem because the right must be agreed upon.

RULES:1. NO TIME AGREED UPON – 4 years from date of contract.2. TIME AGREED UPON – cannot exceed 10 years.

Some cases as to the period contemplated:

1. “At any time they have the money” – there is agreement as to the time, although it is indefinite. Right should be exercised within 10 years.

2. “When he has the means” – there is also agreement as to time, though indefinite. Within 10 years.

3. “In March of any year” – there is an agreement as to time, though indefinite. Within 10 years.

4. “Not before 5 years nor after 8 years” – stipulation is all right because the right to repurchase may be suspended. BUT “right cannot be exercised till after 10 years.” This stipulation cannot be given effect since this would destroy the right. But still the right in this case may be exercised within 10 years.

5. “Right cannot be exercised within 3 years from the date of the contract” – Here there is no time agreement, so only 4 years – 4 years from the time it could be exercised. This is

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all right because the total period is only 7 years. Right can be exercised after the 3 rd year but before the expiration of the 7th year.

Can the period of redemption be extended after the original period has expired?In one case it was held that this is all right as long as the total period should not exceed

10 years from the time of the making of the contract. Because there is nothing in the law that prohibits this.

Period in excess of 10 years is VOID!

CONSIGNATION -IS A DEPOSIT which a debtor makes of the thing that he owes into the hands of a 3rd person and under the authority of a court.IS CONSIGNATION NECESSARY?

If a seller a retro wants to repurchase the property, he should tender the proper amount. Now then, aside from tender, is consignation essential?

Court said that the right to repurchase is NOT A DEBT (because the seller a retro may or may not, at his own option, repurchase). Therefore, no consignation is necessary.

LAST PARAGRAPH OF Art 1606 – means that after the courts have decided by a final or executory judgment that the contract is a pacto de retro and not a mortgage, the vendor (whose claim as mortgagor has definitely been rejected) may still have the privilege of repurchasing within 30 days. It is not sufficient to manifest the desire to repurchase. There must be an actual and simultaneous tender of payment, unless of course, there is a definite refusal to permit repurchase. The 30 days period must of course be counted from the time of finality of judgment.

Article 1607. Talks about the reason for the JUDICIAL ORDER before the registration of the consolidation of ownership

Law seeks to prevent usurious transactions. A judicial order is merely for purposes of REGISTERING the consolidation of title.

FAILURE TO COMPLY:If the parties agree that the redemption price would be fixed after an accounting to be

made by the buyer a retro, then failure of such buyer to render said accounting should excuse the seller a retro from effecting the repurchase within the time stipulated. Equity demands that the seller a retro be given an additional time within which to repurchase after a correct accounting has been made either by the buyer a retro or by the court.

Article 1608. RIGHT OF SELLERS A RETRO TO REDEEM PROPERTY FROM PERSONS OTHER THAN THE BUYER A RETRO.

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EXAMPLE: S sold B with right to repurchase. B sold the things to T. In the second contract, no mention was made of the right to repurchase. Can S proceed against T?

Ans. YES. Without prejudice to the provisions of the Mortgage law and the Land Registration Law with respect to third persons.

This right of the seller to exercise the right to repurchase is a real right and not mere personal in character.

Article 1609. Vendee is subrogated to the vendor’s rights and actions.Subrogation of Buyer in the Seller’s rights and actions.

A sale with the right to repurchase to the buyer all the elements of ownership subject to a resolutory condition.

A seller can only transfer what he has, or if the seller was not really the owner but only a usufructuary, buyer only acquires usufructuary right.

Examples of Rights of Vendor Transferred to the Vendee1. To mortgage the property2. To continue prescription3. To receive fruits

Effect of Registration Proper registration of the contract of sale with pacto de retro is notice to all those

dealing with the property of the character of the agreement entered into and duly recorded.

Article 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor.

When Seller’s Creditor Can Use Seller’s Right of Redemption

EXAMPLE: S sold to B with pacto de retro. S has unpaid creditors. Can the creditors exercise S’s right of redemption?ANS.: Yes, but only if S’s properties have first been exhausted.

Reason Why There Should First Be an ExhaustionIt would be detrimental to the stability of property if we were to countenance

an excessive use of the resolutory action.

NOTE: Should there ALWAYS be a prior exhaustion?ANS.: No.

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Article 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 4987, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption.

When Seller May Be Required to Redeem the Whole Property Although He Had Sold Only Part Thereof.

Reason for the law If the law were otherwise, then in the example given, should S be allowed to repurchase only half of the property, there would again be co-ownership.

Article 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share. The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired.

Rule When Property Owned in Common is Sold by the Co-Owners Jointly and in the Same Contract

EXAMPLE: A, B, and C jointly and in the same contract sold undivided piece of land with the right to repurchase. The buyer a retro was X. Prior to the expiration of the period of redemption, A wanted to repurchase the whole land. X refused, alleging that A was entitled merely to repurchase A´s share. Is X correct?ANS.: Yes, by express provisions of the law. None of the co-owners in this case is allowed to exercise the right to redeem for more than his respective share.

Article 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the repurchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption.

When Buyer Cannot Be Compelled to Consent to a Partial Redemption

Reason for the LawThe law is against co-ownership.

NOTE: The buyer, however, if he wants to, may allow a partial redemption, for the option is his.

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Article 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards hid own share, and the vendee cannot compel him to redeem the whole property.

When Co-Owners Sell Their Shares Separately

EXAMPLE: A, B, and C are the co-owners of the undivided house. A sold with the right to repurchase his right to X. Later, X acquires B´s and C´s rights. Now A wants to redeem his share. X refuses and asks A to redeem the whole property. Question: Is A allowed to redeem only his share?ANS.: Yes, since in this case, the selling had been made separately.

Article 1615. If the vendee should leave several heirs, the actions for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them. But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for a whole.

Rule if Buyer Dies Leaving Several HeirsEXAMPLE: A sold a piece of land to B with pacto de retro. B dies leaving C, D and E as heirs. A brought an action for redemption against C. Can C be compelled to resell the whole property?ANS.: As a rule, C can be compelled to sell his share only whether the land be still undivided or already partitioned among C, D, and E. But if the inheritance has already been divided, and the land sold has been awarded to C, then A can institute the action for redemption against C for the whole land.

Article 1616. The vendor cannot avail himself of the right of the repurchase without returning to the vendee the price of the sale, and in addition:

1. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and I addition:

2. The necessary and useful expenses made on the thing sold.

What Seller Must Give Buyer if Redemption is Madea. The priceb. Expenses of the contractc. Any other legitimate payments made by reason of the saled. The necessary expenses made on the thing solde. The useful expenses on the thing sold

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Price to be Returned Not the ValueRefers to the price paid to the seller by the buyer, NOT the VALUE of the thing at

the time of repurchase

The Expenses of the ContractThe expenses for the execution and registration of the sale shall be borne by the

vendor, unless there is a stipulation to the contrary

NOTE: The expenses for the contract of repurchase can be paid directly to the notary public.

No Reimbursement for Land TaxesThe buyer a retro is not entitled to be reimbursed for land taxes because these

taxes are not considered expenses on the property.

Article 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed.

Should there have been no fruits at the time of the sale, and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale.

Rule with Respect to Fruits

EXAMPLE: S sold B land with pacto de retro. At time of sale, there were growing fruits, B did not pay any indemnity for said fruits. At redemption, is S obliged to pay indemnity for fruits growing at the said time of redemption?ANS.: No

Reason for Prorating in the Second ParagraphOWNERSHIP during the period concerned

Article 1618. The vendor who recovers the thing sold shall receive it free from all changes or mortgages constituted by the vendee, but he shall respect the leases which latter may have executed in good faith, and in accordance with the custom of the place where the land is situated.

Property to be Freed Generally from Charges and MortgagesThe article states the general sale and the exception.

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LeaseThis includes leases which are registered and those which are not.

NOTE: However, that they must have been executed in good faith and must be in accord with local customs.

LEGAL REDEMPTION

Article 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of the one who acquires a thing by purchase and dation in payment, or by any other transaction whereby ownership is transmitted by onerous title.

The right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by (1) purchase or (2) dation in payment, or (3) by any other transaction whereby ownership is transferred by onerous title.

May be effected against movables or immovables. It must be exercised within thirty (30) days from the notice in writing by the vendor.

NOTE: Written notice under Article 1623 is mandatory for the right of redemption to commence (PSC vs. Sps. Valencia 19 August 2003.)

Legal RedemptionCan be exercised against a transferee who gets the property because of.1. Purchase2. Dation in payment3. Any other transaction whereby ownership is transmitted by onerous title.

Pre-emption and Redemption Distinguised

PRE-EMPTION REDEMPTIONa.Arises before saleb.No rescission because no sale as yet existsc.The action here is directed against

prospective seller

a.Arises after saleb.There can be rescission of the original salec.The action here is directed against the

buyer

Basis of Legal RedemptionThis right is not predicted in any proprietary right, which after the sale of the

property on execution, leaves he judgment debtor and vests in the purchaser, but on bare statutory privilege to be exercised only by the persons named in the statute.

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Property AffectedLegal redemption can be affected against either movable or immovable

property.

Article 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion the share they may respectively have in the thing owned in common.

Right of Legal Redemption of Co-Owner1. Reason for the law: To minimize co-ownership2. Note that for Art. 1620 to apply, the share must have been sold to a third

person. Hence, if the purchaser is also a co-owner, there is no legal redemption. A tenant is a third person under this article.

Who can Exercise the Right of Legal Redemption1. The right of legal redemption lies in all co-tenants of the things held in common.2. This right is granted not only to the original co-owners but applies to all those

who subsequently acquire their respective shares while the community subsists.

Entire Amount of RedemptionThe co-owner who desires to redeem must tender the entire amount of the redemption price or validly consign the same in court. This is needed to show good faith.

Article 1621. The owners of adjoining lands shall also have the right of redemption when a piece of the rural land, the area of which doesn´t exceed one hectare, is alienated, unless the grantee does not own any rural land.

This right is not applicable to adjacent lands which are separated by brooks, draines, ravines, roads and other apparent servitudes for the benefit of other estates.

If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested redemption.

Legal Redemption by Adjacent Owner of Rural Property1. Reason for the law: To foster the development of agricultural areas by adjacent

owners who may desire the increase for the improvement of their own land.

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2. Reason for paragraph 2: Here the properties cannot be said to be adjacent. Proof of being non-adjacent is on grantee.

Against Whom Right Can Be ExercisedThis right may be exercised only against a stranger and not against an adjacent rural owner who purchases the property. For the right however to be exercised against the stranger, the stranger must already have RURAL land (not an adjacent rural one). This is because if the stranger has NO rural land at all, the right to redeem cannot be exercised against him.

Article 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be resold, the owner of any adjoining land has right of pre-emption to a reasonable price.

If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a new reasonable price.

When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred.

Legal Pre-emption and Redemption by Adjacent Owners of Urban Property

There are 2 rights here: pre-emption and redemption. ´´Urban´´ does not refer to the land itself nor to the purpose to which it is devoted,

but to the character – of the COMMUNITY or REGION where it is found. So land may be urban although dedicated somehow to agriculture.

If the urban land that was sold is made into a SUBDIVISION, the Article will not apply. To make use of the right granted here, the land must be so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been previously bought by the seller merely for speculation.

Article 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners.

Within What Period Right May Be Exercised

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a. The right of legal redemption is SUBSTANTIVE.b. The periods given in the law are conditions precedent, and not periods of

prescriptions. The offer to exercise the right of redemption must be within the period stipulated by the law, for said periods are requisites for legal and effective exercise of the right. Once the offer is validly made, an action may LATER ON be brought to enforce the redemption. Therefore, if claim or offer is not made within the period, no action will be allowed to enforce the right.

NOTE: The law says ``notice in writing.´´ Now then, what is the effect if despite lack of written notice. If the notice is not given, the 30-day period has not even begun to run.

The 30-day notice in writing referred to in Art. 1623 should be counted from notice, not of the perfected sale, but of the actual execution and delivery of the document of sale.

Preference of Co-OwnersCo-owners are preferred over adjacent owners.

Notification to Buyer That Redemption Would Be ExercisedThe would-be redemptioner is not required to notify the buyer, previous to

bringing n action to compel redemption. The general practice, however, is to first notify so that judicial trouble can be avoided.

Redemption Offer Must Be With Legal Tender When the right of redemption is exercised (whether it be conventional or legal

redemption) the offer to redeem must be in legal tender. Thus, if a check is offered, it is as if no tender had been made.

Instances of legal redemption:

A. Under the Civil Code (legal redemption): 1. Sale of a co-owner of his share to a stranger (Article 1620) 2. When a credit or other incorporeal right in litigation is sold (Article 1634) 3. Sale of an heir of his hereditary rights to a stranger (Article 1088) 4. Sale of adjacent rural lands not exceeding one hectare (Article 1621) 5. Sale of adjacent small urban lands bought merely for speculation (Article 1622)

B. Under special laws:

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1. An equity of redemption in cases of judicial foreclosures 2. A right of redemption in cases of extra-judicial foreclosures 3. Redemption of homesteads 4. Redemption in tax sales 5. Redemption by an agricultural tenant of land sold by the landowner

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