sales up.docx

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CIVIL LAW REVIEWER Chapter I. The CONTRACT of SALE

Prof. Roberto N. Dio Faculty Editor SAL

ES

SALES TEAM Chapter I. The Contract of Sale

DEFINITION ELEMENTS A. CONSENT B. SUBJECT MATTER C. PRICE

III. STAGES A. PREPARATION/NEGOTIATION B. PERFECTION C. CONSUMMATION

IV. KINDS A. ABSOLUTE B. CONDITIONAL

. FORM I. SALE DISTINGUISHED FROM OTHER

CONTRACTS A. DONATION B. BARTER C. CONTRACT FOR A PIECE OF WORK D. LEASE OF THINGS E. AGENCY TO BUY AND SELL F. DACION EN PAGO G. CONTRACT TO SELL H. BILATERAL PROMISE TO BUY AND SELL

I. II.

Jaim Mari M. Crisostomo Lead Writer

Jessa Mary Ann C. Cedeo Eva Marie Guttierez

Kristoffer Gabriel L. Madrid Ros Jean Nonato

Writers

CIVIL LAW

Kristine Bongcaron Patricia Tobias

Subject Editors ACADEMICS COMMITTEE

Kristine Bongcaron Michelle Dy

Patrich Leccio Editors-in-Chief

PRINTING & DISTRIBUTION

Kae Guerrero 26

SAL

DESIGN & LAYOUT

Pat Hernandez Viktor Fontanilla Rusell Aragones

Romualdo Menzon Jr. Rania Joya

I. Definition (Art 1458, CC)

Contract where one of the parties (Seller) obligates himself to:

Transfer ownership of and

to deliver a determinate thing; LECTURES COMMITTEE

Michelle Arias Camille Maranan

Angela Sandalo Heads

Katz Manzano Mary Rose Beley Sam Nuez Krizel Malabanan Arianne Cerezo Marcrese Banaag

Volunteers

and the other (Buyer) to pay a price certain in money or its equivalent.

II. Elements

The case of (Coronel v CA, 1996) enumerates the 3 elements of a valid contract of sale namely:

Consent Subject matter Price

_______

A. CONSENT Meeting of minds upon the thing which is the object of the contract and the price. (Art 1475, CC)

Requisites 1. Capacity 2. Offer and acceptance 3. No vitiation

MOCK BAR COMMITTEE

Lilibeth Perez BAR CANDIDATES WELFARE

Dahlia Salamat LOGISTICS

Charisse Mendoza SECRETARIAT COMMITTEE

Jill Hernandez Head

Loraine Mendoza Faye Celso Mary Mendoza Joie Bajo

Members


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CAPACITY

All persons who have capacity to enter into obligations may enter into a contract of sale (Art 1489, CC)

Kinds of Incapacity 1. Absolute Incapacity (MInD-CI) (Art. 1327,

CC) a. Minors b. Insane or Demented c. Deaf-mutes who do not know how to

write d. Civil Interdiction e. Judicially-declared Incompetents(Art.

39) Prodigals Imbeciles

Absence & presumption of death Persons not of unsound mind but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property without outside aid (Easy prey for deceit and exploitation)

2. Relative Incapacity a. Husband and Wife (Art 1490, CC)

(Asked in 75, 76, 00, 02, 06)

General Rule: Cannot sell property to each other

Exceptions: 1. Separation of property in marriage

settlement, OR 2. Judicial separation of property.

b. Alienage (Art. 39, CC) Aliens disqualified to purchase acquire property.

c.

Rationale: Guardianship is a trust of the highest order, and the trustee can not be allowed to have any inducement o neglect his wards interest. (Phil Trust Co v Roldan, 1956)

Executors and Administrators Propertyofestateunder administration

their

d. Public Officers and Employees PropertyofState/anyofits subdivisions/GOCC, the administration of which was entrusted to them.

e. Lawyers Property or rights in litigation in which they take part because of their profession

Rationale: Lawyer may have undue influence over client. Greed may get the better of the sentiments of loyalty and disinterestedness. (Valenciav Cabanting, 1991)

Prohibition is definite and permanent, cannot be cured by ratification. (Rubias v Batiller, 1973)

Exceptions: An assignment to a lawyer by his client of an interest in the property does not violate Art 1491, where

A judgment has been rendered and has become final; and In case of contingency fee arrangements. The interest of the lawyer maybe annotated as an adverse claim on the property awarded to his client (Director of Lands v Ababa, 1979)

f. Justices, Judges, prosecuting attorneys, clerks Property or rights in litigation or levied upon on execution

Rationale: to prevent fraud and to surround their profession with prestige

Prohibition applies only on sales or assignment during the pendency of litigationinvolvingtheproperty. (Macariola v Asuncion, 1963)

Effects of Incapacity 1. Absolute Incapacity

If both parties are incapacitated: UNENFORCABLE (Art. 1403 (3))

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or

Exception: if acquisition is through hereditary succession

c. Trusteeship (Art. 39)

3. Specific Incapacity (Art. 1491, CC) (AGE- PLJ) a. Agents

Property whose administration or sale was entrusted to them

Exception: principal gives consent.

b. Guardian Cannot purchase property of person under his guardianship


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If only 1 party is incapacitated: VOIDABLE

-If necessaries are sold and delivered to an incapacitated person: must pay a reasonable price therefore. (Art 1489, CC) Necessaries those which are indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation. (Art 194, Family Code)

the provisions of law governing the form of contracts. (Art. 1475, CC)

A private instrument signed by the defendant reciting that he bought from the plaintiff a property at a specific address for a specific price to be paid as soon as a bill of sale is signed is not a mere draft but a perfected agreement and hence, obligatory, even if there was no statement as to area or price per meter. (Goyena v. Tambunting, 1902)

2. Relative Incapacity Sale between spouses is VOID. Rationale: (as provided in the case of Medina v CIR, 1961)

rd To protect 3 persons who may have contracted with the spouse

To avoid undue advantage of the dominant spouse over the weaker spouse.

To avoid indirect prohibition against donations between spouses.

Such prohibition shall likewise apply to

common law spouses. (Calimlim-

Canulas v Fortun, 1984) BUT if already sold to a third person who relied on the title of his immediate seller, reconveyance to the seller spouse is no longer available (Cruz v CA, 1997)

3. Specific Incapacity Contracts expressly prohibited by law are void and cannot be ratified. Neither can the right to set-up the defense of illegality be waived. (Art. 1409 (7), CC) Sales entered into by guardians, administrators, and agents (specific incapacities) in violation of Art. 1491 may be ratified by means of and in the form of a new contract when the cause of nullity has ceased to exist. Ratification is valid only from date of execution of the new contract and does not retroact. Thoseenteredintobypublic officer/employees, justices and judges, and lawyers also in violation of Art. 1491 are inexistent and void from the beginning. (Rubias v Batiller, 1973).

OFFER AND ACCEPTANCE

Form and Offer Offer must be certain as to the object and price (Art. 1319, CC) Business advertisements of things for sale are not offers but mere invitations to make an offer

Exception: If otherwise provided (Art. 1325, CC)

Advertisements for bidders are simply invitations to make proposals (Asked in 80)

Advertiser not bound to accept the highest or lowest bid

Exception: Unless the contrary appears

(Art. 1326, CC)

Form of Acceptance unconditional Qualified acceptance = counter-offer (Art. 1319, CC) May be express or implied (Art. 1320, CC)

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. (Beaumont vs. Prieto, 1916)

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MUST NOT BE VITIATED A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (Art. 1330, 1390 (2), CC) There is fraud where through insidious

words or machinations of one of contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (Art. 1338, CC)

_______ In General

The contract of sale is perfected at the moment there is meeting of the 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

B. SUBJECT MATTER

Requisites 1. Licit 2. Existing, future or contingent 3. Determinate or determinable


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come into existence: the price even if the contract is considered as thing does not actually not made and there is no came into existence obligation to pay the price In case of doubt the presumption is in favor of emptio rei speratae since it is more in keeping with the commutative character of the contract.

MUST BE LICIT (ART. 1459)

The thing is licit when 1. Within the commerce of man (Art 1347, CC)

Example of properties that are not within the commerce of man: a. Those belonging to the State or its

political subdivisions intended for public use or public service. (Art 420, CC).

b. Church c. Narcotics or dangerous drugs except

upon prescription (RA 6425, the dangerous drugs act of 1972)

2. Rights are also licit when not intransmissible (Art 1347, CC)

Sale of future inheritance is void. (Art. 1347, CC) 1. The rights to succession are transmitted

from the moment of the death of the decedent (Art. 777, CC). Thus, one cannot sell or promise to sell what he expects to inherit from a living person. (Rivero v. Serrano, 1950)

2. -Heir may sell his hereditary rights (which have accrued).

When the subject matter is illicit, the contract of sale is void (Art. 1409 (7))

EXISTING, FUTURE, CONTINGENT

The goods which form the subject of a contract of sale may be either 1. existing goods owned or possessed by the

seller; 2. goods to be manufactured, raised, acquired

by the seller, also called future goods; 3. whose acquisition of the seller depends

upon a contingency which may or may not happen. (Art 1462, CC)

4. Things having potential existence may be the object of a contract of sale. (Art 1461, CC)

Sale of MERE hope or expectancy Valid BUT subject to condition that the thing will come into existence

Example: Next catch of a fisherman.

Emptio Rei Speratei Valid Partiesmakethe contract depend upon the existence of a thing,

If the thing does not

Sale of VAIN hope or expectancy Void

Example: Sale of a falsifiedraffleticket which will never win.

DETERMINATE OR DETERMINABLE

A thing is determinate when it is particularly

designated or physically segregated from all others of the same class. (Art 1460, CC) A thing is determinable when it is capable of being madedeterminate at the time the contract was entered into without the necessity of a new or further agreement between the parties. (Art 1460, CC) Failure to state the exact location of the land does not make the subject matter indeterminate, so long as it can be located. (Camacho v C,A 2007) The fact that the exact area of subject land in the contract of sale is subject to the result of a survey does not render the subject matter indeterminate. (Heirs of Juan San

Andres v. Rodriguez (2000))

Particular Kinds 1. Future Goods

Sale of future goods or those goods which are to be manufactured, raised, or acquired by seller after the perfection of the sale is valid (Art 1462, CC). Future goods are those capable of future existence.

2. Sale of Undivided Interest or Share a. Sole owner of a thing may sell an undividedinteresttherein. (Art

1463,CC) Ex., a fraction ( or half) or percentage (50%), or my share in the property.

b. The sale of an undivided share in a specific mass of fungible goods makes the buyer a co-owner of the entire mass in proportion to the amount he bought. (Art 1464,CC)

c. Co-owner cannot sell more than his share (Yturralde v CA, 1972) (Asked in 01, 02)

3. Sale of Things in Litigation a. Sale of things under litigation entered

into by defendant, without the approval of the litigants or the court is rescissible. (Art 1381 (4))

b. NO RESCISSION where the thing is rd

legally in the possession of 3 persons who did not act in bad faith (Art 1385 (2))

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SAL

Emptio Spei Void Partiesintendthe contract to exist at all events

Buyer will have to pay


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4. Things Subject to Resolutory Condition Sale of things subject to a resolutory condition, i.e. things acquired under legal or conventional right of redemption, or subject to reserva troncal, may be the object of a contract of sale. (Asked in 99) (Art 1465, CC)

5. Quantity of Subject Matter not determinate The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract provided it is possible to determine the same, without the need of new contract. (Art. 1349, CC)

_______

2. But if thing or part thereof has been delivered and appropriated by the buyer, he must pay a reasonable price therefore. a. What is reasonable price? A question

of fact dependent on circumstances. (Art 1474, CC)

b. In the case of Philippine Free Press v CA (2005), the court held that the price wasreasonable based on factual determinationpredicated on offered evidence (CompanysBalance Sheet showed the book value or fair market value of its shares)

IN MONEY OR ITS EQUIVALENT

Example of equivalent: Letters of credit If price is partly in money and partly in another thing: Determine manifest intention of the parties to see whether it was barter or sale. (Art 1468,CC) If intention does not clearly appear, it shall be considered a barter if the value of the thing exceed the amount of money or its equivalent.(Art 1468,CC)

C. PRICE

Requisites (Ce-MoRe) 1. Certain or ascertainable at the time of

perfection 2. In Money or its equivalent 3. Real

CERTAIN OR ASCERTAINABLE AT THE TIME OF PERFECTION

Price considered certain in the following cases 1. Fixed by agreement of the parties

a. Fixing of price cannot be left to discretion of one of the parties

b. BUT if such is accepted by the other, sale is perfected. (Art 1473, CC)

2. Determination is left to the judgment of a specified person a. If unable or unwilling: Sale is

inefficacious UNLESS parties subsequently agree about the price.

b. If in bad faith/by mistake: Courts may fix price

rd c. If 3 person is prevented from fixing

price by fault of seller or buyer: Innocent party may avail of remedies.

3. It be so in reference to another thing, or when the price fixed is that which the thing have on a definite day, or in a particular exchange or market, OR when the amount fixed is above or below the price on such day, exchange or market. (Art 1472, CC)

If price cannot be determined (Asked in 76) 1. Sale is inefficacious (Art. 1474, CC)

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REAL

Meaning of Real When buyer has an intention to pay and the seller has an expectation to receive the price 1. If simulated: Sale is VOID; BUT act may be

shown to have been a donation or some other act or contract. (Art 1471, CC)

2. In Labagala vs. Santiago (2001), Petitioner admittedly did not pay any centavo for the property. Hence, the sale is void.

If Price is false (real consideration is not the same as that stated in the contract) 1. Sale is void 2. UNLESS proved to be founded on another

true and lawful price (Art 1353, CC) _______

Gross Inadequacy of Price 1. General Rule: Does not affect a contract of

sale. (Art 1470,CC) The stipulation in a contract of sale which states that the consideration is P1 and other valuable considerations does not make the contract void. Gross inadequacy of price does not affect the contract of sale except that it may indicate a defect in consent. (Bagnas v. C.A., 1989)


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2. Exceptions: a. It may indicate a defect in consent such

as fraud, mistake, or undue influence b. It may indicate that the contract was in

reality a donation or some other act or contract

c. Inadequacy would make the contract of sale rescissible where a contract was entered into by the guardian of a ward or a representative of an absentee, without the courts approval, and the owner suffers lesion by more than of the value of the thing sold. (Art 1381 (1) (2), CC)

Manner of Payment Disagreement on the manner of payment is tantamount to a failure to agree on the price. (Toyota Shaw vs. CA, 1995)

agreed period, at a fixed price. (De la Cavada vs. Diaz, 1918)

An option is not of itself a purchase, but merely secures the privilege to buy.

A consideration for an optional contract is just as important as the consideration for any other kind of contract.Iftherewasno consideration for the option, then it cannot be enforced any more that any other contract where no consideration exists. (Baviera)

b. Difference from Sale:

SALE Bilateral

OPTION CONTRACT Unilateral: gives a right to buy or to sell, but imposes no obligation on the part of the option-holder, aside from the consideration for the offer Sale of right to purchase III. Stages

A. Negotiation/Preparation

From the time the parties indicate interest in the contract up to the time said contract is perfected

1. Offer a. General Rule: Offer may be withdrawn

at any time without even communicating such withdrawal to the interested buyer.

b. Exception: When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal. (Art 1324, CC)

c. Exception to the exception: Cannot be withdrawn within the period if offer is founded upon a consideration. (Art 1324 and 1479, CC)

Sale of property 27

SAL

c.

2. Option Contract (Asked in 75, 77, 80, 93, 02) a. Definition

An accepted unilateral promise to buy or sell supported by a consideration distinct from the price (Art 1479, CC) An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise or certain specified property, if he chooses, at any time within the

Right of first refusal (Asked in 93, 96, 98, 02, 08)

As to enforceability Equatorial Realty Development vs. Mayfair, (1996): If the right to the first offer is embodied in the contract, it should be executed accordingtotheterms stipulated. The right should be enforced according to the law on contracts and not on the panoramic and indefinite rule on human relations. This juridical relation is not amorphous nor is it merely preparatory.

When the grantee fails to exercise the right

Paranaque Kings vs. CA, (1997): Only after the grantee

st fails to exercise its right of 1

priority under the same terms and conditions within the period agreed upon, could the grantor validly offer to sell the property

rd to a 3 person under the same

terms as offered to the grantee. As to the effects of the violation of the right

Rosencor Devt. Corp. Vs.

Inquing (2001): A sale made in violation of a right of first refusal is valid but rescissible, and may be the subject of an action for specific performance. However, before the sale to the

rd 3 person may be rescinded, he


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must have been actually or constructively aware of the

st right of 1 refusal at the time he bought it. Thesanctionforthe enforcement of the right of first refusal against third persons is based on Art. 19 of NCC, as no real right was created on the property.

Option Money vs. Earnest Money (Limson vs. Ca, 2001)

OPTION MONEY Separate and distinct consideration from the purchase price Given when sale is not yet perfected When given, the would- be-buyer is not required to buy, but may even forfeit it depending on the terms of the option Grantee of option is still undecided whether or not to buy or sell the property (Baviera)

EARNEST MONEY Part of purchase price (Art 1482, CC)

Given only when there is already a sale When given, the buyer is bound to pay the

balance

Difference from sale: ST

SALERIGHT OF 1 REFUSAL BilateralUnilateral Price and other Price and other terms are yet to terms of payment be agreed upon are certain the thing to be sold must be determinate

Buyer manifests his earnest desire to buy the property

_______

C. Consummation Distinction from Option Contract

RIGHT OF 1 ST OPTION CONTRACT Separate considerationis necessary Grantee has the right to buy or sell

REFUSAL

a separate No need for consideration

No right to buy or sell, only a st

right to match the 1 offer to buy should the grantor decide to sell

IV. Kinds of Sale (Asked in 97, 00)

A. Absolute Sale Sale is not subject to any condition whatsoever; title passes to the buyer upon delivery of thing sold

B. Conditional Sale Contract is subject to certain conditions (usually the payment of the purchase price); title will only pass once the conditions have been fulfilled

In some cases, the Court makes finer distinctions between a conditional sale and a contract to sell: a. Contract to sell- The fulfilment of the

suspensive condition, which is the full payment of the price, will not automatically transfer ownership to the buyer although the property may have been previously delivered to him.

b. Conditional Sale: The fulfilment of the suspensive condition renders the sale absolute and affects the sellers title thereto such that if there was previous delivery of the property, the sellers ownership or title the property is automatically transferred to the buyer. (Ursal vs. CA, 2005)

_______ B. Perfection (Asked in 88 and 91)

When Perfected 1. Contract of sale is a consensual contract,

hence perfected at the moment of the meeting of the minds of the parties as to the object of the contract and the price. (Art 1475,CC)

2. It is the proof of all the essential elements of the contract of sale, and not the mere giving of earnest money, which establishes the existence of a perfected sale. (Platinum Plans Phils. vs. Cucueco, 2006)

Effect of Perfection From the moment of the perfection of the contract of sale, the parties may reciprocally demand performance, subject to the provisions of the Statute of Frauds. (Art 1475,CC)

Earnest Money Definition- paid in advance of the purchase price agreed upon by the parties in a contract of sale, given by the buyer to the seller, to bind the latter to the bargain. (Asked in 93, 02)

SAL

Begins when the parties perform their respective undertakings under the sale. It culminates in the extinguishment of the sale. (See obligations of

seller and buyer, Chapter II)

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V. Form

General rule: No form required as to validity since sale is perfected by consent of the parties.

The sale may be (Art.1483,CC): 1. Written 2. Oral 3. Partly written and partly oral 4. Inferred from the conduct of the parties

Exceptions: 1. Statute of Frauds (Art,1403 (2),CC)

a. Contract or some memorandum thereof must be in writing and subscribed by the party or his agent, otherwise contract is unenforceable. Unless ratified by failure to object to oral evidence or acceptance of benefits under the contract

b. What are under the Statute of Frauds: Sale of goods, chattels, or things in

action at a price not less than P500 Sale not to be performed within 1

year Sale of real property or an interest therein (Art 1358, CC)

c. Applies only to executory contracts, not to contracts either totally or partially performed. (Iigo v. Estate of Maloto, 1967)

2. Sale of realty by an agent Agents authority must be in writing, otherwise the sale is void (Art.1874, CC)

3. Sale of large cattle To be valid, transfer of large cattle must be registered with the municipal treasurer (Sec.529, Revised Administrative Code)

Electronic Commerce Act (RA 8792) 1. Electronic documents have the legal effect,

validity or enforceability of any other document or legal writing

2. As long as electronic document maintains its integrity and reliability and is capable of being displayed to the person to whom it is to be presented, containing the electronic signature of the person sending it. (Sec 7, 8 of RA 8792)

VI. Sale Distinguished Contracts

A. DONATION

SALE Onerous Perfected consent

From Other

by mere DONATION Gratuitous Must comply with the formalities required by law. (Art 745, CC)

When the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation or some other contract. (Art.1471.CC)

B. BARTER

SALE Consideration is price inmoneyorits equivalent

BARTER Consideration another thing is

27

SALBarter is a contract where one of the parties binds himself to give one thing in consideration of the others promise to give another thing (Art.1638, CC)

If consideration consists partly in money and partly in another thing, the intention of the parties determines whether the contract is one of sale or barter:

If manifest intention is not clear: Barter when the value of thing is more than the amount of money or its equivalent, otherwise, sale. (Art.1468)

C. CONTRACT FOR A PIECE OF WORK

SALE

Goods are manufactured or procured in the ordinarycourseof business For the general market, whether on hand or not

CONTRACT FOR A PIECE OF WORK Goods are manufactured for customer upon his special order

Specifically for customer

The fact that the object were made by the seller only when customers placed their orders, does not alter the nature of the contract of sale, for it

only accepted such orders as called for the employment of such materials as it ordinarily manufactured or was in a position habitually to manufacture such. (Celestino Co & Co vs. Collector, 1956)

When each product or system executed is always UNIQUE and could not mass-produce the product because of its very nature, such is a


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SALE

Consideration Buyer: thing Seller: price Title passes to the buyer

BILATERAL PROMISE TO BUY AND SELL Consideration is the promise made by the other (Baviera)

No transfer of title

contract for a piece of work. (Commissioner vs. Engineering Equipment and Supply Co., 1975)

D. LEASE OF THINGS

SALE No pre-existing debt Creates an obligation

DACION EN PAGO Pre-existing debt Extinguishesthe obligation(modeof payment)

Price is value of the thing given Price is more freely

agreed upon, fixed by the parties

There is a novation of the contract of loan into a contract of sale when the creditor agrees to accept a thing in payment of the debt. Hence, if the thing given in payment turns out to belong to another, the creditors remedy should be governed by the law on sales, not loan. (Baviera)

E. CONTRACT TO SELL (Asked in 97, 01, 03)

Contract of Sale Ownership is transferred upon delivery

Non-paymentis resolutory condition

a

Contract to Sell Ownershipisonly transferreduponfull payment of price Full payment is a positive suspensivecondition, hencenonpayment would not give rise to the obligation to transfer ownership Contract to sell

No perfected sale yet A subsequent buyer is presumed to be a buyer in good faith

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Conditional Contract of Sale Sale is already perfected A subsequent buyer is presumed to be a buyer in bad faith

NOTE: Contract to Sell is an executory contract, while a Contract of Sale is a consummated contract.

F. BILATERAL PROMISE TO BUY AND SELL

(Asked in 80, 91)

A promise to buy and sell a determinate thing for

a price certain is reciprocally demandable. (Art 479, CC)

Like a sale, the thing must be determinate and the price certain.


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CIVIL LAW REVIEWER Chapter II. OBLIGATIONS of the SELLER and BUYER

Chapter II. Obligations of the Seller and Buyer

I. OBLIGATIONS OF THE SELLER A. TO TRANSFER OWNERSHIP B. TO WARRANT AGAINST EVICTION AND

HIDDEN DEFECTS C. TO PRESERVE THE THING D. TO PAY FOR THE EXPENSES FOR THE

EXECUTION AND REGISTRATION OF THE DEED OF SALE OBLIGATIONS OF THE BUYER

A. TO ACCEPT DELIVERY B. TO PAY THE PRICE OF THE THING SOLD

Sellers residence

b. In case of specific goods, which the parties knew to be at some other place when the contract was perfected, that place is the place of delivery

c. If goods are at the time of sale possessed by a third person, then there is no delivery until he acknowledges to the buyer that he holds the goods for buyer.

II.

I. Obligations of the Seller

4. When to Deliver Absent a stipulation as to time, delivery must be made within a reasonable time; demand or tender of delivery shall be made at a reasonable hour.

Ways of Effecting Delivery 1. Actual Delivery

a. When deemed made: when the thing sold is placed in the control and

possession of the vendee (Art. 1497)

b. Not always essential to passing of title (Art. 1475)

c. Parties may agree when and on what conditions the ownership in the subject of the contract shall pass to the buyer (example: Art 1478 where ownership will only pass after full payment of the price)

2. Constructive Delivery a. Execution of public instrument (Art

1498, par. 1) General rule: produces the same legal effects of actual delivery. Exceptions:

The intention of the parties is otherwise.

At the time of execution, the subject matter was not subject to the control of the seller which must subsist for a reasonable length of time after execution. (Pasagui v Villablanca, 68 SCRA 18)

Control over thing sold must be such that seller is capable of physically transferring it to buyer

b. Symbolic Delivery Delivery of keys of the place or depositary where the movable is stored or kept. (Art 1498, CC) Unless otherwise agreed, when symbolic delivery has been made, the seller is not obliged to remove tenants to place the buyer in actual

A. To transfer ownership (Asked in 84, 98, 99, 03)

Obligation to transfer ownership and to deliver is really implied in every contract of sale (Arts. 1458-1459)

Transfer of ownership requires delivery (Art. 1495)

General Concepts 1. Delivery comprises 2 obligations in Art. 1495:

a. Actual duty to deliver b. Transfer of ownership can only be

accomplished via delivery

2. What to Deliver a. Thing sold (Art. 1495) b. Fruits (Art. 1164 & 1537) c. Accessions and accessories (Art. 1166

& 1537) Improvements by seller at his expense grants him a usufructuary right. No indemnification But he may remove it to the extent that there is no damage (Art. 1538)

3. Where to Deliver a. A hierarchy is followed (STOR):

Stipulation Usage of trade Sellers place of business (office)

SAL

Obligations of the Seller (TWPP) 1. Transfer ownership 2. Warrant against eviction and hidden defects 3. Preserve the thing 4. Pay for the expensed for the execution and

registration of the deed of sale

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possession of the property as he has already complied with his obligation to transfer ownership of and deliver the thing sold. (Power Commercial and Industrial Corp. v. CA, 1997; Sabio v. The International Corporate Bank, Inc., 2001)

c. Tradition Longa Manu (Long Hand) Deliveryofthingbymere agreement. Example: Seller points to the property without actually transferring physical possession thereof. When an employer assigned all its rights and title to all surplus property salvaged by the contractor, tradition longa manu takes place. Delivery is upon the moment a thing is salvaged. (Board of Liquidators v. Floro, 1960)

F.A.S.: Free Alongside Seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named port.

d. Tradition Brevi Manu (Short Hand) MOVABLE is delivered when the buyer had the thing already in his possession before the sale took place, not as owner but as lessee, borrower, or depositary.

e. Tradition Constitutum Possessorium Seller continues to be in possession of the property sold, by virtue of a lease contract agreement with the vendee.

f. Delivery to a Common Carrier General Rule: Delivery to the

courier or carrier tantamount to

delivery to buyer. Exceptions

Seller reserved title by the form of the bill of lading, with intent to remain the owner, not merely for thepurposeofsecuring payment, OR

Contrary intent appears in the contract (i.e. seller is required to deliver goods to buyer at the point of destination)

F.O.B.: Free on Board When seller bears the expenses of transportation up to the F.O.B. point.

C.I.F.:Cost,Insurance, Freight Price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the point of destination.

Completeness of Delivery 1. When may the seller refuse to deliver:

a. No payment yet or no period for payment has been fixed in the contract (Art.1524);

b. The buyer loses the right to make use of the term, as when:

He becomes insolvent UNLESS he gives a guaranty or security for the debt; He does not does not furnish the seller the guaranties or securities he promised; He impairs the guaranties or securitiesortheydisappear fortuitously UNLESS he immediately gives new ones equally satisfactory; He violates any undertaking, in consideration of which the seller agreed to the period; He attempts to abscond. (Art.1536)

2. Rules on Sales of Goods a. When Quantity less than expected

Buyer may reject all Buyer accepts with knowledge of sellers inability to deliver the rest buyer pays at contract price Buyer has used or disposed prior to knowing sellers inability to deliver the rest buyer pays fair value b. Quantity more than expected If divisible, buyer may reject excess If indivisible, buyer may reject all

c. Quality different or different goods If divisible, buyer may accept the goods compliant with contract and reject those that are not If indivisible, buyer may reject all (Art. 1522)

d. Sale of specific mass of goods In the sale of fungibles where the measure or weight has not been agreed upon nor is there a fixed rate based upon a measurement, the subject matter of the sale is a

determinate object the specific mass; seller is merely required to deliver such mass even if actual quantity falls short of parties estimate (Art. 1480)

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e. Delivery by installments By default, buyer is not bound to accept delivery of goods by instalments In a contract of delivery by installment to be paid for via installment as well, delay or breach may not necessarily mean breach of the entire contract; depending on the circumstances, breach may be severable and the aggrieved party is entitled to damages and not rescission. (Art. 1583)

3. Rules on Sales of Immovables a. Sale at a fixed rate per unit of measure

Seller bound to deliver entire land If the area is less than that stated, buyer may rescind or demand a proportionate reduction in price If a part of the land is not of the quality stated in the contract, buyer may rescindordemanda proportionate reduction in price Buyer may only avail of rescission if the area deficiency is 10% or more of total area or if the inferior value of the part of the land exceeds 10% of the price agreed upon. (Art. 1539) If the area turns out to be greater than that stated, buyer may accept area included and reject the excess oracceptallandpaya proportionate increase in price (Art. 1540)

b. Sale for lump sum Follows the same rule as the sale of a specific mass which is explained above There is no change in price even if area or number turns out to be greater or lesser than that stated (Art. 1542) Exception: when the excess or deficiency is no longer reasonable; in Asian v Jalandoni, 1923, 644 sq m was found to be unreasonable. Exception to the exception: when buyer expressly assumes risk on actual area of the land. (Garcia v Veloso, 1941)

If the price per unit or measure is not provided for in the contract, then the rules of lump sum sale should prevail. (Sta. Ana v Hernandez, 1966)

Effect of Delivery 1. Delivery, generally, results in transfer of

ownership from seller to buyer. 2. As such, it also transfers the risk of loss of

the thing sold to the buyer. 3. Acceptance is not a condition for the

completeness of delivery; even with such refusal of acceptance, delivery will be deemed completed and produce its legal effects.

4. By default, expenses of and incidental to putting the goods into a deliverable state must be borne by seller. (Art. 1521)

When delivery does not transfer title 1. Sale on approval, trial, or satisfaction

General Rule: Title remains with the seller

Exceptions: a. Buyer signifies his approval or

acceptance to the seller or does any other act adopting the transaction

b. Retains the goods without giving notice

of rejection after the time fixed has expired, if no time has been fixed, after the expiration of a reasonable time (Art 1502, CC)

Difference between sale on approval and sale on return

Sale on Approval Ownership does not pass upon delivery

Sale on Return Ownershippassesupon delivery, but buyer may revest ownership in the seller by returning or tendering the goods within the time fixed in the contract Depends on the will of the buyer Subjecttoaresolutory condition Risk of loss remains with the buyer

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Depends on the character or quality of goods Subject to a suspensive condition Risk of loss remains with the seller

2. Express Reservation If it was stipulated that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (Art 1478, CC)

3. Implied Reservation The following are instances when there is an implied reservation of ownership a. Goods are shipped, but by the bill of

lading goods are deliverable to the seller or his agent, or to the order of the seller or his agent


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b. Bill of lading is retained by the seller or his agent.

c. When the seller of the goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer, and the latter does not honor the bill of exchange by returning the bill of lading to the seller.

4. When sale not valid eg. When the thing sold is a public property

5. When Seller is not the owner (Asked in 77, 78, 86, 87)

General Rule: Ownership is not acquired by the buyer. One cannot give what one does not have. (Art 1505, CC)

Exceptions: (RE-ROM) a. Seller has a Right to transfer ownership

Seller need not be the owner of the thing at the time of perfection of the

contract It is sufficient that seller has

a right to transfer ownership thereof at the time it is delivered (Art. 1459) One who sells something he does not own yet is bound by the sale when he acquires the thing later (Bucton vs Gabar, 55 SCRA 469)

b. Estoppel: Owner is by his conduct precluded from denying the sellers authority to sell. (Art. 1434)

c. Registered land bought in good faith General rule: Buyer need not go beyond the Torrens title Exception: When he has actual knowledgeoffactsand circumstances that would impel a reasonably cautious man to make further inquiry

d. Order of courts Statutory Sale In execution sale, the buyer merely steps into the shoes of the judgment debtor (Rule 39, sec. 33, ROC)

e. When goods are purchased in Merchants store, Fair, or Market (Art 1505, CC)

The policy of the law has always been that where the rights and interest of the vendor clash with that of an innocent buyer for value, the latter must be protected. (Sun Brothers and Co. V. Velasco, (1958)

6. Sale by person having a voidable title a. True owner may recover the thing when

provided the ff. requisites concur: Subject matter is movable Owner has either lost the thing or has been unlawfully deprived. (Art 559, CC)

b. Reimbursement is necessary before owner can recover when:

Buyer acted in good faith Acquired at a public auction (Art 559, CC) c. Recovery no longer possible when: Buyer in good faith

Acquired it at a merchants stor e, fair or market. (Art 1506, CC)

__________

B. To warrant against eviction & hidden defects (Art. 1495; 1547)

Warranties A statement or representation made by the seller contemporaneously and as part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to ensure that certain facts are or shall be as he then represents.

Effects of Warranties 1. Natural tendency is to induce buyer to

purchase the subject matter 2. Buyer purchases subject matter relying

thereon 3. Seller liable for damages in case of breach

Effects of Waivers Only applicable to waiver of warranty against eviction (see the following section) parties may increase or decrease warranty against eviction but the effect depends on good/bad faith of the seller 1. Seller in bad faith and there is warranty

against eviction null and void 2. buyer without knowledge of a particular risk,

made general renunciation of warranty not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction)

3. buyer with knowledge of risk of eviction assumed its consequences and made a waiver vendor not liable

4. waiver to a specific case of eviction wipes

out warranty as to that specific risk but not as to eviction caused by other reasons

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Express Warranty Concealment of facts does not necessarily amounttofalse representation

False Representation When concealment of

facts comes with an active misstatement of factorapartial statement of fact such that withholding of that unsaid portion makes that which is stated absolutely false

However, buyer who fails to inspect condition ofpropertydespite ample opportunity to do so and no opposition on the part of seller cannot later on allege false representation. (Phil Mftg Co. v Go Jucco, 1926) This is because buyers duty to inspect remains despite false representation by the seller. Buyer has the duty to exercise due diligence.

Condition v. Warranty

Condition Pertains to and affects the existence of the obligation

Non-happening does not amount to breach of contract Must be stipulated

May attach to either to the sellers duty to deliver thing or some other circumstance

arranty Goesintothe performanceofan obligation and may, in itself, be an obligation Non-fulfillment constitutes breach of contract Stipulation or operation of law Always relates to the subject matter or the sellers obligations as to the subject matter

If seller has promised that the condition should happen or be performed, the buyer may treat the nonperformance of the condition as a breach of warranty. (Art.1545)

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following requisites must concur: a. An affirmation of fact or any promise

relating to the thing sold; b. The natural tendency of such affirmation

or promise is to induce the buyer to buy; c. The buyer buys the thing relying

thereon. (Art. 1546) d. Made before the sale not upon delivery

or any other point

An express warranty can be made by and

also be binding on the seller even in the sale

of a second hand article. (Moles v. IAC, 1989)

Express Warranty

Whatisspecifically represented as true in said document cannot be considered as mere dealer's talk. (Moles v. IAC, 1989)

Dealers or Traders Talk

Affirmation of the value of the thing or statementofthe sellers opinion only is not a warranty unless:

- The seller made it as an expert;

- It was relied upon

by the buyer.

(Art.1546) Ordinarily, what does

not appear on the face ofthewritten instrument (Moles v. IAC, 1989)

2. Implied Warranty a. Implied Warranty of Title b. Implied Warranty against Encumbrance

/ Non-Apparent Servitudes c. Implied Warranty against Hidden

Defects (Art. 1547) Impliedwarrantyasto Merchantable Quality and Fitness of Goods Impliedwarrantyagainst Redhibitory Defect in the Sale of Animals (Art. 1572) Quality and Fitness of Goods in Sale by Sample or Description

d. Other Warranties

Implied Warranty of Title 1. Implied warranty arises by operation of law

and need not be stipulated in the contract of sale.

2. Warranty of Seller s Right to Sell: seller warrants his right to sell at the time the ownership is to pass.

Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law. (Art. 1547)

3. Warranty against Eviction: seller warrants that buyer, from the time ownership passes, shall have and enjoy legal and peaceful possession of the thing. Its requisites are: a. Buyer is deprived of the whole or a part

of the thing sold;


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b. Eviction is by final judgment c. Final judgment based on a right prior to

the sale or an act imputable to the vendor

d. Seller is summoned and made co- defendant in the suit for eviction at the instanceofthebuyer. (Power Commercial and Industrial Corp. v. CA, 1997)

Implied Warranty against Encumbrance / Non-Apparent Servitudes Requisites for breach: 1. Thing sold is an immovable 2. Burden or servitude encumbering the thing

sold is a. Non-apparent to the naked eye b. Not mentioned in the agreement c. Of such nature that it must be presumed

that the buyer would not have bought it had he been aware thereof

d. Not recorded in the Registry of Property unless there is an express warranty that the thing is free from all burdens and encumbrances (Art.1560)

Implied warranty against Hidden Defects Requisites for breach: 1. The defect renders the thing sold unfit for

the use for which it was intended OR diminishes its fitness for such use to such an extent that had the buyer been aware thereof, he would not have bought it or would have paid a lower price;

2. The defect is not patent or visible; 3. The buyer is not an expert who, by reason of

his trade or profession, should have known the defect

4. The seller is aware of the hidden fault or defect, OR even he is not aware thereof, if there is no stipulation to the contrary (Arts.1561 &1566)

Implied warranty as to Merchantable Quality and Fitness of Goods Merchantable Quality: 1. Where the goods are brought by description

from a seller who deals in goods of that description (Art.1562)

2. In a sale by sample, if the seller is a dealer in goods of that kind and the defect is not

apparent on reasonable examination of the sample (Art.1566)

Fitness for a particular purpose: Where the buyer expressly or impliedly makes known to the seller the particular purpose for which the goods are acquired AND it appears that the buyer

relies on the (Art.1562(1))

sellers skill or udgment

Other Warranties 1. Warranty in Sale of Consumer Goods

Consumer goods goods primarily for personal, family, household or agricultural purposes, which shall include but not limited to food, drugs, cosmetics, and devices

: (Sec.4(q), RA 7493 Consumer Act of the Phil)

Kinds: a. Full warranty - if the written warranty

meets the minimum standards

b. Limited warranty - if the written warranty does not meet the minimum standards (Sec.6(c), RA7394)

Minimum standard for warranties that the warrantor shall: a. Remedy such consumer product within

a reasonable time and without charge in case of a defect, malfunction or failure to conform to such written warranty;

b. Permit the consumer to elect whether to ask for a refund or replacement without

charge of such product or part, as the

case may be, where after reasonable number of attempts to remedy the defect or malfunction, the product continues to have the defect or to malfunction

The warrantor will not be required to perform the above duties if he can show that the defect, malfunction or failure to conform to a

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Implied warranty against Redhibitory Defect in the Sale of Animals (Art. 1572)

Redhibitory defect- a hidden defect of animals of such nature that expert knowledge is not sufficient to discover it, even in case a professional inspection has been made No warranty in case of (Art. 1574): a. Animals sold at fairs or public auctions b. Livestock sold as condemned The following sales are void (Art. 1575): a. Sale of animals suffering from

contagious diseases b. Sale of animals unfit for the purpose for

which they are acquired as stated in the contract

Veterinarian liable if he fails to discover or disclose the hidden defect through ignorance or bad faith (Art 1576) Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of sale. (Art 1578) 28


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written warranty was caused by damage due to unreasonable use thereof. (Sec.68(d), RA 7394)

2. Warranty in sale of Subdivision Lot or Condominium Units The owner or developer shall be answerable and liable for the facilities, improvements, infrastructuresorotherformsof development represented or promised in brochures, advertisements and other sales

propaganda disseminated by the owner or developer or his agents and the same shall form part of the sales warranties enforceable against said owner or developer, jointly and severally. (Sec.19,PD957:The Subdivision and Condominium Buyers Protective Decree)

__________

C. To preserve the thing, pending delivery, with proper diligence (Art. 1163)

Duration: From the perfection of sale until delivery (Art 1480)

Default standard of care: Diligence of a good father of a family

General rule: seller is liable for loss or deterioration (Art. 1174)

Exception: fortuitous event (Art. 1174)

Exception to exception: seller is still liable for fortuitous event if

1. Law provides for it (e.g. delay or promising

to deliver the same thing to 2 or more persons with different interests Art. 1165)

2. By stipulation 3. Nature of obligation requires assumption of

risk

Fungibles sold for a price fixed according to weight, number or measure: duty to preserve begins only after the things are weighed, counted or measured except when seller is already in delay.

__________

D. To pay for the expenses for the execution and registration of the deed of sale (Art. 1487)

General rule: The seller has the duty to pay for the expenses for the execution and registration of the deed of sale

Exception: if there is a stipulation to the contrary (Art. 1487)

Expenses incurred subsequent to the transfer of title are to be borne by the buyer, unless caused by the fault of the seller

II. Obligations of the Buyer

Obligations of the Buyer 1. To Accept delivery 2. To Pay the price of the thing sold

Pertinent Rules 1. In a contract of sale, the seller is not

required to deliver the thing sold until the price is paid nor is the buyer required to pay the price before the thing is delivered in the absence of an agreement to the contrary (Art 1524)

2. If stipulated, then the buyer is bound to accept delivery and to pay the price at the time and place designated

3. If there is no stipulation as to the time and place of payment and delivery, the buyer is bound to pay at the time and place of delivery

4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected (Art. 1521)

5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is required to pay even before the thing is delivered to him.

First Obligation: accept delivery 1. Form

a. Express: buyer intimates acceptance b. Implied:

Goods delivered to the buyer and he does any act in relation to them that is inconsistent with the ownership of the seller.

After the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he has rejected them. (Art.1585)

2. Manner RightofInspection: reasonable opportunity to examine the goods upon delivery. If there is a stipulation that delivery is preconditioned on payment, then buyer has no right of inspection until he has paid. (Art.1584) Exception: in case such right of inspection is permitted by agreement or usage trade.

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3. Effect of Refusal to accept a. If buyer refuses to accept goods, having

the right to do so, he is not bound to return them to the seller; it being sufficient that he notifies the seller of his refusal to accept

If he voluntarily constitutes himself a depositary of the goods, he shall be liable as such. (Art.1587)

b. Unjust refusal to accept still results to transfer of ownership; title to the goods passes to the buyer from the moment they are placed at his disposal, except if ownership has been reserved by the seller (Art.1588)

Second Obligation: pay the price of the thing sold (Art. 1582) 1. Payment of interest

Buyer is liable for interest when: (SFD) a. Interest is stipulated; b. Thing sold produces fruits or income; c. Buyer is in default - interest accrues

from the time of judicial or extrajudicial demand for payment

2. Suspension of payments Buyer may suspend payment when: a. his ownership or possession of the thing

is disturbed or b. he has reasonable grounds to fear such

disturbance by a vindicatory action or a foreclosure of mortgage

Exceptions: buyercannotsuspend payment when:

a. seller gives security for the return of the

price in a proper case b. ithasbeenstipulatedthat,

notwithstanding any such contingency, the buyer shall be bound to pay (Art. 1590)

Suspension may continue until the seller has caused the disturbance or danger to cease

A mere act of trespass shall not authorize the suspension of the payment. (Art.1590)

3. Sale of real property

In the sale of immovable property, buyer may pay even beyond the expiration of the period agreed upon, as long as no demand for rescission of the contract has been made upon him either

judicially or by a notarial act, despite a stipulation providing for ipso jure rescission (Art.1592) (Asked in 88, 00)

After demand, court may not grant him a

new term (Heirs of Escanlar, et.al. v. CA, 1997) R.A. 6552 (Maceda Law) applies to sale or financing of real estate on installment (Rillo v.Courtof

Appeals,1997) Buyer is awarded a grace period of 1 month per year of installments paid or 60 days, whichever is higher, within which he may pay without additional interest o may be used once every 5 years of the life of the contract

or any of its extensions If contract is to be cancelled, seller must first: o 30 day notice of cancellation,

and o refund cash surrender value to

buyer; amount is equivalent to 50% of total payments made including deposits, options and down-payments plus 5% for every year in excess of 5 years of the life of the contract or any of its extensions

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CIVIL LAW REVIEWER Chapter III. DOUBLE SALES

Chapter III. Double Sales (Asked in 77, 87, 89, 98, 01, 04)

I. General Rule II. Requisites III. Rulesgoverningsaleofmovables,

immovables and unregistered lands IV. Purchaser in good faith

both registration in its ordinary and strict sense and cancellation, annotation, and even marginal notes. (Cheng v. Genato, 1998)

NOTE: Pencilled entries on the title are not considered registration (AFPMBAI v. Court of Appeals, 1999).

C. Sale by Virtue of Execution and Attachment

Art. 1544 does NOT apply to the sale of unregistered land at an execution sale because a buyer of unregistered land at a execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. (Carumba v. CA, 1970)

I. General Rule Prior tempore, potior jure (he who is first in time is preferred in right) applies.

II. Requisites

Requisites (Cheng v Genato, 1998) 1. 2 or more valid sales; 2. Same subject matter; 3. 2 or more buyers with conflicting interests at

odds over the rightful ownership of the thing sold; 4. Same seller

III. Rules Governing Sale of Movables, Immovables and Unregistered Lands

A. Sale of Movables Ownership shall be transferred to the person who may have first taken possession in good faith.

B. Immovables 1. Ownership belongs to the person who: a. In good faith first recorded in the

Registry of Property; OR b. If there is no inscription, ownership

passes to the person who in good faith was first in possession; OR

c. In the absence thereof, to the person whopresents the oldest title, PROVIDED there is good faith. NOTE: good faith is required all the time.

NOTE: a. Oldest Title any public document

showing acquisition of the land in good faith.Toconstitutetitle,the transmission of ownership must appear in a public document [Art. 1358 (1)]

b. Examples: Deed of Sale, Deed of Donation, Deed of Trust

2. Registration includes any entry made in the Primary Entry Book of the registry, including

D. Sale of Unregistered Land 1. Instrumentordeedsestablishing,

transmitting, acknowledging, modifying or extinguishing rights with respect to lands not registered under the Land Registration Act or the Spanish Mortgage Law, are required to be registered in the Registry of Property

rd to prejudice 3 persons, although such registration is understood to be w/o

rd prejudice to a 3 party with a better right. (PD 1528 Sec 113)

2. Art. 1544 applies to unregistered land subject to a conventional sale (because of

Art. 1358) but NOT to unregistered land subject to judicial sale.

E. Purchaser in good faith (Asked in 76, 86, 08) 1. General Characteristics

a. One who buys the property of another, without notice that some other person has a right to or interest in such property, and who pays a full and fair price for the sale, at the time of the purchase or before he has notice of the claim/interest of some other person in the property. (Agricultural and Home Extension Development Group v CA, 1992)

b. A buyer could not have failed to know or discover that the land sold to him was in adverse possession; hence he is deemed to have acted in bad faith. (Heirs of Ramon Duran v Uy, 344 SCRA 238)

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CIVIL LAW REVIEWER Chapter III. DOUBLE SALES

2. Presumption Gen Rule: As a rule, he who asserts the status of a purchaser in good faith and for value, has the burden of proving such assertion. This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith, i.e., that everyone is presumed to act in good faith (Mathay v CA, 295 SCRA 556)

When buyer is presumed to be in bad faith: a. Annotation of adverse claim: Places

any subsequent buyer of the registered land in bad faith. (Balatbat v CA, 261 SCRA 128)

b. Annotation of Lis Pendens: Buyer cannot be considered an innocent purchaser for value where it ignored the lis pendens on the title.

Lis Pendens Annotation of Adverse Claim may be cancelled only in one instance, i.e., after the claim is adjudged invalid or unmeritorious by the Court

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NOTE: The two are not contradictory or repugnant to one another; nor does the existence of one automatically nullify the other, and if any of the registrations should be considered unnecessary or superfluous, it would be the notice of lis pendens (A. Doronila Resources Development Inc v CA, 1988)


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CIVIL LAW REVIEWER Chapter IV. RISK of LOSS

Chapter IV. Risk of Loss

I. II.

GENERAL RULE EXCEPTION

I. General Rule

Res perit domino: Owner bears risk of loss

Ownership is not transferred until delivery

II. Exceptions

1. Contrary stipulation 2. An obligation to deliver a generic thing is

not extinguished by loss. (Art 1263, CC) 3. Risk of loss of specific things is subject to

the ff: a. When loss occurs before perfection,

such loss is borne by seller b. When loss occurs at time of perfection, loss must have occurred before the

contract was entered into, without the knowledge of both parties

TOTAL LOSS PARTIAL LOSS (Or loss whichresultsin substantial change in character) Buyer may withdraw from the contract OR Buy the remainder at a proportionate price

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Contract ineffective.

is

Because there can be no contract

without an object

c. When loss occurs after perfection but before delivery

Seller bears risk of loss Buyer does not bear risk of loss until goods are delivered to him


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CIVIL LAW REVIEWER Chapter V. DOCUMENTS of TITLE

Chapter V. Documents of Title

I. IN GENERAL II. NEGOTIABLE DOCUMENTS OF TITLE III. NON-NEGOTIABLE DOCUMENTS OF TITLE

I. In General

Who may negotiate it? (Art.1512,CC) 1. Owner 2. Person to whom the possession or custody

of the document has been entrusted by the owner a. If bailee undertakes to deliver the goods

to such person b. If document is in such form that it may

be negotiated by delivery

A person to whom a document has been negotiated acquires 1. Rights of the vendor 2. Rights of the original consignee

A person who negotiates a document of title warrants 1. Genuineness of document 2. Legal right to negotiate or transfer 3. No knowledge of fact which would impair the

validity or worth of the document 4. Right to transfer the title to the goods and

merchantability or fitness for a particular purpose, whenever such warranties would have been implied had the contract been transfer the goods without a document

He does not warrant that 1. Common carrier will fulfill its obligation to

deliver the gods 2. Previous indorsers will fulfill their obligation

(Art. 1516-1517, CC)

Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, UNLESS 1. Document is first surrendered to the carrier;

or 2. Impounded by the court; or 3. Its negotiation is enjoined. (Art. 1519-

1520,CC)

Definition A document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to t ransfer or receive, either by endorsement or by delivery, goods represented by such document. (Art. 1636)

Examples: bill of lading, quedan, warehouse receipts, trust receipts

Purpose 1. Evidence of possession or control of goods

described therein 2. Medium of transferring title and possession

over the goods described therein without having to effect actual delivery thereof (Villanueva)

3. The custody of a negotiable warehouse receipts issued to the order of the owner, or to bearer, is a representation of tit le upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner. (Siy Cong Bieng vs. HSBC, 56 Phil 598)

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II. Negotiable Documents of Title

Definition Document of title which states that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document (Art. 1508, CC).

TERMSOFTHE DOCUMENT Goods are deliverable to bearer

Endorsed in blank by the person to whose order the goods were deliverable Goods are deliverable to the order of a specified person

HOW NEGOTIATED

By delivery of the document to another

III. Non-Negotiable Documents of Title

Goods described in a non-negotiable document of title are deliverable only to a specified person Carrier will not deliver the goods to any

holder of the document or to whom such

document may have been endorsed by the consignee Must present the deed of sale or donation in his favor

By indorsement of suchperson (Art. 1509,CC)


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CIVIL LAW REVIEWER Chapter V. DOCUMENTS of TITLE

Negotiation [negotiable document of title] VS. Transfer [non -negotiable document of title]:

Transfer The assignment of rights of the consignee of a non-negotiable document of title to another; or

Document of title was ordered sold or assigned, without indorsement.

Negotiation (Art. 1508) Delivery of a negotiable document of title to another if by the terms thereof, the goods are deliverable to bearer, or when the document was endorsed in blank by the person to whose order the goods are deliverable.

In a negotiable document of title, the buyer may acquire a better title.

Transferee does not acquire a better title than his transferor

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CIVIL LAW REVIEWER Chapter VI. REMEDIES of the SELLER and BUYER

Chapter VI. Remedies of the Seller and Buyer

GENERAL REMEDIES A. SPECIFIC PERFORMANCE B. RESCISSION C. DAMAGES

II. REMEDIES OF THE SELLER A. IN THE SALE OF MOVABLES

1. EXTRAJUDICIAL REMEDIES 2. JUDICIAL REMEDIES B. IN THE SALE OF IMMOVABLES 1. RESCISSION FOR ANTICIPATORY

BREACH 2. SPECIFICPERFORMANCEWITH

DAMAGES 3. RESCISSION WITH DAMAGES 4. MACEDA LAW

III. REMEDIES OF THE BUYER A. FOR BREACH OF OBLIGATION TO

PRESERVE B. FOR BREACH OF OBLIGATION TO

DELIVER C. FOR BREACH OF WARRANTY

I.

a. Possessory lien over the goods

Right to retain possession of goods until payment or tender of the whole price, or unless he agrees to sell on credit (1526- 1529, 1503, 1535)

When available: Goods are sold without stipulation

as to credit Goods are sold on credit, but term of credit has expired Buyer becomes INSOLVENT

When lost: Seller delivers goods to carrier or

other bailee for transmission to the buyer under a straight or non- negotiable bill of lading Buyer/his agent lawfully obtains

possession of goods Seller waives it

Not lost in remainder of goods when only partial delivery is made (unless such is symbolic delivery of the whole)

Not lost by mere fact that seller obtained a judgment for the price

When revived: Goods are returned by the buyer in a wrongful repudiation of the contract

b. Right of stoppage in transitu

An extension of the lien for the price; entitles unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee (1530-1532, 1535, 1636[2])

Available when: INSOLVENT

Vendee becomes

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I. General Remedies (Art. 1191, CC)

The following remedies arise from the bilateral nature of the contract of sale: 1. Specific performance (Asked in 02) 2. Rescission (Asked in 03, 08)

General rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co., (1925))

3. Damages

Neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him (Art 1169, CC)

Prescriptive periods 1. 10 years if based on written contract 2. 6 years if based on oral contract

II. Remedies of the Seller

A. In the Sale of Movables 1. Extrajudicial or Self-Help Remedies

[NOTE: No need to resort to the courts; as long as possession of the goods has not yet passed to the buyer]

When are goods in transit? From time of delivery to the

carrier or other bailee by the seller, for the purpose of transmission to the buyer, until the buyer or his agent takes such delivery from the carrier. Even when goods have reached

their ultimate destination, if buyer rejects them and carrier retains possession


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To terminate transit by delivery to a middleman, delivery must be to keep, not to transport.

When are goods no longer in transit? Buyer obtained delivery of the

goods before such have reached their ultimate destination Goods have arrived at ultimate

destination, but carrier refuses to deliver

Carrier enters into a new contract

with the buyer upon arrival of the goods at their ultimate destination

How exercised? By obtaining actual possession of the goods By giving notice of his claim to the carrier/otherbaileewhohas possession of the goods

Carrier must redeliver goods to seller, or according to his instructions Carrier not obliged to redeliver until the negotiable document of title,ifany,hasbeen surrendered for cancellation

Sellers right to stoppage in transitu not affected even if buyer has sold or disposed of the goods; Unless the seller assented

c. Special right of resale

Available to unpaid seller who has a right of lien or who has stopped the goods in transitu (1533)

Purpose: For seller to liquidate his damages

He must do so within a reasonable time and in such manner as to obtain the best price possible. Resale = fair sale if in accordance with established business practices, with no attempt to take advantage of the original buyer. Resale may be in a private or public sale, but seller cannot buy indirectly or directly. For resale to be valid, buyer need not be notified of an intention to resell or the time and place of the resale.

Effects: Seller is no longer liable to the original buyer upon the contract of sale or for any profit made by the resale Buyer at resale acquires good title as against the original owner In case resale is at a loss, seller entitled to recover the difference from the original buyer Seller may recover damages from original buyer for breach of contract

d. Special right to rescind:

RETURN of the title over the undelivered goods to the seller, and right to recover DAMAGES for breach of contract (1534)

Available to unpaid seller who has a right of lien or who has stopped the goods in transitu

When available: Seller expressly reserved right to

rescind in case buyer defaults Buyer has been in default in

payment for an unreasonable time

Transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or some other overt act an intention to rescind.

2. Judicial Remedies of an unpaid seller a. Action for the price or specific performance (1595)

Conditions: the goods has passed to the buyer Price is payable on a certain day, irrespective of delivery of the goods Buyer can set up the defense that seller could not or did not intend to deliver the goods Seller was notified by the buyer of his repudiation of the contract after the seller has completed the manufacture of the goods/had procured the goods to be delivered and the goods could not readily be resold for a reasonable price

b. Actionfordamages fornon- acceptance, if buyer wrongfully neglects or refuses to accept and pay for the goods (1596)

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c. Rescission by giving the buyer notice of the election to rescind (1597)

Under this rule, rescission would bar an action on the contract because it means cancellationofthecontractual obligationsbetweentheparties. (Baviera)

d. Special rule for sale of movables by instalments Recto Law (1484, 1485)

(Asked in 99)

Applies in cases of: Sale of movables in installment

Levy Hermanos vs. Gervacio, (1939): The rule is intended to apply to sales of movables, the price of which is payable in 2 or more installments, but not to straight-term sales where the price is payable in full, after making a down payment because the law aims to protect improvident buyers who may be tempted to buy beyond their means. Lease of personal property with

option to buy When lessor has deprived the lessee of the possession or enjoyment of the thing (Ex. When lessor files a complaint for replevin against lessee)

SAL

Measure of damages: Estimated loss directly and naturally resulting in the ordinary course of events from the buyers breach

Where there is available market for goods: Difference between the contract price and the market price at the time the goods ought to have been accepted or if no time was fixed, at the time of refusal to accept If the resale was made with diligence, resale price is evidence of market value, taking into account whether or not the goods could be readily sold Wherelabor/expensewas necessary for seller to fulfill his obligation: Labor performed and expenses made by seller before receivingnoticeofbuyers repudiation or countermand Profit that the seller would have made if sale had been fully performed

Also applies when seller assigns his credit to someone else

Alternative Remedies of the unpaid seller under Recto Law

Specific Performance Cancellation of sale: If vendee fails to pay 2 or more installments

When the seller cancels the sale by repossessing the property sold, he is barred from exacting payment for its price.

Foreclosure of Chattel Mortgage: If vendee fails to pay 2 or more installments

If seller chooses this remedy, he shall have no further action to recover any unpaid balance, and any stipulation to the contrary shall be void Motors vs. Sapinoso, (1970): What Art 1484 (3) prohibits is further action against the purchaser to recover any unpaid balance of the price; and althoughthisCourthas con strued the word action to meananyjudicialor extrajudicialproceedingby virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchasepricefromthe purchaser or his privy, there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250 of Sapinoso was a voluntary act on his part and did not result from a further action instituted by Northern Motors. Bachrach Motor Co., Inc. v. Millan, (1935): Purpose of the law is to remedy the abuses committed in foreclosure of chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiencyjudgment.The almost invariable result of this procedurewasthatthe mortgagor found himself minus

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the property and still owing practically the full amount of his original indebtedness.

Nonato vs. IAC (1985): Remedies are ALTERNATIVE, not cumulative, i.e. exercise of one bars exercise of the others

NOTE: Unpaid Seller (1525): e. When the whole of the price has not

been paid or tendered; f. When a bill of exchange or other

negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.

_________

B. In the Sale of Immovables

1. Rescission for Anticipatory Breach (1591) a. Available when seller has reasonable

grounds to fear the loss of the immovable property sold and its price

b. Example: Buyer destroys the building sold, there being no security therefor, and buyer becomes insolvent

c. Court has no discretion to compel the seller to wait for the expiration of the period to pay, or to grant the buyer more time to pay

2. Specific Performance + Damages (1191) a. Seller may choose between specific performance and rescission, with damages in either case

b. Court has discretion, for a just cause, to give the buyer more time to pay even if the seller chooses rescission

3. Rescission + Damages (1191) a. If seller chose specific performance, and

such becomes impossible, he may still avail of rescission

b. If absolute sale, seller must make a demand for rescission

Judicially, OR By a notarial act c. Necessary even if automatic rescission

is stipulated d. Effect of lack of demand: Buyer can still

pay e. Effect of demand: Court may not grant

buyer a new term

4. Maceda Law: Sale of Residential Realty on Installments (Asked in 77, 89, 99, 00)

RA 6552: An Act To Provide Protection for Buyers of Real Estate on Installment Payments

DOES not apply to: a. Industrial lots b. Commercial buildings c. Sale to tenants under

Reform Code (RA 3844) Agricultural

Imposes ADDITIONAL REQUIREMENTS FOR A VALID RESCISSION: a. If buyer has paid at least 2 years of

installments: GRN Grace period: 1 month per year of installment payments made. BUT buyer may only avail of it only once in every 5 years Refund of Cash Surrender Value (CSV): 50% of total amount paid +

st

5% for every year after the 1 5 years of installments

BUT not greater than 90% of total amount paid

Notice of cancellation of demand for rescission by notarial act, effective 30 days from the buyers receipt thereof and upon full payment of CSV

b. If buyer has paid less than 2 years: GN Grace period: at least 60 days Notice of cancellation or demand for

rescission by notarial act, effective 30 days upon receipt thereof

c. Down payments, deposits, or options on the contract shall be included in the total number of installments made

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d. Seller may go to court for judicial rescission in lieu of a notarial act of rescission

e. During the grace period, buyer shall have the right:

To sell or assign his rights, to be evidenced in a notarial instrument To update his account To pay in advance any installment, or the full unpaid balance of the price, without any interest


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deficiency from goods of the same kind and quality, UNLESS a contrary intent appears. III. Remedies of the Buyer

General rule: Courts will refuse to decree specific performance with respect to chattels, because damages are a sufficient remedy Exception: Buyer is entitled to the specific thing which to him has special value and which he cannot readily obtain in the market OR where damages would not furnish a complete and adequate remedy (Baviera) _________

A. Remedy for breach of obligation to preserve

If thing is lost 1. Without fault of seller: No breach; Obligation

is extinguished 2. Through fault of seller (or through fortuitous

event, if seller is liable): Damages

A thing is lost when it

1. Perishes 2. Goes out of commerce 3. Disappears in such a way that its existence

is unknown or it cannot be recovered

If thing deteriorates

ithout fault of seller No breach

Impairment shall be borne by buyer

Through fault of seller Rescission + damages Or Specific performance + damages

Real Estate (1539-1543) 1. If at the rate of a certain price per unit of

measure or number:

Less (in area or quality) than what was agreed upon: Proportional reduction of price OR Rescission, if:

Lack in area is at least 1/10 of what is stated, or inferior value of thing sold exceeds 1/10 of price

Buyer would not have bought the property has he been aware of the inferior quality or smaller area

More

Reject the excess OR Accept the whole and pay at contract rate

[NOTE: Also applies to judicial sales (1541)]

2. If for a lump sum: Everythingiswithin boundaries, even if less or more than stated area No remedy Rudolf Lietz, Inc. v. CA, (2005): Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area.

Not everything is within boundaries

Proportional reduction in price OR Rescission

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_________

B. Remedy for breach of obligation to deliver

Delivery of wrong quantity (1522)

Goods are less than what was contracted Reject the goods OR

Accept and pay At contract rate if buyer

accepts knowing that seller wont perform in full

At fair value: If goods were used before knowing that seller wont be able to perform in full

More

Reject the excess (Or thewhole,if indivisible) OR

Accept the whole and pay at contract rate

Prescriptive period: 6 months, counted from date of delivery

_________

C. Remedy for breach of warranty

Express Warranty 1. Prescriptive period: Period specified in

express warranty OR 4 years, if no period is specified (following the general rule on rescission of contracts)

2. Remedies: a. Acceptgoods+demand

diminution/extinction of price b. Accept goods + damages c. Refuse to accept goods + damages d. Rescind (Refuse to accept or return or

offer to return) + recover price paid 3. Rescission not available when buyer:

a. Knew of breach of warranty when he accepted the goods without protest

Art. 1464. Civil Code. In the sale of an undivided share of a specific mass of fungible goods, if the mass contains less than the number, weight, or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the


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b. Fails to notify the seller about election to rescind within a reasonable period of time

c. Fails to return or offer to return the goods to the seller in substantially a good condition as they were when delivered, unless deterioration was due to breach of warranty

4. Measure of damages: Difference between value of goods at time of delivery and the value they would have had if they had answered to the warranty 5. Effects of rescission: a. Buyer no longer liable for price