I.

NATURE AND FORM OF THE CONTRACT

Sources of the Law on Sales
Sales are governed by the provisions of the Civil Code:

1. Book IV, Title VI, Articles 1458-1637 (Sales)

2. Title I, Arts. 1156-1422 (Obligations and Contracts)

3. Opinions of Commentators

4. Jurisprudence

Concept of Contract of Sale

The contract of sales is an agreement whereby one of the parties (called the seller or
vendor) obligates himself to deliver something to the other (called the buyer or
purchaser or vendee) who, on his part, binds himself to pay therefore a sum of money
or its equivalent (known as the price).

The transfer of title to property or the agreement to transfer title for a price paid or
promised, not mere physical transfer of the property, is the essence of sale.

Characteristics of a Contract of Sale

1. Consensual - perfected by mere consent of the parties without
further acts.
2. Bilateral - both the contracting parties are bound to fulfill
correlative obligations towards each other (the seller to
deliver and transfer ownership of the thing sold, and the
buyer to pay the price).
3. Onerous - the thing sold is conveyed in consideration of the price
and vice versa.
4. Commutative - the thing sold is considered the equivalent of the price
paid and vice versa.
5. Aleatory - in the case of sale of hope, one of the parties or both
reciprocally bind themselves to give or to do something
in consideration of what the other shall give or do upon
the happening of an event which is uncertain, or which
is to occur at an indeterminate time.
6. Nominate - the contract is given a special name or designation in
the Civil Code.
7. Principal - the contract does not depend for its existence and
validity upon another contract.

Essential Requisites of a Contract of Sale

1. Consent or meeting of the minds refers to the conformity of the parties to the
terms of the contract, the acceptance by one of the offer made by the other. As a
bilateral contract, the acceptance of payment by a party is an indication of his
consent to a contract of sale, thereby precluding him from rejecting its binding
effect [Clarin vs. Rulova, 127 SCRA 512].
There may be a sale against the will of the owner in case of expropriation and
the three different kinds of sale under the law ordinary execution sale,
judicial foreclosure sale, and extra-judicial foreclosure sale.
2. Object or subject matter refers to the determinate thing which is the object of
the contract;
Even a future thing not existing at the time the contract is entered into may be
the object of sale, provided it has a potential or possible existence, that is, it
is reasonably certain to come into existence as the natural increment or usual
incident of something in existence already belonging to the seller, and the tile
will vest the buyer the moment the thing comes into existence (Art. 1461).
Emptio rei speratae Emptio Spei
(sale of thing expected)

- the sale of a thing not yet in - the sale of hope itself that the thing
existence, subject to the condition will come into existence, where it is
that the thing will exist and on failure agreed that the buyer will pay the price
of the condition, the contract even if the thing does not eventually
becomes ineffective and hence, the exist;
buyer has not obligation to pay the
price;
- the future thing is certain as to - like the sale of a sweepstake ticket, it
itself but uncertain as to its quantity is not certain that the thing itself
and quality; (winning a prize) will exist, much less it
quantity and quality;
- contract deals with a future thing; - contract relates to a thing which
exists or is present the hope or
expectancy;
- sale is subject to the condition that - produces effect even though the thing
the thing should exist, so that if it does not come into existence because
does not, there will be no contract by the object of the contract is the hope
reason of the absence of an essential itself, unless it is a vain hope or
element. expectancy (like the sale of a falsified
sweepstakes ticket which can never
win).
3. Cause or consideration refers to the price certain in money or its equivalent.
Natural Elements those which are deemed to exist in certain contracts, in the
absence of any contrary stipulations, like warranty against eviction;
Accidental Elements those which may be present or absent depending on the
stipulations of the parties, like conditions, interest, penalty, time or place of
payment.
Kinds of a Contract of Sale
1. As to presence or absence of conditions

Absolute where the sale is not subject to any condition whatsoever and where the
title passes to the buyer upon delivery of the thing sold.

Conditional where the sale contemplates a contingency and where the contract is
subject to certain conditions, usually in the case of the vendee, for the full payment
of the agreed purchase price.

2. Other kinds

As to the nature of the subject matter real or personal, tangible or intangible

As to the manner of payment cash or installment

As to its validity valid, rescissible, unenforceable, void

Contract of Sale Distinguished from Contract to Sell

Contract of Sale Contract to Sell
Transfer of - passes to the buyer upon - remains with the seller until
title: delivery of the thing sold. full payment of the agreed
price.
Payment of - non-payment of the price is a - full payment is a positive
price: negative resolutory condition, suspensive condition, the
and the remedy is to exact failure of which is not a breach,
fulfillment or to rescind the casual or serious, of the
contract. contract but simply an event
 that prevents the obligation of
the vendor to convey title from
acquiring binding force.
Ownership - vendor loses and cannot - title remains in the vendor
of vendor: recover ownership of the thing until full payment of price.
sold and delivered, actually or
constructively until and unless
the contract of sale itself is
resolved and set aside.
Sale Distinguished from Dation in Payment:
Sale Dation in Payment
- no pre-existing credit - there is pre-existing credit
- gives rise to obligation - extinguishes obligation
- cause or consideration is the price, or - cause of consideration is
the acquisition of title to the property extinguishment of the debt (from the
point of view of the offeror), and the
acquisition of the object offered (from
the point of view of the creditor) in lieu
of the original credit
- there is greater freedom in the - less freedom
determination of the price
- giving of the price may generally end - the giving of the object in lieu of the
the obligation of the buyer credit may extinguish completely or
partially the credit (depending on the
agreement)

Sale of goods by description Sale of goods by sample

- occurs where the purchaser has
not seen the article sold and relies on - the parties contracted solely with
the description given him by the reference to the sample, with the
vendor, or has seen the goods but the understanding that the bulk was like
want of identity is not apparent on it.- the vendor warrants that the thing
inspection.- If the bulk of the sold and to be delivered by him shall
goods delivered does not correspond conform with the sample in kind,
with the description, the contract may charater, and quality.
be rescinded. (Art. 1481.)
Form of Contract of Sale
Generally, a contract may be entered into in any form provided all the essential
requisites for its validity are present (Art. 1356). It may be in writing, oral, or partly
in writing and party oral. It may even be inferred from the conduct of the parties,
since sale is a consensual contract that is perfected by mere consent.

However, in case the contract of sale should be covered by the Statute of Frauds, the
law requires that the agreement be in writing subscribed by the party charged, or by
his agent; otherwise, the contract cannot be enforced by action [see Art. 1403].

Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the
following contracts must be in writing to be enforceable:
(a) sale of personal property at a price not less than P500;

(b) sale of real property or an interest therein regardless of the price involved; and

(c) sale of property not to be performed within a year from the date thereof
regardless of the nature of the property and the price involved.

The Statute Frauds specifies three (3) ways in which contracts of sales of goods
within its terms may be made binding:
(a) the giving of a memorandum;

(b) acceptance and receipt of part of the goods (or things in action) sold and actual
receipt of the same (Art. 1585); and

(c) payment or acceptance at the time some part of the purchase price.

The Statute of Frauds is applicable only to executory contracts (where no

performance, i.e., delivery and payment, has as yet been made by both
parties), and not to contracts which are totally consummated or partially
performed [Vda. De Espiritu vs. CFI of Cavite, 47 SCRA 354].
Recto Law (Art. 1484) Remedies of Vendor in Sale of Personal Property Payable
in Installments:
(a) elect fulfillment upon the vendees failure to pay;

(b) cancel the sale, if the vendee shall have failed to pay two or more installments;

(c) foreclose the chattel mortgage, if one has been constituted, if the vendee shall
have failed to pay two or more installments.
 These remedies are alternative and are not to be exercised cumulatively or
successively and the election of one is a waiver of the right to resort to the
others [Pacific Commerial Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140
SCRA 255].
In transactions involving the sale of financing of real estate on installment
payments, including residential condominium apartments, the following are the
rights given to the buyer who has paid at least two (2) years of installments in
case he defaults in the payment of succeeding payments
(a) to pay without additional interest the unpaid installments due within the total
grace period earned by him fixed at the rate of one-month grace period for every one
year of installment payments made this right shall be exercised by him only once in
every five (5) years of the life of the contract and its extension, if any; and

(b) if the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to 50% of the total
payments made and, after 5 years of installments, an additional 5% of every year but
not to exceed 90% of the total payments made. [Sec. 3, RA 6552 or the Realty
Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA 627].
(c) The buyer has the right to sell his right or assign the same before actual
cancellation of the contract and to pay in advance any unpaid installment anytime
without interest and to have such full payment of the purchase price annotated in the
certificate of title covering the property.
II. CAPACITY TO BUY OR SELL
Persons Who May Enter Into a Contract of Sale
As a general rule, all persons, whether natural or juridical, who can bind themselves,
have the legal capacity to buy and sell.
Persons Who Are Incapacitated to Enter Into a Contract of Sale
1. Absolute Incapacity pertains to persons who cannot bind themselves
(a) Minor

(b) Insane or demented persons

(c) Deaf-mutes who do not know how to read and write

Contracts entered into by a minor and other incapacitated persons

arevoidable. However, where the necessaries are sold and delivered to him
(without the intervention of the parent or guardian), he must pay a reasonable
price therefor. The contract is therefore valid, but the minor has the right to
recover any excess above a reasonable value paid by him.
 Sale of real property by minors who have already passed the ages of puberty
and adolescence and are now in the adult age, when they pretended to have
already reached their majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves from compliance with
the obligations assumed by them or to seek their annulment. This is in accord
with the doctrine of estoppel[Mercado and Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity where it exists only with reference to certain persons or
class of property (Art. 1490-1491). The prohibition extends to sales by virtue of legal
redemption, compromises, and renunciations.
(a) Husband and wife to each other except when a separation of property was
agreed upon in the marriage settlements, or when there has been a judicial
separation of property

(b) Guardian as to the property of his ward

(c) Agents as to the property whose administration or sale has been entrusted to
them, unless consent of the principal is given

(d) Executors or administrators as to the state under their administration

(e) Public officers and employees as to the property of the State or any subdivision
thereof, or of the government-owned or controlled corporations, the administration
of which is entrusted to them

(f) Judges and government experts who take part in the sale of the property and
rights under litigation

The prohibition is based on the fiduciary relationship (based on trust), to

prevent fraud and undue and improper influence.
With respect to (b) to (d), the sale shall only be voidable because in such cases
only private interests are affected. The defect can be cured by ratification by
the seller. With respect to (e) and (f), the sale shall be null and void, public
interests being involved therein.
(g) Aliens who are disqualified to purchase private agricultural lands under Art. XII,
Secs. 3 and 7 of the Constitution

(h) Unpaid seller having a right of lien or having estopped the goods in transitu
(i) Officer holding the execution or his deputy
III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
 Where the thing is entirely lost at the time of perfection, the contract is
inexistent and void because there is no object. There being no contract, there
is no necessity to bring an action for annulment.
Where the thing is only partially lost, the vendee may elect between
withdrawing from the contract and demanding the remaining part, paying its
proportionate price.
The thing is lost when it perishes or goes out of commerce or disappears in such
a way that its existence is unknown or it cannot be recovered.
IV. OBLIGATIONS OF THE VENDOR
Principal Obligations of the Vendor
to transfer the ownership of the determinate thing sold (Art. 1495);

The vendor need not be the owner of the thing at the time of perfection of the
contract; it is sufficient that he has a right to transfer the ownership thereof at
the time it is delivered (Art. 1459).
If the seller promised to deliver at a stipulated period and such period is of the
essence of the contract but did not comply with his obligation on time, he has
no right to demand payment of the price. The vendee-buyer is fact may ask for
the rescission or resolution of the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it
was the buyer who failed to supply the necessary credit for the transportation
of the goods, delay on the part of the seller may be said to be sufficiently
excused.
to deliver the thing, with its accessions and accessories, if any, in the condition in
which they were upon the perfection of the contract (Art. 1537);

to warrant against eviction and against hidden defects (Arts. 1495, 1547);

to take care of the thing, pending delivery, with proper diligence (Art. 1163);

to pay for the expenses of the deed of sale, unless there is a stipulation to the
contrary (Art. 1487).

Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which
one has the right and intention to alienate a corporeal thing, transmits it by virtue of
a just title to one who accepts the same.
 Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver
right away; he has one (1) year within which to redeem the property.
Kinds of Delivery or Tradition
1. Actual or Real (Art. 1497) the thing sold is placed in the control and
possession of the vendee or his agent. This involves the physical delivery of
the thing and is usually done by the passing of a movable thing from hand to
hand.
2. Legal or Constructive (Arts. 1498-1501) through the execution of a public
instrument
Legal formalities applies to real and personal properties, where the delivery is made
through the execution of a public document;
Traditio simbolica to effect delivery, the parties make use of a token symbol to
represent the thing delivered;
Traditio longa manu movable property is delivered by mere consent by the
contracting parties if the thing sold cannot be transferred to the possession of the
vendee at the time of the sale;
Traditio brevi manu the vendee already has the possession of the thing sold by virtue
of another title as when the lessor sells the thing leased to the lessee;
Constitotum possessorium the vendor continues in possession of the property sold
not as owner but in some other capacity (e.g., as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real
property, made by placing the titles of ownership in the hands of the vendee or
lawyer, by execution of a public instrument, or by allowing the vendee to use his
rights as new owner with the consent of the vendor.

Requisites in constructive delivery before ownership may be transferred:

(a) Seller must have control over the thing; otherwise, can he put another in
control?

(b) Buyer must be put under control;

(c) There must be the intention to deliver the thing for purposes of ownership.

Rules of constructive delivery:

1. If a seller has an actual possession, he cannot transfer ownership by constructive
delivery.

2. There can be no constructive delivery by means of a public instrument if there is a

stipulation to the contrary.
3. The execution of a deed or contract is only presumptive delivery.

An Unpaid Seller is one who has not been pair or rendered the whole price or who has
received a bill of exchange or other negotiable instrument as conditional payment and
the condition on which it was received has been broken by reason of the dishonor of
the instrument.
Rights of an unpaid seller:
1. A lien on the goods or right to retain them for the price while in his possession

2. A right of stopping the goods in transitu in case of insolvency of the buyer;

requisites:
(a) the seller must be unpaid;

(b) the buyer must be insolvent;

(c) the goods must be in transit;

(d) the seller must either actually take possession of the goods sold or give notice of
his claim to the carrier or other person in possession;

(e) the seller must surrender the negotiable document of title, if any, issued by the
carrier or bailee; and

(f) the seller must bear the expenses of delivery of the goods after the exercise of
the right.

3. A right of resale

4. A right to rescind the sale

Rules in case of loss, deterioration, or improvement of thing before delivery

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, if is understood that the thing is lost when it perishes, or goes out
of commerce, or disappears in such a way that its existence is unknown or it
cannot be recovered.
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. If the thing is improved by its nature, or by time, the improvement shall inure
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.
Rules as to preference of ownership in case of double sale
1. If the property sold is movable, the ownership shall be acquired by the vendee
who first takes possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25
SCRA 861].
2. If the property sold is immovable, the ownership shall belong to:
(a) the vendee who first registers the sale in good faith in the Registry of Deeds has
preferred right over another vendee who has not registered his title even if the latter
is in actual possession of the immovable property governed by the principle prius
tempore, patior jure (first in time, stronger in right) knowledge by the first buyer of
the second sale cannot defeat the first buyers right except when the second first
registers in good faith the second sale;
(b) in the absence of registration, the vendee who first takes possession in good
faith; and

(c) in the absence of both registration and possession, the vendee who presents the
oldest title (who first bought the property) in good faith.

Article 1544 has no application to lands not registered with the Torrens system.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency on the happening of which the
obligation (or right) of the contract depends.
Warranty is a statement or representation made by the seller of goods,
contemporaneously and as a 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
insure that certain facts are or shall be as he then represents them.
If the obligation of either party is subject to any condition and such condition is not
fulfilled, such party may either (1) refuse to proceed with the contract, or (2)
proceed with the contract, waiving the performance of the condition.

If the condition is in the nature of a promise that it should happen, the non-
performance of such condition may be treated by the other party as a breach of
warranty.
Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he
has a right to sell the thing sold and to transfer ownership to the buyer who shall not
be disturbed in his legal and peaceful possession thereof.

Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that
the seller guarantees that the thing sold is reasonably fit for the known particular
purpose for which it was acquired by the buyer or, where it was bought by
description, that it is of merchantable quality.

Essential elements of warranty against eviction

1. the vendee is deprived in whole or in part of the thing purchased;
2. the vendee is so deprived by virtue of a final judgment ;
3. the judgment is based on a right prior to the sale or an act imputable to the
vendor;
4. the vendor was summoned in the suit for eviction at the instance of the
vendee; and
5. there is no waiver on the part of the vendee.
Kinds of waiver of eviction
1. Consciente the waiver is voluntarily made by the vendee without the
knowledge and assumption of the risks of eviction. If the waiver was only
conscious, the vendor shall pay only the value which the thing sold had at the
time of eviction this is a case of solution indebiti the effect is to deprive
the purchaser of the benefits mentioned in Nos. 2, 3, 4 and 5 of Article 1555.
2. Intencionada the waiver is made by the vendee with knowledge of the risks
of eviction and assumption of its consequence. The vendor is exempted from
the obligation to answer for eviction, provided he did not act in bad
faith [Andaya vs. Manansala, 107 Phil. 1151].
Rights of the vendee against the vendor in case eviction occurs (Art. 1555)
1. return of the value of the thing sold at the time of eviction;
2. income or fruits if he has been ordered to deliver them to the party who won
the suit against him;
3. costs of the suit;
4. expenses of the contract;
5. damages and interests and ornamental expenses if the sale was made in bad
faith.
Redhibition Redhibitory action Redhibitory vice or
defect
- an action instituted to - a defect in the article
- the avoidance of a sale avoid a sale on account of sold against which defect
on account of some vice some vice or defect in the the seller is bound to
or defect in the thing thing sold which renders warrant. The vice or
sold, which renders its its use impossible, or so defect must constitute an
use impossible, or so inconvenient and imperfection, a defect in
inconvenient and imperfect that it must be its nature, of certain
imperfect that it must supposed that the buyer importance; and a minor
be supposed that the would not have purchased defect does not five rise
buyer would not have it had he known of the to redhibition. The mere
purchased it had he vice. The object is the absence of a certain
known of the vice. rescission of the contract. quality in the thing sold
If the object is to procure which the vendee thought
the return of a part of the it to contain is not
purchase price paid by the necessarily a redhibitory
vendee, the remedy is defect. One thing is that
known as accion is positively suffers from
minoris orestimatoris. certain defects.
Doctrines of caveat venditor and caveat emptor
Caveat venditor Caveat emptor
(Let the buyer beware)
(Let the seller beware)

- the vendor is liable to the vendee - applies in sheriffs sale, sales of

for any hidden faults or defects in the animals, and tax sales, for there is no
thing sold, even though he was not warranty of title or quality on the part
aware thereof (Art. 1566).- Based on of the seller in such sales.
the principle that a sound price - Also applies in double sales of
warrants a sound article. property where the issue is who
between two vendees has a better right
to the property .
- Requires the purchaser to be aware
of the supposed title of the vendor and
one who buys without checking the
vendors title takes all the risks and
losses consequent to such
failure [Solvoso vs. Tanega, 87 SCRA
349].
Alternative remedies of the buyer to enforce warranty (Art. 1567):
 1. Accion redhibitoria to withdraw from the contract
2. Accion quanti minoris demand a proportionate reduction of the price, with a
right to damages in either case
Effect of loss of thing sold on account of hidden defects (Art. 1568)
If the vendor was aware of the hidden (a) the expenses of the price paid
defects in consequence of which the b) the contract; and
thing sold was lost, he shall bear the (c) damages.
loss because he acted in bad faith. In
such case, the vendee has the right to
recover:
If the vendor was not aware of them, (a) the price paid
he shall be obliged only to return: (b) interest thereon; and
(c) expenses of the contract if paid
by the vendee. He is not made liable
for damages because he is not guilty of
bad faith.
VI. OBLIGATIONS OF THE VENDEE
The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing
sold.
The following rules must be borne in mind:
1. In contract of sale, the vendor is not required to deliver the thing sold until
the price is paid nor the vendee pay the price before the thing is delivered in
the absence of an agreement to the contrary [La Font vs. Pascacio, 5 Phil.
591].
2. If stipulated, then the vendee 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 vendee 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. 1251).
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; if only
the time for payment of the price has been fixed, the vendee is entitled to
delivery even before the price is paid by him (Art. 1524).
Instances when the vendee may suspend the payment of the price:
a) should he be disturbed in the possession or ownership of the thing sold;
b) should he have reasonable grounds to fear such disturbance by a vindicatory action
or by a foreclosure of mortgage;

These rights do not exist in the following cases:

(a) should there be a stipulation to that effect; or

(b) should the vendor give security for the return of the price; or

(c) should the vendor have caused the disturbance or danger to cease; or

(d) should the disturbance consist only of a mere act or trespass.

VII. ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODS

Goods include all chattels personal but not things in action or money of legal tender
in the Philippines. The term includes growing fruits or crops.
Actions available for breach of the contract of sale of goods:
Action by the seller for payment of the price (Art. 1595)

Action by the seller for damages for non-acceptance of the goods (Art. 1596)

Action by the seller for rescission of the contract for breach thereof (Art. 1597)

Action by the buyer for specific performance (Art. 1598)

Action by the buyer for rescission or damages for breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has been guilty of a breach of
promise or warranty (Art. 1599):
1 Recoupment - accept the goods and set up the sellers breach to reduce or
extinguish the price.The theory of recoupment is that the sellers damages
are cut down to an amount which will compensate him for the value of
what he has given.
2 Set-off or Counterclaim for damages - accept the goods and maintain an
action for damages for the breach of the warranty. Both sides of the
contract are enforced in the same litigation. The buyer (defendant) does
not seek to avoid his obligation under the contract but seeks to enforce the
sellers (plaintiffs) obligation and to deduct it from his liability for the
price for breach of warranty.
3 Action for damages refuse to accept the goods and maintain an action for
damages for the breach of the warranty.
4 Rescission - rescind the contract of sale by returning or offering the return
 of the goods, and recover the price or any part thereof which has been
paid. This remedy is not available in the following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty
without protest;
(b) if he fails to notify the seller within a reasonable time of his election
to rescind; and
(c) if he fails to return or offer to return the goods in substantially as good
condition as they were in at the time of the transfer of ownership to him.
But where the injury to the goods was caused by the very defect against
which the seller warranted, the buyer may still rescind the sale.
VIII. EXTINGUISHMENT OF SALE
Classification of modes or causes of extinguishing the contract of sale:
Common those causes which are also the means of extinguishing all other contracts
like payment, loss of the thing, condonation, etc. (Art. 1231).

Special those causes which are recognized by the law on sales (those covered by
Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591).

Extra-special conventional redemption and legal redemption.

Conventional Redemption Legal Redemption

(Arts. 1601-1618) (Arts. 1619-1623)
It is the right which the vendor reserves It is the right to be subrogated, upon
to himself, to reacquire the property the same terms and conditions
sold provided her returns to the vendee stipulated in the contract, in the place
the price of the sale, the expenses of of one who acquires a thing by
the contract, any other legitimate purchase or dation in payment, or by
payments made therefore and the any other transaction whereby
necessary and useful expenses made on ownership is transmitted by onerous
the thing sold, and fulfills other title.
stipulations which may have been
agreed upon.
Nature: Nature: (a) identical with
(a) it is purely contractual because it conventional redemption, except for
is a right created, not by mandate of the source of the right conventional
the law, but by virtue of an express redemption arises from the voluntary
contract[Ordoez vs. Villaroman, 78 agreement of the parties; legal
Phil. 116]; redemption proceeds from law;
(b) it is an accidental stipulation and, (b) it is not predicated on
therefore, its nullity cannot affect the proprietary right but on a bare
sale of itself since the latter might be statutory privilege to be exercised only
entered into without said by the person named in the statute
stipulation [Alojado vs. Lim Siongco, 51 the statute does not make actual
Phil. 339]; ownership at the time of sale or
(c) it is a real right when registered, redemption a condition precedent, the
because it binds third persons [Mortera right following the person and not the
vs. Martinez, 14 Phil. 541]; property[Magno vs. Viola and Sotto, 61
(d) it is a resolutory Phil. 80];
condition because when exercised, the (c) it is in the nature of a mere
right of ownership acquired by the privilegecreated partly for reason of
vendee is extinguished[Aquino vs. Deal, public policy and partly for the benefit
63 Phil. 582]; and convenience of the redemptioner
(e) it is potestative because it to afford him a way out of what might
depends upon the will of the vendor; be a disagreeable or inconvenient
(f) it is a power or privilege, not an association into which he has been
obligation, that the vendor has thrust it is intended to minimize co-
reserved for himself [Ocampo vs. ownership [Basa vs. Aguilar, 117 SCRA
Potenciano, CA 48 OG 2230]; 128; Tan vs. CA, 172 SCRA 660].
(g) it is reserved at the moment of
the perfection of the contract for if Instances of Legal Redemption:
the right to repurchase is agreed upon
afterwards, there is only a promise to (a) Under the Civil Code, those found
sell which produces different rights and in Arts. 1620-1622, 1634, and 1088;
effects and is governed by Art.
1479 [Diamante vs. CA, 206 SCRA 52]; (b) Under special laws:
(h) the person entitled to exercise (1) redemption by owner of real
the right of redemption necessarily is property sold for delinquent taxes
theowner of the property sold and not period is within 1 year from date of
any third party [Gallar vs. Husain, 20 sale;
SCRA 186]; (2) repurchase by homesteader of
(i) it gives rise to reciprocal homestead sold under the Public Land
obligationthat of returning the price of Act period is 5 years [Tupas vs.
sale and other expenses, on the part of Damasco, 132 SCRA 593];
the vendor, and that of delivering the (3) redemption by judgment debtor
property and executing a deed of sale or redemptioner or real property sold
therefore, on the part of the on execution period is 12 months;
vendee [Pandaquilla vs. Gaza, 12 Phil. (4) redemption by mortgagor after
663]. mortgaged property has been judicially
foreclosed and sold period is 90 days
but before confirmation of sale by the
court (in all cases of extra-judicial
foreclosure sale, the mortgagor may
redeem the property within 1 year from
the date of registration of the sale);
(5) redemption by an agricultural
lessee of landholding sold by the
landowner period is 180 days from
notice in writing which shall be served
by the vendee on all lessees affected
by DAR upon the registration of the
sale.
An equitable mortgage is one which lacks the proper formalities, form of words, or
other requisites prescribed by law for a mortgage, but shows the intention of the
parties to make the property subject of the contract as security for a debt and
contains nothing impossible or contrary to law [Cachola vs. CA, 208 SCRA 496].
Dacion en pago is the transmission of the ownership of a thing by the debtor to the
creditor as the accepted equivalent of the performance of an obligation.
Pacto de retro Mortgage
Ownership is transferred but theOwnership is not transferred but the
ownership is subject to the conditionproperty is merely subject to a charge or
that the seller might recover thelien as security for the compliance of a
ownership within a certain period ofprincipal obligation, usually a loan.
time.
If the seller does not repurchase theThe mortgagor does not lose his interest
property upon the very day named inin the property if he fails to pay the
the contract, he loses all interestdebt at its maturity.
thereon.
There is no obligation resting upon theIt is the duty of the mortgagee to
purchaser to foreclose; neither does theforeclose the mortgage if he wishes to
vendor have any right to redeem thesecure a perfect title thereto, and after
property after the maturity of the debt. the maturity of the debt secured by the
mortgage and before foreclosure, the
mortgagor has a right to redeem [Basilio
vs. Encarnacion, 5 Phil. 360].
Instances when conventional redemption is presumed to be an equitable
mortgage:
1. when the price of a sale with right to repurchase is unusually inadequate;
2. when the vendor remains in possession as lessee or otherwise;
3. when 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. when the purchaser retains for himself a part of the purchase price;
5. when the vendor binds himself to pay the taxes on the thing sold;
6. in any other case where it may be fairly inferred the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation; and
7. when there is a doubt as to whether the contract is a contract of sale with
right or repurchase or an equitable mortgage.
Requisites before legal redemption can be exercised:
1 There must be a sale or assignment of credit. The concept of sale must be
understood in its restricted sense. The right cannot be exercised if the
transaction is exchange or donation.
2 There must be a pending litigation at the time of the assignment. The
complaint by the assignor must have been filed and answered by the
creditor before the sale of the credit.
3 The debtor must pay the assignee (a) the price paid by him, (b) the judicial
costs incurred by him, and (c) the interests on the price from the date of
payment.
4 The right must be exercised by the debtor within 30 days from the date the
assignee demands (judicially or extra-judicially) payment from him.

Redemption Pre-emption
1 The sale to a third person has alreadyThe sale to a third person has not yet
been perfected been perfected
2 Has a much broader scope Narrower in scope may be exercised
only where there is a prospective
resale of a small piece of urban land
originally bought by the prospective
vendor merely for speculation
3 Directed against the third person whoDirected against the prospective
bought the property vendor who is about to resell the
 property
4 Effect is to extinguish a contract thatEffect is to prevent the birth or
has already been perfected or evenperfection of a contract
consummated
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of credit a contract by which the owner of a credit transfers to another
his rights and actions against a third person in consideration of a price certain in
money or its equivalent (Art. 1458).
Assignment of credit and other incorporeal rights are consensual, bilateral, onerous,
and commutative or aleatory contracts. The assignment involves no transfer of
ownership but merely effects the transfer of rights which the assignor has at the time
to the assignee [Casabuena vs. CA, 286 SCRA 594].
It may be done gratuitously, but if done onerously, it is really a sale. Thus, the
subject matter is the credit or right assigned; the consideration is the price paid for
the credit or right; and the consent is the agreement of the parties to the assignment
of the credit or right at the agreed price.

Renunciation the abandonment of a right without a transfer to another.

Agency involves representation, not transmission wherein the agent acts for the
principal.
Substitution the change of a new debtor for the previous debtor with the credit
remaining in the same creditor.
Subrogation the change in the person of the creditor with the credit being
extinguished.
Binding effects of assignment:
1 As between the parties, the assignment is valid although it appears only in a
private document so long as the law does not require a specific form for its
validity.
2 To affect third persons, the assignment must appear in a public instrument,
and in case it involves real property, it is indispensable that it be recorded
in the Registry of Deeds [Lopez vs. Alvarez, 9 Phil. 28].
3 The assignee merely steps into the shoes of the assignor, the former
acquiring the credit subject to defenses (fraud, prescription, etc.) available
to the debtor against the assignor. The assignee is deemed subrogated to
the rights as well as to the obligations of the seller. He cannot acquire
greater rights than those pertaining to the assignor. [Koa vs CA, 219 SCRA
541].
 X. BARTER OR EXCHANGE
Barter a contract whereby one person transfers the ownership of non-fungible things
to another with the obligation on the part of the latter to give things of the same
kind, quantity, and quality.
The contract is perfected from the moment there is a meeting of the minds upon the
things promised by each party in consideration of the other. It is consummated from
the time of mutual delivery by the contracting parties of things they promised.

Effect where the giver is not the lawful owner of the thing delivered: the aggrieved
party cannot be compelled to deliver the thing he has promised. He is entitled to
claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the
property he has given in exchange with damages or only claim an indemnity for
damages. The right to recover is, however, subject to the rights of innocent third
persons (Art. 1640).

XI. THE BULK SALES LAW

Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the
secret sale or disposal or mortgage in bulk of all or substantially all of a merchants
stock of goods.

The general scheme is to declare such bulk sales fraudulent and void as to creditors of
the vendor, or presumptively so, unless specified formalities are observed, such as
the demanding and the giving of a list of creditors, the giving of actual and
constructive notice to such creditors, by record or otherwise, and the making of an
inventory.

A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or
assignment

(a) of a stock of goods, wares, merchandise, provisions, or materials otherwise than

in the ordinary course of trade and the regular prosecution of the business; or

(b) of all or substantially all, of the business or trade; or

(c) of all or substantially all, of the fixtures and equipment used in the business of
the vendor, mortgagor transferor, or assignor.

Acts punished by the law:

1. knowingly or willfully making or delivering a statement as required by the Act
which does not include the names of all the creditors of the vendor, etc. with
the correct amount due and to become due or which contains any false or
untrue statement; and
2. transferring title to a any stock of goods, wares, merchandise, provisions or
materials sold in bulk without consideration of for a nominal consideration
only.