civil review2 sales to trust

8/11/2019 Civil Review2 Sales to Trust

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Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian RosapapanNovember 20081

SALES

Articles / Laws to Remember: 1458, 1467,

1477 transfer of ownership, 1505, 559 whocan transfer xxx, 1504, 1544, 1484 Recto

Law, R.A. 6552, 1602, 1606, 1620, 1623,Redemption xxx

Q: A obliged himself to deliver a certain

thing to B. Upon delivery, B would pay a

sum of money to A. Is that a contract ofsale?A: Not necessarily. Even if there is an

obligation to deliver, if there is no obligationto transfer ownership, it will not be a

contract of sale. It may be a contact of

lease.

Memorize:Art. 1458

Note: Sale is a contract, so the generalprinciples in oblicon are applicable to salebut note that there are provisions which are

contrary.

Characteristics of Contract of Sale (COS)

1. Consensual (1475) COS isconsensual, it is perfected by mere meetingof the minds of the parties as to the object

and price.

Note: There is 1 special law which requiresa particular form for the validity of a contract

of sale in that sale, it can be said that kindof sale is a formal contract ! CattleRegistration Decree. In a sale of large

cattle, the law provides that the contract of

sale of large cattle must be: in a publicinstrument, registered and a certificate oftitle should be obtained in order for the sale

to be valid. But otherwise, the other

contracts are perfected by mere consent ormere meeting of the minds.

2. Principal sale is a principal contract, it

can stand on its own. It does not depend onother contracts for its existence and validity.

3. Bilateral (1458) necessarily in a COS,both parties will be obligated. It is notpossible that only 1 party is obligated

because a contract of sale is essentiallyonerous.

4. Onerous (1350) COS is essentially

onerous. Otherwise, it may be another

contract or any other act like it may be a

donation if there is no compensation for thetransfer of ownership to the other party.

5. Commutative (2010) meaning there is

equivalency in the value of the prestation tobe performed by both parties. Normally, thething sold would be equal to the price paid

by the other party (buyer).

Exception: a contract of sale which is analeatory contract like sale of hope. In sale ofhope, the obligation of 1 party will arise

upon the happening of a certain event orcondition.

Example Sale of Hope:Sale of a lotto ticket,PCSO will have the obligation to pay youonly if you got all the 4 or 6 numbers which

are drawn

Another Example of Aleatory:Insurance

6. Nominate (1458)

Classification of Contract of Sale1. As to Nature of Subject Matter

a. Movableb. Immovable

Q: Why there is a need to determine?A: Because some concepts will apply if theobject is movable or some laws will apply if

the object is immovable.

Examples:Under the Statute of Frauds, you

have to determine if the object if movable or

immovable in order that statute of frauds willapply. The Recto law will apply if the object

is movable. The Maceda law will apply if the

object is realty. Article 1544 or Double Salewill require you to determine the nature of

the subject matter.

2. As to Nature

a. Thing


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b. Right

Q: Why there is a need to determine?

A: Relevant in the mode of delivery

Distinctions

1. Deed of Absolute Sale (DAS) vs.Conditional Sale (CS) vs. Contract to Sell

(CTS)2. Dation in Payment (DIP) vs. COS

3. Contract for a Piece of Work (CPW) vs.COS4. Barter vs. COS

5. Agency to Sell (ATS) vs. COS

Deed of Absolute Sale (DAS) vs.Conditional Sale (CS) vs. Contract to Sell(CTS)

DAS seller does not reserve his title overthe thing sold and thus, upon delivery of the

thing, ownership passes regardless of

whether or not the buyer has paid.

CS - condition/s are imposed by the seller

before ownership will pass. Normally, the

condition is the full payment of the price. InCS, ownership automatically passes to thebuyer from the moment the condition

happens. There is no need for anothercontract to be entered into.

BE: Receipt was issued by A to B. Thereceipts tenor Date of the receipt xxxReceived from B the sum of P75,000.00

as partial payment for the car xxx the

balance to be paid at the end of themonth xxx. Contract to Sell?SA: No. It does not pertain to a CTS

because in a CTS ownership is reserved bythe seller despite delivery to the buyer. The

buyer does not acquire ownership. This is

an Absolute Sale.

Q: In a CTS, upon the happening of the

condition/s imposed by the seller, would

ownership automatically pass to buyer?A: No. While a CTS is considered a special

kind of conditional sale, it is a peculiar kindof sale because despite the happening ofthe condition and actual delivery, the buyer

does not automatically acquire ownership.

In CTS, if condition/s happen, the right ofthe buyer is to compel the seller to executea final deed of sale. So ownership does not

automatically pass.

Dation in Payment (DIP) vs. COS

DIP (1245) whereby property is alienatedto the creditor. It is provided that the law on

sales shall govern such transaction. It isspecifically provided that the pre-existing

obligation must be in money. If not in moneyand there is DIP, it will not be governed bythe law on sales but by the law on novation

because practically there is a change in the

object of the contract.

Example 1: If A owes B P100,000.00instead of paying P100,000, he offers B and

B accepts the car of A as an equivalentperformance ! this is DIP and will be

governed by the law on sales.

Example 2:If the pre-existing obligation is todeliver a specific horse but instead of

delivering the horse, the debtor told his

creditor and the creditor accepted, that hewill instead deliver his car ! it is still DIPbut it will not fall on 1245 but on novation

because there is a change in the object ofthe obligation which would extinguish the

obligation.

Note: A guide to distinguish one conceptfrom another is to know the nature,

requisites and effects.

1. As to Nature

DIPa special form of payment

COS - it is a contract

2. As to Requisites

DIP with a pre-existing obligation

COS not a requirement

3. As to Effect

DIP to extinguish the obligation eitherwholly or partially.

COS obligation will arise instead of beingextinguished.


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Contract for a Piece of Work (CPW) vs.COSBE: A team if basketball players went to

a store to buy shoes and out of the 10

members, 5 of them were able to choose

the shoes. They agreed to pay the price

upon delivery. The other 4 memberswere able to choose but the shoes were

not available at that time but they arenormally manufactured. The last member

could not find shoes that could fit his 16

inches feet and therefore he has to orderfor such kind of shoes. What

transactions were entered into by these

players?

SA: 1467!the first 2 transactions involvinga total of 9 players would be considered aCOS because the shoes which they ordered

are being manufactured or procured in theordinary course of business for the general

market. However, the last transaction which

will be manufactured only because of thespecial order of the player and is notordinarily manufactured for the general

market will be considered a CPW which is

known as the Massachusetts rule.Massachusetts rule rule in determiningwhether the contract is a COS or a CPW.

Barter vs. COS

Q: A obliged himself to deliver adeterminate car with a market value ofP250,000.00. B obliged himself to deliverhis watch and P150,000.00 in cash. What

kind of contract?

A: First, you have to consider the intentionof the parties. They may want thistransaction to be considered as a sale or

barter and that will prevail. But if theintention of the parties is not clear from their

agreement then the nature of the contract

will depend on the value of the watch. If the

value of the watch is greater than P150,000then this is barter. If the value of the watch

is equal or less than P150,000 then this is

sale. The value of the car is irrelevant. Whatis only relevant is the value of the thing

(watch) in relation to the cash to be given byone of the parties.

Agency to Sell (ATS) vs. COS

BE: A gave B the exclusive right to sellhis maong pants (he has his own brandof maong pants) in Isabela. It was

stipulated in the contract that B has to

pay the price of maong within 30 days

from delivery to B. It was stipulated that

B will receive 20% commission(discount) on sale. The maong pants

were delivered to B. However, before Bcould sell the goods, the store was

burned without fault of anyone. Can B be

compelled to pay the price?From the wordings of the problem you may

have an idea that this is an agency to sell. If

this is an ATS, the fact that the agent has

not yet sold the maong pants when theywere burned will not result in a liability onhis part, there being no negligence on his

part because with the delivery of the thingfrom the principal to the agent, ownership

does not pass. Under the principle in the

Civil Code res perit domino it will be theseller (owner) who will bear the loss. But ifthis transaction is sale then with the delivery

of the maong pants to B, ownership passed

to B because he did not reserve ownershipover the pants despite the fact that the otherparty has not paid the price. So when the

pants were burned, it would now be B asthe owner who will bear the loss.

SA: This is exactly the case of Quiroga vs.Parsons. Article 1466 in construing acontract containing provisions

characteristics of both a COS and ATS, you

have to go into the essential clauses of thewhole instrument. In this problem, one ofthe clauses B has to pay the price within 30

days. That would make the contract COSand not ATS because in 30 days from

delivery, whether or not B has already sold

those pants to other persons, he is already

obliged to pay a price. That is not an ATS.Being a COS, therefore, after having been

delivered, ownership passed to the buyer

and hence under res perit domino rule, thebuyer bears the loss and therefore he can

be compelled to pay the price.

Essential Elements of a Contract of Sale

1. Consent of the Contracting Parties


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2. Object or Subject Matter which is adeterminate thing or rightNote:Service cannot be the subject matter

of sale.

3. Cause or Consideration as far as

seller is concerned, it is the price in

money or the equivalent of the payment ofthe price.

CONSENT OF THE CONTRACTING

PARTIES

A. No consent of one or both of theparties

! the contract is void. Under the law on

sales, it is a fictitious contract where the

signature of one of the parties was forged.Normally, the sellers signature is forged. Ifthe signature of the seller is forged, that

would be a fictitious contract. The allegedseller will not have participation in the

execution of the contract. But another kind

of contract recognized in the Civil Code is asimulated contract.

Simulated parties to this contract actually

would have participation. They wouldvoluntarily sign in the deed of sale.However, they do not intend to be bound at

all or they may intend to be bound toanother contract but they executed a deed

of sale. Thus, the law would ratify thesecontracts considering there is a simulatedsale.

Kinds of Simulated Contracts

1. Absolutely Simulated they do not intendto be bound at all.

Q: Why would they enter into this kind ofsale?A: To defraud creditors

2. Relatively Simulated sale where they

actually intended another contract whichnormally would be a donation.

B. If consent was given! If consent was given, it does not

necessarily mean that the COS is valid. Theconsent may be given by an incapacitatedperson or one with capacity to give consent.

If given by an incapacitated person,

consider the nature of the incapacity. It maybe:

a. Absolute Incapacity the party

cannot give consent to any and all

contracts.

b. Relative Incapacity the party is

prohibited from entering sometimeswith specific persons and sometimes

over specific things.

Kind of Capacity1. Juridical Capacity it is the fitness to bethe subject of legal relations. If a party to a

sale has no juridical capacity, the contract is

void. Note that all natural living persons

have juridical capacity. Even if he is a 1 dayold baby, he has juridical capacity. Thebaby can be the subject of donation. Even if

he is conceived, he has provisionalpersonality.

Example:One example of a party to a salewithout juridical capacity would be acorporation not registered with the SEC.

The contract entered by this corporation is a

void contract because one of the parties hasno juridical capacity to enter into thatcontract.

2. Capacity to Act it is the power to do

acts with legal effects. If the incapacity onlypertains to capacity to act, the contractwould normally be voidable. Withoutcapacity to act or there are restrictions with

ones capacity to act such as minority,

insanity, deaf mute and does not know howto write and civil interdiction.

Note: Under R.A. 6809 (December 1989)there is no more creature known as

unemancipated minor. Before 1989, the

age of majority was 21.

C. If both parties are incapacitated

!not only voidable but unenforceable.

Q: What if one of the parties in a COS isa minor and the minor actively

misrepresented as to his age?A: The SC said that the minor will be boundto such contract under the principle of

estoppel.


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Atty. Uribes Comment:Estoppel is not agood ground because the minor is not

aware.

Sale of Necessaries

In sale of necessaries such as food, clothingand medicine to a minor, the minor has to

pay a reasonable price. This contract is notvoidable. The sale of necessaries will bind

the minor and he will be compelled to paynot really the contract price but only toreasonable price.

Relative Incapacity (Articles 1490 and

1491)1. Sale between spouses it is void except:

a. The spouses executed a marriage

settlement and in the marriagesettlement they agreed for a

complete separation of property

regime. Then they can sell to eachother.

b. If no marriage settlement, they may

have obtained judicial declaration of

separation of property. After that,they can sell to each other.

2. Those mentioned in Article 1491a. A guardian cannot buy the property

of the ward. The guardian is notactually prohibited from entering intoany and all contracts. It is just thathe cannot be the buyer of a property

of his ward.

b. An agent cannot buy without theconsent of the principal a propertywhich he was supposed to sell or

administer.c. The executors and administrators of

the estate cannot buy a property

which is part of the estate.

d. Public officers, judges, their staff,clerk of court, stenographers and

lawyers are prohibited from buying

those properties which are thesubject of litigation during the

pendency of the case.

Q: What is the status of the contracts

under 1491?

A: Prof. Tolentino voidableJustice Vitug & Prof. Baviera voidProf. Pineda & Prof. de Leon the

first 3 are voidable and the last 3 are

void.

The better answer is void because these

persons are prohibited from entering intothese contracts. Under Article 1409, if the

contract is prohibited, it is void.

3. Aliens are prohibited from acquiring bypurchase private lands Take noteacquiring which means buying not selling.

They can sell.

Exceptions / when aliens can buy:

a. Former natural born Filipino citizen.Under the Constitution they areallowed to buy small land which they

can use for residential purpose.b. Another way of acquiring is by

succession but this is not a sale

D. Even if consent was given by one withcapacity to give consent but if the

consent is vitiated

!voidable. FIVUM

E. If the party gave such consent in the

name of another without authority of thatperson or no authority of law

! unenforceable. Take note may beauthorized by the person or by law.Example of authorized by law:notary publichas the right to sell in pledge because he

has the authority to sell under the law.

OBJECT OR SUBJECT MATTERThe requisites in sale as to thing would

almost be the same as the requisites ofcontracts in general.

1. The thing must be within the commerce

of men

Examples:sale of a navigable river is void,sale of a cadaver is void but donation of a

cadaver is allowed, sale of human organs is

void, things which are not appropriated likeair is void but if appropriated it can be the

object of a valid sale.

2. The thing must be licit not contrary to

law


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Examples:sale of prohibited drugs or shabuis void, sale of marijuana is void, sale of wildflowers or wild animals is void

3. Must be determinate

Read Article 1460

RULES AS TO OBJECT OF COS

Q: A obliged himself to deliver andtransfer ownership over the palay that

will be harvested from a specific parcel

of rice land in May 2008. What if by May2008, no palay was harvested?

a. What is the status of the sale?

b. May the seller A be held liable for

damages for failure to comply withhis obligation?

A:

a. Always consider that in a COS thereare only 3 requisites. As long as these 3

were complied, there is a valid sale. In fact,

by express provision of law, sale of thingshaving potential existence (emptio reisperati) is valid.

b. Not necessarily because there are

excuses to non-performance such aspestilence, typhoon, flood and therefore hisfailure to comply is an excuse. But if the

reason of the seller is because of hisnegligence, he cannot find support under

Art. 1174.

Sale of Hope (Emptio Spei)Example:Sale of a lotto ticket

Q: Sale of a land to B with a right torepurchase within 1 year which A

delivered. On the 3rd month, B sold theland to C. However, on the 9 thmonth, Aoffered to repurchase the land.

(a) What is the status of the sale

between A and C?

(b) Who will have a better right over theland?

(Sale with a right to repurchase)

A: (a) Be guided by the fact that a COS is a

consensual contract. The mere meeting ofthe minds as to the object and the price,then there is a valid and perfected sale.

Hence, this is a valid sale even if the object

of the sale is a sale with a right torepurchase. Article 1465 provides thatthings subject to a resolutory condition may

be the object of a COS.

Atty. Uribe: Mas tamang sabihin since

the ownership thereof is subject to a

resolutory condition. Hindi naman yungthing is the subject of resolutory condition, it

is the ownership over the thing.If A exercises the right to repurchase and

such would be a valid exercise of such rightthen the ownership of B would beextinguished. The exercise of the right is

considered a resolutory condition as to the

ownership of B. The fact that the object of

the sale is subject to a repurchase will notaffect the validity of the sale.

(b) As a rule, it would be A as a seller a

retro because he has the right torepurchase assuming his repurchase is

valid. C may have a better right if he can

claim that he is an innocent purchaser forvalue. Example: maybe the right torepurchase was not annotated at the back

of the title of the land and he has no actual

knowledge. If that is the case, C may have abetter right.

SALE OF RIGHT / ASSIGNMENT OFRIGHT

Assignment of right is not necessarily asale. If there is a valuable consideration forthe assignment, it is a sale. If there is novaluable consideration, it may be a donation

or dacion en pago.

Examples of right:credit, shares of stock

Requisite of a right ! the onlyrequirement is that the right must not be

intransmissible

G.R.: As a rule, rights and obligations

arising from contracts are transmissible.Exceptions:

1. Intransmissible by Nature

2. Intransmissible because of Stipulation3. Intransmissible because of Law

CAUSE OR PRICE CERTAIN IN MONEYOR ITS EQUIVALENT


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Q: A deed of sale was entered into by Aand B. The price agreed upon was 1Myen.

(a) May that be a valid sale?

(b) Can the seller compel the

buyer to pay in yen?

A: (a) Yes, it is valid. Basis is Article1458 because the only requirement of the

law is in money. Even Japanese yen is inmoney. The law states that it may not even

be in money, it may be equivalent likepromissory notes whether or not negotiableor letters of credit.

(b) If the contract was entered into

today, yes it is valid because of R.A. 8183

which repealed R.A. 529 in 1996. If COSwas entered before R.A. 8183, the sellercannot compel even though the contract is

valid. The payment has to be made inPhilippine money.

Consider the date of the sale. If parties

failed to stipulate as to which currency, ithas to be in Philippine currency.

Price Must be Certain

Q: Who can fix the price?A: (1) The best way is for the parties to

agree as to the price. (2) They may agreethat one of them will fix the price.

Q: May the sale be perfected if theagreement of the parties was for one ofthem to fix the price?

A: Yes, it may be perfected only if the price

fixed by the party who was asked to fix theprice was accepted by the other party. If notaccepted, there was no meeting of the

minds.

Note:The perfection will only be considered

at the time of the acceptance of the price

fixed by the other party not from the time ofthe first agreement of the parties.

Q: What if a 3rdperson was asked to fixthe price A and B agreed that X will fix

the price, may the sale be void?A: Yes, the sale may be void if the thirdperson does not want to fix the price or

unable to fix the price. Hence, there was nomeeting of the minds.

Q: If the 3rdperson fixed the price but it

was too high or too low or maybe there

was fraud committed by the 3rdperson or

he was in connivance with one of theparties, may the sale be void?

A: No, because the remedy of the otherparty is to go to court for the court to fix the

price.

Note: Lesion or gross inadequacy of the

price does not as a rule invalidate a contract

unless otherwise specified by law.

Exception: when otherwise provided by law.Example:Article 1381.

Note: Under the law on sales, if there isgross inadequacy, it may reflect vitiation of

consent so the SC would normally enjoin

the lower courts to be warned of thepossibility of fraud in case of lesion. Lesionmust be proven as a fact. It is not

presumed.

If there is gross inadequacy, it maybebecause actually they intended anothercontract and that would make the sale a

simulated sale and therefore the sale isvoid.

Example: The value of the property is P1Mbut only P10,000 was written in the contractbecause they intended it to be a donation !void.

TIME OF THE PERFECTION OF THECONTRACT

Auction SaleAuction sale is perfected upon the fall of the

hammer or any other customary manner.

Thus, before the fall of the hammer in an

auction sale, the bidder even if he hasalready made a bid, he can still withdraw

the bid as long as he would do that before

the fall of the hammer. Otherwise, (if afterthe fall of the hammer), there is already a

perfected sale.

Q: Can the auctioneer withdraw the

goods before the fall of the hammer?


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A: As a rule, yes because the sale has notbeen perfected at the moment unless thebidding or auction has been announced to

be without reserve.

Note: Before perfection, there is one

contract which maybe perfected. Beforeperfection meaning in the negotiation stage

! this contract is known as the optioncontract.

Option ContractSanchez vs. Rigos

Facts: Mrs. Rigos offered to sell her land to

Sanchez for a certain price. Rigos gave

Sanchez 2 years within which to decide.(Note:The optionee or promisee or offereeis not bound to purchase but he has the

option to buy or purchase). In this case,Sanchez has the option. Before the lapse of

2 years, Sanchez told Rigos that he is

buying and offered the price agreed uponbut Rigos refused claiming that she was notbound by the written option agreement

because no option money (consideration)

was given by Sanchez. According to Rigos,the option contract is void.Held: Since Sanchez accepted the offer and

decided to buy within the period before theoffer was withdrawn, a perfected COS was

created even without option money. In thiscase, there was no option contract becauseit was merely an option agreement.Therefore, there was merely an offer on the

part of Rigos and once the offer was

accepted before it was withdrawn,regardless of whether option money wasgiven and in this case no option money was

given, a perfected COS was created.Note:Iba pag may option money

Q: 2 years within which to decide

assuming there was option money,

before the offeree could decide to buy,the offeror withdraw on the 6thmonth.

(a) Can the offeree on the 10th

month say I would like tobuy?

(b) Can the buyer compel theseller to sell?

A: (a) No.

(b) No, an action for specific performancewill not prosper because when he said hewill but there was not more offer to be

considered. Na-withdraw na eh.

Q: If the offeree files an action for

damages, may that action prosper therebeing option money given?

A: Yes, because with the option money, anoption contract is perfected, the offeror is

bound to give the offeree, 2 years withinwhich to decide and failure to that he isliable not based on perfected COS but on

perfected contract of option.

Option Money (OM) vs. Earnest Money(EM)OM is not part of the price while EM is part

of the price and at the same time, it is aproof of the perfection of the contract.

G.R.: A COS may be in any form. Article1483 provides that a COS may be in writing,partly in writing xxx. This provision is exactly

the same as Article 1356 in contracts which

provides that contracts may be obligatory inwhatever form they may have been enteredinto provided all the essential requisites are

present. But then again even Article 1356just like Article 1475 would provide for

exceptions.Exceptions: The law may require aparticular form for its validity. The CattleRegistration Decree is an example - where

the law itself provides for a particular form

for the validity of the sale. But the law mayrequire particular form for its enforceabilityof the sale and that would be 1403 or the

statute of frauds. Concretely, the sale of aparcel of land if not in writing is valid but

unenforceable. It is not void. Note that the

price of the land is irrelevant if immovable.

Example:Before, the sale of a land for P300

is valid and enforceable even if not in

writing. But presently, it has to be in writingto be enforceable. The price is still

irrelevant.

If the object of the sale is movable, you

have to consider not the value of the thing


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but the price agreed upon. The value maybe different from the price. You can sell athing worth P1,000 for P400 but the law

provides for the price. If the price is at least

P500 and the sale is not in writing, it will be

unenforceable.

Paredes vs. Espino

Facts: Paredes was a prospective buyer.Espino owns a land in Palawan. Paredes is

from Northern Luzon. Their negotiation wasthru letters and telegrams. Espino sent aletter to Paredes stating that he and his wife

agreed to sell the land to Paredes, that the

deed of sale will be executed upon the

arrival of Paredes in Palawan. WhenParedes arrived, Espino said he is no longerinterested in selling. Paredes filed a case to

compel Espino to sell the land. Espinocontended that the contract is

unenforceable because it is not in writing.

He contended that under the statute offrauds it is unenforceable. His contentionwas sustained by the trial court.

Held: This contract is no longer covered by

the statute of frauds because there was aletter. Article 1403 provides that a note ormemorandum signed by the part charged

would be sufficient to take that contract outof the operation of the statute of frauds. In

this case, the defendant wrote a letter withhis signature on it. The letter took thatcontract out of the operation of the statute offrauds and therefore he may be compelled

to execute the final deed of sale.

RIGHTS AND OBLIGATIONS OF THE

VENDORIn a deed of sale (DOS), there can

be hundreds of obligations of the vendor but

those obligations would be because of the

stipulation. But there are only few

obligations imposed by law. The 3 mostimportant:

1. To transfer ownership

2. To deliver3. To warrant the thing

There are other obligations:4. Obligation to take care of the thing

sold with the diligence of a good

father of a family prior to delivery.

5. From the time of the perfection up tothe time of delivery then there wouldbe obligation to pay for the expenses

for the execution and registration of

the sale and obligation to pay the

capital gains tax would be on the

seller as a rule.6. Obligation to deliver the fruits which

is related to the obligation to deliverthe thing

OBLIGATION TO DELIVER THE FRUITSBE: A sold a mango plantation to B but

they stipulated that delivery will be after

the signing of the deed of sale. After the

expiration of the 6-month period, Bdemanded for the delivery. The vendorwas able to deliver 1 month after the date

when he was supposed to deliver themango plantation. During this period, the

vendor harvested mango fruits and sold

them to X. The vendor was able todeliver only after the other fruits wereharvested and sold to Y. Can B recover

the mango fruits from Y during the 6th

month period?SA: Determine first whether B is entitled tothe fruits because if he is not entitled, then

he cannot recover the fruits. Is he entitled tothe fruits after 6-month period during the 1-

month period prior to delivery? Yes, in fact,under 1537, the fruits of the thing sold fromthe time of perfection shall pertain to thebuyer.

OBLIGATION TO TAKE CARE OF THETHING

G.R.:The thing sold should be determinate

because if generic (1460, 2nd paragraph)then there is nothing to be taken cared of. It

will become determinate only upon delivery.

Exceptions: There are sales transactions

wherein the vendor would not have thisobligation:

a. Constructive delivery - brevi

manu There would be noobligation on the part of the

seller to take care of the thingfrom the time of perfectionbecause at the time of

perfection, the buyer was


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already in possession of thething. Maybe he borrowed thething. Example:he borrowed the

car and he decided to buy it

the thing was already in his

possession.

OBLIGATION TO PAY EXPENSES /

TAXESThese obligations may be the

subject of stipulation. By agreement, itwould be the buyer who will pay xxxNormally, dito hindi natutuloy ang sale dahil

hindi magkasundo kung sino magbabayad

ng tax.

OBLIGATION TO TRANSFEROWNERSHIP

BE: May a person sell something whichdoes not belong to him? Would the sale

be valid? Would the buyer acquire

ownership over the thing sold, if sellerdoes not own the thing?SA: Yes. Ownership over the thing sold is

not an essential requisite for the sale to be

valid. But if the seller does not own thething, he may have a problem on hisobligation to transfer ownership. The

problem would be whether or not the buyerwould acquire ownership over the thing sold

if the person who sold the thing is not theowner.

Q: Who would have the right to sell and

therefore they can transfer ownership by

way of sale?A: First, is the owner. Even if he is not theowner, he may have the right to sell

because:(1) He was given the authority by

the owner. Example:Agent

(2) He may be the owner but he

may have the authority of the lawto sell, known as Statutory

Power to Sell (Article 1505).

Examples: Notary public inpledge, liquidators, guardians

and receivers.(3) Those who have the authority of

the court. Example: Sheriff.

Note: it is as if they have the

authority of law because noteven the judge can validly sellsomething if it is not consistent

with the law.

Q: May a buyer acquire ownership over

the thing sold if the seller has no right tosell?

A: The answer by way of exception is yes.But the general rulehere is under 1505

the buyer acquires no better title than whatthe seller had. If the seller is neither theowner nor does he have the authority to

sell, the buyer acquires no better title than

what the seller had. If his right is only as a

lessee that is the most that can betransferred to the buyer. If he has no titlethen no title can be transferred to the buyer.

Exceptions:(When the buyer can acquire abetter title than what the seller had. Even if

the seller does not have the right to sell, the

buyer may acquire ownership over the thingsold because the law so provides and notbecause the seller was able to transfer

ownership to the buyer.)

1. By Estoppel2. Estoppel by Deed3. Estoppel by Record

4. Sale by an Apparent Owner5. Negotiable Document of Title

6. Purchases from a Merchants Storexxx

1. By Estoppel by the principle ofestoppel, a person is precluded from

denying that another person has authority to

sell because of his acts. Also known asEstoppel in Pais which is a kind ofequitable estoppel because of the acts /

representation of the owner, he may notlater on deny the authority of the 3 rdperson.

2. Estoppel by Deed

BE: A and B co-owners of land sold (saleis verbal) to X their land. X subsequently

sold the land to Y. Would Y be

considered to have acquired ownershipover the land?

SA: Under 1434 which is considered asEstoppel by Deed (technical estoppel) when the seller who was not the ownerat

the time of the sale, acquires ownership,


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automatically, ownership passes to thebuyer by operation of law. However, Article1434 requires delivery to the buyer. And

under the facts, 1434 would not apply

because:

a) There was no showing there was

paymentb) No showing that there was delivery

of the land to X.It cannot be said that by operation of law, Y

likewise acquired ownership by way ofestoppel by deed.

3. Estoppel by Record

Jurisprudence: Sale by nephew of the

owner of the land. Since the nephew couldnot deliver the land, the buyer sued thenephew for estafa. For the accused to be

acquitted, he asked his uncle to testify thathe actually had the authority to sell. When

the uncle testified in court, the nephew is

acquitted. After acquittal, the buyerdemanded from the uncle the delivery of theland. The uncle refused, claiming that sa

totoo land, I did not authorized my nephew.

Q: Case was filed against the uncle,would that action prosper?A: SC said yes because he cannot be

allowed now to claim that his nephew wasnot authorize to sell after he testified in court

that he gave such authority.This is estoppel by record which isconsidered a technical estoppel.

4. Sale by an Apparent Owner

A. Factors ActB. Recording LawsC. Any other provision of law enabling the

apparent owner of the goods to dispose ofthem as if he was really the owner.

A. Factors Act

Even if agent has no right to sell, a thirdperson may acquire ownership because he

may rely on the power of attorney as

written.

B. Recording Laws*most common question in the bar exam

Read: Mapalo vs. Mapalo

5. Negotiable Document of TitleIf goods are covered by a negotiable

document of title and it was thereafter

negotiated. If the buyer bought it in good

faith and for value, he will be protected

under the law. He will acquire ownership

even if the seller did not have the right tosell.

Example:The seller may have acquired titleby violence. Binugbog nya yung owner ng

goods. Pero kung negotiable document oftitle yan and properly negotiated, lalo nakung bearer document of title, then the

buyer may acquire ownership even if the

seller has no right to sell.

6. Purchases from a Merchants Store /Markets / Fairs

Sun Brothers vs. VelascoFacts: Sun Brothers was the owner of a

refrigerator. Sun Brothers was engaged in

the business of selling refrigerator. SunBrothers sold a ref to Lopez on installmentbasis. As stipulated, Sun Brothers reserved

ownership until full payment. Lopez only

paid P300 out of P1,500. The balance to bepaid on installment. Lopez then sold the refto Velasco.

Q: Would Velasco acquire ownership?

A: No because Article 1505 provides thatthe buyer acquired no better title than whatthe seller had. However, Velasco was theowner of a store. On the next day, Velasco

sold the ref to Ko Kang Chu who paid in full.

When Sun Brothers learned this transaction,it filed an action to recover the ref from KoKang Chu.

BE: F lost her diamond ring in a hold-up.

Later on, this ring was an object of a

public sale of one pawnshop. Can F

recover the ring from the buyer in thatpublic sale?

SA: Yes, Article 559 provides that even if

the buyer is in good faith so long as theowner is willing to reimburse the buyer of

the price paid in that sale.

Note: Again in 1505, there is no right to

recover as long as the buyer bought it in


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good faith from a merchants store, therecan be no recovery as a matter of right.

Q: How transfer of ownership is

effected?

A: Under the law, as far as things are

concerned, it is effected by delivery:(a) Actual

(b) ConstructiveThere can be no transfer of ownership

without delivery.

Notes:

(a) There may be a period agreed upon

by the parties within which the buyer

would have to decide. Even if he failedto signify his acceptance by the merelapse of the period, he is deemed to

have accepted (impliedly accepted)hence, ownership passes to him.

(b) Even before the lapse of the period,

he may be considered to haveaccepted if he did an act wherein hewould be considered to have adopted

the transaction then ownership passed

to him.Example: Even if he has 10 dayswithin which to decide but on the 2nd

day, he sold the car to another.Obviously, he is deemed to have

accepted the thing because he did anact which is inconsistent with theownership of the seller like he donatedor destroyed the thing.

(c) If there is no period agreed upon, the

law says if he did not signify hisacceptance he will be considered tohave accepted after the lapse of a

reasonable time. Reasonable time willdepend on the circumstances of the

sale, purpose of the sale, nature of the

thing sold. Example: Perishable

goods.

Sale or Return

Q: Ownership passes upon delivery?A: Yes. However, the buyer is given the

right to revest the title back to the sellernormally within a certain period. Example:Clauses in subscription magazine which

says that you can return within 30 dayswithout payment.

BE: A car was sold for P150,000. P75,000

paid upon the execution of DOS. The

balance payable on a monthly basis.

P75,000 was paid. The car was deliveredto the buyer. However, before he could

pay the balance, the car was destroyeddue to a fortuitous event or was burned

xxx Can he still be compelled to pay the

balance?SA: Yes. Upon the delivery of the car to the

buyer, there being no retention of ownership

by the seller. (Note: Wala sa facts na na-

retain ng seller and ownership). Therefore,ownership passed to the buyer. Under theprinciple of res perit domino Article 1504

the owner bears the loss and hence it canbe compelled to pay the price.

G.R.:Res perit domino 1504.Note: Determination of when ownershippassed is important because if at the time of

the loss, the buyer is not yet the owner, as a

rule, the buyer will not bear the loss like insale on approval and he has 10 days withinwhich to decide and the thing was lost

through a fortuitous event within the 10-dayperiod without fault on his part, the seller will

bear the loss.Exceptions:1. Read Lawyers Cooperative vs.Tabora

2. Delay in the DeliveryWhen there is delay in the delivery

due to the fault of one of the parties,

whoever was at fault will bear the loss. Notethat either buyer or seller may be at fault.

Example 1: The buyer and the seller may

have agreed that the goods are to beobtained by the buyer at the warehouse of

the seller on a specific date. On the date

agreed upon, the seller demanded thebuyer to get the goods. Despite such, the

buyer failed to get the goods. On the nextday, the warehouse was destroyed due tofortuitous event.

Q: Who is the owner at that time?


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A: The seller but there was delay on the partof the buyer hence under 1504 it is thebuyer who will bear the loss.

Example 2: The seller himself maybe the

one at fault. Thus, he is in delay in

delivering the goods to the buyer.Q: Why would this be an exception to the

res perit domino rule?A: Ang premise dito, the ownership has

already passed to the buyer but the goodsare still with the seller. Can this happen?Yes, because of constructive delivery. If

there was constructive delivery, ownership

passes to the buyer but physical possession

is still with the seller. They may have agreedthis time that the seller will be the one todeliver the goods to the buyer at a certain

date. When the date arrived, despitedemand from the buyer, there was no

delivery on the part of the seller. Even if the

goods are destroyed the next day due tofortuitous event, take note ang owner ayang buyer na but who will bear the loss?

The seller because he was in delay in

delivering the goods.

DOUBLE SALE (ARTICLE 1544)BE: F sold a registered parcel of land to

R who did not register the sale.Thereafter, F sold the very same parcelof land to C who registered and obtaineda new TCT in his name. Who would have

a better right?

SA: Atty. Uribe: I fully agree with the UPLaw Centers answer. It depends onwhether or not C registered the sale in good

faith. Registration is only one of therequirements good faith is equally an

important requirement.

Note: In 1544 (double sale), as to whichrule applies will depend on the thing sold if

movable or immovable.

Q: If the thing is sold twice, who would

have the better right?A: If movable, the buyer who first tookpossession in good faith will have the better

right. If immovable, the buyer, who first

registered in good faith, will have the betterright. If there was no registration, it will bethe first who took possession in good faith.

If no possession in good faith, the

buyer who has the oldest title in good faith.

Even the 1stbuyer is required to be in good

faith. Obviously, the first buyer would havethe oldest title. Yung good faith ditto

obviously would not pertain to absence ofknowledge of the 2nd sale kasi syempre 1st

buyer sya. He is nonetheless required tohave bought the thing in good faith. Goodfaith means that he had no knowledge of

the defect of the title of the seller.

Warning:Please be careful when you recite you register the sale not the land.

Read: Bautista vs. Sioson

Carumba vs. CA

Facts: Sale of land to B who took physicalpossession but did not register. He is thefirst buyer. However, the seller (A) is a

judgment debtor in one case to a certain

creditor named C. The land became thesubject of an execution sale. The buyerbecame C who registered the sale.

Q: Who would have a better right

between C and B (C had no knowledge ofthe sale)?A: SC Said !B because this land was notregistered under the Torrens System. 1544

would not apply to unregistered lands.

OBLIGATION TO DELIVER THE OBJECT

OF THE SALEDetermine the subject matter if it is a

thing or a right because there are different

modes of delivery as to thing and as to right.

ThingsKinds of delivery of things as a

consequence of sale known as

tradition under the law:1. Actual Delivery / Material Delivery /

Physical Delivery / Real Delivery the thingis in the possession and control of thevendee. Take note control. Take note to

the vendee.


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Q: What if the thing was delivered to a 3rdperson?A: Jurisprudence SC said ! yes, there

maybe actual delivery if the third person has

authority to receive from the vendee. Thus,

making him an agent of the vendee and that

would still be actual delivery.

Note: Philippine law does not only requireactual delivery constructive delivery may

result in transfer of ownership.

2. Constructive by the execution of a

public instrument if the contrary intention

does not appear on the document. By the

mere execution of the public instrument thatis equivalent to delivery. Hence, ownershippasses to the buyer.

Kuenzle & Streiff vs. Macke & Chandler

Facts: The original owner here Stanley and

Griffindor (parang Harry Potter !) and theproperty involved here are fixtures of asaloon. Macke and Chandler are judgment

creditor of Stanley and Griffindor. Because

of a judgment in favor of Macke andChandler, the sheriff levied upon theseproperties which was still in the possession

of Stanley and Griffindor. The propertiesunder execution were questioned by

Kuenzle and Streiff. Kuenzle and Streiffclaimed that these things were sold to themprior to the levy. If they claimed that theproperties were sold to them, the properties

should be in their possession. Take note

that Stanley and Griffindor were still inpossession of the goods physically. Hence,there was no actual delivery.

Held: In order that ownership would pass, ithas to be in a public instrument if that would

be by constructive delivery.

Kinds of Constructive Delivery1. Delivery of the Keys of the place where

the goods are located like a warehouse.

Prof. De Leon: this also called as symbolicdelivery.

2. By Mere Consent or Agreement of theParties if at the time of the sale,

possession to the goods cannot be

transferred to the buyer. There must be areason why it cannot be transferred at thetime of the sale. This is also known as

tradition longa manu.

Example 1: The thing was the subject

matter of a lease with a 3rdperson until the

expiration of the lease, the thing cannot bedelivered.

Example 2: The thing was the subject

matter of commodatum. As a rule, period ofcommodatum has to be respected.

3. Brevi Manu this is a kind of constructive

delivery because the buyer was already in

possession of the thing sold at the time ofthe perfection of the sale so he will continueto be in possession after the sale, no longer

as a lessee but this time as the owner. Sodati lessee lang sya that is why he was in

possession or maybe depositary lang sya or

maybe he was the agent at the time prior tothe sale.

4. Constitutum Possessorium the seller

will continue to be in the possession of thething after the sale but no longer as anowner but in another capacity like lessee.

Bautista vs. Sioson

Because a lease agreement was enteredinto by the buyer and seller after the salethen the buyer became the lessor and theseller became lessee. Therefore, the lessee

would continue with the possession no

longer as an owner.

RightsKinds of Delivery of Incorporeal Property/ Quasi Tradition:

1. Execution of Public Instrument

2. Placing the Title of Ownership in thePossession of Vendee a right would

normally be covered by a certificate.

Example:delivery of the certificate of sharesof stocks.

3. Use by the Vendee of His Rights with theVendors Consent


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Example: Sale of shares of stocks ! thevendee may not always have the right toexercise his rights under the shares of

stocks. Concretely, if there is a

stockholders meeting, the books of the

corporation will be closed for 30 days before

the meeting. Thus, if the sale occurredwhen the books are already closed, no one

will be recognized except those registeredowners. So if you are the buyer of those

stocks, you can only use your right with theconsent of the vendor.

RULES ON SALE AS TO QUANTITY /

QUALITY OF THE THING SOLD

Q: In a sale involving 1,000 pairs ofshoes with a specific design as agreedupon. The seller delivered 1,200 pairs of

shoes instead of only 1,000. Can thebuyer reject everything?

A: No. He has the right to reject only the

excess. Reject the 200 but he can becompelled to accept the 1,000.

Q: What if instead of 1,000, 800 was only

delivered?A: The buyer cannot be compelled toreceive 800 because partial performance is

non-performance. You cannot compel thecreditor to accept partial fulfillment as a rule

because it can be a subject of a stipulationthat there can be partial delivery.

Q: The obligation to deliver 1,000 cavans

of Milagrosa rice. Instead of delivering

1,000 cavans of Milagrosa, the sellerdelivered 1,100 cavans of both Milagrosa

and Burmese rice. May the buyer rejecteverything?A: Yes, if the goods are indivisible. Meaning

each sack of rice, Milagrosa and Burmese

rice were mixed. However, if it is clear that

per sack it is Milagrosa rice and the 100sacks, it is clear that those are Burmese rice

that would not be considered as indivisible.

He can be compelled to accept 1,000 sacksMilagrosa and he has the right to reject 100

sacks Burmese rice.

SALE OF REALTY

Q: Sale of a parcel of land. Price agreedupon is P1M. More or less 100 sqm. Theactual area delivered by the seller was

only 95 sqm. What are the remedies of

the buyer?

A: (1) Specific performance would be a

remedy if the seller is still in the position todeliver the balance. Siguro yung katabing

lupa sa seller din, hence, he can afford togive additional 5 sqm.

(2) Q: If specific performance is not

possible, is proportional reduction aremedy?

A: It depends on whether the sale is

considered as a sale with a statement of an

area of a rate of a certain measure or if it isa lump sum sale.

Q: Under the facts, 95 sqm wasdelivered, would rescission be a

remedy?

A: As a rule no because rescission wouldonly be a remedy if the area lacking is morethan 10% of that area agreed upon. So

kung 100 sqm, dapat 11 sqm or 15 sqm ang

kulang, so out of 100 kung 85 lang ang na-deliver, then rescission is a matter of right.

PLACE OF DELIVERYRead 1524, 1525 and 1198

The seller delivered the goods to the placeof business of the buyer. If the buyerrefuses to receive the goods, the buyer willbe considered in delay and therefore will be

liable to the seller because of unjust refusal.

Q: May the buyer be considered in delayfor his refusal to accept if there is no

place stipulated in the contract?A: It depends on the kind of thing.Determine if it is determinate or generic. If

the thing is determinate, the law provides

that it will be the place where the thing is

located at the time of the perfection of thecontract.

Q: What if the object of the sale is ageneric thing?

A: Sellers place of business or residence.


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Note: If there is no stipulation when to bedelivered, the seller cannot be compelled todeliver.

Q: What if at the time of the perfection of

sale, though the thing is determinate, it

was on board a ship while in transit.Where will be the place of delivery?

A: Depending on the shipping arrangementagreed upon by the parties.

F.O.B. Free on BoardC.I.F. Cost, Insurance, Freight

F.O.B. and C.I.F are rules of presumption

which would have to give way to the realintention of the parties. So after all, theF.O.B. or C.I.F. arrangements do not really

determine the place of delivery, they onlymake rules of presumption.

So in a C.I.F. arrangement, it is onlypresumed that the place of delivery is theport of origin.

In a F.O.B. destination, it is only presumedthat the point of destination is the place ofdelivery.

Q: What really determines the place of

delivery?A: SC said this indication as to theintention of the parties as to the place ofdelivery is the manner and place of

payment. If there is an agreement as to

where and how the price is to be paid thatwould be the place considered for purposesof delivery and therefore for transfer of

ownership.

Read 1582

Obligations which cannot be Waived:1. Obligation to transfer

2. Obligation to deliver

Obligation which can be Waived:

1. Obligation to warrant the thing

Kinds of Warranties under the Law:

1. Express

2. Implied

1. Express any affirmation of fact or any

promise by the seller relating to the thing,

the natural tendency is to induce to

purchase the thing.

Requisites:(a) There is an affirmation of fact

(b) The fact must pertain to the thingeither to the quality, character or title

of the thing

Any other matter may not be considered as

an express warranty.

The use of the words / terminologies is notconclusive as to whether or not there is anexpress warranty.

Example:I guaranty / warranty you that youwill be happy if you buy this car at

P100,000! this does not result in an

express warranty

Again, if the affirmation of fact pertains to

the quality of the thing, it is an express

warranty.Example:These 10 sacks of fertilizer wouldresult in 200 cavans of rice.

The statement of the sellers opinion is not

as a rule considered an express warranty.Example: This is the best pia cloth ! itmay turn out that there are better pia cloth.

As long as the seller is not an expert on that

field, that would be treated merely as anopinion and there can be no liability forbreach of an express warranty.

BE: A sold a land to B for P1M in

Antipolo. As agreed upon P100,000 will

be paid upon the signing of the DOS. The

balance will be paid within 30 days fromthe time the occupants (squatters) of the

land are evicted. It was so stipulated that

if within 6 months, the squatters havenot yet been evicted, the seller should

return the P100,000. Another stipulationstates within the 6-month period, thevalue of the land doubled. Despite the

filing of an eviction suit by the seller and


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the lapse of the 6-month period, thesquatters were still occupying the land.The seller offers to return the P100,000

to the buyer. The buyer refused to accept

the P100,000 and told the seller never

mind even if the squatters are still there.

I will still buy the land. So the buyeroffered to pay the balance P900,000 and

demanded that a DOS be executed bythe seller. The seller refused to accept

the P900,000. What he did is to file an

action to rescind the contract. Would theaction prosper?

SA: If the answer is based on rescission,

the action will not prosper because

rescission may only be invoked by theaggrieved party. The seller is not anaggrieved party.

2. Implied

Prof. De Leon: because of this implied

warranty, it cannot be said that Philippinelaw does not adopt caveat emptor buyerbeware. (Fayes Caveat !: Please check

the book of Prof. De Leon regarding this

statement. Thanks !)

Even if there is no stipulation as to these

warranties, the law itself would provide forthese warranties and hence if there are

hidden defects he would have remediesunder the law or even if he was deprived ofthe thing he bought he would have aremedy against the seller. Hence, it is not

correct to say that Philippine law has

adopted caveat emptor. But there arecertain instances when there would be nosuch implied warranty against hidden

defects. There may be warranty as to title oragainst eviction but there is no warranty

against hidden defects under certain

circumstances.

Warranty Against Eviction / Title

Q: If the seller was able to transfer

ownership to the buyer may the sellernonetheless be held liable for breach of

warranty against eviction?A: Yes. These are 2 different obligations:the obligation to transfer ownership and the

obligation to warrant the thing.

Example: This warranty against evictionwould include the warranty that the buyer

from the moment of the sale have and enjoy

the legal and peaceful possession over the

thing sold.

Requisites of warranty against eviction:

1. There has to be final judgment deprivinghim of such thing either wholly or partially.

In other words, a case was filed by a 3rdperson against the buyer which resulted in afavorable decision as to the plaintiff

resulting in the deprivation of the property

by the buyer.

2. Deprivation must be either:(2.1) Based on a 3rdpersons prior right

over the thing prior to the sale or(2.2) Based on an act after the sale but

imputable to the vendor.

3. There should be no valid waiver

4. The action to hold the vendor liable

should be filed within the period prescribedby law.

WARRANTY AGAINST HIDDENDEFECTS

Requisites:1. The defect must exist at the time of thesale. If the defect started after the sale therecan be no such liability.

2. The defect must be hidden. If the defectis patent and the buyer nonetheless boughtthe thing then he can no longer hold the

seller liable.If the seller is not aware of the hidden

defects, he can be held liable. If he was

aware, his liability will be greater because

that makes him a bad faith seller.

Q: Even if there is such a hidden defect,

is it possible that the vendee cannot holdthe vendor liable despite the fact that

there was hidden defect even if he wasnot informed because maybe the sellerwas not aware?


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A: Yes, he may not be able to hold the sellerliable if he is an expert on the thing. He isexpected to know the defect.

3. The defect must result in the thing being

unfit for the purpose of the buyer or at least

it diminish the fitness of the thing such thatthe buyer would not have bought it at the

price had he known of such defect.

Q: If the thing which has a hidden defect

was lost or destroyed, can the vendeehold the vendor liable for this breach of

warranty? Does it matter if the loss was

due to a fortuitous event or maybe the

loss was due to the fault of the buyerhimself, nonetheless, can he hold thevendor liable?

A: Yes. The vendee can hold the vendorliable for breach of warranty against hidden

defects even if the thing was lost due to

fortuitous event or due to the fault of thevendee himself because of the hiddendefects. But of course, if the cause of the

loss was the defect itself, the liability is

greater than if the cause of the loss was afortuitous event or fault of the buyer.

If there would be a problem here as to theextent of the liability of the vendor, he

should first consider the cause of the loss,maybe it was lost due to the defect itself orlost through fortuitous event or lost throughthe fault of the vendee. After that, he should

determine whether the vendor was aware of

the defects or he was not aware. Again, ifhe was aware, damages may be recovered.If he was not aware, he may not be held

liable for damages unless he can only beheld liable for interest.

If the defect was the cause of the loss, the

vendor would be liable for the return of theprice, not only the price less value but also

to refund the expenses and damages

because the vendor was aware of thedefects.

If the vendor was not aware of the defects,he cannot be held liable for damages but he

would only be held liable for the price.

If the cause of the loss of the thing was afortuitous event, he can only be held liable

for the price less value.

ANY CHARGE OR NON APPARENT

ENCUMBRANCE NOT DECLARED ORKNOWN TO THE BUYER

Q: Would there be an encumbrance overan immovable which is a form of

easement or servitude?A: An example of this is a road right of way.

Q: If the buyer bought the land which

turned out to have a road right of way in

favor of a 3rd person, can he claimbreach of warranty against any charge ornon apparent encumbrance?

A: Of course there are requisites:(1) The encumbrance or easement or

burden or the road right of way has to

be non apparent.

Q: If there is an encumbrance, what are

the remedies of the buyer?

A: (a) He can seek for the reduction of theprice.

(b) Rescission - the law requires that the

action for rescission must be filed within 1year from the date of the contract. If after 1

year, no more rescission.

(c) If he became aware more than ayear, he may file an action for damages, But

the law requires that the action for damages

has to be filed within 1 year also but fromthe time of the discovery of encumbrance. Ifhe filed it for example, after 2 years from

discovery no recovery of damages.

WARRANTY OF QUALITY

Prof. Deleon, Prof. Vitug, Prof. Baviera:

there is another warranty which isWARRANTY OF QUALITY which includes:

(1) Warranty of Fitness

(2) Warranty of Merchantability

To some authors the warranty of quality isconsidered under the warranty of hiddendefects.


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and other persons who sell by virtues of anauthority of law like notary public becausethey are not really selling for themselves,

they are selling on behalf of another person.

RIGHTS AND OBLIGATIONS OF THE

VENDEE1. Obligation to accept the thing

delivered.2. Obligation to pay the price (if

warranted, with interest)

1. Obligation to accept the thing

delivered

Q: If the buyer received the goodsdelivered, does it mean that he alreadyaccepted?

A: No because receiving is preliminary toaccepting. In fact, this is consistent to the

right provided by law to the buyer which is

the right of inspection or the right ofexamination. Thereafter, he may reject thegoods if defective.

2. Obligation to pay the priceQ: When?A: (1) As stipulated

(2) If there is no stipulation, it wouldbe at the time and place of delivery.

Right to Inspect / ExamineThis may be waived.Example:C.O.D. arrangement.

MACEDA LAWStudy Maceda Law and its essentialfeatures (see book of Prof. Baviera)

Q: Are the remedies under the Maceda

Law alternative? Can the buyer be able

to exercise 2 or more remedies all at the

same time?A: Yes. Remedies under the Maceda Law

are cumulative.

REMEDIES FOR BREACH OF

CONTRACTREMEDIES OF AN UNPAID SELLER(ARTICLE 1526)

(1) Right to retain the thing in hispossession (possessory lien)

(2) Right of stoppage in transitu / right to

resume possession of the goods

(3) Right of resale

(4) Right to rescind

Q: Are there other remedies aside 1526?

A: Yes. The seller may opt to file an actionfor specific performance or an action for

damages.

Unpaid seller is one who has not been

fully paif of the price.

Note:remedies of the unpaid seller are notnecessarily alternative. The right of resaleand the right to rescind may only be

exercised if the seller has possessory lien.

POSSESSORY LIEN

Q: Why is it called possessory lien?A: because there another lien in the law.This is the lien under the rules on

concurrence and preference of credit.

Note: The buyer is not required to beinsolvent.

Q: When would the seller be considered

to have lost his lien?A:

(1) If he waives his right(2) If the buyer lawfully obtained

possession over the goods

(3) When the thing is delivered to acommon carrier and the sellerdid not prefer his ownership and

possession over the goods.

STOPPAGE IN TRANSITU

Requisites:

(1) Insolvency of the buyer(2) The seller must have parted

possession over the goods

(3) The goods must be in transit

How right is exercised:(1) By obtaining actual possession of

the goods


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(2) This may be exercised by merenotice to the common carrier

If the seller validly exercised the right of

stoppage in transitu, he will be considered

to have regained his possessory lien.

RIGHT OF RESALE

Q: When would the seller have thisright?

A:(1) If the goods are perishable(2) The right is expressly

reserved in the contract

(3) The buyer has been in

default for an unreasonable time.

Note:The seller should send a notice of the

intention to resell to the buyer.

Note:The resale may be a private sale or a

public sale. The only limitation here is thatthe seller cannot buy directly or indirectly.

RECTO LAW

Pls. read Sales by Prof. Baviera

EXTINGUISHMENT OF SALE

Pls. read Sales by Prof. Baviera

1. Payment2. Novation3. Loss of the thing

Under the law on sales

1. The exercise of the right of resalewill result in the extinguishment ofthe 1stsale. The ownership of the 1st

buyer will be terminated and suchownership will be vested to the 2nd

buyer

2. Rescission or cancellation will

extinguish COS3. Redemption

Kinds of Redemption1. Conventional

2. Legal


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LEASE

Note:

Read the Definition of Lease underArticles 1643, 1644, 1713.

Consider also on Formalities: Articles

1647, 1724 in relation to 1403 onStatute of Frauds and 1403, 1878 on

Agency to Lease.

Assignment and Sublease: Articles1649, 1650

Implied new lease or tacita recunducion:Article 1670 (important)

Rights and Obligation of the Lessor and

Lessee: Articles 1673, 1678, 1680, 1723(take note several questions in the barhave appeared under these provisions)

Period of the Lease if the parties failed

to Fixed the Period: Articles 1682, 1687

Rights of Third Person: Article 1729 (ex:rights of owner of materials against the

owner of the building)

Note: The first thing to consider in lease isto consider the kind of lease.

Kinds of Lease:1. Lease of Things

2. Lease of Work or Service

3. Lease of Right

Note: In lease of Service, there are four (4)of them but three (3) will not be covered by

Civil Law, which are Household Service andContract of Labor (covered by Labor Law),

and Contract of Carriage (covered byCommercial Law). The only kind of Leaseof Service that will be discuss under the

Civil Law is the Contract for a Piece of

Work.

Definition:

Q: If a party binds himself to giveanother the enjoyment or use of thing,does that make the contract one of lease

of things?

A: No, the most important distinction here

with that of commodatum is that in lease, it

must be for a price certain, otherwise ifthere is no valuable consideration for the

use or enjoyment of the thing it will becommodatum.

Distinguish a Contract for Piece of Workfrom Contract of Agency

Read:Frensel vs. Mariano

Note: In Agency, the control of the principalover the agent is so pervasive that theprincipal can control not only the result but

also the manner and method of theperformance of the obligation which is not

present in this case and therefore Merit was

not considered an agent of Mariano.

Q: As to the relationship of the taxi

driver with his operator, is this a contract

of lease?A: SC, ruled that this is in fact a lease butnot a lease of thing, but lease of service

specifically an employment contract, this isbecause of the control of the operator over

the taxi driver, as to when, what time thedrive operates the vehicle.

Note: Again, to distinguish lease contract

from other legal relationship you have to

consider the characteristic of the contract.The best way to remember the kinds ofcontract is to know by heart what are the

real contract (mutuum, commodatum,deposit, pledge) and formal contract

(antichresis, donation). Aside from that it

may be safe to consider as a rule all the

other contract as consensual contract,where no particular form is required except

in exceptional case: e.g. sale of large cattle.

As a rule lease, therefore is aconsensual contract by mere meeting of the

mind as to the object and to theconsideration the contract is perfected.


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Note: Lease of things is not essentiallypersonal.

Heirs of Fausto Dimaculangan vs. IAC.

Upon the death of parties like death of

lessee, the contract is not thereby

terminated. The heirs of the lessee maycontinue to occupy the premises by virtue of

the lease because it is not extinguish upondeath of lessee.

Characteristic of Lease of things

Consensual Contract

Onerous

Bilateral

Nominate

Principal.

Essential Requisites of Contract ofLease

1. CONSENT2. OBJECT

Q: In lease of things, may a consumable

thing be the subject matter of lease?A: Normally when a consumable thing isuse in accordance with its nature it is

consumed, as a rule therefore consumablethings cannot be the subject matter of lease

of things. The exception is, when the use ofthe things is only for exhibition, or when

they are accessory to an industrialestablishment then it may be a subject of

lease.

3. CAUSE

FORMALITIES

Lease of Service there is no particularform required by law for the validity of the

lease not even for the enforceability as arule.

Read:Donald Dy vs. CA

Lease of Things certain provision of thelaw which requires certain forms to beenforceable.

Note: the problem in lease would normally

be a combination of an agency and lease.

BE: Agreement for the repair of a privateplane and for a certain sum of money,however additional work was requested

by a person who has the authority of a

duly recognize representative of the

owner of the plane and the request was

merely verbal, when the additional workwas completed, the one who rendered

the work demanded additional payment,the defense raise was under 1724 in

order that a claim for additional payment

for the additional work, the agreementfor the additional work must be in writing

and the changes should be authorized in

writing

SA: The suggested answer of UP willsustain the defense because of 1724; suchchange not being authorized in writing, the

request was merely verbal then the claimmay not prosper.

RIGHTS AND OBLIGATION OF THELESSOR

As to necessary repairs of the thing

lease, this is an obligation of the lessor,under the law the lessor is oblige to makethe necessary repairs.

Read: Gonzales vs. Mateo

RIGHTS AND OBLIGATIONS OF THELESSEE

Note: Two (2) favorite articles are 1649

pertaining to assignment of lease, and 1650on sublease.

The question in the Bar may be assimple as may a lessee sublease the

property without the consent of the lessor

and what are the respective liabilities of the

lessee and sublessee.

Articles 1649 and 1650 would tell us

that a lessee may not assign his right on thelease without the consent of the lessor

however he may sublease the property inwhole or in part even without the knowledgeof the lessor as long as he was not

prohibited from subleasing the premises.


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Read: Malacat vs. SalazarFrensel vs. Mariano

TERMINATION OF THE LEASE

BE: Discuss the effect of death of lessee,lessor, agent and principal.

SA: In a lease of thing, death of the lesseedoes not terminate the contract. A contract

of lease is not essentially a personalcontract therefore upon the death of thelessee, it may be continued until the

expiration of period of the lease by the

heirs. (Case: Heirs of Dimaculangan vs.

IAC)

IMPLIED NEW LEASENote: one of the most favorite in the bar

exam.

Requisites:1. The lease period has expired and

2. The lessee continues to be in possession

of the lease for at least 15 days from thetime of the expiration of the lease and3. No notice to the contrary from the lessor

and the lessee.

BE: Pertain to contract of lease enteredinto for period of 3 years Jan 1, 81 up to1984. Rentals were paid on monthlybasis. It was stipulated that the lessee

has the option to buy property at a

certain price within a certain period(option to buy). Despite the lapse of the

3 year period, the lessee did not exercisethe option, but continued to be inpossession of the property and paying

the monthly rentals and the lessor

accepting the same. This continued until

June 1984 when the lessee stated that hewould now buy the property in

accordance with the option to buy. The

lessor refuse, claiming there was nomore option. Was the lessor correct?

Yes. Was it correct to say that there wasextension of the lease under the facts?SA: Yes, there was an extension known

was implied new lease. However, with the

implied new lease it does not mean that allthe terms and condition of the contract inthe original lease continue also. First as to

the term, under the law, the term of the

renewed lease would not be the term

agreed upon but only be of a period

depending on the manner the rentals arepaid. If the payment is on annual basis, the

renewal would only be for a year and ifmonthly payment of rental is made, the

implied new lease would only last for 30days.

As to the option, it was renews, SC

held, in an implied new lease, only those

terms and conditions which are germane in

a contract of lease are deemed renewed asto the rest like option to buy, will not beconsidered renewed. Even in the facts of

the case itself, it was stipulated that theoption may be exercise within the period

agreed upon (3 years).


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AGENCY

Definition 1868, 1874 and 1878- formalities

Coz a form is required for the validity or forthe enforceability of the contract entered bythe agent-1878, 1874

1892- pertain to appointment of the

substitute- effect- may the agentnonetheless be held liable for the loss thatincurred by the principle as the result of the

appointment of the substitute.

Other provisions pertain to the right and

obligations of commission agent or more

importantly the guaranty commission agent-1907-1908

Effect of death-1919, 1930 and 1931Either of the agent or principal

Revocation-kind of agency- agency coupledwith interest-1927

BE: A asked her best friend to B buy forher certain items in a grocery store. Isthere a nominate contract created

between A and B?

SA: Better answer, if B agreed to therequest of A, an agency relationship has

been created, a nominate contract has beencreated.

Read:Quiroga vs Parsons

Distinguishing contact of agency from othercontract and other legal relationship.

Consider the characteristics of a contract of

agency as a contract and as a legalrelationship business organization.

Read: Lepanto Mining case

Mariano case

Some authors would classify contract of

agency into three, not concepts.1. Actual agency2. Apparent / dormant

3. Estoppel

1. Estoppel

Kang case

Facts: Flores appears to have full control of

a restaurant, owned by Kang and in the

administration of the restaurant he boughtcertain items from Mack, items needed for

restaurant but a portion / price to be paid,not by Flores, so Mack ( seller ) went after

the owner of the resto. The only defenseraised by the owner was that Flores was nothis agent.

Take note: it is very difficult to prove actual

agency, because an agreement between 2

persons, eh kung verbal lang angagreement dun, how would you be able toprove, the owner of the restaurant can be

held liable by estoppel because he clothFlores with full power as if he has the

authority to buy those items necessary for

the administration of restaurant aside fromthat Mack was able to prove pieces ofevidence like in the lease agreement over

the building where restaurant was located

and comes the owner of the restaurant aslessee and Flores sign as an agent of thelessee with all this the

Held: The owner of the restaurant is liableunder the Principle of Estoppel.

2. Apparent / OstensibleQ: A letter was sent by B to X, informingX that A has the authority to enter into a

contract with X specifically to obtain

goods from X, like copra, abaca whichgoods will be sold by A, after the sale a

portion can be deducted as acommission and the restaurant to bedelivered to X. after a certain period, the

goods obtain by A from X remained

unpaid. In other words A will get the

goods from X, A did not deliver theproceeds of the sale. X demanded

payment from B. The defense of B was

as of that moment from that certainperiod he has already revoked the

authority of the agent and therefore bebound by any contract entered into by Ain representation of B with 3rdperson. Is

the claim of B tenable?


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SA: No. 1873 so far as 3rd person areconcern, this notice itong letter nya kay Xremain in full force and effect until it is

rescinded in the same manner it was given.

3 Actual agency

The law itself classify actual agency into asmanner of creation, express / implied. There

is no problem with express agency.3. Express agency-it is a kind of

agency the consent of both partieswere expressly given.

4. Implied agency- were the consent of

one parties was only impliedly given

on the part of principal- the leading

case is Dela Pena vs. Hidalgo

Q: If a person was asked to administerthe property of another to sell the

property, and he said nothing- by his

silence, by his inactions may be deemedaccept agency?A: Not necessarily. Under the law, you have

to make distinction to determine the

scenario under which the said appointmentwas made, okie! The law would say whenthe 2 parties are absent, and when the 2

parties are present.When 2 parties are absent- 1 is in Manila

and the other is in Cebu.When 2 parties are present- present in thesame room

(a) 2 persons present- present in the

same conference hall(b) If 2 persons are in different place,one in Manila and the other one in Cebu

Compensation

As to the compensation in a contract of

agency consider if the agency is gratuitous

or onerous.

Read: 1909 - the liability of the agent for

damage to the principal due to hisnegligence or even bad faith or fraud

committed against the principal may bemitigated if the agency is gratuitous incharacter.

BE: Scope of authority of the agentwhether it only pertains to the acts ofadministration or acts of anu yun

dominion?

SA: Under this provision 1877 if the agency

is comes in general term this only comprise

acts of administration even if the principalbeholds power to the agent or it is stated

that the agent may execute any act as maybe deemed appropriate. That will still be an

agency pertaining to act of administration.

As to form, the law is clear that it may be

oral however the law may require a

particular form.

ESSENTIAL ELEMENTS OF ACONTRACT OF AGENCY

Read: Rallos caseThe SC enumerated the essential elements

or the alleged essentials elements of a

contract of agency.1. Consent2. Execution of the juridical act-

subject matter

3. Acts within the scope of authority4. The acts must be in

representation of the principal

This are allegedly the essential elementagain some authors would discuss in their

books with due respect to the ponente ofthis case, medyo mali mali angenumeration, first there was nothingmention about the cause or consideration

as a contract, a contract will never validly

have a cause or consideration well it maybe liberality pwede naman cause yan butthere must have a cause if only for that the

enumeration be defective more than thatthat last 2 mention that the agent act within

the scope and that the agent must act in

representation are not essential elements of

a contract of agency they are actuallyobligations of agent which means they have

been already perfected of contract of

agency, no obligation will arise kung voidung kontrata kung wala pang valid contract,

so essential elements are only thoseelements necessarily for the validity of thecontract, once the contract is valid then the

obligations will arise even if the agent


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acted outside the scope of authoritydoes it mean that the contract of agencyis void? Of course not, he can be held

liable for acting outside the scope of

authority or if he acted not in contemplation

of the principal, does it mean that there

was no agency at all?Of course not, thereis a contract of agency. Under the rule the

consequences if the agent did not act in therepresentation of the principal.

PARTIESGoing to the consent of the parties, well 1

author claims that there are 3 parties in a

contract of agency that is totally wrong!

There are only 2 parties in a contract ofagency the principal and the agent, howeverin problems involving agency there may be

there would be normally three personsinvolve, the third persons with whom the

agent transacted, no longer part of the

concept agency, this is the agency, thecontract entered into between by theprincipal and the agent, but when the agent

entered into a contract it may be a sale,

lease or other contract and the 3rdperson isnot a party to this contract, the 3rdperson isa party to a 2nd contract, that again the

parties is the principal and the agent, theymay be called in another names the

principal- employer, constituent, chief; theagent may be called attorney-in-fact, proxy,representative.

OBJECT

As to the object of the contract of agency -this is the execution of juridical act.

FORMAgency may be oral. It does not matter, the

contract of agency would be valid but the

parties even if it is by verbal agreement,

however any effe

civil review2 sales to trust

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