CHAPTER 5 Sales
Obligations of the Vendee

1 CHAPTER 5
Obligations of the Vendee ARTICLE 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (See page 167 for example) Principal Obligations of vendee: 1. Accept delivery 2. Pay the price 3. To bear the expenses for the execution & registration of the sale and putting goods in a deliverable state, if such is the stipulation Pertinent Rules: 1. In a contract of sale, the vendor is not required to deliver the thing sold until the price is paid nor the vendee to pay the price before the thing is delivered in the absence of an agreement to the contrary 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; 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. ARTICLE 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments. Where there is a contract of sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more instalments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken. (See page 169 for example) Rules governing delivery in installments: 1. GR: The buyer is not bound to receive delivery of goods in installments. Similarly, a buyer has no right to pay the price in installments. Neither can he be required to make partial payments Exceptions: By agreement, however, goods may be deliverable by installments or the price payable in installments.

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Where separate price has been fixed for each installment: it depends in each case on the terms of the contract and the circumstances of the case whether the breach thereof is severable or not. Where breach effects whole contract: The injured party may sue for damages for breach of the entire contract if the breach is so material as to affect the contract as a whole Where breach divisible: Give rise to a claim for compensation for the particular breach but not a right to treat the whole contract broken,

ARTICLE 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the contrary. Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words "collect on delivery," or otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of agreement or usage of trade permitting such examination. Acceptance: assent to become owner of the specific goods when delivery of them is offered to the buyer. 1. Actual delivery contemplated -Ownership of the goods shall be transferred only upon actual delivery subject to a reasonable opportunity of examining them to determine if they are in conformity with the contract -Right of examination or inspection is thus a condition precedent to the transfer of ownership unless there is a stipulation to the contrary 2. Goods delivered C.O.D/ not C.O.D - C.O.D, buyer has the right to examine the goods before paying. Right to examine the goods is a condition precedent to paying price after ownership has passed - C.O.D sale, the buyer is allowed to examine the goods before payment of the price should it have been so agreed upon or if it permitted by usage NOTE:  Buyer does not have absolute right of examination since the seller is bound to afford the buyer a reasonable opportunity of examining the goods only “on request”  If seller refused to allow inspection, to ascertain whether they are in conformity with the contract, the buyers may rescind the contract and recover the price or any part of it that he has paid

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Right of inspection may be given up by the buyer by stipulation

ARTICLE 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. Modes of manifesting acceptance: 1. Express acceptance takes place when the buyer after delivery of the goods intimates to the seller, verbally or in writing, that he has accepted them. 2. Implied acceptance takes place: a. When the buyer, after the delivery of goods, does any act inconsistent with the seller’s ownership, as when he sells or attempts to sell the goods, or he uses or make alteration in them in a manner only for an owner; b. When the buyer, after the lapse of a reasonable time without intimating his rejection.

the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily constitutes himself a depositary thereof, he shall be liable as such. Where buyer’s refusal to accept justified 1) Duty of the buyer to take care of goods w/o obligation to return – If the goods have been sent to the buyer and he rightfully refuses to accept them, as in the case where the goods are not of the kind and quality agreed upon, he is in the position of a bailee who is in possession of the goods thrust upon him w/o his assent. 2) Duty of seller to take delivery of goods: After notice that goods have not and will not be accepted, the seller must have the burden of taking delivery of the said goods. 3) Seller’s risk of loss: While the goods remain in the buyer’s possession under these circumstances, they are, of course at seller’s risk. But the buyer is not deemed and is not liable as a depositary, unless he voluntarily constitutes himself as such. 4) Right of buyer to resell goods: Should the seller when notified to take delivery of the goods, fail to do so; the buyer may resell the goods.

Delivery and acceptance, separate acts a. Acceptance, not a condition to complete delivery – The seller must comply with his obligation to deliver although there is no acceptance yet by the buyer b. Acceptance and actual receipt do not imply the other – Acceptance of the buyer may precede actual delivery. There may be an actual receipt w/o any acceptance and there may be acceptance w/o any receipt.

ARTICLE 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal.

ARTICLE 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall not be liable therefor.

ARTICLE 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three cases: (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce fruits or income; (3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.

NOTE:  Acceptance of the goods by the buyer does not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale  Requires buyer, in order to hold the seller for breach of promise or warranty, to give notice to the seller of any such breach within a reasonable time  Purpose is to protect the seller against belated claims ARTICLE 1587. Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to return them to

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Under this article, the buyer’s refusal to accept the goods is w/o a just cause while under Art 1587, the refusal is with a right to do so.

This article presupposes that the delivery of the thing sold and the payment of the price were not made simultaneously but the thing sold was delivered first followed by the payment of the price after the lapse of a certain period of time. Vendee is liable to pay interest from the delivery of the thing until payment of the price Fruits or income received by the vendee from thing sold, two conditions must exist: a) Thing sold has been delivered b) It produces fruits or income. If the vendee would not be bound to pay interest for the use of the money, which he should have

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paid, the principle of bilaterality which characterize a contact of sale would no longer exist If the vendee incurs in delay in the payment of the agreed price, the interest is due from the time of judicial or extrajudicial demand by the vendor for the payment of the price.

ARTICLE 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price. When vendee can suspend payment of the price: 1) If he is disturbed in the possession or ownership of the thing bought 2) If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of mortgage Note: Under Art 1590, the vendee has no cause of action for rescission before final judgment, the reason being that otherwise, the vendor might become the victim of collision (ie., secret agreement or cooperation for a fraudulent purpose) between the vendee and the third person. But the remedy of the buyer is rescission, not suspension of payment, where the disturbance is caused by the existence of non-payment servitude. When vendee cannot suspend payment of the price: 1) If the vendor gives security for the return of the price in a proper case; 2) If it has been stipulated that notwithstanding any such contingency the vendee must make payment 3) If the vendor has caused the disturbance or danger to cease 4) If the disturbance is a mere act of trespass 5) If the vendee has fully paid the price NOTE: There is a mere act of trespass when the third person claims no right whatever. The vendor is not liable therefor. The vendee has a direct action against intruder. ARTICLE 1591. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately sue for the rescission of the sale. Should such ground not exist, the provisions of article 1191 shall be observed. NOTE:  This article refers only to a sale of real property where vendor has good reasons to fear the loss of the property and its price.  It contemplates a situation where there has been delivery of the immovable property but the vendee has not yet paid the price.

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It is applicable to both cash sales and to sales in installments

ARTICLE 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. NOTE:  GR: the vendor may sue for rescission of the contract should vendee fail to pay the agreed price  The sale of real property, however, is subject to the stipulations agreed upon by the parties and to the provisions of Art 1592.  Before the demand of the rescission of the contract (not payment of the price) has been made by the vendor, the vendee may still pay the price even after the expiration of the stipulated period for payment and notwithstanding a stipulation that failure to pay the price on the stipulated date ipso facto resolves the sale  Right to rescind is not absolute and the court may extend the period for payment  Once a demand for rescission by suit or notarial act is made however, under Art 1592, the court may not grant a new term  Art 1592 does not apply on: a. To sales on installments of real property; b. A mere promise to sell (executory contract to sell) where the title remains with the vendor until full payment of the price. In other words, the vendee in such cases may no longer pay the price after the expiration of the time agreed upon although no demand has yet been made upon him by suit or notarial act. ARTICLE 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment. (See page 181 for example) ‘NOTE:  In the case of personal property (which has not yet been delivered to the vendee), the vendor can rescind the contract, as a matter of right, if the vendee, without any valid cause, does not: a. accept delivery; or b. pay the price unless credit period for its payment is stipulated. The mere failure of the vendee to comply with the terms of the contract, however, does not rescind the same. It is necessary that the vendor should take some affirmative action indicating his intention to rescind.

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Reason for the difference is that personal properties are not capable of maintaining a stable price in the market. Their prices are so changeable that any delay in their disposal cause the vendor great prejudice In the case of real property which has more or less stable price in the market and the delay that might result form the requirement imposed on the vendor to demand rescission before being entitled to rescind the contract will not in any way prove detrimental to the interest of the vendor.

CHAPTER 6 Actions for Breach of Contract of Sale of Goods ARTICLE 1594. Actions for breach of the contract of sale of goods shall be governed particularly by the provisions of this Chapter, and as to matters not specifically provided for herein, by other applicable provisions of this Title. “Goods” includes all chattels personal but not things in action or money of legal tender; includes growing fruits or crops. Actions available for breach of the contract: 1) Action by the seller for payment of the price 2) Action by the seller for damages for nonacceptance of the goods 3) Action by the seller for rescission of the contract 4) Action by the buyer for specific performance 5) Action by the buyer for rescission or damages for breach of warranty ARTICLE 1595. Where, under a contract of sale, the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods. Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense to such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or an intention not to perform it. Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer's and may maintain an action for the price. See page 186 for example Seller’s right of action for the price:

1) When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the price 2) When price is payable on a certain day and the buyer wrongfully neglects or refuses to pay such price, irrespective of delivery or of transfer of title 3) When goods cannot readily be resold for a reasonable price and the buyer wrongfully refuses to accept them even before ownership in the goods has passed, if the provisions of Art 1596, 4 th paragraph are not applicable NOTE:  Seller cannot maintain an action for the price if the ownership in the goods has not passed to the buyer, unless the price is payable on a certain day or unless the goods cannot readily be resold for a certain price and the provisions of Art 1596, 4 th par are not applicable  Art 1588, the tiles to the goods passes to the buyer from the moment they are placed at his disposal when his refusal to accept them is w/o just cause. The seller, may therefore bring an action for the price upon wrongful refusal of the buyer to accept. ARTICLE 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance. The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept. If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer's repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. See page 189 for example Seller’s right of action for damages: 1) If the buyer w/o lawful cause neglects or refuses to accept and pay for the goods he agreed to buy, the seller may maintain an action against him for damages for nonacceptance 2) In an executory contract, where the ownership in the goods has not passed and the seller cannot maintain an action to the price, the seller’s remedy will also be an action for damages

5 3) If the goods are not yet identified at the time of the contract or subsequently, the seller’s right is necessarily confined to an action for damages.

retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just.

Measure of damages for nonacceptance of goods 1) Difference between contract price, that is the amount of the obligation which the buyer failed to fulfill and the market price or current price, that is, the value of the goods which the seller has left upon his hands. This follows the GR that damages comprehended not only the actual loss suffered but also unrealized profit. 2) If there is no available market in which the goods can be sold at the time, the seller is “entitled to the full amount of damage which he has really sustained by a breach of the contract 3) Seller is allowed under special circumstances proximate damages of greater amount than the diff between the contract price and market price when such damages may be reasonably attributed to the non-performance of the obligation

NOTE:  This article apples only where the goods to be delivered are specific or ascertained.  In reciprocal obligations, it is the injured party who has right to choose between fulfillment and rescission w/ the payment of damages in either case.  Consequently, the right of the injured party to demand specific performance cannot be defeated by the guilty party’s choice to rescind the contract.  This is also the rule in this article which grants to the buyers, as a matter of right, the remedy of specific performance in case the seller should violate his obligation to make delivery The seller cannot retain the goods on payment of damages because damages are imposed by law to insure fulfillment of contract and not to substitute for it.

Measure of damages for repudiation or countermand: 1) The labor performed and expenses incurred for material before receiving notice of the buyer’s repudiation 2) Profit he would have realized if the sale had been fully performed ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. Seller’s right of rescission before delivery: 1) When the buyer has repudiated the contract of sale; 2) When the buyer has manifested his inability to perform his obligations thereunder 3) When the buyer has committed a breach of the contract of sale. NOTE:  The right granted to the seller follows the GR in reciprocal obligations that a party to a contract injured by nonfulfillment, may rescind the contract and at the same time ask for damages. It should be noted that the seller is required to give notice of his election to seek rescission  If the goods have been delivered, the seller may recover the value of what he has given ARTICLE 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall be performed specifically, without giving the seller the option of

ARTICLE 1599. Where there is a breach of warranty by the seller, the buyer may, at his election: (1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price; (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty; (3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty; (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191. Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid,

6 concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price. Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by article 1526. (5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (SEE PAGE 194 FOR EXAMPLE) Remedy of buyer for breach of warranty by seller: 1) Accept the goods and set up the seller’s breach to reduce or extinguish the price (RECOUPMENT) 2) Accept the goods and maintain an action for damages for the breach of the warranty (COUNTERCLAIM FOR DAMAGES) 3) Refuse to accept the goods and maintain an action for damages for the breach of warranty (ACTION) 4) Rescind the contract of sale by returning or offering the return of the goods and recover the price (RESCISSION) When rescission by the buyer not allowed: 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 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 Rights and obligations of buyer in case of rescission a) In case of rescission, the buyer shall cease to be liable for the price, his only obligation being to return the goods; b) If he has paid the price or any part thereof, he may recover from the seller; c) He has also the right to hold the goods as bailee for the seller should the latter refuse to return of the goods d) He has the right to have lien on the goods for any portion if the price already paid which lien he may enforce as if he were an unpaid seller

Chapter 7 Extinguishment of Sale ARTICLE 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption. Causes: 1. Common or those causes which are also means of extinguishing all other contracts like payment, loss of the thing, condonation, etc. 2. Special or those whose causes which are recognized by law of sales 3. Extra-special: Conventional and Legal Redemption SECTION 1
Conventional Redemption ARTICLE 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon. Conventional redemption is the right which the vendor reserves to himself, to reacquire the property sold provided he reimburses the vendee of the price, the expenses of the contract, any other legitimate payments made therefor and the necessary and useful expenses made on the thing sold and fulfills other stipulations which may have been agreed upon Note:  Both real and personal property may be the subject matter of sales with right to repurchase although there are certain articles which are applicable only to immovable.  Stipulation is done @ the perfection of sales  Not a right given by the vendee (Right reserved by the vendor)  ARTICLE 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (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;

7 (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 that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. See page 200 for examples Equitable mortgage is one which, although it lacks the proper formalities of a mortgage, shows the intention of the parties to make the property subject of the contract as a security for the fulfillment of an obligation. NOTE:  In equitable mortgage, it is void if the property transferred immediately to the creditor without going through the proper process of auction (pactum commissorium-prohibited by law)  Ask for reformation, loan w/ collateral  Equitable mortgage has to go the process of foreclosure in case of non-payment of loan  Art 1602 provide safeguard and restrictions against evils of sales with right of repurchase commonly called pacto de retro sale.  Contract of sale with pacto de retro sale, the price is usually less than in absolute sales for the reason that in the former, the vendor expects to reacquire or redeem the property sold, or else he may sell his right to redeem and thus recover the loss he claims suffered by reason of the inadequacy of price. ARTICLE 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. (n) ARTICLE 1604. The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale. Presumption in case of doubt 1. Doubt resolved in favor of equitable mortgage – Whether the sale is absolute or pacto de retro, it shall be presumed to be an equitable mortgage, if any cases mentioned in Art 1602 is present. In case of doubt, a contract purporting to be a sale with right to repurchase shall still be regarded as an equitable mortgage. 2.

Presumption, an exception to GR: Art 1603 is an exception to the rule that doubts affecting an onerous contract shall be settled in favor of the greatest reciprocity of interests. An equitable mortgage effects a lesser transmission of rights than a contract of sale, since the debtor does not surrender all rights to his property but simply concurs upon the creditor the right to collect what

is owing from the value of the thing given as security. ARTICLE 1605. In the cases referred to in articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument. See page 203 for examples REFORMATION – remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when such intention is not expressed in the instrument NOTE:  If the parties really intended a mortgage but the instrument states that the property is sold absolutely or with a right of repurchase, the same may be reformed or corrected so that the contract should appear to be a mortgage and not a pacto de retro or absolute sale ARTICLE 1606. The right referred to in article 1601, in the absence of an express agreement, shall last four years from the date of the contract. Should there be an agreement, the period cannot exceed ten years. However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. See page 204 for examples Period to exercise right of redemption 1. No agreement/ granting right – No right of redemption since the sale should be considered an absolute sale 2. Agreement to the right of redemption but there is no stipulation as to which repurchase should be made: period of redemption shall be 4 years from the date of the contract 3. Definite period of redemption agreed upon – Right to redeemed must be exercised within the period fixed provided it does not exceed 10 yrs 4. Period of agreed upon exceeds 10 years – the vendor a retro has 10 years from the execution of the contract to exercise the right of redemption 5. Final judgment by rendered that contract pacto de retro –From the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase, the vendor has a retro 30 days within which to exercise the right to repurchase ARTICLE 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. (n) NOTE:

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If real property is involved and the vendor failed to redeem within period agreed upon, the vendee’s title becomes irrevocable. However, the consolidation if ownership in the vendee sha ll not be recorded in the Registry of Property w/o judicial order and until after the vendor has been duly heard. REASON: transaction may not be a genuine pacto de retro but only an equitable mortgage. Requirement provides additional protection to debtors.

ARTICLE 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1510) See page 207 for example NOTE:  

Right to repurchase is of a real character and should not be considered personal The vendor a retro cannot exercise his right of redemption against a subsequent transferee for value and good faith if his right is not properly registered or annotated.

ARTICLE 1609. The vendee is subrogated to the vendor's rights and actions. (1511) Subrogation transfers to the person subrogated the credit with all the rights thereto appertaining ARTICLE 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor. ARTICLE 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption. See page 209 for examples PURPOSE: To discourage co-ownership which is undesirable since it does not encourage the improvement of the property co-owned Partition of the property – Co-owner may demand the partition of the thing owned in common, insofar as his share is concerned. A. If a thing is essentially indivisible it may be allotted to the co-owner who shall indemnify the others B. If the co-owners cannot agree that the thing be allotted to one of them, it shall be sold and its proceeds distributed

Redemption of the whole property : In either case, the vendee, who acquired the whole of an undivided immovable a part of which is subject to a right to repurchase, has a right to demand that the vendor a retro, who likes to exercise his right of redemption, redeem the whole property. ARTICLE 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share. The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired. ARTICLE 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the repurchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. See page 210 for examples Redemption in joint by co-owners/co-heirs of undivided immovable 1. Co-owners of an undivided immovable sold by them jointly or collectively and in the same contract w/ the right to repurchase, can exercise such right only as regards their respective shares 2. Co-heirs of the vendor of an undivided immovable, can exercise the right of redemption only for the respective portions they have inherited. 3. The vendee a retro can refuse partial redemption. He may require all the vendors or all the heirs to redeem the entire property or to agree to its redemption by any one of them. The right is given to the vendee in line with the object of the law to put an end to co-ownership whenever possible 4. Under Art. 1620, the right of a co-owner who chooses not to redeem accrues to the benefit of the others. The extent of the share of the redeeming co-owner of the redeeming co-owner is not taken into account except as provided in the second par. Effect of redemption by co-owner of entire property  Under Art 1612, a co-owner cannot redeem more than his share in the co-ownership. The redemption by a co-owner of the property in its entirely, shouldering the expenses therefor, does not make him the owner of all of it. In other words, it does not put to end the existing state of co-ownership.  Art 1613, does not provide for a mode of terminating a co-ownership nor does the fact that the redeeming co-owner has succeeded in securing title over a parcel of land in his name terminate the existing co-ownership. Registration of property is not a means of acquiring ownership. It operates as a mere notice of existing title, if there is one.

9 ARTICLE 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property. (1516) See page 211 for examples Redemption in separate sales by co-owners of undivided immovable  If the sale was made separately and independently, it would be unjust to require the co-owners, to come to an agreement with regard to the repurchase of the thing sold, and certainly, it would be worst to deprive them of their right in case they fail to agree.

ARTICLE 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them. But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole. See page 212 for examples ARTICLE 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition: (1) The expenses of the contract, and any other legitimate payments made by reason of the sale; (2) The necessary and useful expenses made on the thing sold. (1518) Obligation of vendor a retro in case of redemption He must return to the vendee a retro: 1. The price - “price of sale and not the value of the thing”; It is lawful, however, for the parties to agree that the price be returned will be more or less than the original sum paid by the vendee 2. Expenses of contract and other legitimate expenses – Expenses paid for the execution and registration of the sale paid by the vendee, the same shall be reimbursed by the vendor. a. Necessary expenses: incurred for the preservation of the thing or those which seek to prevent the waste, deterioration or loss of the thing; b. Useful expenses: increase the value of the thing or create improvements thereon; are refunded to the vendee a retro because he is considered a possessor in good faith Offer to redeem must be bona fide  The mere declaration by the vendor of his intention to exercise the right of repurchase is not sufficient to preserve the right of redemption.

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The law requires that the offer must be a bona fide one and accompanied by a tender of the price agreed upon for repurchase.

ARTICLE 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed. Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale. See page 215 for examples Rights of parties as to fruits of the land This article refers only to natural and industrial fruits. Civil fruits are deemed to accrue daily and belong to the vendee in that proportion. a. If there were fruits at the time of the sale and the vendee paid for them, he must be reimbursed at the time of redemption as the payment forms part of the purchase price. b. If no indemnity was paid by the vendee for the fruits, the shall be no reimbursement for those existing at the time of redemption c. If the property had no fruits at the time of the sale and some exist at the time of redemption, they shall be apportioned proportionately between the redemptioner and the vendee, giving the latter a share in proportion to the time he possessed the property during the last year counted from the anniversary of the date of the sale, to compensate the vendee for his expenses. The same rule, is also applicable if there were fruits at the time of the sale and the vendee paid for them ARTICLE 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated. (1520) SECTION 2 Legal Redemption ARTICLE 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. (1521a) NOTE:  Co-owners has the right to redeem of one property was purchased by a stranger  Has 1 year to redeem  If the property was foreclosed and was purchased, right of repurchase of prior owner has 1 year right to redeem

10 ARTICLE 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other coowners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. `Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. See page 217 for example Requisites for right to exist: 1) There must be co-ownership 2) There must be alienation of all or any of the shares of the other co-owners 3) The sale must be to a third person or stranger, i.e, a non-co-owner 4) Sale must be before partition 5) Right must be exercised within period provided in Article 1623 6) The vendee must be reimbursed for the price of the sale By whom and against whom right may be exercised: 1. Co-owner’s right to redeem is invoked only after the shares of the other co-owners are sold to a third party or stranger. 2. Co-owners have no right of legal redemption against each other to whom the law grants the same privilege, but only against a third person. 3. Should any of the heirs sells his hereditary right to a stranger before partition, any or all of the coheirs may be subrogated to the rights of the purchaser by reimbursing him for the purchase price, provided it be done within the period of 1 month to be counted from the time they were notified in writing of the sale by the vendor 4. Right of legal redemption is not granted solely and exclusively to the original co-owners but applies to those who subsequently acquires their respective shares while the community subsists. Purpose of the right grant to co-owners: to reduce the number of participants until the community is done away with, as being a hindrance to the development and better administration of the property.

should both lands have the same area, the one who first requested the redemption. (1523a) Requisites for the exercise of right under this article: 1. Both the land of the one exercising the right of redemption and the land sought to be redeemed must be rural; 2. Lands must be adjacent; 3. There must be an alienation 4. Piece of rural alienated must not exceed 1 hectare 5. Vendee must already own some rural land 6. Rural land sold must not be separated by brooks, drains, ravines, roads and other apparent servitudes from the adjoining lands. NOTE: In case two or more adjacent owners desire to exercise the right of redemption, the law gives preference to the owner of the adjoining land of smaller area but if both lands have the same area, the one who first asked the redemption ARTICLE 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of preemption at a reasonable price. If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price. When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (n) See page 221 for examples Pre-emption: act of purchasing before others; exercised before the sale or resale against the wouldbe vendor Redemption: after the sale against the vendee Requisites: 1. 2. 3.

ARTICLE 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land. This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates. If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and

4. 5.  

Piece of land is urban land One exercising the right must be an adjacent owner; Piece of land sold must be so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time; Such urban land was bought by its owner merely for speculation It is about to be resold, or that its resale has been perfected.

Price to be paid is a reasonable price In case two or more adjoining owners desire to exercise the right of legal redemption, the law prefers him whose intended use of the land appears best justified

11 

Purpose of the grant of right of owners of adjoining urban lands: to discourage speculation in real estate and the consequent aggravation of the housing problems in centers of population

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

Section 3 – Conditions and Warranties ARTICLE 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (n) See page 131 for examples “Condition” - an uncertain event or contingency on the happening of which the obligation of the contract depends; obligation of the contract does not attach until conditions is performed Effect of non-fulfillment of condition 1. If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either: a. Refuse to proceed with the contract, waiving the performance of the condition b. Proceed with the contract, waiving the performance of the condition 2. 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. ARTICLE 1546. Any affirmation of fact or any promise by the seller relating to thething is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the

seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. See page 132-133 for examples “Warranty” : any representation made by the seller of the thing with respect to its character, quality, or ownership, by which he induces the buyer to purchase the same on relying said representation Kinds of warranty Seller is liable for his express warranties and for the implied warranties of title, absence of hidden defects, fitness or merchantability, description and sample Effect of express warranty “Express warranty” : any affirmation of fact or any promise by the seller relating to the thing, the natural tendency of which is to induce the buyer to purchase the thing, and the buyer thus induced to purchase the same NOTE:  Warranty is part of a contract of sale  Immaterial whether the seller did not know that it was false or true  No intent is necessary to make the seller liable for his warranty Effect of expression of opinion  Does not import warranty unless the seller is an expert and the opinion was relied upon by the buyer ARTICLE 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing; (2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest. “Implied warranty”: the law derives by implication or interference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it. Implied warranties in sale a. As to seller’s title: seller guarantees that he has a right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed on his legal and peaceful possession thereof b. Against hidden defects or unknown encumbrances: seller guarantees that the thing

12

c.

sold is free from any hidden faults or defects or any charge or encumbrances not declared or known to the buyer Fitness or merchantability: 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, merchantable quality

When implied warranty not applicable a. “As is and where is” sale (adopted from dispositions of army surplus property) : means nothing more than that the vendor makes no warranty as to the quality or workable condition of the goods and that the vendee takes them in the conditions in which they are found and from the place where they are located; does not extend to liens and encumbrances unknown to the vendee and could not be disclosed by a physical examination of the goods sold. b. Sale of secondhand articles c. Sale by virtue of authority in fact or law: does not apply to sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell SUBSECTION 1
 Warranty in Case of Eviction ARTICLE 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject. The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (1475a) See page 137 for examples “Eviction”: the judicial process whereby vendee is deprived of the whole or part of the thing purchased by virtue of a final judgment based on a right prior to sale or an act imputable to the vendor. Essential elements of eviction: a. Vendee is deprived in whole or in part of the thing purchased b. He is so deprived by virtue of a final judgment c. Judgment is based on a right prior to the sale or an act imputable to the vendor d. Vendor was summoned in the suit for eviction at the instance of the vendee e. There is no waiver on the part of the vendee Note: Absence of any of these requisites, a breach of warranty against eviction under Article 1547 cannot be declared. Warranty against eviction refers to trespass in law  Trespass in fact does not give rise to the application of the doctrine of the eviction  There is a mere act of trespass when the trespasser claims no right whatever. The vendor is

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not liable therefor. In such case, the vendee has a direct action against trespasser in the same way as the lessee has such right The disturbance referred to in the case of eviction is a disturbance in law which requires that a person go to the courts of justice claiming the thing sold, or part thereof, and giving reasons. If final judgment is rendered depriving the vendee of the thing sold or any part thereof, the doctrine of eviction becomes applicable.

ARTICLE 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction.  With a judgment becoming final whatever be the cause of finality, the requirement of the law is deemed satisfied. ARTICLE 1550. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction. See page 139 for examples By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions prescribed by law. In the same way, rights and actions are lost by prescription. 1. Completed before sale –  The vendee may lose the thing purchased to a third person who has acquired title thereto by prescription  When prescription has commenced to run against the vendor and was already completed before the sale, the vendee can enforce the warranty against eviction  In this case, the deprivation is based on a right prior to the sale and an act imputable to the vendor 2. Completed after sale  Even if prescription has started before the sale but has reached the limit prescribed by law after the sale, the vendor is not liable for eviction  Reason: Vendee could easily interrupt the running of the prescriptive period by bringing necessary action  Note: If the property sold, is land registered under Torrens system (ownership of land is not subject to prescription) then Art 1550 will have no application. ARTICLE 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for eviction. Note: It is required that at the time of sale, the nonpayment of taxes was not known to the vendee.

13 ARTICLE 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n) Note: 

Judgment debtor is responsible for eviction and hidden defects, even in judicial sales, unless otherwise decreed in judgment  Based on the general principle that a person may not enrich himself at the expense of another  If the purchaser of real property sold on execution be evicted therefrom because the judgment debtor had no right to the property sold, the purchaser is entitled to recover the price paid with interest.  If the sale was effected by the judgment creditor, the latter should not be permitted to retain proceeds of the sale, at the expense of the purchaser. ARTICLE 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476) 1. Effect of vendor’s bad faith – consists of knowing beforehand at the tome of sale of the presence of the fact giving rise to eviction; if the vendor after selling his property sold it again to another purchaser, he cannot, even by stipulation be exempt from warranty against eviction. 2. Effect of vendee’s bad faith – proceeded with the sale with the assumption of the risk of eviction and therefore, is not entitled to warranty against eviction nor to right to recover damages. ARTICLE 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the vendor shall not be liable. Two kinds of waiver: 1. Consciente – waiver is voluntarily made by the vendee without the knowledge and assumption of the risks of eviction 2. Intencionada – waiver is made by the vendee with knowledge of the risk of eviction and assumption of its consequences. ARTICLE 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor: (1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; (2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; (3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty; (4) The expenses of the contract, if the vendee has paid them;

(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. Note:  The above article specify in detail the rights and liabilities of the vendor and the vendee in the event of eviction takes place “when the warranty has been agreed upon or nothing has been stipulated, that is, in the absence of waiver of eviction by the vendee. ARTICLE 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances that those which it had when he acquired it. He may exercise this right of action, instead of enforcing the vendor's liability for eviction. The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. See page 145 for example Note:  This article contemplates of partial eviction while Article 1554 treats of total eviction.  It states that if there is partial eviction, the vendee has the option either to enforce the vendor’s liability for eviction (Art 1555) or to demand recession of the contract  In case the vendee is totally evicted from the thing sold, he cannot avail the remedy of recession because this remedy contemplates that the one demanding it is able to return whatever he has received under the contract.  The above rule is applicable: 1. When the vendee is deprived of a part of the thing sold if such part is of such importance to the whole that he would not have bought the thing without said part 2. When two or more things are jointly sold whether for a lump sum or for a separate price for each, and the vendee would not have purchased one without the other. ARTICLE 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. Essential elements for the enforcement of warranty in case of eviction: 1. Deprivation in whole or in part of the thing sold 2. Existence of final judgment ARTICLE 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee.  Another essential requisite before a vendor may be legally liable for eviction is that he should be

14  

summoned in the suit for eviction at the instance of the vendee. To give him an opportunity to show that the action interposed against the vendee is unjust and to defend his title that he has transferred Absence of such summons, the vendor is not bound his warranty.

ARTICLE 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor be made a co-defendant.  Notification required by this article refers to case where the vendee is the defendant in a suit instituted to deprive him of the thing purchased. ARTICLE 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and encumbrances. Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages. One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he discovered the burden or servitude. (1483a) Note:  The vendee may still rescind the contract and ask for indemnity, if the thing sold should be encumbered with any non-apparent burden or servitude not mentioned in the agreement of such nature that the vendee would not have acquired it had he been aware thereof.  Servitude/Easement: an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner.  Lack of knowledge on the part of the vendor is not a defense. Contract can still be invalidated on the ground of mistake.  Art 1560 cannot be exercised in the ff: 1. If the burden or servitude is apparent, that is, “made known and is continually kept in view by external signs that reveal the use and enjoyment of the same 2. If the non-apparent burden or servitude is registered 3. If the vendee had knowledge of the encumbrance whether it is registered or not.  Registration of the non-apparent burden or servitude in the Registry of Property operates as a constructive notice to the vendee. Hence, vendor is relieved from liability unless there is an express warranty that the immovable is free from any such burden or encumbrance.

 

If burden is known to vendee, there is no warranty. When action must be brought a) Action for rescission or damages must be brought 1 year from the execution of the deed of sale. b) If period has already elapsed, the vendee may only bring an action for damages within 1 year from the date if the discovery of the non-apparent burden or servitude.

SUBSECTION 2 Warranty Against Hidden Defects of or Encumbrances Upon the Thing Sold ARTICLE 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. See page 150 for example Requisites for warranty against hidden defects: a) Defect must be important or serious b) Must be hidden c) Must exist at the time of the sale d) Vendee must give notice of the defect to the vendor within reasonable time e) Actions for rescission of the price must be brought within the proper period- 6 months from the delivery sold of the thing sold or within 40 days from the date of the delivery in case of animals f) Must be no waiver of warranty on the part of the vendee Note: 

 

Defect is important if: it renders the thing sold unfit for the use for which it is intended or if it diminishes its fitness for such use to such an extent that the vendee would not have acquired it had he been aware thereof or would have given a lower price for it Defect is hidden or latent if it was not known and could not have been known to the vendee. Vendor’s liability for warranty cannot be enforced although defect is hidden if vendee is an expert, who by reason of his trade or profession should have known it.

ARTICLE 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;

15 (2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n) Note:   

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Quality of goods includes their state or condition Purpose of holding the seller on his implied warranties is to promote high standard in business and to discourage unfair dealings. Implied warranty of fitness: a.) buyer expressly or by implication, manifests to the seller the particular purpose for which the goods are acquired and b.) buyer relies upon the seller’s skill or judgment whether he be the grower or manufacturer of not – there is an implied warranty that the goods are reasonably fit for such purpose Implied warrant of merchantability: Where goods are bought by description, the seller impliedly warrants that the goods are merchantable quality. Warranty of merchantability: a warranty that goods are reasonably fit for the general purpose for which they are sold Warranty of fitness: warranty that the goods are suitable for the special purpose of the buyer which will not be satisfied by mere fitness for general purposes.

ARTICLE 1563. In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. See page 152 for example Note:  Under Art 1562(1) the buyer makes known to the seller the particular purpose for which the goods are desired. Article 1563 limits the application of Article 1562  There is an implied warranty of fitness for a particular purpose where the buyer relied upon the seller’s judgment rather than the patent or trade name. ARTICLE 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade.  A warranty as to the quality or fitness for a particular purpose may be attached to a contract containing no express provision in regard to warranty, though in the absence of usage, no warranty would be implied. The usage is relied on for the purpose of showing the intention of the parties.  If there is no usage, the parties would naturally express their intention. ARTICLE 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any

defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. Merchantability of goods sold by sample:  GR: All the buyer is entitled to, in case of a sale or contract to sell by sample, is that the goods be like the sample. So he has no right to have the goods merchantable if the sample which he has inspected is not.  Where the defect in the goods is such a character that inspection will not reveal it, so in the case of a sale by sample, if the sample is subject to a latent defect, and the buyer reasonably relies in the seller’s skill or judgment, the buyer is entitled not simply to goods like the sample, but to goods like those which the sample seems to represent, that is, merchantable goods of that kind and character. ARTICLE 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. Note: 

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Ignorance of the vendor does not relieve him from liability to the vendee for any hidden faults or defects in the thing sold. In other words, good faith cannot be availed of as a defense by the vendor However, parties may provide otherwise in their contract provided the vendor acted in good faith, that is, he was unaware if the existence of the hidden fault or defect.

ARTICLE 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case.  Vendee has the option either: o To withdraw from the contract (known as accion redhibitoria); or o Demand proportionate reduction of the price, with a right to damages in either case (known as accion quanti minoris)  Same right is given to the vendee in the sale of animals with redhibitory defects. ARTICLE 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he shall only return the price and interest thereon, and reimburse the expenses of the contract which the vendee might have paid. a) Vendor is aware of the hidden defects – vendee has the right to recover: price paid, expenses of the contract, and damages.

16 b) Vendor not aware of hidden defects – shall be obliged only to return: price, interest thereon, and expenses of the contract if paid by the vendee. Not liable for damages because he is not guilty of bad faith. ARTICLE 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost. If the vendor acted in bad faith, he shall pay damages to the vendee. See page 156 for examples Note:  Under this article, the vendor is still made liable on his warranty  Difference between the price paid for the thing and the value at the time of the loss, represents the damage suffered by its vendee and is at the same time the amount to which the vendor enriched himself at the expense of the vendee. If the vendor acted in bad faith, shall also be liable for damages. ARTICLE 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. ARTICLE 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold.  Action for recession of the contract or reduction of the purchase price prescribes 6 months form the date of delivery that means action shall be barred unless brought within the said period. ARTICLE 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have purchased the sound animal or animals without the defective one. The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the animals composing the same. See page 158 for example ARTICLE 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of other things. ARTICLE 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned. ARTICLE 1575. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been

stated in the contract, and they are found to be unfit therefor. ARTICLE 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory. But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages. (1495)  Redhibitory vice or defect: a defect in the article sold against which defect the seller is bound to warrant  To be considered redhibitory, the defect must not only be hidden. It must be of such nature that expert that expert knowledge is not sufficient to discover it.  However, if the veterinarian failed to discover it through his ignorance, or failed to disclose it to the vendee through bad faith, he shall be liable for damages. ARTICLE 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. This action can only be exercised with respect to faults and defects which are determined by law or by local customs. ARTICLE 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death existed at the time of the contract. Note: 

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If the animal sold is suffering form any disease at the time of sale, the vendor is liable should it die of said disease within 3 days from the date of the sale (not date of delivery). If death occurs after 3 days, he is not liable If loss is caused by a fortuitous event or by the fault of the vendee, and the animal has vices art 1567 should be applied.

ARTICLE 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. Note: 

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If the vendee avails himself of the remedies granted by article 1567, the vendee must return the animal in condition in which it was sold and delivered In case of injury due to his negligence, the vendee shall be responsible but this would be no obstacle to the rescission of the contract due to redhibitory defect or fault of the animal.

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Under art 1556, the buyer may not ask for rescission where he has created new encumbrances upon the thing sold.

ARTICLE 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. Note:

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Vendee has the same right to bring at his option, either redhibitory action or an action quanti minoris.

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The action must be brought within 40 days from the date of the delivery of the animals to the vendee.

ARTICLE 1581. The form of sale of large cattle shall be governed by special laws.  Special law governing sale of large cattle is Act No. 4117, now found in Sections 51 to 536 of the Revised Administrative Code, as amended, providing for the registration, branding, conveyance and slaughter of large cattle  Sale must appear in a public document.