Philippine Law on Sales Reviewer 1458-1543
A small, but informative reviewer for Philippine Sales Laws....
ART 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of & to deliver a determinate thing, & the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (This Art serves as def’n for Sale)
ANNOTATION FORM & INTERPRETATION Characteristics of a contract of sale: 1. Consensual –perfected by mere consent 2. Bilateral –parties are bound to fulfill correlative oblis toward each other 3. Onerous – the thing sold is conveyed in consideration of the price & vice versa 4. Commutative – thing sold is considered equivalent of the price paid & vice versa 5. Nominate – given a special name & designation 6. Principal –its existence & validity does not depend upon another contract Essential requisites of sale: 1. Consent or meeting of the minds (1475) 2. Object or subject matter (1460) 3. Cause or consideration (1458) Kinds of contract of sale: 1. Absolute – not subject to condition. Ownership is transferred upon constructive or actual delivery. 2. Conditional – subject to a contingency. Ownership is reserved until fulfillment of a suspensive condition or extinguished upon the happening of a resolutory condition. Contract of Absolute Sale Title passes upon delivery Non-payment of the price may be seen as a negative resolutory condition (b/c ownership will revert to the seller if he chooses to rescind the contract) Non-payment gives seller right to either demand specific performance or rescind the contract Seller loses ownership of the thing sold & delivered unless the sale is rescinded Remedy of rescission available (b/c rescission found in 1191 is not based upon the non-payment of the price but rather on the failure of the debtor to comply w/ an ALREADY EXISTING obli) Contract to Sell Similar to the nature of a conditional sale, since transfer of title is conditioned upon the full payment of the purchase price Full payment of the purchase price does not automatically vest ownership or title to the prospective buyer as the prospective seller explicitly reserves its transfer. Seller still has to convey title. If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd person’s right is better than original buyer but seller incurs damages.
1459. The thing must be licit & the vendor must have a right to transfer the ownership
Requisites of Object:
Contract to Sell Title shall not pass until buyer has paid the price despite delivery Full payment of the price is a positive suspensive condition. (b/c ownership will be vested upon the buyer only when he pays the price) Non-payment is not a breach but simply an event that prevents the obli of the vendor to convey title from acquiring binding force Seller retains ownership until buyer’s fulfillment of the condition Remedy of rescission not available
NOTES *Correlate w/: - 1459, 1460, re: determinate thing - 1469, 1472, re: price Contract to Sell – a bilateral contract of conditional sale whereby the prospective seller, while expressly reserving the ownership of the subject prop despite delivery thereof to the prospective buyer, binds himself to sell the said prop exclusively to the prospective buyer upon fulfillment of the condition agreed upon. Dignos v CA: “A deed of sale is absolute in nature although denominated as a ‘Deed of Conditional Sale’ where nowhere in the contract in question is a proviso or stipulation to the effect that title to the prop sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay w/in a fixed period.” (Hence, designation of the parties to the contract is not, in a word, ‘controlling’ as to what the contract is) In People’s Homesite & Housing Corp v CA, it would appear that in a conditional sale, there is no perfected contract of sale until the fulfillment of the suspensive condition. It is the willingness of the seller to sell the object w/c is dependent upon the condition. So if the condition is not fulfilled, there is NO MEETING OF THE MINDS hence there is no perfected contract of sale. *This gives us another difference b/w contract to sell & conditional sale. In a contract to sell, the sale is perfected but the transfer of ownership depends upon the fulfillment of the suspensive condition, the full payment of the purchase price.
Conditional Sale Willingness of the vendee to sell is dependent upon a condition not necessarily the payment of the purchase price Fulfillment of the suspensive condition makes the sale absolute. If there has been previous delivery to the buyer, ownership/title automatically transfers to the buyer. If seller sells the object of sale to a 3rd person once condition is fulfilled, 3rd person’s right cannot defeat that of the orig buyer. (The orig buyer may even ask for reconveyance if the object has been delivered to such 3rd person.) Read the cases of Artates v Urbi, Heirs of Zambales v CA for examples of sales involving
thereof at the time it is delivered.
1. 2. 3. 4.
It must be determinate It must be licit It must be w/in the commerce of men As to rights, it must be transmissible or personal
2 kinds of illicit things: (relate w/ 1409) 1. Illicit per se 2. Illicit per accidens
things illicit per accidens *When the thing is sold in violation of a right of 1st refusal of another person, the sale is valid but rescissible *Relate w/ Arts. 1347-48, 1460, CC
Seller need not own the thing to be sold, all that is required of him is the right to transfer ownership thereof at the time it is delivered. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class. *Relate w/ Art. 1349, CC 1461. Things having a potential existence may be the object of the contract of sale. ‘Things having a potential existence’ – something that is reasonably certain to come into existence as the natural increment or usual incident of something in existence already The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition belonging to the seller that the thing will come into existence. - The moment the thing does come into existence, title is vested upon the buyer. The sale of a vain hope or expectancy is void. Emptio Rei Speratae Emptio Spei Sale of a thing not yet in existence subject to the condition that the thing will exist & on Sale of hope itself that the thing will come into existence even if the thing does not failure of the condition, the contract becomes ineffective & hence, the buyer has no obli eventually exist to pay the price Future thing is certain as to itself but uncertain as to its quantity & quality It is not certain that the thing itself will exist, much less its quantity & quality Deals w/ a future thing Deals w/ a present thing – the hope or expectancy Presumption is in favor of Emptio Rei Speratae 1462. The goods w/c form the subject of a contract of sale may be either existing goods, Existing goods – goods owned or possessed by the seller owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the Future goods – goods to be manufactured, raised, or acquired by the seller seller after the perfection of the contract of sale, in this Title called “future goods”. In the sale of future goods, the seller assumes the risk of acquiring the title (to the future goods) & making the conveyance, or responding in damages for the buyer’s loss of his bargain 1462 does not apply if the goods are to be manufactured ESPECIALLY for the buyer, b/c that case is a contract for a piece of work & not of sale. 1463. The sole owner of a thing may sell an undivided interest therein. Legal effect of the sale of an undivided interest in a thing is to make the buyer a co-owner in the thing sold 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell & the Fungible goods – goods of w/c any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit buyer to buy a definite number, weight or measure of the goods in the mass, & though the number, weight or measure of the goods in the mass is undetermined. By such sale the buyer becomes owner in common of such a share of the mass as the number, weight or Owner of mass may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate. measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure - By such sale, buyer becomes a co-owner of the seller of the whole mass in proportion in w/c the definite share bought bears to the bought, the buyer becomes the owner of the whole mass & the seller is bound to make good the deficiency from goods of the same kind mass & quality, unless a contrary intent appears. - Aliquot share of each owner can be determined only by the measurement of the entire mass. If it turns out that the whole mass is actually LESS than the thing sold, the buyer becomes the owner of the whole mass & the seller must supply the deficiency. 1465. Things subject to a resolutory condition may be the object of the contract of sale. *Resolutory condition – an uncertain event upon the happening of w/c the obli (or right) subject to it is extinguished. 1466. In construing a contract containing characteristics of both the contract of sale & of By the contract of agency, a person binds himself to render some service or to do Read: Quiroga v Parsons the contract of agency to sell, the essential clauses of the whole instrument shall be something in representation or on behalf of another, w/ the consent or authority of the considered. latter. (1868, CC) Atty. Busmente: Is there a case wherein a contract is both a contract of sale & a contract of agency to sell at the same time? Transaction b/w car dealerships & manufacturers. The dealers will own the cars sold Sale Agency by the manufacturers but are still able to give the warranties of the manufacturers Buyer receives the goods as owner Agent receives the goods as the goods of when they sell the cars in turn. the principal who retains ownership over them & has the right to fix the price & terms of the sale & receive the proceeds less the agent’s commission upon the sales made Buyer has to pay the price Agent simply has to account for the proceeds of the sale he may make on the principal’s behalf Buyer, generally, cannot return the object Agent can return the object in case he is sold unable to sell the same to a 3rd person Seller warrants the thing sold Agent makes no warranty for w/c he assumes personal liability as long as he
1467. A contract for the delivery at a certain price of an art w/c the vendor in the ordinary course of his business manufactures or procures for the gen’l market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer & upon his special order, & not for the gen’l market, it is a contract for a piece of work.
1468. If the consideration of the contract consists partly in money, & partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; o/w, it is a sale.
acts w/in his authority & in the name of the seller Buyer can deal w/ the thing sold as he Agent in dealing w/ the thing received, pleases must act & is bound according to the instructions of his principal. By the contract of a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The distinction b/w a contract of sale & one for a piece of work is tested by the inquiry whether the thing transferred is one not in existence & w/c NEVER WOULD HAVE EXISTED IF NOT FOR THE ORDER of the party desiring to acquire it or a thing w/c WOULD HAVE EXISTED & been the subject of sale to some other person, even if the order had not been given. Contract of Sale The object of the sale would have existed & been the subject of sale to some other person, even if the order had not been given Risk of loss before delivery is borne by the buyer (at least according to 1480) W/in the statute of frauds Read: Concrete Aggregates v CTA By the contract of barter/exchange, one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing. Rule in determining the character of a contract the consideration of which is partly in money & partly in another thing: 1. Determine intention of the parties 2. If such intention does not appear: a. Value of thing given > amount of money or its equivalent = BARTER b. Value of thing given < amount of money or its equivalent = SALE
Contract for a Piece of Work The object of the sale never would have existed if not for the order of the party desiring to acquire it Risk of loss before delivery is borne by the contractor Not w/in the Statute of Frauds In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain & for a period w/c may be definite or indefinite. *Difference b/w sales & lease is in lease, only TEMPORARY possession & enjoyment is transferred unto the lessee. Dacion en pago – Alienation of prop to the creditor in satisfaction of a debt in money. Sale No preexisting credit or debt Oblis are created Cause is, as to the seller, the price paid & as to the buyer, the thing sold.
More freedom in fixing the price Buyer still has to pay the price
1469. In order that price may be considered certain, it shall be sufficient that it be so w/ reference to another thing certain, or that the determination thereof be left to the judgment of a specified person or persons. Should such person/s be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. If the 3rd person/s acted in BF or by mistake, the courts may fix the price. Where such 3rd person/s are prevented from fixing the price or terms by fault of the seller or the buyer, the party in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be.
1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation, or some other act or contract. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.
Dacion En Pago Pre-existing credit or debt Oblis are extinguished Cause is, as to the debtor, the extinguishment of debt & as to the creditor, he object acquired in lieu of the credit Less freedom. Lols Debtor has already received payment before the contract (of dation) is perfected.
The price is certain if: a. The parties have fixed or agreed upon a definite amount b. It be certain w/ reference to another thing certain (relate to 1472) c. The determination of the price is left to the judgment of a specified person/s *(b) & (c) apply only in absence of (a). Gen’l rule: Price fixed by a 3rd person is binding upon the parties Exceptions: 1. When the 3rd person acts in BF or by mistake (mistake ≠ error in judgment). In such a case, the courts may fix the price. 2. When the 3rd person disregards specific instructions or procedure or data given him (Walang sinabi si De Leon kung anong mangyayari but it’s analogous to the 1st exception, so I think courts will fix the price din ang ending nito) 3. When the 3rd person refuses or cannot fix it. If this happens, the contract is void unless the parties subsequently agree upon the price. 4. When the 3rd person is prevented from fixing the price either by the seller or the buyer. In this case, innocent party may choose b/w rescission & fulfillment, w/ damages in either case. (De Leon) Inadequacy of price however, may indicate a defect in the consent such as when fraud, mistake or undue influence is present. Read arts. 1355 & 1381, pars 1 & 2 Where the price is so low that ‘a man in his senses & not under a delusion’ would not accept it, the sale may be set aside. Simulation – occurs when an apparent contract is a declaration of a fictitious will 1345. Simulation of a contract may be absolute or relative. The former takes place deliberately made by agreement of the parties, in order to produce, for the purpose of when the parties do not intend to be bound at all; the latter when the parties conceal deception, the appearance of a juridical act w/c does not exist or is different from that w/c their true agreement. was really executed. 1409. The ff contracts are inexistent & void from the beginning:
Requisites of simulation: 2. Those w/c are absolutely simulated or fictitious. 1. An outward declaration of will different from the will of the parties; 2. The false appearance must have been intended by mutual agreement; & Hence, only those acts of absolute simulation where the parties do not intend to be 3. The purpose is to deceive 3rd persons. bound at all are void. 1472. The price of securities, grain, liquid, & other things shall also be considered certain, when the price fixed is that w/c the thing sold would have on a definite day, or a particular exchange or market or when an amount fixed is above or below the price on such day, or in such exchange or market, provided said amount be certain. 1473. The fixing of the price can never be left to the discretion of one of the contracting Acceptance by one of the parties of the price fixed by the other produces a meeting of the Read the case of Serra v CA & RCBC, re the part of adhesion contracts w/c is similar to parties. However, if the price fixed by one of the parties is accepted by the other, the sale minds b/w the parties as to the price. Therefore, the fact that only one of the parties fixed a price fixed by one of the parties is perfected. the price does not automatically invalidate the sale. 1474. Where the price cannot be determined in accordance w/ the preceding arts, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has Applies only where the means contemplated by the parties for fixing the price have, been delivered to & appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each for any reason, proved ineffectual. particular case. Reasonable price = generally (but not necessarily) market price at the time & place fixed by the contract or by law for the delivery of goods. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon Perfection ≠ Consummation Toyota Shaw v CA: “A definite agreement on the MANNER of payment of the price is the thing w/c is the object of the contract & upon the price. Validity of contract ≠ Enforceability of the contract an essential element in the formation of a binding & enforceable contract of sale. This From that moment, the parties may reciprocally demand performance, subject to the Reluctance ≠ Absence of consent is so b/c the agreement as to the manner of payment goes into the price such that a provisions of the law governing the form of contracts. DISAGREEMENT ON THE MANNER OF PAYMENT IS TANTAMOUNT TO A FAILURE TO Absence of Price v Non-Payment of Price AGREE ON THE PRICE. Definiteness as to the price is an essential element of a binding Absence of price will render the contract void while non-payment of price is a resolutory agreement to sell personal prop.” condition for w/c the seller may choose b/w rescission or specific performance. Read & understand 1403, 2(d). Atty. Busmente hinted na lalabas yan sa midterms. He At the moment of perfection, the reciprocal oblis imposed upon the parties by the asked this question in class: “What are the 2 exceptions to the UNENFORCEABILITY of contract of sale arise & are, hence, demandable reciprocally in the absence of contrary an UNWRITTEN contract of sale of goods, chattels or things in action at a price not less stipulation. (remember 1169, par 3, delay in reciprocal oblis) than P500?” Answer: 1. When the buyer has either: a) accepted or received part of such goods & Gen’l rule: a contract of sale is binding regardless of its form. chattels or the evidences or some of them; or b) paid at the time some part of the Exception: when the law requires a certain form for its validity or enforceability such as purchase money. those falling under the Statute of Frauds. (Read 1356-58 & 1403) 2. Sale is made by auction & entry is made by the auctioneer in his sales book. De Leon: Sale, by itself, does not transfer or affect ownership, what it does is it CREATES THE OBLI TO TRANSFER the ownership of the thing sold. “Ownership is transferred not by contract but by tradition or delivery” –Sampaguita v Jalwindor, Ten Forty Realty v Cruz 1476. In the case of a sale by auction: 1. Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. 2. A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; & the auctioneer may w/draw the goods from the sale unless the auction has been announced w/o reserve. 3. A right to bid may be reserved expressly by or on behalf of the seller, unless o/w provided by law or by stipulation. 4. Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual Sale is consummated by delivery of both the thing sold & the purchase money. Addison v Felix: “The thing is considered to be delivered when it is placed ‘in the hands or constructive delivery thereof. & possession of the vendee.’ In order that symbolic delivery may produce the effect of This article applies in the absence of stipulation to the contrary, reserving ownership in tradition, it is necessary that the vendor shall have had such control over the thing sold the thing sold despite its delivery. that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership & the right of possession. THE If the vendee/buyer fails to pay, & the thing has already been delivered, ownership of the THING SOLD MUST BE PLACED IN HIS CONTROL. When there is no impediment thing DOES NOT automatically revert back to the vendor. In this case, the vendor has 2 whatever to prevent the thing sold passing into the tenancy of the purchaser by the options: 1, to demand payment of the price; & 2, rescission. sole will of the vendor, symbolic tradition thru the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser *Correlate w/: cannot have the enjoyment & material tenancy of the thing & make use of it himself or - 1496 thru another in his name, b/c such tenancy & enjoyment are opposed by the - 1497, re: actual delivery interposition of another will, then fiction yields to reality – the delivery has not been - 1498-1501, re: constructive delivery effected.” Sampaguita v Jalwindor: “Ownership is not transferred by perfection of the contract but by delivery, either actual or constructive. This is true even if the purchase has been made on credit. Payment of the purchase price is not essential to the transfer of ownership as long as the prop sold has been delivered.”
1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. 1479. A promise to buy & sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.
Norkis Distributors v CA: “In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled w/ the intention of delivering the thing. The act, w/o the intention, is insufficient.” *Gen’l rule is 1477. 1478 works only if there is a stipulation to that effect. (Read: EDCA Publishing v. Santos) A unilateral promise of offer to sell or to buy a thing w/c is not accepted creates no juridical effect or legal bond. AKA Policitacion. Option – a contractual privilege existing in one person for w/c he has paid a consideration w/c gives him the right to buy/sell from/to another person, if he chooses, at any time w/in the agreed period at a fixed price, or under, or in compliance w/ certain terms & conditions. Nature of Option Contract: 1. Preparatory contract separate & distinct from the main/principal contract. 2. Gives one party to the right to decide whether or not to enter into principal contract, while it binds the other: a) not to enter into the principal contract w/ any other person during the agreed time; & b) to enter into the principal contract w/ the party to whom the option was granted if the latter should decide to use the option w/in the agreed period. 3. It imposes no binding obli on the person holding the option aside from the consideration for the offer. 4. Must be supported by a consideration distinct from the price (in order to bind the promissor the oblis stated in No.2), else it is void. (read: Atkins v Cua Hian Tek, Sanchez v Rigos, Sps. Trinidad v IAC) 5. Consideration need not be money or actual cash. It must be something of value though. (read: Serra v CA & RCBC) Option Contract Promissor cannot sell the prop to a 3rd person UNLESS the period agreed upon the option contract expires
1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by Arts 1163 to 1165, & 1262. This rule shall apply to the sale of fungible things, made independently & for a single price, or w/o consideration of their weight, number, or measure. Should fungible things be sold for a price fixed accdg to weight, number or measure, the
Right of 1st Refusal Promissor cannot sell the prop to a 3rd person UNLESS he allows the promisee to exercise his right of 1st refusal, i.e. giving the promisee a similar offer, allowing the latter to choose whether or not to accept such offer Promisee cannot compel promissor to enter into principal contract since right of 1st refusal arises only when promissor decides to sell If promisee elects to buy, the price is subject to negotiations Usually found in contracts of lease, the consideration is INTEGRAL in the contract Sale to a 3rd person in violation of Right of 1st Refusal is RESCISSIBLE
Art 1324, CC. When the offeror has allowed the offeree a certain period to accept, the offer may be w/drawn at any time before acceptance by communicating such w/drawal except when the option is founded upon a consideration, as something paid or promised. Atkins v Cua Hian Tek: “If the option is given w/o consideration, it is a mere offer of a contract of sale, w/c is not binding until accepted. If, however, acceptance is made before a w/drawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration.” Sanchez v Rigos: “1354 (presumption of cause) applies to contracts in gen’l, whereas the 2nd par of 1479 refers to ‘sales’ in particular, &, more specifically, to ‘an accepted unilateral promise to buy or to sell.’ In order that said promise may be made ‘binding upon the promissor’, 1479 requires the concurrence of a condition, namely, that the promise be ‘supported by a consideration distinct from the price.’ Accordingly, the promisee cannot compel the promissor to comply w/ the promise, UNLESS the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration.” Equatorial v Mayfair: “Where a period is given to the offeree w/in w/c to accept the offer, the ff rules gen’lly govern: 1. If the period is NOT ITSELF FOUNDED UPON OR SUPPORTED BY A CONSIDERATION, the offeror is still free & has the right to w/draw the offer before its acceptance, or if an acceptance has been made, before the offeror’s coming to know of such fact, by communicating that w/drawal to the offeree. 2. If the period HAS A SEPARATE CONSIDERATION, a contract of ‘option’ is deemed perfected, & it would be a breach of that contract to w/draw the offer during the agreed period. The option, however, is an independent contract by itself; & is to be distinguished from the projected main agreement w/c obviously yet to be concluded. If, in fact, the optioner-offeror w/draws the offer before its acceptance by the optionee-offeree, the latter may not sue for specific performance on the proposed contract since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option.”
Promisee may compel promissor to enter into principal contract if he decides to exercise the option w/in the agreed period If promisee elects to buy, the price of the object of sale is FIXED Right of 1st Refusal - 1. A potential buyer's contractual right to meet the terms of a 3rd The consideration is DISTINCT from the party's higher offer. -For example, A has a right of 1st refusal on the purchase of B’s purchase price house, C then offers to buy the house for P1M, then A can match this offer & prevent C rd Sale to a 3 person in violation of Option: from buying it. (Black’s Law Dictionary – 9th Ed.) a. is Valid IF 3rd person is in GF. Buyer may only hold seller liable for damages; b. is Rescissible (by original buyer) if 3rd person is in BF Read: Equatorial v Mayfair Who bears the loss: 1. Before perfection – seller (in accordance w/ res perit domino) 2. At the time of perfection – contract is void & inexistent, therefore seller (1493) 3. After perfection, before delivery – if basis is 1480, buyer, regardless w/n ownership has been transferred (note the exception in the 3rd par of this Art, there has to be delivery before the buyer can be made liable if things sold are fungible things for a price according to weight, number or measure). But if 1504, seller, if ownership is yet to be transferred. If ownership has been transferred, buyer.
risk shall not be imputed to the vendee until they have been weighed, counted, or measured, & delivered, unless the latter has incurred in delay.
1481. In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond w/ the description or the sample, & if the contract be by sample as well as by description, it is not sufficient that the bulk of goods correspond w/ the sample if they do not also correspond w/ the description. The buyer shall have a reasonable opportunity of comparing the bulk w/ the description or the sample. 1482. Whenever earnest money is given in a contract of sale it shall be considered as part of the price & as proof of the perfection of the contract.
4. After delivery – buyer Atty. Busmente: 1480 v 1504. I don’t know w/c should prevail over the other. If your client is the seller, use 1480. If it’s the buyer, 1504. *Read De Leon’s discussion of 1480 v 1504. Lumabas siya sa 2009 Sales Midterms ni Sir. Sale by description – occurs where a seller sells things as being of a particular kind, the buyer not knowing whether the seller’s representations are true or false, but relying on them as true Sale by sample – to constitute a sale by sample, it must appear that the parties contracted solely w/ reference to the sample, w/ the understanding that the bulk was like it. ‘Bulk of goods’ in this art = goods to be actually sold Earnest money – something of value given by the buyer to the seller to show that the buyer is really in earnest, & to bind the bargain. Earnest money forms part of the consideration ONLY IF the sale is PERFECTED & the sale is CONSUMMATED upon full payment of the purchase price. Earnest money constitutes an advance or down payment & must therefore be deducted from the total price. Earnest Money Part of the purchase price Given only where there is already a perfected sale When given, buyer is bound to pay balance
1483. Subject to the provisions of the Statute of Frauds & of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing & partly by word of mouth, or may be inferred from the conduct of the parties.
Option Money Distinct & separate consideration Applies to a sale not yet perfected When given, would-be buyer not bound to pay the balance (& may even forfeit the option money if given such right in the terms of the option contract) *Option money may become earnest money if the parties so agree. Or it may actually be in the nature of earnest money when considered w/ the rest of the contract. Gen’l rule: a contract of sale is binding regardless of its form. Exception: when the law requires a certain form for its validity or enforceability such as those falling under the Statute of Frauds. (Read 1356-58 & 1403) In case the contract of sale is covered by the SoF, it should be in writing o/w they shall be unenforceable. (Remember, unenforceable ≠ void)
1484. In a contract of sale of personal prop the price of w/c is payable in installments, the vendor may exercise any of the ff remedies: 1. Exact fulfillment of the obli, should the vendee fail to pay; 2. Cancel the sale, should the vendee’s failure to pay cover 2 or more installments. 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (AKA RECTO Law)
Registration of a public instrument in the registry of deeds is not indispensible as regards the contracting parties. However, doing so would bind 3rd parties to the contract & protect the buyer against claims of 3rd persons arising from subsequent alienations by the vendor. Remedies are alternative; election of one is a waiver of the right to resort to the others. Southern Motors v Moscoso: Only the exercise of one of these remedies will serve as a bar to the others. Foreclosure incident to 1st remedy Foreclosure of chattel mortgage (3rd remedy) If seller chooses option 2, the buyer may demand the return of the installments unless Procedure is those prescribed for Procedure is outlined in §14 of there is a stipulation effecting forfeiture (read 1486). ordinary civil actions, under the RoC Chattel Mortgage Law The RULES APPLY to: 1. The SALE of PERSONAL PROP, w/c is PAYABLE IN INSTALLMENTS 2. The LEASE of PERSONAL PROP, w/ OPTION TO BUY, & the LESSOR has DEPRIVED THE LESSEE of the POSSESSION/ENJOYMENT of the thing.
Pascual v Universal Motors Corp: Sellers cannot go after guarantors if they have already chosen 3rd remedy. B/c if they did, guarantors would have a right to go after the original debtors, w/c would result in the situation the law seeks to prevent (double recovery).
RA 6552 governs sales of REAL ESTATE on installments. Where the buyer has paid at least 2 years of installments, the buyer is entitled to the ff rights in case he defaults in the payment of succeeding installments: 1486. In the cases referred to in the 2 preceding arts, a stipulation that the installments or 1. Grace Period – to pay, w/o additional interest, the unpaid installments due w/in the rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same total grace period earned by him w/c is hereby fixed at the rate of one month grace may not be unconscionable under the circumstances. period for every year of installment payments made; Provided, that this right shall be exercised by the buyer only once in every 5 years of the life of the contract & its extensions, if any; 2. Refund of Cash Surrender Value – if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the prop equivalent to 50% of the total payments made, &, after 5 years of installments, an additional 5% every year but not to exceed 90% of the total payments made; Provided, that the actual cancellation of the contract shall take 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act & upon full payment of the cash surrender value to the buyer. Read: Layug v IAC 1487. The expenses for the execution & registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. 1488. The expropriation of prop for public use is governed by special laws. CAPACITY TO BUY OR SELL
Ridad v Filinvest: “Should the vendor choose to foreclose the mortgage (3rd remedy), he has to content himself w/ the proceeds of the sale at the public auction of the chattels w/c were sold on installment & mortgaged to him.”
1485. The preceding art shall be applied to contracts purporting to be leases of personal prop w/ option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.
Why is it that in Southern Motors v Moscoso, they were able to exact the fulfillment of the deficiency of the purchase price even after foreclosing the chattel mortgage while in Ridad v Filinvest, the court ruled that the vendor has to content himself w/ the proceeds of the foreclosure? B/c in the Moscoso case, what the vendors filed was a complaint to recover of the unpaid balance of the promissory note covering the chattel mortgage. In effect, what they chose was the 1st remedy. The foreclosure in this case was not an exercise of the 3rd remedy but was merely incident of their choice to exact the fulfillment of the obli. In Ridad, they chose to foreclose the chattel mortgage extrajudicially, w/c is the 3 rd remedy, barring them to recover the deficiency from the vendees.
1489. All persons who are authorized in this Code to obligate themselves may enter into a contract of sale, saving the modifications contained in the ff arts. Where necessaries are sold & delivered to a minor or other person w/o capacity to act, he must pay a reasonable price therefor. Necessaries are those referred in Art 290.
Gen’l rule: All persons, whether natural/juridical, who can bind themselves have also legal capacity to buy & sell. Exceptions: When law determines that a party suffers from either absolute or relative incapacity.
*Art. 290, CC = Art. 94, FC
Absolute incapacity – exists in case of persons who cannot bind themselves (e.g. minors, insane or demented persons) Ralative incapacity – exists only w/ reference to certain persons or a certain class of prop (e.g. 1490, 1491)
1490. The husband & the wife cannot sell props to each other, except: 1. When a separation of prop was agreed upon in the marriage settlements; or 2. When there has been a judicial separation of prop under Art. 191.
1491. The ff persons cannot acquire by purchase, even at public or judicial auction, either in person or thru the mediation of another: 1. The guardian, the prop of the person/s who may be under his guardianship; 2. Agents, the prop whose administration or sale may have been intrusted to them, unless the consent of the principal have been given; 3. Executors & administrators, the prop of the estate under administration; 4. Public officers & employees, the prop of the State or of any subdivision thereof, or of any gocc, or institution, the admin of w/c has been intrusted to them; this provision shall apply to judges & gov’t experts who, in any manner whatsoever take part in the sale; 5. Justices, judges, prosecuting attorneys, clerks of superior & inferior courts, & other officers & employees connected w/ the administration of justice, the prop & rights in litigation or levied upon an execution before the court w/in whose jurisdiction or territory they exercise their respective fxns; this prohibition includes the act of acquiring by assignment & shall apply to lawyers, w/ respect to the prop & rights w/c may be the object of any litigation in w/c they may take part by virtue of their profession; 6. Any others especially dq’d by law.
Necessaries – those things w/c are needed for sustenance, dwelling, clothing, medical attendance, education & transportation according to the financial capacity of the family of the incapacitated person (Art. 94, FC) Prohibition also applies to common-law relationships. Persons allowed to question such sale: 1. Those who bear such relation to the parties making the transfer or to the prop itself that such transfer interferes w/ their rights or interests. 2. The government. Pars. 1-3 = unenforceable, capable of ratification (b/c it involves private interests) Pars. 4-6 = void (b/c it involves public interests) No. 2 not absolute, agent may buy the prop intrusted unto him if: 1. The agency has been terminated 2. His principal gives consent 3. The sale was made under a special power pursuant to a special law (read: Fiestan v CA) No.3 refers only to props under the administration of the executor or administrator at the time of the acquisition. Executor may purchase the hereditary rights of any heir, since they do not administer such rights.
Contracts of sale entered into by incapacitated persons are: 1. VOIDABLE, if only ONE of the parties is incapable of giving consent to a contract (1390) 2. UNENFORCEABLE, if BOTH parties are incapable of giving consent to a contract (1403) Who are incapable of giving consent to a contract? 1327. The ff cannot give consent to a contract: 1. Unemancipated minors; 2. Insane or demented persons, & deaf-mutes who do not know how to write. 1329. The incapacity declared in art 1327 is subject to the modifications determined by law, & is understood to be w/o prejudice to special dq’s established in the laws. A sale b/w husband & wife is VOID. (1409) If you want: Read Art. 87, FC, re donations b/w husband & wife/common-law partners 134-142, FC, re judicial separation of prop 143-146, FC, re separation of prop Fiestan v CA: “The prohibition mandated by par 2 of Art 1491 does not apply where the sale of the prop in dispute was made under a special power inserted in or attached to the real estate mortgage pursuant to Act No. 3135, as amended. Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in the bidding & purchase under the same conditions as any other bidder.” Act No. 3135 – An Act to Regulate the Sale of Prop under Special Powers inserted in or Annexed to Real Estate Mortgages. (applies in cases of extrajudicial foreclosure sales) *It seems that we can consider pars. 1-3 of this article to be covered by 1403  & pars. 4-5 to be under 1409 
No.4 refers only to props: 1. Belonging to the Sate, or of any subdivision thereof, or of any gocc or institution 2. The admin of w/c has been entrusted to PO/Es.
For no. 5 to operate, sale or assignment must take place during the pendency of the litigation involving the prop. A prop is “in litigation” from the moment it becomes subject to judicial action. 1492. The prohibitions in the 2 preceding arts are applicable to sales in legal redemption, compromises & renunciations.
Compromise – amicable settlement of a (legal) controversy Renunciation – condonation (remember obli, read 1270-1274 kung trip mo)
EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST 1493. If at the time the contract of sale is perfected, the thing w/c is the object of the contract has been entirely lost, the contract 1493 applies to a sale of a specific thing. 1494 applies to a sale the object of w/c consists of a mass of “specific goods” shall be w/o any effect. Loss or injury referred to in these articles is one w/c takes place BEFORE or AT THE TIME OF PERFECTION. But if the thing should have been lost in part only, the vendee may choose b/w w/drawing from the contract & demanding the remaining part, paying its price in proportion to the total sum agreed upon. The thing is ‘lost’ when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered. (1189, ) 1494. Where the parties purport a sale of specific goods, & the goods w/o the knowledge of the seller have perished in part or Perish – material deteriorations, complete change in the nature of the thing in such a manner that it loses the utility it had during the time of have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option, the perfection of the contract treat the sale: 1. As avoided; or Rule in 1493 & 1494 similar: 2. As valid in all of the existing goods or in so much thereof as have not deteriorated, & as binding the buyer to pay the agreed If lost/deteriorated in whole = void price for the goods in w/c the ownership will pass, if the sale was divisible. If lost/deteriorated in part = rescind contract or pay for what’s left (if divisible) OBLIS OF THE VENDOR Section 1. – Gen’l Provisions 1495. The vendor is bound to transfer the ownership of & deliver, as well as warrant the Principal oblis of a vendor: thing w/c is the object of the sale. (1) To transfer the ownership of the determinate thing sold (1948, 1495);
1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in arts 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.
(2) To deliver the thing, w/ its accessions & accessories, if any, in the condition in w/c they were upon the perfection of the contract; (1537) (3) To warrant against eviction & against hidden defects; (1495, 1547) (4) To take care of the thing, pending delivery, w/ proper diligence; (1163) (5) To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary. (1487) *Seller need not be the owner of the thing at the time of perfection of the contract; 1459 provides that it is sufficient that he has a right to transfer the ownership thereof at the time it is delivered. Ways of effecting delivery: (1) Actual or real delivery (1497); (2) Constructive or legal delivery (1498-1501); or (3) Any other manner signifying an agreement that the possession is transferred to the vendee. (1496-1499) Delivery must be made to vendor or his authorized representative, if any. Constructive delivery – a gen’l term comprehending all those acts w/c, although not conferring phys’l possession of the thing, have been held by construction of law equivalent to acts of real delivery. Ways of effecting constructive delivery: Execution of a public instrument (1498, par. 1); Symbolic tradition or tradition symbolica (1498, par. 2); Traditio Longa Manu (1499, par. 1); Traditio Brevi Manu (1499, par. 2); Traditio Constitutum Possessorium (1500); Quasi-traditio or quasi-delivery (1501).
1497. The thing sold shall be understood as delivered, when it is placed in the control & possession of the vendee. (Actual delivery)
In all forms of delivery, it is necessary that the act be coupled w/ the intention of delivering the thing. For the same reason, any act, although not provided for in the preceding arts, but accompanied by the evident intention of the vendor to deliver or of the vendee to receive the thing sold, will be considered as constituting tradition. It is the intention w/c is essential. Section 2. – Delivery of the Thing Sold Tradition is a derivative mode of acquiring ownership by virtue of w/c one who has the right & intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same. Ownership is not transferred by contract merely but by delivery, actual or constructive. Contracts only constitute title or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same. Note however, that the parties to the contract may agree when & on what conditions the ownership in the subject of the contract shall pass to the buyer. Delivery of thing sold + payment of purchase price = consummation of contract of sale. Since perfection ≠ consummation, delivery is not essential to the perfection of the contract of sale.
1498. When the sale is made thru a public instrument, the execution thereof shall be equivalent to the delivery of the thing w/c is the object to the contract, if from the deed the contrary does not appear or cannot clearly be inferred. W/ regard to movable prop, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.
Remedies of buyer if seller fails to deliver: Specific performance Rescission, w/ damages 1st par applies both to movable & immovable prop. Delivery here is only PRESUMPTIVE & can be rebutted by evidence to the contrary. A seller cannot deliver constructively if he cannot actually deliver even if he wants to. In order to bind 3rd parties to the sale, the public instrument needs to be recorded in the Register of Deeds & a certificate of title must be issued in the name of the buyer over the prop. But, as b/w the buyer & seller, the execution of the public instrument is enough to bind the 2 of them. Symbolic tradition – when parties, to effect delivery, make use of a token symbol to represent the thing delivered. (e.g. Delivery of car keys)
Addison v Felix: “In order that symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership & the right of possession. THE THING SOLD MUST BE PLACED IN HIS CONTROL. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic tradition thru the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment & material tenancy of the thing & make use of it himself or thru another in his name, b/c such tenancy & enjoyment are opposed by the interposition of another will, then fiction yields to reality – the delivery has not been effected.” Ten Forty Realty v Cruz: “Execution of a public instrument gives rise only to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected b/c of a legal impediment. A constructive or symbolic delivery, being merely presumptive, is deemed negated by the failure of the vendee to take actual possession
of the land sold.”
1499. The delivery of movable prop may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason.
1500. There may also be tradition constitutum possessorium. 1501. W/ respect to incorporeal prop, the provisions of the 1st par of art 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, w/ the vendor’s consent, shall be understood as a delivery. 1502. When goods are delivered to the buyer “on sale or return” to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods w/in the time fixed in the contract, or, if no time has been fixed, w/in reasonable time. When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer: 1. When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; 2. If he does not signify his approval or acceptance to the seller, but retains the goods w/o giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, &, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
1503. When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notw/standing the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer. Where goods are shipped, & by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of goods, the seller’s prop in the goods shall be deemed only for the purpose of securing performance by the buyer of his oblis under the contract. Where goods are shipped, & by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer. Where the seller of goods draws on the buyer for the price & transmits the bill of exchange & bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, & if he wrongfully retains the bill of lading he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in GF, for value, the bill of lading or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the
Traditio Longa Manu – takes place by mere consent or agreement of the contracting parties IF the thing sold cannot be transferred to the possession of the vendee at the time of the sale
Note the cases of Roman v Grimalt, Norkis Distributors v CA Atty. Busmente’s example of Traditio Longa Manu: e.g. A buys B’s car, however, such car is in Baguio. Or such car is the subject of a lease contract b/w B & C at the time B sold it to A.
Traditio Brevi Manu – happens when the vendee has already the possession of the thing sold by virtue of another title (e.g. Lessor sells thing leased to lessee) Traditio Constitutum Possessorium – takes place when the vendor continues in possession of the prop sold not as owner but in some other capacity. (e.g. A sells his land to B. Instead of delivering the land to B, A continues to occupy the land as B’s tenant.) Quasi-traditio – delivery of incorporeal things thru: *Incorporeal – having a conceptual existence but no phys’l existence; - Execution of a public instrument; intangible (BLD – 9th Ed.) - If (1) is inapplicable, the placing of titles of ownership in the possession of the vendee; or - Allowing vendee to use his rights as new owner w/ the consent of the vendor. Sale or Return – a contract by w/c prop is sold but the buyer, who becomes the owner of the prop on delivery, has the option to return the same to the seller instead of paying the price. If buyer does not return w/in the time fixed in the contract, or if no time has been fixed, w/in reasonable time, sale is absolute & he is liable to pay the seller. Sale on Trial or Approval – a contract in the nature of an option to purchase if the goods prove satisfactory, the approval of the buyer being a condition precedent. *Buyer cannot accept part & reject the rest of the goods. In both cases, if the goods are injured or damaged substantially thru the negligence or misuse of the buyer, his right to return is lost & the sale becomes absolute. Sale or Return Subject to resolutory condition (ownership is extinguished if buyer decides to return) Depends entirely on the will of the buyer Ownership of the goods passes to the buyer on delivery & subsequent return of the goods reverts ownership in the seller. Risk of loss/injury rests upon buyer
Sale on Trial/Approval Subject to suspensive condition (ownership transfers if goods are satisfactory) Depends on the character or quality of the goods Ownership remains in the seller until the buyer signifies his approval or acceptance to the seller Risk still remains w/ the seller except when buyer is at fault or there is a contrary agreement. GEN’L RULE: ownership in the goods sold passes to the buyer upon their delivery to the carrier. This is so b/c the carrier is presumed to be a bailee for the buyer. EXCEPTIONS: 1st, 2nd, & 3rd pars of 1503 Bakit di kasama yung 4th paragraph? B/c it talks about transmission of the Bill of Lading (BoL) w/ a Bill of Exchange (BoE) & not delivery of goods to a carrier or bailee *Bill of Lading - A docu acknowledging the receipt of goods by a carrier or by the shipper's agent & the contract for the transportation of those goods; a docu that indicates the receipt of goods for shipment & that is issued by a person engaged in the business of transporting or forwarding goods. (BLD – 9th Ed.) Scenarios wherein SELLER reserves the right of possession or ownership despite delivery of the goods to the buyer, a carrier or other bailee: 1st Scenario (1st par): Seller reserves the right of possession or ownership in the goods BY THE TERMS OF THE CONTRACT until certain conditions have been fulfilled *Think of a contract to sell, where the seller still owns the thing despite delivery 2nd Scenario (2nd par): By the BoL the goods are DELIVERABLE TO THE SELLER OR HIS ORDER for the purpose of retaining ownership Effects: 1. The carrier is deemed as a bailee of the SELLER, not the buyer 2. The seller may retain the goods until the buyer performs his obli 3. The seller may dispose of the goods to a 3rd person (but he will be liable for damages; the 2nd buyer though obtains a better right against the original buyer.) *The BoL may be deliverable to the seller or his order but his purpose is not to retain ownership but to secure the performance of the buyer’s obli. In such cases, the buyer will bear the risk of loss & he will also have an action based on ownership against anyone except an innocent purchaser for value of the BoL from the consignee. 3rd Scenario (3rd par): BoL is DELIVERABLE TO THE ORDER OF THE BUYER, but the SELLER RETAINS POSSESSION OF THE BoL. Effect: Buyer, even if the BoL is deliverable to him, cannot recover the goods until he presents the BoL (w/c he cannot do KASI NGA na kay Seller ang putang inang BoL) De Leon: A 3rd person may be named as consignee in the BoL. In this case, the buyer can only obtain the goods when the consignee surrenders the BoL to the carrier/buyer or he indorses the bill in blank or especially to the buyer. The consignee will only do so upon payment of the price (b/c if he would do so nonetheless, then USELESS! Seller might as well save himself the trouble by naming the buyer the consignee in the BoL) 4th Scenario (4th par): Seller transmits the BoL, together w/ a bill of exchange. (In the BoE, drawer & payee is seller, drawee is buyer) Effects:
consignee named therein, or of the goods, w/o notice of the facts making the transfer wrongful.
1. 2. 3. 4. 5.
Title is retained by the seller until the BoE is paid. Delivery of goods is conditioned upon the payment/acceptance of the BoE If BoE is not paid, buyer is BOUND to return the BoL. If the buyer wrongfully retains the BoL, he acquires no additional right thereby. If the BoL names the buyer as consignee or is indorsed in blank or specially to the buyer, a purchaser in GF for value of the BoL from the buyer will obtain ownership in the goods even if BoE is not honored. (De Leon: safe move for the seller is to send the BoL & BoE to a 3rd person b/c if sent to the buyer, he may obtain the goods & forget about honoring the BoE w/c would compel the seller to enter upon litigation)
It seems that in these scenarios, the risk of loss is borne by the seller, as he reserves ownership in the things sold + res perit domino. The exception is when his only purpose is to secure the performance of the buyer’s obli. 1504. Unless o/w agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the This provision states 2 exceptions to the principle of Res Perit Domino. In the 1st par, goods are at the buyer’s risk whether actual delivery has been made or not, except that: the owner is the seller but merely to secure the performance of the buyer of his oblis. 1. Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract & the ownership in the goods has been retained by the seller In this par, the buyer is the one who bears the risk. In the 2nd par, the risk of loss is merely to secure performance by the buyer of his oblis under the contract, the goods are at the buyer’s risk from the time of such delivery; borne by the party at fault. 2. Where actual delivery has been delayed thru the fault of either the buyer or seller the goods are at the risk of the party in fault. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not Gen’l rule: Buyer cannot acquire more rights than the seller had 559. The possession of movable prop acquired in GF is equivalent to a tile. the owner thereof, & who does not sell them under authority or w/ the consent of the Exceptions: (in these cases, the buyer’s right to the prop is better than the owner, Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, owner, the buyer acquires no better title to the goods than the seller had, unless the provided he is in GF) may recover it from the person in possession of the same owner of the goods is by his conduct precluded from denying the seller’s authority. 1. Owner is estopped from denying seller’s authority to sell If the possessor of a movable lost or of w/c the owner has been unlawfully deprived, Nothing in this Title, however, shall effect: 2. Where the law enables the apparent owner to dispose of the goods as if he were the has acquired in GF at a public sale, the owner cannot obtain its return w/o reimbursing 1. The provisions of any factors’ acts, recording laws, or any other provision of law true owner thereof the price paid therefor. enabling the apparent owner of goods to dispose of them as if he were the true 3. Where the sale is sanctioned by statutory or judicial authority owner thereof; 4. Where the sale is made at merchant’s stores, fairs or markets Dizon v Suntay: “The right of the owner cannot be defeated even by proof that there 2. The validity of any contract of sale under statutory power of sale or under the order 5. When the seller has a voidable title w/c has not been avoided at the time of the sale was GF in acquisition by the possessor. Suffice it to say in this regard that the right of of a court of competent jurisdiction; 6. Where seller subsequently acquires title the owner to recover personal prop acquired in GF by another, is based on his being 3. Purchases made in a merchant’s store, or in fairs, markets, in accordance w/ the Read: Dizon v Suntay, EDCA Publishing v Sps. Santos dispossessed w/o his consent. The common law principle that where 1 of 2 innocent Code of Commerce & special laws. persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enable the fraud to be committed, cannot be applied in a case w/c is covered by an express provision of the new CC, specifically 559 of the CC. B/w a common law principle & a statutory provision, the latter must prevail in this jurisdiction.”
1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, & w/o notice of the seller's defect of title.
Requisites for acquisition of good title by buyer: 1) The seller’s voidable title is yet to be avoided; 2) Buyer buys in good faith & for value; 3) Buyer has no notice of the seller’s defect of title. If the seller has NO title, then a buyer, even if he purchases in GF & for value, cannot acquire a good title. Read the notes for the preceding article, specifically 559 & the Dizon v Suntay doctrine.
1507. A docu of title in w/c it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such docu is a NDT.
Why is it that in Dizon v Suntay, the owner (Suntay) was allowed to recover his prop but in EDCA v Sps Santos, EDCA was not? >In the latter case, the court held that EDCA WAS NOT UNLAWFULLY DEPRIVED OF THEIR PROP. They delivered the prop in question (books) to Cruz (who talked them into selling said books) & as we all know, ownership is transferred upon delivery, actual or constructive. By the time Cruz sold the books to the Santoses, he was already the owner of such books, allowing him to make a valid transfer of them. 1385. (par 2) Neither shall rescission take place when the things w/c are the object of the contract are legally in the possession of 3rd persons who did not act in BF. (owner cannot rescind contract b/w seller & buyer if buyer fulfills requisites) 1388. Whoever acquires in BF the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on acct. of the alienation, whenever, due to any cause, it should be impossible for him to return them. (If the buyer does not fulfill the requisites, this is the remedy of the owner if ever the buyer cannot return the thing)
CLASSES OF DOCUMENTS OF TITLE: 1) Negotiable Documents of Title (NDT) – deliverable to bearer or to the order of a specified person. 2) Non-negotiable Documents of Title (Non-NDT) – deliverable to a specified person. (“straight” bill) *A document deliverable to bearer or to the order of a specified person w/c is subsequently indorsed to a specified person DOES NOT lose its negotiable character, read 1509. DEFINITION OF TERMS: 1) Document of Title of Goods – any document used in the ordinary course of business in the sale or transfer of goods, or authorizing a person to do so in his behalf. a. Bill of Lading – a receipt for the transport of goods & their delivery to the person named therein. Three Persons Involved: Shipper – Carrier – Consignee. b. Dock Warrant – instrument given by dock owners to an importer of goods warehoused on the dock. c. Warehouse Receipt – a receipt of goods deposited w/ a warehouseman to hold & deliver the goods to the person named therein or bearer
d. Quedan – warehouse receipt usually for sugar. 2) Order – Relating to documents of title means an order by indorsement on the documents. 1508. A NDT may be nego’d by delivery: (Abbreviations: nego = negotiable, nego’n = negotiation, nego’d = negotiated, nego’ing = negotiating, nego’s = negotiates) 1) Where by the terms of the docu the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to When NDT is nego’d by delivery: (1508) the bearer; or 1. When it is a ‘bearer’ NDT 2) Where by the terms of the docu the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to 2. When it is an ‘order’ NDT indorsed in blank or to bearer the order of a specified person, & such person or a subsequent indorsee of the docu has indorsed it in blank or to the bearer. Where by the terms of a NDT the goods are deliverable to bearer or where a NDT has been indorsed in blank or to bearer, any When indorsement is essential for the nego’n of NDT: holder may indorse the same to himself or to any specified person, & in such case the docu shall thereafter be nego’d only by the 1. When it is an ‘order’ document (1509) indorsement of such indorsee. 2. When it is a ‘bearer’ NDT indorsed to a specified person (1508, 3rd par) 1509. A NDT may be nego’d by the indorsement of the person to whose order the goods are by the terms of the docu deliverable. *In dealing w/ such NDTs, delivery alone is not sufficient to produce the effects of nego’n. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again nego’d by *1511: If an NDT requires an indorsement to be nego’d BUT is TRANSFERRED BY DELIVERY ONLY, then the transferee acquires no additional the indorsement of such person in blank, to bearer or to another specified person. right than that of the transferor (transferor is a mere assignee). Meanwhile, a person transferring a non-NDT, even if he indorses it, can Subsequent negotiations may be made in like manner. transfer only such rights that he had to the transferor, non-negotiable nga e diba. In both cases, the transferor only acquires the rights in 1510. If a docu of title w/c contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a 1514. specified person or order of a specified person or w/c contains words of like import, has placed upon it the words "not nego," *If indorsement is made merely for identification, the party “indorsing” the document is liable only as guarantor (subsidiarily liable), not as "non-nego" or the like, such docu may nevertheless be nego’d by the holder & is a NDT w/in the meaning of this Title. But nothing an indorser (primarily liable). in this Title contained shall be construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or *The words ‘non-nego’ or other words of similar import does not affect the nego character of NDT (1510) other bailee issuing a docu of title or placing thereon the words "not nego," "non-nego," or the like. 1511. A docu of title w/c is not in such form that it can be nego’d by delivery may be transferred by the holder by delivery to a How indorsement is made: (1509) purchaser or donee. A non-nego docu cannot be nego’d & the indorsement of such a docu gives the transferee no additional right. 1. Blank or to bearer – effect: NDT can be subsequently nego’d by mere delivery 1512. A NDT may be nego’d: 2. Special indorsement – effect: NDT, to be subsequently nego’d, must be nego’d by indorsement + delivery 1) By the owner thereof; or Blank Indorsement –does not name a specific person w/c makes the goods deliverable to whoever possesses the NDT 2) By any person to whom the possession or custody of the docu has been entrusted by the owner, if, by the terms of the docu the Special Indorsement –names a specific person w/c makes the goods deliverable only to such named person bailee issuing the docu undertakes to deliver the goods to the order of the person to whom the possession or custody of the docu has been entrusted, or if at the time of such entrusting the docu is in such form that it may be nego’d by delivery. Who may indorse: (1512) 1513. A person to whom a NDT has been duly nego’d acquires thereby: 1. Owner of an ‘order’ NDT 1) Such title to the goods as the person negotiating the docu to him had or had ability to convey to a purchaser in good faith for 2. Any holder of a ‘bearer’ NDT value & also such title to the goods as the person to whose order the goods were to be delivered by the terms of the docu had or had ability to convey to a purchaser in good faith for value; & Rights acquired from a NDT duly nego’d: (1513) 2) The direct obligation of the bailee issuing the docu to hold possession of the goods for him according to the terms of the docu as 1) Title of the person nego’ing the document, over the goods covered by the docu fully as if such bailee had contracted directly w/ him. 2) Title of the person (depositor or owner) to whose order by the terms of the docu the goods were to be delivered, over such goods 1514. A person to whom a docu of title has been transferred, but not nego’d, acquires thereby, as against the transferor, the title 3) The direct obli of the bailee to hold possession of the goods for him, as if the bailee contracted directly w/ him to the goods, subject to the terms of any agreement w/ the transferor. If the docu is non-nego, such person also acquires the right to notify the bailee who issued the docu of the transfer thereof, & Rights acquired from a non-NDT or a NDT not duly nego’d: (1514) thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the docu. 1) The title of the goods as against the transferor; Prior to the notification to such bailee by the transferor or transferee of a non-NDT, the title of the transferee to the goods & the 2) The right to notify the bailee of the transfer thereof; & right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a 3) The right, thereafter, to acquire the obli of the bailee to hold the goods for him. creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a - These are not absolute. These rights are subject to the terms of the transferor. subsequent sale of the goods by the transferor. - If what is transferred is a NDT, the goods cannot be attached or levied unless the NDT is 1 st surrendered to the bailee or its nego’n is 1515. Where a NDT is transferred for value by delivery, & the indorsement of the transferor is essential for nego’n, the transferee enjoined. If Non-NDT, transferee’s right may be defeated by a levy of an attachment or execution by a creditor of the transferor acquires a right against the transferor to compel him to indorse the docu unless a contrary intention appears. The nego’n shall - If the transferor of a NDT is a PURCHASER FOR VALUE, he may compel the transferee to indorse the NDT so that he may acquire the rights take effect as of the time when the indorsement is actually made. in 1513. The negotiation shall take effect as of the time the indorsement is actually made, not at the time the document is delivered. (1515) 1516. A person who for value negotiates or transfers a docu of title by indorsement or delivery, including one who assigns for This does not apply however, when the intention of the parties is to affect a mere transfer only. value a claim secured by a docu of title unless a contrary intention appears, warrants: 1. That the docu is genuine; Warranties & liabilities of a person negotiating or transferring a document: (1516) 2. That he has a legal right to negotiate or transfer it; - Liability is limited only to a violation of these four warranties (G – LR – K – RT) 3. That he has knowledge of no fact w/c would impair the validity or worth of the docu; & - It is the duty of every indorsee to know that all previous indorsements are genuine, o/w, he will NOT ACQUIRE a valid title to the 4. That he has a right to transfer the title to the goods & that the goods are merchantable or fit for a particular purpose, whenever instrument. Similarly, under the NIL, the last indorser warrants that all previous indorsements are genuine. such warranties would have been implied if the contract of the parties had been to transfer w/o a docu of title the goods *Indorsers are subsidiarily liable if the person primarily liable fails honor the document. represented thereby. *Indorser however, is not liable if the goods are lost or becomes defective due to the fault of the bailee as he is a mere conveyor of the docu 1517. The indorsement of a docu of title shall not make the indorser liable for any failure on the part of the bailee who issued the & not a guarantor. (1517) docu or previous indorsers thereof to fulfill their respective oblis. 1518. The validity of the nego’n of a NDT is not impaired by the fact that the nego’n was a breach of duty on the part of the person THIS ARTICLE PERTAINS ONLY TO THE DOCUMENT, NOT THE GOODS making the nego’n, or by the fact that the owner of the docu was deprived of the possession of the same by loss, theft, fraud, - Under 1512, only the owner of the docu or the person to whom he entrusted the docu to may negotiate said document. But under 1518, accident, mistake, duress, or conversion, if the person to whom the docu was nego’d or a person to whom the docu was if a person, not having such authority, nego’s the docu to an INNOCENT PURCHASER FOR VALUE, such purchaser’s right to the docu is subsequently nego’d paid value therefor in good faith w/o notice of the breach of duty, or loss, theft, fraud, accident, mistake, indefeasible. (similar to a Holder in Due Course in nego) duress or conversion.
1519. If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner & a NDT is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or o/w or be levied under an execution unless the docu be first surrendered to the bailee or its nego’n enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the docu is surrendered to him or impounded by the court. 1520. A creditor whose debtor is the owner of a NDT shall be entitled to such aid from courts of appropriate jurisdiction by injunction & o/w in attaching such docu or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property w/c cannot readily be attached or levied upon by ordinary legal process.
1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, b/w the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one, & if not his residence; but in case of a contract of sale of specific goods, w/c to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them w/in a reasonable time. Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless & until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. Unless o/w agreed, the expenses of & incidental to putting the goods into a deliverable state must be borne by the seller.
GEN’L RULE: The goods cannot be attached or levied under execution EXCEPTIONS: 1) The Document of Title is surrendered to the bailee; or 2) The negotiation is prohibited or the goods are impounded by the court *If the depositor of the goods however is neither the owner nor someone authorized to convey title to the goods, 1519 does not apply. In case a debtor refuses to surrender a NDT to a creditor, the latter may, w/ aid from the Courts, afford of the ff remedies: 1. Injunction 2. Attaching the NDT 3. Satisfy his claim on the NDT (Only IF the prop cannot be readily attached /levied upon ordinary legal process) However, if the NDT is negotiated to an innocent person, the transfer is nevertheless effectual. RULES IN DELIVERY OF GOODS (PLACE): Usage of trade – is any practice or method of dealing having such regularity of 1) According to that Agreed upon; observance in a place, vocation or trade to justify an expectation that it will be 2) In the absence of an agreement Usage of Trade; observed w/ respect to the transaction in question. 3) Seller’s Place of business; 4) Seller’s Residence; Ex. Appliance or machinery: delivered to the residence or place of business of buyer; 5) For specific goods, where the said goods are Found (Paras Civil Code Book V, 2008) car tires – delivered at the place of business of seller (good luck ikaw magpalit ng goma ng gulong mo); mambabalot, magtataho, street vendors – kung saan mo sila PRESUMPTION: The buyer must take the goods from the seller’s place of business or matitiempuhan. residence rather than the seller to deliver them to the buyer. Course of dealing – is a sequence of previous conduct b/w the parties to a particular When the delivery was made not as stipulated & the buyer accepted the goods w/o transaction w/c is fairly to be regarded as establishing a common basis of complaint, it is deemed that the buyer WAIVED his right against the seller’s failure to understanding for interpreting their expressions & other conduct. deliver. Explanation: there has been previous transactions b/w the seller & buyer. There has RULES IN DELIVERY OF GOODS (TIME): been an established understanding how delivery is to be conducted. That established 1) The time stipulated or agreed upon understanding is the “course of dealing.” - Time is of the essence: w/in the period stipulated - Time is NOT of the essence: w/in a reasonable time (Deleon p.236) Note: above examples & explanation need to be confirmed if correct 2) The time is not stipulated - Time is of the essence: buyer cannot invoke time is of the essence unless he gives the seller sufficient notice of his intention to cancel delivery is not made on or before a fixed time. - Time is NOT of the essence: w/in a reasonable time (a question of fact; case to case basis) HOUR OF DELIVERY: (speaks of the hour of the day) - A question of fact; depends on kind of obli
1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract & reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. Where the seller delivers to the buyer the goods he contracted to sell mixed w/ goods of a different description not included in the contract, the buyer may accept the goods w/c are in accordance w/ the contract & reject the rest. In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the whole of the goods. The provisions of this art are subject to any usage of trade, special agreement, or course of
DUTY OF SELLER: To prepare the good in a deliverable state at his expense. In such state, the buyer is bound to accept delivery. (unless o/w agreed) DELIVERY OF GOODS LESS THAN THE QUANTITY CONTRACTED: - The buyer may reject delivery - The buyer may accept delivery - Know that seller would not complete delivery: Pay contract price - Does not know that seller will not complete delivery: Fair value of the goods DELIVERY OF GOODS MORE THAN THE QUANTITY CONTRACTED: - Buyer may accept quantity contracted & reject the excess - Buyer may accept including the excess provided, he pays for their value - If indivisible, buyer may reject the whole or accept it entirely DELIVERY OF GOODS MIXED W/ OTHERS: - Buyer may accept those w/c are in accordance w/ the contract & reject the rest - Buyer may accept including that w/c are not in accordance w/ the contract provided, he pays for their value - If indivisible, buyer may reject the whole or accept it entirely DELIVERY OF INDIVISIBLE GOODS WHETHER IN EXCESS OR MIXED GOODS
FAIR VALUE: not necessarily the market value; the benefit w/c the buyer may receive from the goods. Since the seller did not delivery the correct quantity as agreed upon, the buyer is not required to pay the contract price if such price is more than fair value to him 1233. A debt shall not be understood to have been paid unless the thing or service in w/c the obli consists has been completely delivered or rendered, as the case may be. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, & w/o expressing any protest or objection, the obli is deemed fully complied w/.
dealing b/w the parties. 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in art 1503, first, second & third paragraphs, or unless a contrary intent appears. Unless o/w authorized by the buyer, the seller must make such contract w/ the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods & the other circumstances of the case. If the seller omits so to do, & the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages. Unless o/w agreed, where goods are sent by the seller to the buyer under circumstances in w/c the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, &, if the seller fails to do so, the goods shall be deemed to be at his risk during such transit.
1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract.
1525. The seller of goods is deemed to be an unpaid seller w/in the meaning of this Title: (1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other nego instrument has been received as conditional payment, & the condition on w/c it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or o/w. (*In arts 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller.)
1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has: (1) A lien on the goods or right to retain them for the price while he is in possession of them; (2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted w/ the possession of them; (3) A right of resale as limited by this Title; (4) A right to rescind the sale as likewise limited by this Title. Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies a right of withholding delivery similar to & coextensive w/ his rights of lien & stoppage in transitu where the ownership has passed to the buyer. 1527. Subject to the provisions of this Title, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the ff cases, namely: (1) Where the goods have been sold w/o any stipulation as to credit; (2) Where the goods have been sold on credit, but the term of credit has expired; (3) Where the buyer becomes insolvent. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.
Buyer may reject the whole or accept it entirel NOTA BENE: THIS PROVISION APPLIES ONLY IF THERE IS AN AGREEMENT THAT THE SELLER WILL SHIP THE GOODS GEN’L RULE: Delivery to the carrier constitutes delivery to the buyer, whether the carrier was named by the buyer or not. EXCEPTIONS: 1) The contrary appears (parties did not intend delivery to carrier is delivery to buyer) 2) 1st, 2nd & 3rd pars of 1503
C.O.D. – Collect of Delivery – Carrier collects the purchase price. F.O.B. – Free on Board – where ever the FOB pertains to, the buyer shall not pay for the expenses of delivery up to that place of designation. Ex. FOB-Manila. Buyer’s place of business is in Bulacan. The goods will be coming from Cebu (seller’s place of business). The expenses for shipping the goods from Cebu to Manila will be borne by the seller. The expenses for shipping the goods from Manila to Bulacan shall be borne by the buyer. “Free” yung expenses from Cebu to Manila.
DUTIES OF SELLER AFTER DELIVERY TO CARRIER: C.I.F. – Cost, Insurance & Freight – Signifies that the price fixed covers also expenses 1) Enter into contract w/ the carrier on behalf of the buyer. of freight & insurance. IOW, the seller pays for the insurance & shipping expenses. - Failure to do so: A) Buyer may DECLINE to treat delivery to carrier as delivery to him; OR F.A.S. – Free Along Side – The seller pays all charges & is subject to risk until the goods B) the buyer may hold seller responsible for DAMAGES are placed alongside the vessel. (Mem-Aid 2012) 2) To give notice to the buyer regarding necessity to insure the goods - Failure to do so: RISK borne by the seller PROVIDED the buyer is unaware of the need to insure such goods. If the buyer is aware of the need to insure, seller may not be held responsible. GEN’L RULE: The obligation to deliver arises from the moment the contract is perfected. The buyer may, from that moment, demand delivery. The seller, reciprocally, may demand payment. Hence, the thing shall not be delivered unless the price be paid. EXCEPTION: The thing shall be delivered but the price shall not be paid first, if the time of payment has been fixed to be paid at a latter date. (in such cases, the seller is considered to have sold on credit) EXCEPTION TO THE EXCEPTION: Vendee has lost the right to make use of the period of payment. Art. 1536 (Period of payment is at a latter date but the seller is not bound to make delivery) An UNPAID SELLER is one who: Art. 1249. Par. 2. The delivery of promissory notes payable to order, or bills of 1) has not been paid or to whom the price has not been tendered exchange, or other mercantile documents shall produce the effect of payment only 2) has received a bill of exchange or other negotiable instrument as conditional payment, when they have been cashed x x x & the condition to w/c it was received has been broken by reason of the dishonor of the instrument, insolvency of the buyer or o/w. Note consignation. 1256. If the creditor to whom tender of payment has been made UNPAID SELLER includes: refuses w/o just cause to accept it, the debtor shall be released from responsibility by 1) Agent of the seller; the consignation of the thing or sum due. 2) Consignor or agent who has himself paid or is directly responsible for the price; or 3) Any Other person in the position of the seller. WHERE WHOLE OF PRICE HAS NOT BEEN PAID: 1) Tender of payment by buyer – such as checks (juan tamad). Seller’s lien is destroyed. 2) Payment of part of price – payment of price does NOT destroy a seller’s lien. The seller remains an unpaid seller even if title has passed to the buyer. 3) Payment by negotiable instrument – OBLICON (Art. 1249) REMEDIES OF UNPAID SELLER (SAR-SPASMS) 1) Possessory lien (Art 1527-1529) 2) Stoppage of goods in transitu (Art 1530) 3) Special right of resale (Art 1533) 4) Special right of rescission (Art 1534) 5) Action for the price (Art 1595) 6) Action for damages (Art 1596) 7) Recto Law (Art 1484) 8) Maceda Law (Governs financing of real estate on installment payment) (ung special law na cinite sa Layug v IAC) 9) Specific performance (Art 1595) POSSESSORY LIEN – a right to retain possession of goods WHEN IT MAY BE EXERCISED a) The goods has been sold w/o any stipulation as to credit b) The goods has been sold on credit, but the term of credit has expired c) The buyer becomes insolvent
CREDIT SALE – whereby the seller binds himself to give the goods to the buyer w/o receiving at that time payment for them. Stipulation as to credit – means that a period of payment price has been fixed in the contract. In the absence of this stipulation, the seller is entitled to the payment of the price at the same time that he transfers the possession of the goods. Accordingly, the seller always has a lien upon the goods until payment or tender of the entire price. INSOLVENT – is a person who either ceased to pay his debts in the ordinary course of
business or cannot pay his debts as they become due. (w or w/o insolvency proceedings) Insolvency does not dissolve the bargain, it merely revives the seller’s lien. Note: Notwithstanding transfer of ownership, possessory lien may still be exercised as long as the goods are in the possession of the seller. 1528. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. 1529. The unpaid seller of goods loses his lien thereon: (1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer w/o reserving the ownership in the goods or the right to the possession thereof; (2) When the buyer or his agent lawfully obtains possession of the goods; (3) By waiver thereof. The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained judgment or decree for the price of the goods.
1530. Subject to the provisions of this Title, when the buyer of goods is or becomes insolvent, the unpaid seller who has parted w/ the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, & he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted w/ the possession.
1531. Goods are in transit w/in the meaning of the preceding art: (1) From the time when they are delivered to a carrier by land, water, or air, or other bailee for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes delivery of them from such carrier or other bailee; (2) If the goods are rejected by the buyer, & the carrier or other bailee continues in possession of them, even if the seller has refused to receive them back. Goods are no longer in transit w/in the meaning of the preceding art: (1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination; (2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf & continues in possession of them as bailee for the buyer or his agent; & it is immaterial that further destination for the goods may have been indicated by the buyer; (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf. If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the carrier as such or as agent of the buyer. If part delivery of the goods has been made to the buyer, or his agent in that behalf, the
GEN RULE: Lien NOT lost by partial delivery. When part of the goods are delivered, the unpaid seller has a lien upon the remainder for the proportion of the price w/c is due on account of the goods so retained. EXCEPT: Art 1529 (3) Delivery of the part intended as symbolical delivery of the whole, w/c is considered a waiver of any right of retention as to the remainder & therefore the lien is lost. WHEN UNPAID SELLER LOSES POSSESSORY LIEN When seller has no possession of goods anymore, he therefore has no more lien 1) Delivery to agent/a carrier or bailee of buyer Buyer’s wrongful taking of the goods w/o the seller’s consent does NOT destroy the a. For the purpose of transmission to the buyer lien b. W/o reserving ownership or right of possession If goods are put in the possession of the buyer merely for purpose of allowing the 2) Possession by buyer or his agent – when buyer lawfully obtains possession buyer to examine the goods, the lien in intact. 3) Waiver of the lien Seller may lose his lien by express agreement to surrender such lien - thus, where the buyer was allowed to alter the character of the goods & make them much more LOSS OF LIEN (Tolentino) valuable, the seller could no longer assert a lien. The lien of the seller depends upon either possession OR control of the property on w/c Mere judgment by a court obtained by the unpaid seller for the price of the goods is the lien is claimed, & if the seller permits the property to go into actual possession of the NOT a ground for the loss of his lien (Art 1529, par.2) buyer, such LIEN IS LOST, although he delivers on the faith of a chattel mortgage w/c turn Possessory lien IS LOST after the seller loses possession BUT his LIEN on the price as out to be invalid, or draft given in payment was dishonored. If however, the seller has an unpaid seller remains. The bringing of an action to recover the purchase price is been induced to part w/ possession by fraud, the lien of the seller is NOT LOST. NOT one of the ways of losing possessory lien. (from PINEDA) REVIVAL OF LIEN AFTER DELIVERY POSSESSORY LIEN LIEN ON THE PRICE 1) If the buyer refuses to receive the goods after they have been delivered to a carrier on The seller is entitled to retain After delivery, the seller loses his his behalf, though the seller has parted w/ both ownership & possession may reclaim possession of the goods as security possessory lien but retains his lien on the goods & revest himself w/ his lien (see Art 1531 par.2) for the purchase price the price of the goods 2) If the buyer returns the goods in wrongful repudiation of the sale, the lien is revived Requisites for the exercise of RIGHT OF STOPPAGE OF GOODS IN TRANSITU: Notice must be given either to the person in actual possession of the goods or to his 1. Seller must be unpaid (Art 1525) principal 2. Buyer must be insolvent (need not be judicially declared) When notice is given to the carrier or other bailee in possession of the goods, he 3. Goods must be in transit must deliver the goods according to the directions of the seller 4. Seller must either – (NOTE: expenses must be borne by the seller) a. take possession of the goods sold EXCEPTION: a negotiable document of title representing the goods has been issued b. give notice of his claim to the carrier or other person in possession of the goods (in w/c case the carrier or bailee is not obliged to redeliver the goods unless the seller 5. Seller must surrender the negotiable document of title, if any, issued by the carrier surrendered the document for cancellation) 6. Seller must bear the expenses of delivery of the goods after the exercise of the right WHEN GOODS ARE CONSIDERED IN TRANSIT Taking of goods in transit by an unauthorized agent of the buyer DOES NOT 1. After delivery to a carrier or other bailee & before the buyer or his agent takes delivery extinguish the right of stoppage n transitu (Paras) of them In case of misdelivery, the goods are still considered in transit, hence, the seller may 2. If the goods are rejected by the buyer, & the carrier or other bailee continues in still exercise said right pursuant to Art 1523, w/c provides that an unpaid seller may possession of them (even if the seller refuse to receive them back) exercise his right of stoppage in transitu by giving notice of his claim to the carrier or other bailee in whose possession the goods are. WHEN GOODS ARE NO LONGER IN TRANSIT 1. After delivery to the buyer or his agent in that behalf ATTORN – to agree to be tenant to a new owner of the same prop 2. If the buyer or his agent obtains possession of the goods at a point before the destination originally fixed 3. If the carrier or the bailee acknowledges to hold the goods in behalf of the buyer 4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer *If the carrier is owned by the buyer, carrier is considered an agent for the buyer. Therefore, delivery to carrier = delivery to buyer
remainder of the goods may be stopped in transitu, unless such part delivery has been under such circumstances as to show an agreement w/ the buyer to give up possession of the whole of the goods. 1532. The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, must be given at such time & under such circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer. When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the seller. The expenses of such delivery must be borne by the seller. If, however, a NDT representing the goods has been issued by the carrier or other bailee, he shall not be obliged to deliver or justified in delivering the goods to the seller unless such docu is first surrendered for cancellation. 1533. Where the goods are of perishable nature, or where the seller expressly reserves the right of resale in case the buyer should make default, or where the buyer has been in default in the payment of the price for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. Where a resale is made, as authorized in this art, the buyer acquires a good title as against the original buyer. It is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer.
SPECIAL RIGHT OF RESALE May be exercised only when the unpaid seller has either a right of lien or has stopped the goods in transitu & under any of the ff conditions: 1. Goods are perishable in nature 2. The right to resell is expressly reserved in case the buyer should make a default 3. The buyer delays in the payment of the price for an unreasonable time EFFECT OF RESALE The buyer acquires a good title as against the original buyer. The seller is not liable to the original buyer for any profit earned in the resale & may recover damages occasioned by the buyer’s breach of the contract of sale. Action for the rescission of the sale is not necessary. (Pineda, Civil Code Annotated 2010)
But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the time & place of such resale should be given by the seller to the original buyer.
Atty. Busmente: When is notice essential? - When the right of resale is exercised under the condition of the buyer delaying payment for an unreasonable time - De Leon: safe move is to always send notice.
The seller is bound to exercise reasonable care & judgment in making a resale, & subject to this requirement may make a resale either by public or private sale. He cannot, however, directly or indirectly buy the goods. 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title & resume the ownership in the goods, where he expressly reserved the right to do so in case the buyer should make default, or where the buyer has been in default in the payment of the price for an unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract. The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. 1535. Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage in transitu is not affected by any sale, or other disposition of the goods w/c the buyer may have made, unless the seller has assented thereto. If, however, a NDT has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such docu has been nego’d, whether such nego’n be prior or subsequent to the notification to the carrier, or other bailee who issued such docu, of the seller's claim to a lien or right of stoppage in transitu. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in art 1198.
Resale may be public or private sale To avoid injustice & unfairness, the seller is prohibited from becoming the buyer of the goods whether directly or indirectly Notice of sale need not be sent to the original buyer
SPECIAL RIGHT TO RESCIND – available ONLY if the seller has either the right of lien or a right to stop the goods in transitu PLUS either of two situations: 1. Where the right to rescind on default has been expressly reserved 2. Where the buyer has been in default for an unreasonable time EFFECT OF EXERCISE OF RIGHT The seller shall not thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer damages for any loss occasioned by the breach. There must be NOTICE or some other OVERT ACT of intention to rescind. Overt act need not be communicated BUT the giving of notice is relevant in case of default for an unreasonable time. EFFECT OF SALE OF GOODS SUBJECT TO LIEN OR STOPPAGE IN TRANSITU 1) Where goods are NOT covered by negotiable doc of title - seller can give NO larger than what he has. When goods are subject to a legal lien a purchaser from the original buyer can acquire ONLY such rights as the buyer then had. 2) Where goods are covered by negotiable doc of title – the seller’s lien cannot prevail against rights of a PURCHASER FOR VALUE IN GOOD FAITH to whom the document has been indorsed. RIGHT OF THE VENDOR TO HOLD DELIVERY IN SALE ON CREDIT GEN RULE: The vendor is NOT bound to make delivery if the vendee has not paid the price.
WAYS OF EXERCISING THE RIGHT OF STOPPAGE 1. By taking actual possession of the goods 2. By giving notice of his claim to the carrier or bailee The seller’s power to stop in transitu includes: 1. Power to counter delivery 2. Power to order redelivery to himself Art 1533 only applies id the title to goods has already passed to the buyer. Otherwise, the goods cannot be resold. ILLUSTRATIVE CASE: Facts: S sold to B a tractor for P12, 000 - - P5, 000 upon delivery & 7,000 w/in 60 days. B failed to take delivery of the tractor & pay the purchase price. S was forced to sell the tractor at a lower price of P10, 000. Issue: Is B liable for the difference of P2, 000? Held: YES. In a contract of sale w/c is executory as to both parties, the vendor is entitled to resell the goods if the purchaser fails to take delivery & pay the purchase price. If he is obliged to resell for lesser value, he holds the buyer for the difference BUT if he sells for the same or more than the contract price, the breach of contract of the original buyer is DAMNUM ABSQUE INJURIA. (A loss or damage w/o injury)
Rescission – a party’s unilateral unmaking of a contract for a legally sufficient reason, or a judgment rescinding the contract. (BLD – 9th Ed.) Effect of rescission: 1385. Rescission creates the obli to return the things w/c were the object of the contract, together w/ their fruits, & the price w/ its interests; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. (If the thing cannot be returned anymore, then damages, 1388)
The rule protects a purchaser w/o notice after the seller had stopped the goods either by virtue of right of lien or stoppage in transitu.
EXCEPTION: If a period has been fixed for payment, the vendor must deliver the thing sold THOUGH the price is not yet paid. EXCEPTION TO THE EXCEPTION: Vendor may not be compelled to make delivery, even if vendee was given the benefit of period, in case the vendee should lose the right to make use of the term (Art 1198) & such vendee has NOT yet paid the price.
1537. The vendor is bound to deliver the thing sold & its accessions & accessories in the condition in w/c they were upon the perfection of the contract. All the fruits shall pertain to the vendee from the day on w/c the contract was perfected.
WHEN DOES A VENDEE LOSE EVERY RIGHT TO MAKE USE OF PERIOD: (1198) 1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the price 2) When he does not furnish to the creditor/vendor the guaranties or securities w/c he has promised 3) When by his own acts he has impaired said guaranties or securities after their establishment, & when thru a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory 4) When the debtor/vendee violates any undertaking, in consideration of w/c the creditor agreed to the period. 5) When the debtor/vendee attempts to abscond CONDITION OF THING TO BE DELIVERED thus, in Consing vs CA (1989) the Court ruled that a subdivision lot seller should not The THING sold & its ACCESSIONS & ACCESSORIES must be in the condition in w/c they shift to the buyer the burden of providing access to & from the subdivision. It is the were upon the perfection of the contract. seller’s duty to construct the necessary roads in the subdivision that could serve as SELLER’S DUTYoutlets. Proper access to the residence is essential to its enjoyment 1) To preserve the thing pending delivery (relate to Arts. 1163 & 1164) 2) To deliver the thing sold in a condition suitable for its enjoyment by the buyer for the 1166. The obli to give a determinate thing includes that of delivering all its accessions purposes contemplated & accessories, even though they may not have been mentioned. Accessions – are the fruits of a thing; additions to, or improvements upon, a thing such as the young of animals, house or trees on a land, etc. Accessories – are anything attached to a principal thing for its completion, ornament, or better use such as picture frame, key of a house, etc. VENDEE IS ENTITLED TO THE FRUITS Art. 1164 - the vendee has a right to the fruits of the thing sold from the time the obligation to deliver it arises. Art. 1475 - the obligation to deliver arises upon the perfection of the contract of sale
1538. In case of loss, deterioration or improvement of the thing before its delivery, the rules in art 1189 shall be observed, the vendor being considered the debtor.
1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity w/ the ff rules: If the sale of real estate should be made w/ a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose b/w a proportional reduction of the price & the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.
VENDEE IS NOT ENTITLED TO THE FRUITS 1. When the rule provided in Art 1537(2) is modified by agreement of the parties, their agreement shall govern. 2. If the vendee rescinds the contract of sale instead of exacting the fulfillment thereof, he is entitled only to damages like interest, attorney’s fees & costs but he may not also claim the fruits of the thing sold 3. In a contract of promise to sell, the vendee is not entitled to the fruits. RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF THING BEFORE DELIVERY (based on Art 1189) 1) If the thing is lost w/o the fault of the debtor, the obligation shall be extinguished 2) If the thing is lost thru the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; 3) When the thing deteriorates w/o the fault of the debtor, the impairment is to be borne by the creditor 4) If it deteriorates thru the fault of the debtor, the creditor may choose for: a. Rescission of obligation w/indemnity for damages, OR b. Fulfillment w/ indemnity for damages 5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor 6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary SALE OF REAL PROP BY UNIT OF MEASURE OR NUMBER W/ Statement of area at the rate of a certain price for a unit or measure or number. If the vendee should demand, the vendor shall deliver ALL that may have been stated in the contract. If what is delivered is: - LESS IN AREA OR INFERIOR or DIFFIRENT QUALITY – Buyer may seek:
*Sale of the principal entitles the buyer to the accessions & accessories, but sale of the accessories & accessions does not entitle buyer to the principal.
Usufructuary – a person who has the right to the benefits of another’s property (BLD – 9th Ed) Usufruct - A right for a certain period to use and enjoy the fruits of another's property without damaging or diminishing it (BLD – 9th Ed) - the right to enjoy benefits or profits from something, as real prop, while not being the owner of it.
The rule is different where there is violation of the warranty against hidden defect (Art 1571). The vendor is also liable for damages --- Art 1567; 1191(2) Judicial sales of immovable lacking in area or of inferior quality OR of greater quantity --- relate to Art 1552 & 1570)
The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract. The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds 1/10th of the price agreed upon. Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area of inferior quality, he may rescind the sale. 1540. If, in the case of the preceding art, there is a greater area or number in the immovable than that stated in the contract, the vendee may accept the area included in the contract & reject the rest. If he accepts the whole area, he must pay for the same at the contract rate. 1541. The provisions of the two preceding arts shall apply to judicial sales. 1542. In the sale of real estate, made for a lump sum & not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less area or number than that stated in the contract. The same rule shall be applied when two or more immovables as sold for a single price; but if, besides mentioning the boundaries, w/c is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included w/in said boundaries, even when it exceeds the area or number specified in the contract; &, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded b/c the vendee does not accede to the failure to deliver what has been stipulated.
1. Rescission if lack in area is at least 1/10 of area agreed upon 2. Rescission if the deficiency in quality specified in the contract exceeds 1/10 of the price agreed upon. 3. Rescission if the vendee would not have bought the immovable had he known of its smaller area or inferior quality 4. Proportional reduction of price. - GREATER IN AREA 1. Accept per stipulation & reject the rest 2. Accept the whole & pay the contract price
SALE OF REAL ESTATE MADE FOR A LUMP SUM - a cuerpo cierto/por precio alzado If the sale is made for lump sum, & not so much per unit of measure or number, the cause of the contract is the thing sold independent & irrespective of its number or measure. 2 types of pricing agreement 1. Unit price contract – purchase price is determined by way of reference to a stated rate per unit 2. Lump sum contract – states a full purchase price for an immovable the area of w/c may be declared based on estimate or where both the area & boundaries are stated. Example: P1M for 1,000 square meters. Sale of real estate made for a lump sum 1) Mistake of area stated in contract immaterial – the vendor is obligated to deliver all the land included w/in the boundaries, regardless whether the real estate should be greater or smaller than they recited in the deed (Balantakbo vs CA) The boundaries of the land stated in the contract determine the effects & scope of the sale, NOT the area thereof (Semira vs CA) 2) Where area or number stated together w/ boundaries – (De Leon p.274-276) If vendor cannot deliver to vendee all that is stated in the contract, the vendee has the option: a. To reduce the price in proportion to the deficiency OR b. To set aside the contract Phrase “should not be able to do so” refers to a situation when the vendor cannot deliver all that is included w/in the boundaries b/c a part or parcel of the real estate does not belong to him. 3) Where there is conflict b/w area stipulated & title to property – (p.276) Area included w/in the stipulated boundaries prevails over that w/c the title shows when the boundaries are certain & no alterations thereof has been proven. 4) Where identity of erroneously designated property clearly established – (p.277) -the mistake in designating the property in the deed of sale does NOT vitiate consent of the parties or affect the validity & binding effect of the contract Remedy: have the document reformed 5) Where words “about” , “more or less” , etc. Are used – (p. 277-278) Words when used in connection w/ quantity or distance are intended to cover some slight or unimportant inaccuracy. They do NOT weaken or destroy the statements of distance & quantity when no other guides are furnished. CONFLICT B/W AREA STATED & BOUNDARIES RULE: Natural boundaries will prevail over area. Boundaries prevail b/c what really defines a piece of ground is NOT the area BUT the boundaries. Erroneous statement regarding area can be disregarded-1) Where boundaries given are sufficiently certain, or 2) Where discrepancy in measurement is so great, provided, the natural boundaries are very clear & convincing EXCEPTION: Area stated in the contract should be followed. 1) Where boundaries do not identify land or 2) overlapping of boundaries exists When 2 or more real estates are sold for a single price, the rule is the same as when the real estate is sold for a lump sum. There shall be no increase or decrease in the area actually delivered & the area stated in the contract (Beda MemAid)
Where price per unit is not indicated--GREATER/LESSER - No rescission or adjustment of price, UNLESS there is gross mistake. 1543. The actions arising from arts 1539 & 1542 shall prescribe in six months, counted from the day of delivery.