SALES

 

SALES SALE  A nominate contract whereby one of the th e co cont ntra ract ctin ingg pa part rtie iess obli obliga gate tess himself to transfer the ownership of and to deliver determinate and the other toapay therefor a thing price certain in money or its equivalent. Delive very ry and and paym paymen entt in a NOTES: Deli contract of sale are so interrelated and intertwined with each other that without de deli live very ry of th the e go good odss th the ere is no correspon corr esponding ding obligation obligation to pay. pay. The two complement complement each other. It is clear th that at th the e two two elem eleme ents can ann not be dissociated, for the contract of purchase an and d sa sale le is esse sent ntia iall llyy a bila bilate terral contra con tract, ct, as it gives gives ris rise e to re recip ciproc rocal al obligation obliga tions. s. (Pio Barretto Sons, Inc. vs. Compania Maritima, 62 SCRA 167). 

Neither is the delivery of the thing bought nor the payment of the price necessary for the perfection of the contract of sale. Being consensual, it is perfected by mere consent.

Elements: a. Essential elements – those without which, there can be no valid sale: 1. Consent or meeting of minds 2. A Determinable subject matter Pric ice e ce cert rtai ain n in mo mone neyy or its 3. Pr equivalent b. Natural elements – inherent in the contract, and which in the absence of any contr ontra ary pr prov ovis isio ion n, are are 

deemed to exist in the contract: Warranty against eviction 2. Warranty against hidden defects c. Acci Accide dent ntal al elem elemen ents ts – may may be present or absent depending on the sti tipu pula lati tion on of th the e pa part rtie iess (e.g.: 1.

conditions,, inter conditions interest, est, penal penalty, ty, time or place of payment, etc.) 

Characteristics: 1. Principal 2. Consensual; 3. Bilateral; 4. Nominate; 5. Co Comm mmut utat ativ ive; e; In so some me ca case ses, s, aleatory (emptio spei);

6.

Onerous.

* Aleatory contract: one of the parties or both reciprocally bind themselves to give or to the do something consideration of what other shall in give or do upon the happening of an event which is uncer uncertai tain, n, or which is to occ occur ur at an indeterminate tim time. (Ex: Sale of   sweepstakes ticket)

Contract to sell   excl exclus usiv ive e righ rightt and and pr priv ivil ileg ege e to purchase an object. bilate tera rall co cont ntra ract ct wher whereb ebyy the the  a bila prospecti prosp ective ve seller, seller, while while expressly expressly rese reserv rvin ingg the the ow owne ners rsh hip of the the subjec sub jectt proper property ty despit despite e delive delivery ry ther thereo eoff to the the pr pros ospe pect ctiv ive e bu buye yerr binds himself to sell the said property exclusively to the prospective buyer upon fulfilment of the condition agreed upon, that is, full payment of the purchase price.

NOTE: Absent a proviso in the contract NOTE: that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the con contra tract ct the mom moment ent the ven vendee dee fails to pay within the fixed period, the transa tra nsacti ction on is an abs absolu olute te contra contract ct of sale and not a contract to sell.   (Dignos vs. CA [1988])

* The contract of sale by itself is not a mo mode de acqu acsfer quir irin owne hip. p.ts;;The Thit e cont contac actt oftran transf ers s inggno ow real reners al rshi righ rights merely mer ely causes causes ce certa rtain in obli obligat gation ionss to arise.

Contract of  Sale

Contract to Sell

1. Title passes to the buyer   upon upon del deliver iveryy of the thing sold

1. Owne Owners rshi hip p is res reserve erved d in the the seller and is not to pass until full pay payment ment of the the purchase price 2. Full payment is a

2. No Nonn-pa paym ymen entt of the price is a nega negativ tive e resol resolut utor oryy co cond ndit itio ion n and the the

positi positive ve sus suspen pensiv sive e condition, the

failure of which is not

a

breach

–

 

ca casu sual al or serio serious us but simply prevents the oblig obligat atio ion n of th the e vendor ven dor to con convey vey ti title tle fr from om havin havingg binding force 3. Title remains in

regi regisstr tra ant in go goo od faith. fait h. Such Such second second buyer buy er cannot cannot def defeat eat the first buyer’s title. Ratio: Ful Fulfil filmen mentt of the suspensive conditions affects the selle seller’ r’ss tit title le to th the e

be deemed a buyer in bad faith and prospective buyer cannot seek the relief of reconveyanc reconv eyance e of property.

the e ve vend ndor or if the cannot recover th vend ndee ee does does not not ownersh rship of the ve comply ly wi with th the the thing sold and comp deliv deliver ered ed until until th the e condition of co cont ntra ract ct of sale sale is  precedent  resolved and set making payment at the time specified aside in the contract

property delivery andofprevious the property automatically transfers ownership/title to the buyer.

E ce na: s nIf Tx he reptiow o previou prev iouss sale sale of the property.

remedy of the seller is to exact fulfilment or to rescin ind d the the contract

3. Vendor Vendor loses and

Conditional Sale

Contract to Sell

 As to reserva reservation tion of title to the subject  property  In both cases the seller may reserve the title itle to the subje ubject ct pro propert pertyy unti untill fulfillment of the suspensive condition i.e. full payment of the price  As to effect of fulfill fulfillment ment of suspensive suspensive condition Upon 1. Upon fulfillment o off 1. the suspensive fulfillment of the condition, the suspensive condition, ion, which co cont ntra ract ct of sale ale is condit the full ther thereb ebyy pe perf rfec ecte ted, d, is paymen entt of th the e such that if there had paym purcha hase se price price,, been previous delivery purc owners rshi hip p wi will ll of the subject owne property to the buyer, not owne owners rshi hip p th ther eret eto o automatically tr tran ansf sfer er to the the automatically  buyerr alth althou ough gh transfers to the buye buyer buy er by ope operat ration ion the property may been of law wi with thou outt any any have fu furt rthe herr act by the the previously delivered to him. seller. The  prospective seller seller st still ill has has to convey convey title title to the  prospective buyer   by ente enteri ring ng into into a contract of absolute sale.  As to effect of sale sale of the sub subject ject  property to 3rd  persons

1. Cons Constr truc ucti tive ve /actual knowledge on the part of the 2nd buyer of the defect in the seller’s title

1. Third person buying the property prope rty despite despite fulfilment of the suspensive

renders him

condition condit ion canno cannott

not

a

OBJECTS OF SALE Requisites: 1. THINGS: a) de dete term rmin inat ate e or de dete term rmin inab able le (Arts. 1458, 1460) b) lawful (Arts 1347, 1409 [1,4] c) shou should ld no nott be impo imposs ssib ible le (Art (Art.. 13 1348 48)) e.g. .g. must be within thin the the commerce of man 2. RIGHTS – must be transmissible Exceptions: -future inheritance - service Emptio rei speratae

Emptio spei

1. Sale of an expected 

1. Sale Sale o off a me mere re hope or expectancy that the thing will come to existence;

thing

Sale Sale of the the ho hope pe itself 

2. Sale is subject to the condition that the th thin ingg wi will ll ex exist ist;; if it does not, there is no contract 3. The uncert uncertaint aintyy is with with rega regard rd to th the e quantity and quality of the thing and not the existence of the thing 4. Object is a future thing

2. Sa Sale le prod produc uces es effec effectt even even if the thing does not come into existence, unless it is a vain hope 3. The uncertainty is with with rega regard rd to th the e exis existe tenc nce e of the thing 4. Object is a present thing which is the hope or expectancy

NOTE: In case of doubt the presumption is in favor of emptio rei speratae which is more in keeping with the commutative character of the contract Goods which may be Object of Sale

 

a. Existing goods – goods owned or possessed by the seller. b. Future goods – goods to be manufactured, raised or acquired by the seller after the perfection of the contract. NOTES:  



 

A of future goods istovalid only as ansale executory contract be fulfilled by the acquis acquisiti ition on and delive delivery ry of goods specified. While Whi le there can be sal sale e of future future property, there can generally be no donation of future property ( Article 751 Civil Code) Future inheritance cannot be sold. A co cont ntra ract ct of sale sale or pu purc rcha hase se of go goods ods to be de deli live vere red d at a fu futu ture re time, tim e, if enter entered ed into into witho without ut the intention of having any goods pass from one party to another, but with an understanding that at the ap appo poin inte ted d ti time me,, th the e pu purc rcha hase serr is merely to receive or pay th the e difference between the contract and the market market price prices, s, is illega illegal. l. Su Such ch contract falls under the definition of “fu futu turres es” ” in whi hicch th the e pa part rtiies merely gamble on the rise or fall in prices and is declared null and void by law. law. (A (Art rt.. 20 2018 18,, NCC) NCC) (Onapal Phil Phil..

Co Comm mmod odit itie ies, s,

In Inc. c.

vs vs..

3. Buyer, as a generall rule, cannot genera re retu turn rn the the obje object ct sold 4. Se Selle llerr wa warra rrants nts the thing sold

5. Buye Buyerr ca can n deal deal with wit h the thing sol sold d as he pleases being the owner

Contract for Piece of Work

1. The thing tr tran ansf sferr erred ed is on one e not in existen existence ce and which whi ch never never wou would ld have existed but for the orde rder of the part partyy desir esirin ingg to acquire it

CA

[1993])

In Inst stan ance cess when when the the Civi Civill Code Code reco cogn gniizes zes sale of th thiing ngss no nott actually or already owned by the seller at the time of the sale: 1. Sale of a thing having pot potential  Article 1461) existence ( Article 2. Sale Sale of fu futu ture re go goods ods ( Article  Article 1462) 3. Contra Contract ct for for the the delive delivery ry at at a certa certain in price of an article which the vendor in the ordinary course of the business busi ness manufactu manufactures res or procures procures for the general market, whether the same is on hand at the time or not (Article 1467) 

Sale

Agency to sell

1. Buye Buyerr re rece ceiv ives es the goods as owner

1. Agen Agentt re rece ceiv ives es the goods as goo goods ds of the princip principal al who retains his ownership over them

2. Buyer  pays the  price

2. The services dominate the contract even thou though gh ther there e is a sale of goods involved

3. Not Not wi with thin in the the Statute of Frauds

2.  Agent

delivers the price which which in turn he got from his buyer 

3. Agent can return the goods in case he is unable to sell the same to a third person 4. Agent Agent make makess no warran war ranty ty for which which he assumes personal lia liabi bilit lityy as lo long ng as he acts acts wi with thin in hi hiss authority and in the name of the seller 5. Agent in dealing with the thing received rece ived,, must must act and is bound acco accord rdin ingg to the the instruc instructio tions ns of the principal

Sale 1. The thing tr tran ansf sferr erred ed is one one wh whic ich h wo woul uld d have have exi exist sted ed and and wo woul uld d have been the subj subjec ectt of sale sale to some other person, person, even even if the the ord rder er had not been given 2. The primary obje object ctiv ive e of the the contract is a sale of the manu manufa fact ctur ured ed item; it is a sale of goods goo ds even tho though ugh the item is ma manu nufa fact ctur ured ed by la labo borr furni furnish shed ed by the seller and upon prev previo ious us orde orderr of the customer 3. Within the Statute of Frauds

Rules to determine if the contract is one of Sale or Piece of work: a. If ordered in the ordinary course of business – sale b. If man manufa ufactu cture red d specia specially lly for the customer and upon his special order,

 

an and d no nott fo forr th the e ma mark rket et –  piece of  work

5.

Buyer still has to pay the price

SCHOOLS OF THOUGHT: a) Massachusetts rule: If specifically done at the order of another, this is a contract for a

p iece of work. (Philippin pine application) b) New New Yo York rk rule rule:: If thin thingg alr already eady exists-SALE; if not-WORK c) Engl Englis ish h rule: rule: If mate materi rial al is more more valuab val uablele-SAL SALE; E; if ski skill ll is mor more e valuable-WORK

BARTER   contract whereby one of the parties binds bin ds him himsel selff to give give one thing thing in consideration of the other's promise to give another thing. NOTE: The The on only ly poin pointt diff differ eren ence ce between contract of sale and barter is in the element which is present in sale but not in or barter barits ter, , namely namely::  price certain in money equivalent

NOTE:  If the considera consideration tion iiss partly in mone mo ney y and partly in another thing, determine: a. Th The e man manif ifes estt inte ten nti tio on of th the e parties b. If the the inten intentt is not not clea clear, r, appl applyy the following rules: 1. If the thing is more valuable than money – barter  2. If the money and the thing are of equal value – sale 3. If the thing thing is less less valuab valuable le than money – sale Sale

Dation in Payment

No pre-existing credit 2. Obli Obliga gati tion onss are are created 3. Consid Considera eratio tion n on the part of the seller is the price; on the part of the buyer is the the acqu acquis isit itio ion n of the object

1. Pre-existing credit

1.

4.

Greater freedom in dete determ rmin ining ing the price

2. Obliga Obligatio tions ns are extinguished 3. Con Consid sidera eratio tion n of the the debt debtor or is the the exti exting ngui uish shme ment nt of the debt; on the part of the creditor, it is the the acqu acquis isit itio ion n of the object offered in lieu lieu of th the e origi origina nall credit 4. Less Freedom in determining determ ining the price

5. The paymen paymentt is received receive d by the debt debtor or befo before re th the e cont contra ract ct is perfected.

PRICE  The sum stipulated as the equivalent of the the thin thingg sold sold and and also also ever everyy incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. 

Requisites: 1. Certainty or ascertainable at the time of perfection 2. Real, not fictitious ome e ca casses, es, must ust not be 3. In som gross grossly ly infer inferior ior to the value value of the thing sold. 4. Paid in money or its equivalent

Certainty  It is not necessary that the certainty of the price be actual or determined at the time of the execution of the contract. The price is certain in the following cases: 1. If the parties have fixed or agreed upon a definite amount; NOTE:  The fi fixing xing of th the e pri price ce can can never be left to the discretion of one of the contracting parties. However if the the pr pric ice e fixe fixed d by on one e of the the parties is accepted by the other, the sale is perfected. 2. If iitt be cer certai tain n wi with th rref efere erence nce to another thing certain 3. If tthe he dete determi rminat nation ion of tthe he pric price e is le left ft to the the ju judg dgme men nt of a specified person or persons even before such determination 4. In th the e cases cases prov provid ided ed unde underr Art. Art. 1472 NCC

Effect Eff ect when the pr price ice is fix fixed ed by the third person designated:   GENERAL RULE: Price fixed by a third pe pers rson on de desi sign gnat ated ed by the the pa part rtie iess is binding upon them.   EXCEPTIONS:

 

1. Whe hen n th the e th thir ird d pe perrson acts acts in bad faith or by mistake 2. When When the the third third perso person n disreg disregard ardss the specific specific instructions instructions or the pr proc oced edur ure e mark marked ed out out by th the e parties

Eff Effect when thedesignated: price price is not fixed fixed by theect third person 1. If the the th thir ird d pe perrso son n refus efuse es or cannot fix the price, the contract shall become ineffe ine ffecti ctive, ve, unles unlesss the partie partiess su subs bseq eque uent ntly ly ag agre ree e up upon on th the e price 2. If the the third third pers person on is pre preve vent nted ed from fixing the price by the fault of the seller or buyer, the party not in fault may obtain redress against the party in fault Effect of Gross Inadequacy of Price: 1. Vo Volu lunt ntar ary y sale saless   

GE GENE NERA RAL Ldoes RULE RULE: : affect Mere Mer e inadeq ina dequac uacy of the price not validity ofy the sale.  A valuable valuable considera consideration tion,, however however small or nominal, if given or sti stipul pulate ated d in good good faith faith is is,, in the absence of fraud, sufficient. (Rodriguez vs. CA, 207 SCRA 553) 

Future inheritance cannot be sold.

  EXCEPTIONS:

a. Where Where low low pri price ce indi indicat cates es vice vice of consent, sale may be annulled; or contract is presumed to be an equitable mortgage b. Wher Where e the the pric price e is so low low as as to be “sho hock ckin g aside. to co cons nsci cien ence ce”, ”, sale “s may being set

2. Involu Involunta ntary ry or Forced Forced sales sales   GENER GENERAL AL RULE:  Mere Mere inadeq inadequac uacyy of the price is not a sufficient ground for the cancellation of the sale if property is real.   EXCEPTIONS:

a. Wher Where e the the pric price e is so low low as as to be shocking to the moral consci con scien ence, ce, judici judicial al  sale of pe pers rson onal al pr prop oper erty ty wi will ll be set set aside

b. In the the even eventt of a re resal sale, e, a bett better er price can be obtained

NOTE:  The validity of the sale is not necessarily affected where the law gives to the owner the right to redeem, upon the theory that the lesser the price, the easi easier er it is fo forr the the ow owne nerr to ef effe fect ct redemption.

Effect where price is simulated 1. If it it is shown shown to have have been been in realit reality  y  a dona donati tion on or some some other other act or  contract 

The sale is void but the act or contract may be valid as a donation

2. If not 

The contract inexistent

is

void

and

Effect of Failure to determine price: 1. Wher Where e cont contra ract ct exe execu cuto tory  ry  

inefficacious

Th The e co cont ntra ract ct is

2. Wher Where e the thin thing g has been been deli delive vere red  d  to and appropriated by the buyer  

The buyer must pay a reasonable price therefore

Reasonable price – generally the market price at the time and place fixed by the contract or by law for the delivery of the goods PERFECTION OF SALE   GENERAL RULE: It is perfected at the moment there is meeting of the minds upon a determinate thing (object), and a cer certai tain n is price pridelivered. ce (consi (consider derati ation) on),, between eve even n if neither A choice rescission and fulfilment, with damages in either case)

NOTE:: Sale is a consensua NOTE consensuall contract; contract; He Hence nce,, del delive ivery ry and paymen paymentt are are not essential for its perfection   EXC EXCEPT EPTION ION:: When the sale is subject to a suspensive condition by virtue of law or stipulation. * The terms and conditions of payment are merely merely accide accidenta ntal, l, not es essen sentia tiall elements of the contract of sale except where the partied themselves stipulate that in addit addition ion to the subjectsubject-matte matterr

 

an and d th the e pr pric ice, e, th they ey ar are e es esse sent ntia iall or material to the contract.

whereb wher eby, y, de desp spit ite e de deli live very ry of the the proper pro perty ty sold, sold, ow owner nersh ship ip rem remain ainss with the seller until full payment of the price is made.

Requirements Requireme nts for perfection a. When When p part arties ies are face face to to face face  When an offer is accepted without conditions or qualifications

2. Co Cont ntra ract ct to sell sell 3. Co Cont ntra ract ct of of insu insura ranc nce e – a perfected

  ndit NOTES:  A co cond itio iona nall ac acce cept ptan ance ce is a counter-offer  when negotiated thru phone it is as if it is negotiated face to face

de deli live very ry,, ve vest stss an in existing the the ve vend ndee ee an equitable title, interest over the goods sufficient to be the subject of insurance

b. When contract is thru correspondence or thru telegram When n the offeror offeror re recei ceives ves or has  Whe knowledge of the acceptance by the offeree NOTE:  If the the buy buyer er has has alr alrea eady dy ac acce cept pted ed bu butt th the e sell seller er do does es no nott kn know ow ye yett of th the e ac acce cept ptan ance ce,, the the seller may still withdraw c. When a sale is subject to a suspensive condition 

From Fro m the moment moment the conditio condition n is fulfilled

TRANSFER OF OWNERSHIP   GE GENE NERA RAL L RULE RULE:: Whi While le a contra contract ct of sa sale le is co cons nsen ensu sual al,, owne owners rshi hip p of th the e th thin ingg sold sold is acqu acquir ired ed on only ly upon upon it itss delivery, actual or constructive, to the buyer. buy er. (Daus vs. Sps. De Leon, 16 June 2003) 

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 property sold has been delivered. (Sampaguita Pictures, Inc vs. Jalwindor Manufacturers, Inc. 93 SCRA 420)



Nonpayment only creates a right to demand payment or to rescind th the e cont contra ract ct,, or to cr crim imin inal al prosecution in the case of bouncing checks. (EDCA Publ Publis ishi hing ng an and d Di Dist stri ribu buti ting ng Corp. vs. Santos, 184 SCRA 614)

  EXCEPTIONS:

Pactum (contractual reservation of title) – a stipulation, usua usuall llyy in sale saless by in inst stal allm lmen ent, t,

1. Contrary stipulation re rese serv rvat atii do domi mini niii 

or

cont contra ract ct

of

sale sale,,

ev even en

wi with thou outt

RULES GOVERNING AUCTION SALES 1. Sales of separate lots by auction are separate contracts of sale. 2. Sale iiss per perfecte fected d by the fall of the the hammer 3. Se Sell ller er has has the ri righ ghtt to bid in the the auction, provided:   a) such rright ight was reserved   b) notice was given that the sale was subject to a right to bid on behalf of the seller   c) right is not prohibited by law or by stipulation 4. Advertisements for bidders are simply invitations to make proposals, and the adver adv ertis tiser er is not not bou bound nd to acc accept ept the high highes estt or lo lowe west st bi bidd dder er,, un unle less ss the the contrary appears. EFFECT OF PROMISE EFFECT PROMISE TREATE TREATED D UNDE UNDER  R  ART. 1479 Civil Code: 1. Accepted unilateral promise to sell or buy  Onl Onlyy one makes the promis promise, e, this this promis pro mise e is acc accept epted ed by the other. other. Example: A promises to sell to B, B accepts the promise, but does not in turn buy. does promise not bindtothe promissor even if ac acce cept pted ed an and d may may be with withdr draw awn n anytime. NOTE:  Pending not notice ice of its withdrawal, withdrawal, the the acce accept pted ed pr prom omis ise e part partak akes es the the natu ature of an offe ffer to sel elll which ich if accepted, results in a perfected contract of sale (Sanchez vs. Rigos 45 SCRA3 68 ). In othe otherr word words, s, if the the ac acce cept ptan ance ce is made before withdrawal, it constitutes a bindin bin dingg contra contract ct of sal sale e althou although gh the option is given without consideration. the pr prom omis ise e is suppo support rted ed by a  if the consider cons ideration ation distin distinct ct and separate separate from the price (option money), its



 

ac acce cept ptan ancce will ill give give ri rise se to a perfected contract. 2. 

Bilateral promise promise to buy and sell One party arty ac acce cept ptss th the e ot oth her er’s ’s promise to buy and the latter, the former’s promise to sell a

  It is a right of first priority all things

and condit condition ionss bei being ng equ equal; al; the there re should be identity of the terms and cond condit itio ions ns to be of offe fere red d to the the optionee optio nee and all othe otherr prospectiv prospective e buyers, with optionee to enjoy the right of first prior priority. ity. A deed of sale

determinate thing for a price certain it is reciprocally demandable It requires no consideration distinct from the selling price NOTE: this is as good as a perfected sal ale. e. No tit title le of of domin dominiion is is transferred as yet, the parties being given giv en only only  th the e ri righ ghtt to dema demand nd fulfillment or damages.

executed in favor of a third party who cannot be deemed a purchaser in good faith, and which is in violation viola tion of the the of the right right of first first refusa ref usall gra grante nted d to the option optionee ee is NOT voidable under the Statute of Frauds Fra uds,, suc such h contra contract ct is val valid id BUT re resc scis issi sible ble un unde derr Arti Articl cle e 13 1380 80 to 13 1381 81(3 (3)) of the the New Civ Civil Co Code de (Guzman Bocaling & Co. vs.

Policitation  An unaccepted unilateral promise to buy or sell. Even if accepted by the ot othe herr pa part rty, y, it do does es no nott bind bind th the e pr prom omis isso sorr an and d mayb maybe e wi with thdr draw awn n anytime. This is a mere offer, and has not yet been converted into a contract.

Bonnavie; Riviera Filipina, Inc vs. CA et.al. GR No. 117355, April 5, 2002).

 

Option contract  A contract granting a privilege in one pers person on,, fo forr whic which h he has has paid paid a consider cons ideration ation,, which which gives him the right to buy certain merchandise, at anytime within the agreed period, at a fixed price. option without without consider consideration ation is  An option void and the effect is the same as if there was no option * Howe However, ver, in Sanchez vs. Rigos (1972 ), even though the option was not supp suppor orte ted d by a cons consid ider erat atio ion, n, th the e moment mom ent it was accept accepted, ed, a perfec perfected ted contract of sale resulted, applying Art. 1324 of the NCC. In view of the ruling of the Supreme Court, the only importance of the consideration for an option is that the option cannot be withdrawn by the grantor after acceptance. * In an option to buy, the party who has an opt option ion may validl validlyy and effect effective ively ly exercise his right by merely notifying the owner own er of the former’s former’s decisi decision on to buy and expressing his readiness to pay the stipulated price. Right of First Refusal

  The basis of the right of first refusal

must be the current offer to sell of the seller or offer to purchase of any prospecti prosp ective ve buyer. buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated could the owner validly offer to sell the the pr prop oper erty ty to a thir third d pers person on,, agai again, n, unde underr the the same same term termss as offered to the optionee ( Paranaque Kings Enterprises, Inc. vs. CA GR No. 111538, February 26, 1997 )   The lessee’s right of first option to

buy the leased property in case of its sale is but a part of the bigger right to lease the said property from the lessor. lesso r. The option option was given given to the the lessee because she was the lessee of the the sub subje ject ct prop proper erty ty.. It was was a component compo nent of the consideration consideration of the the lea lease se.. Th The e optio option n was by no meanss an independe mean independent nt right right whic which h can be exercise exercised d by the lessee. lessee. If the lessee is barred by the contract from assigning her right to lease the subject property to any other party, the the le less ssee ee is simi simila larl rlyy ba barr rred ed to assi assign gn he herr firs firstt opti option on to bu buyy the the leased property to another. (Bangayan et.al vs. CA and Lim GR No.123581, August 29, 1997 )

Ea Earn rnes estt mone money y  – or “ARRAS” is so some meth thin ingg of valu value e to show show that that the the buyer was really in earnest, and given to

 

th the e sell seller er to bind bind th the e barg bargai ain. n. It is considered as: a) part of the purchase price b) proo prooff of perf perfec ecti tion on of th the e contract *I *Itt shal shalll be de dedu duct cted ed fr from om th the e to tota tall price.

been tolost profit the thing had itthe notone been or from destroyed.  

money Earnest mo

Option mo money

1. Title passes to the the buy buyer upo upon deli delive very ry of the thing sold

1. Ownership is reserved to the seller and is not to pass until full payment 2. In case of non-payment, non-pa yment, there ca can n be act ctio ion n fo forr specific performance

2. In case of non-pa non -payme yment, nt, an action for specific perf perfor orma manc nce e or for res rescis cissio sion n can be fil ile ed by the injured party 3. Part of the purchase price

4. Whe hen n gi give ven, n, the buyer is bound to pay the balance 5. Given when there is already a sale

3. Money given as a distinct consideration for an option contract 4. The would-be buyer is not required to buy 5. Applies to a sale not yet perfected

  GENERAL

RULE: Who bears the risk

of

is

governed

by

the

of

any

stipulations in the contract 

 

Contrary view: Where the ownership is transferred by de deli live very ry,, as in ou ourr code code,, the the perit applic app licati ation on of the axiom axiom res perit domino, impo impose sess the the risk risk of lo loss ss upon the vendor; hence, if the thing is lo lost st by fo fort rtui uito tous us ev even entt be befo fore re delivery, the vendor suffers the loss and cannot recover the price from the vendee (Comm Comment entari aries es and   Jurisprudence on the Civil Code of  the Philippines, Tolentino )

d. T he th ing ithe s loloss. st after delivery : Buyer bears Question: If one does not comply, the other need not pay? Answer: True. But this only applies when the seller is able to deliver but does not.

RULES ON RISK OF LOSS AND DETERIORATION: a. The thing sold is lost before  perfection: Seller bears the loss. b. The The thin thingg sold sold is is los lostt at the time of   perfection: Contract is void or inexistent. c. The thing sold is lost after   perfection, but before delivery : loss

  seller is guilty of fraud, negligen negl igence, ce, default default or violation violation of contractual terms 3. object sold is generic (Civil Code of the Philippines, Paras) This vie view w conf conform ormss with with NOTE:  This Manre Man resa’ sa’ss view. view. Buy Buyer er wo would uld have have 2.

In the absence stipulation:

First view: Buyer  bears the loss as an exception to the rule of res perit domino.   EXCEPTIONS: 1. wh when en ob obje ject ct so sold ld cons consis ists ts of fungible goods for a price fixed according to weight, number or measure

EFFECT OF LOSS AT THE TIME OF SALE: a. Thing entirely   lost at the time of pe perf rfec ecti tion on:: Co Cont ntra ract ct is vo void id an and d inexistent b. Thing o on nly  partially   lost: Vende Vendee e mayy el ma elec ectt be betw twee een n with withdr draw awin ingg from the contract or demanding the remaining part, paying its proportionate price Sale by description  A sale where a seller sells things as being of a certain kind, buyer merely relying on the seller’s representationss or descriptions. representation  There is warranty that the thing sold correspon corr esponds ds to the repr represen esentatio tations ns or descriptions. Sale by sample  A sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the bulk, which is not present and as to which there

 

is no op oppo porrtu tuni nity ty to in insp spec ectt or examine. NOTE:  The mere exhibit exhibition ion of the sample does not necessarily make it a sale by by sample sample.. This This exhibi exhibitio tion n must mu st ha have ve be been en th the e so sole le ba basi siss or inducement of the sale. 

  GENER GENERAL AL

bind themselves also have legal capacity to buy and sell.   EXCEPTIONS: 1.

There is warranty that the bulk of the commod commodity ity will will corre correspo spond nd in kind, quality, and character with the sample exhibited.

NOTE: In a ssal ale e by sam sampl ple e and and by des description, there is a tw two o-fold warranty. RIGHTS OF BUYER: 1) Re Retu turn rn th the e th thin ingg an and d re reco cove verr th the e money paid, or 2) Reta Retain in th the e th thin ingg and and su sue e fo forr th the e breach of warranty. Cont ntra ract ct is PURCHASE BY MINORS: Co ge gen nerally ally void vo“where idab able le necessaries bu butt in care ase ase sold of necessaries, and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore. Necessarie Necessariess are those in Art. 290.”

FORMALITIES OF CONTRACT OF SALE   GENER GENERAL AL RULE:  Sale Sale is a consen consensua suall cont contra ract ct and and is perf perfec ecte ted d by mer mere consent.   EXCEPTIONS: In order to be enfor enf orcea ceable ble by action action,, the fol follow lowing ing must be in writing: 1. Sal Sale e of person personal al proper property ty at a price not less than P500

2.

CAPACITY TO BUY OR SELL

Abso Absolu lute te inca incapa paci city ty (min (minor ors, s, demen dem ented ted person persons, s, imb imbec ecile iles, s, deaf and dumb, prodigals, civil interdictees) party cannot bind themselves in-any case. Relative Relat ive incapacit incapacityy – inca incapaci pacity ty ex exis ists ts only only with with re refe fere renc nce e to certain persons or a certain class of property

Relative Incapacity A. Husb Husban and d and and wi wife fe (A (Art rt.. 14 1490 90): ): Gene Genera rall lly, y, a sale sale by one one sp spou ouse se to another is void. 

The husba husband nd and wife wife can cannot not sell sell property to each other except: 1. Wh When en a se separ parati ation on of proper property ty was agreed upon by the spouses 2. When there has been a judicial se sepa para rati tion on and of 135 pr prop oper ty Family un unde derr Article 134 oferty the Code

B. Incapacity by reason of relation to property (Art. 1491)  The following persons cannot acquire prop pr oper erty ty by pu purc rcha hase se,, ev even en at a publicc auction, publi auction, either in person person or throug thr ough h the mediat mediation ion of anothe another: r: (GAEP-JO) 1. the guardian, with respect to the property of his ward; 2. age gen nts, ts, with ith re resp spec ectt to the the property whose administration or sale may have been entrusted to

2.

Sinterest ale ale oftherein real pro rop per erty ty or an 3. Sal ale e of property not to be perfor per formed med within within a year year fro from m the date thereof 4. “Ap “Applic plicabl able e statut statute” e” re requi quires res that the contract of sale be in a certain form Statute of Frauds Frauds is applicable applicable NOTE:  Statute only to executory contracts and not to contracts which are totally or partially performed.

RULE:  All pers persons ons who can

3.

4.

5.

6.

them, unless the consent of the principal has been given; execu xecutor tor or administra administrator, tor, with re respe spect ct to the property property of the estate under administration; public offic officers ers and emplo employees yees,, with respect to the properties of the the go gove vern rnme ment nt,, its po poli liti tica call subdivisi subdi visions, ons, or GOCCs, that are entrusted to them; udge ges, s, just justic ices es,, pr pros osec ecut utin ingg  jud attorneys, clerks of courts, etc., with respect to the property in custogia legis; and any

ther other

pers person on

disqualified by law.

spec specia iall llyy

 

Examples of persons especially disqualified by law: a. Aliens who are disqualified to purchase agricultural lands b. An unpaid seller having a right of lien lien or ha havi ving ng st stop oppe ped d th the e goods in transitu, who is prohibited from the goods either eit her direct directly ly buying or in indir direc ectly tly in the resale of the same, at public or pr priv ivat ate e sale sale wh whic ich h he may may make c. The officer holding the execution, or his deputy. those disqu disqualifi alified ed NOT NO TE: While those under Arts. 1490 and 1491 may not become lessees (Art. 1646), still aliens may become lessees even if they cannot buy lands.  

Effect of violation: a) With respect to nos. 1 to 3: the sale is VOIDABLE .

1. 2.

OBLIGA OBL IGATIO TIONS NS OF THE VENDOR VENDOR:: (WPDTT)

(c (can anno nott

be

Del eliv iver er the the thin thingg sold sold (ca (canno nnott be waived)

3.

Warrant against eviction and against hidd hidden en de defe fect ctss (c (can an be waiv waived ed or  modifi mod ified ed since since warran warranty ty is not an essential essen tial elemen elementt of sale)

4.

5.

of the the contract contract

ake car care of the the thin thing, g, pend pendin ingg Take deli delive very ry,, wi with th pr prop oper er dili dilige genc nce e ( Article  Article 1163) Pay for the expenses of the deed of sal sale, e, unl unless ess there there is stipul stipulati ation on to the contrary

DELIVERY  Is a mode of acquiring ownership, as a consequence of certain contracts such such as sale sale,, by virt virtue ue of wh whic ich, h, actually or constructively, the object is placed in the control and possession of the vendee. 



Delivery Delive ry of the thing thing tog togeth ether er with the payment of the price, marks the consummation of the contract of sale(PNB vs. Ling, 69 Phil. 611) In all all fo form rmss of deli delive very ry,, it is necessary that the act of de deli live very ry be co coup uple led d with with the the intention of delivering the   thing. The act without the intention is insufficient.  (Norkis Distributor, Inc. vs. CA, 195 SCRA 694)



1.

administrator sell. irregular The sal sale e was indubitablytoillegal,

and fic fictit titiou ious, s, and the court’ court’ss approval of the assailed compromise agreement violated Article 1491 and cannot work to ratify a fictitious contract which non-existe xistent nt and void   from is non-e the very beginning b) With respect to nos. 4 to 6: the sale is NULL AND VOID. viol olat atio ion n of publ public ic Reason:  vi poli policy cy cann cannot ot be su subj bje ect to ratification

ownership

waived)

  only on ly pr priv ivat ate e ri righ ghts ts,, Reason: which are subject to ratification are violated NOTE:  In th the e case case of Lao vs. Gen Ge nato, to, 137 SCRA 77 , the Suprem Sup reme e Court Court found found that that the sale sale by th the e admi admini nist stra rato torr of certain properties of the estate in or order der to settle settle the existi existing ng ob obli liga gati tion onss of th the e esta estate te was was made to the administrator’s son  for a grossly low price. Furthe Fur thermo rmore, re, the sai said d sale was not submitte submitted d to the pro probat bate e court for approval as mandated  by th the e or order der au auth thor oriz izin ing g th the e

Transfer

2.

Kinds: Actu Actual al or re real al – pl plac acin ingg the the thin thingg under the control and possession of the buyer. Legal Leg al or con constr struct uctive ive – delive delivery ry is repre rep resen sented ted by other other signs signs or act actss indicative thereof a. de deli live very ry by the the execution of a  public instrument.

Givess rise rise only only to a pr prim ima a NOTE: Give NOT facie presumption of delivery which is destroyed when actual delivery is not not ef effe fect cted ed beca becaus use e of a le lega gall impe impedi dime ment nt (Te (Ten n Forty Forty Realty Realty vs. Cruz, 10 Sept. 2003) b. trad radit itio io symbo ymboli licca  - to eff effec ectt

delivery, the parties make use of

 

a token or symbol to represent the thing delivered c. traditio longa manu  – se sell ller er po poin inti ting ng out out to th the e bu buye yerr th the e things things which which are transf transferr erred, ed, which at the time must be in sight.



d. simply traditiocontinues brevi m nu – bu buyye inapossession ofr



th the e th thin ingg but but under nder ti titl tle e of ownership. e. traditio constitutum  possessorium  – seller seller continue continuess

3.

in possession but under a different title oth the er than ownership. Quasi-tradition – delivery of rights, cred cr edit itss or in inco corp rpor orea eall pr prop oper erty ty,, made by: a. placin placingg title titless of own owners ership hip in the the hands of buyer b. allo allow win ingg bu buyyer to make make use use of rights

4.

Tradition by operation of law Construct Const ructive ive delivery delivery require requiress three three th thin ings gs befo fore re owne ownerrsh shiip may be transferred: 1. The The sell seller er must must have have cont contro roll ov over er the thing 2. The buyer buyer must must be put put under under contro controll 3. There must be the intention to de deli live verr th the e th thin ingg fo forr pu purp rpos oses es of ownership

Whe hen n is th the e vend vendo or not bound ound to deliver the thing sold: 1. If the the vend vendee ee has has not not paid paid him the the price 2. If no in per pethe rio iod dcontract for paym paymen entt has been been fixed 3. Even Even if a per erio iod d for pay paymen entt has been bee n fix fixed ed in the contrac contract, t, if the vendee has lost the right to make use of the same.

Sale or return  Property is sold, but the buyer, who becomes the owner of the property on delivery, has the option to return the th e sa same me to th the e se sell ller er in inst stea ead d of paying the price. NOTES: 



It is a kind of sale with a condition subsequent. Th The e bu buye yerr must must co comp mply ly with with the the exp xprress ess or impl implie ied d co con nditi dition onss atta attach ched ed to the the re retu turn rn pr priv ivil ileg ege; e; otherwise, the sale be beccomes absolute. Buyer, being the owner, bears the risk of loss

Sale on trial, approval, or satisfaction  A contract in the nature of an option to purchase if the goods prove to be sati satisf sfac acto tory ry,, the the ap appr prov oval al of the the buyer being a condition precedent.  Rules: 1. titl title e re rema main inss in tthe he ssel elle lerr 2. risk isk of lo losss rem remai ains ns with ith se sell lle er except when the buyer is at fault or has agreed to bear the loss 3. buyer buyer must must giv give e go goods ods a trial, trial, e exce xcept pt where wh ere it is evi eviden dentt that that it can cannot not perform the work 4. period within which bu buyyer must sign signif ifyy his his ac acce cept ptan ance ce runs runs only only when all the parts essential for the operat ope ration ion of the object object have have been been delivered. 5. if it it is sstipu tipulat lated ed th that at a thi third rd pe perso rson n must satisfy approval or satisfaction, the provision is valid, but the third pers person on mu must st be in good good fait faith. h. If refusa ref usall to acc accept ept is not not jus justif tified ied,, seller may still sue. 6. Gener Generall ally, y, th the e sa sale le and and deliv delivery ery to a buyer who is an expert on the object purchased is not a sale on approval, trial, or satisfaction.

Sale or return

Sale on Trial

1. Subject to a resolutory condition 2. Depends entirely on the will of the buyer 3. Ownership passes to the buyer on deli delivver eryy and sub subse seque quent nt ret return urn rev revert ertss owner ownershi ship p in the seller

1. Subject to a suspensive condition 2. Depen epends ds on the the character or quality of the goods

4. Risk Risk of los losss or in inju jury ry re rest stss upon upon the buyer

4. Risk of loss remains with the seller

3. Owner Ownership ship rema remains ins in the seller until buyer signifies his approval or accep ccepta tan nce to the the seller

 

In Inst stan ance cess wher where e Se Sell ller er is stil stilll the the Owner despite Delivery: 1. Sale Sale on trial trial,, appr approva ovall or satisf satisfact action ion 2. Cont Contra rary ry in inte tent ntio ion n appe appear arss by th the e term of the contract; 3. Im Impl pliied rese reserrvati vatio on of owner wnersh ship ip (Article 1503) a. goods If unde under r the bill bill of ladi la ng,, the are deliverable toding seller or agent or their order; b. If the the bill bill of lad adiing ng,, alth althou ough gh stating that the goods are to be de deli live vere red d to th the e bu buye yerr or hi hiss agent, is kept by the seller or his agent; a. Whe hen n the bu buyyer er,, alt altho hou ugh th the e goods are deliverable to order of buyer, and although the bill of lading is given to him, does not honor the bill of exchange sent along with it.

* “Unlaw “Unlawful ful dep depriv rivati ation” on” is no longer longer limi limite ted d to a cr crim imin inal al act. act. Ther There e is Unlawful Deprivation where there is no valid transmission of ownership.

Place of delivery of goods 1. 2.

3.

SALE OF GOODS BY A NON-OWNER    GENERAL RULE: Buyer acquires no title even if in good faith and for value under th the e maxi maxim m Nemo dat quid non habet (“ (“Yo You u cann cannot ot gi give ve what what you you do not not have”).   EXCEPTIONS: (SMERVS) 1. Owner is estopped or precluded by his conduct

of delivery is that upon, place Where there is noagreed agreement of delivery determined by usage of trade Where there is no agreement and no  prevalent usage , place of delivery is

the seller’s place 4.

In any other case , place of delivery

is the seller’s residence 5.

In case of specific goods , which to

the knowledge of the parties at the time the contract was made were in some other place, that place is the place of delivery, in the absence of agreement or usage of trade to the contrary

Transf Tra nsfer er of owners ownership hip where where goods goods sold delivered carrierto the carrier is Delivery General Rule: to deemed to be delivery to the buyer Exception:  Where th the ri right of of possession or ownership of specific goods sold is reserved

Where there is an agreement , place

Time of delivery of goods Stipulated time 2. In the the ab abse senc nce e ther thereo eof, f, with within in a reasonable time 1.

NEGOTI NEGO TIAB ABLE LE DOCU DOCUME MENT NT OF TITL TITLE E (NDT)  A document of title in which it is stated sta ted that that the goo goods ds referr referred ed to ther therei ein n wi will ll be deli delive vere red d to the the bearer, or to the order of any person named in such document. May be ne nego goti tiat ated ed by de deli live very ry or  May indorsement.

2.

3. 4. 5.

6.

W heiste ntere sadle owne isnerrmaor de ap byparen thet egis red ow appar ent reg owner in accordance with recording or registration laws Sale ales sanc anctio tioned ned by judici judicial al or statutory authority Purchases in a merchant's store, fairs or markets When a person who is not the owner sells and delivers a thing, ubsequ quen entl tlyy acqu acquir ires es ti titl tle e subse thereto (Art. 1434) When Wh en the selle sellerr ha hass a voidable title which has not been avoided at th the e ti time me of th the e sale sale (A (Art rt.. 1506)

The document is negotiable if: The e go good odss are are de deli live vera rabl ble e to the the 1. Th bearer; or 2. If the goods are deliverable to the order of a certain person Persons who may negotiate NDT: 1. The owner; or 2. Any person to whom the possession or custody thereof has been entrusted by the owner, if by the terms ter ms of the docume document nt the baile bailee e issuing the document undertakes to deliver the goods to the order of the person per son to whom whom the possess possession ion or custody of the document has been entrusted or if at the time of such

 

en entr trus usti ting ng th the e do docu cume ment nt in su such ch form that it may be negotiated by delivery. * If the holder of a negotiable document of title (deliverable to bearer) entrusts the document document to a fri friend end for deposi deposit, t,

NOTE: Acceptance, even if not express may be implied when the buyer exerci exe rcises ses acts acts of own owners ershi hip p over over the excess goods. RULE ULES WHEN HEN GOO GOODS MI MIX XED WITH ITH GOODS OF DIFFERENT DESCRIPTION:  

bu butt th the e frie frthe iend nddocument be betr tray ayss by th the edelivering tr trus ustt an and d negotiates it to another who is in good faith, the said owner cannot impugn the validity of the negotiatio negot iation. n. As between between two inno innocent cent persons, he who made the loss possible shall bear the loss, without prejudice to his right to recover from the wrongdoer.



RIGHTS OF PERSON TO WHOM DOCUMENT HAS BEEN NEGOTIATED: 1) The title of the person negotiating the docum doc ument ent,, over over the goods goods covere covered d by the document; 2) The title of the person (depositor or owner) to whose order by the terms of

DELIVERY TO THE CARRIER    GENE GENERA RAL L RULE RULE:: Wh Where ere the seller seller is authorized or required to send the goods to the buyer, delivery to the carrier is delivery to the buyer.

th the e do docu cume ment nt such th the e goods; go good odss were were to be delivered, over 3) The direct obligation of the bailee to hold possession of the goods for him, as if th the e ba bail ilee ee ha had d co cont ntra ract cted ed to hi him m directly NOTE; Mere transferee does not acquire directly the obligation of the bailee (in Art. 1513). To acquire it, he must notify the bailee.

WHO CAN DEFEAT RIGHTS TRANSFEREE: 1. Creditor of transferor 2. Transferor 3. Subsequent purchaser

OF

RULES WHEN RULES WHEN QUANTITY QUANTITY IS LESS THAN AGREED UPON: 1. Buyer may reject; or 2. Buyer may accept what has been delivered, at the contract rate RULES WHEN QUANTITY IS MORE THAN AGREED UPON: 1. Buyer may reject all; or Buyyer may may acce accept pt th the e good goodss 2. Bu agreed upon and reject the rest; or 3. Buyer may accept all and must pay fo forr th them em at th the e co cont ntra ract ct rate

Buyer may accept the goods which are in accordance with the contract and reject the rest

NOTE:  If the subject matter is indivisible, in case of delivery of larger quantity of goods or of mixed goods, the buyer may reject the whole of the goods

  EXCEPTIONS: 1. 2.



When

a

co con ntrar traryy

inte intent ntiion

appears Implied reservation of ownership under pars. 1,2,3 of Art. 1503

Kinds of Delivery to the Carrier a. C.I.F. (cost, insurance, freight ) – sign signif ifyy that that the the pr pric ice e fixe fixed d covers not only the costs of the goods, goo ds, but the expens expense e of the freight and the insurance to be paid by the seller b. F.O.B. (fr (free ee on board  board   )  – goods are to be de deli live verred fre free of ex expe pens nse e to the the buye buyerr to the the point where they are F.O.B. The po poin intt of F.O. F.O.B. B.,, ei eith ther er at the the point of shipment or the point of destin des tinati ation, on, determ determine iness when when the ownership passes. NOTE: the terms C.I.F. and F.O.B. merely make rules of presumption p resumption c. C.O.D. (collect on delivery)  – the carr carrie ierr acts acts fo forr the the sell seller er in collec col lectin tingg the purcha purchase se pri price, ce, whic wh ich h the the bu buye yerr mu must st pa payy to obtain possession of the goods.

SELLER’S SELLER ’S DUTY DUTY AFTE AFTER R DELIV DELIVERY ERY TO CARRIER  1. To enter on behalf of buyer into such contract reasonable under the circumstances

 

2. To give give notice notice to buye buyerr regard regarding ing necessity of insuring the goods

PAYMENT OF THE PURCHASE PRICE   GENERAL RULE: The seller is not bound to deli delive verr th the e th thin ingg so sold ld un unle less ss th the e purchase price has been paid. EXCEPT PTIO ION: N: The   EXCE e sell se ller er has is boun bo und d to deliver even ifTh the price not been paid, if a period of payment has been fixed.

Sale of Real Property by Unit Entir tire e area area sta stated ted in the contra contract ct  En must be delivered  Whe hen n enti tirre area area could ould no nott be delivered, vendee may: 1. Enf Enforc orce th the e co cont ntrrac actt wit ith h th the e corresponding decrease in price 2. Resc Rescin ind d the the sale sale:: a. If the the lac lackk in are area a is at lea least st 1/10 1/10 th than an th that at st stat ated ed or stipulated b. If th the e de defi fici cien ency cy in qu quali ality ty spec specif ifie ied d in th the e cont contra ract ct ex exce ceed edss 1/ 1/10 10 of th the e pric price e agreed upon c. If the vendee would not have bought bou ght the immova immovable ble had he known of its smaller area of inferior quality irrespective of the extent of lack of area or quality

Sale for a Lump Sum (A Cuerpo Cierto)  Vendor is obligated to deliver all the land included within the boundaries, regardless of whether the real area should be greater or smaller  Ordinarily, there can be no rescission or reduction or increase whether the ar area ea be gr grea eate terr or less lesser er,, un unle less ss there is gross mistake. presumes that that the NOTE:  The Civil Code presumes purchaser had in mind a particular piece of land and that he ascertained its area and quality before the contract of sale was perfected. perfected. If he did not not do so, or if if having hav ing done so he made no object objection ion and consented to the transaction, he can blame bla me no one one bu butt hi hims msel elff (Ter Teran an vs. Villanueva Viuda de Riosa 56 Phil 677 )).. What is important is the delivery of all the land included in the boundaries.

DOUBLE SALE (Art. 1544) Requisites: VOCS 1. tw two o or more more tran transa sact ctio ions ns mu must st constitute valid sales; 2. they they must must pe pert rtai ain n ex exac actl tlyy to the the same object or subject matter; 3. they must be bought from the same or immediate seller; AND 4. two or more buyers who are at odds overr the rightf ove rightful ul ow owner nersh ship ip of the subj subjec ectt matt matter er must must re repr pres esen entt conflicting interests.  

Rules of preference: preference: 1. Personal Property a. first possessor in good faith 2. Real Property a. first first reg regist istran rantt in goo good d faith faith b. first first poss possess essor or in goo good d faith faith c. pe pers rson on wit with h ol olde dest st titl title e in go good od faith  

NOTES:  Purchaser in Good Faith  – one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property (Veloso vs. CA). tion requires actual  Registratio recording; if the property was never rea eall llyy reg egis iste tere red d as when the registrar forgot to do so although he ha hass be been en ha hand nded ed the the do docu cume ment nt,, there is no registration. 



P ossession isince s eitthe her law acmade tual no or constructive Sanch nchez ez vs. Ramos Ramos 40  distincti disti nction on (Sa Phil614) Possessio Poss ession n in Art.1 Art.1544 544 incl includes udes not on only ly mate materi rial al but but also also symb symbol olic ic poss posses essi sion on (T (Ten en Fort Forty y Re Real alty ty vs vs.. Cruz, 10 Sept. 2003.)





Title means Title means title title bec becaus ause e of sal sale, e, and not any other title or mode of ac acqu quir irin ingg pr prop oper erty ty (Lic Licha hauc uco o vs vs.. Berenguer 39 Phil 642 ) Hernandez vs. Katigbak  Rule: When the property property sold on exe execu cutio tion n is registered under Torrens, registration is the operative act that

 

gi give vess va vali lidi dity ty to th the e tr tran ansf sfer er or creates a lien on the land, and a purcha pur chaser ser on execut execution ion sal sale e is not required to go behind the registry to de dete term rmin ine e th the e co cond ndit itio ions ns of th the e pr prop oper erty ty.. Exce Except ptio ion: n: Wher Where e th the e purchaser had knowledge, prior to or

EFFECT IF BUYER HAS  ALREADY SOLD THE GOODS: General Rule: The unpaid seller’s right to lien or stoppage in transitu remains even if buyer has sold the goods. Except: 1) Wh When en the se selle llerr has given con conse sent nt

at vious th the eusti time men of the e umbra levy levy, , nce, ofe,su such chs pre previo lien lie or th encum enc branc hi his knowledge is equivalent to registration.

thereto, or buyer is a purchaser in good 2) When the faith for value of a negotiable document of title.

CONDITION Eff ffe ect of Non-f on-fu ulfil fillment of  Condition 1. If the the oblig obligati ation on of eit eithe herr party party is subject to any condition and such suc h condit condition ion is not ful fulfil filled led,, such party may either: a. ref refuse to pr pro oce cee ed wit ith h th the e contract b. proc procee eed d wi with th the the cont contra ract ct , waiving the performance of

 

condition. 2. If the ththe e condi con diti tion on is in in the nat natur ure e of a pro promise mise th that at it sh shou ould ld happen, the non-performance of such suc h condit condition ion may be treate treated d by the other party as breach of warranty. dist stin inct ctio ion n must must be made made NOTE: A di be betw twee een n a co cond ndit itio ion n impo impose sed d on th the e perfection of a contract and a condition imposed merely on the performance of an obligation. The failure to comply with the fir first st condit condition ion would would preven preventt the juridical relation itself from coming into existence, while failure to comply with th the e se seco cond nd mere meor rely ly gi give vess with th the e the opti opsale tion on either to refuse proceed or to waive the condition.  

Th The e mer mere fac actt th that at th the e seco con nd contra con tract ct of sal sale e was perfe perfecte cted d in good faith is not sufficient if, before ti titl tle e pass passes es,, th the e se seco cond nd ve vend ndee ee acqu acquir ires es know knowle ledg dge e of th the e firs firstt tran tr ansa sact ctio ion. n. Th The e good good fai faith th or or innocenc inno cence e of the posterior vendee needs to continue until his contract ripens into ownership by tradition or registration.  (Pal (Palan anca ca vs vs.. Di Dir. r. Of  Lands, 46 PHIL 149)

WARRANTY  a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents.  Kinds: 1. EXPRESS – any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such such affi affirm rmat atio ion n or pr prom omis ise e is to induce ind uce the buy buyer er to pur purcha chase se the same and if the buyer purchases the thing relying thereon

NOTE:  A mere expression of opinion, no matter how positively asserted, does not import a warranty unless the seller is an expert and his opinion was relied upon by the buyer. 2.

IMPLIED 

- tth hat which ich tth he llaw aw

derives by implication or inference from the nature of the transaction or the relative situation or circu ircum mstan stancces of the the pa parrtie ties, irrespective of any intention of the seller to create it.

a. Warra Warranty nty aga agains instt evict eviction ion b. Warra Warranty nty aga agains instt hidde hidden n defe defects cts c. Warranty as to Fitness and Merchantability NOTE: An implied warranty is a natural, not an essential element of a contract, and and is deem deemed ed inco incorp rpor orat ated ed in the the co cont ntra ract ct of sale sale.. It ma mayy ho howe weve ver, r, be waived or modified by express stipulation. (De Leon)

 

There is no implied warranty as to the co cond ndiiti tion on,, ad ada apt ptat atiion, on, fit itn nes esss or suitab sui tabili ility ty or the quality quality of an articl article e sold as a second-hand article. But such arti articcles les mig might be sol old d unde derr su such ch ci circ rcum umst stan ance cess as to rais raise e an impl implie ied d warranty.

whatev what ever er he ha hass re rece ceiv ived ed un unde derr the the contract. Since the vendee can no longer restore the subject-matter of the sale to the vendor, rescission cannot be carried out.

* A seco certification by vendor a se cond nd-h -han and d issued ma mach chin ine e awas wa s in that AA-1 1 condition is an express warranty binding on the vendor. (Moles vs. IAC [1989])

only against immediate seller, not sellers of thethe seller unless such sellers had promised to warrant in favor of later buyers buy ers or unl unless ess the immedi immediate ate seller seller has expressly assigned to the buyer his own right to sue his own seller. NOT NO TE: The distur disturban bance ce referr referred ed to in the case of eviction is a disturbance in law which requires that a person go to the courts of justice claiming the thing so sold ld,, or pa part rt ther thereo eoff and and invo invoki king ng reasons. Mere trespass in fact does not gi give ve rise rise to the the appl applic icat atio ion n of the the doctrine of eviction.

A. Warra Warranty nty agains againstt evic evictio tion n anty in which the seller  Warranty guarantees that he has the right to sell the thing sold and to transfer ownership to the buyer who shall not be distu turrbed in his legal and peaceful possession thereof. 

Elements: vendee is deprived, in whole or in part, of the thing purchased;

* The suit for the breach can be directed

1.

2. 3.

4.

5.



the deprivation is by virtue of a final judgment; the judgment is based on a prior right to the sale or an act imputable to the vendor; the vendor was summoned in the suit for eviction at the instance of the vendee; AND no waiv waiver er of warr warran anty ty by th the e vendee.

Vendor's liability shall consist of: 1. Total eviction: (VICED) a. Value of the thing at the time of eviction; b. Income or fruits if he has been ordered to deliver them to the party who won the suit; c. Costs of the suit; d. Expenses of the contract; AND e. Damages and interests if the sale was in bad faith. 2.

Partial eviction: a. to enforce vendor’s liability for eviction (VICED); OR  b. to de dem man and d re resscis cissio ion n of contract.

Question: Why is rescission not a remedy in case of total eviction? Answer: Answ er: Resc Rescissio ission n contemplat contemplates es that the one demanding it is able to return



Vendor’s liability is waivable but any stipul stipulati ation on exemp exemptin tingg the vendor vendor from fro m the obliga obligatio tion n to ans answer wer for eviction shall be void if he acted in bad faith.  Kinds of Waiver: a. Consciente  – vo volu lunt ntar aril ilyy made by the vendee without the knowledge and assu assump mpti tion on of the the risk riskss of eviction NOTE:  vendor shall pay only the value which the thing sold had at the time of eviction b. Intencionada – made by the vendee ven dee with with knowle knowledge dge of the the risk riskss of ev evic icti tion on and and

a ssumption of its consequences EFFECT:  vendor not liable NOTE: Every waiver is presumed to be consciente. To consider it intencionada, it mu musst be ac acco comp mpan aniied by some ome circu ircums msta tanc nce e which ich re revvea eals ls the ve vend ndor or’s ’s kn know owle ledg dge e of the the risk riskss of eviction and his intention to submit to such consequences. consequences.

WHERE IMMOVABLE SOLD ENCUMBERED WITH NON-APPARENT BURDEN 1. Right of vendee a) recission, or b) indemnity

 

2. When right cannot be exercised: a) if th the e burd burden en or se serv rvit itud ude e is apparent b) if th the e no nonn-ap appa pare rent nt bu burd rden en or servitude is registered registered c) if vendee had knowledge of the encumbrance, whether it is registered or 3. not When action must be brought - within ONE YEAR from execution of the deed of sale

the

B. Warra Warranty nty agai against nst hidd hidden en defec defects ts anty in which the seller  Warranty guarantees that the thing sold is free from any hidden faults or defects or any any char charge ge or encu encumb mbra ranc nce e not not declared or known to the buyer.  

Elements: (SHENPW) 1. defect must be important; 2. it mu must be be Hidden;

erious us Serio

or

3. it mu must Exist at the time of the sale; 4. vendee mus must giv give Notice of the de defe fect ct to th the e vend vendor or wi with thin in a reasonable time; 5. action action for rres escis cissio sion n or redu reducti ction on of price must be brought within the proper Period (within 6 mos. from delivery of the thing or 40 da days ys fr from om da date te of de deli live very ry in case of animals); and 6. no Waiver of the warranty.

Remedies of the Vendee: a.  Accion redhibitoria (rescission) b.  Accion quanti minoris (reduction of the price) NOTES:   Hidden faults or defects pertain only to those that make the object unfit for the use for which it was intended 

2.

c. damages If vendor was not aware, he shall be obliged to return: (PIE) a. price paid b. interest thereon c. expenses of the contract if paid by the vendee

Effect if the cause of loss was not the hidden defect  If the thing sold had any hidden fault at the time of the sale, and should sho uld thereaft thereafter er be lost by a (1) fortuitous fortu itous event OR (2) through the fault of the vendee:  the vendee may demand of the vendor the price which he paid less the value of the thing at the time of its loss. NOTE:  the difference between the price paid and the value of the thing at the time of its loss represents the damage suffered by the vendee and



the amount which the the vendor enriched himself at the expense of the vendee If the vendor acted in bad faith:  vendor shall pay damages to the vendee

C. Impli Implied ed Warr Warrant antie iess of Qual Quality ity Warranty of Fitness  Warranty in which the the seller gu guar aran ante tees es that that the the thin thingg sold sold is reasonably fit for the known particular purpose for which it was acquired by the buyer   GENER GENERAL AL

warranty as to the quality or fitness for any particular particular purpose of goods under a contract of sale   EXCEPTIONS: 1.

at the time of the sale.

This warranty in Sales is applicable in Lease (Yap vs. Tiaoqui 13Phil433) Effect of loss of thing on account of  hidden defects: 1. If ven endo dorr was awar aware e of hidde idden n defects, he shall bear the loss and ven vende dee e shall all hav ave e th the e rig ight ht to recover: (PED) a. the price paid b. expenses of the contract

RULE:  The There re is no impli implied ed



2.

Where the buyer, expressly or by impl implic icat atio ion n ma mani nife fest stss to the the seller the particular purpose for which the goods are required Where the buyer relies upon the seller’s skill or judgment

Warranty of Merchantability Merchantability in which the the seller  Warranty guarantee guar antees, s, wher where e the goods were bought by description, that they are

 



reas ason onab ably ly fit fit fo forr th the e ge gen neral purpose for which they are sold It requires identity between what is described in the contract   AND what is tende tendered  red , in the sense that the latter is of such quality to have some value

Instances where implied warranties are inapplicable: 1. As is and and wher where e is sale sale - ve vend ndor or makes no warranty as to the quality or workable condition of the goods, and that the vendee takes them in th the e cond condit itio ion n in whic which h th they ey ar are e found and from the place where they are located. 2. Sale of second-hand articles 3. Sale by virtue of authority in fact or law Vendit Venditor  or   (“ (“Le Lett the the se sell ller er beware”):   the vendor is liable to the

Caveat Cav eat

vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. Empto Emptor  r   (“Let the buyer beware”):  requires the purchaser to be awar aw are e of th the e su supp ppos osed ed ti titl tle e of th the e vend vendor or an and d one who bu buyys with tho out checking chec king the vendor’s vendor’s title takes all the risk riskss an and d loss losses es cons conseq eque uent nt to su such ch failure. Ca Cave veat at

RULES IN CASE OF SALE OF ANIMALS 1. When two or more animals animals have been been sold at the same time and the redhibitory defect is in one, or some of them butredhibition not in all, the rulethe is that the will general not affect ot othe hers rs with withou outt it. It is immat immater eria iall whether the price has been fixed for a lump sum for all the animals or for a separate price for each. 2. No war warrant rantyy again against st hidden hidden defects defects of an anim imal alss sold sold at fair fairss or at pu publ blic ic auctions, or of livestock sold as cond condem emne ned. d. This This is bas based ed on the the assumption that the defects must have been clearly known to the buyer. 3. Sale of animals shall be void when:   a) animals sold are suffering from contagious disease   b) if the use or servi service ce for which which they are acquired has been stated in the

contract, and they are found to be unfit therefor 4. Lim Limita itatio tion n o off the the action action:: 40 day dayss from the date of their delivery to the vendee 5. Vend Vendor or shall shall be liable liable if the animal animal sho houl uld d die within thin 3 da dayys af afte terr its purchase if theatdisease which caused the death existed the time of the contract

OBLIGATIONS OF THE VENDEE: A. Princi Principal pal Oblig Obligati ations ons:: 1. To acce accept pt deli delive very ry 2. To pay pay the the pri price ce o off the thi thing ng ssol old d in legal leg al ten tender der unless unless anothe anotherr mod mode e has been agreed upon grac ace e peri period od gra grant nted ed tthe he NOTE:  A gr ve vend ndee ee in ca case se of fail failur ure e to pay the amount/s due is a right not an obligation oblig ation.. The gr grace ace period period must must not be likene likened d to an obl obliga igatio tion, n, the nonpayment of which, under Article 1169 of the the Civi Civill Co Code de,, woul would d stil stilll ge gene nera rall llyy require judicial or can extra-judicial demand before bef ore “defaul “def ault” t” be said said to arise arise (Bricktown Dev’t Corp vs. Amor Tierra Dev’t Corp. 57SCRA437 )

B. Othe Otherr Obli Obliga gati tion onss 1. To take take care care of the the goods goods with withou outt the obligation to return, where the goods are delivered to the buyer and he rightfully refuses to accept NOTES:  The buyer in such a case is in the position of a bailee who has had goods goo ds thr thrust ust upon upon him witho without ut his assent. assent. He has the obligation to takebut reasonable care can of the goods nothing more be demanded of him. goods in the buyer’s  The possession under these circumstances are at the seller’s risk 2. To be liab liable le as a de depo possitar tary if he volunt vol untari arily ly con consti stitut tuted ed himse himself lf as such 3. To pay interest for the period betwe bet ween en delive delivery ry of the thing thing and the the paym paymen entt of the the pr pric ice e in the the following cases: a. Sh Shoul ould d it have have been been stipul stipulate ated d

 

b. Should the thing sold and deli delive vere red d pr prod oduc uce e fr frui uits ts or income c. Sho houl uld d he be in defa defau ult lt,, fr from om the th e ti time me of ju judi dici cial al or ex extr traajudicial demand for the payment of the price 

1.

2. 3.

4.

Pertinent Rules: The vend vendor or is not not requir required ed to deli deliver ver the thing sold until the price is paid nor nor th the e ve vend ndee ee to pay pay th the e pric price e before the thing is delivered in the abse absenc nce e of an agre agreem emen entt to th the e contrary ( Article  Article 1524). If stip stipula ulated ted,, the the vende vendee e is bound bound to to accept delivery and to pay the price at the time and place designated; If the there is no stip stipul ulat atio ion n as to the the ti time me and and plac place e of paym paymen entt and and delivery, the vendee is bound to pay at the time and place of delivery d elivery In the the abse absenc nce e of stip stipul ulat atio ion n as to

th the e pla place ce of de deli live very ry, , it might sh shal alll be be made wherever the thing at th the e mome moment nt th the e co cont ntra ract ct was was perfected ( Article  Article 1251) 5. If only only the the time time for for deliv delivery ery has been been fixed in the contract, the vendee is requ requir ired ed to pay ev even en be befo fore re th the e thing is delivered to him; if only the time tim e for payme payment nt has been fix fixed, ed, the vendee vendee is entitl entitled ed to delive delivery ry even before the price is paid by him ( Article  Article 1524)

Ways of accepting goods: Express acceptance 2. Implied acceptance

1.

a. only   does an act which Whenanbuyer owner can do, b. Fa Fail ilur ure e to re retu turn rn go goods ods afte afterr

reasonable lapse of time

NOTES: The e rete retent ntio ion n of go good odss is st stro rong ng  Th evidence that the buyer has accepted ownership of the goods.  Deli Delive very ry an and d ac acce cept ptan ance ce ar are e two two separate and dis distinct acts of different parties  Delivery is an act of the vendor and one of the vendor’s obligation oblig ations; s; vendee vendee has nothing nothing to do with the act of delivery by the vendor









obliga igatio tion n of Acceptance   is an obl the vende vendee; e; acceptan acceptance ce cannot cannot be re rega gard rded ed as a co cond ndit itio ion n to complete delivery; sell seller er must must comp comply ly wi with th the the obliga obl igatio tion n to del delive iverr althoug although h there the re is no accept acceptanc ance e ye yett by

the buyer Acceptance by the buyer may precede actual delivery; there may be actual receipt without acceptance and and there may be acceptance without receipt Unle Unless ss othe otherw rwis ise e agre agreed ed upon upon,, acce accept ptan ance ce of the the good goodss by the the buyer does not discharge the seller from liability for damages or other legal remedy like for breach of any promise or warranty

When vendee may suspend payment of  the price: 1. If he is disturbed in the possession or ownership of the thing bought 2. If he has well-grounded fear that his posses pos sessio sion n or own owners ership hip would would be disturbed by a vindicatory action or foreclosure of mortgage NOTES:   If the thing sold is in the possession of the the ven ende dee e an and d the the pr pric ice e is already in the hands of the vendor, the sale is a consummated contract and Article 1590 is no longer applicabl able. Artic ticle 1590, presup pre suppos poses es tha thatt the price or any part thereof has not yet been paid and the contract is not yet consummated.  Under Article 1590, the vendee has no ca caus use e of ac acti tion on fo forr re resc scis issi sion on before befor e final final judg judgemen ement, t, othe otherwis rwise e the vendor might become a victim of machin mac hinati ations ons betwee between n the vendee vendee and the third person  Dis Distur turban bance ce mus mustt be in pos posses sessio sion n and ownership of the thing acquired  If the disturbance is caused by the existence of non-apparent servitude, the remedy of the buyer is rescission, not suspension of payment.

 

When vendee cannot suspend payment of the price even if there is dist distu urb rba anc nce e in th the e poss osses essi sion on or ownership of the thing sold: 1. if the the vendo vendorr gives gives secu securi rity ty for for the return of the price in a proper case 2. if it has been stipulated that

received as conditional payment, AND the condit condition ion on which which it was received has been broken by re reas ason on of the the disho dishono norr of the the instru ins trumen ment, t, ins insolv olven ency cy of the buyer or otherwise.  Remedies:

notwithstanding any such contingency, the vendee must make payment (see Article 1548 par.3) 3. if the vendor has caused the disturbance or danger to cease 4. if the the distu disturb rban ance ce is a mere mere act of trespass 5. if the the vend vendee ee has has fully fully paid paid the price price

1. 2.

3. 4. 5. 6.

REMEDIES FOR BREACH OF CONTRACT A. Re Reme medi dies es of of the the sell seller er 1. Action for payment of the price (Art. 1595) 2. Action for damages for nonacceptance of the goods (Art. 1596) 3. Action for rescission (Art. 1597)

3. Articl Article e 148 1484 4 or or Rect Recto o Law Law  



B. Reme medi dies es specific of of the the buy buyer er Action for performance (Art. 1. Re 1598) 2. Action for for rescission rescission or damages for breach of warranty (Art 1599) A. REMEDIE IESS OF THE SELLER FOR  BREACH OF CONTRACT 

IN CASE OF MOVABLES

1. Ordi Ordina nary ry Re Reme medi dies es a. Mova Movabl bles es in Gen Gener eral al – Failu Failure re of the vendee to appear to receive delive del ivery ry or, having having appear appeared, ed, failure to tender the price at the same time, unless, a longer period for its payment has been stipulated acti tion on to re resc scin ind d th the e sale sale  ac (Art. 1593) b. Sale ale of of Goo Goods ds – acti tion on fo forr th the e pric price e (A (Art rt..  ac 1595) action on fo forr dama damage gess (A (Art rt..  acti 1596) 2. Unpaid Seller  Types: a. Th The e sell seller er of of the the good goodss who who has has not been paid or to whom the price has not been tendered b. The seller seller of the the good goods, s, in in case case a bill of exchange or other negotiable nego tiable instrume instrument nt has been

Possessory lien over the goods Righ Rightt of stop stoppag page e  in transi transitu tu afte afterr he has has part parted ed wi with th the the possession of the goods and the buyer becomes insolvent Special Right of resale Special Right to rescind the sale Action for the price Action for damages





Rem Remed edie iess of ve ven ndo dorr in sal ale e of   personal property by installments

Requisites: 1. Contract of sale 2. Personal property 3. Payable in installments 4. In the case of the second and third third re remed medie ies, s, that that the there re has be been en a fail failur ure e to pa payy tw two o or more installments NOTE:  Apply likewise likewise to ccontr ontracts acts purporting to be leases of personal property with option to buy Art. 1484 does not apply to a sale: 1. Payable on straight terms (partly in cash and partly in one term) 2. Of Real property Remedies: peccific ific pe perf rfo orman rmancce upo pon n 1. Spe vendee’s failure to pay NOTE: Does not bar full recovery for judgment secured may be executed on all personal and real properties of the the bu buye yerr whic which h are are no nott ex exem empt pt from execution (Palma v. CA.) 2. Rescission of the sale if vendee shall have failed to pay two or more installments NOTES:   Na Natu ture re of the the re reme medy dy – wh whic ich h requires mutual restitution – bars further furt her action on the purchase purchase price (Nonato vs. IAC.) GENERAL RAL RULE:  cancellation      GENE of sale requires mutual re rest stit itut utio ion, n, that that is all all pa part rtia iall

 

payments of price or rents must be returned   EXCEPTIONS: a stipulation that the instal installme lments nts or re rents nts paid paid shal shalll not not be re retu turn rned ed to th the e vendee or lessee shall be valid insofar as the same may not be

3.

unconscionable under the circumstan-ces ( Article  Article 1486). Fore orecl clos osu ure of th the e chatte attell mort mo rtga gage ge on th the e th thin ingg so sold ld if vendee shall have failed to pay two or more installments. In this case, there shall be no further action against the purchaser to recov recover er unpai unpaid d balance balance of the price.

NOTES:  Further her recovery recovery barred only from  Furt the time of actual sale at public auction cond conduc ucte ted d purs pursua uant nt to fo forreclo eclosu sure re (Macondray vs. Tan.) 

Othe Otherr ch chat atte tels ls gi give ven n as se secu curi rity ty

cannot  be fo fore recl clos osed ed if th they ey are no nott subje sub ject ct of the install installmen mentt sal sale e ( Ridad  vs. Filipin Filipinas as invest investmen mentt and Financ Finance e Corp. GR 39806, Jan. 28, 1983)

If the vendor assigns his right to a fin financ ancing ing compan company, y, the latter latter may be regarded as a collecting agency of the vendor and cannot therefore recover any defici def icienc encyy from from the vendee vendee (Zaya (Zayass vs. 

Luneta Motors Co.)

When the vendor assigns his credit to anothe ano therr person person,, the latter latter is likewi likewise se bound bou nd by the same same law. Accord According ingly, ly, when wh en th the e as assi sign gnee ee fo fore recl clos oses es on th the e mort mo rtga gage ge,, th ther ere e can can be no fu furt rth her reco recove very ry of th the e defi defici cien ency cy and and th the e vendor ven dor-mo -mortg rtgage agee e is deemed deemed to have have renounced any right thereto (Borbon II



vs. Servicewid ide e 258SCRA658)

Spec pecialis istt,

Inc.

However, Article Article 1484( 1484(3) 3) does does NOTE:  However, NOT bar one to whom the vendor has assign ass igned ed on with with a rec recour ourse se bas basis is  his credit against the vendee from re reco cove veri ring ng fr from om th the e vend vendor or th the e as assi sign gned ed cred credit it in fu full ll  althou although gh the vendor ven dor may have have no rig right ht of re recov covery ery agains aga instt the vendee vendee for the defici deficien ency cy (Filipin Filipinas as Invest Invest.. & Fin Financ ance e Cor Corp. p. vs. Vitug, Jr. 28SCRA658)

Reme medi dies es are alte NOTE: Re alternati rnative ve and exclusive  

IN CASE OF IMMOVABLES

1. Ordi Ordina nary ry Reme Remedi dies es a. In cas case e of antici anticipat patory ory bre breach ach –  rescission ( Article  Article 1591) b. Failur Failure e to p pay ay the the purch purchase ase price price – resci scissi ssion on upon upon judici judicial al or  re notarial demand for rescission ( Article  Article 1592)  the vendee vendee may pay, even even after aft er the expira expiratio tion n of the period, as long as no demand for rescission has been made upon him NOTE:  Articl Article e 159 1592 2 d does oes not apply to: 1) Sale ale on ins instalm talmen entt of re real al estate 2) Co Cont ntra ract ct to sell sell 3) Co Cond ndit itio iona nall sal sale e 4) Cas Cases co covvered ered by RA 6552 52:: Re Real alty ty Inst Instal allm lmen entt buye buyerr protection act 2. R.A. R.A. No. No. 6552 6552 or or Maced Maceda a Law Law Actt to Pr Prov ovid ide e Pr Prot otec ecti tion on to  An Ac buyers of Real Estate on Installment Payments  Law govern governing ing sal sale e or financ financing ing of real estate on installment payments  Requisites: 1. transactions or contracts involving invo lving the sale OR financing financing of re real al esta estate te on inst instal allm lmen entt payments, paym ents, including including residenti residential al condominium apartments; and 2. buy uyer er de defa faul ults ts in pay aym ment of succeeding installments. 

Rights of the buyer:  A. If Buyer has paid at least two (2) years of installments 1. The The bu buyyer must ust pa pay, y, without additional addit ional interest interest, the unpa unpaid id installments due within the total grac grace e peri period od earn earned ed by him. him. Th Ther ere e shal shalll be one one (1) (1) mo mont nth h grace period for every one (1) ye year ar of inst instal allm lmen entt pay payme ment ntss made This righ ight ssh hall all b be e NOTE: 

ex exer erci cise sed d by the the bu buye yerr ONLY ONLY

 

once in every 5 years of the life of the contract AND its extensions. 2. Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of canc cancel ella lati tion on OR dema demand nd fo forr rescission rescissi on by a notarial notarial act AND upon full payment of the cash su surr rren ende derr valu value e to th the e bu buye yerr (Olympia Housing vs. Panasiatic, 16 January 2003.)

NOTE: The seller shall refund to the th e bu buye yerr th the e ca cash sh su surr rren ende derr valu value e of th the e pa paym ymen ents ts on th the e proper pro perty ty equiva equivalen lentt to 50% of the total payments made. After fiv five e (5) years years of instal installme lments nts,, there shall be an additional 5% every year but not to exceed 90% of the total payments made 3. The buyer shall have the right to sell his rights or assign the same tre oinssta ante otherthe n trac OtR  rein tate theperscoon ontr act

to

by updating the account during the grace period and before actual cancellation of the contract 4. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without intere int erest st and to have have su such ch full full payme pay ment nt of the purcha purchase se price price annotated anno tated in the certific certificate ate of title covering the property. B. If Buy Buyer has has pai paid le less ss than than 2 years of installments

1. Th The e sell seperiod ller er sha shall ll NOT give give less the the buye bu yerr60 a grace of than days from the date the installmen inst allmentt became became due. due. If the buyer fails to pay the installments due at the expiration expir ation of the grace period, period, the seller may cancel the cont contra ract ct afte afterr 30 days days fr from om rece receip iptt by th the e bu buyyer of the no noti tice ce of ca canc ncel ella lati tion on or th the e demand for rescission of contract by a notarial act. 2. Same No. 3 and 4 paragraph A above 

Down paym payment ents, s, dep deposi osits ts or NOTE:  Down options on the contract shall be included in the computation of the total number of installment payments made

Remedies of Unpaid Seller I. Possessory Lien 

When may be exercised: 1. Wh Wher ere e the goo goods ds hav have e been been sol sold d with withou outt an anyy stip stipul ulat atio ion n as to credit 2. Wh When en the the goo goods ds have have be been en sol sold d on credit, but the term of credit has expired 3. Where the buyer becomes insolvent  When lost: 1. Del Delive ivery ry of of th the e go goods ods to a carri carrier er or bail bailee ee fo forr the the purp purpos ose e of transmission to the buyer without with out reservin reservingg ownershi ownership p or right of possession 2. Wh When en the the buyer buyer lawf lawful ully ly obtai obtains ns possession of the goods 3. By wa waiv iver er of the the lien lien NOTE:  Possessor Possessoryy lien is lost lost after the sellerr loses possessio selle possession n but his lien as an unpaid seller remains; hence he is still an unpaid creditor with respect to the pric price e of spe speci cifi ficc goods goods sold sold.. His His preference can only be defeated by the governments claim to the specific tax on the goods goods the themse mselve lvess ( Arts.  Arts. 2247 and  2241). NOTE:  Th The e bring bringin ingg of a an n acti action on tto o recover the purchase price is not one of the ways of losing the possessory lien. An unpaid seller does not lose his lien by re reaso ason n tha thatt he has obtai obtained ned a money money judgem jud gemen entt or dec decree ree for the price price of goods ( Art.  Art. 1529, last paragraph). II. 

Stoppage of goods in transitu Requisites: 1. Se Sell ller er must must be un unpa paid id 2. Buye Buyerr mu must st be inso insolv lven entt 3. Goods Goods must must be iin n tra trans nsit it 4. Se Sell ller er must must ei eith ther er:: a. actu actual ally ly tak take e poss posses essi sion on of the goods sold OR b. give ive noti otice of his his cl cla aim to the carrier or other person in possession 5. Seller must surrender the negotiable document of title, if

 

an any, y, is issu sued ed by th the e ca carr rrie ierr or bailee 6. Sell Seller er must must bear bear the the expe expens nses es of delivery of the goods after the exercise of the right

2. Where the right to resell is expre exp ressl sslyy re reser served ved in case case the buyer should make a default 3. Wh Wher ere e the buye buyerr delay delayss in the pa paym ymen entt of the the pr pric ice e fo forr an unreasonable time

GOODS ARE CONSIDERED IN TRANSITU: 1. after after delivery delivery to a carrie carrierr or other other bailee and before the buyer or his agent takes delivery of them; and 2. If the the goods goods are are rejec rejecte ted d by the buyer, and the carrier or other bailee continues in possession of them

IV. 

GOODS ARE NO LONGER CONSIDERED IN TRANSITU: 1. after after del delive ivery ry to the the buyer buyer or his his agent in that behalf; 2. if the the buyer buyer or his his agent agent obta obtain inss possession of the goods at a point before the destination originally fixed; 3. if the carrier or the bailee ackn acknow owle ledg dges es to hold hold th the e good goodss on behalf thecarri andbailee 4. if of the cabuyer; rrier er or bailee wrong wrongful fully ly refuses to deliver the goods to the buyer 

1. 2.

3.

4.

2. Under Art. rescission”) V. 

Effects of the exercise of the right The goods goods are are no longe longerr in tran transit sit.. The contract of carriage ends; instead the carrier now becomes a mere bailee, and will be liable as such. The carrier should not deliver anymore to the buyer or the latter’s agent; otherwise he will clearly be liable for damages. Th The e carri arrie er mus must re rede deli live verr to to,, or accor acc ordin dingg to the direct direction ionss of the seller.

WAYS OF EXERC WAYS EXERCISI ISING NG THE RIGHT RIGHT TO STOP: 1. By taking taking actua actuall possess possession ion of the the goods 2. By giving giving notice notice of of his claim claim to the the carrier or bailee III. 

Special Right of Resale May May be ex exer erci cise sed d only only when when th the e unpai unpaid d seller seller has eithe eitherr a ri right ght of lien lien OR ha hass st stopp opped ed the goods goods in transitu  AND AND unde underr AN ANY Y of the following conditions: 1. Wher Where e the good goodss are peri perish shab able le in nature

Rescission Types: 1. Spec Special ial Right to Rescind Under   Art. 1534  – If th the e sel elle lerr has either the right of lien OR a right to stop the goods in transitu AND under either of 2 situations: a. Wher ere e the ri righ ghtt to res rescin cind on default has been expressly reserved b. Wher Where e th the e buye buyerr has has been been in in default for an unreasonable time 1597

Action for the price When may be exercised: 1. Wh Wher ere e the owne owners rshi hip p has pass passed ed to the buye buyerr AND he wrongfull wrongfullyy negle neglects cts OR refuse refusess to pay for the price 2. Wh Wher ere e the the pric price e is pay payab able le on on a day ce certa rtain in AND he wro wrongf ngfull ullyy negle neglects cts OR refuse refusess to pay for the the pr pric ice, e, irre irresp spec ectiv tive e of the the delivery or transfer of title 3. Wh Wher ere e the good goodss canno cannott readi readily ly be resold for a reasonable price AND the buyer wrongfully refuses to accept them even before the own ow nersh rship of the the go goo ods ha hass passed, if Article inapplicable.

VI. 

(“techn hnic ica al

1596

is

Action for damages When may be exercised: 1. In case ase of wron rongful gful negl negle ect or refusal by the buyer to accept or pay for the thing sold (Art. 1596 par.1) 2. In an ex exec ecut utor oryy contr contrac act, t, wher where e the ownership in the goods has not passed, and the seller cannot mainta mai ntain in an action action to rec recove overr the price (Art 1595) 3. If the goods are not yet id iden enti tifi fied ed at the the time time of the the contract or subsequently

 

B. REMEDIES OF THE BUYER BREACH OF CONTRACT

FOR 

1. Act ctio ion n for for spec specif ific ic pe perf rfor orma manc nce e (Art. 1598) Wher ere e th the e sell seller er ha hass br brok oken en th the e  Wh co con ntrac tractt to del eliv ive er spe peccif ifiic or 

ascertained goods Th The e ju judg dgme ment nt or de decr cree ee may may be uncon uncondit dition ional, al, or upon upon such such ter terms ms an and d condi onditi tion onss as to da dam mag age es, payment of the price and otherwise as the court may deem just

2. Reme Remedi dies es of bu buye yerr for for br brea each ch of  warranty by seller (Art. 1599): 1. Recoupment  – accept the goods and set up the seller’s breach to reduce or extinguish the price 2. Ac Accep ceptt the goods and mainta maintain in an ac acti tion on fo forr da dama mage gess fo forr brea breach ch of warranty Refu se to acce accept pt th the e good goodss and and 3. Refuse maintain action for damages for breach of an warranty 4. Rescind the contract by returning or offering the return of the goods, and recover the price of any part thereof NOTE: These are alternative remedies.

When rescission by buyer not allowed: 1. if the the buyer buyer acce accept pted ed the the goods goods know knowin ingg of th the e brea breach ch of warr warran anty ty without protest 2. if he fails to to notify the seller within a reas reason onab able le ti time me of hi hiss elec electi tion on to rescind 3. if he fails to return or offer to return th the e good goodss in su subs bsta tant ntia iall llyy as good good condition as of they were into athim the time of the transfer ownership

EXTINGUISHMENT OF SALE Same causes as in all obligations 2. Conventional Redemption 3. Legal Redemption

1.

other

CONVENTIONAL REDEMPTION  The right which the vendor reserves to himself, to reacquire the property sold sold prov provid ided ed he re retu turrns to th the e vendee: b. th the e pric price e of of the the ssal ale; e; c. ex expe pens nses es of of the the cont contra ract ct;;

d. any any othe otherr le legi giti tima mate te pa paym ymen ents ts made therefore and; e. the necessary and useful ex expe pens nses es made made on the the thin thingg sold; and f. fulf fulfil ills ls othe otherr stip stipul ulat atio ions ns wh whic ich h may have been agreed upon.

A sale with conventional redemption is de deem emed ed to be an equitable mortgage in any of the following cases: (IPERTOD) 1. Unusually Ina nade dequ quat ate e pu purc rcha hase se price; 2. Possession by the vendor remains, as lessee or otherwise; 3. Extension of redemption period after expiration; 4. Retention by the vendee of part of the purchase price; 5. Vendor binds himself to pay the Taxes of the thing sold; 6. Any Othe therr cas case e wh where ere the partie partiess really intended that the transaction should secure the payment of a debt or the performance of any obligation; or 7. When th there iiss Doubt as to whether co cont ntra ract ct is co cont ntra ract ct of sale sale with with right of repurchase or an equitable mortgage.

Equitable Mortgage   One which lacks the proper formalities, form of words, or other requis req uisite itess pre prescr scribe ibed d by law for a mortgage, but shows the intention of the the pa part rtie iess to make make the the pr prop oper erty ty subject of the contract as security fo forr a debt debt and and cont contai ains ns noth nothin ingg impo posssible or contrary to law (Cachola vs. CA 208SCRA496) * When can there be presumption as to Equitable Mortgage? 1) Pa Part rtie iess mu must st ha have ve en ente tere red d into into a contract denominated as a contract of sale 2) The intention of the parties was to secu curre an exis xistin ting de deb bt by way of mortgage NOTE: NOT E: In the cases referred to in Arts. 1602 and 1604, the apparent vendor may ask for the reformation of the instrument.

 

Remedy of Reformation: To correct the instrument so as to make it express the true intent of the parties.

NOTE: Written notice under Article 1623 is mandatory for the right of redemption to commen commence ce (PSC vs. Sps. Valencia 19   August 2003.)

Redemption Period ther ere e is an ag agre reem emen ent: t: pe peri riod od a. if th agreed upon cannot exceed 10 years b. c.

if no agreement as to the period: 4 years from the date of the contract the vendor who fails to repurchase th the e prop proper erty ty wi with thin in th the e peri period od agreed upon may, however, exercise the rig right ht to repurc repurchas hase e within within 30 days FROM the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase  This refers to cases involving a tran tr ansa sacti ction on wher where e one one of th the e parties parti es contests contests or denies denies that the true agreement is one of sale with right to repurchase; not to cases cas es whe where re the transa transacti ction on is co conc nclu lusi sive vely ly a: Where pa pact cto o re retr o sale. Example Example: Wher e adebuyer buye rtro a retro honestly believed that he entered merely into an Equitable Mortgage, not a pacto de retro transaction, and because of such beli belief ef he had had not not re rede deem emed ed within the proper period. NOTE: Tender of payment is sufficient to compel redemption, but is not in it itsself a pa payymen ment th that at relieves the vendor from his liability to pay the redemp redemptio tion n pri price ce (Paez  vs. Magno.)

LEGAL REDEMPTION  The right to be subrogated, upon the same terms and conditions sti stipul pulate ated d in the contra contract, ct, in the place of one who acquires a thing by (1) purchase or (2) dation in payment, or (3) by any oth the er transa tra nsacti ction on where whereby by owner ownershi ship p is transferred by onerous title.  May be effected against movables or immovables. mustt be exerci exercised sed within within thi thirty rty  It mus (30) days from the notice in writing by the vendor.\

BASIS BASIS OF LEGAL LEGAL REDE REDEMPT MPTION ION:: Not on any pro propri prieta etary ry right, right, wh which ich after after the sale of the property on execution, leaves the judgment judgment debtor debtor and vests in the purc purcha hase ser, r, but but on a bare bare stat statut utor oryy privil privilege ege to be exerci exercise sed d only only by the persons named in the statute. 

Tender of payment is not necessary; offer to redeem is enough.

PRE-EMPTION

REDEMPTION

1. aris arises es befo before re sale 2. no res resci cisssi sion on because no sale as yet exists 3. the act ctio ion n is

1. arises after sale

dir direc tedpros ag agai ains nst the th eected prospe pect ctiv ive et seller

against the buyer

2. there can be resc escis isssio ion n of the original sale 3. action is directed

Instances of legal redemption: A. Under the Civil Code (legal redemption): 1. Sale of a co-owner of his share to a stranger ( Article  Article 1620 ) 2. When a credit or other incorporeal right in litigation is sold ( Article  Article 1634) 3. Sale of an heir of his hereditary righ ghts ts to a stran trange gerr ( Article  Article 1088) 4. Sale of adjacent rural lands not exceeding exce eding one hectare hectare ( Article 1621) 5. Sale Sale of ad adja jace cent nt sm smal alll urba urban n lands bought merely for speculation ( Article  Article 1622) B. Under special laws: 1. An equity of redemption in cases of judicial foreclosures 2. A right of redemption in cases of extra-judicial foreclosures 3. Redemption of homesteads 4. Redemption in tax sales 5. Redem Redempti ption on by an agricu agricultu ltural ral tenant of land sold by the landowner

 

ASSIGNMENT OF CREDIT  a contract by which the owner of a credit transfers to another his rights and actions against a third person in consid con sidera eratio tion n of a pri price ce certai certain n in money or its equivalent

not not the the ob obje ject ctss wh whic ich h make make up his his inheritance.

Liabilities of the assignor of credit for violation of his warranties 1. Assi Assign gnor or in good good fait faith h 

NOTE: Transfer of rights by assignment takes place takes place by th the e pe perf rfec ecti tion on of th the e co cont ntra ract ct of assi assign gnme ment nt wi with thou outt th the e necess nec essity ity of delive deliveri ring ng the docume document nt evidencing the credit.  this rule doe does not apply ply to ne neggot otia iabl ble e docum ocume ents and do docu cume ment ntss of ti titl tle e whic which h ar are e governed by special laws. Effects of Assignment: 1. transf transfers ers the righ rightt to colle collect ct the the full full value of the credit, even if he paid a price less than such value 2. transf transfers ers all the the acces accessor soryy right rightss 3. debtor can set up against the assign ass ignee ee all the defens defenses es he could could have set up against the assignor 

Effect of payment by the debtor after assignment of credit 1. Before Before Notice Notice of the assign assignmen mentt 

Payment to the original creditor is val alid id and de debt btor or sh shal alll be released from his obligation

2. After No Notice 



Payment to the original creditor is not valid as against the assignee He can be made to pay again by the assignee

Warranties of the assignor of credit: a. He warr warrant antss the the exist existen ence ce of of the the credit b. He warr warran ants ts the the legal legalit ityy of th the e credit at the perfection of the contract There is no warranty warranty as to the NOTE:  There solv solven ency cy of the the debt debtor  or   unless unless it is expr expres essl slyy st stip ipul ulat ated ed OR unle unless ss th the e insolvenc insol vencyy was already existing existing and of pu publ blic ic kn know owle ledg dge e at th the e ti time me of th the e assignment seller of an an inhe inherit ritanc ance e NOTE:  The seller warrants only the fact of his heirship but

Liabi Liabilit lityy is lim limite ited d only only to the price received and to the expen exp enses ses of the con contra tract, ct, and any other other legitimat legitimate e payments payments by reason of the assignment

2. As Assi sign gnor or in in bad bad fait faith h 

Liable not only for the payment of the price and all the expenses but also for damages

Legal Redemption in Sale or Credit or other incorporeal right in litigation  Requisites: 1. Th Ther ere e must must be a sal sale e or assi assign gnme ment nt of credit 2. There There must must be be a pe pendi nding ng litig litigati ation on at the time of the assignment 3. The debtor debtor mus mustt pay the assign assignee: ee: a. pr pric ice e paid paid by him him b. jud udic icia iall co cosst incu incurrre red d by him; AND c. int nter eres estt on th the e pri price fr from om the the date of payment 4. Th The e right right mu must st be e exe xerc rcis ised ed by tthe he debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him

SALE OF CREDIT OR OTHER   INCORPOREAL INCORPOR EAL RIGHTS IN LITIGATION   GENERAL RULE: Debtor has the right of lega legall re rede demp mpti tion on in sale sale of cred credit it or incorporeal rights in litigation   EXCEPTIONS:

a. Sa Sale le to to a co-hei co-heirr or or co-o co-own wner er b. Sale ale to to a co-o co-ow wner ner c. Sa Sale le to to th the e posse possesso ssorr of pro proper perty ty in question

BARTER  BARTER   contract whereby one of the parties binds bin ds him himsel selff to giv give e one thing thing in consideration of the other's promise to give another thing ( Article  Article 1638)

 

Barterr is simila similarr to a sale with NOTE:  Barte th the e on only ly di diff ffer eren ence ce th that at in inst stea ead d of paying a price in money, another thing is given in lieu of the purchase price

PERFECTION and CONSUMMATION  Perfected from the moment there is a meeting of minds upon the things promised by each party in consideration of the other 

from om the ti time me of Consummated  fr mutual mutu al delivery delivery by the contract contracting ing parties of the things promised

NOTES:  Where the giver of the thing ba bart rter ered ed is no nott th the e lawf lawful ul owne ownerr thereof, the aggrieved party cannot be compel compelled led to delive deliverr the thing which he has promised and is also entitled to damages.  Where a party is evicted of the thing exchanged, the injured party is given the option option,, either either to re recov cover er the proper pro perty ty he has given given in exchan exchange ge wit ith h da dama mage gess or onl nlyy clai claim m an indemnity for damages.  As to matters not provided for by the provisions on barter, the provisions on sales will apply suppletorily BULK SALES LAW (Act No. 3952) When Sale or Transfer in Bulk: 

 Any sale, transfer, mortgage, or  assignment:

1. Of a stock of goods, wares, merchandise, provisions, or mate ma teri rial alss ot othe herw rwis ise e th than an in th the e or ordi dina nary ry co cour urse se of tr trad ade e an and d th the e regular prosecution of business; or 2. Of all all or sub ubst sta ant ntiially ally all all,, of th the e business or trade; or 3. Of all all or sub ubst sta ant ntiially ally all all,, of th the e fixtures and equipment used in the business of the vendor, mortgagor, transferor or assignor (section 2)

When sale When sale or tran transf sfer er in bu bulk lk no nott covered by Bulk Sales Law: 1. If the sale or transfer is in the or ordi dina nary ry co cour urse se of tr trad ade e an and d th the e regula reg ularr prosec prosecuti ution on of busin business ess of the vendor;

2. If it is made made by on one e who who produ producces and delivers a written waiver of the provisions of the Bulk Sales Act from his creditors 3. If it is made by an executor, administr admin istrator, ator, rec receiver eiver,, assignee assignee in insolvency, or public officer, acting Sectio tion n 8); under und er jud judici icial al pro proces cesss (Sec and 4. If it refe ferrs to pr prop oper erti tie es exe xem mpt from attachment or execution (Rules of Court, Rule 39, Section 12 )

Pr Prote otecti ction on Accor Accorded ded to Credit Creditors ors by Bulk Sales Law: 1. It re requ quir ires es the the ve vend ndor or,, mort mortga gago gor, r, transferor or assignor to deliver to the vendee, mortgagee, or to his or its agent or representative a sworn wr writ itte ten n stat statem emen entt of na name mess an and d addresses of all creditors to whom said said ve vend ndor or,, et etc. c. ma mayy ha have ve be been en indebted together with the amount due or to be due (Section 3) 2. It re requ quir ires es the the ve vend ndor or,, mort mortga gago gor, r, transf tra nsfero erorr or ass assign ignor, or, at lea least st 10 days days befo before re the the sale sale,, tran transf sfer er,, mortgage, assignment to make a full deta detail iled ed inve invent ntor oryy show showin ingg the the qu quan anti tity ty an and d the the co cost st of pric price e of goods, and to notify every creditor of the price terms and conditions of the sale, etc. (Section 5)

Effe Effect ctss of Fals False e St Stat atem emen ents ts in th the e Schedule of Creditors: 1. With Withou outt kn know owle ledg dge e of buye buyer  r   If the statement is fair upon its face and the buyer has no

knowle kno its pincor inc rectne a ndwledge nodge thi thingof to ut orrec himtness oss n inq nqui uirry ab abo out it, he will ill be protected in its purchase  The remedy of the creditor is not against the goods but to prosecute the seller criminally 2. With knowledge or imputed   knowledge of buyer  The ve vend ndee ee acce accept ptss it at his his  The peril  The sale is valid only as between the vendor and the vendee but void against the creditors

 

3. With With names names of ce cert rtai ain n cred credit itor orss withou wit houtt not notice ice are omitte omitted d from from the list  The sale is void as to such creditors, whether the omission was fraudulent or not, 4. With respect to an innocent

Acts Punished by Bulk Sales Law: 1. Knowingly or wilfully making or delivering delive ring a state statement ment required required by the Act which does not include the na name mess of all all the the cred credit itor orss of the the ve vend ndo or, etc. tc. with the the corre rrect amount due or to become due or

 purchaser for a value from the original purchaser   An innocent purchaser for value from fro m the ori origin ginal al purcha purchaser ser is protected  How Howeve everr if the cir circum cumsta stanc nces es are such as to bind the sub ubse sequ que ent pur urccha hasser wit ith h constructive notice that the sale to the vendor (original purchaser purch aser)) was fraudulen fraudulent, t, the pr prop oper erty ty wi will ll be liab liable le in hi hiss hands to creditors of the original vendor

which contains any false or untrue statement; and 2. Tran Transsfe ferrring ing titl title e to an anyy stoc stockk of goods, wares, merchandise, provisions or materials sold in bulk without consideration or for nominal consideration (Section 7 )

Effect of violation of law on Transfer: 1. As be betw twee een n the the pa parti rties es 

The Bulk Sales Law does not in an anyy way way affe affect ct th the e vali validi dity ty of th the e tr tran ansf sfer er as betw betwee een n th the e intermediate parties thereto  A sa sale le no nott in co comp mpli lian ance ce wi with th th the e Bul ulkk Sale ales Law is vali valid d agains aga instt all person personss other other than than the creditors. 2. As ag agai ains nstt cre credi ditor torss  A purchaser in violation of the law law acqu acquir ires es no ri righ ghtt in th the e proper pro perty ty purch purchase ased d as agains againstt the creditors of the seller  His status is that of a trustee or receiver for the benefit of the creditors of the seller; as such, h e is reof spthe onsiproperty ble for disposition

the

Remedies Available to creditors:  The proper proper rem remedy edy is one against against the th e go good odss to su subj bjec ectt th them em to th the e payment of the debt, such as execution, attachment, garnishment, or by a proceeding in equity ordi ordin nary ary ac acti tio on ag agai ains nstt the  An purchaser to obtain money judgem jud gement ent will will not lie, lie, unless unless the pu purc rcha hase serr ha hass so sold ld or ot othe herw rwis ise e di disspo possed of of,, or de deal altt with the property, so as to become personally liable to creditors for value of it.

RETAIL TRADE LIBERALIZATION ACT (RA 8762) Retail Trade Any ac actt occu occupa pati tion on or ca call llin ingg of  Any habi habitu tual ally ly se sell llin ingg dire direct ct to the the general publ bliic merchandise, commodities or goods for consumption, but the restrictions of this this law law shal shalll no nott app pply ly to the the following: 1. Sa Sale less by manu manufa fact ctur urer er,, pr proc oces esso sor, r, labore lab orer, r, or wor worker ker,, to the ge gener neral al publicc the produ publi products cts manufactu manufactured, red, pr proc oces esse sed d pr prod oduc uced ed by him him if his his capital does not exceed P100,000; 2. Sale Saless by a farmer farmer or agric agricul ultu tura rali list st selling the products of his farm 3. Sale Saless in resta restaur uran antt ope opera rati tion onss by a hotel owner or inn-keeper irr irresp spec ecti tivve of the the amou amount nt of capital; provided that the restaurant is incidental to the hotel business; and 4. Sales which are limited only to products manufactured, processed or ass assem embl ble ed by a man anuf ufac actu turrer through a single outlet, irrespective of capitalization

High-End or Luxury Goods  Goods which are not necessary for life maintenance and whose demand is ge gene nera rate ted d in larg large e pa part rt by the the higher income groups  Shal Shalll incl includ ude e bu butt no nott limi limite ted d to: to: jewelry, branded or de dessigner cl clot othi hing ng and and fo foot otwe wear ar,, wear wearin ingg apparel, leisure and sporting goods, el elec ectr tron onic icss and and othe otherr pers person onal al effects

 

natural-born n citizen citizen of the NOTE:  A natural-bor Philippines  who has lost his citizenshi citizenship p but who resides in the Philippines shall be granted the same rights as Filipino citizens

Foreign Equity Participation: 

Foreign-owned partnerships, ps, associations and corporations formed and organized under the laws of the Philip Phi lippin pines es may, may, upon upon regist registrat ration ion wit ith h SEC an and d DTI, TI, or in case ase of Foreign-owned Foreign-own ed single proprietorship wi with th th the e DTI, DTI, en enga gage ge or in inve vest st in retail trade business, subject to the  following categories: 1. Categor ory y A: A:  Paid-up capital of the equivalent in Philippine Peso of: < $2,500,000 US Dollars  Reserved exclusively for Filipino citizens and corporations wholly owned by citizens 2. Categor ory y B: B:  Minimum paid-up capital of the equivalent in Philippine Peso of $2 $2,5 ,500 00,0 ,000 00 US Do Doll llar ars, s, bu butt 60% of total equity. 3. Categor ory y C:  Paid-up capital of the equivalent in Philippine Peso of: $7,500,000 US Dollars or more 

May be wholly owned by foreigners shal alll th the e NOTE:  In no ca case se  sh invest inv estmen ments ts fo forr establi establishi shing ng a store  in Categories B and C  be

les less th than an th the e eq equ uiv ival ale ent in Philippine Peso of: US $830,000 4. Categor ory y D: D:  Enterprises specializing in highend or luxury products with paidup capital of the equivalent in Philippine Peso of: $250,000 US Dollars per store  May be wholly owned by foreigners

NOTES:  Foreign investor shall be required to maintain in the Philippines the FULL amount of the prescribed minimum capital, UNLESS the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines  Failure to maintain the full amount of the prescribed prescribed minimum minimum capital capital prior to notification of the SEC and the the DTI DTI shal shalll subj subjec ectt the the fo fore reig ign n investors to penalties or restrictions on any future trading activities/business activities/busine ss in the Philippines NOTE:  Foreig Foreign n Inv Invest estors ors Acquir Acquiring ing Shares of Stock of existing retail stores whether or not publicly listed whose net worth is in excess of the Peso equivalent of US $2,500,000 $2,500,000 may purchase only up to the maximum of 60% of the equity  thereo the reoff within within the fir first st 2 years, years, and  ther there eaft after er,, the hey y may may ac acqu quir ire e th the e remaining rema ining percentage percentage consisten consistentt with the allowable allowable foreign foreign participati participation on as herein provided

NOTE: All retail Trade enterprises under cate ca tego gori ries es B an and d C in wh whic ich h fo fore reig ign n owners own ership hip exceeds exceeds 80% of equ equity ity shall offer a minimum of 30% of their equity  to the pu publ bliic through any stock exch exchan ange ge in th the e Ph Phil ilipp ippin ines es wi with thin in 8 years from the start of the operations

Qualification of Foreign Retailers 1. Mini Minimu mum m of $20 $200, 0,00 000, 0,00 000 0 US Dol Dolla lars rs net worth in its parent corporation for Categories B and C and $50,000,000 net worth in its parent corporation for Categories D 2. 5 retail retailing ing b bran ranche chess or franc franchis hises es in op oper erat atio ion n anyw anywhe here re arou aroun nd the the worl wo rld d un unle less ss such such re reta tail iler er ha hass at least 1 store capitalized at a minimum of $25,000,000 US Dollars 3. 5-year 5-year track track re recor cord d in reta retaili iling; ng; a and nd 4. On Only ly natio ation nals als from from,, or jur juridic idical al entiti ent ities es for forme med d or incor incorpor porate ated d in Countries which allow to engage in retail trade in the Philippines

 

condominium unit in the registered proj pr ojec ectt un unle less ss he shal shalll ha have ve firs firstt obtained a license to sell the project within two weeks from the registration of such project.

PD 957 (SUBDIVISION AND CONDOMINIUM BUYERS’ PROTECTIVE DECREE Registration of Projects  The registered owner of a parcel of land who wishes to convert the same





Exempt transactions 

in into to a su subd bdiv ivis isio ion n proj projec ectt sh shal alll submit his subdivis submit subdivision ion plan plan to the HOUSING AND LAND-USE REGULATORY BOARD, which shall act upon and approve the same, upon a finding that the plan complies with th the e Su Subd bdiv ivis isio ion n St Stan anda dard rds' s' and and Regulations enforceable at the time the th e pl plan an is su subm bmit itte ted. d. Th The e same same procedure shall be followed in the case cas e of a plan plan for a con condom domini inium um project except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance

A licens license e to sel selll and perfor performan mance ce bond shall not be required in any of the following transactions: 1. Sa Sale le of a subd subdiv ivis isio ion n lo lott re resu sult ltin ingg from the partition of land among coowners and co-heirs. 2. Sale Sale or tr tran ansf sfer er of a subdi subdivi visi sion on lo lott by the original purchaser p urchaser thereof and any subsequent sale of the same lot. 3. Sale of a subdivision lot or a cond condom omin iniu ium m unit unit by or fo forr the the ac acccount ount of a mo morrtgag tgage ee in the the ordina ord inary ry cou course rse of busine business ss whe when n necess nec essary ary to liquid liquidate ate a bon bona a fide fide debt.

wi with th th the e Na Nati tion onal al Buil Buildi ding ng Co Code de (R.A. No. 6541). The subdivision plan, as so approved, sha hall ll th the en be sub ubmi mitt tted ed to the Dire Direct ctor or of Land Landss fo forr ap appr prov oval al in acco accord rdan ance ce with with th the e proc proce edure dure prescribed in Section 44 of the Land Re Regi gist stra rati tion on Act Act (A (Act ct No. No. 49 496, 6, as amended by R.A. No. 440): Provided, that it case of complex subdivision plans, court approval shall no longer be required. The condominium plan as like likewi wise se so ap appr prov oved ed,, sh shal alll be submitted to the Register of Deeds of the province or city in which the property lies and the same shall be

Grounds for Revocation of registration certificate and license to sell of owners or dealers 1. Is inso insolv lven ent; t; or 2. Has violat violated ed a any ny of of the the provi provisio sions ns o off this Decree or any applicable rule or regulation of the Authority, or any undertaki unde rtaking ng of his/ his/its its perf performan ormance ce bond; or 3. Has bee been n or is enga engaged ged or is is abou aboutt to engage in fraudulent transactions; or 4. Has Has made any mi misr srep epre rese sent ntat atio ion n in any prospectus, brochure, circular or other literature about the subdivisio subdi vision n proje project ct or condomini condominium um project that has been distributed to

acted conditions and upon in asubject ccordanto cethe w ith the procedure prescribed in Section 4 of th the e Cond Condom omin iniu ium m Act Act (R (R.A .A.. No No.. 4726).

or e; or 5. prospective Is of bad busine busbuyers; iness ss re reput pute; 6. Doe Does not condu onduct ct his bu bussine iness in ac acccor orda dan nce with law law or soun und d business principles.

Nati Nation onal al Hous Housin ingg au auth thor orit ityy (n (now ow Housingg and Land Housin Land Use Regula Regulator toryy Board) has the exclusive jurisdiction to regulate the real estate trade and business.

License to sell Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to



sell

any

subdivision

lot

or

LEASE LEASE consensu ensual, al, bilateral, bilateral, one onerous, rous, and  cons commutativ commu tative e cont contract ract by virtue virtue of which wh ich one person person binds binds him himsel selff to gran grantt te temp mpor orar aril ilyy the the use use of the the thing or to render some service to another who undertakes to pay some rent.

 

Kinds of Leases (From the view point of  the subject matter 1. Leas Lease e of of tthi hing ngss 2. Le Leas ase e of serv servic ice e 3. Leas Lease e of wor orkk NOTE NO TE:: Since lease is consensual and is not imposed by law, only the lessor has the right to fix the rents. However, the increasing of the rent is not an absolute right on the part of the lessor.

Characteristics or Requisites for Lease of Things 1. Consensual 2. Principal 3. Nominate 4. Purpos Purpose e is to allo allow w enjo enjoyme yment nt or use use of a th thin ingg (t (the he pers person on to enjoy is the lessee; the person allo allow win ingg th the e en enjo joyymen ment by another is the lessor 5. Su Subj bjec ectt matt matter er must must be wi with thin in the commerce of man 6. Purp Purpos ose e to whic which h th the e th thin ingg wi will ll be devoted should not be immoral 7. Onerous (th ther ere e mu must st re rent nt or   price certain) 8. Period is Temporary (not  perpetual, hence, the longest  period is 99 years)

9. Period is either definite or indefinite  If no term is fixe ixed , we should apply Art.1682 (for rural leases) and Art. 1687 (for urban leases)  If the term is  fixed but indefinite, the court will fix the term under the law of obligations and contracts 10. Lessor Lessor nee need d not be the owner owner

NOTE:  A usufru usufructu ctuary ary may thus thus leas lease e th the e prem premis ises es in favo favorr of a stranger, such lease to end at the time that the usufruct itself ends Rent 

The The comp compen ensa sati tion on eith either er in money, mone y, provi provision sions, s, chattels, chattels, or labo labor, r, re rece ceiv ived ed by th the e less lessor or from the lessee.

NOTES:  When a student boards and lodges in a dormitory, there is no contract of lease. The contract is not designate desig nated d specifica specifically lly in the Civil Code. It is an in innominate nominate contract. It is ho howe weve ver, r, be beli liev eved ed that that the the contract can be denominated as the contract of board and lodging.  There is a contract of lease when the use use and enjoy njoyme men nt of a safe afety deposit box in a bank is given for a price certain. This is certainly not a contract of deposit.  A lea lease se of person personal al pro proper perty ty with with option to buy (at a nominal amount) at the the en end d of the the le leas ase e can be considered a sale. LEASE 1. only use or enjoyment is transferred 2. transfer is temporary 3. lessor need not be the owner

4. the price of the object, distinguishe distin guished d from the rent, is usually not mentioned

SALES 1. own wner ersshi hip p transferred

is

2. transfer is permanent 3. seller must be the owner at the time the property is delivered 4. usua usuall llyy, the the sel elli ling ng pri price is mentioned

Lease of  Things

Lease of Services

1. object of contract is a thing 2. lessor h ha as tto o deliver the thing leased 3. in case of brea breach ch,, ther there e can be an action for specific performance

1. object is sso ome work or service 2. lessor has to perform some work or service 3. in case of brea breach ch,, no ac acti tion on for specific performance

Lease of  Services (locatio operatum)

Contract for a Piece of Work (locatio operas)

1. the importan impo rtantt obje object ct is the labor performed by the

1. the important obje object ct is th the e wo work rk done

 

lessor 2. the r es esult i s generall rallyy not important, hence the laborer is ent entitle itled d to be paid even if there is dest destru ruct ctio ion n of the work through fortuitous event

Lease of  Services It is based on – employment   the lessor of servic rvice es does not represent his employer nor 

2. the result is generally important; generally, the price is not payable until the work is completed, and said pric rice cannot be lawfullyy deman lawfull demanded ded if the work is destroyed destro yed before it is finished and accepted

Agency It is based on repr repres esen enta tati tion on – agent represents his principall and enters principa into juridical acts.

does he execute

 juridical acts.

Principal contract

Preparatory contract

Rule for Lease of Consumabl Consumable e Goods   GENERAL RULE: Con Consum sumable able goods goods cann cannot ot be th the e su subj bjec ectt matt matter er of a contract of lease of things. Why?   To use or enjoy enjoy he hem, m, th they ey will will have hav e to be con consum sumed. ed. This cannot cannot be done don e by a lease lease since since ownersh ownership ip over over them is not transferred to him by the contract of lease.   EXCEPTIONS:

a. If they they are merely merely exhibi exhibited ted b. Iindustrial f they a re accessory to an establishment

RECORDIN RECOR DING G OF LEASE LEASE OF PERSON PERSONAL AL PROPERTY   GENERAL RULE: Lease of real property is personal right   EX EXCEP CEPTI TION ONS: S: Leas Lease e pa part rtak akes es of th the e nature of real right if: a. Le Leas ase e of real eal pr prop oper erty ty is more more than 1 year b. Lease of real property is registered regardless of duration Lease e of pe pers rson onal al pro prope pert rtyy NOTE:  Leas cannot can not be rregi egist stere ered. d. To be bindin bindingg

against third persons, the parties must execute a public instrument. * Lease may be made orally, but if the lease of Real Property is for more than 1 year, it must be in writing under the Statue of Frauds.

Persons Disqualified to be Lessees Because Disqualified to Buy 1. A husba husband nd and and a wife wife cannot cannot leas lease e to each other their separate properties except: a. if se sepa para rati tion on of pr prop ope erty rty wa wass agreed upon b. if there has been judicial separation of property Pe Pers rson onss re refe ferr rred ed to in Art. Art. 14 1491 91 are are dis disqu qual alif ifiied be beccau ause se of fidu fiducciar iary relationships SUBLEASE  A separate and distinct contract of lease lea se where wherein in the origin original al les lessee see becomes a sublessor to a sublessee.  Allowed unless expressly prohibited. sublesse see e is sub subsid sidiar iarily ily liable liable  The subles for any rent due. The lessor has an accion directa  against the sublessee for unpaid rentals and improper use of the object. SUBLEASE

ASSIGNMENT OF OF LEASE

1. there are two le leas ases es an and d two two distinct distin ct juridical juridical relationships although immediately conn connec ecte ted d and and rela re late ted d to each each other 2. the pers person onal alit ityy of th the e les lesse see e does does not disappear 3.the lessee does not transmit abso bsolu lute tely ly hi hiss rights and obligations to the sublessee 4. the sublessee, ge gene nera rally lly,, does does not have any

1. there is only one juridical relationship, relatio nship, that of the le less ssor or an and d the assi assign gnee ee,, who who is co conv nver erte ted d in into to a lessee

direct

action

2. the personality of the lessee disappears 3. the lessee transmits absolutely hi hiss rig igh hts to the assignee

4. the assignee has a direct action against the lessor

 

against the lessor

RIGHTS OF LESSOR IF SUBLEASE PROH PROHIB IBIT ITED ED BUT BUT ENTE ENTERE RED D INTO INTO BY LESSEE: 1) Rescission and damages, or 2) Damag amages es on only ly (C (Con ontr trac actt wi will ll be allowed to remain in force) 3) Ejectment Instances when sublessee is liable to the lessor: a. Al Alll acts acts whic which h refe referr to the the use use an and d pr pres eser erva vati tion on of th the e th thin ingg leased in the manner stipulated be betw twe een the les lesso sorr and th the e lessee b. The sublessee is subsi bsidiarily liable to the lessor for any rent due from the lessee. The sub uble lessse see e sha hall ll not be NOTE:  The responsible beyond the amount of rent due from him.  Accion Directa: direct action which the lessor may bring against a sublessee who misuses the subleased property. p roperty.

OBLIGATIONS OF THE LESSOR (DnM) a. Deli eliver very y of the object object (ca (canno nnott be waived) b. Making of of necessary repairs c.  Mai aint nten enan ance ce in peac peacef eful ul an and  d  adequate possession

OBLIGATIONS OF THE LESSEE (R2EN2U) a. to pay rent b. to use thing leased as a diligent father of a family, devoting it to the use stipulated c. to pay expenses for the deed of lease d. to notify the lessor of usurpation or untoward acts e. to notify the lessor of need for repairs f. to retu eturn rn the proper property ty leased leased upon termination of the lease Ef Effe fect ct of De Dest stru ruct ctio ion n of the the Thin Thingg Leased: 1. Tota Totall dest destru ruct ctio ion n by a fo fort rtui uito tous us event 

Lease is extinguished

2. Part Partia iall de dest stru ruct ctio ion n

a. Prop ropor orttion ional red edu uctio ction n of the rent, or b. Re Resc scis issi sion on o off the the le leas ase e When lessee may suspend payment of 

rent: 1. lesso lessorr fails to undertake undertake necessary necessary repairs 2. lessor fails to maintain the lessee in peaceful and adequate enjoyment of the property leased “Suspend” pend”-- for the inte interven rvening ing NOT NO TE: “Sus period, the lessee does not have to pay the rent.

EFFECTIVITY OF THE SUSPENSION: The right begins: a) In the case of repairs, from the time he made the demand for said repairs, and the demand went unheeded. b) In the case of eviction, from the time the final judgment for eviction becomes effective. Alte Altern rnat ativ ive e reme remedi dies es of Ag Aggr grie ieve ved d party (Lessor/Lessee) in case of Nonfulfillment fulfillme nt of duties: 1. Re Resc scis issi sion on an and d dama damage gess 2. Damage Damagess only, only, a allo llowi wing ng th the e contr contract act to remain in force – Specific Performance NOTE:  Dama Damage gess Reco Recove vera rabl ble e in ejectment cases are the rents or the fair re rent ntal al va valu lue e of th the e premi premise ses. s. Th The e cannot following be succ succes essf sful ully ly claimed: 1. Profits plaintiff could have earned were it not for the poss ossible ible en entr tryy or unlaw nlawfu full detainer 2. Mat Materi erial al inju injury ry to to th the e pr premi emises ses 3. Actua tual, moral, or exemplary damages

Immediate termination of lease under Art. 1660 applies: 1. only only to dwel dwelli ling ng plac place e or any any oth other er building intended for human habitation 2. ev even en if at at the tim time e the ccon ontr trac actt was perfec per fected ted,, the lessee lessee knew knew of the dangerous dange rous condition condition or waive waived d the

 

right to rescind on account of this condition Rules on Alteration of the Form of the Lease   can alter provided there  The Lessor  can is no impairment of the use to which the thing is devoted under the terms of the lease  Alteration can also be made by the Lessee  so long as the value of the property is not substanti tia ally impaired

Rules in case of Urgent Repairs  The lessee is obliged to tolerate the work although it may be very annoying to him and although during the same time he may be deprived of a part of the premises 1. If repa repairs irs last last for more more than than 40 40 days: days: Lessee Less ee cannot cannot act for reduction reduction of rent or rescission 2. If 40 days days or more more:: less lessee ee can can ask ask for proportionate reduction NOTE: In either case, rescission may be avai availe led d of if th the e main main purp purpos ose e is to pro provide a dwelling place and the property becomes uninhabitable. Effects if Lessor fails to make Urgent Repairs 1. Lessee may order repairs at the lessor’s cost 2. Less Lessee ee m may ay sue sue for for dam damag ages es 3. Less Lessee ee ma mayy suspe suspend nd the the payme payment nt of the rent 4. Lesse Lessee e may ask ask for for resci rescissi ssion, on, in case case of substantial damage to him TRESPASS IN LEASE: 1. Tr Tresp espass ass in fact fact  (pert (perturbac urbacion ion de mere hecho):   physical enjoyment is reduced  Lessor will not be held liable. 2. Tr (perturbac urbacion ion de Tresp espass ass in law law  (pert derecho):  



A third person claims legal right to enjoy the premises Lessor will be held liable

While e the Japanese Japanese Occupatio Occupation n NOTE:: Whil NOTE was a fortuitous event, the lessor is still not not excu excuse sed d fr from om his ob obli liga gati tion on to warrant peaceful legal possession. Lease is a contract that calls for prestations

both reciprocal and repetitive; and the ob obli liga gati tion onss of eithe itherr pa part rtyy are are not discha dis charge rged d at any giv given en mom momen ent, t, but must be fulfilled all throughout the term (Villarue ruell vs. Manila Manila of the the  contract.  (Villa Motor Co.)

Duration of Lease

1. Lease made for a determinate time or fixed Period   Lease will be for the said period and and it ends ends on the the day day fixe fixed d without need of a demand d emand 2. If ther there e is no no fixe fixed d peri period od  A. For Rural Lands (Article 1680)   it shall be for all time necessary for the gathering of fruits which the whole estate may yield in 1 year, or which it may yield once B. For Urban Urban Lands Lands (A (Arti rticle cle 1687) 1687) a. If rent is pa paid id da dail ilyy: le leas ase e is is from day to day b. If rent rent is is p pai aid d w wee eekl kly: y: le leas ase e is is from week to week c. If re rent nt is pa paid id mo mont nthl hly: y: le leas ase e iiss from month to month d. If rent rent is paid paid ye year arly ly:: le leas ase e iiss from year to year

RULES ON EXTENS RULES EXTENSION ION OF THE THE LEA LEASE SE PERIOD: 1) If a lease contract for a definite term allows lessee to extend the term, there is no necessity for lessee to notify lessor of his his de desi sire re to so ex exte tend nd the the te term rm,, unless the contrary is stipulated. 2) “Ma “Mayy be exten extended ded” ” as stipul stipulati ation: on: le less ssee ee can can exte extend nd wi with thou outt le less ssor or’s ’s consent but lessee must notify lessor. 3) “May be extended for 6 years agreed upon by both parties” as stipulation: This must mu st be inte interp rprreted eted in favo favorr of the the lessee. less ee. Hence, ordinari ordinarily ly the lessee at the the end of the the or orig igin inal al peri period od may may either: a) le leav ave e the the pr prem emis ises es;; or or b) re rema main in in po poss sses essi sion on 4) In co-o co-own wner ersh ship ip,, asse assent nt of all all is neede ded d; otherwise, it is void or ineffective as against non-consenting coowners. 5) Where according to the terms of the contract, the lease can be extended only by the written written con consen sentt of the partie partiess

 

thereto, no right of extension can rise without such written consent.

enjoyment of possession, but not those with respect to special agreements

Rule if Lessor Objects to the Lessee’s continued Possession:  Requisites: 1. Co Cont ntra ract ct ha hass ex expi pire red d 2. Lesse Lessee e contin continued ued enjo enjoyin yingg the thin thingg 3. Lessor Lessor Object Objected ed to thi thiss enjoy enjoymen mentt  If the three requisites are present, the th e less lessee ee sh shal alll be co cons nsid ider ered ed a

which are by nature foreign to the right of occupancy or enjoyment inherent in a contract of lease – such as an option to purchase the leased premises (Dizon vs.

 possessor in bad faith (Tacita IMPLIED NEW LEASE Reconducion)  lease which arises if at the end of th the e cont contra ract ct th the e less lessee ee sh shou ould ld continue cont inue enjoying enjoying the thing thing leased leased for 15 days with the acquiescence of the lessor, lessor, unless unless a notice notice to the contrary had previously been given by either party. 



Requisites: a. the term term of the or origi iginal nal contra contract ct has expired b. the lessor has not given the lessee a notice to vacate c. th the e less lessee ee cont contin inue ued d enjo enjoyi ying ng the thing leased for at least 15 dayss with day with the acqui acquiesc escenc ence e of the lessor Whe hen n th ther ere e is no impl implie ied d ne new w lease: before or after the 1. When expira exp iratio tion n of the term, term, there there is a no noti tice ce to vaca vacate te give given n by eith either er party. 2. When

there is no definite fixed period in the original lease contract as in the case of successive renewals.



Effects: a. Th The e peri period of the the new leas lease e is not that that stated stated in the original original contract but the time in Articles 1682 and 1687. b. Other terms of the original contract are revived.

NOTE:  Terms that are revived are only th tho ose which are germane to the

Magsaysay GR No. 23399, May 31,1974)

Perpetual Lease  A lease contract providing that the lessee can stay in the premises for as long as he wants and for as long as he ca can n pa payy the the rentals tals and its its increases.  This is not permissible; it is a purely po pote test stat ativ ive e co cond ndit itio ion n be beca caus use e it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee NOTE:  In  Jespajo Realty vs. CA, 27  Sept. Sep t. 2002 2002, the SC uph phe eld a lease contract, which provides that “the lease contract shall continue for an indefinite period provided that the lessee is up-todate date in the the pa paym ymen entt of his his mo mont nthl hlyy rentals” for the contract is one with a period subject to a resolutory condition condition.. PURCHASE OF THE LEASED PROPERTY   GEN GENERA ERAL L RULE: RULE:  Pur Purch chase aserr of thing thing leased can terminate lease.   EXCEPTIONS:  a. le leas ase e is reco record rded ed in Reg Regis istr tryy of Property b. there is stipulation in the contract of sale that purchaser shall respect the lease c. purcha purchaser ser knows knows the existe existenc nce e of the lease d. sale sale is fic ficti titi tiou ouss e. sale is made with right of repurchase GROUNDS FOR EJECTMENT UNDER ART. 1673: (ELVU) 1. Expiration of the period agreed upon or the period under Arts. 1682 and 1687; 2. Lack of payment of the price stipulated; 3. Viol iolati ation on of any of the condi conditio tions ns agreed upon in the contract; and 4. Unauthorized use or service by the lessee of the thing leased.

 

6. Exp xpir irat atio ion n of pe peri riod od of the the le leas ase e contract.

RENTAL REFORM ACT OF 2002 (R.A. No. 9161)  Effectivity: January 1, 2002.  Coverage: a. All All resi reside dent ntia iall unit unitss of NCR  and  and other highly hig hly urbani urbanized zed cit cities ies,, the total total mont mo nthl hlyy rent rental al fo forr ea each ch of wh whic ich h does not exceed P7,500 ; b. All res resid ide enti tial al unit unitss in other areas the total monthly rental for each of which wh ich does not exceed P4,000   as of 1/1/02 1/1 /02,, withou withoutt prejud prejudice ice to prepreexisting contracts. Groundss for judici Ground judicial al ejectm ejectment ent:: SANORE 1. Assignment of lease or subleasing of resi reside dent ntia iall unit unitss in incl clud udin ingg th the e acceptance of boarders or bedspacers without written consent of the owner or lessor; 2. Arrea rrears rs in pa paym ymen entt of re rent nt fo forr a total of 3 months; 3. Leg Legiti itimat mate e nee eeds ds of th the e owne ownerr or lessor to repossess for his own use or for the use of any immediate member of his family as a residential unit, provided: a. owner owner or or imme immedia diate te memb member er not not being owner of any other available residential unit within the same city or municipality; b. leas lease e fo forr a defi defini nite te perio period d has has expired; c. less lessor or has has gi give ven n less lessee ee forma formall notice 3 months in advance; and d. owne ownerr or les lessor is pr pro ohib ibiite ted d from leasing the residential unit or allowing its use by a third person for at least 1 year. 4. Absolute ownership by the lessee of anothe ano therr dwelli dwelling ng unit unit in the same same cit cityy or munici municipal pality ity which which may be la law wfull fullyy us used ed as hi hiss res esid ide ence provided lessee is with formal notice 3 months in advance; 5. Need of the lessor to make necessary repairs in the leased premises which is the subject of an existing order of co con nde dem mna nati tion on by ap appr prop oprriate iate author aut horiti ities es concer concerned ned in order order to make said premises safe and habitable; and 

NOTE: Except pt when the the le leas ase e is fo forr a  Exce defin def inite ite per period iod,, the provis provision ionss of Art. 1673(1) of the Civil Code (CC), insofar as they refer to residential units, shall be suspended during the effect eff ectivi ivity ty of R.A R.A.. 916 9161, 1, but other other provisions of the CC and the Rules of Court on lease contracts insofar as they they are are no nott in co conf nfli lict ct with with the the prov pr ovis isio ions ns of R.A. R.A. No. No. 91 9161 61 shal shalll apply.  No incr increa ease se in mo mont nthl hlyy re rent ntal al by more than 10% is allowed. TERMINATION OF THE LEASE  If made for a determinate time, it ceases upon the day fixed without the need of a demand. 1) By the expiration of the period 2) By the total loss of the thing 3) By the resolution of the right of the lessor 4) By the the will ill of the the pu purc rch haser aser or transferee of the thing 5) By rescission due to non-performance of the obligation of one of the parties Special Provisions for Rural Lands  Effe Effect ct of lo loss ss du due e to fo fort rtui uito tous us event: 1. Or Ord dinar inaryy for ortu tuit itou ouss event vent – no reduction 2. Extraordinary fortuitous event a. if more than ½ of the fruits were lost, there shall be a reduction, unless there is a stipulation to the contrary b. if ½ or less less,, there there sh shall all be n no o reduction  Lease duration: If not fixed, it shall be fo forr all all time time ne nece cess ssar aryy fo forr the the gathering of fruits which the whole estate estat e may yield yield in 1 year year,, or whic which h it may yield once. Special Provisions for Urban Lands Repairs for which urban lessor is liable: 1. spec specia iall stip stipul ulat atio ion n 2. if non none, e, cus custo tom m of the the pla place ce 

 

3. in cas case of doubt oubt,, th the e re repa pair irss are chargeable against him

Lease duration: 1. If there is a fixed period, lease will be for said period. 2. If no fixed period, apply the following rules: a. If rent rent is paid paid daily daily:: day day tto o day day b. If rent rent is pai paid d week weekly ly:: week week to week c. If ren rentt is paid paid mont monthl hly: y: mon month th to month d. If rent rent is paid paid year yearly ly:: year to year 