Sales & Lease

8/13/2019 Sales & Lease

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SALES

SALE A nominate contract whereby one of thecontracting parties obligates himself totransfer the ownership of and to deliver adeterminate thing and the other to paytherefor a price certain in money or itsequivalent.

Elements:

a. Essential elements those without which,there can be no valid sale:1. Consent or meeting of minds

. A !eterminable sub"ect matter #. $rice certain in money or its equivalent

b. %atural elements inherent in the contract,and which in the absence of any contraryprovision, are deemed to e&ist in thecontract:1. 'arranty against eviction

. 'arranty against hidden defectsc. Accidental elements may be present or

absent depending on the stipulation of theparties

Characteristics:1. $rincipal

. Consensual(#. )ilateral(*. %ominate(+. Commutative( n some cases, aleatory

-emptio spei (/. 0nerous.

Contract to sell

e&clusive right and privilege to purchase anob"ect.a bilateral contract whereby the prospectiveseller, while e&pressly reserving theownership of the sub"ect property despitedelivery thereof to the prospective buyerbinds himself to sell the said propertye&clusively to the prospective buyer uponfulfilment of the condition agreed upon, thatis, full payment of the purchase price.

Contract of Contract to

Sale Sell1. itle passes upondelivery of the thing sold

1. 0wnership is reservedin the seller and is not topass until full payment ofthe purchase price

. %on2payment of theprice is a negativeresolutory condition andthe remedy of the selleris to e&act fulfilment orto rescind the contract

. 3ull payment is apositive suspensivecondition, the failure ofwhich is not a breach casual or serious butsimply prevents the

obligation of the vendorto convey title fromhaving binding force

#. 4endor loses andcannot recoverownership of the thingsold and delivered untilthe contract of sale isresolved and set aside

#. itle remains in thevendor if the vendeedoes not comply with thecondition of ma5ingpayment at the timespecified in the contract

Conditional 6ale Contract to 6ell As to reservation of title to the subject property

n both cases the seller may reserve the title to the

sub"ect property until fulfillment of the suspensivecondition i.e. full payment of the price As to effect of fulfillment of suspensive

condition1. 7pon fulfillment ofthe suspensivecondition, the contract ofsale is therebyperfected, such that ifthere had been previousdelivery of the sub"ectproperty to the buyer,ownership theretoautomatically

transfers to the buyerby operation of la wwithout any further actby the seller.

1. 7pon fulfillment ofthe suspensivecondition, which is thefull payment of thepurchase price,ownership will notautomatically transfer tothe buyer although theproperty may have beenpreviously delivered to

him. he prospectiveseller still has toconvey title to the

prospective buyer byentering into a contractof absolute sale.

OBJECTS OF SALE

Emptio rei speratae Emptio spei


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1. 6ale of thinge&pected

1. 6ale of a merehope or e&pectancythat the thing will cometo e&istence

. 6ale is sub"ect tothe condition that thething will e&ist( if itdoes not, there is nocontract

. 6ale produces effecteven if the thing doesnot come intoe&istence, unless it isa vain hope

#. he uncertainty iswith regard to thequantity and quality ofthe thing

#. he uncertainty iswith regard to thee&istence of the thing

*. 0b"ect is a futurething

*. 0b"ect is a presentthing which is the hopeor e&pectancy

NOTE: n case of doubt the presumption is infavor of emptio rei speratae which is more in5eeping with the commutative character of thecontract

Goods which may e O !ects of Salea. E&isting goods goods owned or possessed

by the seller.b. 3uture goods goods to be manufactured,

raised or acquired by the seller after theperfection of the contract.

NOTES:

A sale of future goods is valid only as ane&ecutory contract to be fulfilled by theacquisition and delivery of goods specified.'hile there can be sale of future property,there can generally be no donation of futureproperty - Article 751 Civil Code3uture inheritance cannot be sold.

"nstances when the Ci#il Codereco$ni%es sale of thin$s not act&ally oralready owned y the seller at the time ofthe sale:

1. 6ale of a thing having potential e&istence- Article 1461

. 6ale of future goods - Article 1462 #. Contract for the delivery at a certain price of

an article which the vendor in the ordinarycourse of the business manufactures orprocures for the general mar5et, whetherthe same is on hand at the time or not(Article 1*/8

Sale A$ency to sell1. )uyer receives thegoods as owner

1. Agent receives thegoods as goods of theprincipal who retains

his ownership overthem

. )uyer has to paythe price

. Agent has toaccount for theproceeds of the salehe may ma5e on theprincipal9s behalf

#. )uyer, as a generalrule, cannot return theob"ect sold

#. Agent can return thegoods in case he isunable to sell thesame to a third person

*. 6eller warrants thething sold

*. Agent ma5es nowarranty for which heassumes personalliability as long as he

acts within hisauthority and in thename of the seller

+. )uyer can deal withthe thing sold as hepleases being theowner

+. Agent in dealingwith the thingreceived, must act andis bound according tothe instructions of theprincipal

Contract for 'iece of(or) Sale

1. he thing

transferred is one notin e&istence and whichnever would havee&isted but for theorder of the partydesiring to acquire it

1. he thing

transferred is onewhich would havee&isted and wouldhave been the sub"ectof sale to some otherperson, even if theorder had not beengiven

. he servicesdominate the contracteven though there is asale of goods involved

. he primaryob"ective of thecontract is a sale ofthe manufactureditem( it is a sale ofgoods even though theitem is manufacturedby labor furnished bythe seller and uponprevious order of thecustomer

#. %ot within the6tatute of 3rauds

#. 'ithin the 6tatuteof 3rauds

*&les to determine if the contract is one ofSale or 'iece of wor):a. f ordered in the ordinary course of business

sale


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b. f manufactured specially for the customerand upon his special order, and not for themar5et piece of work

BA*TE*contract whereby one of the parties bindshimself to give one thing in consideration ofthe other s promise to give another thing.

NOTE: he only point difference betweencontract of sale and barter is in the elementwhich is present in sale but not in barter,namely: price certain in money or its equivalent

NOTE: f the consideration is partly in money and partly in another thing , determine:

a. he manifest intention of the partiesb. f the intent is not clear, apply thefollowing rules:1. f the thing is more valuable than

money barter . f the money and the thing are of

equal value sale#. f the thing is less valuable than

money sale

Sale +ation in 'ayment1. %o pre2e&isting

credit1. $re2e&isting credit

. ;ives rise toobligations

. E&tinguishesobligations

#. Consideration onthe part of the seller isthe price( on the partof the buyer is theacquisition of theob"ect

#. Consideration of thedebtor is thee&tinguishment of thedebt( on the part of thecreditor, it is theacquisition of theob"ect offered in lieu ofthe original credit

*. ;reater freedom indetermining the price

*.


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b. 'here the price is so low as to be@shoc5ing to conscience , sale may beset aside.

1/ "n#ol&ntary sales GE E!A" !#"E$ ?ere inadequacy of the

price is not a sufficient ground for thecancellation of the sale.

E%CE&' ) *$a. 'here the price is so low as to be

shoc5ing to the moral conscience, "udicial sale personal property will beset aside

b. n the event of a resale, a better pricecan be obtained

NOTE: he validity of the sale is not necessarilyaffected where the law gives to the owner theright to redeem, upon the theory that the lesserthe price, the easier it is for the owner to effectredemption.

Effect where price is sim&lated1+ , it is sho-n to have .een in reality a

donation or some other act or contracthe sale is void but the act or contract shall

be valid as such2+ , not

he contract is void and ine&istent

Effect of Fail&re to determine price:1+ /here contract e0ecutory

he contract is inefficacious2+ /here the thing has .een delivered to and

appropriated .y the .uyer he buyer must pay a reasonable price

therefore

'E*FECT"ON OF SALE GE E!A" !#"E$ t is perfected at the

moment there is meeting of the minds upon adeterminate thing -ob"ect , and a certain price

-consideration , even if neither is delivered.NOTE: 6ale is a consensual contract( >ence,delivery and payment are not essential for itsperfection

E%CE&' ) $ 'hen the sale is sub"ect to asuspensive condition by virtue of law orstipulation.

*e,&irements for perfectiona. When parties are face to face

'hen an offer is accepted withoutconditions or qualifications

NOTES: A conditional acceptance is a counter2offer when negotiated thru phone it is as if itis negotiated face to face

b. When contract is thru correspondenceor thru telegram'hen the offeror receives or has 5nowledgeof the acceptance by the offereeNOTE: f the buyer has already acceptedbut the seller does not 5now yet of theacceptance, the seller may still withdraw

c. When a sale is subject to a suspensivecondition3rom the moment the condition is fulfilled

T*ANSFE* OF O(NE*S2"' GE E!A" !#"E$ 'hile a contract of sale is

consensual, ownership of the thing sold isacquired only upon its delivery, actual orconstructive, to the buyer. ( aus v+ *ps+ e"eon 16 3une 2

E%CE&' ) $1. Contrary stipulation or Pactum reservati

dominii -contractual reservation of title astipulation, usually in sales by installment,whereby, despite delivery of the propertysold, ownership remains with the seller untilfull payment of the price is made.

2+ Contract to sell #. Contract o, insurance a perfected contract

of sale, even without delivery, vests in thevendee an equitable title, an e&istinginterest over the goods sufficient to be thesub"ect of insurance

EFFECT OF '*O3"SE T*EATE+ 4N+E*A*T/ .567 Ci#il Code:1. Accepted &nilateral promise to sell or

&y0nly one ma5es the promise, this promiseis accepted by the other. E0ample : A

promises to sell to ), ) accepts thepromise, but does not in turn promise tobuy.does not bind the promissor even ifaccepted and may be withdrawn anytime.

NOTE: $ending notice of its withdrawal, theaccepted promise parta5es the nature of anoffer to sell which if accepted, results in aperfected contract of sale - *anches vs+ !igos45*C!A 6 . n other words, if the acceptanceis made before withdrawal, it constitutes abinding contract of sale although the option isgiven without consideration.


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if the promise is supported by aconsideration distinct and separate from theprice -option money , its acceptance willgive rise to a perfected contract.

. Bilateral promise to &y and sell0ne party accepts the other9s promise tobuy and the latter, the former9s promise tosell a determinate thing for a price certainit is reciprocally demandable

t requires no consideration distinct from theselling priceNOTE : this is as good as a perfected sale.%o title of dominion is transferred as yet, theparties being given only the right to demand

fulfillment or damages.

Policitation An unaccepted unilateral promise to buy orsell. Even if accepted by the other party, itdoes not bind the promissor and maybewithdrawn anytime.

Option contract A contract granting a privilege in oneperson, for which he has paid aconsideration, which gives him the right tobuy certain merchandise, at anytime withinthe agreed period, at a fi&ed price.

An option without consideration is void andthe effect is the same as if there was nooption

*i$ht of First *ef&salt is a right of first priority all things and

conditions being equal( there should beidentity of the terms and conditions to beoffered to the optionee and all otherprospective buyers, with optionee to en"oythe right of first priority. A deed of salee&ecuted in favor of a third party whocannot be deemed a purchaser in goodfaith, and which is in violation of the of theright of first refusal granted to the optioneeis %0 voidable under the 6tatute of3rauds, such contract is valid )7rescissible under Article 1#B to 1#B1-# ofthe %ew Civil Code - Gu8man 9ocaling :Co+ vs+ 9onnavie; !iviera 7

he lessee9s right of first option to buy theleased property in case of its sale is but apart of the bigger right to lease the saidproperty from the lessor. he option wasgiven to the lessee because she was thelessee of the sub"ect property. t was acomponent of the consideration of thelease. he option was by no means anindependent right which can be e&ercisedby the lessee. f the lessee is barred by the

contract from assigning her right to leasethe sub"ect property to any other party, thelessee is similarly barred to assign her firstoption to buy the leased property to another.-9angayan et+al vs+ CA and "im G!

o+12 5 1 August 2> 1>>7

Earnest money partial payment of thepurchase price and considered as proof ofperfection of the sale( it shall be deducted fromthe total price

Earnest money Option money1. itle passes to thebuyer upon delivery ofthe thing sold

1. 0wnership isreserved to the sellerand is not to pass untilfull payment

. n case of non2payment, an action forspecific performanceor for rescission canbe filed by the in"uredparty

. n case of non2payment, there can beaction for specificperformance

#. $art of the purchaseprice

#. ?oney given as adistinct considerationfor an option contract

*. 'hen given, the

buyer is bound to paythe balance

*. he would2be buyer

is not required to buy

+. ;iven when there isalready a sale

+. Applies to a sale notyet perfected

*4LES ON *"S8 OF LOSS AN++ETE*"O*AT"ON:a. he thing sold is lost before perfection :

6eller bears the loss.b. he thing sold is lost at the time of

perfection : Contract is void or ine&istent.c. he thing sold is lost after perfection, but

before delivery :


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GE E!A" !#"E$ 'ho bears the ris5 ofloss is governed by the stipulations in thecontract

"n the a sence of any stip&lation:First view:)uyer bears the loss as an e&ception to therule of res perit domino .

E%CE&' ) *$1. when ob"ect sold consists of fungible

goods for a price fi&ed according toweight, number or measure

. seller is guilty of fraud, negligence,default or violation of contractual terms

#. ob"ect sold is generic-Civil Code o, the &hilippines &aras

NOTE: his view conforms with ?anresa9sview

ontrary view:'here the ownership is transferred bydelivery, as in our code, the application ofthe a&iom res perit domino , imposes the ris5of loss upon the vendor( hence, if the thingis lost by fortuitous event before delivery,the vendor suffers the loss and cannotrecover the price from the vendee-Commentaries and 3urisprudence on theCivil Code o, the &hilippines 'olentino

d. he thing is lost after delivery : )uyer bearsthe loss.

EFFECT OF LOSS AT T2E T"3E OF SALE:a. hing entirely lost at the time of perfection:

Contract is void and ine&istentb. hing only partially lost: 4endee may elect

between withdrawing from the contract ordemanding the remaining part, paying itsproportionate price

Sale y description A sale where a seller sells things as being of

a certain 5ind, buyer merely relying on theseller9s representations or descriptions.here is warranty that the thing sold

corresponds to the representations ordescriptions.

Sale y sample A sale where a small quantity of acommodity is e&hibited by the seller as afair specimen of the bul5, which is notpresent and as to which there is noopportunity to inspect or e&amine.

NOTE: he mere e&hibition of the sampledoes not necessarily ma5e it a sale bysample. his e&hibition must have been thesole basis or inducement of the sale.

here is warranty that the bul5 of thecommodity will correspond in 5ind, quality,and character with the sample e&hibited.

NOTE : n a sale by sample and by description,there is a two2fold warranty.

FO*3AL"T"ES OF CONT*ACT OF SALE GE E!A" !#"E$ 6ale is a consensual

contract and is perfected by mere consent. E%CE&' ) *$ n order to be enforceable by

action, the following must be in writing:1. 6ale of personal property at a price notless than $+

. 6ale of real property or an interesttherein

#. 6ale of property not to be performedwithin a year from the date thereof

NOTE: 6tatute of 3rauds is applicable only toe&ecutory contracts and not to contracts whichare totally or partially performed.

CA'AC"T9 TO B49 O* SELL GE E!A" !#"E$ All persons who can bind

themselves also have legal capacity to buy andsell.

E%CE&' ) *$1. Absolute incapacity -minors, demented

persons, imbeciles, deaf and dumb,prodigals, civil interdictees 2 partycannot bind themselves in any case.

. =elative incapacity incapacity e&istsonly with reference to certain persons ora certain class of property

*elati#e "ncapacityA/ 2&s and and wife Art/ .57; : the sale is

!"#$A%&' +*eason: only private rights, which aresub"ect to ratification are violatedNOTE: n the case of &ao vs. (enato,)*+ -A++ , the 6upreme Court foundthat the sale by the administrator ofcertain properties of the estate in orderto settle the e&isting obligations of theestate was made to the administrator?s son ,or a grossly lo- price .3urthermore, the said sale -as notsu.mitted to the pro.ate court ,orapproval as mandated .y the orderauthori8ing the administrator to sell .

he sale was indubitably illegal,irregular and fictitious, and the court9sapproval of the assailed compromiseagreement violated Article 1*D1 andcannot wor5 to ratify a fictitious contractwhich is non e/istent and void fromthe very beginning

b 'ith respect to nos. 5 to ? : the sale is01&& A0$ !"#$ +*eason: violation of public policycannot be sub"ect to ratification

OBL"GAT"ONS OF T2E 0EN+O*:1. ransfer ownership

. !eliver the thing sold#. 'arrant against eviction and against hidden

defects*. a5e care of the thing, pending delivery,

with proper diligence - Article 116

+. $ay for the e&penses of the deed of sale,unless there is stipulation to the contrary

+EL"0E*9%ot only a necessary condition for theen"oyment of the thing, but also the mode oftransferring ownership.

8inds:1. Actual or real placing the thing under the

control and possession of the buyer..


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Sale or ret&rn$roperty is sold, but the buyer, whobecomes the owner of the property ondelivery, has the option to return the sameto the seller instead of paying the price.

NOTES: t is a 5ind of sale with a condition

subsequent.he buyer must comply with the e&press or

implied conditions attached to the returnprivilege( otherwise, the sale becomesabsolute.)uyer, being the owner, bears the ris5 of

loss

Sale on trial@ appro#al@ or satisfaction A contract in the nature of an option topurchase if the goods prove to besatisfactory, the approval of the buyer beinga condition precedent.

*&les:1. title remains in the seller

. ris5 of loss remains with seller e&ceptwhen the buyer is at fault or has agreed tobear the loss

#. buyer must give goods a trial, e&cept whereit is evident that it cannot perform the wor5

Sale or ret&rn Sale on Trial1. 6ub"ect to aresolutory condition

1. 6ub"ect to asuspensive condition

. !epends entirely onthe will of the buyer

. !epends on thecharacter or quality ofthe goods

#. 0wnership passesto the buyer ondelivery andsubsequent returnreverts ownership inthe seller

#. 0wnership remainsin the seller until buyersignifies his approvalor acceptance to theseller

*. =is5 of loss or in"uryrests upon the buyer

*. =is5 of loss remainswith the seller

"nstances where Seller is still the Ownerdespite +eli#ery:1. 6ale on trial, approval or satisfaction

. Contrary intention appears by the term ofthe contract(

#. mplied reservation of ownership -Article1+ #

a. f under the bill of lading, the goods aredeliverable to seller or agent or theirorder(

b. f the bill of lading, although stating thatthe goods are to be delivered to thebuyer or his agent, is 5ept by the selleror his agent(

a. 'hen the buyer, although the goods aredeliverable to order of buyer, andalthough the bill of lading is given tohim, does not honor the bill of e&changesent along with it.

SALE OF GOO+S B9 A NON=O(NE*

GE E!A" !#"E$ )uyer acquires no titleeven if in good faith and for value under thema&im 0emo dat 2uid non habet -@Fou cannotgive what you do not have .

E%CE&' ) *$ -6?E=461. 0wner is estopped or precluded by his

conduct. 'hen sale is made by the r egistered

owner or apparent owner in accordancewith recording or registration laws

#. 6ales s anctioned by "udicial or statutoryauthority

*. $urchases in a m erchant s store, fairs ormar5ets

+. 'hen a person who is not the ownersells and delivers a thing, s ubsequentlyacquires title thereto -Art. 1*#*

/. 'hen the seller has a #oidable titlewhich has not been avoided at the timeof the sale -Art. 1+ /

NEGOT"ABLE +OC43ENT OF T"TLE N+T< A document of title in which it is stated thatthe goods referred to therein will bedelivered to the bearer, or to the order ofany person named in such document.

?ay be negotiated by delivery orindorsement.

The doc&ment is ne$otia le if:1. he goods are deliverable to the bearer( or

. f the goods are deliverable to the order of acertain person

'ersons who may ne$otiate N+T:1. he owner( or

. Any person to whom the possession orcustody thereof has been entrusted by theowner, if by the terms of the document thebailee issuing the document underta5es to


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deliver the goods to the order of the personto whom the possession or custody of thedocument has been entrusted or if at thetime of such entrusting the document insuch form that it may be negotiated bydelivery.

'lace of deli#ery of $oods1. 'here there is an agreement, place of

delivery is that agreed upon. 'here there is no agreement, place of

delivery determined by usage of trade#. 'here there is no agreement and no

prevalent usage, place of delivery is theseller9s place

*. n any other case, place of delivery is theseller9s residence+. n case of specific goods, which to the

5nowledge of the parties at the time thecontract was made were in some otherplace, that place is the place of delivery, inthe absence of agreement or usage of tradeto the contrary

Time of deli#ery of $oods1. 6tipulated time

. n the absence thereof, within a reasonabletime

*4LES (2EN 4ANT"T9 "S LESS T2ANAG*EE+ 4'ON:

1. )uyer may re"ect( or . )uyer may accept what has been

delivered, at the contract rate

*4LES (2EN 4ANT"T9 "S 3O*E T2ANAG*EE+ 4'ON:

1. )uyer may re"ect all( or . )uyer may accept the goods agreed

upon and re"ect the rest( or #. )uyer may accept all and must pay for

them at the contract rate

NOTE: Acceptance, even if not e&press may beimplied when the buyer e&ercises acts ofownership over the e&cess goods.

*4LES (2EN GOO+S 3" E+ ("T2 GOO+SOF +"FFE*ENT +ESC*"'T"ON:

)uyer may accept the goods which are inaccordance with the contract and re"ect therest

NOTE: f the sub"ect matter is indivisible, incase of delivery of larger quantity of goods or ofmi&ed goods, the buyer may re"ect the whole ofthe goods

+EL"0E*9 TO T2E CA**"E* GE E!A" !#"E$ 'here the seller is

authoriGed or required to send the goods to thebuyer, delivery to the carrier is delivery to thebuyer.

E%CE&' ) *$1. 'hen a contrary intention appears

. mplied reservation of ownership underpars. 1, ,# of Art. 1+ #

8inds of +eli#ery to the Carrier a. C. .3. (cost insurance ,reight signify

that the price fi&ed covers not only thecosts of the goods, but the e&pense of

the freight and the insurance to be paidby the seller b. 3.0.). (,ree on .oard goods are to be

delivered free of e&pense to the buyerto the point where they are 3.0.). hepoint of 3.0.)., either at the point ofshipment or the point of destination,determines when the ownership passes.

NOTE: the terms C. .3. and 3.0.). merelyma5e rules of presumptionc. C.0.!. (collect on delivery the carrier

acts for the seller in collecting thepurchase price, which the buyer mustpay to obtain possession of the goods.

'A93ENT OF T2E '4*C2ASE '*"CE GE E!A" !#"E$ he seller is not bound to

deliver the thing sold unless the purchase pricehas been paid.

E%CE&' ) $ he seller is bound to delivereven if the price has not been paid, if a periodof payment has been fi&ed.

Sale of *eal 'roperty y 4nitEntire area stated in the contract must bedelivered

'hen entire area could not be delivered,vendee may:1. Enforce the contract with the

corresponding decrease in price. =escind the sale:

a. f the lac5 in area is at least 1H1than that stated or stipulated

a. f the deficiency in quality specifiedin the contract e&ceeds 1H1 of theprice agreed upon

b. f the vendee would not havebought the immovable had he5nown of its smaller area of inferior


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quality irrespective of the e&tent oflac5 of area or quality

Sale for a L&mp S&m 3A uerpo ierto44endor is obligated to deliver all the landincluded within the boundaries, regardlessof whether the real area should be greateror smaller0rdinarily, there can be no rescission orreduction or increase whether the area begreater or lesser, unless there is grossmista5e.

NOTE: he Civil Code presumes that thepurchaser had in mind a particular piece of landand that he ascertained its area and quality

before the contract of sale was perfected. f hedid not do so, or if having done so he made noob"ection and consented to the transaction, hecan blame no one but himself - e leon vs@illanueva @iuda de !iosa 56 &hil 677 .

'hat is important is the delivery of allthe land included in the boundaries.

+O4BLE SALE Art/ . 55< *e,&isites: 0OCS1. two or more transactions must constitute

#alid sales(. they must pertain e&actly to the same o b"ect

or sub"ect matter(#. they must be bought from the same or

immediate s eller( A%!*. two or more buyers who are at odds over

the rightful ownership of the sub"ect mattermust represent conflicting interests.

*&les of preference:1. $ersonal $roperty

a. first possessor in good faith. =eal $roperty

a. first registrant in good faithb. first possessor in good faithc. person with oldest title in good faith

NOTES:'&rchaser in Good Faith one who buysthe property of another without notice thatsome other person has a right to or interestin such property and pays a full and fairprice for the same at the time of suchpurchase or before he has notice of theclaim or interest of some other person in theproperty (@eloso v+ CA +=egistration requires actual recording( if theproperty was never really registered as

when the registrar forgot to do so although

he has been handed the document, there isno registration.$ossession is either actual or constructivesince the law made no distinction - *anchesvs+ !amos 4 &hil614$ossession in Art.1+** includes not onlymaterial but also symbolic possession ('en


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c. 'arranty as to 3itness and?erchantability

A/ (arranty a$ainst e#iction'arranty in which the seller guarantees thathe has the right to sell the thing sold and totransfer ownership to the buyer who shallnot be disturbed in his legal and peacefulpossession thereof.

Elements:1. vendee is deprived, in whole or in part,

of the thing purchased(. the deprivation is by virtue of a final

"udgment(#. the "udgment is based on a prior right tothe sale or an act imputable to thevendor(

*. the vendor was summoned in the suitfor eviction at the instance of thevendee( A%!

+. no waiver of warranty by the vendee.

0endorDs lia ility shall consist of:1. 5otal eviction: 3!# '$4a. 0 alue of the thing at the time of

eviction(b. "ncome or fruits if he has been ordered

to deliver them to the party who won thesuit(

c. Costs of the suit(d. E&penses of the contract( AN+e. + amages and interests if the sale was

in bad faith.

. Partial eviction:a. to enforce vendor9s liability for

eviction -4 CE! ( O*b. to demand rescission of contract.

4endor9s liability is waivable but any

stipulation e&empting the vendor from theobligation to answer for eviction shall bevoid if he acted in bad faith.

8inds of (ai#er:a. onsciente voluntarily made by

the vendee without the 5nowledgeand assumption of the ris5s ofeviction

NOTE: vendor shall pay only the valuewhich the thing sold had at the time ofevictiond. #ntencionada made by the

vendee with 5nowledge of the ris5s

of eviction and assumption of itsconsequences

NOTE: vendor not liable

B/ (arranty a$ainst hidden defects'arranty in which the seller guarantees thatthe thing sold is free from any hidden faultsor defects or any charge or encumbrancenot declared or 5nown to the buyer.

Elements: S2EN'(/ Article .5 5 or *ecto Law!emedies o, vendor in sale o, personal

property .y installments*e,&isites:

1. Contract of sale. $ersonal property#. $ayable in installments*. n the case of the second and third

remedies, that there has been a failureto pay two or more installments

NOTE: Apply li5ewise to contractspurporting to be leases of personal propertywith option to buyArt/ .5 5 does not apply to a sale:1. $ayable on straight terms -partly in cash

and partly in one term. 0f =eal property

*emedies:

1. *peci,ic per,ormance upon vendee?s,ailure to pay

NOTE: !oes not bar full recovery for "udgment secured may be e&ecuted on allpersonal and real properties of the buyerwhich are not e&empt from e&ecution(&alma v+ CA+

. !escission o, the sale i, vendee shallhave ,ailed to pay t-o or moreinstallments

NOTES: %ature of the remedy which requiresmutual restitution bars further actionon the purchase price ( onato v+ AC+

GE E!A" !#"E$ cancellation of

sale requires mutual restitution, that isall partial payments of price or rentsmust be returned

E%CE&' ) *$ a stipulation that theinstallments or rents paid shall not bereturned to the vendee or lessee shallbe valid insofar as the same may not beunconscionable under the circumstan2ces - Article 14 6 .

#.


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25 *C!A65 NOTE: >owever, Article 1*B*-# doesNOT ar one to whom the vendor hasassigned on -ith a recourse .asis hiscredit against the vendee fromreco#erin$ from the #endor theassi$ned credit in f&ll although thevendor may have no right of recoveryagainst the vendee for the deficiency-


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1. 'here the goods have been soldwithout any stipulation as to credit

. 'hen the goods have been sold oncredit, but the term of credit has e&pired

#. 'here the buyer becomes insolvent(hen lost:1. !elivery of the goods to a carrier or

bailee for the purpose of transmission tothe buyer without reserving ownershipor right of possession

. 'hen the buyer lawfully obtainspossession of the goods

#. )y waiver of the lienNOTE: $ossessory lien is lost after the sellerloses possession but his lien as an unpaid seller

remains( hence he is still an unpaid creditor withrespect to the price of specific goods sold. >ispreference can only be defeated by thegovernments claim to the specific ta& on thegoods themselves - Arts+ 2247 and 2241 .NOTE: he bringing of an action to recover thepurchase price is not one of the ways of losingthe possessory lien. An unpaid seller does notlose his lien by reason that he has obtained amoney "udgement or decree for the price ofgoods - Art+ 152> last paragraph .

ii/ Stoppa$e of $oods in transitu *e,&isites:1. 6eller must be unpaid

. )uyer must be insolvent#. ;oods must be in transit*. 6eller must either:

a. actually ta5e possession of thegoods sold 0=

b. give notice of his claim to thecarrier or other person inpossession

+. 6eller must surrender the negotiabledocument of title, if any, issued by thecarrier or bailee

/. 6eller must bear the e&penses of

delivery of the goods after the e&erciseof the rightEffects of the e-ercise of the ri$ht

1. he goods are no longer in transit.. he contract of carriage ends( instead the

carrier now becomes a mere bailee, and willbe liable as such.

#. he carrier should not deliver anymore tothe buyer or the latter9s agent( otherwise hewill clearly be liable for damages.

*. he carrier must redeliver to, or accordingto the directions of the seller.

iii/ Special *i$ht of *esale

?ay be e&ercised only when the unpaidseller has either a right of lien 0= hasstopped the goods in transitu A%! under

A%F of the following conditions:1. 'here the goods are perishable in

nature. 'here the right to resell is e&pressly

reserved in case the buyer should ma5ea default

#. 'here the buyer delays in the paymentof the price for an unreasonable time

i#/ *escissionTypes:1. *pecial !ight to !escind #nder Art+

15 4 f the seller has either the rightof lien 0= a right to stop the goods intransitu A%! under either of situations:a. 'here the right to rescind on

default has been e&pressly reservedb. 'here the buyer has been in

default for an unreasonable time2+ #nder Art+ 15>7 (Ftechnical rescission

#/ Action for the price(hen may e e-ercised:1. 'here the ownership has passed to the

buyer A%! he wrongfully neglects 0=refuses to pay for the price

. 'here the price is payable on a daycertain A%! he wrongfully neglects 0=refuses to pay for the price, irrespectiveof the delivery or transfer of title

#. 'here the goods cannot readily beresold for a reasonable price A%! thebuyer wrongfully refuses to accept themeven before the ownership of the goodshas passed, if Article 1+D/ isinapplicable.

#i/ Action for dama$es

(hen may e e-ercised:1. n case of wrongful neglect or refusal bythe buyer to accept or pay for the thingsold -Art. 1+D/ par.1

. n an e&ecutory contract, where theownership in the goods has not passed,and the seller cannot maintain an actionto recover the price -Art 1+D+

#. f the goods are not yet identified at thetime of the contract or subsequently

B/ *E3E+"ES OF T2E B49E* FO*B*EAC2 OF CONT*ACT


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./ Action for specific performance Art/. 7 August2 +

ender of payment is not necessary( offer toredeem is enough.

'*E=E3'T"ON *E+E3'T"ON1. arises before sale 1. arises after sale

. no rescissionbecause no sale as yete&ists

. there can berescission of theoriginal sale

#. the action isdirected against theprospective seller

#. action is directedagainst the buyer

"nstances of le$al redemption:A/ 4nder the Ci#il Code le$al redemption


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b. "udicial cost incurred by him( A%!c. interest on the price from the date of

payment

*. he right must be e&ercised by the debtorwithin # days from the date the assigneedemands -"udicially or e&tra2"udiciallypayment from him

SALE OF C*E+"T O* OT2E*"NCO*'O*EAL *"G2TS "N L"T"GAT"ON

GE E!A" !#"E$ !ebtor has the right oflegal redemption in sale of credit or incorporealrights in litigation

E%CE&' ) *$

a. 6ale to a co2heir or co2owner b. 6ale to a co2owner c. 6ale to the possessor of property in

question

BA*TE*BA*TE*

contract whereby one of the parties bindshimself to give one thing in consideration ofthe other s promise to give another thing- Article 16

NOTE: )arter is similar to a sale with the onlydifference that instead of paying a price inmoney, another thing is given in lieu of thepurchase price

'E*FECT"ON and CONS433AT"ON'erfected from the moment there is ameeting of minds upon the things promisedby each party in consideration of the other

Cons&mmated from the time of mutualdelivery by the contracting parties of thethings promised

NOTES:'here the giver of the thing bartered is notthe lawful owner thereof, the aggrievedparty cannot be compelled to deliver thething which he has promised and is alsoentitled to damages.'here a party is evicted of the thinge&changed, the in"ured party is given theoption, either to recover the property he hasgiven in e&change with damages or onlyclaim an indemnity for damages.

As to matters not provided for by theprovisions on barter, the provisions on saleswill apply suppletorily

B4L8 SALES LA( Act No/ >7 1;@;;;8. ategory $:

Enterprises specialiGing in high2end orlu&ury products with paid2up capital ofthe equivalent in $hilippine $eso of:

1 ;@;;; 4S +ollars per store?ay be wholly owned by foreigners

NOTES:3oreign investor shall be required tomaintain in the $hilippines the 37


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condominium pro"ect e&cept that, inaddition, said Authority shall act upon andapprove the plan with respect to the buildingor buildings included in the condominiumpro"ect in accordance with the %ational)uilding Code - !+A+ o+ 6541 .

he subdivision plan, as so approved, shallthen be submitted to the !irector of as violated any of the provisions of this!ecree or any applicable rule or regulationof the Authority, or any underta5ing of hisHitsperformance bond( or

#. >as been or is engaged or is about toengage in fraudulent transactions( or

*. >as made any misrepresentation in anyprospectus, brochure, circular or otherliterature about the subdivision pro"ect orcondominium pro"ect that has beendistributed to prospective buyers( or

+. s of bad business repute( or /. !oes not conduct his business in

accordance with law or sound businessprinciples.

LEASELEASE

consensual, bilateral, onerous, andcommutative contract by virtue of which oneperson binds himself to grant temporarilythe use of the thing or to render someservice to another who underta5es to paysome rent.

8inds of Leases From the #iew point of thes& !ect matter 1. > yearsD. $eriod is either definite or indefinite

f no term is ,i0ed , we should apply Art.1/B -for rural leases and Art. 1/B8-for urban leases

f the term is ,i0ed .ut inde,inite , thecourt will fi& the term under the law ofobligations and contracts

1 .


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NOTE: A usufructuary may thus lease thepremises in favor of a stranger, such leaseto end at the time that the usufruct itselfends

*enthe compensation either in money,

provisions, chattels, or labor, received bythe lessor from the lessee.

NOTES:'hen a student boards and lodges in adormitory, there is no contract of lease. hecontract is not designated specifically in theCivil Code. t is an innominate contract. t

is however, believed that the contract canbe denominated as the contract of boardand lodging.

here is a contract of lease when the useand en"oyment of a safety deposit bo& in aban5 is given for a price certain. his iscertainly not a contract of deposit.

LEASE SALES1. only use oren"oyment istransferred

1. ownership istransferred

. transfer istemporary

. transfer ispermanent

#. lessor need not bethe owner

#. seller must be theowner at the time theproperty is delivered

*. the price of theob"ect, distinguishedfrom the rent, isusually not mentioned

*. usually, the sellingprice is mentioned

Lease of Thin$s Lease of Ser#ices1. ob"ect of contractis a thing

1. ob"ect is somewor5 or service

. lessor has todeliver the thingleased

. lessor has toperform some wor5 orservice

#. in case of breach,there can be an actionfor specificperformance

#. in case of breach,no action for specificperformance

Lease of Ser#ices3locatio operatum4

Contract for a 'ieceof (or)

3locatio operas41. the importantob"ect is the labor

1. the importantob"ect is the wor5 done

performed by thelessor

. the result isgenerally notimportant, hence thelaborer is entitled to bepaid even if there isdestruction of the wor5through fortuitousevent

. the result isgenerally important(generally, the price isnot payable until thewor5 is completed, andsaid price cannot belawfully demanded ifthe wor5 is destroyedbefore it is finishedand accepted

Lease of Ser#ices A$encyt is based on

employment thelessor of services doesnot represent hisemployer nor does hee&ecute Juridical acts .

t is based on

representation agentrepresents his principaland enters into

"uridical acts.

$rincipal contract $reparatory contract

*&le for Lease of Cons&ma le Goods GE E!A" !#"E$ Consumable goods cannot

be the sub"ect matter of a contract of lease ofthings

E%CE&' ) *$a. f they are merely e&hibitedb. f they are accessory to an industrial

establishment

*ECO*+"NG OF LEASE OF 'E*SONAL'*O'E*T9

GE E!A" !#"E$


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$ersons referred to in Art. 1*D1 are disqualifiedbecause of fiduciary relationships

S4BLEASE A separate and distinct contract of leasewherein the original lessee becomes asublessor to a sublessee.

Allowed unless e&pressly prohibited.he sublessee is subsidiarily liable for any

rent due. he lessor has an accion directaagainst the sublessee for unpaid rentals andimproper use of the ob"ect.

S4BLEASE ASS"GN3ENT OFLEASE

1. there are two leasesand two distinct "uridical relationshipsalthough immediatelyconnected and relatedto each other

1. there is only one "uridical relationship,that of the lessor andthe assignee, who isconverted into alessee

. the personality ofthe lessee does notdisappear

. the personality ofthe lessee disappears

#.the lessee does nottransmit absolutely hisrights and obligationsto the sublessee

#. the lessee transmitsabsolutely his rights tothe assignee

*. the sublessee,generally, does nothave any direct actionagainst the lessor

*. the assignee has adirect action againstthe lessor

"nstances when s& lessee is lia le to thelessor:

a. All acts which refer to the use andpreservation of the thing leased in themanner stipulated between the lessorand the lessee

b. he sublessee is subsidiarily liable tothe lessor for any rent due from thelessee.

NOTE: he sublessee shall not be responsiblebeyond the amount of rent due from him.

Accion $irecta $ direct action which the lessormay bring against a sublessee who misuses thesubleased property.

OBL"GAT"ONS OF T2E LESSO* +N3

Sales & Lease

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