SALES seek to extinguish.

Sale, concept Sale distinguished from payment by cession or cession de bienes

A contract whereby one of the contracting parties (known as the seller or vendor), obligates 1. In sale, there is no pre-existing credit, while in payment by cession, there are pre-existing
himself to transfer the ownership of and to deliver a determinate thing, and the other party, (known credits.
as the buyer or vendee), obligates himself to pay therefor a price certain in money or its equivalent. 2. A sale creates' obligations, while payment by cession extinguishes obligations.
(SeeArt. 1458.) 3. In sale, the cause or consideration is the price, from the seller's point of view; and the
delivery of the object, from the buyer's point of view. In payment by cession, the cause or
Elements of a contract of sale consideration is the extinguishment of the obligation, from the debtor's point of view; and the
1. Essential elements/requisites - Those without which a contract of sale would not exist. assignment of the things to be sold, from the creditors' point of view.
a. Consent of the contracting parties 4. In sale, there is greater freedom in fixing the price, while in payment by cession, there is less
b. Subject matter which should be a determinate thing freedom in fixing the price because of the fixed amount of the pre-existing credits which the
c. Price certain in money or its equivalent parties seek to extinguish.
5. In sale, the ownership of the thing is transferred to the buyer. In payment by cession, the
2. Natural elements - Those inherent in a contract of sale, which in the absence of stipulation creditors do not become the owners of the properties assigned to them but are merely given
excluding them are deemed to exist the right to sell such properties and apply the proceeds to their claims.
a. Warranty against eviction
b. Warranty against hidden defects and encumbrances Sale distinguished from contract for a piece of work
A contract for the delivery at a certain price of an article which the vendor in the ordinary
3. Accidental elements - They refer to particular stipulations of the parties such as terms, place course of business manufactures or procures for the general market, whether the same is on hand
and time of payment, and other conditions agreed upon. or not, is a contract of sale.
However, if the goods are to be manufactured specially for the customer and upon his special
Characteristics of a contract of sale order, and not for the general market, it is a contract for a piece of work. (Art. 1467)
1. Consensual - It is perfected by mere consent of the parties.
2. Principal - It can exist by itself without being dependent upon another contract. Puregoods Corporation, which maintains a professional basketball team, entered into a
3. Bilateral - The parties are bound by reciprocal obligations. contract with Avenidas Footwear Company for the latter to provide a pair of rubber shoes to the
4. Onerous - Valuable considerations are given by both parties to acquire rights. former's two imported basketball players, Scottie Duncan and John Bryant. Avenidas Footwear
5. Commutative - The parties exchange almost equivalent values. was instructed to make a pair for any or both of the players in case the company did not
6. Nominate - It has a special name given to it by law. manufacture shoes of their size. No pair was, however, immediately available for both the players.
Scottie Duncan, who is 6'3' tall and wears size 12 rubber shoes, was given a pair the following day
Sale distinguished from dacion en pago from the 200 pairs that Avenidas Footwear was in the process of manufacturing for its customers at
1. In sale, there is no pre-existing credit, while in dacion en pago, there is a pre-existing credit. the time the orders were received. John Bryant, who is stands at 7 feet and wears size 18 shoes,
2. A sale creates obligations, while dacion en pago extinguishes obligations. was provided three days later, with a pair that was specially made for him since Avenidas Footwear
3. In sale, the cause or consideration is the price, from the seller's point of view; and the does not make shoes of his size. What kind of contracts were entered into for the shoes provided
delivery of the object, from the buyer's point of view. In dacion en pago, the cause or to the two basketball players?
consideration is the extinguishment of the obligation, from the debtor's point of view; and the Answer: The contract with respect to the shoes provided to Scottie Duncan was one of sale
delivery of the object given in place of the credit, from the creditor's point of view. since the pair given to him was manufactured by Avenidas Footwear in the ordinary course of
4. In sale, there is greater freedom in fixing the price, while in dacion en pago, there is less business. The contract with respect to the pair provided to John Bryant was for a piece of work
freedom in fixing the price because of the amount of the pre-existing credit which the parties since it was specially made for him and upon Puregoods' special order.
 Sale distinguished from barter and rule if consideration is partly in money and partly in to pass to the vendee until full payment of the purchase price. (Sps. Orden vs. Sps. Aurea, G.
another thing R. No. 172733, August 20, 2008.) In a contract to sell, the prospective seller does not yet
In sale, the cause or consideration is in money. In barter, the cause or consideration is agree or consent to transfer ownership of the property subject of the contract to sell until the
another thing. happening of an event, such as, in most cases, the full payment of the purchase price. (David
However, where the consideration is partly in money and partly in another thing, the following vs. Misamis Occidental II Electric Cooperative, Inc., G.R. No. 194785, July 11,2012)
rules shall be observed to determine whether the contract is a sale or barter: 2. In a contract of sale, non-payment of the price is a negative resolutory condition, i.e.; the
1. The contract shall be one of sale or barter depending upon the manifest intention of the vendor loses ownership of the property and cannot recover it until and unless the contract of
parties. sales is resolved or rescinded. In a contract to sell, full payment of the purchase price is a
2. If the intention of the parties does not clearly appear: positive suspensive condition, i.e., title remains in the vendor if the vendee does not comply
a. The contract is one of barter if the value of the thing given as part of the consideration with condition precedent of making payment at the time specified in the contract. In other
exceeds the monetary consideration. words, failure to pay the price is not a breach but an event that prevents the obligation of the
b. The contract is one of sale if the monetary consideration is more than or equal to the vendor to convey title from becoming effective. (Sps. Orden vs. Sps. Aurea, supra; Castillo
value of the thing given as part of the consideration. (Art. 1468) vs. Reyes, G. R. No. 170917, November 28, 2007; Serrano vs. Caguiat, G. R. No. 139173,
Examples: February 28, 2007; Sps. Garcia vs. Court of Appeals, G.R. No. 172036, April 23,2010)
1. S and B entered into a written contract which states that "S, Seller, hereby transfers his ring 3. In a contract of sale, the risk of loss is on the buyer. In contract to sell, the risk of loss is on
worth P20,000.00 to B, Buyer, for B's cell phone worth P12.000.00 and cash of P8,000.00." the seller.
What contract was entered into between S and B?
Answer: The contract entered into between S and B is one of sale. It is evident that such Sale distinguished from agency to sell
was their intention when they referred to themselves as seller and buyer, respectively, even if 1. In sale, title to the goods is transferred to the buyer upon delivery of the thing sold. In agency
the value of the cell phone, the property consideration, (P12,000.00) is more than the to sell, title to the goods is retained by the owner despite the delivery of the goods to the
monetary consideration of P8.000.00. agent.
2. Suppose the written contract merely states that "S hereby transfers his ring worth P20,000.00 2. In sale, the buyer is required to pay the price. In agency to sell, the agent is required to turn
to B, for B's ceil phone worth P12.000.00 and cash of P8,000.00." What contract was entered over to the principal the price of the goods which he received from the buyer.
into between S and B? 3. In sale, the recipient (i.e., the buyer) of the property may do with the property as he pleases.
Answer: The contract is one of barter since the intention of the parties does not clearly In agency to sell, the principal retains control of the property. (Sps. Viloria vs. Continental
appear, and the value of the cell phone, the property consideration (P12,000.00) is more than Airlines, Inc., G. R. No. 188288, January 16, 2012, citing Commissioner of Internal Revenue
the monetary consideration of P8,000.00. vs. Constantino, 31 SCRA 779)
3. Suppose the written contract provides that "S hereby transfers his ring worth P20,000.00 to
B, for B's cell phone worth P10,000.00 and cash of P10,000.00." What contract was entered Rules on the object of the contract of sale
into between S and B? 1. Requisites of object of a contract of sale
Answer: The contract is one of sale. Under Art. 1468, if the intention of the parties does a. The thing must be within the commerce of men.
not clearly appear, "it shall be considered a barter if the value of the thing given as a part of b. The thing must be licit, i.e., it must not be contrary to law, morals, good customs, public
the consideration exceeds the amount of money or its equivalent; otherwise, it is a sale." order or public policy. (Art. 1459)
"Otherwise", meaning, the monetary consideration is more than or equal to the value of the c. The thing must be determinate.
property consideration. A thing is determinate' if it is particularly designated or physically segregated from all
others of the same class. The requisite that a thing is determinate is satisfied if at the
Sale distinguished from contract to sell time the contract is entered into, the thing is capable of being made determinate without
1. in a contract of sale, the title to the property passes to the vendee upon the delivery of the the necessity of a new or further agreement between the parties. (Art. 1460)
thing sold; in a contract to sell, ownership is, by agreement, reserved to the vendor and is not
2. The vendor must have the right to transfer the ownership of the thing at the time that it is There may be a sale of an undivided share of a specific mass of fungible goods though
delivered. (Art. 1459) the seller purports to sell and the buyer purports to buy a definite number, weight or measure
Thus, it is not necessary that the vendor must be the owner at the time of sale. of the goods in the mass, and though the number, weight or measure of the goods in the
mass is undetermined. The following rules shall be observed if the quantity sold is different
3. Things having a potential existence may be the object of a contract of sale. (Art. 1461) Thus, from the quantity of the mass:
one can sell the young of animals that thereafter will be born or the future harvest from a a. If the quantity, i.e., number, weight or measure, of the mass is more than the quantity
farm. However, the thing must come into existence; otherwise, the sale will not be effective sold, the parties shall become co-owners of the mass. (Art. 1464)
for not having a subject matter. Example: S sells to B 200 sacks of corn from a mass stored in the warehouse of S. The
mass, however, actually consists of 300 sacks of corn. Thus, S and B will become co-
Distinction between sale of an expected thing (emptio rei speratae) and the sale of the hope owners of the whole mass to the extent of 2/3 for B and 1/3 for S.
itself (emptio spei) b. If the quantity of the mass is less than the quantity sold,the buyer becomes the owner of
a. Emptio rei speratae is the sale of a future thing; emptio spei deals with a present thing - the whole mass, with the seller being bound to make good the deficiency from goods of
the hope or expectancy. the same kind and quality, unless a contrary intent appears. (Art. 1464)
b. In emptio rei speratae, the thing sold must come into existence; otherwise, the sale will Example: S sells to B 300 sacks of yellow corn from a mass stored in the warehouse
not be effective. In emptio spei, the sale produces effects even if the thing hoped for of S. The mass, however, actually consists of 280 sacks of yellow corn. In this case, B
does not come into existence. However, the sale of vain hope or expectancy is void, becomes the owner of all the 280 sacks of yellow corn and S is bound to deliver to B an
such as the sale of a losing sweepstake ticket already drawn. additional 20 sacks of yellow corn to complete the quantity agreed upon.
4. The goods which form the subject of a contract of sale may be either:
a. Existing goods owned or possessed by the seller. Thus, the sale of bathroom fixtures 7. Things subject to a resolutory condition may be the object of a contract of sale. (Art. 1465)
currently stored in the seller's warehouse is a sale of existing goods. Example: S sold his lot to B with S being given the right to repurchase the lot within 5
b. Goods to be manufactured, raised, or acquired by the seller after the perfection of the years from the date of sale. The sale and the right to repurchase were registered in the
contract of sale, called "future goods", or goods whose acquisition by the seller depends Register of Deeds where the lot is located. Two years after the sale, B sold the lot to X. X
upon a contingency which may or may not happen. (Art. 1462) became the owner of the lot subject to the right of S to repurchase it within the 5-year period
Examples: from the time he sold it to B.
1) The garments to be sewn or to be purchased by the seller are goods to be
manufactured or acquired by the seller. Price, concept
2) There may also be a sale of chickens that may be raised in a poultry farm. Price is the sum stipulated as the equivalent of the thing sold, and also every incident taken
3) D promised to give C a specific car if Ccompletes his course in mechanical into consideration for the fixing of the same, put to the debit of the vendee, and agreed to by him.
engineering. C may sell the car to X although the acquisition by C of the car is (Unson vs. Urquico, 50 Phil. 171)
subject to a contingency.
5. The sole owner of a thing may sell an undivided interest therein. (Art. 1463) Such sale shall Rules on price
produce the effect of making the seller and the buyer co-owners of the thing sold. 1. Certainty of price
Example: S is the sole owner of an apartment. He sells 1/4 undivided interest therein to The price of the thing sold must be certain; otherwise, the sale is void by reason of the
B. Such sale shall produce the effect of making S and B co-owners of the property with each absence of meeting of minds between the parties. The price is considered certain under the
party becoming an owner of 1/2 undivided interest. following rules:
a. If the parties have agreed upon a definite amount for the sale.
6. Sale of fungible goods Example: S sold to B a specific wristwatch. The parties agreed that B would pay
Fungible goods refer to interchangeable goods such as grain, oil, etc., that allow one to P2,500.00 for it. The price is certain because the parties have agreed on a definite
be replaced by another without loss of value. ' amount for the thing sold.
 defect in the consent, or that the parties really intended a donation or some other act or
Fixing of the price by one of the contracting parties. contract. (Art. 1470) There is gross inadequacy of price if a reasonable man will not agree to
The fixing of the price can never be left to the discretion of one of the contracting dispose of his property. (Vda. De Delfin vs. Dellota, G.R. No. 143697, January 28, 2008,
parties. However, if the price fixed by one of the parties is accepted by the other, the sale citing Aguilar vs. Ribato and Gonzales Vila, 40 Phil 570)
is perfected. (Art. 1473) Example: S sells to B for P80,000.00 a certain car whose actual value is P100,000.00.
Example: S sold his car to B at a price to be fixed by S ten days after their The fact that the price is inadequate does not affect the validity of the contract. However, if S
agreement. On the tenth day, S fixed the amount at P100,000.00. If B accepts the said agreed to sell the car at P80.000.00 because B used insidious words or machinations so that
price, the sale is perfected as there is a meeting of minds. If B does not so accept, no S would sell the car for the said price, then S may annul the sale on the ground of vitiated
sale is perfected. consent due to fraud.
b. If it be certain with reference to another thing certain. (Art. 1469)
Example: S sells to B a certain ring the price of which is the price of 20 bags of 3. Simulated price
Island cement being sold at a certain store. If the price is simulated (i.e., the parties make it appear that a price certain in money is to
c. If the determination of the price is left to the judgment of a specified person or persons. be paid or has been paid), the sale is void, but the act may be shown to have been in reality a
(Art. 1469) donation, or some other act or contract. (Art. 1471)
1) If such persons or persons are unable or unwilling to fix the price, the contract shall Example: S and B entered into a contract where they made it appear that S sold his car
be inefficacious, unless the parties subsequently agree upon the price. to B for P100,000.00. In reality however, B did not give S P100,000.00. The sale here is void
2) If the third person or persons acted in bad faith or by mistake, the courts may fix the by reason of the absence of an essential requisite which is the price. The parties may,
price. however, show that S really donated the car to B, in which case, the contract shall be one of
3) If such third person or persons are prevented from fixing the price or terms by the donation, not a sale.
fault of the seller or buyer, the party not at fault may have such remedies against the When a contract of sale is perfected
party at fault as are allowed the seller or buyer, as the case may be. (Art. 1469) A contract of sale is perfected at the moment there is a meeting of minds upon the thing
d. If the price fixed is that which the thing sold would have on a definite day, or in a which is the object of the contract and upon the price.
particular exchange or market, or when an amount is fixed above or below the price on From that moment, the parties may reciprocally demand performance, subject to the
such day, or in such exchange or market, provided said amount is certain. (Art. 1472) provisions of law governing the form of contracts. (Art. 1475)
Example: S sells to B 500 shares of stock of San Miguel-B shares at the price
equivalent to the closing price of the shares on April 23, 2010, at the Philippine Stock Form of a contract of sale
Exchange. This is of course on the condition that there will be trading of the said shares 1. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a
on the day agreed upon; otherwise, the sale is of no effect. Or the parties may agree that contract of sale may be in any of the following forms:
the price of the shares will be 20% above or 20% below the price of the shares in the a. in writing, or
exchange on the said day. b. by word of mouth, or
c. partly in writing and partly by word of mouth, or
Effect if the price cannot be determined d. may be inferred from the conduct of the parties. (Art. 1483)
The sale shall be inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is 2. Under the Statute of Frauds, the sale involving the following must be in writing to be
reasonable price is a question of fact dependent on the circumstances of each particular enforceable:
case. (Art. 1474) a. Sale of real property or of any interest therein (regardless of the price).
b. Sale of goods, chattels or things in action the price of which is P500.00 or more. (Art.
2. Gross inadequacy of price 1403) Things in action include credit, shares of stock and other incorporeal properties.
Gross inadequacy of price does not affect a contract of sale, except as it may indicate a
3. Sale of a piece of land through an agent withdrawn unless no bid is made within a reasonable time.
The authority of the agent to sell a piece of land must be in writing; otherwise, the sale is b. Rights of parties after perfection
void. (Art. 1874) The winning bidder cannot retract his bid nor can the auctioneer withdraw the goods
a. If the authority of the agent to sell a piece of land is not in writing - the sale is void since there is already a perfected contract. Withdrawal from the contract by either party
whatever may have been the form it was entered into, i.e., oral, private instrument or constitutes a violation of the Principle of Mutuality of Contracts. (See Art. 1308.)
public instrument.
b. If the authority of the agent is in a private instrument and the sale was: 3. Right of seller to bid
1) entered into orally - the sale is unenforceable. (Art. 1403) The seller may bid at the auction provided the following requisites are present:
2) in a private instrument - the sale is valid. a. The right to bid must have been reserved expressly by or on behalf of the seller.
3) in a public instrument - the sale is valid. b. His right to bid must not be prohibited by law or stipulation.
c. If the authority of the agent is in a public instrument and the sale was: For instance, in the exercise by the unpaid seller of his right to resell the goods, he
1) entered into orally - the sale is unenforceable. (Art. 1403) cannot buy the goods directly or indirectly. (See Art. 1533.)
2) in a private instrument - the sale is valid. c. Notice must be given that the sale is subject to a right to bid by or on behalf of the seller.
3) in a public instrument - the sale is valid. Effect of employment by the seller of "by bidders" or "puffers" without notice
Note: In order, however, that the sale may be recorded in the Register of Deeds, both the authority "By bidders" or "puffers" refer to persons employed by . the seller to bid in his behalf, the
of the agent and the sale must be in a public instrument. (See Art. 1358, paragraphs 1 and 3.) purpose of which is to raise the price, but the said persons are not in themselves bound by
their
Rules in case of sale by auction (Art. 1476) bids.
1. Sale by auction in lots Any sale whereby the seller employs "by bidders" or "puffers" without notice may be
Each lot is the subject of a separate contract of sale. treated as fraudulent by the buyer. (Art. 1574). Thus, the buyer may annul the sale on the
2. When sale by auction is perfected ground of vitiated consent due to fraud.
When the auctioneer announces its perfection (a) by the fall of the hammer, or (b) in any
other manner. When ownership of the thing sold is transferred
a. Rights of parties before perfection The ownership of the thing sold is transferred upon the actual or constructive delivery thereof.
1) Any bidder may retract his bid. (Art. 1477) The time when ownership is transferred is important to determine the party who shall
This is so because a bid is merely an offer and an offer may be withdrawn at bear the loss.
anytime before acceptance. The parties may, however, stipulate, that ownership in the thing sold shall not pass to the
2) The auctioneer may withdraw the goods from the sale unless the auction has been purchaser until he has fully paid the price. (Art. 1478)
announced to be without reserve.
Withdrawal of the goods is equivalent to a rejection of the offer made by any Promise to buy and/or sell
bidder. 1. Bilateral promise - This takes place when one party promises to buy and the other party
a) Auction with reserve promises to sell a determinate thing at an agreed price.
In an auction with reserve, the auctioneer is the offeree and has the power This is reciprocally demandable since this is as good as a perfected contract of sale. For
of acceptance. As offeree, he has the power to reject all bids. Such rejection enforceability, however, observance of the proper form is required, if the object of the sale is
includes withdrawal of the goods during the bidding process. a movable with a price of at least P500.00, or real property or an interest therein, regardless
b) Auction without reserve of the price (See Art. 1403.) In other words, the promises should be in writing.
In an auction without reserve, the auctioneer is much like an offeror, with
the bidders competing to determine who will win the power of acceptance. After 2. Unilateral promise - Here, the promise to buy or to sell a determinate thing at a certain price
the auctioneer calls for bids on an article or lot, that article or lot cannot be is made by only one of the parties. The promise may be accepted or not and shall have the
 following effects: onerous nature of the option contract. Furthermore, when a consideration for an option contract is
a. If not accepted by the promissee (policitaciori) – This does not produce any legal effect. not monetary, said consideration must be clearly specified as such in the option contract or clause.
b. If accepted by the promissee - (Bible Baptist Church vs. Court of Appeals, G.R. No. 126454, November 26, 2004, 444 SCRA
1) And is supported by a consideration distinct from the price, the promise is binding upon the 607, also cited in Eulogio vs. Sps. Apeles, supra)
promissor. (Art. 1479) From the foregoing discussions, earnest money and option money are distinguished as
2) And it is not supported by any consideration distinct from the price, the promise is not binding follows:
upon the promissor. Accordingly, the promissor- can withdraw his promise by informing the 1. Earnest money is part of the purchase price, while option money is separate and distinct from
promissee of such withdrawal even before the lapse of any option period given to the the purchase price.
promissee. (See Art. 1324 on option contracts.) 2. Earnest money is paid upon the perfection of a contract of sale, while option money is paid
A unilateral promise to buy or sell, even if accepted, is only binding if supported by a for a sale that is yet to be perfected.
consideration. In other words, "an accepted unilateral promise" can only have a binding
effect jf supported by a consideration, which means that the option can still be withdrawn, Illustration of earnest money
even if accepted, if the same is not supported by any consideration. (Eulogio vs. Sps. Apeles, B is interested in buying the car of S for P100,000.00 payable within 30 days from the dale of
G.R. No. 167884, January 20, 2009, citing Southwestern Sugar and Molasses Company sale. To show that he is really in earnest, B gives S P1.000.00 upon the execution of their
vs. Atlantic Gulf and Pacific Co., 97 Phil 241) agreement, which amount S accepts. There is here a perfected contract of saie between B and S.
Examples: Accordingly, on the due date for the payment of the price, B will have to pay S the amount of
a. B promised in writing to buy and S promised in writing to sell his car for P100,000.00. The P99.000.00 only.
promise of each party is reciprocally demandable.
b. S promised to sell his car to B for P100,000.00 giving B one week to decide whether to buy or Rules on preservation of, injury to or benefit from the thing sold before or after perfection
not. If B does not accept the promise, such non-acceptance does not create any obligation on 1. Duty of seller to preserve thing after perfection but before delivery
the part of the parties. If B accepts the promise, S will be bound by the promise if B gives a The seller is obliged to take care of the thing with the diligence of a good father of a
consideration, say P500.00 because a contract of option is perfected. So S cannot dispose family unless the law or the stipulation of the parties requires another standard of care. (Art.
the property within the period that he gave to B for the exercise of his option. B, may or may 1163)
not buy the car since he is not obliged to buy but is merely given the option to buy it. 2. Right of the buyer to the fruits
Query: How much will B pay if he eventually decides to buy the car? P100,000.00 or The buyer has a right to the fruits of the thing from the time of the perfection of the
P99.500.00? contract (Art. 1537), unless a contrary stipulation has been agreed upon or a later date is set
Answer; P100,000.00 because the amount paid by B as option money is not part of the by the parties when such right will accrue such as when the obligation to deliver arises at
purchase price. some future date. However, the buyer shall acquire no real right over the thing and its fruits
until the same have been delivered to him. (Art. 1164)
Earnest money and option money, concept and distinctions
Earnest money is the money given as part of the purchase price and as proof of the 3. Loss of or injury to the thing
perfection of the contract. (Dizon vs. Lustre, 02381-R, June 21, 1974) It is also called a. Loss before perfection (including deterioration in quality)
"arras" or something of value to show that the buyer was really in earnest, and given to the seller to 1) In case of complete loss, the sale is void because of the absence of the object.
bind the bargain. (14 Words and Phrases 230) 2) In case of partial loss, the buyer may choose between:
Option money, on the other hand, is the consideration paid for the purpose of holding one to a) Withdrawal from the contract (rescission), and
his promise to buy or sell a determinate thing for a certain period of time, which consideration is b) Demanding the remaining part and paying its proportionate price. (Arts.
separate and distinct from the purchase price. (Dizon vs. Lustre, supra) However, the consideration 1493,1494)
for an option contract is not always monetary but could consist of other things or undertakings. If b. Loss after perfection - There are two views on this matter.
the consideration is not monetary, these must be things or undertakings of value, in view of the 1) First view - Buyer bears the risk of loss (Art. 1480), i.e., he must pay the price.
 After perfection but before delivery, the buyer bears the risk of loss of or injury description, as the case may be, the buyer may ask for the rescission of the sale. (Art. 1481)
to the thing since any benefit therefrom during the same period inures to him.
Therefore, the loss of the thing through a fortuitous event extinguishes the seller's Remedies of vendor in installment sales of personal property (Recto Law) (Art. 1484), and
obligation except in the following cases: contracts purporting to be leases of personal property with option to buy, when the lessor
a) When the seller delays. has deprived the lessee of the possession or enjoyment of the thing
b) When the law provides that the seller shall be liable even in case of fortuitous 1. Exact fulfillment of the obligation, should the vendee fail to pay.
event. This remedy applies regardless of the number of installments defaulted.
c) When the parties have stipulated that the seller shall be liable even in case of a 2. If the vendee's failure to pay covers two or more installments, he may, at his option, avail
fortuitous event. himself of the first remedy, or do either of the following:
d) When the nature of the seller's obligation requires the assumption of risk. (Art a. Cancel the sale.
1262) When the sale is cancelled or rescinded, the vendor shall return to the vendee the sums
2) Second view - Seller bears the risk of loss (Art. 1504), i.e., buyer is not obliged to received minus reasonable rent. However, the parties may stipulate that the installments or
pay the price. rents paid shall not be returned provided the stipulation is not unconscionable (Art. 1486)
After perfection, the goods remain at the seller's risk until the ownership of the b. Foreclose the chattel mortgage on the thing sold, if one has been constituted. In this case, he
goods is transferred to the buyer by actual or constructive delivery. However, shall have no further action against the purchaser to recover any unpaid balance of the price.
notwithstanding that the ownership is not transferred to the buyer, the goods are the Any agreement to the contrary is void.
buyer's risk: Note: The above remedies are alternative, not cumulative. Accordingly, the availment by
a) If there is an agreement to that effect. the vendor of one remedy will not entitle him to make use of the others. (Pacific Commercial
b) If ownership of the goods is retained by the seller merely to secure the Co. vs. Dela Rama, 72 Phil 380)
performance by the buyer of his obligation under the contract.
c) When actual delivery has been delayed through the fault of the buyer. S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of
Note: The weight of authority is on the second view because it is consistent with the P10,000.00 each. As security, B executed a chattel mortgage on the car.
principle of "res perit domino" which means "(T)he loss of property falls upon the owner." 1. After paying the first three installments, B defaulted in the payment of the fourth installment.
What remedy or remedies are available to S?
Sale by sample; description; and sample and description Answer: S can exact fulfillment of the obligation, i.e., he can demand payment of the
1. Sale by sample installment defaulted only unless there is an acceleration clause (the whole shall become due
The parties contract solely with reference to the sample. The seller warrants that the bulk upon default of the payment of an installment) or that the default of the buyer is under such
of the goods delivered correspond with the sample shown to the buyer. circumstance as to make him lose the right to make use of the period given to him. (Art.
2. Sale by description 1198)
The parties contract solely with reference to the description. The seller warrants that the
bulk of the goods delivered correspond with the description of the goods presented to the 2. May S cancel the sale or foreclose the chattel mortgage on the car?
buyer. Answer: No, because the remedy of cancelling the sale or foreclosing the chattel
3. Sale by sample and description mortgage constituted on the thing is available only when the buyer's default covers two or
The seller warrants that the bulk of the goods delivered correspond with both the sample more installments.
and the description, and not with only one. (Art. 1481) The buyer shall have reasonable
opportunity of comparing the bulk with the description or the sample. (Art. 1481) 3. B defaulted in the payment of fourth and fifth installments and as a result, S foreclosed the
chattel mortgage constituted on the car. At the foreclosure sale, the car was sold only for a
Rescission by buyer net amount of 'P50.000.00. Can S recover the deficiency of P20,000.00 from B?
If the goods delivered do not correspond with the sample, description, or sample and Answer: No. Since S chose the third remedy, he shall have no further action against the
 buyer for any deficiency. This is true even if there was an agreement between S and B that S 2. May S foreclose the chattel mortgage on the car in order to recover the deficiency?
could go after B should the purchase price at the auction sale be less than the balance of the Answer: No, because S will just be going around the law.
original purchase price.
S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of P10,000.00
O, the owner of a forklift, leased the same to T. The lease contract provided, among other each. As security, B executed a chattel mortgage on the car. After paying the first 2 installments, B
terms and conditions, the following: (1) Lease period - two years; (2) monthly rental P2,000.00; (3) defaulted in the payment of the third, fourth and fifth installments. As a consequence, S brought a
T is given the option to buy the forklift at the end of the term of the lease with the monthly rentals court action against B to recover the balance. The court rendered judgment in favor of S and
being considered as installments payments. After 8 months, T defaulted in his payment of rental on against B who was ordered to pay. Since B had no other property except the car, S moved for the
the ninth, tenth and eleventh months. Accordingly, O terminated the lease contract and attachment of the car and its sale to satisfy the judgment. At the execution sale, the car was sold
repossessed the forklift. May O recover the rental in arrears from T? only for a net amount of P75,000.00. May S recover the deficiency of P5,000.00?
Answer: No. The contract between 0 and T which is a lease of personal property with option Answer: Yes, because the prohibition to recover the deficiency applies only if S had the
to buy is considered a sale of personal property in installments. Accordingly, Art. 1484 is chattel mortgage on the car foreclosed. The prohibition does not apply if the thing is sold in an
applicable. Hence, O has no further action against T including the recovery of the rental in arrears. execution sale. In the instant case, S had the car sold to satisfy the judgment.

When deficiency may be recovered Sale of Real Property in Installments (R.A. No. 6552, the Maceda Law)
1. In case of sale on straight-term. The law is known as the "Realty Installment Buyer Act". Its objective is "to protect buyers of
2. If security foreclosed is other than the chattel mortgage constituted on the thing sold. real estate on installment payments against onerous and oppressive conditions.
3. In the case of sale on execution of judgment in favor of the seller. 1. Transactions covered
Sale or financing of real estate on installment payments, including residential
S sold his only ring to B for P50,000.00 under the following terms: down payment of P30,000.00; condominium apartments, but excluding industrial lots, commercial buildings, and sales to
balance payable at month end. As security, B executed a chattel mortgage on the ring. B defaulted tenants under ,RA No. 3844 as amended by RA No. 6389 (Land Reform Law), where the
in the payment of the balance. By reason thereof, S foreclosed the chattel mortgage on the ring. buyer has paid at least two years of installments.
However, only P15,000.00 was realized in the foreclosure sale. Can S still proceed against B to
collect the deficiency of P5,000.00? 2. Rights of the buyer
Answer: Yes because Art. 1484 does not apply to a sale on straight term which is a sale a. Grace period to pay installment in case of default
where the balance is to be paid in its entirety after the payment of an initial sum. This is an 1) If at least 2 years of installments had been paid at the time of default
application of the general rule that if the foreclosure sale in chattel mortgage results in deficiency, a) To pay, without additional interest, the unpaid installments due within the total
the same may be recovered by the creditor. Article 1484 is an exception to such general rule, i.e., grace period earned by him, which is fixed at the rate of one (1) month grace
no deficiency may be recovered. period for every one (1) year of installments paid. This right shall be exercised
by the buyer only once in every five (5) years of the life of the contract and its
S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of P10,000.00 extensions, if any.
each. As security, B executed a chattel mortgage on the car and another chattel mortgage on his b) If the contract is cancelled, he shall be entitled to the refund of the cash
piano. After paying the first 2 installments, B defaulted in the payment of the third, fourth and fifth surrender value of the payments on the property equivalent to fifty percent
installments. As a consequence, S foreclosed the chattel mortgage on the piano which was sold for (50%) of the total payments made, and after five (5) years of installments, an
P75,000.00. additional five percent (5%) every year but not to exceed ninety percent (90%)
1. May S recover the deficiency of P5.000.00? of the total payments made.
Answer: Yes, because the prohibition on the recover of the deficiency applies only when When cancellation shall take place
the chattel mortgage foreclosed was on the thing sold, which was the car. The actual cancellation shall take place after thirty (30) days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the
 contract by notarial act and upon full payment of the cash surrender value to the a condominium unit in a condominium project.
buyer. b. Contract to sell, contract of purchase and sale, exchange, attempt to sell, option of sale
Note: Down payments, deposits or options on the contracts shall be included in or purchase, a solicitation of a sale, or an offer to sell, directly or by an agent, or by
the computation of the total' number of installments. circular, letter, advertisement or otherwise.
2) If less than two (2) years of installments had been paid at the time of default 2. Subdivision lot and condominium unit, concept
The buyer shall be given a grace period of not less than sixty (60) days from the a. "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or
date the installment became due to pay. recreational, in a subdivision project. [Sec. 2 (e)]
b. "Condominium unit" shall mean a part of the condominium project intended for any type
When cancellation shall take place of independent use or ownership, including one or more rooms or spaces located in one
If the buyer fails to pay the installment due upon the expiratioir of the grace or more floors (or part or parts of floors) in a building or buildings and such accessories
period, the ' seller may cancel the sale after thirty (30) days from the receipt by the as may be appended thereto. [Sec. 2 (h)]
buyer of the notice of cancellation or the demand for rescission of the contract by c. Rights of buyer in case of default
notarial act. The rights of the buyer in the event of his failure to pay the installments due for
b. Additional rights reasons other than the failure of the owner or developer to develop the project shall be
1) The buyer shall have the right during the grace period before the cancellation of the governed by R.A. No. 6552, otherwise known as the "Realty Installment Buyer Act" or
contract: the Maceda Law. (Sec. 24)
a) To sell his rights to another by notarial act; No installment payment made by the buyer shall be forfeited in favor of the owner or
b) To assign his rights to another, by notarial act; or developer when the buyer, after due notice to the owner or developer, desists from
c) To reinstate the contract by updating the account. further payment due to the failure of the owner or developer to develop ' the subdivision
2) To pay in advance any installment or the full unpaid balance any time without or condominium project according to the approved plans and within the time limit for
interest. complying with the same. Such buyer may, at his option, be reimbursed the total amount
3) To ask for the annotation of the full payment of the purchase price in the certificate paid including amortization interests but . excluding delinquency interests, with interest
of title covering the property. thereon at the legal rate. (Sec. 23)
Note: A reading of The Subdivision and Condominium Buyers' Protective Decree indicates an
B bought from S Realty, Inc. a residential house and lot for P600.000.00. The terms of the contract expansion of the application of the Maceda Law so -as to include subdivision lots whether
provided for the following: down payment of P60,000.00; balance payable in 15 years in residential, commercial, industrial, or recreational, in a subdivision project. [Sec. 2 (e)], and
installments of P3,000.00 per month. After paying the down payment and 84 monthly installments, condominium units in any condominium project intended for any type of independent use or
B defaulted in the payment of the 85th and succeeding installments. As a consequence, S Realty, ownership, including one or more rooms or spaces located in one or more floors (or part or parts of
Inc. cancelled the sale. How much cash surrender value is B entitled to receive? floors) in a building or buildings and such accessories as may be appended thereto. [Sec. 2 (h)]
Answer: B shall be entitled to receive a cash surrender value of PI87,200.00 computed as
follows: 60%[P60,000.00 + (P3.000 x 84 months)]. Since B has paid more than 5 years of Requisites for cancellation of contract to sell under the Maceda Law
installments, he shall be entitled to a cash surrender value equivalent to 50% plus 5% for the sixth Under the Maceda Law, the actual cancellation of a contract to sell takes place after 30 days
year and another 5% for the seventh year for a total of 60%. from receipt by the buyer of the notarized notice of cancellation, and upon full payment of the cash
surrender value to the buyer. In other words, before the contract to sell can be validly and
Installment sale of subdivision lots and condominiums (P.D. No. 957, otherwise known as The effectively cancelled, the seller has (1) to send a notarized notice of cancellation to the buyer and
Subdivision and Condominium Buyers' Protective Decree) (2) refund the cash surrender value. Until and unless the seller complies with these twin mandatory
1. Transactions covered, what "sale" or "sell" includes [Sec. 2 (b)] requirements, the contract to sell between the parties remain valid and subsisting. Thus, the buyer
a. Every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, has the right to continue occupying the property subject of the contract to sell, and may "still
including the building and other improvements thereon, if any, in a subdivision project or reinstate the contract by updating the account during the grace period and before the actual
cancellation" of the contract. (Communities Cagayan, Inc. vs. Sps. Nanol, G.R. No. 176791, take part by virtue of their profession. (Art. 1491)
November 14, 2012.) The contracts mentioned above have the following status:
a. For items (a) to (c), the contract is voidable since only private interests are
Capacity to buy or sell involved.
1. Who may enter into a contract of sale b. For items (d) and (e), the contract is void since they are imbued with public
As a general rule, all those who may oblige themselves may enter into a contract of sale. interest.
(Art. 1489) Note: It may be observed that the persons above-mentioned occupy positions
2. Kinds of incapacity in a contract of sale of trust and confidence.
a. Absolute incapacity - This applies to persons who cannot bind themselves and includes
minors, insane or demented persons, and deaf-mutes who do not know how to write. OBLIGATIONS OF THE VENDOR
(Art. 1327) Obligations of the vendor
A contract of sale entered into by a person suffering from absolute incapacity is 1. To transfer the ownership of the thing sold.
voidable. However, when necessaries, are sold to a minor or other Incapacitated person, The ownership of the thing sold is acquired by the vendee from the moment the thing is
he must pay a reasonable price therefor. The sale therefore is valid. Necessaries include delivered to him. (Art. 1496)
everything indispensable for sustenance, dwelling, clothing, medical attendance, 2. To deliver the thing sold.
education and transportation (Art. 194, Family Code) The vendor is bound to deliver the thing sold and its accessions and accessories in the
b. Relative incapacity - This applies to certain persons who, under circumstances, cannot condition in which they were upon the perfection of the contract. All the fruits shall pertain to
purchase certain property. the vendee from the day on which the contract is perfected. (Art. 1537)
The following are cases of relative incapacity. As a rule, the creditor has a right to the fruits of the thing from the time the obligation to
1) The husband and the wife cannot sell property to each other, except: deliver the thing arises (Art. 1164), but in a contract of sale, the fruits shall pertain to the
a) When a separation of property was agreed upon in the marriage settlements. buyer from the day on when the contract was perfected. (Art. 1537). The seller and buyer
b) When there has been a judicial separation of property. (Art. 1490) may, however, stipulate that the fruits of the thing sold shall pertain to the buyer at some
Note: A sale between husband and wife that does not fall under the exceptions is void. future time such as when the obligation is one with a period.
2) Persons prohibited from acquiring by purchase 3. To warrant the thing sold. (Art. 1495)
a) The guardian, the property of the person or persons under his guardianship. The vendor is liable for breach of warranty against eviction and warranty against hidden
b) Agents, the property whose administration or sale may have been entrusted to defects or encumbrances. (Art. 1547)
them, unless the consent of the principal has been given. 4. To take care of the thing sold with the diligence of a good father of a family unless the law or
c) Executors and administrators, the property of the estate under administration. the stipulation of the parties requires another standard of care. (Art. 1163, Art. 1480) In case
d) Public officers and employees, the property of the State or of any subdivision of loss, deterioration or improvement of the thing before delivery, the rules under Art. 1189
thereof, or of any government owned or controlled corporation or institution, the shall be observed, the vendor being considered the debtor. (Art. 1538)
administration of which has been entrusted to them; this provision applies to
judges and government experts who, in any manner whatsoever, take part in Delivery or tradition, concept
the sale. It is a mode of acquiring ownership whereby the object of the contract is placed in the control
e) Justices, judges, prosecuting attorneys, clerks of court, and other officers and and possession of the vendee, either actually or constructively.
employees connected with the administration of justice, the property and rights Delivery, in its natural sense, means something in addition to the delivery of property or title;
in litigation or levied upon an execution before the court whose jurisdiction or it means transfer of possession. In the Law on Sales, delivery, whether actual or constructive
territory they exercise their respective functions; this prohibition includes the act contemplate "the absolute giving up of the control and custody on the part of the vendor, and the
of acquiring by assignment and shall apply to lawyers, with respect to the assumption of the same by the vendee." [Equatorial Realty Development, Inc. vs. Mayfair Theater,
property and rights which may be the object of any litigation in which they make Inc., 370 SCA 56 (2001)]
 b. Placing the titles of ownership in the possession of the vendee (such as delivering the
Kinds of delivery or tradition stock certificate covering the snares of stock sold):
1. Actual or real delivery - This is delivery by physically placing the thing sold in the hands of the c. Use by the vendee of his rights, with, the consent of the vendor, (Art. 1501) (such as
vendee (in the case of movables) or physically placing it in his possession and control (in the when the seller authorizes the buyer of shares of stock to vote during the stockholders'
case of immovables). meeting).
2. Constructive or legal delivery "Sale or return" and "sale on approval"
a. By legal formalities - When the sale is made through a public instrument, the execution 1. Sale or return
thereof shall beequivalent to the delivery of the thing sold, if from the deed the contrary The ownership of the goods is transferred to the buyer on delivery, but the buyer has the
does not appear or cannot be clearly inferred. (Art. 1498) This kind of delivery applies to option to revest their ownership on the seller by returning them within the time fixed in the
both movable and immovable property. contract, or if no time has been fixed, within a reasonable time. (Art 1502)
The execution of a public instrument only gives rise to a prima facie presumption of 2. Sale on approval or on trial or on satisfaction
delivery. Sue presumption is destroyed when the delivery is not effected because of a Ownership of the goods remains with the seller despite delivery but shall be transferred
legal impediment. Thus, there is no constructive delivery although there was an to the buyer in the following cases:
execution of a deed of absolute sale which was duly notarized if the thing sold is in the a. When he signifies his approval or acceptance of the goods.
control of another person. (See Asset Privatization Trust vs. TIJ. Enterprises, G.R. No. b. When he does an act adopting the transaction.
167195, May 8, 2009.) A person who does not have actual possession of the thing sold Thus, the buyer is deemed to have approved of the goods if he starts consuming or
cannot transfer constructive possession by the execution and delivery of a public using them.
instrument. (Villamar vs. Mangaoil, G.R. No. 188661, April 11, 2012) The c. If he does not signify his approval or acceptance of the goods but retains the goods
presumption is also negated by the failure of the vendee to take actual possession of the without giving notice of rejection within the time fixed in the contract, or within a
land sold despite her assertion that she was the lawful owner thereof and despite the fact reasonable time, and such time has expired. (Art. 1502)
that the sale to her was in a public instrument. (Beatingo vs.Bugasis, G.R. No. 179641, Distinctions between "sale or return" and "sale on approval or on trial or satisfaction"
February 9, 2011) 1. In "sale or return", ownership of the goods passes to the buyer upon delivery. In "sale on
b. Symbolic delivery (traditio simbolica) - Delivery that takes place by delivering the keys of approval, ownership passes to the buyer upon his acceptance of the goods or the expiration
the place or depository where the movable is stored or kept. (Art. 1498) Also referred to of the time given to him to signify his acceptance.
as traditio clavium. 2. In "sale or return", the risk of loss is on the buyer. In "sale on approval", the risk of loss is on
c. Traditio longa menu - Delivery of a movable by mere consent or agreement of the parties the seller.
if the thing cannot be transferred to the possession of the vendee at the time of sale. 3. In "sale or return", the buyer may return the goods even if he is satisfied of its quality. In "sale
(Art. 1499) Literally, "delivery by the long hand"; usually made by pointing at the thing. on approval', the buyer has no right to return the goods iftie is satisfied of its quality.
d. Traditio brevi menu - Delivery that takes place when the vendee is already in the
possession of the thing sold even before the sale and thereafter continues in possession Examples:
thereof in the concept of an owner. (Art. 1499) This applies, to movables only. Literally, 1. Sale or return
"delivery oythe short hand." On May 2, S delivered an electronic calculator to B under a "sale or return" arrangement.
e. Traditio eonstitutum possessohum - Delivery that takes Place when the vendor continues S gave B up to May 7 to return the electronic calculator. On delivery, B became the owner of
in possession of the thing, sold after the sale but in another capacity such as that ef a the calculator. If on or before May 7, B does not return the calculator, the sale to him will
lessee or depositary. (Art. 1500) This applies to both movable and immovable property. become absolute. If B returns the calculator on or before May 7, ownership thereof is
Literally, "delivery by agreement of possessors." revested in S.
3. Delivery tit incorporeal property, (quasi-traditio) Suppose that before B could return the calculator, the same is destroyed in a fire, must B
a By constructive tradition - Delivery of incorporeal property by the execution of a public still pay its price? The answer is Yes, because upon delivery, he became the owner of it, so
document. the risk of loss was with him. The same rule applies, with more reason, if the loss was due to
 his fault.
2. Sale on approval Problems:
On June 3, S delivered a computer to B under a "sale on approval" basis. S gave B up to 1. S stole the ring of O and sells the same to B who does not have any knowledge that the ring
June 10 to try the computer and decide to purchase it if it proves satisfactory. If the computer was stolen. Did B acquire title to the ring?
proves satisfactory after trial by B and B signifies his approval to S, the ownership of the Answer: No, because the title of S is that of a thief and B, the buyer acquires no better
computer is passed on to B upon his communication of his approval to S. If B does not signify title than S had over it. O may therefore recover the ring from B without any obligation on his
his approval of the computer but retains possession of the computer even after June 10, part to reimburse B. Whoever loses a movable or has been unlawfully deprived thereof may
ownership thereof is likewise passed on to him. recover it from the person in possession of the same without such possessor being entitled to
Suppose that before the time given to B has expired and B has not yet signified his reimbursement, except if the acquisition in good faith had been made in a public sale or
approval to S, the computer is destroyed in a fire, will B be obliged to pay its price? The auction. (Art. 559)
answer is No because the risk of loss is with S who retained ownership of the computer
despite its delivery to B. However, if the cause of the loss is due to the fault of B, then B must 2. Suppose the ring found its way into a jewelry store and it was from that jewelry store that B
pay for its price. bought the ring in good faith, (a) Did B acquire title to the ring? (b) Can O recover the ring
Transfer of ownership by delivery of specific goods to carrier or other bailee from B?
General rule: Delivery of specific goods to a carrier or other bailee for the purpose of Answers: (a) Yes, because when the purchase is made from a merchant's store, fair or
transmission to the buyer transfers ownership to the buyer. market, title to the thing is transferred to the buyer notwithstanding that the seller is not the
Exceptions, i.e., ownership of specific goods is retained by the seller despite delivery to owner thereof. This is so because a contrary ruling would be in restraint of trade, (b) No, he
carrier or other bailee in the following cases: cannot recover even if he offers to reimburse. The right to reimburse is available to the owner
1. When there is a stipulation to that effect. only if the acquisition was in a public sale.
2. When by the terms of the bill of lading, the goods are to be delivered to the seller or his agent
or to the order of the seller or his agent. 3. O authorized S to sell his ring. Thereafter, S sells the ring of 0 to B. Did B acquire title to the
3. When by the terms of the bill of lading, the goods are to be delivered to the order of the buyer ring?
or his agent, but the bill of lading is retained by the seller or his agent. Answer: Yes, because the sale was made under the authority of the owner.
4. When the seller draws on the buyer a bill of exchange for the price of the goods and 4. O gave his ring to S for safekeeping. Later, S sold the ring to B in the presence of O but
transmits the bill of exchange and the bill of lading to the buyer to secure acceptance or without O's express authority. O did not make any objection while S was selling the ring to B.
payment of the bill of exchange, but the buyer dishonors such bill of exchange. (Art. 1503) Did B acquire title to the ring?
However, if the bill of lading is negotiated to a purchaser for value in good faith, Answer: Yes, because 0 is precluded by his conduct from denying S's authority to sell
ownership of the goods is passed on to him. (Art. 1503) the ring.
Sale by a person who is not the owner of the thing sold
When goods are sold by a person who is not the owner thereof, the buyer acquires no better 5. O, the owner of certain parcel of land, sold the same to B in a public instrument. B, however,
title than the seller had, except in the following cases: did not register the sale. Subsequently, O sold the land to C who was not aware of the
1. When the sale is made under authority or with the consent of the owner. previous sale to B and who registered the transfer of the land to his name with the Register of
2. When the owner is precluded by his conduct from denying the seller's authority to sell. Deeds. Who has a better right to the land, B or C?
3. When the sale is made under the provisions of any factor's acts, recording laws or any other Answer: - C has a better right to the land. While 0 was no longer the owner of the land at
provisions of law enabling the apparent owner to dispose of the goods as if he were the true the time he sold it to C, still 0 was the apparent owner in the records of the Register of
owner thereof. (Art. 1505) Deeds. This enabled him to dispose of it as if he were the true owner thereof. (Art. 1505)
4. When the sale is made under a statutory power of sale or under the order of court of Also, in the case of the sale of immovables to different vendees, ownership thereof shall
competent jurisdiction. (Art. 1505) belong to the person who in good faith first registered the sale in the Registry of Property.
5. When the purchase is made in a merchant's store, or in fairs, or markets. (Art. 1505) (Art. 1544)
 A negotiable document of title is one in which it is stated that the goods will be delivered
When seller's title to the goods is voidable to bearer, or to the order of any person named in such document. (Art. 1507)
If the seller's title is voidable but the same has not been avoided at the time of sale, the buyer Examples:
acquires a good title to the goods, provided he buys them in good faith, for value, and without a. Bearer document of title - "Deliver the goods to bearer"
notice of the seller's defect of title. (Art. 1506) b. Order document of title - "Deliver the goods to the order of Dionisio Diamante" or "Deliver
Example: S, a minor of 17 years, sold his wristwatch for P1.500.00 to B, 30 years old. The the goods to Dionisio Diamante or his order"
guardian of S was not aware of the sale; hence, no action for annulment has yet been filed.
Subsequently, B sold the wristwatch to T, who acquired it in good faith. Did T acquire title to the 2. Non-negotiable documents of title
wristwatch? A non-negotiable document of title is one in which it is stated that the goods are to be
Answer: Yes, because although the title of B was voidable, T acquired the wristwatch in good delivered to a specified person.
faith, for value, and without notice that the title of B was defective. Example: "Deliver the goods to Dionisio Diamante"

Document of title to goods, concept How negotiable document of title negotiated

"Document of title to goods" includes any document used in the ordinary course of business 1. By delivery
in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or a) If by the terms of the document of title, the carrier, warehouseman or other bailee issuing
purporting to authorize the possessor of the document to transfer or receive, either by indorsement it undertakes to deliver the goods to bearer. (Art. 1508)
or by delivery, goods represented by the document. (Art. 1636) Example:
D deposits his goods in the warehouse of W. W issues a warehouse receipt which
Common forms of documents of title provides that the goods are "Deliverable to bearer." D may negotiate the warehouse
1. Bill of lading - This refers to the written acknowledgment of the receipt of the goods by a receipt to another by mere delivery.
carrier, and an agreement to transport and to deliver the goods at a specified place to a
person named therein, or to his order or to bearer. Other terms used are receipt for Effect of special indorsement of a document of title which states that the goods are
transportation, forwarder's receipt, shipping receipt (Continental Co. Ltd. vs. Liberation deliverable to bearer
Steamship Co., CV-58713, April 29, 1983) It is an instrument in writing, signed by a carrier or The document of title becomes an order document of title. Consequently, it may be
his agent, describing the freight so as to identify it, stating the name of the consignor, the further negotiated by the indorsee only by indorsement completed by delivery. (Art. 1508)
terms of the contract for carriage, and agreeing or directing that the freight to be delivered to This is a feature of a negotiable document of title that distinguishes it from a
the order or assigns of a specified person at a specified place. (Ace Navigation Co., Inc. vs. negotiable instrument payable to bearer. A negotiable instrument payable to bearer
FGU Insurance Corp., G.R. No. 171591,June 25, 2012.) remains a bearer instrument even if specially indorsed.
2. Dock warrant - A warrant given by a dock owner to the owner of the goods imported and b) If by the terms of the document of title, the carrier, warehouseman or other bailee issuing
warehoused on the dock upon the faith of the bill of lading, as a recognition of the title to the it undertakes to deliver the goods to the order of a specified person and such person or a
goods of the owner of such goods. subsequent indorsee of the document has indorsed it in blank or to bearer.
3. Warehouse receipt or order - This a written acknowledgment by a warehouseman of the Example:
receipt of the goods which are placed in his possession. This is also a contract between the D deposits his goods in the warehouse of W. W issues a warehouse receipt which
owner of the goods and the warehouseman whereby the latter agrees to store the goods and provides that the goods are "Deliverable to order of D." If D indorses the warehouse
the former to pay the compensation for such storage. receipt in blank, i.e., he just writes his signature and nothing else, or he writes "Deliver to
Quedan is a kind of warehouse receipt. bearer" and signs his name, and delivers the warehouse receipt to A, A may negotiate
the instrument by mere delivery.
Classes of documents of title 2. By indorsement plus delivery.
1. Negotiable documents of title If by the terms of the document of title, the goods are to be delivered to the order of a
 specified person, the document of title may be negotiated by him only by indorsement person to whom this document has been entrusted by D". Thereafter, D entrusted the
coupled with delivery. (Art. 1509) Such indorsement may take any of the following forms: document to X. X may negotiate the document to another person.
a. Blank indorsement - This consists of the signature of the indorser without specifying the b. If, at the time of such entrusting the document, it is in such form that it may be negotiated
name of the indorsee. In this case, the document may be further negotiated by mere by delivery.
delivery. Example:
b. To bearer - Where the indorsement states that the goods are deliverable to bearer. The D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse
document may be further negotiated by mere delivery. receipt which states that "(T)he goods are to be delivered to bearer." Thereafter, D
c. Special indorsement - Where the name of the indorsee is specified. The document may entrusted the document to X. X may negotiate the document to another person.
be negotiated further through the indorsee's indorsement plus delivery.
Example: D indorses the warehouse receipt as follows: "Deliver to A. (Sgd.) D" Rights acquired by a person to whom a negotiable document of title is negotiated (Art. 1513)
1. The title of the person negotiating the document, over the goods covered by the document.
Effect if negotiable document of title is marked "non-negotiable" 2. The title of the depositor or shipper over the goods covered by the document.
A negotiable document of title even if marked "non-negotiable" remains to be negotiable. (Art. 3. The direct obligation of the bailee issuing the document to hold possession of the goods for
1510) him according to the terms of the document as fully as if such bailee had contracted directly
with him.
Delivery of an order document of title without indorsement
The delivery of an order document of title without any indorsement does not constitute Rights of the transferee of a document of title
negotiation, but a mere assigment by the holder to the purchaser or donee. (Art. 1511) 1. Non-negotiable document of title
The transferee of a non-negotiable document of title acquires the following rights:
Transfer of a non-negotiable document of title a. As against, the transferor, the title to the goods, subject to the terms of any agreement
A non-negotiable document of title cannot be negotiated. It can only be transferred or with the transferor.
assigned. Its indorsement does not constitute negotiation and gives the transferee no additional b. The right to notify the bailee (warehouseman or carrier) of the transfer to him of the
rights. (See Art. 1511.) document of title.
Effect of notification
Who may negotiate negotiable document of title (Art. 1512) Upon notification to the bailee of the transfer to him of the document, the transferee
1. By the owner thereof. acquires the direct obligation of the bailee to hold possession of the goods for him
Example: according to the terms of the document.
D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse
receipt which states that "(T)he goods are to be delivered to the order of D". D, as owner of Effect of lack of notification
the warehouse receipt, may negotiate it to another. Before notification, the title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
2. By the person to whom the possession or custody of the document has been entrusted by the 1) The levy of an attachment or execution upon the goods by the creditor of the
owner in the following cases: transferor.
a. If, by the terms of the document, the bailee issuing the document, undertakes to deliver 2) A notification to such bailee by the transferor or a subsequent purchaser from the
the goods to the person to whom the possession or custody of the document has been transferor of a subsequent sale of the goods by the transferor.
entrusted. Example:
Example: D deposited his goods on June 1 with W, warehouseman, who issued a non-negotiable
D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse warehouse receipt for the goods to D. On June 2. D assigned the warehouse receipt to A. On
receipt which states that "(T)he goods are to be delivered to the order of D or to the June 5, A assigned the warehouse receipt to H. Neither A nor H notified W of the transfer of
 the document to H. On June 7, A sold the goods covered by the warehouse receipt to X who indorsed the warehouse receipt to A.
immediately informed W of the sale to him of the goods. Who has a better right to the goods? a. Assume that on July 5, A delivered the warehouse receipt without any indorsement to H,
H or X? a purchaser for value. On July 7, A notified W that he h,ad sold the goods to X. At the
Answer: X has a better right to the goods because the notification he made to W of the time of such notificatidh, W had not yet learned of the transfer of the document made by
sale made to him by A defeated H's title to the goods and right to acquire the direct obligation A to H. Who has a better right to the goods? H or X?
of W to hold possession of the goods in favor of H even if the transfer of the document took Answer: X has a better right. If a negotiable document of title is not negotiated but is
place ahead of the sale of the goods by A to X. Upon the transfer of the warehouse receipt to merely transferred, the transferee does not acquire the direct obligation of the bailee at
him, H should have immediately notified W. the time of transfer. In the above case, H should have notified W of the transfer of the
warehouse receipt to him ahead of the notification to W of the sale made by A to X. If a
2. Negotiable document of title negotiable document of title is merely transferred and not negotiated, if shall be treated
The transferee to whom a negotiable document of title has been transferred but not as if it were non-negotiable.
negotiated acquires the following rights: b. Suppose that on July 5, A instead indorsed the warehouse receipt to H, a purchaser for
a. As against the transferor, the title to the goods, subject to the terms of any agreement value. On July 7, A notified W that he had sold the goods to X. At the time of such
with the transferor. (Art. 1514) notification, W had not yet learned of the indorsement of the warehouse receipt made by
b. The right to notify bailee (warehouseman or carrier) of the transfer to him of the A to H. Who has a better right to the goods? H or X?
document of title. (Art. 1514) Answer: H has a better right. This is so because upon the indorsement of the
Effect of notification warehouse receipt to him, H acquired the direct obligation of W to hold the goods for him
Upon notification to the bailee of the transfer to him of the document, the transferee as if he had contracted directly with W. If the transfer was by negotiation, there is no
acquires the direct obligation of the bailee to hold possession of the goods for him need for the transferee to notify the bailee which, in this case, is the warehouseman.
according to the terms of the document. (Art. 1514)
Warranties of a person transferring or negotiating a document of title (Art. 1516)
Effect of lack of notification A person who for value negotiates or transfers a document of title by indorsement or delivery,
Before notification, the title of the transferee to the goods and right to acquire the including one who assigns for value a claim secured by a document of title unless a contrary
obligation of the bailee may be defeated by the following: intention appears, warrants the following:
1) The levy of an attachment or execution upon the goods by the creditor of the 1. That the document is genuine.
transferor. Thus, if the transferee cannot obtain the goods from the warehouseman because the
2) A notification to such bailee by the transferor or a subsequent purchaser from the warehouse receipt is forged, he can hold liable the person transferring or negotiating the
transferor of a subsequent sale of the goods by the transferor. (Art. 1514) document to him.
c. The right to compel the transferor to indorse the document unless a contrary intention 2. That he has a legal right to negotiate or transfer it.
appears. (Art. 1515) Example: D deposited goods with W who issued to D a warehouse receipt stating that
Effect of indorsement the goods are deliverable to bearer. D entrusted the warehouse receipt to A for safekeeping.
1) The negotiation takes effect upon the indorsement. However, A negotiated the warehouse receipt to H. Later, W refused to deliver to H on the
2) Upon indorsement, the transferee acquires the direct obligation of the bailee to hold ground that his title is defective. H can hold A liable because he warranted that he had a legal
possession of the goods. No further notification by the transferee to the bailee is right to negotiate the warehouse receipt.
required upon such indorsement completed by delivery (Arts. 1513, 1514) for the 3. That he has knowledge of no fact which would impair the validity or worth of the document.
transferee to acquire such direct obligation. Thus, a transferor is not liable if at the time he transferred the document, he had no
Example: knowledge that the same was already worthless because goods represented by it had been
On July 1, D deposited his goods with W, warehouseman, who issued to D a warehouse lost.
receipt which states that the goods are to be delivered to the order of D. Thereafter, D 4. That he has a right to transfer the title to the goods and that the goods are merchantable or fit
 for a particular purpose, whenever such warranties would have been implied if the contract of 1. That the negotiation was made in breach of duty of the person negotiating.
the parties had been to transfer without a document of title the goods represented thereby. 2. That the owner of the document was deprived of the possession of the same by loss, theft,
These refer to the warranty against eviction and warranty against hidden defects. fraud, accident, mistake, duress or conversion.
Example:
Effect of failure of bailee or previous indorsers to fulfill their obligations S delivers his goods to C, a common carrier, for shipment. C issues to S a bill of lading for
The indorser shall not be liable for any failure on the part of the bailee who issued the the goods which states that they are to be delivered to bearer. However, the bill of lading is stolen
document or previous indorsers to fulfill their respective obligations. (Art. 1517) by T who thereafter negotiates it by mere delivery to H, a purchaser for value in good faith and
without notice of T's defective title. Is the negotiation of T to H valid?
Problems Answer: Yes, because the validity of the negotiation is not impaired by the fact that the owner
D, depositor; W, warehouseman. An order negotiable warehouse receipt was issued for the of the document was deprived thereof by theft. (Art. 1518) Accordingly, H can obtain possession of
goods. Thereafter, D indorsed the receipt to A, A to B, and B to H, holder. the goods.
1. When H presented the receipt to W, W failed to deliver the goods to him because they were
lost through his negligence. Is D, A or B liable to H for the failure of W to deliver the goods? Attachment or surrender of goods covered by a document of title
Answer: No. because an indorser is not liable for the failure of the bailee to fulfill his 1. Negotiable document of title (Art. 1519)
obligation. (Art. 1517) a. As a general rule, the goods covered by a negotiable document of title cannot be
2. Supposing that the receipt presented by H to W was forged for which reason W refused to attached or levied upon, except:
deliver the goods to H, will D, A or B be liable to H? 1) When the document is surrendered to the bailee; or
Answer: Yes, because an indorser warrants that the document of title is genuine. (Art. 2) The negotiation of the document is enjoined.
1516). b. The bailee cannot be compelled to surrender the goods, except:
1) When the document is surrendered to him, or
However, A negotiated the warehouse receipt to H. Later, W refused to deliver to H on 2) The document is impounded by the Court.
the ground that his title is defective. H can hold A liable because he warranted that he had a 2. Non-negotiable document of title
legal right to negotiate the warehouse receipt. The goods covered by a non-negotiable document of title may be attached or levied
3. Supposing that D stole the goods of T and deposited them in W's warehouse, may H obtain upon in execution although the document is not surrendered to the bailee.
delivery of the goods from W assuming that H is a holder for value and without notice?
Answer: No, because H acquired only whatever rights D had over the goods, which was Remedy of creditor of debtor-owner of goods covered by a negotiable document of title
the same right acquired by the indorsers subsequent to D. (Art. 1513) A depositor who has The creditor can ask the courts for an order attaching the document of title or enjoining the
no title to the goods cannot confer title to them by depositing them with a warehouseman or delivery of the goods to the debtor-owner. (Art. 1520)
other bailee and obtaining a receipt therefor notwithstanding that the purchaser of the goods
is an innocent purchaser for value. Time and place of delivery of thing sold
4. Refer to No. 3. Will D, A or B be liable to H by reason of the non-delivery of the goods to H? 1. Place of delivery
Answer: Yes, because an indorser warrants that he has the right to transfer the title to a. Place stipulated.
the goods. (Art. 1515, par.4) b. If there is no stipulation, place fixed by usage or trade.
c. In the absence of both, the seller's place of business if he has one; if none, the seller's
Non-impairment of the validity of negotiation although it was made in breach of duty, etc. (Art. place of residence. However, in the case of sale of specific goods, which to the
1518) knowledge of the parties when the contract was made were in some other place, that
The validity of the negotiation, if the person to whom the document is negotiated or a person place shall be the place of delivery. (Art. 1521)
to whom the document is subsequently negotiated was a purchaser for value in good faith and 2. Time for delivery of goods
without notice, is not impaired by the following: a. Time stipulated.
 b. If there is no stipulation, delivery must be made within a reasonable time from the Example:
execution of the contract. (Art. 1521) B ordered 500 cans of sardines from S at P8.00 per can. On due date, however, S could
3. Goods in the possession of a third person deliver only 450 cans. The rights of B shall be as follows:
The seller has. not fulfilled his obligation to deliver the goods unless such third person a. B may reject the 450 cans.
acknowledges to the buyer that he holds the goods on the buyer's behalf. (Art. 1521) b. B may accept the 450 cans. If he accepts the 450 cans believing that S could no longer
4. Demand or tender of delivery deliver the balance of 50 cans, then he only has to pay the 450 cans received at the
It must be made at a reasonable hour to be effectual. (Art. 1521) contract rate of at P8.00 per can or a total of P3.600.00. If he accepts the 450 cans
5. Expenses of delivery. believing that S would still deliver the deficiency and he has disposed of the 450 cans
The seller bears the expenses of and incidental to putting the goods into a deliverable received, then he only has to pay the fair value of the goods, which amount may be
state, unless otherwise stipulated. (Art. 1521) lower, but not greater, than the contract rate.
2. When the quantity delivered is more than that which the parties agreed upon, the buyer may:
When vendor is not bound to deliver the thing sold a. Accept the goods agreed upon and reject the rest.
1. If the vendee has not paid him the price. (Art. 1524) Thus, if in the example in No. 1, S delivered 520, B may accept only 500 cans and
2. If no period for the payment of the price has been fixed in the contract. (Art. 1524) reject the excess of 20 cans.
3. If a period has been fixed for the payment of the price, the vendor is bound to deliver the b. Accept the whole of the goods delivered and pay for them at the contract rate.
thing sold. However, he is not bound to deliver if the vendee loses the right to make use of Thus, B may accept all the 520 cans and pay for them at the contract rate at P8.00
the period (Art. 1536) as follows: per can.
a. When the vendee becomes insolvent, unless he gives a guaranty or security for the c. Reject the whole of the goods if they are indivisible.
payment of the price. Example: B ordered a container of orange concentrate weighing 20 gallons from S.
b. When the vendee fails to furnish the guaranties or securities that he has promised. S delivered a sealed container weighing 25 gallons. B may reject the whole 25 gallons
c. When the guaranties or securities have been impaired through his own acts or when because although 5 gallons can be removed from the container being delivered, still the
through a fortuitous event they disappear, unless he immediately gives new ones equally whole container is indivisible because punching a hole on it to extract the extra 5 gallons
satisfactory. will destroy the integrity of the product.
d. When the vendee violates any undertaking in consideration of which the vendor agreed 3. When the seller delivers the goods agreed upon but are mixed with goods of different
to the period. description, the buyer may:
e. When the vendee attempts to abscond. (Art. 1198) a. Accept the goods agreed upon and reject the rest, if the sale is divisible.
b. Reject the whole of the goods, if the sale is indivisible.
Rights of the buyer when quantity or quality of goods delivered is different from that which the Examples:
seller contracted to sell (Art. 1522) a. B ordered 10 sacks of rice from S. S delivered 8 sacks of rice and 2 sacks of com. B may
1. When the quantity delivered is less than that which the parties had agreed upon, the buyer reject all because the quantity of rice being delivered is incomplete, while the 2 sacks of
may: corn are of a different description.
a. Reject the goods. b. If S delivered 10 sacks of rice and 2 sacks of corn, B may accept the 10 sacks of rice
This is based on the rule the creditor cannot be compelled to accept partial payment. and reject the 2 sacks of corn.
b. Accept the goods. c. If S delivered 12 sacks with each sack containing a mixture of rice and corn, B may
However, if he accepts the goods knowing that the seller is not going to perform the reject the whole delivery even if the ratio of rice to corn is 10:2 in each sack..
contract in full, he must pay for them at the contract rate. If the buyer has used or
disposed of the goods before he knows that the seller is not going to perform his contract Unpaid seller, concept
in full, the buyer shall not be liable for more than the-fair value to him of the goods so An unpaid seller is one who has not been paid or tendered the whole of the price or who
received. has received a bill of exchange or other negotiable instrument as conditional payment and the
condition under which it was received has been broken by reason of the dishonor of the instrument, or to his principal. If given to the principal, the notice to be effectual, must be given
the insolvency of the buyer, or otherwise. (Art. 1525) at such time and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent delivery to the buyer.
Rights of an unpaid seller When notice is given to the carrier or other bailee for the buyer, he must
1. Possessory lien, or a lien on the goods or right to retain them while he is in possession of redeliver the goods to, or according to the instructions of, the seller, with the seller
them. (Art. 1526) bearing the expenses of delivery. However, if a negotiable document of title
a. When available representing the goods has been issued, the carrier or other bailee shall not be
This right is available to the seller and notwithstanding that he may be in possession obliged or justified in delivering the goods to the seller unless such document is first
of the goods as agent or bailee for the buyer in the following instances: surrendered to him. (Art. 1532)
1) Where the goods have been sold without any stipulation as to credit. c. Effects of exercise of right of stoppage in transitu
2) Where the goods have been sold on credit, but the credit term has expired. 1) The goods are no longer in transit.
3) Where the buyer is insolvent. (Art. 1527) 2) The contract of carriage ceases; the carrier shall be liable as depositary or other
b. Lien where there is partial delivery bailee.
Where an unpaid seller has made part delivery of the goods, he may exercise his 3) The carrier must redeliver the goods to, or according to the instructions of, the seller.
right of lien on the remainder, unless such part delivery has been made under such (Art. 1532)
circumstances as to show an intent to waive the lien or right of retention. (Art. 1528) However, if a negotiable document of title has been issued for the goods, the
c. When lien is lost carrier will not be bound to deliver the goods unless the document of title is first
The unpaid seller loses his lien on the goods in the following cases: surrendered to him for cancellation. (Art. 1532)
1) When he delivers the goods to a carrier or other bailee for the purpose of d. When goods are in transit
transmission to the buyer without reserving the ownership in the goods or the right to 1) From the time they are delivered to the carrier or other bailee for the purpose of
the possession thereof. transmission to the buyer, until the buyer or his agent, takes delivery of them from
2) When the buyer or his agent lawfully obtains possession of the goods. such carrier or other bailee.
3) By waiver thereof. (Art. 1529) 2) If the goods are rejected by the buyer, and the carrier or other bailee continues in
Note: The unpaid seller having a lien on the goods does not lose his lien by reason only that he possession of them, even if the seller has refused to received them back. (Art. 1531)
has obtained judgment or decree for the price of the goods. (Art. 1529) e. When goods no longer in transit
1) If the buyer obtains delivery of the goods before arrival at the appointed destination.
2. Right of stoppage in transitu 2) If the carrier or other bailee acknowledges to the buyer or his agent, that he is
This right involves the right of the unpaid seller to resume possession of the goods at holding the goods in his behalf, after arrival of the goods at their appointed
any time while they are in transit, and he will then become entitled to the goods as he would destination.
have had if he had never parted with the possession. (Art. 1530) 3) If the carrier or other bailee wrongfully refuses to deliver the goods to buyer or his
a. When right available agent. (Art. 1531)
This right is available after the unpaid seller has parted with the possession of the
goods and the buyer is or becomes insolvent. (Art. 1530) 3. Right of resale
b. How exercised a. When right available
The unpaid seller may exercise this right: This right is available to an unpaid seller when the following requisites are present:
1) By obtaining actual possession of the goods. 1) The buyer has defaulted in the payment of the price.
2) By giving notice of his claim to the carrier or other bailee in whose possession the 2) The seller has the right of lien or has stopped the goods in transitu.
goods are. 3) Title to the goods has passed on to the buyer.
This notice may be given either to the person in actual possession of the goods 4) The grounds must be any of the following:
 a) The goods are of a perishable nature. whether the buyer has been in default for an unreasonable time before the right of
b) The seller has expressly reserved the right to resell the goods in case the buyer rescission was asserted. (Art. 1534)
should make default. c. Effects of rescission
c) The buyer has been in default for an unreasonable time. (Art. 1533) 1) The seller shall not be liable to the buyer upon the contract of sale.
b. How resale is made 2) He may recover from the buyer damages for any loss occasioned by the breach of
The seller may resell the goods in a public or private sale. He is bound to exercise contract of sale.
reasonable care and judgment in making the resale. He cannot, directly or indirectly, buy 3) The seller resumes ownership of the goods.
the goods. (Art. 1533)
c. Effects of resale Effect on possessory lien or right of stoppage in transitu if buyer has sold or disposed of the goods
1) The seller shall not be liable to the original buyer upon the contract of sale or for any The sellers possessory lien or right of stoppage in transitu is not affected by any sale or'
profit made by such resale. disposition of the goods made by the buyer except in the following cases:
2) He may recover damages from the buyer for any loss occasioned by the breach of 1. When the seller has assented to the sale by the buyer.
contract of sale. 2. When a negotiable document of title representing the goods has been negotiated to a
3) The new buyer acquires a good title against the original buyer. (Art. 1533) purchaser for value in good faith. (Art. 1535)
d. Importance of notice to the original buyer
Notice need not be given to the original buyer of the intention to resell the goods for Sale of real estate with a statement of its area at the rate of a certain price per unit of measure or
the validity of the resale. However, if the basis of the resale is not the perishable nature number
of the goods or upon an express provision in a contract of sale, the giving or failure to The vendor shall deliver the area mentioned in the contract of sale. However, if the actual
give notice shall be relevant in any issue involving the question whether the buyer has area is more or less than the area specified in the contract, or if a part of the immovable is not of
been in default for an unreasonable time before the resale was made. the quality specified therein, the following rules shall be observed:
It is not likewise essential to the validity of the resale that notice of the time and 1. If the actual area is less than that stated in the contract (Art. 1539) - The buyer may:
place of such resale should be given by the seller to the original buyer. (Art. 1533) a. Ask for a proportionate reduction in the price if the lack in area is less than one-tenth of
that stated in the contract, unless the vendee would not have bought the thing had he
4. Right to rescind the sale known of its smaller area, in which case, he may opt to rescind the sale.
a. When available b. Rescind the sale if the lack in area is not less than one-tenth of that stated.
This right is available to an unpaid seller when the following requisites are present: 2. If the actual area is more than that stated in the contract (Art. 1540) - The buyer may:
1) The buyer has defaulted in the payment of the price. a. Accept the area stated in the contract and reject the rest.
2) The seller has the right of lien or has stopped the goods in transitu. b. Accept the whole area and pay for them at the contract rate.
3) Title to the goods has passed on to the buyer. 3. If the area is the same but a part of the immovable is not of the quality specified in the
4) The grounds must be any of the following: contract (Art. 1539) - The buyer may:
a) The seller has expressly reserved the right to rescind the sale in case the buyer a. Ask for a proportionate reduction of the price if the inferior value of the thing does not
should make default. exceed one-tenth of the price agreed upon, unless the buyer would not have bought the
b) The buyer has been in default in the, payment of the price for an unreasonable thing had he known of its inferior quality, in which case, he may opt to rescind the sale.
time. b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed
b. How rescission is made upon.
1) By giving notice to the buyer of the intention to rescind.
2) By doing an overt act manifesting the intention to rescind. Illustration:
It is not necessary that such overt act be communicated to the buyer, but the S sold to B a lot consisting of 1,500 square meters at the rate of P1,000.00 per square meter.
giving or failure to give notice shall be relevant in any issue involving the question 1. Suppose the actual area being delivered is only 1,400 square meters, what are the rights of
 B? although there be greater or less area br number than that stated in the contract.
a. B may ask for a proportionate reduction in the price since the lack in area is less than 3. Buyer's remedies if the vendor does not deliver the area within the boundaries stated in the
one-tenth of that stated in the contract (One-tenth of 1,500 square meters is 150; while contract
the lack in area is 100.) Thus, B has to pay only 1,400 square meters at P1,000.00 per a. Buyer may ask for a proportionate reduction in the price, or
square meter or a total of P1,400,000.00. b. Rescind the contract.
b. B may ask for rescission if he would not have bought the lot had he known of its smaller Illustration:
area. B bought from S a lot for a lump sum of P1,500,000.00. Aside from mentioning the
boundaries of the lot, the deed of sale also states the area at 1,500 square meters.
2. Suppose the area being delivered by S is only 1,300 square meters, what is the right of B? 1. Suppose the area contained within the boundaries is actually 1,400 square meters, then all
B may ask for the rescission of the contract because the lack in area consisting of 200 that S has to deliver is 1,400 square meters. B will have to pay the same amount of
square meters is not less than one-tenth of the area agreed upon. P1,500,000.00, i.e, there is no proportionate reduction in the price.
2. Suppose the area contained within the boundaries is actually 1,600 square meters, then S
3. Suppose the area being delivered by S is 1,600 square meters, what are the rights of B? will have to deliver such area with no increase in the price that B must pay. If S wants to
a. B may accept the area being delivered (1,600 square meters) and pay for them at the deliver only 1, 500 square meters, B has the right:
contract rate. a. To rescind the contract, or
b. B may accept only 1,500 square meters and reject the rest. b. Ask for a proportionate reduction in the price, hence, he can pay only P1,406,250.00
(1,500/1,600 square meters xP1,500,000.00).
4. Assume the area being delivered is the same as that stated in the contract, i.e., 1,500 square
meters. Rules of preference in case of double sale
a. Suppose 200 square meters should be priced only at P950.00 per square meter because 1. Movable property
of inferior quality, what are B's rights? Ownership shall be transferred to the person who first took possession of the property in
Since the inferior value of P50.00 (P1,000.00 - 950.00) does not exceed one-tenth of good faith, ( i.e. first possessor in good faith)
the price agreed upon which is P100.00 (P1,000.00 x 1/10): The possession referred to here may either be actual or constructive.
1) B may ask for a proportionate reduction in the price by paying only P1,490,000.00 Examples:
(1,300 x P1,000.00) + (200 x P950.00), or a. S sold his computer to B who told S that he would obtain delivery of the computer after 3
2) He may ask for rescission if he would not have bought the lot had he known that a days. Before the third day, S sold that same computer to X who immediately took
part thereof is of inferior value. physical possession of the computer. X was not aware of the previous sale to B. Neither
b. Suppose 200 square meters should be priced only at P800.00 per square meter because was B aware of the sale made to X because the sale to X had not yet taken place at the
of inferior quality, what are B's rights? time that he (B) purchased the computer. Who has a better right to the computer? B or
In this case the inferior value (P200.00) exceeds 1/10 of the value agreed upon; X?
hence, B may ask for the rescission of the contract. Answer: X because he first took possession of the computer in good faith.
b. S sold his ring to B in a public instrument. However, B informed S that he would obtain
Sale of real estate for a lump sum and not at the rate of a certain sum for a unit of measure or actual delivery of the ring after 3 days. The day after the sale to B, S sold the same ring
number (Art 1542) to X in a private instrument. X immediately took actual possession of the ring. X was not
1. Area to be delivered aware of the previous sale to B. Neither was B aware of the sale to X at the time that he
The vendor is bound to deliver all that it is included within the boundaries stated in the (B) purchased the ring since the sale to X had not yet taken place. Who has a better right
contract although there be greater or less area or number than that stated in the contract. to the ring B or X?
2. The price to be paid by vendee Answer: B because although he did not take actual possession of the ring, the sale
The vendee shall pay the lump sum stipulated with no increase or decrease in the price to him was in a public instrument the execution of which resulted in the constructive
 delivery of the ring to him. second sale, since such knowledge taints his prior registration with bad faith. It is thus essential, to
2. Immovable property merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good
a. Ownership shall belong to the person who in good faith first registered the sale in the faith in registering the deed of sale. (Fudot vs. Cattleya Land, Inc., G. R. No. 171008, September
Registry of Property (i.e., first registrant in good faith). 13, 2007)
b. If there was no registration, ownership shall belong to the person who first took (Note: The Supreme Court, in the foregoing case, reiterated the rule that the principle of
possession thereof in good faith (i.e., first possessor in good faith). automatic registration does not apply to the first buyer when he gains knowledge of the second
The possession referred to here is either actual or constructive. sale. In other words, the first buyer, who was in good faith at the time the sale was madeito him,
c. In the absence of both registration and possession, ownership shall belong to the person remains in good faith notwithstanding his knowledge of the second sale. For the second buyer, in
who presents the oldest title in good faith. (Art. 1544) order that he may invoke Art. 1544, he must possess good faith from the time of sale in his favor
In all of the above cases, good faith is essential, being the basic premise of preferential until the registration of the same.) (See Pagaduan vs. Spouses Estanislao, G.R. No. 176308, May
rights granted to the person claiming ownership of the immovable. [Tanglao vs. Parungao, G. 8, 2009.)
R. No. 166913, October 5, 2007; P-yongayong vs. Court of Appeals, 430 SCRA 210 (2004)]
Presence of occupants and improvements on immovable
Example: B1 bought a lot from S Realty for P1,400,000.00 giving a down payment of P600,000.00.
On May 1, S sold his lot to X. The deed of sale was in a private instrument. On May 3, S Balance was to be paid within one year from execution of contract under an agreement that B1
sold the same lot to Y in a public instrument. On May 5, S sold again the said lot.to Z in a could apply for a loan to pay the balance. In the meantime, B1 introduced permanent
public instrument. Z immediately registered the sale with Register of Deeds. X, Y and Z did improvements on the property consisting of a building and concrete parameter fence. B1 failed to
not know of the sale made to the other two and none of them took physical possession of the pay the balance because S Realty refused to deliver the title to the property which was required in
lot. B1's application for a loan. S Realty then sold the lot to B2 who forcibly opened the steel gate and
a. Who has a better right to the lot? the building doors and entered the premises. B2 thereafter registered the sale. Who shall be
Answer: Z because he was the first to register the sale in good faith. preferred? B1 or B2?
b. Suppose Z did not register the sale or he registered the sale but he was in bad faith Answer: B1 shall be preferred. At the time of the second sale, there were already
(meaning, he was aware of one or both of the previous sales), who has a better right to improvements on, and occupants (other than the seller) of, the property in question. These facts
the lot? should have put B2 on his guard. He cannot therefore be regarded as a buyer in good faith and
Answer: Y will have a better right because he was the first to take possession in cannot have any right over the property. (See Tanglao vs. Parungao, supra.)
good faith. Since the sale to him was in a public instrument, the lot was deemed
constructively delivered to him. Conditions and Warranties
c. Suppose all the sales were in a private instrument and all buyers are in good faith, who Conditions in a contract of sale
has a better right to the lot? If the obligation of a party is subject to a condition which is not fulfilled, the other party may
Answer: Since no one registered the sale or took possession of the lot, X shall be choose to do any of the following:
the owner because he has the oldest title. 1. Refuse to proceed with the contract.
He may also treat the non-performance of the condition as a breach of warranty.
Knowledge gained by first buyer of the second sale does not defeat his rights 2. Waive the performance of the condition. (Art. 1545)
The governing principle in double sale is priore tempore, potior jure (first in time, stronger in
right.). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights, Kinds of warranties
except where the second buyer registers in good faith the second sale ahead of the first. Such 1. Express warranties
knowledge of the first buyer does not bar him from availing himself of his rights under the law, Express warranty refers to any affirmation of fact or any promise by the seller relating
among them to register first his purchase as against the second buyer. However, knowledge to the thing whose natural tendency is to induce the buyer to purchase the same, and if the
gained by the second buyer of the first sale defeats his rights even if he is first to register the buyer purchases the thing relying on such affirmation or promise. (Art. 1546)
 5, p. 1006) (See also Ang vs. Court of Appeals, G. R. No. 177874, September 29, 2008.)
Statement of seller's opinion Example:
This shall not be construed as a warranty unless made by an expert and it was relied S sold his lot to B in a private instrument. B took immediate actual possession of the lot.
upon by the buyer. (Art. 1546) Two days later, S sold the same lot in a public instrument to X who recorded the sale with the
2. Implied warranties Register of Deeds. Neither one was aware of the sale made to the other. When X visited the
Implied warranties are those that are inherent in contracts of sale and accompany them lot to take actual possession of it, he saw that B was occupying the same and learned from B
unless they are suppressed by the parties. They are of two kinds: that S had sold the lot to B earlier. Accordingly, X filed a complaint for eviction against B.
a. Warranty against eviction - This refers to the implied warranty on the part of the seller Upon receipt of the summons and the complaint, B notified S of the suit brought against him.
that he has the right to sell the thing at the time when ownership is to pass, and that the After hearing, the court rendered judgment evicting B from the lot. B can hold S liable for
buyer shall from that time have and enjoy the legal and peaceful possession of the thing. breach of warranty against eviction because all the elements for liability for breach of
b. Warranty against hidden defects - This refers to the implied warranty that the thing shall warranty against eviction are present.
be free from any hidden faults or defects, or any charge or encumbrance not declared or 3. Other instances when seller is liable for breach of warranty against eviction
known to the buyer. (Art. 1547) a. Sale of the property for non-payment of taxes
Persons not liable for breach of warranty If the property is sold for non-payment of taxes due and not made known to the
1. Sheriff vendee before the sale, the vendor is liable for eviction. (Art. 1551)
2. Auctioneer b. Judicial sales
3. Mortagee The judgment debtor is liable for eviction unless otherwise decreed in the judgment.
4. Pledgee (Art. 1551)
5. Other persons professing to sell by virtue of authority in fact or law. (Art. 1546)
4. Vendor's liability.in case of eviction
Warranty in Case of Eviction a. If there is a stipulation exempting the vendor from the obligation to answer for eviction
Warranty in Case of Eviction 1) Vendor acted in bad faith, i.e., he had knowledge at the time of sale of the existence
1. Eviction, concept of a fact that may give rise to eviction, the waiver is void - Vendor shall be liable for
Eviction is the deprivation of the vendee of the whole or a part of the thing sold by virtue the following:
of a final judgement based on a right prior to the sale or an act imputable to the vendor. (Art. a) Value of the thing at the time of eviction.
1548) b) Income or fruits, if the vendee has been ordered to deliver them to the party
who won the suit against him.
2. Requisites in order that the seller’s warranty against eviction may be enforced c) Cost of suit which caused the eviction, and, in a proper case, those of the suit
a. The purchaser has been deprived of the whole or part of the thing sold brought against the vendor for the warranty.
b. The eviction is by final judgment d) Expenses of the contract, if the vendee has paid them, and
The vendee need not appeal from the decision or judgment in order that the vendor e) Damages and interests, and ornamental expenses, if the sale was made in bad
may become liable for eviction. (Art. 1548) faith. (Arts. 1553, 1555)
c. The deprivation is based on a right prior to the sale or an act imputable to the vendor. 2) Vendor acted in good faith - Vendor's liability shall be as follows:
(Art. 1548) a) If vendee made the waiver without knowledge of the risks of eviction (waiver
d. The vendor must have been notified of the suit for eviction at the instance of the vendee consciente), the vendor shall pay only the value of the thing sold at the time of
The defendant vendee shall ask within the period fixed in the Rules of Court for eviction.
answering the complaint, that the vendor be made a co-defendant. (Art. 1559) This will b) If vendee made the waiver with knowledge of the risks of eviction and assumed
enable the vendor to defend his title (City of Manila vs. Lack, 19 Phil 324) and show that the consequences (waiver intencionada), the vendor shall not be liable.
the suit for eviction against against the buyer is unjust (Javier vs. Rodriguez, 40 OG No. b. Where no warranty has been agreed upon or there was no stipulation exempting the
 vendor from liability b. After one year from the execution of the deed of sale, the vendee may ask for:
1) Vendor acted in bad faith - Vendor's liability shall be the same as items a) to e) in Damages, within a period a period of one year from the discovery of the easement
4.a.1) above. or servitude. (Art. 1560)
2) Vendor acted in good faith - Vendor's liability shall be the same as items a) to d) in
4.a.1) above, i.e., there is no liability for damages and interest. 5. When vendor not liable for easement or servitude
a. When the easement is apparent.
5. Vendee's remedies in case of partial eviction b. When the non-app'arent easement or servitude is recorded in the Registry of Property,
If the vendee loses, by reason of eviction, a part of the thing sold of such importance, in unless there is an express warranty that the thing is free from all burdens and
relation to the whole, that he would not have bought it without said part, he may demand: encumbrances. (Art. 1560)
a. Rescission of the contract; or c. When the vendee had knowledge at the time of the sale of the existence of the
b. Enforcement of the vendor's liability for eviction. easement or servitude, though it was non-apparent. (10 Manresa 222), such as when it
The above rule shall be observed when two or more things have been jointly sold for was mentioned in the agreement. (Art. 1560)
a lump sum, or for a separate price for each of them, if it should clearly appear that the
vendee would not have purchased one without the other. (Art. 1556) Warranty Against Hidden Defects of
or Encumbrances upon the Thing Sold
Rules on easement or servitude Warranty against hidden defects
1. Easement or servitude, concept 1. Requisites for enforcement of vendor's liability against hidden defects.
Easement or servitude is an encumbrance imposed upon an immovable for the benefit of a. The defect must exist at the time of sale. (Art. 1561)
another immovable belonging to a different owner. (Art. 613) b. The defect must be hidden, i.e., not patent or visible. (Art. 1561)
Example: A and B are owners of adjoining lots. The only way by which B can have The vendor, however, shall not be liable for defects that are not visible if the vendee
access to his lot from the road is to pass through A's lot so he enters into an agreement with is an expert who, by reason of his trade or profession, should have known them. (Art.
A for A to give him a right of way. The right of way is an easement or servitude imposed upon 1561)
the lot of A for the benefit of tsshe lot belonging to B. c. The defect must render the thing unfit for the use for which it is intended or diminishes its
2. Kinds of easement or servitude fitness for such use to such an extent, that had the vendee been aware thereof, he would
a. Apparent easement - One that is made known and continually kept in view by external not have acquired it or would have given a lower price for it. (Art. 1561)
signs that reveal its use and enjoyment. (Art. 615) d. The action to enforce it must be made within the period provided by law.
b. Non-apparent easement - One which shows no external indication of its existence. (Art. 2. Warranties included
615) a. Implied warranty of fitness for a particular purpose
3. Requisites for vendor's liability should the immovable sold be encumbered with easement or 1) Requisites
servitude a) The buyer makes known to the seller the particular purpose for which the goods
a. The easement must be non-apparent. are acquired.
b. It must not have been mentioned in the agreement. b) The buyer has relied upon the seller's skill or judgment. (Art. 1562)
c. It must be of such nature that it must be presumed that the vendee would not have 2) Sale of goods under their patent or trade name
acquired the immovable had he been aware thereof. (Art. 1560) There is no warranty as to the fitness of such' goods for a particular
4. Vendee's remedies should the immovable sold be encumbered with any non-apparent purpose, unless otherwise stipulated. (Art. 1563)
easement or servitude 3) Usage of trade
a. Within one year from the execution of the deed of sale, the vendee may ask for: An implied warranty or condition as to the quality or fitness for a
1) Rescission, or particular purpose may be annexed by the usage of trade. (Art. 1564)
2) Damages. b. Implied warranty of merchantable quality
 This is an implied warranty that the goods are fit for the general purpose of the thing, liability for hidden defects when the thing is lost (Arts. 1568 and 1569) and in judicial sales (Art.
and not necessarily for the purpose of the buyer. This warranty is present when the 1570), is six (6) months from the delivery of the thing sold (Art. 1571)
goods are bought by description from a seller who deals in goods of such description
(whether he is the grower or not.) (Art. 1562) Rules in sale of animals with defects or disease
c. Implied warranty of merchantability 1. Sale of animals with redhibitory defects
In sale by sample, if the seller is a dealer in goods of that kind, there is an implied a. Redhibitory defect, concept; liability of veterinarian
warranty that the goods shall be free from any defect rendering them unmerchantable Redhibitory defect is a defect of such nature that expert knowledge, even after a
which would not be apparent upon reasonable examination of the sample. (Art. 1565) professional inspection has been made, is not sufficient to discover it.
3. Responsibility for hidden defects If the veterinarian, through ignorance or bad faith should fail to discover or disclose
General rule: The vendor shall be liable to the vendee for any hidden faults or defects in it, he shall be liable for damages. (Art. 1576)
the thing sold, even though he was not aware thereof. b. Remedies of vendee in case of sale of animals with redhibitory defects
Exception: The vendor shall not be liable if there is a stipulation exempting him from such General rule: If two or more animals are sold together, whether for a lump sum or for
defects and he was not aware thereof. (Art. 1566) a separate price for each of them, the redhibitory defect of one shall only give rise to its
4. Remedies of vendee in case of breach (in the warranties under Arts. 1561, 1562, 1564, 1565 redhibition. Accordingly, the vendee may only ask for:
and 1566) The buyer may choose between: 1) The' rescission of the sale of the defective animal {accion redhibitoria), or
a. Withdrawing from the contract or rescission (accion redhibitoria), and 2) Ask for a proportionate reduction in its price {accion quanti minoris). (Arts. 1572,
b. Demanding a proportionate reduction in the price (accion quanti minoris), with damages 1567, 1580)
in either case. (Art. 1567) Exception: The redhibitory defect of one shall give rise to the redhibition of all the
animals sold, including the sound ones, if the vendee would not have bought the sound
Rules in case of loss of the thing with hidden defects animals without the defective one. This intention by the vendee is presumed when a
1. The cause of the loss is the defect - team, yoke, pair, or set is bought, even if a separate price has been fixed for each one of
a. If the vendor was aware of the defect, he shall be obliged: the animals composing the same. (Art. 1572) Accordingly, the vendee may ask for the
1) To return the price; rescission of the whole contract.
2) To refund the expenses of the contract; and Note: The above rule and exception apply in like manner to the sale of other things.
3) To pay damages. (Art. 1568) (Art. 1573)
b. If the vendor was not aware of the defect, he shall be obliged: Example:
1) To return the price; B bought 6 horses from S. A few days after the sale, one of the horses was found to
2) To pay the interest thereon; and have a redhibitory defect. Here, B can only ask for the rescission of the sale of the horse
3) To refund the expenses of the contract. (Art. 1568) with such defect or for a proportionate reduction in its price.
2. The cause if loss is a fortuitous event or the fault of the vendee - However, if B bought the 6 horses as a team, such as for his horse-drawn carriage,
a. If the vendor was aware of the defect, he shall be obliged: B may seek the rescission of the sale of all the horses because he would not have
1) To return the price paid less the value of the thing at the time of loss; and bought the sound horses without the defective horse.
2) To pay damages. (Art. 1569) c. When must redhibitory action be filed The redhibitory action must be filed within forty (40)
b. If the vendor was not aware of the defect, he shall be obliged: days from the date of delivery to the vendee. This action can only be exercised with
To return the price • paid less the value of the thing at the time of loss. (Art. 1569) respect to faults and defects which are determined by law or local customs. (Art. 1577)
d. Effect of the rescission of the sale of an animal with redhibitory defect
Period of filing action The animal shall be returned in the condition in which it was sold and delivered, the
The action to withdraw from the contract (accion redhibitoria) or reduction of the price with vendee being answerable for any injury due to his negligence, and not arising from the
damages (accion quanti minoris) (Arts. 1561 to 1567); and all other actions to enforce the seller's redhibitory fault or defect. (Art. 1579)
2. When sale of animals is void expenses and costs necessary to honor the warranty. He may, however, proceed against
a. When the animals are suffering from contagious diseases. the manufacturer and distributor. [Sec. 68 (b) (3)]
b. When the animals are found to be unfit for the use or service for which they were 4. Minimum standards for warranties
acquired as stated in the contract. (Art. 1575) For the warrantor of a consumer product to meet the minimum standards for warranty, he
3. Vendor's liability in case the animal sold dies of disease shall:
The vendor shall be liable for the death of the animal sold, whether the defect is a. Remedy such consumer product within a reasonable time and without charge in case of
redhibitory or not, if the following requirements are present: defect, malfunction or failure to conform to such written warranty.
a. The disease existed at the time of sale; b. Permit the consumer to elect whether to ask for a refund or replacement without charge
b. The disease is the cause of death of the animal, and of such product or part, as the case may be, where after reasonable number of attempts
c. The animal dies within three (3) days from time of purchase. (Art. 1578) to remedy the defect or malfunction, the product continues to have the defect or to
4. Sale without warranty against hidden defects of animals malfunction. [Sec. 68 (d)]
There is no warranty against hidden defects of animals sold at fairs or at public auctions,
or of livestock sold as condemned. (Art. 1574) 5. When warrantor not required to perform warranty
The warrantor will not be required to perform the duties mentioned in No. 4 above, if he
Consumer product warranties under R. A. No. 7394, otherwise known as the "Consumer Act" can show that the defect, malfunction or failure to conform to a written warranty was caused
approved on April 13, 1992 and published in the Official Gazette on June 15,1992 by. damage due to unreasonable use thereof. [Sec. 68 (d)]
In addition to the Civil Code provisions on sale with warranties, the following provisions shall 6. Duration of warranty
govern the sale of consumer products with warranty: a. Period stipulated by the seller and consumer when the express warranty shall be
1. Terms of express warranty - Any seller or manufacturer who gives an express warranty shall: enforceable. If the implied warranty on merchantability accompanies an express
a. Set forth the terms of warranty in clear and readily understandable language and clearly warranty, both will be of equal duration.
identify himself as the warrantor; b. Any other implied warranty shall endure not less than
b. Identify the party to whom the warranty is extended; sixty (60) days nor more than one (1) year following the
c. State the products covered; sale. [Sec. 68 (e)]
d. State what the warrantor will do in the event of a defect, malfunction or failure to the 7. Remedies for breach of warranty [Sec. 68 (f)]
written warranty and at whose expense; a. Express warranty
e. State what the consumer must do to avail (himself) of the rights which accrue to the The consumer may elect either of the following:
warranty; and 1) Repair of the product, in whole or in part
f. Stipulate the period within which, after notice of defect, malfunction or failure to conform The warranty work must be made to conform to the express warranty within
to the warranty, the warrantor will perform any obligation under the warranty. [Sec. 68 thirty (30) days by either the warrantor or his representative, which period may be
(a)] extended by conditions beyond the control of the warrantor or his representative.
2. When express warranty operative 2) Refund of the purchase price
All written warranties or guarantees issued by a manufacturer, producer or importer shall The amount directly attributable to the use of the consumer prior to discovery of
be operative from the moment of sale. [Sec. 68 (b)] the non-conformity shall be deducted.
3. Persons liable b. Implied warranty
a. Manufacturer. The consumer may:
b. Distributor. 1) Retain in the goods and recover damages, or
c. Retailer. 2) Reject the goods, cancel the contract and recover from the seller so much of the
The retailer shall be liable only subsidiarily, i.e, when the manufacturer and purchase price as has been paid, including damages.
distributor fail to honor the warranty. In such case, the retailer shall shoulder the OBLIGATIONS OF THE VENDEE
Obligations of the vendee a) Buyer has no duty to return goods to the seller unless otherwise agreed. (Art.
1. To accept the delivery of the thing sold. (Art. 1582) 1587)
a. When buyer deemed to have accepted the goods b) Title to. the goods does not pass on to him. (Art. 1588)
1) When he intimates to the seller that he is accepting them. c) He shall not be obliged to pay the price.
2) When he does any act in relation to the goods which is inconsistent with the d) If he constitutes himself as depositary of the goods, he shall be liable as such.
ownership of the seller. (Art. 1587)
Thus, the buyer is deemed to have accepted the goods if he begins to consume Obligation of the buyer
them or give them to others, or if he has performed additional work on them. It is sufficient that the buyer notifies the seller that he refuses to accept the
3) When he retains the goods after the lapse of a reasonable time without intimating to goods (Art. 1587) so that the seller can take action on them.
the seller that he has rejected them. (Art. 1585) 2) If refusal to accept delivery is not justified.
b. Delivery of goods in installments a) Title to the goods passes to the buyer from the moment the goods are placed at
As a general rule, the buyer is not bound to accept delivery of the goods in his disposal, (Art. 1588) except in the following:
installments, unless otherwise agreed. (Art. 1583) This is consistent with the rule that (1) When there is a stipulation to the contrary. (Art. 1588)
payment or performance must be complete. (Art. 1233) (2) When the seller has reserved the ownership of the goods as a security for
If there is a stipulation and the seller makes defective deliveries in respect of one or the payment of the price. (Arts. 1523 and 1503)
more installments, or the buyer neglects or refuses without just cause to take delivery of b) He shall be obliged to pay the price.
or pay one or more installments, the injured party may, depending upon the 2. To pay the price of the thing. (Art. 1582)
circumstances of the case: a. Time and place of payment of the price
1) Refuse to proceed further with the contract and sue for damages for breach of the 1) At the time and place stipulated.
entire contract; or 2) Time and place of delivery of the thing, in the absence of stipulation. (Art. 1582)
2) Claim compensation but not damages, if the breach is severable. (Art. 1583) b. When interest will be paid on the price
c. Right of buyer to examine goods before accepting them The buyer shall pay interest for the period between the delivery of the thing and the
General rule: The buyer has the right to examine the goods before accepting them. payment of the price, in the following cases:
Exceptions, i.e., such right is not available in the following cases: 1) If there is a stipulation.
1) When there is an agreement to that effect. If interest was stipulated but the rate was not indicated, the rate shall be the
2) When there is a stipulation that the goods shall not be delivered to the buyer until he legal rate of 6%. (Effective July 1, 2013, the legal rate shall be 6% per Circular No.
has paid the price such as when the goods are marked with the words "collect on 799 of the Monetary Board.)
delivery" – unless there is an agreement or usage of trade permitting such 2) If the thing sold produces fruits or income.
examination. (Art. 1584) 3) If he is in default, from the time of judicial or extrajudicial demand for the payment of
d. Effect of acceptance of goods on seller's liability for breach of warranty the price. (Art. 1589)
General rule: The seller is not discharged from liability in damages or other remedy c. Suspension of payment of the price by vendee
for breach of warranty by the acceptance of the goods. 1) Grounds
Exceptions, i.e., the seller is discharged from such liability in the following cases: a) Disturbance in the vendee's possession or ownership of the thing purchased.
1) If there is an agreement, whether express or implied. Thus, the vendee may suspend payment if a complaint for eviction was
2) If the buyer fails to give notice to the seller of any breach of warranty within a brought against him.
reasonable time after the buyer knows or ought to know of such breach. (Art. 1586) b) Reasonable grounds to fear such disturbance, by a vindicatory action or
e. Effect when buyer refuses to accept delivery foreclosure of mortgage. (Art. 1590)
1) If refusal to accept delivery is justified (such as when the quantity is not complete or Thus, the vendee may suspend payment if he receives a demand letter
the goods being delivered are different from those stipulated). which threatens the filing of a complaint for the recovery of the thing sold or for.
 foreclosure of the mortgage constituted on the thing. of the vendor, i.e., at his option, if at the time fixed for the delivery of the thing,
2) Duration of suspension of payment the vendee:
Until the vendor has caused the disturbance or danger to cease. (Art. 1590) (1) does not appear to receive the thing, or
3) When right to suspend payment not available. (2) having appeared, does not pay the price, unless a longer period is
a) If the vendor gives security for the return of the price. stipulated for its payment. (Art. 1593)
b) If it has been stipulated that the vendee shall pay the price notwithstanding the
existence of the aforementioned disturbance or danger. ACTIONS FOR BREACH
c) If the disturbance is a mere act of trespass. (Art. 1590) Thus, the mere entry OF CONTRACT OF SALE OF GOODS
and presence of squatters will not justify suspension of the payment of the price Actions by the seller
by the buyer. 1. Maintain an action for the price of the goods if the buyer wrongfully neglects or refuses to
d. Rescission by vendor pay. (Art. 1595)
1) Immovables 2. Maintain an action for damages if the buyer wrongfully neglects or refuses to accept and pay
a) When vendor is entitled to sue forimmediate rescission for the goods. (Art. 1596)
The vendor may immediately sue for rescission of the sale if there are 3. Rescind the contract if the buyer has repudiated the sale, or manifested his inability to
reasonable grounds to fear: perform his obligation, or has committed a breach of contract, where the goods have not
(1) the loss of the immovable property sold, and been delivered to buyer. (Art. 1597)
(2) its price. (Art. 1591)
Example: S sold his lot to B for P50.000.00. While the lot had been Actions by the buyer
delivered to B, B was to pay the price after 2 months. If the lot was in danger of 1. Bring an action for specific performance, if the seller has broken the contract to deliver
being eroded because B was cutting all the trees planted thereon and B was specific or ascertained goods. (Art. 1598)
squandering his money in gambling, S may sue for the immediate rescission of 2. In case of breach of warranty by the seller, the buyer may, at his election:
the sale. a. Accept or keep the goods and set up against the seller, the breach of warranty by way of
If one or both grounds do not exist, the vendor may choose between: recoupment or diminution or extinction of the price.
(1) fulfillment of the contract, with damages, and b. Accept or keep the goods and maintain an action against the seller for damages for
(2) rescission of the contract, with amages. (Art. 1191) breach of warranty.
b) Pactum commissorium c. Refuse to accept the goods, and maintain an action against the seller for damages for
This is an agreement between the vendor and the vendee in the sale of an breach of warranty.
immovable that rescission of the contract shall of right take place if the vendee d. Rescind the sale and refuse to receive the goods or if the goods have already been
fails to pay the price at the time agreed upon. (Art. 1592) received, return them or offer to return them to the seller and recover the price or any
This agreement is not valid. Accordingly, the vendee may pay even after part thereof which has been paid. (Art. 1599)
the expiration of the period as long as no demand for rescission has been made
upon him either judicially or by notarial act. After the demand, the court may not EXTINGUISHMENT OF SALE
grant him a new term. (Art. 1592) How sales are extinguished
In the case of sale of real property which is payable in installments and the Sales are extinguished:
buyer has paid at least two years of installments, the provisions of the Realty 1. By the same causes as all other obligations.
Installment Buyer Act are applicable. 2. By the various causes of extinguishment in Title VI (Sales) Such as:
2) Movables a. Cancellation of sale of personal property payable in installments. (Art. 1484)
a) Grounds for immediate rescission b. Resale of the goods by the unpaid seller. (Art. 1532)
Rescission of the sale of a movable shall of right take place in the interest c. Rescission of the sale by the unpaid seller. (Art. 1534)
 d. Rescission by the buyer in case of partial eviction. (Art. 1556) 1) If the period does not exceed ten years – such as when the right to repurchase shall
e. Rescission by the buyer in case of breach of warranty against hidden defects. (Art. 1567) be exercised within five (5) years, then the period shall be five (5) years from the
f. Rescission by the buyer of sale of animals with redihibitory defects. (Art. 1580) date of the contract.
3. By redemption, whether conventional or legal 2) If the period exceeds ten (10) years, then the period shall be ten (10) years from the
date of the contract, the stipulation as to the excess being null and void. (Montiero
Conventional redemption vs. Salgado, 27 Phil 631)
1. Concept c. Where the period agreed upon is indefinite, such as when the repurchase may be made
Conventional redemption takes place when the vendor reserved the right to repurchase "at any time", the repurchase may be exercised within ten (10) years from the date of the
the thing sold, with the obligation: contract. (Soriano vs. Abalos, et. al., G.R. No. L-1525, July 27, 1949)
a. to return to the vendee: d. In case there was a civil action between the parties, the vendor may still exercise the
1) the price of sale, right to repurchase within thirty (30) days from the time final judgment was rendered in a
2) the expenses of the contract, and any other legitimate payments made by reason of civil action on the basis that the contract was a true sale with a right to repurchase. (Art.
the sale, and 1606)
3) the necessary and useful expenses made on the thing sold; and
b. to comply with other stipulations which may have been agreed upon. (Arts. 1601, 1616) 3. Effect of failure to exercise right of repurchase
Ownership is consolidated in the vendee. However, in case of real property, a judicial
Liability with respect to fruits existing at the time of redemption order, after the vendor has been duly heard, is required for the purpose of recording the
a. If there were visible or growing fruits at the time of sale consolidation in the Registry of Property. (Art. 1607)
There will be no reimbursement for or prorating of the fruits at the time of redemption if no
indemnity was paid by the purchaser at the time the sale was executed. 4. Against whom right to repurchase available
b. If there were no fruits at the time of sale a. The vendee a retro (original vendee).
The fruits at the time of redemption will be prorated between the redemptioner and If the original vendee dies leaving several heirs, the vendor can exercise his right to
the vendee, giving the vendee the part corresponding to the time he possessed the land repurchase against each of them for his own share, whether the thing be undivided, or it
in the last year, counted from the anniversary of the date of sale. (Art. 1617) has been partitioned among them.
However, if the inheritance has been divided, and the thing sold has been awarded
Condition of the property at the time of redemption to one of the heirs, the action for redemption may be instituted against for the whole.
a. The vendor shall receive the property free from all charges constituted by the vendee. (Art. 1615)
b. He shall respect the leases which the vendee may have executed in good faith, and in b. Every possessor whose right is derived from the vendee a retro (original vendee), even if
accordance with the custom of the place where the land is situated. (Art. 1618) no mention is made in the second contract of the right to repurchase, provided the right
Right of vendee to subrogation has been recorded in the Register of Deeds, or even, if the right is not registered, but the
In sale with right to repurchase, the vendee is subrogated to the vendor's rights and possessor has knowledge of the existence of the right. (Art. 1608, Mortgage Law, Land
actions. (Art. 1609) Registration Law)
Examples:
2. Period of redemption S sold his lot to B with a right to repurchase the said I within 5 years.
a. When no period is fixed a. S may repurchase the lot from B, the original vendee, within the 5 year period.
If the right of redemption was agreed upon but there was no stipulation as to the b. Assume that B dies before S could repurchase the lot. B is survived by his sons X, Y
period within which the right shall be exercised, the period of redemption shall be four (4) and Z. S may exercise his right to repurchase against X, Y and Z only to the extent
years from the date of the contract. of 1/3 undivided interest of each on the lot.
b. When a period is fixed by the parties If the lot has been divided, S may exercise his ' right to repurchase against X, Y
 and Z only to the extent of the part that had been given to each one of them in the redeem the whole property, and if they fail to do so, X cannot be compelled to consent to
partition. a partial redemption.
If X inherited the whole lot (Y and Z having been given other properties from the The same rule applies if S was the original seller who sold the lot with right to
estate), then S may exercise his right to repurchase against X alone. repurchase and he dies with A, B and C as heirs.
c. Assume that B sold the property to C. S may exercise his right to repurchase against d. A, B and C are co-owners of a lot. A sells his undivided interest of 1/3 on the lot with right
C provided the sale with right to repurchase was registered or C was aware that the to repurchase to X. Sometime later, B also sells his 1/3 undivided interest to X with right
sale was with a right to repurchase when he purchased the property from B. to repurchase. Thereafter, C also sells his 1/3 undivided interest to X with right to
5. Who may avail themselves of the right to repurchase repurchase. A, B and C may each exercise his right to repurchase only with respect to
a. The vendor a retro his share and no one of them can be compelled by X to redeem the whole property.
1) A co-owner of an undivided immovable which is essentially indivisible who sells his
share with a right to repurchase to a third person who subsequently acquires the Legal redemption
whole thereof, may be compelled by the latter to redeem the whole property, if the 1. Concept
former wishes to make use of the right of redemption. (Arts. 498 and 1611) Legal redemption is the right to be subrogated upon the same terms and conditions
2) If several persons, jointly and in the same contract, should sell an undivided stipulated in the contract, in the place of one who acquires a thing by purchase, or dation in
immovable with a right of repurchase, none of them may exercise this right for more payment, or by any other transaction whereby the ownership is transmitted by onerous title.
than his respective share. (Art. 1612) (Art. 1619)
If the person who sold an immovable alone has left several heirs, each heir may 2. Instances of legal redemption
redeem only the part which he may have acquired. (Art. 1612) a. Legal redemption by co-owner
The vendee may demand that the co-owners or co-heirs come to an agreement A co-owner of a thing may exercise the right of redemption in case the shares of all
upon the repurchase of the whole thing, and if they fail to do so, the vendee cannot the other co-owners or of any of them, are sold to a third person. (Such is the rule in
be compelled to consent to a partial redemption. (Art. 1613) order to reduce the number of co-owners since co-ownership is not favored upon).
3) Each one of the co-owners of an undivided immovable who may have sold his share If two or more co-owners desire to exercise the right of redemption, they may only
separately, may independently exercise the right of repurchase as regards his own do so in proportion to the share they may respectively have in the thing owned in
share and the vendee cannot compel him to redeem the whole property. (Art. 1614) common. (Art. 1620)
b. Creditors of the vendor. Example: A, B and C are co-owners of a lot. A sells his 1/3 undivided interest in the
However, they cannot make use of the right of redemption against the vendee, until property to X. B or C may redeem the share of A from X. If both of them desire the
after they have exhausted the property of the vendor. (Art. 1610) redeem the share of A, each can redeem only 1/6 of the property; i.e., they halve the
Examples: share of A.
a. S sold his lot to B reserving his right to repurchase the same within 5 years. S himself b. Legal redemption by adjoining owner of rural land
may repurchase the lot from B. If a piece of rural land not exceeding one hectare is alienated, the adjoining owner
b. A, B and C are co-owners of a lot. The lot is situated on a hillside and of a shape that shall have the right of legal redemption unless the grantee does not own any rural land.
subdividing it among the owners would render the lot unproductive, hence, essentially
indivisible. A sells his 1/3 undivided interest to X with right to repurchase the same in 5 Rule if two or more adjoining owners desire to exercise the right of redemption:
years. Shortly thereafter, B and C also sell their respective undivided interests to X 1) The owner of the adjoining land of smaller area shall be preferred.
without a right to repurchase. When A exercises his right to repurchase, X may compel 2) if both lands have the same area, the one who first requested the redemption, shall
him to redeem not only his share but also those of B and C, i.e., the whole property. be preferred. (Art. 1621)
c. A, B and C are co-owners of a lot. They sell the lot to X with right to repurchase in the When right not available
same contract. In this case, each one may repurchase only to the extent of his 1/3 If adjacent lands are separated by brooks, drains, ravines, roads and other apparent
undivided interest. X, however, may demand that A, B and C come to an agreement to servitudes for the benefit of other estates. (Art. 1621)
 c. Legal redemption by adjoining owner of urban land e. When the vendor binds himself to pay the taxes on the thing sold.
If a small piece of urban land which was bought for speculation has been resold, the f. When the real intention of the parties is that the transaction shall secure the payment of
owner of the adjoining land has a right of redemption at a reasonable price. a debt or the performance of any other obligation. (Art. 1602)
In any of the above cases, any money, fruits, or other benefit to be received by the vendee as
Right of pre-emption by adjoining owner rent or otherwise shall be considered as interest which shall be subject to the usury laws.
If such small piece of urban land is about to be resold, the adjoining owner shall (Art. 1602)
have the right of pre-emption at a reasonable price, i.e., the adjoining owner shall -be 3. Rule in case of doubt
given the right to buy the property before it is offered to others. A contract purporting to be a sale with right to repurchase shall be construed as an
equitable mortgage. (Art. 1603)
Rule if two or more adjoining co-owners wish to exercise the right of redemption or pre- 4. Right to reformation
emption The apparent vendor may ask for the reformation of the instrument in the contracts
Preference shall be given to the owner whose intended use of the land in question presumed to be an equitable mortgage. (Art. 1605)
appears best justified. (Art. 1622)
Note: The right of redemption of co-owners excludes that of adjoining owners. (Art. 1623) ASSIGNMENT OF CREDIT
3. Period of pre-emption or redemption AND OTHER INCORPOREAL RIGHTS
a. Pre-emption – Within 30 days from written notice by prospective vendor. Assignment of credits, concept
b. Redemption - Within 30 days from written notice by vendor. Assignment of credits is a contract whereby a person (assignor) transfers his credit, right or
action against a third person to another person (assignee) for a consideration which is certain in
4. Recording of sale in the Registry of Property money or its equivalent.
The deed of sale shall not be recorded in the Registry of Property, unless accompanied An assignment of credit not only entitles the assignee to the credit itself, but also gives him
by an affidavit of the vendor thai he has given written notice of the sale to all possible the power to enforce it as against the debtor of the assignor. (Sps. Serfino vs. Far East Bank and
redemptioners. (Art. 1623) Trust Co., Inc., G.R. No. 171845, October 10, 2012)
Example: D owes C P5.000.00. C assigns his credit right toT for a consideration with notice
Equitable mortgage to D. C is the assignor. T is the assignee. D will have to make his payment to T and no longer to C.
1. Concept
An equitable mortgage is one which, although lacking in some formality, or form or Nature of assignment of credits and other incorporeal rights
words, or other requisites demanded by statute, nevertheless reveals the intention of the It partakes of the nature of a contract of sale; hence, it is perfected at the moment there is a
parties to charge real property as security for a debt, and contains nothing impossible or meeting of minds upon the credit or right which is the object of the contract and upon the price.
contrary to law. Its essential elements are: (See Arts. 1475,1624.)
a. The parties enter into what appears to be a contract of sale. Assignment of credit may also constitute exchange, donation or dation in payment (dacion en
b. Their intention is to secure an existing debt by way of mortgage. (Vda. De Delfin vs. pago). In case of dation in payment, the assignment of credit operates as a mode of extinguishing
Dellota, G. R. No. 143697, January 28, 2008.) the obligation; the delivery and transmission of ownership of a thing (in this case, the credit due
2. Contracts presumed to be an equitable mortgage from a third person) by the debtor to the creditor is accepted as the equivalent of the performance
A contract of sale with a right to repurchase and other contracts purporting to be an of the obligation. (Sps. Serfino vs. Far East Bank and Trust Co., supra)
absolute sale, shall be presumed to be an equitable mortgage, in any of the following cases:
a. When the price of a sale with a right to repurchase is unusually inadequate. Form of assignment of credits
b. When the vendor remains in possession as lessee or otherwise. 1, Between the parties
c. When the period for the exercise of the right to repurchase is extended. It may be in any form. It may be oral or written, or partly oral and partly written.
d. When the purchaser retains for himself a part of the purchase price. 2. For binding effect against third persons
 a. If personal property is involved - public instrument. 2. As regards the debtor's solvency, he does not warrant the same, except:
b. If real property is involved - public instrument recorded in the Registry of Property (Art. a. When there is a stipulation.
1625) b. When the insolvency already existed prior to the sale and of public knowledge.
Example:
Effect of payment by debtor to creditor D obtained a loan of P50,000.00 from C. Thereafter, C assigned his credit right to X.
1. Before knowledge of the assignment On due date, X demanded payment from D but D could not pay because he is insolvent.
The debtor is released from his obligation if he pays his creditor without his knowledge In this case, X cannot not go after C except in the said two cases.
that his debt has been assigned. (Art. 1626)
2. After knowledge of the assignment Liability of the assignor when warranties are violated
The debtor is not released from his obligation to pay the assignee. 1. If he was in good faith - He shall be liable for the following:
Note: An assignment does not require the consent of the debtor. However, actual notice must be a. Price received.
given to him of the assignment so that he could make his payment to the assignee. This notice is a b. Expenses of the contract.
form of protection in favor of the assignee. c. Other legitimate payments by reason of the assignment. (Arts. 1628, 1616)
2. If he was in bad faith - He shall be liable for the following:
Accessory rights included in the assignment (Art. 1627) a. Price received.
1. Guaranty b. Expenses of the contract.
2. Mortgage c. Other legitimate expenses by reason of the assignment.
3. Pledge d. Damages (Arts. 1628,1616)
4. Preference
This inclusion of accessory rights in the assignment is based on the rule that the accessory Duration of assignor's warranty of the debtor's solvency if assignor was in good faith
follows the principal. (See Art. 1537.) However, the parties may stipulate that the accessory rights 1. The period stipulated.
shall be excluded from the assignment. 2. If no period was stipulated -
Example: D obtained a loan from C amounting to P200,000.00. The loan is secured by a a. If the assignment was made before maturity - 1 year from maturity.
mortgage of D's lot. If C assigns his credit right to X, the mortgage right is also considered b. If the assignment was made after maturity - 1 year from the time of the assignment:
assigned unless C and X agree otherwise. (Therefore, the one-year period shall be counted from the date of maturity or the date of the
assignment, whichever comes later.)
Warranties of assignor (Art. 1628)
1. The legality and existence of the credit at the time of sale. Sale of present inheritance
However, there is no such warranty if the credit was sold as doubtful. 1. Warranty of person selling an existing or present inheritance He shall only be answerable for
Example: D owes C P10,000.00. The debt is evidenced by a promissory note. his character as heir but not of the things composing the inheritance, unless such things were
Thereafter, C assigns his credit right to X. If X cannot collect later from D because the note enumerated. (Art. 1630) This is known as the warranty of heirship.
was issued for an illegal gambling debt, C will be liable to X because he warranted that the Example: A, B and C are heirs of X. Pending the partition of the estate of X, A sold his
credit was legal when he assigned it to X share in the inheritance to Y for P200,000.00. After partition, A received only P180,000.00. In
If X cannot collect from D because it turned out that the debt had prescribed, C shall also this case, A will not be liable to Y for the difference because what he warranted was that
be liable to X because he warranted that the credit existed. he'was an heir of X.
Assume that the credit right is in litigation. Here, the credit is doubtful because whether D If A sold his inheritance to Y and listed down that he would be receiving a car, a house
is liable or not to C depends upon the outcome of the case. Accordingly, if X later on cannot and lot, furniture and fixtures, but later on he did not receive the car in the partition, then he
collect from D because the court adjudges him not liable to C, X cannot hold C liable. shall be liable to Y for violation of his warranty.
If A received nothing from X because he was not an heir in the first place, then A will
 likewise be liable to Y for violation of his warranty. amount of P40.000.00 plus judicial costs incurred by X and the interest on the P40.000.00
2. Liabilities of vendor of inheritance sold from the day that the same was paid by X to C.
If the vendor has profited from the fruits or received anything from the inheritance sold 5. Exceptions to legal redemption by debtor (Art. 1635)
(except as to the price thereof), he shall be obligated to pay them to the vendee unless the The debtor's right of legal redemption shall not be available when the assignment of the
contrary has been stipulated. (Art. 1632) right in litigation is made:
3. Liabilities of vendee of inheritance a. To a co-heir or co-owner of the right assigned.
The vendee must reimburse the vendor for the debts and charges on the estate paid by The prohibition is intended to do away with coownership. If redemption by the debtor
the vendor, unless there is a stipulation to the contrary. (Art. 1633) is allowed, the number of co-owners will again increase.
Example: D owes X and Y. X and Y sue D for collection. D files his answer to the
Vendor's warranty for lump sum sale of the whole of certain rights, rents or products (Art. 1631) complaint. While the case is pending, X sells his share of the credit to Y. D cannot
The vendor warrants the legitimacy of the whole in general, and shall not be obliged to redeem the share of X from Y.
warrant each of the various parts of which it may be composed, except when he is evicted: b. To a creditor in payment of his credit.
1. From the whole of the thing; Redemption is not allowed because the assignment is meant as a payment to the
2. From a part of the greater value. assignee. There is therefore no speculation on the part of the assignee whose only
Example: S sold his receivables from more than 50 customers to B for P1,000,000.00. B desire is to be paid.
was deprived of the amount of P20,000.00 representing an alleged receivable from D. Here, Example: D owes X P100,000.00. For failure to pay, X sues D. D files his answer.
S shall not be liable because the warranty of S is on the legitimacy of the whole of the While the case is pending, X assigns his credit right to Y whom he owes P80.000.00. D
receivables. If B, however, is deprived of the whole amount of the receivables or more than cannot redeem against Y.
50% thereof, S shall be liable to B. c. To the possessor of a tenement or piece of land which is subject to the right in litigation
assigned.
Sale of credit or other incorporeal right in litigation (Art. 1634) Redemption is not likewise allowed since the intention of the assignee in taking the
1. When right considered in litigation credit is to preserve the property and not to speculate.
The credit or other incorporeal right shall be considered in litigation from the time the Example: D obtained a loan from C. To secure the debt, D mortgaged his lot. Later,
complaint concerning the same is answered. D sold his lot to X. When D could not pay, C sued D. While the case was pending, C
2. Right of legal redemption of debtor when credit or other incorporeal right in litigation is sold assigned his credit right to X. D has no right of legal redemption against X.
The debtor shall have the right to extinguish the same by reimbursing the assignee the
following: SALES - DIAGNOSTIC EXERCISES
a. Price paid by the assignee for the right purchased. TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.
b. The judicial costs incurred by him. 1. A contract whereby one of the contracting parties obligates himself to transfer the ownership
c. Interest on the price from the day on which the same was paid. of and to deliver a determinate thing and the other to pay therefor a price certain in money or
3. Period within which debtor may be exercise the right its equivalent is a contract of:
Within 30 days from the date the assignee demands payment from him. a. barter. c. dacion en pago.
4. Purpose of the legal redemption b. sale. d. mortgage.
a. To enable the debtor to pay less than the value of the credit.
b. To prevent speculation on the part of the assignee. 2. The following are the essential elements of a contract of sale, except:
Example: D borrowed P50,000.00 from C. When D did not pay the debt upon demand by a. consent of the contracting parties.
C, C filed a complaint against him to collect the debt. D answered the complaint. The credit b. subject matter which should be determinate.
right is considered in litigation. Suppose C sold the credit right to X for P40,000.00. D may c. price which is certain in money or its equivalent.
exercise his right of legal redemption (within 30 days from demand by X) by paying X the d. warranty against eviction and against hidden defects.
 I. The sale of a future thing.
3. The following are the characteristics of a contract of sale, except: II. The sale of hope or expectancy.
a. principal, which means that a contract of sale can stand by itself. III. The sale of a present thing.
b. real, which requires the delivery of the object of the contract of sale for its perfection. IV. The thing sold must come into existence,
c. onerous, where rights are acquired in exchange of a valuable consideration. Based on the above information, which of the following is correct?
d. bilateral, which means that both parties are bound reciprocally to each other. a. Items I and II pertain to emptio rei speratae.
b. Items II and III pertain to emptio spei.
4. One of the following characteristics of dacion en pago is also a characteristic of a contract of c. Items II and III pertain to emptio rei speratae.
sale. Which is it? d. Items III and IV pertain to emptio spei
a. There is a pre-existing credit.
b. Obligations are extinguished. 9. Santiago sells to Bermejo 500 sacks of rice at P1.000.00 per sack from the stock then stored
c. There is less freedom in fixing the price. in the warehouse of Santiago. Unknown to the parties, the warehouse contains only 480
d. Ownership of the object is transferred to the other party. sacks of rice. What is the status of the contract between Santiago and Bermejo?
a. The sale is void since the quantity available is less than the quantity sold.
5. The following are characteristics of a contract of sale except for one which refers to payment b. The sale is valid up to 480 sacks of rice but void as to the deficiency of 20 sacks of rice.
by cession. Which characteristic refers to payment by cession? c. The entire sale is valid up to 500 sacks of rice. Bermejo becomes the owner of the whole
a. There is no pre-existing credit. stock available and Santiago must deliver the deficiency of 20 sacks of rice.
b. The cause or consideration is the price. d. The sale is valid up to 480 sacks of rice but rescissible as to the deficiency of 20 sacks of
c. There is more freedom in fixing the price. rice by reason of damage suffered by Bermejo.
d. Assignee of the property acquires the right to sell the thing but not the ownership thereof.
10. Somera sells to Buenviaje at P50 per gallon 300 gallons of gasoline stored in his truck's tank
6. The following items pertain to either a contract of sale or a contract to sell. which, unknown to the parties, contains 500 gallons gasoline. What is the status of the
I. Ownership of the thing sold is transferred upon delivery. contract of sale between Somera and Bermejo?
II. Ownership of the thing is transferred to the buyer at some future time. a. The sale is void because the quantity available is more than the quantity sold.
III. The risk of loss in on the buyer. b. The sale is valid up to 500 gallons of gasoline. Buenviaje must pay for the additional 200
IV. The risk of loss is on the seller. gallons of gasoline.
Based on the above data, which of the following is correct? c. The sale is valid up to 300 gallons of gasoline. Buenviaje becomes the owner of 3/5 of
a. Items I and III pertain to a contract to sell. the whole stock, while Somera becomes the owner of 2/5 thereof.
b. Items II and III pertain to a contract to sell. d. The sale is rescissible because Somera will suffer lesion of more than % of the value of
c. Items II and IV pertain to a contract of sale. the whole stock.
d. Items I and III pertain to a contract of sale.
11. San Manuel Corporation, which maintains a professional basketball team, entered into a
7. One of the following is not a requisite of the object of a contract of sale. Which is it? contract with Armstrong Rubber Company for the latter to provide a pair of rubber shoes to
a. It must be within the commerce of men. the former's two imported basketball players, Charles Jordan and Michael Barkley. Armstrong
b. It must be licit. Rubber Company was instructed to make a pair for either or both players in case the
c. It must be determinate or determinable, company did not manufacture shoes of their size. No pair was, however, immediately
d. Vendor must have the right to transfer the ownership of the thing at the time of sale. available for both the players. Charles Jordan, who is 6'5' tall and wears size 12 rubber
shoes, was given a pair the following day from the 300 pairs that Armstrong was in the
8. The following items pertain to either emptio rei speratae or emptio spei. process of manufacturing for its customers at the time the orders were received. Michael
 Barkley, who is 7' tall and wears size 18 shoes, was provided three days later, with a pair that both parties to the contract.
was specially made for him since Armstrong does not make shoes of his size. What kind of a. Option money c. Reservation money
contracts were entered into for the shoes provided to the two basketball players? b. Earnest money d. Down payment
a. The contract for the pair of shoes provided to Charles Jordan is a contract for a piece of
work, while that for Michael Barkley is a contract of sale. 16. S orally offered to sell a certain diamond ring to B for P50,000.00. B accepted the offer and to
b. The contract for the pair of shoes provided to Charles Jordan is a contract of sale, while prove that he was in earnest, he gave S P1,000.00. The parties agreed that the delivery of
that for Michael Barkley is a contract for a piece of work. the ring and the payment of the price would be made 30 days later. On due date:
c. Both contracts are contracts of sale. a. S may collect from B P50.000.00.
d. Both contracts are contracts for a piece of work. b. S may collect from B P49.000.00.
c. S cannot enforce payment because the contract was not reduced to writing.
12. S and B entered into a contract whereby S transferred to B a specific car for the price of d. S cannot enforce payment because' there was no contract of sale yet.
P200.000.00, while B gave to S P90.000.00 in cash and a diamond ring worth P110.000.00.
The heading of the written contract signed by the parties reads "Contract of Sale". 17. On June 1, 2014, S sold to B 50 units of machines which were scheduled to arrive from
a. The contract is void because the intention of the parties is void since the value of the Japan the following day on board the vessel "MT Nippon Maru" The sale was evidenced
diamond ring is more than the monetary consideration given. by an invoice identifying each machine by serial number. Each machine was priced at
b. The contract is a valid contract of sale as intended by the parties regardless of whether P10,000.00. Unknown to the parties, 30 units were damaged beyond repair by seawater on
the monetary consideration is more or less than the value of the . property consideration. May 31, 2014. Based on the foregoing, which of the following statements is incorrect?
c. The contract is a valid contract of barter since the value of the property given is more a. B may rescind the whole contract.
than the monetary consideration. The intention of the parties is immaterial. b. B may demand delivery of the remaining 20 units and pay the price therefor.
d. The contract is partly a contract of barter and partly a contract of sale. c. S may require payment of the whole shipment from B since S was not aware of the
damage caused on the machines at the time of sale.
13. The price in a contract of sale is certain, except: d. S has no option to rescind the whole contract or require payment of the remaining 20
a. when the parties have fixed or agreed upon a definite amount. units.
b. if the price is certain with reference to another thing certain.
c. if the fixing of the price is left to the discretion of one of the contracting parties and the 18. It refers to the delivery of the thing sold from hand to hand in case of movables, or the taking
price fixed is not accepted by the other party. of possession with respect to immovables, in the presence and with the consent of the
d. if the price fixed is that which the thing sold would have on a definite day or in a vendor.
particular exchange or market. a. Actual or real delivery.
14. On January 1, S orally sold to B a specific ring for P450.00. The parties agreed that S shall b. Traditio constitutum possessorium.
deliver the ring to B on January 5, while B shall pay the price on January 7. c. Traditio longa manu.
a. The contract is perfected on January 5, when the ring is delivered by S to B. d. Traditio brevi manu.
b. The contract is perfected on January 1, when the parties had a meeting of minds on the
object and the price. 19. On May 1, 2014, S sold to B through a private instrument 20 sacks of corn stored in the only
c. The contract is perfected on January 7, when the price is paid, since both parties would warehouse of S. On May 10, 2014, S delivered the keys to the warehouse to B. The delivery
by then have performed their obligations in the contract. made by S to B is known as:
d. There is no perfected contract because the sale was made orally. a. constructive delivery by legal formalities.
b. symbolic delivery by traditio clavium.
15. A sum of money paid, or a thing delivered upon the making of a contract for the sale of c. traditio longa manu.
goods, to bind the bargain, the delivery and acceptance of which makes the final assent of d. traditio brevi manu.
20. Delivery of incorporeal property may be made through any of the following means, except: 24. In a contract of sale of personal property the price of which is payable in installments, the
a. execution of a public document. vendor may exercise any of the following remedies, except to:
b. placing the titles of ownership in the possession of the vendee. a. exact fulfillment of the obligation, should the vendee fail to pay any number of
c. use by the vendee of his rights, with the debtor's consent. installments.
d. execution of private instrument. b. cancel the sale, should the vendee's failure to pay cover two or more installments.
c. foreclose the chattel mortgage on the property if the vendee's failure to pay cover two or
21. One of the following statements on the transfer of ownership of the thing in "sale on trial" is more installments and recover any deficiency after the foreclosure sale if they have
incorrect. Which is it? stipulated it.
a. Ownership of the thing is transferred to the vendee when he signifies his approval or d. foreclose the chattel mortgage on the property if the vendee's failure to pay cover two or
acceptance to the vendor. more installments but he may no longer recover any deficiency after the foreclosure sale.
b. Ownership of the thing is transferred to the vendee when he does an act adopting the
transaction. 25. Baldomero bought a residential house and lot from Sta. Ana Realty for P250,000.00 giving a
c. Ownership of the thing is transferred to the vendee if the time fixed for the return of the down payment of P10,000.00 and promising to pay the balance of P240,000.00 in 20 years in
thing has expired and the vendee retains the thing without giving notice of rejection or monthly installments of P1,000.00. After paying 72 installments, Baldomero defaulted in the
acceptance to the vendor, payment of the 73rd installment and subsequent ones. Despite the grace period he had
d. Ownership of the thing is transferred to the vendee upon delivery. earned, he was not able to make any further payments. Accordingly, Sta. Ana Realty
cancelled the sale. How much cash surrender value is Baldomero entitled to receive?
22. On March 1, 2014, S sold and delivered to B a television set for P10,000.00 "on sale or a. P45,100.00. c. P36,000.00.
return" giving B up to March 16, 2014 within which to return the television set or pay the b. P39,600.00. d. P41,000.00.
price. On March 10, 2014, the television set was burned through no fault of B. Based on the
foregoing, which of the following statements is incorrect? 26. S stole a ring belonging to O. Subsequently, the ring was offered for sale at a public auction
a. B must pay the price of the television set. where X, who was not aware that the ring was stolen, bought it. A few weeks later, O saw the
b. S must bear the loss since the time for the return of the television set had not yet ring and recognized it as his. Based on the foregoing information, which of the following
expired. statements is correct?
c. The ownership of the television set was transferred to B upon delivery to him. a. O may recover the ring from X without reimbursing X since O was unlawfully deprived of
d. B must bear the loss of the television set. the ring.
b. O may recover the ring from X but he has to reimburse X since X acquired title to the
23. In one of the following cases, delivery of the goods to a carrier for the purpose of ring.
transmission to the buyer transfers ownership to the latter. Which one is it? c. O may no longer recover the ring even if he is willing to reimburse X.
a. . When by the terms of the bill of lading, the goods are to be delivered to the seller or his d. X did not acquire title to the ring since the auctioneer had no valid title thereto.
agent.
b. When by the terms of the bill of lading, the goods are to be delivered to the order of the 27. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the
buyer or his agent but the seller retains the bill of lading. time of the sale, the buyer acquires title to the goods. Such acquisition of title has the
c. When the seller draws a bill of exchange on the buyer for the price of the goods and following requisites, except the:
transmits such bill of exchange and the bill of lading to the buyer to secure acceptance or a. buyer must have bought the goods in good faith.
payment of the bill of exchange and the buyer dishonors the bill of exchange. b. buyer must have bought them for value.
d. When the owner does not reserve the right of possession or ownership of the thing sold c. buyer bought them without notice of the seller's defect of title.
upon delivery to the carrier. d. party from whom the seller obtained the goods must ratify the sale.
 33. Barrameda bought a piece of land from Sarmiento for a lump sum of P120,000.00. Aside
28. An unpaid seller has the following rights, except: from mentioning the boundaries in the contract which is required in the sale of real estate, the
a. a lien on the goods or the right to retain them for the price while he is in possession of contract also states that the piece of land consists of 1,000 square meters. Before delivery,
them. Sarmiento discovered that the piece of land actually contains 1,200 square meters.
b. in case of insolvency of the buyer, a right of stopping the goods in transitu after he has a. Sarmiento must deliver all the 1,200 square meters; Barrameda must pay P120,000.00
parted with the possession of them. plus an additional amount for the excess of 200 square meters.
c. a right of repurchase. b. Sarmiento is required to deliver only 1,000 square meters; Barrameda must pay the
d. a right to rescind. contract price of P120.000.00.
c. Sarmiento must deliver all the 1,200 square meters; Barrameda has to pay only
29. An unpaid seller loses his lien on the goods in the following cases, except: P120,000.00.
a. when he delivers the goods to a carrier or other bailee for the purpose of transmission to d. Neither party is required to perform the obligation because of mistake.
the buyer without reserving the right of ownership in the goods.
b. when the buyer or his agent lawfully obtains possession of the goods. 34. Sison sold a registered piece of land to Bautista on May 1, 2014 in a public instrument. On
c. when the seller waives his possessory lien. May 3, 2014, Sison sold in a private instrument the same piece of land to Cruz, who took
d. when he has obtained judgment for the price of the goods. physical possession of the land. Neither buyer was aware of the sale made to the other.
a. The land belongs to Bautista.
30. Three of the following are the requisites in order that an unpaid seller may exercise his right b. The land belongs to Cruz.
of stoppage of transitu. Which one is not? c. The land still belongs to Sison, because both sales are void.
a. The seller is unpaid. d. The land should be divided equally between Bautista and Cruz to give effect to both
b. The seller has not parted with the possession of the goods. sales.
c. The goods are in transit.
d. The buyer is or becomes insolvent. 35. Refer No. 34. Assume that on May 5, 2014, Sison sold the land in a public instrument to
Domingo who was not aware of the two previous sales. Domingo then registered the sale
31. Goods are still in transit: with the Register of Deeds.
a. if the buyer or his agent obtains delivery of the goods before their arrival at the appointed a. The land belongs to Bautista.
destination. b. The land belongs to Cruz.
b. when the carrier acknowledges possession of the goods as bailee for the buyer after the c. The land belongs to Domingo.
arrival of the goods at the place of destination. d. The land will be equally divided among the three buyers.
c. if the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent. 36. On June 1, 2014, Sanchez sold to Borlaza in a private instrument a certain computer. Two
d. if the goods are rejected by the buyer, and the carrier or other bailee continues in days later, Sanchez orally sold the same computer to Contreras who immediately took
possession of them, even if the seller has refused to received them back. possession of the computer. Neither party was aware of the sale made to the other.
a. The computer belongs to Borlaza.
32. An unpaid seller's right to resell the goods is available in the following cases, except: b. The computer belongs to Contreras.
a. if the goods are of a perishable nature. c. The computer will be co-owned by Borlaza and Contreras to give effect to both sales.
b. when the seller reserved the right to resell the goods. d. Both, sales are void. Accordingly, Sison will still be the owner.
c. when the buyer has defaulted in the payment of the price for an unreasonable time.
d. when the seller has lost his lien on the goods. 37. This refers to the implied warranty on the part of the seller that he has the right to sell the
thing at the time when ownership is to pass, and that the buyer from that time shall have and
 enjoy legal and peaceful possession of the thing.
a. Warranty against hidden defects. c. Warranty of ownership. 42. The vendor shall be liable for the death of the animal sold when the following requisites are
b. Warranty against eviction. d. Warranty of possession. present, except:
a. the disease' existed at the time of sale.
38. Three of the following are the requisites in order that the vendee may enforce the vendor's b. the disease is the cause of the death of the animal.
liability in case of eviction. Which one is not? c. the disease must be redhibitory.
a. There must be a final judgment depriving the vendee of a part or the whole of the thing d. the animal dies within 3 days from the time of purchase.
sold.
b. The vendee must have appealed from such judgment rendered against him. 43. The justified refusal of the buyer to accept the goods produces the following effects, except:
c. The deprivation of the vendee is based on a right prior to the sale or an act imputable to a. buyer has no duty to return the goods, unless otherwise stipulated.
the vendor. b. title to the goods does not pass on to him.
d. The vendor is notified of the suit at the instance of the vendee. c. buyer shall not be obliged to pay the price.
d. buyer is obliged to constitute himself as depositary until he returns the goods.
39. This refers to an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner. 44. In three of the following cases, the buyer is not entitled to suspend the payment of the price.
a. Easement or servitude c. Pledge Which one will give him the right to suspend payment?
b. Real estate mortgage d. Chattel mortgage a. Disturbance in the possession or ownership of the thing purchased.
b. The seller gives him security for the return of the price.
40. Three of the following are the requisites in order that the buyer may enforce the seller's c. It has been stipulated that the buyer shall pay the price notwithstanding any disturbance.
liability for hidden defects. Which one is not? d. The disturbance is a mere act of trespass.
a. The defects of the thing sold must not be patent or visible.
b. The defects render the thing unfit for the use for which it is intended, or which diminish its 45. A contract of sale with a right to repurchase and other contracts including a contract
fitness for such use to such an extent that had the buyer been aware thereof, he would purporting to be an absolute sale shall be presumed to be an equitable mortgage in the
not have bought it. following cases, except when the:
c. The defects must be existing at the time of sale. a. price of sale with right to repurchase to repurchase is unusually inadequate.
d. The defects must be capable of determination by an expert. b. vendor remains in possession of the thing sold.
c. period to repurchase the property is extended.
41. Alessandra purchased from Rose Tan's Department Store, two pieces of imported identical d. vendee binds himself to pay the taxes due.
bathrobe, one of which was embroidered with "HIS" and the other with "HERS", which she
planned to give to his friends Jules and Assunta as a wedding present. She inspected the 46. An owner Of a rural land has the right of legal redemption of an adjoining rural land sold if the
items very carefully with the assistance of the store clerk before paying for them. While she following requisites are present, except when the:
was wrapping them shortly after she arrived home, she noticed that the hem of the 'HERS" a. adjoining rural land is not separated by any apparent servitudes for the benefit of other
bathrobe had disintegrated because it was loosely sewn, which damage was not apparent estates..
because of the many colors of the apparel. b. land sold does not exceed one hectare.
a. Alessandra can rescind the sale of both pieces of bathrobe. c. grantee owns another rural land.
b. Alessandra can rescind only the sale of the bathrobe marked "HERS" d. grantee owns an urban land.
c. Alessandra cannot rescind because she should have inspected the item well when she
bought it. 47. This refers to the right of an adjoining owner of an urban land to be given preference to the
d. Alessandra must pay for both pieces of bathrobe. purchase of a small piece of urban land which is held for speculation before it is offered for
 sale to others. effect on the validity of the negotiation.
a. Right of subrogation. c. Right of pre-emption. c. H may not obtain delivery of the goods from C because H acquired whatever title T had
b. Right of redemption. d. Right of repurchase. over the document.
d. H acquired title to the document but not to the goods.
48. A, B, and C, are co-owners of an undivided parcel of land. On May 1, A sold his share to X;
on June 1, B sold his share also to X; and on July 1, C sold his share also to X. Each sale 52. D obtained from C a loan amounting to P50,000.00, the same being secured by a mortgage
was with a right to repurchase. on D's lot. Thereafter, C assigned his credit right to T with notice to D. Based on the foregoing
a. X may compel A, B and C to come to an agreement to repurchase the whole land. facts, which of the following statements is incorrect?
b. Each co-owner may exercise his right of redemption on the whole property including the a. T cannot collect from D if D does not give his consent to the assignment.
share of the other two co-owners. b. T can collect from D. D's consent to the assignment is not required.
c. Each co-owner may exercise his right of redemption only with respect to his share. c. T can collect from D and if D cannot pay, T can foreclose the mortgage on the lot.
d. Any two of the three co-owners may redeem the property proportionately. d. The notice to D of the assignment is sufficient. D must make his payment to T and no
longer to C.
49. R, S and T are co-owners of an undivided parcel of land. R sold his 1/3 interest to T in a deed
of absolute sale. Which is correct? 53. A kind of mortgage which, although lacking some formality, form of words, or requisites
a. S may exercise the right of redemption on the interest sold by R to T. prescribed by law, shows the intention of the parties to charge real property as security for
b. S cannot exercise the right of redemption. debt and contains nothing impossible or contrary to law is known as:
c. The sale made by R to T is voidable. a. legal mortgage. c. conventional mortgage.
d. S may redeem only 1/2 of the interest sold by R to T. b. equitable mortgage. d. voluntary mortgage.

50. T steals the goods of O and deposits them in the warehouse of W. W issues to T a 54. If a movable property is sold separately to two or more different vendees, ownership shall
warehouse receipt which by its terms indicates that goods are to be delivered to the order of belong to the person:
T. T, thereafter, negotiates the receipt to H who purchases the document in good faith and for a. who in good faith first paid the purchase price in full.
value. b. who in good faith first recorded the sale in the Registry of Property.
a. H may obtain delivery of the goods from W because H was an innocent purchaser for c. who in good faith presents the oldest title.
value. d. who in good faith first took possession of the property.
b. H can obtain delivery of the goods from W because the issuance of the warehouse
receipt to T conferred a valid title to him over the goods. 55. A contract of sale is perfected upon:
c. H can obtain delivery of the goods from W because the acquisition by H of the a. compliance with the requirements of the law as to form.
warehouse receipt in good faith cured the defect in T's title. b. delivery of the object of the contract.
d. H cannot obtain delivery of the goods because he acquired whatever title T had over c. the meeting of the minds on the thing which is the object of the contract and upon the
such goods, which is the title of a thief. price.
d. demand.
51. O delivered certain goods to C, a common carrier, which issued to O a bill of lading stating
that the goods are to be delivered to bearer. Without O's fault, the bill of lading was stolen by 56. It is a contract by virtue of the terms of which the parties thereto promise and obligate
T who thereafter negotiated the document by mere delivery to H, a purchaser .for value and themselves to enter into another contract at a future time, upon the happening of certain
without notice of the defect in the title of T. events, or the fulfillment of certain conditions.
a. The negotiation of the bill of lading by T to H is not valid because of T's defective title. a. Contract of adhesion c. Contract of sale
b. The negotiation of the bill of lading by T to H is valid. T's defective title does not have any b. Contract of option d. Auto-contract
57. A contract of sale is not a: 63. The Recto Law applies to which of the following examples of sale?
a. principal.contract. c. consensual contract. a. Sale of a car on straight term.
b. nominate contract. d. real contract. b. Sale of house and lot on installment.
c. Sale of car on installment where the buyer constituted a mortgage on his truck.
58. The following may not be valid objects of a contract of sale, except: d. Sale of a piano on installments where the buyer constituted a chattel mortgage on the
a. objects outside the commerce of men. piano.
b. Illicit things.
c. future goods. 64. S sold to B a lot through a deed of absolute sale duly acknowledged before a notary public.
d. impossible service. Three days later, S sold the same lot to X, also through a deed of sale duly acknowledged
before a notary public. X had the sale registered with the Register of Deeds. Neither B nor X
59. This is a kind of constructive delivery where the vendor remains in possession of the property was aware of the sale made by S to the other and neither took physical possession of the lot.
sold, such as by virtue of a lease agreement with the vendee. ' Who is the present owner of the lot?
a. traditio longa manu. a. B, because he was the first purchaser in good faith.
b. traditio brevi manu. b. X. because he registered the sale in good vaith.
c. traditio constitutum possessorium. c. Neither B or X
d. delivery to common carrier. d. S, as long as he does not surrender physical possession of the lot.

60. When the goods are delivered to the buyer, the ownership thereof passes to the buyer in: 65. B purchased from S a laptop computer worth P100,000.00. The terms of sale provide for a
a. sale on approval. c. sale on trial. down payment of P20.000.00 with the balance payable in 8 equal monthly installments To
b. sale or return. d. contract to sell. secure the balance, S required B to execute a chattel mortgage on the laptop computer and a
real mortgage on B's lot. B complied with all the requirements but defaulted in the payment of
61. S promised to sell his car to B for P200.000.00 giving B 30 days to decide. B accepted the the third and fourth installments. These remedies are available to S except one. Which is it?
promise of S and informed S that he (B) would make known his decision before the lapse of a. Cancel the sale.
30 days. He also gave S P2.000.00 as consideration so that S would hold on to his promise. b. Exact fulfillment of the obligation.
The contract entered into between S and B and the consideration given by B to S are known c. Foreclose the real mortgage and thereafter recover any deficiency from B.
as: d. Foreclose the chattel mortgage and thereafter foreclose the real mortgage in case of
a. Option contract and option money, respectively. deficiency.
b. Contract of sale and earnest money, respectively.
c. Contract of sale and down payment, respectively. 66. S and B entered Thto a contract whereby S transferred to B a specific piano for the price of
d. Contract to sell and reservation money, respectively. P80.000.00, while B gave to S cash of P30.000.00 and a diamond ring worth P50.000.00.
What kind of contract was entered into between S and B?
62. Refer to No. 61. a. A contract of barter.
a. S may withdraw his offer to sell before the lapse of 30 days by informing B. b. A contract of sale.
b. S may not withdraw his offer before the lapse of 30 days. c. The contract is partly a contract of barter and partly a contract of sale.
c. S may withdraw the offer by returning the amount of P2,000.00 that was paid to him by d. The contract is an innominate contract because the intention of the parties cannot be
B. determined.
d. S may withdraw his offer even before the lapse of 30 days if a favorable price, i.e., more
than P200,000.00, is offered to him by another prospective buyer. 67. One of the distinctions between option money and earnest money is that earnest money is:
 a. the consideration paid for the purpose of holding one to his promise to buy or sell a
determinate thing for a certain period of time. 73 In one of the following cases, the ownership of the thing object of the contract is transferred
b. not part of the purchase price. to the other party upon delivery.
c. proof of the perfection of the contract of sale. a. Contract to sell. c. Sale or return.
d. paid before the perfection of the contract of sale. b. Agency to sell. d. Sale on approval.

68. This refers to the warranty of the seller that he has the right to sell the thing at the time when 74. Under the "Realty Installment Buyer Act", the buyer of real estate on installment payments
ownership is to pass, and which can be enforced if the buyer is deprived of the property sold may pay an installment defaulted without additional interest if he has paid at least two years
by a final judgment in court. of installments. The law is applicable to sales/transactions involving:
a. Warranty against hidden defects. c. Warranty against eviction. a. industrial lots.
b. Warranty of merchantable quality. d. Warranty of possession. b. commercial buildings.
c. residential lots.
69. P, who was in Hong Kong, made an overseas call to A, his friend, to sell P's lot in Quezon d. sales to tenants under the Land Reform Law.
City immediately as P needed cash. Accordingly, A sold the lot to B. The deed of sale was in
a public document. The sale of P's lot is: 75. S, the owner of a rent-a-car business, leased one of his cars to B for one month. On the day
a. valid. c. unenforceable. of the expiration of the lease and while B was still in physical possession of the car, B offered
b. rescissible. d. void. to buy the car from S for P200,000.00. Believing the price to be a good one, S readily
accepted B's offer and then and there executed a deed of absolute sale in favor of B who
70. One of the distinctions between a contract of sale and a contract for a piece work is that a immediately paid the price in cash. Thereafter, B drove away from the place of S.
contract for a piece of work: a. The delivery of the car by S to B is by constitution possessorium.
a. is not governed by the Statute of Frauds. b. The delivery of the car by S to B is by traditio longa manu.
b. refers to a contract for the delivery goods which are manufactured in the ordinary course c. The delivery of the car by S to B is by traditio brevi manu.
of business although the same are not available. d. There was no delivery because B should have turned over the physical possession of
c. has for its parties the vendor and the vendee. the car to S upon the expiration of the lease so that S could make the proper delivery to
d. has for its consideration the price of the thing. him upon the execution of the contract of sale.

71. A and B are co-owners of a rural lot not exceeding 1 hectare.The lot is surrounded on its four 76. B called on S at the shoe factory of S for the latter to make a pair of shoes which B would be
sides as follows: on the North, by the road; on the East, by the lot of X consisting of 2 needing in the play "Romeo an Juliet." B provided S with the description of the pair of shoes
hectares; on the South, by the lot of Y consisting of 2 Vz hectares; and on the West, by Z's lot thaj he wanted since S did not manufacture the kind of shoes that I needed. S quoted a price
consisting of 2 % hectares. A sells his undivided interest in the agricultural lot to T, who owns of P1,000.00 which B agreed to, pay upon delivery to him of the pair of shoes. Since been
several hectares of rural land in the area. Who has the right of legal redemption over the neighbors for a long time, their agreement was sealed with a handshake.
undivided interest in the lot sold by A to T? a. The contract between S and B becomes enforceable if S had already completed making
a. B c. Y the pair of shoes.
b. X d. Z b. The contract between S and B becomes enforceable if B had already paid the amount
agreed upon for the work.
72. It is an affirmation of fact or any promise by the seller relating to the thing which has a natural c. The contract between S and B is enforceable even if it is still executory.
tendency to induce the buyer to purchase the same, relying on such promise or affirmation. d. The contract cannot be enforced by either party because it was not in writing.
a. Condition c. Warranty
b. False representation d. Seller's talk 77. Which of the following contracts of sale is void?
 a. Oral sale of a piece of land made through an agent whose authority is in a public d. the issuance by S of the official receipt for the full payment of the purchase price of the
instrument. shares by B.
b. Sale of a piece of land in a public instrument made through an agent whose authority
was given orally by the principal. 81. Which of the following documents of title requires indorsement and delivery for its
c. Sale of a piece of land in a private instrument made through an agent whose authority is negotiation?
in a public instrument. a. A warehouse receipt which states that the goods are to be delivered to bearer.
d. Sale of a piece of land in a public instrument made through an agent whose authority is b. A bill of lading which states that the goods are to be delivered to the order of a specified
in a private instrument. person but such person indorsed it in blank.
c. A warehouse receipt which states that the goods are to be delivered to bearer but the
78. D deposited his goods in the warehouse of W who issued to D a warehouse receipt stating bearer indorsed it to a specified person.
that the goods are to be delivered to bearer. Thereafter, A obtained possession of the d. A bill of lading which states that the goods are to be delivered to a specified person.
warehouse receipt from D in exchange for what A claimed to be a bar of gold, which,
however, was discovered by D to be fake. D demanded the return of the warehouse receipt 82. S and B executed a deed of absolute sale involving a parcel of land supposedly containing
from A but the same had already been negotiated by A to H who purchased the document for 2,000 square meters. B paid a lump sum of P2,200,000.00 for the purchase. Based on the
value, in good faith and without notice that D was deprived possession thereof by fraud. The foregoing facts, which of the following statements is correct?
negotiation by A to H is: a. If the parcel of land is actually 2,200 square meters in area, S has to deliver only 2,000
a. voidable. c. void. square meters thereof and B must pay P2,200,000.00 as agreed upon.
b. valid. d. rescissible. b. If the parcel of land is actually 1,800 square meters in area, S must deliver only 1,800
square meters and B has to pay only the price equivalent to 1,800 square meters.
79. B purchased a pair of leather shoes from the store of S. Shortly after leaving the store, B c. If the parcel of land actually contains 2,200 square meters, S must deliver all of 2,200
decided to return and requested S, the owner, to place a protective rubber covering on the square meters with B still paying the amount of P2,200,000.00.
sole of each shoe. Since the job required at least 30 minutes to complete, B left the store of d. If the parcel of land actually contains 2,200 square meters, S must deliver all of 2,200
S to shop at the neighboring stores. When he returned to the store of S after 30 minutes, the square meters but B must pay a proportionate amount for the additional 200 square
pair of shoes was nowhere to be found. It turned out that C, a sales clerk, had sold the pair of meters in addition to the price of P2,200,000.00.
shoes that B bought to X, another customer.
a. X acquired ownership of the pair of shoes earlier bought by B. 83. S sold a specific parcel of land separately to the following persons: on July 1, 2014, to X, in a
b. X did not acquire ownership of the pair of shoes earlier bought by B. public document; on July 5, 2014 in a private document to Y, who took physical possession of
c. B remained the owner of the pair of shoes that he had bought despite its sale to X. the land; and on July 9, 2014, to Z, who registered the sale with the Register of Deeds.
d. S reacquired ownership of the pair of shoes when it was brought to him for additional Neither X, Y nor Z was aware of the sale made to the other two buyers. Who is the owner of
work. the parcel of land?
a. X, because he Was the first purchaser.
80. S sold 500 shares of stock of San Manuel Corporation to B at P50.00 per share. The transfer b. Y, because he took physical possession.
of the ownership of the shares of stock may be made through any of the following means, c. Z, because he registered the sale.
except: d. S, because the multiple sales he made rendered each sale a void contract.
a. execution of the sale in a public instrument.
b. the giving by S to B of the power to vote in the stockholders' meeting of San Manuel 84. In which of the following cases is the seller not obliged to make any payment to the buyer for
Corporation and its actual exercise thereof by B. breach of warranty against eviction?
c. the indorsement by S of the stock certificate covering the 500 shares of stock and its a. When such warranty has not been agreed upon.
placing it in the possession of B. b. When there was no stipulation exempting the seller from liability.
 c. When there was a stipulation exempting the seller (who was in good faith) from breach of b. B may validly sell the lot to a third person against whom S may exercise the right to
warranty and the waiver was made by the buyer without knowledge of the risks of repurchase provided the right is registered.
eviction. c. B is subrogated to the rights and actions of S.
d. When there was a stipulation exempting the seller (who was in good faith) from breach of d. B's ownership of the lot becomes irrevocable if S fails to exercise his right to repurchase
warranty and the waiver was made by the buyer with knowledge of the risks of eviction. within the period stated.

85. Mother Lilly purchased from Santiago Farms four horses with different colors: a white, a gray, 89. D borrowed P50.000.00 from C. The obligation is secured by a mortgage of D's house and
a black, and a brown, which Mother Lilly intended to use in a movie to be starred in by four lot. Thereafter, C assigned his credit right to T. Based on the foregoing facts, which of the
movie actors each one of whom represents one of the colors. Each horse was certified to be following statements is incorrect?
fit by the veterinarian who was hired by the parties to examine them. Mother Lilly paid a a. The consent of D to the assignment is not required in order that T may collect from D.
separate price for each of the horses. During the filming of the movie, the brown horse was b. The assignment of the credit right did not carry with it the assignment of the mortgage.
always sick and could not function as the three others. It was subsequently discovered that it c. If D pays C before D was notified of the assignment, D is released from liability.
was suffering from an incurable heart ailment. d. The assignment, to bind third persons, must be in a public instrument and recorded with
a. Mother Lilly may ask.for.the rescission of the sale of the brown horse only since she paid the Registry of Property.
a separate price for each of the horses.
b. Mother Lilly may ask for the.rescission of the sale of all the horses. 90. A contract of sale possesses three of the following characteristics. Which is the exception?
c. Mother Lilly may not ask for rescission of the sale of any horse because she freely a. Bilateral, since the parties are bound by reciprocal prestations.
entered into the contract of sale. b. Commutative, because the parties give almost equivalent values.
d: Mother Lilly is bound by the sale of all the four horses and must honor such contract c. Onerous, since there is an exchange of valuable consideration.
because the veterinarian certified that all horses were fit.. d. Real, because the object of sale must be delivered for the perfection of the contract.

86. The buyer is obliged to pay interest for the period between the delivery of the thing sold and 91. S sold his lot to B reserving his right to repurchase the same within 5 years from the date of
the payment of the price in the following cases, except if: the execution of their agreement. The sale together with the right to repurchase was
a. there is a stipulation to pay interest. registered with the Register of Deeds. Two years after the execution of the sale, B sold the
b. there is no such stipulation but the thing sold produces fruits or income. same lot to X who was not aware that S reserved his right to repurchase the lot.
c. the buyer is in default, from the time of judicial or extra-judicial demand for the payment a. The sale by S to B is subject to a suspensive condition.
of the price. b. The sale by S to B is subject to a resolutory condition.
d. none of the foregoing. c. The sale by S to B is subject to a condition which is neither suspensive or resolutory.
d. The sale by S to B is absolute without any condition.
87. Earnest money possesses three of the following characteristics. Which is the exception?
a. It is part of the purchase price. 92. Refer to Item 91.
b. It is proof of the perfection of the contract of sale. a. S may repurchase the lot from X within the five-year period although X was not aware of
c. It js paid at the time of the perfection of the contract of sale, the reservation of the right to repurchase.
d. It is paid as a consideration for the purpose of holding one to his promise to buy or sell a b. S may not repurchase the lot because X was not aware of the reservation of the right.
determinate thing for a certain period. c. S may repurchase the lot from X if X was aware of such reservation.
88. S sold his farm lot to B with S reserving his right to repurchase the property within five years d. The sale by B to X is void because the acquisition of the lot by B from S is subject to a
from the date of the sale. Based on the foregoing facts, which of the following statements is contingency.
incorrect?
a. The sale is subject to a suspensive condition. 93. B wanted to buy the car of S for P100,000.00 and to show that, he was in earnest, he gave to
 S P2,000.00 which S accepted. There was no written instrument signed by S and B to c. Santos cannot withdraw the offer because the option is founded upon a consideration of
incorporate their agreement. Based on the foregoing, which of the following statements does P500.00.
not pertain to the contract? d. Bersola needs to pay only P49,500.00 if he decides to buy the ring since the option
a. B, thereafter, needs to pay P98,000.00. money of P500.00 that he paid forms part of the purchase price.
b. The giving of earnest money binds S and B to a contract of sale.
c. B, thereafter, must pay C the amount of P100,000.00. 98. S and B executed a deed of absolute sale duly acknowledged before a notary public whereby
d. The contract between S and B is enforceable although there was no written agreement S conveyed his car to B for P100,000.00. B, however, informed S that he would be going
between them. away on a business trip and that he would be taking the car from the place of S when he
returned after two weeks. Three days after the sale of the car to B, S soid the same car to X
94. When the buyer is justified in refusing to accept the goods being delivered to him and has through a deed of absolute sale which was also acknowledged before a notary public. X then
relayed such refusal to the seller, such refusal produces the following effects, except: drove the car away from the place of S and had the sale recorded with the Land
a. buyer has no duty to return the goods unless stipulated. Transportation Office which issued to him a certificate of registration of the car in his name.
b. title to the goods does not pass to the buyer. Neither B nor X was aware of the sale made to the other until B returned from his business
c. buyer is not obliged to pay the price. trip.
d. buyer automatically becomes a depositary of the goods a. Preference shall be given to B since the car was first sold to him.
b. X did not acquire title to the car because S was no longer the owner when the sale was
95. The unpaid seller, in addition to his right to retain the goods while he is in possession of made to him.
them, has the following rights, except the right: c. X acquired title to the car because S appeared to be the owner in the record of the Land
a. of stoppage in transitu. c. to rescind the sale. Transportation Office.
b. to resell the goods. d. to bid when the goods are resold. d. S remained the owner of the car because the sale made to one buyer nullified the sale to
the other.
96. One of the following is a natural element of a contract of sale.
a. The price of the goods. 99. D gives his ring worth P25,000.00 to C in consideration of C's giving of P10,000.00 and a
b. The goods sold. bracelet worth P15,000.00 to D. Based on the foregoing facts, which of the following
c. The stipulation to pay interest on the purchase price of the goods. statements is incorrect?
d. The seller's warranty against hidden defects. a. The transaction between D and C is a sale if they intended it to be a contract of sale.
b. The transaction between D and C is a barter if they intended it to be a contract of barter.
97. On January 1, 2014, Santos offered to sell his only diamond ring for P50.000.00 cash to c. The transaction is barter regardless of the intention of the parties because the bracelet is
Bersola who was interested in buying the same. Santos told Bersola that he was giving the of more value than P10,000.00.
latter up to January 31, 2014 to decide whether to buy the ring or not. Bersola agreed to the d. The transaction is barter if the intention of the parties cannot be determined.
option and gave Santos option money of P500.00. On January 18, 2014, Santos found
another buyer who was willing to pay P70,000.00 cash. Santos personally visited Bersola to 100. S, the proprietor of a rent-a-car enterprise, sold his business and his fleet of 10 cars to B for a
inform him that he was withdrawing his offer unless Bersola agreed to buy the ring for lump sum of P3,000,000.00. S physically delivered the permits and other papers for the
P70,000.00. operation of the business and the vehicles to B at the latter's office except for one car which
a. Santos may validly withdraw the offer without being held liable for breach of contract the parties agreed shall be leased by S for one month while he was winding up his affairs in
since it would be unfair to him if he would receive only P50,000.00 as the price of his ring the Philippines as he was then leaving for abroad. In the meantime, the contract of sale and
when another person is willing to buy it at a higher amount. the contract of lease, though already signed by the parties, have not been acknowledged
b. Bersola is bound to pay P70,000.00 if he were to avail himself of his option to buy the before a notary public, and hence, were still private instruments.
ring. a. The ownership of the car leased by S remained with S.
 b. The ownership of the car leased by S has been transferred to B although there was no d. The seller may validly participate in the bidding without prior notice to the bidders.
physical delivery thereof to B.
c. The execution of the private instrument for the sale of the business and the cars likewise 104. S sold a specific laptop computer to B for P120,000.00 with B giving a down payment of
transferred the ownership to B of the car leased by S. P10,000.00 and promising to pay the balance in 11 equal monthly installments. B likewise
d. Both the contract of sale and the contract of lease must be acknowledged before a executed a chattel mortgage on the computer and a real mortgage on his lot to secure the
notary public by the parties before the ownership of the car leased by S is transferred to payment of the balance of the purchase price. After paying the first two installments, B
B. defaulted in the payment of next three installments. S may avail himself of any of the
following remedies except to:
101. King Gems Company, a jewelry manufacturer, shipped five dozen necklaces to Queen a. exact fulfillment of the obligation.'
Jewelry Store. The shipment was made under a written agreement allowing Queen Jewelry b. cancel the sale.
Store to return the necklaces within a period of one month from delivery. Based on the c. foreclose the chattel mortgage and recover any deficiency during the foreclosure sale if
foregoing facts, which of the following statements is incorrect? there is an agreement to that effect.
a. Title to the necklaces passed to Queen upon delivery. d. foreclose the real mortgage and recover the deficiency during the foreclosure sale even if
b. If Queen does not return the necklaces within one month, the sale to it becomes there is no agreement to that effect.
absolute. 105. B bought from Century Properties, Inc. a 1,000 square-meter lot located beside the Manila
c. If the necklaces are destroyed by fire without the fault of Queen, Queen need not pay the International Airport on which he intended to construct a warehouse condominium. The terms
price thereof. of the sale provided for the payment of the contract price of P300,000.00 in 60 equal monthly
d. If the necklaces are destroyed through the fault of Queen, Queen must pay the price installments of P5,000.00 each. After having paid 36 installments, B defaulted in the payment
thereof to King Gems Company. of the succeeding installments. As a consequence, Century cancelled the sale. B now wants
to claim the return of the cash surrender value of the payments he had made pursuant to the
102. On January 3, 2014, D deposited his goods with W, warehouseman, who issued a "Realty Installment Buyer Act", otherwise known as the Maceda Law.
warehouse receipt which states that the goods are to be delivered "to the order of D". On a. B is entitled to a cash surrender value of 50% of P180,000.00, or P90,000.00 under the
January 5, 2014, D indorsed the receipt to A. On January 8, 2014, however, D sold the goods Maceda Law.
represented by the receipt to X who informed W immediately of the sale to him of the goods b. B is entitled to a cash surrender value of 55% of P180,000.00, or P99,000.00 under the
by D. At that time, W was not aware that D had indorsed the receipt to A. Maceda Law.
a. A acquired title to the goods as represented by the receipt at the time such receipt was c. B is entitled to a cash surrender value of 90% of P180,000.00, or P162.000.00 under the
indorsed to him Maceda Law.
b. X acquired title tothe goods because at the time of the sale to him, W, the d. B cannot invoke the Maceda Law for the return of any of the payments he had made for
warehouseman was not yet aware that D had indorsed the receipt to A. the lot he purchased.
c. D retained ownership of the goods because he cannot indorse the receipt to one person
and sell the goods to another. 106. S shipped FOB Manila, perishable goods worth P50.000.00 to B who is based in Cebu. B
d. W will be bound to deliver the goods to X. remitted a check amounting to P50.000.00 for the price of the goods. While the carrier was
on its way to Cebu, S was informed by his bank that the check issued by B was dishonored
103. One of the following statements pertaining to a sale by auction is incorrect. Which is it? for insufficient funds. On further inquiry, he learned that B had become insolvent. Accordingly,
a. A sale by public auction is perfected when the auctioneer announces its perfection by the S obtained physical possession of the goods from the carrier. After notifying B.'S resold the
fall of the hammer, or in any other manner. goods.
b. Before perfection, any bidder may retract his bid.
c. Before perfection, the auctioneer may withdraw the goods unless the auction was Case A - If the goods are resold for P52,000.00, the profit of P2,000.00 belongs to B since
announced to be without reserve. title had already passed to him.
 110. B received at his office a brand-new computer printer. The printer was delivered to B after the
Case B - If the proceeds of sale, net of incidental expenses, amounted to P47,000.00, S can latter filled up a coupon which he cut out from a magazine where Supreme Machines
recover the loss of P3,000.00 from B. Company placed an advertisement allowing a "Free Trial for 7 days" of the printer to
a. Both Cases are true. prospective customers. After trying the printer shortly after its delivery to him, B placed it on a
b. Both Cases are false. table located just beside a glass window. B forgot all about the printer until two weeks later.
c. Case A is true; Case B is false. By that time, the plastic parts of the printer had been deformed because of its long exposure
d. Case A is false; Case B is true. to sunlight such that the printer would no longer function.
a. The ownership of the printer was transferred to B upon its delivery to him.
107. B visited a store' selling lamps, light bulbs and similar items. He informed the seller that he b. B must pay for the price of the computer.
was buying 2 units of a 50-watt "Phillips" bulb. Though he intended to use the 2 bulbs for the c. B is not liable for the damage because it was caused by "a fortuitous event.
headlight of his car, he did not inform the seller of his purpose. Thereafter, he installed the 2 d. Supreme Machines Company must shoulder the damage because it retained ownership
units of "Phillips" bulb on his car but they did not function. Based oh the foregoing, which of of the printer despite the delivery.
the following statements is incorrect?
a. The seller is liable for breach of warranty of fitness for a particular purpose. 111. Salvosa shipped FOB Manila goods worth P20.000.00 to Bordelo who is based in Davao
b. The seller is not liable for breach of warranty of fitness for a particular purpose because City. While the carrier was on a stopover in Cebu City, Salvosa was informed by his bank that
the buyer did not rely on the seller's skill or judgment. the check issued by Bordelo was dishonored by reason of insufficiency of funds. He also
c. The seller is not liable to B since the seller's warranty is only for merchantability, or that learned from the Credit Bureau that Bordelo had become insolvent. Accordingly, Salvosa
the bulb is fit for the general purpose for which it was intended. notified the carrier that he was taking possession of the goods. The right availed of by
d. There is no warranty of fitness for a particular purpose since the bulb was sold to B Salvosa in the situation is known as the right of:
under its trade name. a. stoppage in transitu. c. attachment.
b. subrogation. d. garnishment.
108. It refers to the right which the vendor reserves to himself to repurchase the thing sold, with
the obligation to reimburse the vendee of the price, the expenses of the contract, any other 112. Refer to No. 111. After obtaining actual possession of the goods, Salvosa offered them for
legitimate payments made therefor and the necessary and useful expenses made on the sale at public auction. Based on the foregoing facts, which of the following statements is
thing sold. incorrect pertaining to the sale of the goods?
a. Conventional redemption. c. Equity of redemption. a. Salvosa may bid at the public auction provided there is notice of his participation.
b. Legal redemption. d. Right of pre-emption. b. The buyer of the goods at the public auction acquires title to the goods as against
Bordelo.
109. Palmares ordered from Superstar Sportswear Company, a sportswear manufacturer, 2 c. If the goods are sold at P19,000.00 net of cost of selling and other expenses, Salvosa
dozens of jackets and jogging pants styled and designed by Palmares for the use of his may recover the amount of P1,000.00 from Bordelo.
basketball team. This was not the type of sportswear normally manufactured by Superstar. d. If the goods are sold at P22,000.00 net of cost of selling and other expenses, the profit of
The price agreed upon by the parties was P72.000.00. After the articles were manufactured, P2,000.00 belongs to Salvosa.
Palmares refused to accept them and claimed that he was not liable since the contract did 113. Brothers Antonio, Benito, Carmelo and Donato are co-owners of an agricultural lot which they
not comply with the Statute of Frauds. inherited from their parents. Antonio sold his undivided share in the property to Teodulfo.
a. Palmares is liable although the contract was not in writing. Either Benito, Carmelo and Donato may purchase Antonio's share in the property from
b. The contract is a contract of sale. Teodulfo by virtue of their right of:
c. The contract is a contract to sell. a. legal redemption. c. conventional redemption.
d. There was no contract at all because no writing was executed by the parties. b. pre-emption. d. consolidation.
114. D, owner of certain goods, deposited the goods with' W, a warehouseman, who issued to D a I. Contract to sell.
warehouse receipt which states that "The goods are to be delivered to the order of D." D may II. Sale or return.
negotiate the warehouse receipt by any of the following means, except by: III. Sale on trial.
a. mere delivery. IV. Agency to sell.
b. special indorsement completed by delivery. Upon the delivery of the goods by the owner thereof to the other party, ownership is not
c. blank indorsement completed by delivery. transferred in:
d. indorsement to bearer completed by delivery. a. I, II and III. c. I, II and IV
b. I, III and IV d. II, III and IV
115. S delivered a diamond ring to B for B's necklace worth P10,000.00 and cash of P15,000.00
which B is scheduled to deliver one week after their agreement. The contract between S and 119. The following are characteristics of certain contracts:
B was not in writing. The contract between S and B is: I. Nominate
a. an enforceable contract of barter. II. Real
b. an enforceable contract of sale. III. Aleatory
c. an enforceable contract that is partly a sale and partly a barter. IV Commutative
d. a sale but it is unenforceable not being in writing and the cash to be paid by B is at least A contract for the sale of a sweepstakes ticket is considered as:
P500.00. a. I and II. c. I and III.
b. I and IV. d. Ill and IV.
116. These contracts are presented to you for evaluation:
I. A contract for the delivery of an article which is manufactured in the ordinary course 120. These statements are presented to you for evaluation:
of business, but the article was not available at the time of the contract was I. Option money is part of the purchase price.
executed. II. Earnest money is proof of the perfection of the contract of sale.
II. A contract for the delivery of an article to be manufactured specially for the customer In your evaluation of the said statements:
and upon his special order. a. Both are true. c. Only I is true.
In your evaluation of the said contracts: b. Both are false. d. Only II is true.
a. Both contracts refer to a contract of sale.
b. Both contracts refer to a contract for a piece of work. 121. S sold a computer to B for P120.000.00 under the following terms: P20,000.00 down; balance
c. I refers to a contract of sale; II refers to a contract for a piece of work. payable in 10 equal monthly installments with an acceleration clause. To secure payment of
d. I refers to a contract for a piece of work; II refers to a contract of sale. the balance, B executed a chattel mortgage on the computer and a real mortgage on his lot.
After paying the first two installments, B defaulted in the payment of the third, fourth and fifth
117. These statements are presented to you: installments. S wants to recover in full the balance of P80,000.00 even in case of deficiency
I. The sale of a thing having a potential existence is not effective if the thing does not so he consults you on which of the following courses of action to take to achieve that
come into existence. purpose:
II. The sale of hope or expectancy produces effects even if the thing hoped for does I. Exact fulfillment of the balance by suing B and have the computer sold for the
not come into existence. execution of the judgment against B.
In your evaluation of the foregoing statements: II. Foreclose the chattel mortgage on the computer.
a. Both are true. c. Only Statement I is true. III. Foreclose the real mortgage on the lot.
b. Both are false. d. Only Statement II is true.
Based on your evaluation of the foregoing data, the course of action that you will likely
118. The following terms are presented to you: recommend to S to achieve his purpose is:
 a. Either I or II. I. S sold a certain ring to B. It turned out that the ring was stolen from O, its true
b. Either II or III. owner.
c. Either I or III. II. S, a jewelry store sold a certain ring to B. The ring, however, actually belongs to O
d. Any of I, II or III. who had lost it a few days earlier.
III. S, a pawnshop, sold at a public auction a certain ring with B as the winning bidder.
122. On January 5, Samonte, who was going abroad as an immigrant, offered to sell his car for O, however, is the true owner of the ring but the pawnshop thought it was owned by
P150,000.00 to Baldriga. He informed Baldriga, however, that he wanted to rent the car for X, a defaulting borrower of the pawnshop.
P1,000.00 per day up to January 15 as soon as the sale is executed since his flight was not In your evaluation of the above sales, B acquired title to the ring in:
scheduled until January 16. Baldriga accepted both offers, and accordingly, he and Samonte a. I and II. c. I and III.
executed a contract of sale and a contract of lease simultaneously on the same day, January b. II and III. d. none of the three contracts.
5. All the while, Samonte remained in physical possession of the car until January 10 when
the car was stolen without his fault. The car was never recovered. 126. Refer to No. 125. O may recover the ring from B without the need of reimbursement in:
a. Samonte must bear the loss by returning the sum of P150,000.00 since Baldriga did not a. I only. c. Ill only.
become the owner not having obtained physical possession thereof. b. II only. d. All three contracts.
b. Baldriga must bear the loss because he acquired ownership of the car despite its lack of
physical delivery to him.. 127. S sold a brand-new electric typewriter to B for P20.000.00 on a credit term of 30 days. The
c. Both Samonte and Baldriga must share equally in the loss. agreement between the parties provides that B may return the typewriter within the same
d. Samonte must bear the loss by returning P150,000.00 less P5,000.00, the rental of the period. Ten days after delivery to B, burglars entered the office of B and carted away various
car for 5 days, in partial compensation. valuables including the typewriter he bought from S.
a. B must pay the price of the typewriter to S.
123. S, who is based in Manila, shipped FOB Cebu goods worth P50.000.00 to B. While the goods b. B is not obliged to pay the price of the typewriter because the loss thereof was without
were on their way to Cebu, S was informed by his bank that the check remitted by B was his fault.
dishonored for insufficient funds. Accordingly, S notified the carrier not to proceed with the c. S must shoulder the loss because B's ownership of the typewriter was not absolute since
delivery and that he was taking possession of the goods. Based on the foregoing facts, which he had the option to return it within 30 days.
remedy is available to S? d. The loss must be shared equally by S and B in fairness to both.
a. Resale of the goods.
b. Rescission of the sale. 128. The following statements are presented to you:
c. Either resale or rescission of the goods, at the option of S. I. A bearer document of title if it is specially indorsed can be negotiated thereafter only
d. Neither resale nor rescission. by indorsement completed by delivery.
II. A bearer negotiable instrument if it is specially indorsed can be negotiated thereafter
124. Before perfection in a sale by auction: only by indorsement completed by delivery.
I. Any bidder may withdraw his bid. In your evaluation of the foregoing statements:
II. The auctioneer may withdraw the goods from the sale unless the auction has been a. Both statements are true. c. Only I is true
announced to be without reserve. b. Both statements are false. d. Only II is true.
The statement is true for:
a. Both I and II. c. I only. 129. S sold to B a specific car for P200.000.00. The terms of the sale provide the following: down
b. Neither I nor II. d. II only. payment of P40,000.00; balance payable in 8 equal monthly installments of P20.000.00 each,
with a real estate mortgage to be executed by B on his lot to secure the said balance. After
125. The following contracts of sale are presented to you: paying 3 installments, B defaulted in the payment of 3 more installments. Based on the
 foregoing facts, the following remedies were presented to B: III. When given, it entitles the party making the payment to hold the recipient from
I. Exact fulfillment of the obligation. offering the object of the contract to other persons within the period agreed upon.
II. Cancel the sale. IV. It is proof the perfection of the contract of sale.
III. Foreclose the real mortgage on the lot and recover any deficiency in the foreclosure Based on your evaluation of the foregoing statements, which of the following is true?
sale. a. I and III refer to option money.
If you were B, the remedy that you may avail yourself of is: b. II and III refer to option money.
a. either I or II. c. II and IV refer to earnest money.
b. either II or III. d. Ill and IV refer to option money.
c. either I or III.
d. any of the three remedies presented. 134. Orlando is the owner of an agricultural lot consisting of 9,000square meters (or .9 hectare).
The lot is surrounded on the North by Nonato's lot consisting of 7,000 square meters; on the
130. An unpaid seller may avail himself of the following remedies, except the right to: East, by Espino's lot consisting of 6,500 square meters; on the South, by Serrano's lot
a. retain the goods while he is in possession of them. consisting of 8,500 square meters; and on the West, by the road, across which was Wagan's
b. resume possession of the goods at any time while they are in transit. lot consisting of 6,300 square meters. Orlando donates the lot to Benito, his brother, who is
c. buy the goods at any public sale if he decides to resell them. the owner of several rural lots in the area. Of the adjoining owners, only Serrano expressed
d. rescind the sale. to Benito his desire to redeem the lot. The right of legal redemption is available to:
a. Serrano because it was only he who offered to redeem the lot.
131. S sold his lot to X on April 1, 2014. The deed of sale was duly acknowledged by the parties b. Wagan because he is the owner of the smallest adjoining lot.
before a notary public. However, X did not take physical possession of the lot. On April 10, c. Espino because he is the owner of the smallest lot that is nearest to the lot of Benito.
2014, S sold the same lot to Y under a deed of sale which was still to be notarized. Y d. None of the adjoining owners may avail himself of the right of legal redemption including
immediately took physical possession of the lot. Y was not aware of the previous sale to X. Nonato.
When X visited the property, he found Y already building a structure thereon. It was also then 135. Barrameda visited the furniture store of Farrales to buy window frames for his house which
that he discovered that S had sold the same lot to Y. was undergoing construction. Not finding any window frame of his liking, he made a sketch of
a. The lot belongs to X. the design he wanted and asked Farrales if he could make four pieces of the specification for
b. The lot belongs to Y. delivery after one week. Farrales answered that he could at the price of P2.000.00 per frame.
c. The lot will be co-owned by X and Y in fairness to both of them since they were in good The window frames ordered by Barrameda was of such odd shape and design that when
faith. completed and installed, Barrameda's house would be the only one in the community that
d. The lot still belongs to S until it can be determined who between X and Y is the owner of had windows of such type. Barrameda left the sketch with Farrales who did not ask any down
the lot. payment since he had previously transacted with Barrameda and knew him. During all the
time that Barrameda and Farrales were dealing with each other, Arnulfo, the assistant of
132. A contract of sale is perfected upon the: Farrales, was present. When the window frames were finished, Farrales proceeded to the
a. full payment of the purchase price by the buyer. house of Barrameda to deliver them but Barrameda refused to accept them saying that he
b. delivery of the object of the contract to the buyer. had changed his mind, and that at any rate, the contract was unenforceable, not being in
c. meeting of minds between seller and the buyer on the object and the price. writing.
d. acknowledgment of the deed of sale by the seller and the buyer before a notary public. a. The contract is enforceable because the sketch made by Barrameda was sufficient to
bind him.
133. These statements are presented to you: b. The contract is enforceable because Arnulfo can testify in court to prove its existence.
I. It is part of the purchase price. c. The contract is enforceable even if no writing was executed by the parties.
II. It is paid before the contract of sale is perfected. d. The contract is unenforceable because no writing was subscribed by the parties.
 a. When there is waiver intencionada
136. Refer to the preceding number. What contract was entered into between Barrameda and b. When there is waiver consciente
Farrales? c. When the vendor was in bad faith and there was no stipulation exempting the vendor
a. Contract of sale. c. Contract to sell. from liability in case of eviction.
b. Contract for a piece of work. d. An innominate contract. d. When the vendor was in bad faith and there was stipulation exempting the vendor from
liability in case of eviction.
137. A contract for a piece of work is different from a contract of sale in that in a contract for a
piece of work: 143. S and B entered into a contract for the sale of the car of S to B for P100,000.00. In reality,
a. the Statute of Frauds does not apply. however, B did not give any amount to S because the latter intended to donate the car to B.
b. the article object of the contract is manufactured or procured in the ordinary course of In this case:
business. a. The contract between S and B is void because the price is simulated.
c. there is usually a stock which is kept on hand and made available to anyone. b. The contract between S and B is a valid contract of donation.
d. if the article is not available, there is no change or modification of it when it is ordered by c. The contract between S and B is a void contract of donation.
the customer. d. The contract between S and B is a valid contract of sale.

138. Which of the following statements is common to both sale or return and sale on trial? 144. On July 1, Serena sold to Berbola through a private instrument a specific piano for
a. Ownership of the thing is transferred upon delivery to the buyer. P20,000.00. Simultaneous with the sale, the parties agreed that Serena would lease the
b. Ownership of the thing is transferred to the buyer at some future time. piano for one week in preparation for a concert after which Berbola could physically get the
c. Ownership of the thing may be reverted to the seller should the buyer return it within the piano. Before the week was over, Serena sold the same piano, also in a private instrument
time agreed upon. and for P25,000.00, to Jezebel who immediately loaded the piano in her van. Neither Berbola
d. In case the thing is lost through a fortuitous event after the lapse of the time to keep or nor Jezebel was aware of the sale made to the other. Who is the owner of the piano?
return it and the buyer was still in possession of it, the risk of loss is with the buyer. a. Berbola
b. Jezebel
139. The full payment of the price is a positive suspensive condition in: c. Berbola and Jezebel, as co-owners.
a. contract to sell. c. sale or return. d. Serena who retained ownership because of Berbola and Jezebel's conflicting rights.
b. contract of sale. d. sale on trial.
145. B bought two carabaos, one male and one female, from S. He paid P2,000.00 and
140. The non-payment of the price is a negative resolutory condition in: P3,000.00, respectively, for the animals which he intended to use for breeding. Later, the
a. contract to sell. c. contract of agency to sell. female carabao was found unfit for breeding because of a redhibitory defect.
b. contract of sale. d. sale on approval. a. B can rescind the sale of the female carabao only because he paid a separate price for
it.
141. When there is a stipulation exempting the vendor from the obligation to answer for eviction b. B can rescind the sale of both animals because he would not have bought the male
and the vendee made the waiver with knowledge of the risks of eviction and assumed the carabao without the female carabao.
consequences, such waiver is known as: c. B cannot rescind the sale of either animal under the "let the buyer beware" rule.
a. waiver intencionada. c. forfeiture of rights. d. B can rescind the sale of both animals only if he had paid a single price for both them.
b. waiver consciente. d. surrender of rights
146. What may the consideration consist of in an option contract in order to bind the offerer?:
142. In case of eviction, the vendor shall be liable to the vendee only for the value of the thing sold a. Monetary.
at the time of eviction in which of the following cases? b. Other things or undertakings.
 c. Either (a) or (b). 152. A, B and C were the co-owners of a lot in the ratio of 1:2:1. A died. He was succeeded to the
d. May not be a valuable consideration, i.e., may be gratuitous. property by S, his son and heir. Who may redeem the lot of A from S?
a. B, because as the owner of a bigger portion, he enjoys preference in the exercise of the
147. The following statements pertaining to sale by auction are presented to you: right of legal redemption.
I. The auctioneer may not withdraw the goods from the auction sale if the sale was b. C, so that he and B will have an equal share in the lot.
announced to be without reserve. c. B and C, in proportion to the share of each in the lot.
II. The auctioneer may withdraw the goods from the auction sale if the sale was d. Neither B nor C may exercise the right of legal redemption.
announced to be with reserve.
In your evaluation of the foregoing statements: 153. When is the vendor bound to deliver the thing sold?
a. Both statements are true. c. Only Statement I is true. a. If the vendee has not paid him the price.
b. Both statements are false. d. Only Statement II is true. b. If no period for the payment of the price has been fixed in the contract.
c. If the buyer has been given the benefit of the period.
148. Under the Maceda Law, in determining the number of installments paid by the buyer, the d. None of the foregoing.
following payments are included, except:
a. down payments. c. option money. 154. These statements concerning the double sale of an immovable are presented to you:
b. deposits. d. none of the foregoing. I. The first buyer who was in good faith at the time the sale was made to him, remains
in good faith notwithstanding that he subsequently obtains knowledge of the second
149. Necessaries include everything indispensable for sustenance, clothing and medical sale.
attendance, and which of the following? II. In order that the second buyer may be given preference, he must possess good faith
a. Dwelling c. Transportation from the time of sale in his favor until the registration of the same. In your evaluation
b. Education d. All of the foregoing. of the foregoing statements:
a. Both statements are true. c. Only Statement I is true.
150. While her* parents were away on a visit to the province, M, 17 years old, entered into a b. Both statements are false. d. Only Statement II is true.
contract for the purchase of textbooks prescribed in his course and an expensive evening
gown. Which sale to M is/are considered valid and binding, i.e., not voidable? 155. A credit right is considered to be in litigation:
a. The sale of the textbooks. a. as soon as a complaint is filed by the creditor against the debtor.
b. The sale of the evening gown. b. when the debtor has filed his answer to the complaint.
c. Both (a) and (b). c. when the case is scheduled for pre-trial conference between the parties.
d. Neither (a) nor (b) because a minor is incapable of giving consent. d. when the trial has started.

151. B bought a refrigerator from S for P20,000.00 which is payable in 20 installments at 156. D owed C P100,000.00. The debt is evidenced by a promissory note and secured by a
P1,000.00 per month. After paying 6 installments, B defaulted in the payment of the seventh mortgage of D's lot. Before due date, C assigned his credit right to T by executing a deed of
and eight installments. Should S decide to exact fulfillment of the obligation, how much, as a assignment but without the parties informing D. On due date, T went to D to collect the debt
rule, may S collect from B? at which time D learned of the assignment.
a. The total amount of installments defaulted, i.e., P2,000.00. a. T cannot collect from D because the latter was not informed of the assignment at the
b. The remaining balance of P14,000.00. time it was made.
c. Either (a) or (b) at the option of S. b. T can collect from D but if D cannot pay, T cannot foreclose the mortgage on the lot.
d. Neither (a) nor (b) because S has to wait for the sale of the property to third persons. c. T can collect from D but if D cannot pay, T can foreclose the mortgage which is deemed
assigned together with the credit right.
 d. T can only go after C, the assignor, since the assignment was without D's knowledge. 7 Traditio constitutum 32 Legal formalities
8 Unpaid Seller 33 Necessaries
157. What does the assignor of a credit warrant?
a. The legality and existence of the credit. 9 Warranty against eviction 34 Stoppage in transitu
b. The solvency of the debtor. 10 Accion redhibitoria 35 Order document of title
c. Both (a) and (b). 11 Legal redemption 36 Right of pre-emption
d. Neither (a) nor (b).
12 Equitable mortgage 37 Warehouse receipt
158. The right of pre-emption differs from the right of redemption in that in pre-emption: 13 Document of title 38 Vendee
a. the action is directed against the buyer. 14 Bill of lading 39 Sale on trial
b. the action is directed against the seller.
c. the right arises after the sale. 15 Sale or return 40 Absolute incapacity
d. there can be a rescission of the original sale. 16 Dacion en pago 41 Payment by cession
17 Fungible goods 42 Future goods
159. The following are certain modes of acquisition of property:
18 Straight sale 43 Bearer document of title
I. Purchase
II. Dacion en pago 19 Emptio rei speratae 44 Waiver intencionada
III. Succession 20 Earnest money 45 Traditio brevi manu
IV. Donation
21 Traditio longa manu 46 Assignment of credit
Legal redemption is available when the transferee acquired the property through:
a. I or II. c. I or III. 22 Possessory lien 47 Bailee
b. Ill or IV d. II or IV. 23 Eviction 48 Redhibitory defect
24 Easement or servitude 49 Auction
160. A sale between husband and wife is valid in which of the following cases?
a. When a separation of property has been agreed upon in the marriage settlements or 25 Accion quanti minoris 50 Option money
when there has been a judicial separation of property.
b. When price of the sale is a moderate amount. Statements
c. When the object of the sale is a necessary such as food or clothing., A. Ownership of a thing is transferred to the creditor to settle a monetary obligation.
d: When the spouses are living separately. B. Lacks fo formalities but nevertheless shows the real intention of the parties to create a
specific property to secure the performance of an obligation.
TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the statement C. They refer to interchangeable goods such as grain, oil, etc., that allow one to be replaced
or explains the numbered items. by another without loss of value.
1 Barter 26 Pactum commissorium D. Proof of the perfection of a contract of sale.
E. Includes a warehouseman, carrier or other person who receives the possession or custody of
2 Piece of work 27 Conventional redemption the thing delivered.
3 Price 28 Vendor F. Even professional inspection is not sufficient to discover it.
4 By-bidders/puffers 29 Relative incapacity G. Exercised by the seller by obtaining actual possession of the goods or by giving notice to the
carrier or other bailee having actual possession of the goods.
5 Policitacion 30 Waiver consciente H. It is made by the buyer with knowledge of the risk of eviction; hence, the seller will not have
6 Symbolic delivery 31 Emptio spei any liability if the buyer is evicted.
I. Ownership is transferred to buyer upon delivery but he has the option to revert such GG. The sum stipulated as the equivalent of the thing sold.
ownership to the seller. HH. The right to be subrogated upon the same terms and conditions stipulated in the contract, in
J. Ownership of the thing sold is retained by the seller despite delivery to the buyer, but the the place of one who acquires a thing by purchase or dation in payment, or by any other
latter agrees to pay the price if he finds the thing satisfactory. transaction whereby ownership is transmitted by onerous title.
K. Delivery that takes place when the buyer who was in possession of the thing sold at the time II. Seller's undertaking that the buyer shall enjoy legal and peaceful possession of the thing
of sale continues in possession of the same as an owner. sold.
L. Negotiated by indorsement. JJ. A stipulation in a contract of sale involving an immovable that the sale is automatically
M. Sale of property to the highest bidder. rescinded upon failure of the buyer to pay the price.
N. The party in a contract of sale who is obligated to transfer the ownership of and to deliver a KK. Delivery of the keys of the place where a movable is kept or stored.
determinate thing. LL. Contract for the storage of goods for a compensation.
O. The consideratipn paid for the purpose of holding one to his promise to buy or sell a MM. Buyer's remedy which involves the proportionate reduction in the price of the thing
determinate thing for a certain period of time, which consideration is separate and distinct purchased.
from the purchase price. NN. A unilateral promise to buy or sell a thing which is not accepted by the promissee.
P. Applies to persons who, under certain circumstances, cannot purchase certain property. OO. An unpaid seller's right to retain the goods for the price while he is in possession of them.
Q. The person obligated to pay the price of the thing purchased. PP. Remedy of buyer to withdraw from the sale and ask for damages.
R. Delivery of a movable by mere agreement of the parties if the thing cannot be transferred to QQ. An encumbrance imposed upon an immovable for the benefit of another immovable
the vendee at the time of sale. belonging to a different owner.
S. Negotiated by mere delivery. RR. A person employed by the seller or auctioneer to raise the price in an auction sale.
T. It is made by the buyer without knowledge of the risk of eviction. SS. A document issued by a common carrier acknowledging the receipt of the goods and
U. The consideration of the contract is another thing. agreeing to transport and deliver them to a specified place.
V. Applies to persons who cannot bind themselves in a contract including a contract of sale. TT. Right of seller to repurchase the thing sold and the exercise of which was reserved by the
W. A document used as proof of the possession or control of the goods, or authorizing or seller at the time of sale.
purporting to authorize the possessor of the document to transfer or receive, either by UU. Delivery that takes place when the seller continues in possession of the thing sold after the
indorsement or by delivery, the goods represented by such document. sale but as lessee, depositary or otherwise.
X. Right given to an adjoining owner of an urban land to purchase the same ahead of others if VV. The creditors are given the right to sell the debtor's properties and apply the proceeds to their
such land is he'd for speculation. respective claims.
Y. Delivery through the execution of a public document. WW. It has for its purpose the transfer to another person of the right to collect the debt.
Z. The deprivation by final judgment of the vendee of the whole or a part of the thing sold based XX. Sale of an expected thing.
on a right prior to the sale or an act imputable to the vendor. YY. None of the foregoing.
AA. Refer to goods to be manufactured, raised or acquired by the seller.
BB. The sale of hope or expectancy. TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word "FALSE"
CC. Includes one who has received as conditional payment for the goods a negotiable instrument if the statement is false.
but the condition has been broken by reason of the dishonor of the instrument or the 1. Warranty against eviction is inherent in a contract of sale; hence, it is an essential element
insolvency of the buyer. thereof.
DD. Include everything indispensable for sustenance, dwelling, clothing, medical attendance, 2. Dacion en pago partakes of the nature of a sale; hence, there is more freedom in fixing the
education and transportation. price of the thing conveyed.
EE. The balance is payable in its entirety after the payment of an initial sum. 3. A contract for a piece of work must comply with the Statute of Frauds. Accordingly, it must be
FF. A contract for the delivery at a certain price of an article to be manufactured specially for the in writing to be enforceable if the price is P500.00 or more.
customer and upon his special order, and not for the general market. 4. A sales contract requires the delivery of the thing sold for its perfection.
5. If the consideration received for a thing is another thing and a monetary consideration and 25. A bearer document of title, becomes an order document of if it is specially indorsed.
the intention of the parties does not clearly appear, the contract will be considered a contract 26. The delivery of an order document of title without a indorsement does not constitute
of barter if the value of the property consideration is greater than the monetary consideration. negotiation.
6. In a contract to sell, the full payment of the price is a suspensive condition which upon 27. A negotiable document of title becomes non-negotiable if it is stamped with the mark "non-
fulfillment will require the execution of a contract of sale. negotiable".
7. It is not necessary that the vendor of a thing must be the owner thereof at the time of sale as 28. If the goods sold are in the possession of a third person, the seller is deemed to have
long as he can transfer its ownership to the buyer upon delivery. delivered the goods to the buyer if the third person acknowledges to the buyer that he holds
8. The sale of hope or expectancy is valid even if the thing hoped for does not come into the goods in the buyer's behalf.
existence. 29. If a period has been fixed for the payment of the price which has not yet arrived, the seller in
9. If the sale of a piece of land is made through an agent, the authority of the agent must be in the meantime is bound to deliver the thing sold.
writing for the sale to be valid. 30. An unpaid seller exercising his right to resell the goods may buy the goods either directly or
10. In a sale by auction, any bidder may retract his bid before the sale is perfected. indirectly.
11. If a "by-bidder" or "puffer" is employed by a seller without notice in sale by auction, the sale 31. When an unpaid seller exercises his right of stoppage in transitu, the contract of carriage
may be treated as fraudulent by the buyer. ceases, the carrier becoming liable as a depositary.
12. The ownership of the thing sold is transferred upon the perfection of the contract of sale. 32. If real estate is sold for a lump sum, the vendor is bound to deliver all that is included within
13. A unilateral promise to buy or sell a determinate thing at a certain price is binding upon the the boundaries stated in the contract although the actual area is greater than that stated in
promissor if the promise is supported by a consideration distinct from the price. the contract.
14. Earnest money is part of the purchase price of a thing; hence, deductible from the total selling 33. If the same immovable is sold to two or more persons who are all in good faith, ownership
price. shall belong to the buyer who first paid its price.
15. In sale of personal property payable in installments, the seller may exact fulfillment of the 34. In order that the buyer may enforce the seller's liability for breach of warranty against eviction,
buyer's obligation when the buyer defaults in the payment of one or more installments. the judgment depriving the buyer of the thing must first be appealed by the buyer.
16. In sale of real property where the buyer has defaulted after paying at least 2 years 35. The vendor's liability for breach of warranty against eviction may be validly waived by the
installments, he shall be entitled to pay, without additional interest, the unpaid installments vendee. However, the vendor will still be liable if the waiver was made by the vendee without
due within the grace period earned by him. knowledge of the risks of eviction.
17. The purchase by a guardian of the property of the person under his guardianship is valid. 36. As a rule, the vendor shall not be liable for a non-apparent easement that is recorded in the
18. The buyer shall be entitled to the fruits of the thing sold from the time of the perfection of the Registry of Property.
contract. 37. The vendor shall be liable generally for any defect on the thing sold even if he was not aware
19. The delivery of incorporeal property may be made through the exercise by the vendee of his thereof.
rights with the consent of the vendor. 38. When animals are sold as a pair, the vendee may ask for the rescission of the sale of both
20. If goods are sold on "sale or return", the risk of loss of the thing sold remains with the seller animals although only one of them suffers from a redhibitory defect.
after its delivery to the buyer. 39. The sale of animals suffering from contagious diseases is voidable.
21. In "sale on approval", the buyer becomes the owner of the thing upon delivery, but he may 40. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of
revert such ownership to the seller by returning it. animals sold as condemned.
22. The delivery of specific goods to a carrier or other bailee for the purpose of transmission to 41. Acceptance of the goods by the buyer generally discharges the seller from his liability for any
the buyer generally transfers ownership of the goods to the buyer. breach of warranty.
23. When a thing is purchased from a merchant's store, fair or market, the buyer acquires title to 42. If the buyer is justified in refusing to accept the goods, he shall be obliged to hold the goods
the thing although the seller may have stolen it or acquired it from a. thief. as depositary.
24. A warehouse receipt is also a contract between warehouseman and the depositor of the 43. The buyer is obliged to pay interest on the price of the goods for the period between the
goods. delivery of the goods and the payment of the price if the thing sold produces fruits or income.
44. The buyer may suspend the payment of the price of the thing purchased by reason of 20. D 50. D 80. D 110. B
trespass on the thing. 21. D 51. B 81. C 111. A
45. A stipulation that the sale of an immovable is automatically rescinded upon the default of the 22. B 52. A 82. C 112. A
buyer in the payment of the price is valid. 23. D 53. B 83. C 113. A
46. In conventional redemption, the creditors of the vendor may make use of the right of 24. C 54. D 84. D 114. A
redemption against the vendee although they have not exhausted the properties of the 25. A 55. C 85. B 115. B
vendor. 26. B 56. B 86. D 116. C
47. In case of doubt, a contract purporting to be a sale with a right to repurchase shall be 27. D 57. D 87. D 117. A
construed as an equitable mortgage, 28. C 58. C 88. A 118. B
48. For an assignment of credit to be binding against third persons if a movable property is 29. D 59. C 89. B 119. C
involved, the same must be in a public instrument and recorded in the Registry of Property. 30. B 60. B 90. D 120. D
49. A debtor who has paid his creditor before he learns of the assignment of his debt shall be 121. C 131. A 141. A 151. A
released from his liability to the assignee. 122. B 132. C 142. B 152. D
50. The debtor's consent is required for the validity of the assignment of the credit made by his 123. D 133. B 143. B 153. C
creditor to another person. 124. A 134. D 144. A 154. A
125. B 135. C •145. B 155. B
ANSWERS TO DIAGNOSTIC EXERCISES 126. A 136. B 146. C 156. C
SALES 127. A 137. A 147. A 157. A
TEST I - MULTIPLE CHOICE 128. C 138. D 148. D 158. B
129. D 139. A 149. D 159. A
1. B 31. D 61. A 91. B 130. C 140. B 150. A 160. A
2. D 32. D 62. B 92. A
3. B 33. C 63. D 93. C TEST II -MATCHING TYPE
4. D 34. A 64. B 94. D 1. U 11. HH 21. R 31. BB 41. W
5. D 35. C 65. D 95. D 2. FF 12. B 22. 00 32. Y 42. AA
6. D 36. B 66. A 96. D 3. GG 13. W 23. Z 33. DD 43. S
7. D 37. B 67. C 97. C 4. RR 14. SS 24. QQ 34. G 44. H
8. B 38. B 68. C 98. C 5. NN 15. I 25. MM 35. L 45. K
9. C 39. A 69. D 99. C 6. KK 16. A 26. JJ 36. X 46. WW
10. C 40. D 70. A 100. B 7. UU 17. C 27. TT 37. LL 47. E
11. B 41. A 71. A 101. C 8. CC 18. EE 28. N 38. Q 48. F
12. B 42. C 72. C 102. A 9. II 19. XX 29. P 39. J 49. M
13. C 43. D 73. C 103. D 10. PP 20. D 30. T 40. V 50. O
14. B 44. A 74. C 104. C
15. B 45. D 75. C 105. A TEST III-TRUE OR FALSE
16. B 46. D 76. C 106. D 1. FALSE 11. TRUE 21. FALSE 31. TRUE 41. FALSE
17. C 47. C 77. B 107. A 2. FALSE 12. FALSE 22. TRUE 32. TRUE 42. FALSE
18. A 48. C 78. B 108. A 3. FALSE 13. TRUE 23. TRUE 33. FALSE 43. TRUE
19. B 49. B 79. A 109. A 4. FALSE 14. TRUE 24. TRUE 34. FALSE 44. FALSE
5. TRUE 15. TRUE 25. TRUE 35. TRUE 45. FALSE
6. TRUE 16. TRUE 26. TRUE 36. TRUE 46. FALSE
7. TRUE 17. FALSE 27. FALSE 37. TRUE 47. TRUE
8. TRUE 18. TRUE 28. TRUE 38. TRUE 48. FALSE
9. TRUE 19. TRUE 29. TRUE 39. FALSE 49. TRUE
10. TRUE 20. FALSE 30. FALSE 40. TRUE 50. FALSE