1.

Define the following terms:

a. Nature of an option contract

It gives the party granted the option the right to decide, whether or not to enter into a

principal contract, while it binds the party who has given the option, not to enter into the

principal contract with any other person during the agreed time and within that period, to

enter into such contract with the one to whom the option was granted if the latter should

decide to use the option.

An option is a contract. It is a preparatory contract, separate and distinct from the main

contract itself (subject matter of the option) which the parties may enter into upon the

consummation of the option.

b. Policitation

A unilateral promise or offer to sell or to buy a thing which is not accepted creates no

juridical effect or legal bond.

c. Right of first refusal a right to purchase property only if it is offered for sale in the

future.

d. Earnest Money
Earnest money is something of value given by the buyer to the seller to show that the

buyer is really in earnest, and to bind the bargain. It is actually a partial payment of the

purchase price and is considered as proof of the perfection of the contract.

e. Unpaid seller and his rights the unpaid seller of goods who is in possession of them

is entitled to retain possession of them until payment or tender of the price in the

following cases, namely:

(a) where the goods have been sold without any stipulation as to credit; (b)

where the goods have been sold on credit, but the term of credit has expired; (c)

where the buyer becomes insolvent.

The seller may exercise his right of lien notwithstanding that he is in possession of the

goods as agent or bailee for the buyer

f. Caveat Emptor there is no implied condition or warranty as to quality or fitness

for any particular purpose of goods supplied

g. Purchaser in good faith

A purchaser in good faith and for value is one who buys property without notice that

some other person has a right to or interest in such property and pays its fair price

before he has notice of the adverse claims and interest of another person in the same

property.

h. Warranty against hidden defects

The vendor shall be responsible for warranty against the hidden defects which the thing

sold may have, should they render it unfit for the use for which it is intended, or should

they diminish its fitness for such use to such an extent that, had the vendee been aware

thereof, he would not have acquired it or would have given a lower price for it; but said

vendor shall not be answerable for patent defects or those which may be visible, or for
those which are not visible if the vendee is an expert who, by reason of his trade or

profession, should have known them.

i. Pacto de Retro Sale

The sale wherein the seller has the right to repurchase the subject matter or the

property being sold.The essence of a pacto de retro sale is that the title and ownership

of the property sold transfers immediately to the vendee a retro.

2. Enumerate completely the objects of the contract of sale

a. Existing goods – goods owned or possessed by the seller

b. Future goods – goods to be manufactured, raised, or acquired by the seller after the

perfection of the contract of sale.

3. What are the remedies in case of violation of warranty against hidden defects?

Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer

can accept or keep the goods and maintain an action against the seller for damages. In

the absence of an existing express warranty on the part of the respondent, the

allegations in petitioner’s complaint for damages were clearly anchored on the

enforcement of an implied warranty against hidden defects, i.e., that the engine of the

vehicle which respondent had sold to him was not defective.

4. What are the rules in case the consideration agreed upon in a contract is money or

property or partly money or property? Give example

a. Accion redhibitoria – to withdraw from the contract

b. Accion quanti minoris – to demand a proportionate reduction of the

price, with a right to damages in either case.

5. Distinguish the following:

a. Sale and contract to sell

The contract of sale is an agreement whereby one of the parties (called the seller or

vendor) obligates himself to deliver something to the other (called the buyer or

purchaser or vendee) who, on his part, binds himself to pay therefor a sum of money or

its equivalent (known as the price). On the other hand, a contract to sell may be defined

as a bilateral contract whereby the prospective seller, while expressly reserving the

ownership of the subject property despite delivery thereof to the prospective buyer,

binds himself to sell the said property exclusively to the prospective buyer upon

fulfillment of the condition agreed upon, that is, full payment of the purchase price.

b. Contract to sell and conditional contract of sale

In a contract to sell, upon the fulfillment of the suspensive condition which is the full

payment of the purchase price, ownership will not automatically transfer to the buyer

although the property may have been previously delivered to him. The prospective seller

still has to convey title to the prospective buyer by entering into a contract of absolute

sale to consummate the transaction.

In a conditional contract of sale, however, upon the fulfillment of the suspensive

condition, the sale becomes absolute and this will definitely affect the seller’s title

thereto.
c. emption rei speratae and emptio spei

Emptio rei speratae (sale of thing expected) is the sale of a thing not yet in existence

subject to the condition that the thing will exist and on failure of the condition, the

contract becomes ineffective and hence, the buyer has no obligation to pay the price.

On the other hand, emptio spei is the sale of the hope itself that the thing will come into

existence, where it is agreed that the buyer will pay the price even if the thing does not

eventually exist.

6. On November 20, 2020, a person identifying himself to be Prof. X, an alleged

PCU College Dean, called up Mr. A asking for the delivery of the books to him. They

were delivered covered by an invoice and a delivery receipt. He then sold 120 of the

books to

Mr. B, who, after verifying the seller’s ownership from the invoice he showed her, paid

him P2,000.00 through a check. Thereafter, he again placed a second order, making

Mr. A suspicious, hence, inquiry were made at PCU but he was informed that no such

person was employed at the said school. The check he issued also bounced. With the

aid of NBI agents, Professor X was able to get back the books from Mr. B without

warrant. Hence, an action to recover them was filed by Mr. A.

Was Mr. A unlawfully deprive as to entitle him to recover the books considering

that the check issued to him bounced? Why? Cite related provisions of the law.

(3%)

Article 1506. Where the seller of goods has an invalid title, but his title has not been

avoided at the time of sale, the buyer shall acquire a good title in respect of the goods,
provided that the buyer purchases the goods in good faith, for value and without notice

of the defect of title of the seller.

7. X, the owner of a parcel of land, sold the same to B, but the document evidencing

the sale was not registered with the proper Registry of Deed. One year later, he sold it

again to C who registered the document and obtained a title over the same. Who has a

better a right over the parcel of land? Why? (3%)

- C has a better right over the parcel of land because in good faith, he is the first

registrant and in the case of immovable property. According to Article 1544 second

paragraph, the property belongs to the person acquiring it who first registered it in the

Registry of Property in good faith.

8. X stole the ring belonging to Y and sold it to Z. Suppose Y finds it in the possession

of Z, can she recover it from Z? Why?

Y will recover it from Z because Art. 1505 claimed that when goods are sold by a person

who is not its owner and who does not sell them under the authority or with the owner's

permission, the buyer (Z) does not have a better title to the goods than the seller had.

9. A and B entered into a contract of sale of land subject to the condition that the

squatters be ejected. It was contended by A that since he failed to meet the

condition he was no longer obligated to proceed with the sale as the contract is void

due to the failure to comply with such condition. Rule on A’s contention. (3%)

Art. of 1546. Any statement of fact or any promise relating to the thing by the seller is an

express warranty if the inherent tendency of such assertion or promise is to persuade

the buyer to buy the same and if the buyer buys the thing that depends on it. No

assertion of the value of the object, nor any statement claiming to be just a statement of

the opinion of the seller, shall be construed as a guarantee, unless the seller has made

such an assertion or statement as an expert and it has been relied on the buyer

10. What are the rights of a vendee of a parcel of land who has made partial payment

and entry into the land despite the fact that the sale is merely oral? (3%)

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered

as part of the price and as proof of the perfection of the contract.

11. X offered to sell his property to Y, giving him a period of one (1) month to accept the

offer. Give the rule if a period is given to the offered within which to accept the offer.

(2%)

Article 1475. At the moment of a meeting of minds on the item that is the object of the

contract and on the price, the contract of sale is perfected. From that moment, the

parties, subject to the provisions of the law regulating the form of contracts, may

reciprocally request results.

12. What is the form of a contract of sale? (2%)

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable

statute, a contract of sale may be made in writing, or by word of mouth, or partly in

writing and partly by word of mouth, or may be inferred from the conduct of the parties.

13. What are the remedies of a seller of a movable property payable on instalment basis

in case the buyer defaults in the payment of his obligation? How about the remedies
 of a seller in case of sale of immovable properties and the buyer likewise defaulted

in his instalment payment? (2%)

Remedies of a seller of a movable property payable on instalment basis in case the

buyer defaults in the payment of his obligation:
a. Exact fulfilment of the obligation, should the vendee fail to pay.
b. Cancel the sale, should the vendee`s failure to pay cover two or more
instalments
c. Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee`s failure to pay cover two or more instalments. In this case,
he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.

Remedies of a seller in case of sale of immovable properties and the buyer

likewise defaulted in his instalment payment:
a. To demand the resolution of the contract from the buyer judicially or by a
notarial act, before that stipulation could be given effect. Otherwise, the buyer
could still pay the price even after the expiration of the period to pay.

If the contract is cancelled, the seller shall refund to the buyer in case the surrender

value of payments made, equivalent to 50% of total payments and an additional 5% for

every year after five years of the life on the contract and its extensions.

14. XYZ Corporation, a dealer in appliance, sold to Mr. T a television set for P20,000.00

payable on installment basis at the rate of P1,000.00 per month. Mr.T executed a

chattel mortgage over the thing sold. when Mr. T defaulted in the payment of his

obligation, ABC corp. foreclosed the mortgage.at the sale, only P10,000.00 was

realized. can the seller recover the deficiency? Why? (4%)

Yes, the seller can recover the deficiency because, art.1484 stated the remedies of the

seller which (1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should

the vendee's failure to pay cover two or more installments. In this case, he shall

have no further action against the purchaser to recover any unpaid balance of the

price. Any agreement to the contrary shall be void.

15. X purchased on instalment basis a car from ABC corp. Having failed to pay his

instalments, the corporation sued X for replevin and seized the unit; sold it but it failed to

realize the balance of X in the sheriff’s sale. Can ABC Corp. recover the balance? Why?

(2%)

Yes, ABC Corp will recover the balance because while X succeeded in replevin and

confiscated the unit, chattel mortgage foreclosure is far in action.

16. A purchased a car from ABC Corp. on installment basis. As security for the

payment of his obligation, he executed a chattel mortgage over the car and another and

another chattel mortgage over another car belonging to him. A failed to pay his

obligation, hence,

ABC Corp. foreclosed the second mortgage. Was the foreclosure proper? Why? (4%)

No, since one of the vendor's remedies is to foreclose the chattel mortgage, if one has

been created, if two or more instalments have not been paid by the vendor and A has

not even paid the first instalment.

17. There was a forcible entry case filed against the defendants by the plaintiff where

the court ruled in favor of the plaintiff, holding the defendant liable for damages, etc. To

satisfy the judgment, the sheriff sold at public auction a parcel of land belonging to the
defendants to the plaintiff, but it was made to appear that the sale was made in favor of

a certain Jomari which was in turn sold to the wife of the lawyer of the plaintiff. Is the

sale valid? Why? (3%)

Answer: As stated in Article 1491, there are people that cannot acquire the property in

the public auction. In this case however, the sale is valid because the wife of the lawyer

of plaintiff is not listed in Art. 1491.

18. A and B are negotiationg for the sale of a car, but before the contract can be

perfected, the car got lost. Who shall bear the lost? Why? State the principle and the

rules. (3%)

The seller bears the lost. The principle of res perit domino is the concept that the owner

bears the risk of loss and deterioration because ownership is not transferred until

delivery.

Rule on Risk of Loss and Deterioration:

Before Perfection: Seller bears the risk

At the time of perfection: Contract is VOID or inexistence

At the time of sale: if entirely lost, contract is VOID or inexistence. If partially lost,

vendee may elect between withdrawing or demanding the remaining part.

After perfection but before delivery: risk of loss is shifted to the buyer but stipulation
After delivery: buyer bears the risk. Unless delivery was delayed through the fault of

either parties, the risk is with the party in fault; and when the ownership of the goods

has been retained by the seller.

19. X and Y are married. In 1985, they entered into a contract of sale over a parcel of

land. A friend of X, the seller of the land to his wife, lent money to money X in 1989.

Can he question the validity of the sale? Why? (3%)

Yes, the fairness of the sale can be disputed because Article 1490 claimed that

the husband and wife were unable to sell land to each other.

20. A, the owner of a parcel of land, sold the same to B, but the document was not

registered. One year later, he sold it again to C who registered the document and

obtained a title over the same. Who has a better right over the parcel of land? Why?

(3%) C has a better claim over the parcel of land since in good faith and Art. 1544

second paragraph, he is the first registrant. If it is immovable property, the property

shall belong to the person obtaining it who first registered it in the Registry of

Property in good faith.

21. In a simple case of double sale of an immovable property, the owner sold it to a

buyer merely in a private instrument. Later on, it was sold to another, this time in a

public instrument and registered at that. The second buyer knew of the first sale.

Between the first and the second buyer, who has a better right? Why? (3%)

The first buyer has a better right because the second buyer is in bad faith because he

already knew the first sale but still continued the transaction.

22. X is the owner of a parcel of land covered by a title. He sold it to Y, but the latter

failed to register. X sold it to Z one year later. Before Z registered the sale, he came
 to know of the sale between X and Y. Between Y and Z, who has a better right?

Why? (3%)

Y has a better right because even though Z registered it first, he is still in bad faith

because he knew the sale between X and Y.

23. X is the owner of a parcel of land. He sold it to Y who did not register the deed of
sale.

Later on, X mortgaged the same land to Z. Between the two contracts, which shall

prevail? (3%)

The contract between X and Z shall prevail if Z doesn`t know the first sale which is the

sale between Y and Z.

24. In an action for annulment of documents and reconveyance with damages, X

contended that he never authorized anyone to sell his real property. He alleged that

his wife was in possession of the title; but when his wife went abroad, he found out

that his title was missing. He discovered that there was a sale by his wife over the

said property supported by a General Power of Attorney. His title was cancelled

under the name of Y.

Can he recover the property? Why? (3%)

Yes, he can still recover his property because accordint to article 1614, each one of the

co-owners of an undivided immovable who may have sold his share separately, may

independently exercise the right of repurchase as regards his own share, and the

vendee cannot compel him to redeem the whole property.

25. X and Y entered into a contract of sale over X’s car. X delivered the car, but no time

has been fixed for the payment. Can X require Y to pay? (3%)

No, because the price should be certain as stated in the art. 1469. In order for the price

to be considered certain, it shall be sufficient that it be so with reference to another thing

certain, or that the determination thereof be left to the judgment of a special person or

persons.

26. A and B entered into a contract of sale of rice with the condition that delivery shall

be made on October 5. B delivered the goods in November 5 which B accepted. On

November 8, B asked for damages due to A’s delay. Is the action proper? Why?

(3%)

Yes, according to Article 1721, the value of the compensation shall, on the other hand,

be determined on the basis of the length of the delay and the amount of the

compensation compensated for, and on the other hand, on the basis of the costs saved

by the contractor as a result of the delay, or on the other hand, on the basis of the

differential employment of his time and industry.

27. What is the effect of the delivery of the goods to the carrier by the seller? (2%)

Article 1503. When there is a contract of sale of specific goods, the seller may, by the

terms of the contract, reserve the right of possession or ownership in the goods until

certain conditions have been fulfilled. The right of possession or ownership may be thus

reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other

bailee for the purpose of transmission to the buyer.

28. A and B entered into a contract of sale of a parcel of land with improvement thereon.

The buyer B shall pay the price on December 1, with the condition that if B will not

pay, the contract shall be considered as automatically rescinded. If B will not pay on

December

1, can he still pay on December 12? Why? (3%)

No, because it is automatically rescinded if B will not pay on Dec. 1 in accordance to the

condition.

29. When is a contract deemed to be an equitable mortgage? When can there be a

presumption that a contract of sale is one of equitable mortgage? (2%)

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to re-purchase another instrument

extending the period of redemption or granting a new period is executed; (4) When

the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties

is that the transaction shall secure the payment of a debt or the performance of any

other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the

vendee as rent or otherwise shall be considered as interest which shall be subject to the

usury laws. (n)