M4 Sales & Consumer Protection

Law on Sales – Sell or Buy

Contact of Sale
 one of the contracting parties obligates himself to transfer the ownership and to deliver
a determinate thing, and the other to pay for a price certain in money or its equivalent.
 Consensual contract

Contract for a Piece of Work - goods are to be manufactured specially for the customer and
upon his special order, and not for the general market

Barter - consideration consists of partly in money and thing; intention not clear, it shall be
considered a barter if the value of the thing given exceeds the amount of the money or its
equivalent.

Promise to Buy and Sell - reciprocally demandable

Accepted Unilateral Promise to Buy or Sell - binding when supported by a consideration

distinct from the price

Parties in Contract of Sale

Things in Contract of Sale

• Determinate • Potential existence, mere
• Licit hope or expectancy, and
• Free disposal (vendor vain hope or expectancy
must have a right to • Undivided Interest
transfer the • Fungible Goods
ownership at the time
of delivery)
• Future Goods
 Price in Contract of Sale
Certain
 Reference to another thing
 Determination left to a special person, his inability or unwillingness - contract is
inefficacious

Earnest Money - part of the price and proof of perfection

No price - contract is inefficacious

Rules on Ownership and Delivery

Ownership is transferred (acquired by the vendee) upon actual or constructive delivery except
when parties stipulate that ownership shall not pass until price is fully paid
 Delivery - thing accessions, accessories, and in the condition which they were at
the perfection of the contract) placed in the possession and control of the
vendee
 Place of Delivery - stipulation, usage of trade, seller's place or business, or some
other place (where the thing is)
 Time of Delivery - stipulation, reasonable period of time
 Expenses for the Delivery including the execution and registration of sale -
Vendor

Delivery to Carrier
 Delivery to carrier is delivery to the buyer
 Seller as agent of buyer when contracting with carrier
 Contract with carrier in behalf of buyer
 Consider the nature of goods and circumstances of the case
 Notice to buver of circumstance

Risk Of Loss Of Goods

Seller > BUYER
Before > After delivery
Ownership is transferred, regardless of delivery
Delivered to buyer but ownership retained by sell
Delay in actual delivery due to his fault

Status of SPECIFIC THING at the time of PERFECTION

Deterioration Buyer's option:
(without knowledge of seller) (1) Avoid the sale,
or
(2) Valid as to
Loss existingContract
goods without effect
(Partial loss - proportionate)
Sale by Auction
 Perfected when the auctioneer announces its perfection by fall of the hammer
 Seller may not bid unless such right is expressly reserved

Sale by Sample
 when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is
not present and there is no opportunity to inspect or examine the same
 the sample is treated as the standard of quality and that the product to be delivered
would correspond to the sample

Sale by description
 when a seller sells things as being of a particular kind, the buyer not knowing whether
the seller's representations are true or false, but relying on them as true

 the buyer has not seen the article sold and relies on the description given to him by the
seller

Art. 1484
Sale of Personal Property bv Installment
Lease of Personal Property with Option to Buy
(Recto Law)
 Exact Fullfilment
 Cancel The Sale
 Foreclose the Chattel Mortgage

Obligations of the Vendor:

1. To deliver
 2. Transfer the ownership of, and
3. Warrant
 Thing which is the object of sale

Delivery of the Thing Sold:

1. ACTUAL
2. CONSTRUCTIVE
A. Immovable and incorporeal rights/ intangible property
1. Execution of public instrument
B. Movable
1. Traditio Symbolica
2. Traditio Brevi Manu
3. Constitutum Possessorium
4. Traditio Longa Manu
5. Agreement of Consent

SALE OR RETURN SALE ON TRIAL

 Ownership  Ownership passes to the vendee
passes to the when he signifies acceptance or
vendee retains without giving
upon delivery objection

 Reversion of  Sale on Satisfaction

ownership to
the
vendor by
return

Module 4 - November 19

Warranty as to Fitness of Goods

• Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the buyer relies on the
seller's skill or judgment

Warranty as to Merchantible Quality

• Where the goods are brought by description from a seller who deals in goods of
that description
Obligations of the Vendee
• To accept delivery and to pay the price of the thing sold at the time and place
stipulated in the contract, otherwise, payment must be made at the time an place of delivery

Rules on Acceptance
1. Prior to acceptance, the vendee has the right to examine, except when the goods
are delivered to the carrier, in such case, the vendee can exercise his/her right after payment
A. Express Acceptance - vendee intimates to the seller that he has accepted them
B. Implied Acceptance - vendee does any act which is inconsistent with the
ownership of the seller, or retains the goods (beyond reasonable time) without
intimating to the seller that he has rejected them
2. Acceptance shall not discharge the vendor from liability, except when vendee
failed to notify the vendor of such breach within reasonable period of time after knowledge
3. Refusal or rejection to accept by the vendee does not obligate him to return to
the vendor, it is sufficient that he notifies the vendor of his refusal or rejection, except when
the goods are delivered to the carrier, title thereto passes to him from the moment they are
placed at his disposal

Vendee can Suspend Payment

• When he is disturbed in the possession or ownership of the thing, or should he
have reasonable grounds to fear such disturbance, unless the vendor gives security for the
return of the price
Note: Disturbance mean any vindicatory action or foreclosure mortgage
and not a mere act of trespass

Remedies of the Vendor (1)

• Action for the Price of Goods - vendee wrongfully neglects or refuses to pay the
price when (a) ownership has passed, (b) ownership has not passed and price is payable on a
certain day, or (c) ownership has not passed but they cannot be resold at reasonable price
[when the vendor offering to deliver but the vendee refuses and the vendor has notified the
vendee that he is holding the goods for vendee as bailee]

Remedies of the Vendor

• Rescission - when the goods were not delivered, and the vendee (a) repudiated,
(b) manifested his inability to perform his obligations, or (c) has committed a breach

When may the vendor exercise his

right to rescind?
 1. If he have reasonable grounds to fear the loss of immovable property sold and
its price
2. If the vendee, upon the expiration of the period fixed for the delivery of the
thing, should not have appeared to receive it
3. If the vendee after receiving, did not tender price (unless a longer period has
been stipulated for its payment)

Vendee's Option
(Automatic Rescission in Sale of Immovable Property)
• Though it may have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act. After the demand, the court may not grant
him a new term.

Remedies of the Vendee [1]

Specific Performance
• When the vendor broke his contract to deliver specific or ascertained goods

Remedies of the Vendee [2]

(for Breach of Warranty by the Vendor)
• Accept the goods and set up against the seller, the breach of warranty by way of
recoupment in diminution or extinction of the price
• Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty
• Refuse to accept the goods, and maintain an action against the seller for
damages for the breach of warranty

Measure of Damages
(Breach of Warranty of Quality)
special circumstances showing PROXIMATE DAMAGES -> DAMAGE "A"

value of the goods at the time of delivery

less: value they would have had, if not for the defect
———————————————————1
DAMAGES "B"

the higher
between DAMAGES A
and DAMAGES B
Remedies of the Vendee [3]
(for Breach of Warranty by the Vendor)
• Refuse to receive the goods, rescind the contract of sale and and recover the
price paid
• Return the goods received, rescind the contract of sale and and recover the price
paid, however, he cannot rescind if (a) he knew of the breach of warranty when he accepted
the goods without protest, (b) he fails to notify the seller within a reasonable time of the
election to rescind, or (c) he fails to return or to offer to return the goods to the seller in
substantially as good condition as they were in at the time the ownership was transferred to
the buyer except when the deterioration is due to the breach or warranty

Effect of Rescission by the Vendee

(for Breach of Warranty)
• As to price - Vendee cease to be liable for the price upon returning or offering to
return the goods, if price paid, the vendor shall repay
• As to goods - Vendee deemed to hold the goods as bailee for the seller, if the
seller refuses to accept, with vendee's lien for price which has been paid

Extinguishment of Sale
GENERAL
1. Payment or Performance
2. Loss of Specific Thing
3. Compensation
4. Condonation
5. Confusion
6. Novation

SPECIAL
1. Redemption
a. Conventional Redemption
b. Legal Redemption
2. Equitable Mortgage

Conventional Redemption
The vendor reserves the right to repurchase the thing sold, with the obligation to:
1. Return to the vendee the:
A. Price of the sale,
B. Expenses of the contract, and
C. Necessary and useful expenses made on the thing sold; and
2. Comply with other stipulations which may have been agreed upon.
Should the vendee be reimbursed by the
vendor-redemptioner/repurchaser for the fruits
existing at the time of redemption?
• No Reimbursement - if at the time of the execution of the sale there be visible or
growing fruits on the land, and no indemnity was paid by the purchaser
• Pro-rated Reimbursement - if at the time of the execution of the sale there are
no fruits on the land, they shall be prorated between the redemptioner and the vendee

Reformation
of Contract

Absolute Sale
Conventional Redemption

Equittable
Mortgage

The contract of sale will be treated as that of

equitable mortgage in the following circumstances:
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 repurchase 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.

CONTRACT TO SELL
CONDITIONAL SALE
ABSOLUTE SALE
PACTO DE RETRO SALE
PACTO COMMISSORIO

PERIOD OF CONVENTIONAL REDEMPTION

• with stipulation as to period
+ ten (10) years from the date of contract
• without stipulation as to period
+ four (4) years from the date of contract
 • civil action
• thirty (30) days from final judgement

When the vendor failed to redeem:

1. The vendee can apply for Consolidation of Ownership
2. The vendor will be summoned in the court proceedings
3. Judicial Order shall be recorded in the Registry of Property

Redemption Right - REAL RIGHT

• Vendor can enforce against every possessor whose right is derived from the
vendee, without prejudice to the provisions of the Mortgage Law
• Vendor's creditors cannot make use of the right of redemption against the
vendee, until after they have exhausted the property of the vendor.

Redemption in Undivided Immovable

• The vendor who is either a co-owner or a co-heir may not exercise his
redemption right more than his respective share.
• The action by the vendor for redemption must be brought against all the
vendee's heirs, individually for his share, except when the inheritance has been divided, and the
thing sold has been awarded to one of the heirs.
• The vendee may compel the vendor/co-owners to redeem the whole property
and he cannot be compelled to consent to partial redemption, except when, each of the co-
owners sold their share separately.

Effect of Redemption
• The vendor who recovers the thing sold shall receive it free from all charges or
mortgages constituted by the vendee, but A he shall respect the leases which the vendee may
have executed in good faith.

Legal Redemption
• The right to be subrogated, upon the same terms and conditions stipulated in
the contract, in the place of one who acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted by onerous title.

Legal Right of Redemption

1. A co-owner of a thing as to the share of a co-owner sold to third person (two or
more co-owners redeeming, pro-rata)
2. An owner of adjoining rural land, an area not exceeding one hectare (two or
more adjoining owners, the one with smaller land or the one who first requested)
 3. A The right of redemption of co-owners excludes that of adjoining owners.

Pre-emption
1. Adjoining owner of a small piece of urban land (preference given to the one
whose intended use appears to be best justified)
2. Exercised within thirty (30) days from the written notice by the vendor or
prospective vendor
3. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice to all possible
redemptioners

Assignment
(Credit and Other Incorporeal Rights)
• Perfected by meeting of the minds but shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the Registry
of Property.
• It includes all the accessory rights, such as a guaranty, mortgage, pledge or
preference.

Effect of Assignment
• To the Debtor of the Credit The debtor who pays his creditor, before having
knowledge of the assignment, shall be released from the obligation.

Warranties of the Vendor/Assignor/Creditor

ASSIGNMENT OF CREDIT
• Existence and legality of the credit at the time of the sale, but not for the
solvency of the debtor, unless the insolvency is of common knowledge or unless expressly
•
•
• stipulated. Period of Warranty on Solvency Period of Payment
one (1) year from assignment - Expired
one (1) year from maturity - Not yet expired

Warranties of the Vendor/Assignor/Creditor

• For sale of inheritance - the character as an heir.
• For a lump sum sale or assignment of certain rights, rents, or products - the
legitimacy of the whole.

Unless otherwise stipulated, the assignment

of inheritance shall have the following effects:
• The vendor/assignor shall pay the vendee any profits derived from the fruits
received from the inheritance sold
 • The vendee/assignee shall reimburse the vendor for all the vendor may have
paid for the debts of and charges on the estate Not applicable to: assignment to a co-heir or co-
owner of the right assigned

The effect of assignment of a credit or other

incorporeal right in litigation:
• The debtor can extinguish it by reimbursing the assignee for the price paid, the
judicial costs incurred, and the interest on the price from the day on which the same was paid.
• The debtor may exercise his right within thirty days from the date the assignee
demands payment from him. Not applicable to: assignment to a creditor in payment of his
credit; and assignment to the possessor of a tenement or piece of land which is subject to the
right in litigation assigned.