SALES
Articles / Laws to Remember: 1458, 1467, 1477 transfer of ownership, 1505, 559 who can transfer xxx, 1504, 1544, 1484 Recto Law, R.A. 6552, 1602, 1606, 1620, 1623, Redemption xxx
Q: A obliged himself to deliver a certain thing to B. Upon delivery, B would pay a sum of money to A. Is that a contract of sale?
A: Not necessarily. Even if there is an obligation to deliver, if there is no obligation to transfer ownership, it will not be a contract of sale. It may be a contact of lease.
Memorize: Art. 1458
Note: Sale is a contract, so the general principles in oblicon are applicable to sale but note that there are provisions which are contrary.
Characteristics of Contract of Sale (COS)
1. Consensual (1475) COS is consensual, it is perfected by mere meeting of the minds of the parties as to the object and price.
Note: There is 1 special law which requires a particular form for the validity of a contract of sale in that sale, it can be said that kind of sale is a formal contract . Cattle Registration Decree. In a sale of large cattle, the law
provides that the contract of sale of large cattle must be: in a public
instrument, registered and a certificate of title should be obtained in order for the sale to be valid. But otherwise, the other contracts are perfected by mere consent or mere meeting of the minds.
2. Principal sale is a principal contract, it can stand on its own. It does not depend on other contracts for its existence and validity.
3. Bilateral (1458) necessarily in a COS, both parties will be obligated. It is not possible that only 1 party is obligated because a contract of sale is essentially onerous.
4. Onerous (1350) COS is essentially onerous. Otherwise, it may be
another contract or any other act like it may be a donation if there is no compensation for the transfer of ownership to the other party.
5. Commutative (2010) meaning there is equivalency in the value of the prestation to be performed by both parties. Normally, the thing sold would be equal to the price paid by the other party (buyer).
Exception: a contract of sale which is an aleatory contract like sale of hope. In sale of hope, the obligation of 1 party will arise upon the happening of a certain event or condition.
Example Sale of Hope: Sale of a lotto ticket, PCSO will have the obligation to pay you only if you got all the 4 or 6 numbers which are drawn
Another Example of Aleatory: Insurance 6. Nominate (1458)
Classification of Contract of Sale 1. As to Nature of Subject Matter a. Movable
b. Immovable
Q: Why there is a need to determine?
A: Because some concepts will apply if the object is movable or some laws will apply if the object is immovable.
if movable or immovable in order that statute of frauds will apply. The Recto law will apply if the object is movable. The Maceda law will apply if the
object is realty. Article 1544 or Double Sale will require you to determine the nature of the subject matter.
2. As to Nature a. Thing
b. Right
Q: Why there is a need to determine? A: Relevant in the mode of delivery Distinctions
1. Deed of Absolute Sale (DAS) vs. Conditional Sale (CS) vs. Contract to Sell (CTS)
2. Dation in Payment (DIP) vs. COS
3. Contract for a Piece of Work (CPW) vs. COS 4. Barter vs. COS
5. Agency to Sell (ATS) vs. COS
Deed of Absolute Sale (DAS) vs. Conditional Sale (CS) vs. Contract to Sell (CTS)
DAS seller does not reserve his title over the thing sold and thus, upon delivery of the thing, ownership passes regardless of whether or not the buyer has paid.
CS -condition/s are imposed by the seller before ownership will pass. Normally, the condition is the full payment of the price. In CS, ownership automatically passes to the buyer from the moment the condition happens. There is no need for another contract to be entered into.
BE: Receipt was issued by A to B. The receipt s tenor Date of the receipt xxx Received from B the sum of P75,000.00 as partial payment for the car xxx the balance to be paid at the end of the month xxx . Contract to Sell?
SA: No. It does not pertain to a CTS because in a CTS ownership is
reserved by the seller despite delivery to the buyer. The buyer does not acquire ownership. This is an Absolute Sale.
Q: In a CTS, upon the happening of the condition/s imposed by the seller, would ownership automatically pass to buyer?
A: No. While a CTS is considered a special kind of conditional sale, it is a peculiar kind of sale because despite the happening of the condition and actual delivery, the buyer does not automatically acquire ownership. In
CTS, if condition/s happen, the right of the buyer is to compel the seller to execute a final deed of sale. So ownership does not automatically pass.
Dation in Payment (DIP) vs. COSDIP (1245) whereby property is alienated to the c reditor. It is provided that
the law on sales shall govern such transaction. It is specifically provided that the pre-existing obligation must be in money. If not in money and there is DIP, it will not be governed by the law on sales but by the law on novation because practically there is a change in the object of the contract.
Example 1: If A owes B P100,000.00 instead of paying P100,000, he offers B and B accepts the car of A as an equivalent performance . this is DIP and will be governed by the law on sales.
Example 2: If the pre-existing obligation is to deliver a specific horse but instead of delivering the horse, the debtor told his creditor and the creditor accepted, that he will instead deliver his car . it is still DIP but it will not fall
on 1245 but on novation because there is a change in the object of the obligation which would extinguish the obligation.
Note: A guide to distinguish one concept from another is to know the nature, requisites and effects.
1. As to Nature
DIP a special form of payment COS - it is a contract
2. As to RequisitesDIP with a pre-existing obligation COS not a requirement
3. As to Effect
DIP to extinguish the obligation either wholly or partially. COS obligation will arise instead of being extinguished. Contract for a Piece of Work (CPW) vs. COS
BE: A team if basketball players went to a store to buy shoes and out
of the 10 members, 5 of them were able to choose the shoes. Theyagreed to pay th e price upon delivery. The other 4 members were able
to choose but the shoes were not available at that time but they arenormally man ufactured. The last member could not find shoes that
could fit his 16 inches feet and therefore he has to order for such kind of shoes. What transactions were entered into by these players?
SA: 1467 . the first 2 transactions involving a total of 9 players would be considered a COS because the shoes which they ordered are being
manufactured or procured in the ordinary course of business for the general market. However, the last transaction which will be manufactured only
because of the special order of the player and is not ordinarily manufactured for the general market will be considered a CPW which is known as the Massachusetts rule.
Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian Rosapapan November 2008
Massachusetts rule rule in determining whether the contract is a COS or a CPW.
Barter vs. COS
Q: A obliged himself to deliver a determinate car with a market value of P250,000.00. B obliged himself to deliver his watch and P150,000.00 in cash. What kind of contract?
A: First, you have to consider the intention of the parties. They may want this transaction to be considered as a sale or barter and that will prevail. But if the intention of the parties is not clear from their agreement then the nature of the contract will depend on the value of the watch. If the value of the watch is greater than P150,000 then this is barter. If the value of the watch is equal or less than P150,000 then this is sale. The value of the car is irrelevant. What is only relevant is the value of the thing (watch) in relation to the cash to be given by one of the parties.
Agency to Sell (ATS) vs. COS
BE: A gave B the exclusive right to sell his maong pants (he has his
own brand of maong pants) in Isabela. It was stipulated in the contractthat B ha s to pay the price of maong within 30 days from delivery to B.
It was stipulated that B will receive 20% commission (discount) on sale. The maong pants were delivered to B. However, before B could sell the goods, the store was burned without fault of anyone. Can B be compelled to pay the price?
From the wordings of the problem you may have an idea that this is an
agency to sell. If this is an ATS, the fact that the agent has not yet sold the maong pants when they were burned will not result in a liability on his part, there being no negligence on his part because with the delivery of the thing from the principal to the agent, ownership does not pass. Under the
principle in the Civil Code res perit domino it will be the seller (owner) who will bear the loss. But if this transaction is sale then with the delivery o f
the maong pants to B, ownership passed to B because he did not reserve ownership over the pants despite the fact that the other party has not paid the price. So when the pants were burned, it would now be B as the owner who will bear the loss.
SA: This is exactly the case of Quiroga vs. Parsons. Article 1466 in construing a contract containing provisions characteristics of both a COS and ATS, you have to go into the essential clauses of the whole instrument. In this problem, one of the clauses B has to pay the price within 30 days . That would make the contract COS and not ATS because in 30 days from
delivery, whether or not B has already sold those pants to other persons, he is already obliged to pay a price. That is not an ATS. Being a COS,
therefore, after having been delivered, ownership passed to the buyer and hence under res perit domino rule, the buyer bears the loss and therefore he can be compelled to pay the price.
Essential Elements of a Contract of Sale 1. Consent of the Contracting Parties
2. Object or Subject Matter which is a determinate thing or right Note: Service cannot be the subject matter of sale.
3. Cause or Consideration as far as seller is concerned, it is the price in money or the equivalent of the payment of the price.
A. No consent of one or both of the parties
. the contract is void. Under the law on sales, it is a fictitious contract where the signature of one of the parties was forged. Normally, the seller s signature is forged. If the signature of the seller is forged, that would be a fictitious contract. The alleged seller will not have participation in the execution of the contract. But another kind of contract recognized in the Civil Code is a simulated contract.
Simulated parties to this contract actually would have participation. They would voluntarily sign in the deed of sale. However, they do not intend to be bound at all or they may intend to be bound to another contract but they executed a deed of sale. Thus, the law would ratify these contracts considering there is a simulated sale.
Kinds of Simulated Contracts
1. Absolutely Simulated they do not intend to be bound at all. Q: Why would they enter into this kind of sale?
A: To defraud creditors
2. Relatively Simulated sale where they actually intended another contract which normally would be a donation.
B. If consent was given
. If consent was given, it does not necessarily mean that the COS is valid. The consent may be given by an incapacitated person or one with capacity to give consent. If given by an incapacitated person, consider the nature of the incapacity. It may be:
a.
Absolute Incapacity the party cannot give consent to any and all contracts.
b.
Relative Incapacity the party is prohibited from entering sometimes with specific persons and sometimes over specific things.
Kind of Capacity
1. Juridical Capacity it is the fitness to be the subject of legal relations. If a
party to a sale has no juridical capacity, the contract is void. Note that all natural living persons have juridical capacity. Even if he is a 1 day old baby, he has juridical capacity. The baby can be the subject of donation. Even if he is conceived, he has provisional personality.
Example: One example of a party to a sale without juridical capacity would be a corporation not registered with the SEC. The contract entered by this corporation is a void contract because one of the parties has no juridical capacity to enter into that contract.
2. Capacity to Act it is the power to do acts with legal effects. If the incapacity only pertains to capacity to act, the contract would normally be voidable. Without capacity to act or there are restrictions with one s capacity to act such as minority, insanity, deaf mute and does not know how to write and civil interdiction.
Note: Under R.A. 6809 (December 1989) there is no more creature known as unemancipated minor . Before 1989, the age of majority was 21. C. If both parties are incapacitated
. not only voidable but unenforceable.
Q: What if one of the parties in a COS is a minor and the minor actively misrepresented as to his age?
A: The SC said that the minor will be bound to such contract under the principle of estoppel.
Atty. Uribe s Comment: Estoppel is not a good ground because the minor is not aware.
Sale of Necessaries
In sale of necessaries such as food, clothing and medicine to a minor, the minor has to pay a reasonable price. This contract is not voidable. The sale of necessaries will bind the minor and he will be compelled to pay not really the contract price but only to reasonable price.
Relative Incapacity (Articles 1490 and 1491) 1. Sale between spouses it is void except: a.
The spouses executed a marriage settlement and in the
marriage settlement they agreed for a complete separation of property regime. Then they can sell to each other.
b.
If no marriage settlement, they may have obtained judicial
declaration of separation of property. After that, they can sell to each other.
2. Those mentioned in Article 1491 a.
A guardian cannot buy the property of the ward. The guardian is not actually prohibited from entering into any and all contracts. It is just that he cannot be the buyer of a property of his ward.
b.
An agent cannot buy without the consent of the principal a property which he was supposed to sell or administer. c.
The executors and administrators of the estate cannot buy a property which is part of the estate.
d.
Public officers, judges, their staff, clerk of court, stenographers and lawyers are prohibited from buying those properties which
are the subject of litigation during the pendency of the case. Q: What is the status of the contracts under 1491?
A:
Prof. Tolentino voidable
Justice Vitug & Prof. Baviera void
Prof. Pineda & Prof. de Leon the first 3 are voidable and the last 3 are void.
The better answer is void because these persons are prohibited from entering into these contracts. Under Article 1409, if the contract is prohibited, it is void.
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3. Aliens are prohibited from acquiring by purchase private lands Take note acquiring which means buying not selling. They can sell.
Exceptions / when aliens can buy: a.
Former natural born Filipino citizen. Under the Constitution they are allowed to buy small land which they can use for residential purpose.
b. Another way of acquiring is by succession but this is not a sale D. Even if consent was given by one with capacity to give consent but if the consent is vitiated
. voidable. FIVUM
E. If the party gave such consent in the name of another without authority of that person or no authority of law
. unenforceable. Take note may be authorized by the person or by law.
Example of authorized by law: notary public has the right to sell in pledge because he has the authority to sell under the law.
OBJECT OR SUBJECT MATTER
The requisites in sale as to thing would almost be the same as the requisites of contracts in general.
1. The thing must be within the commerce of men
Examples: sale of a navigable river is void, sale of a cadaver is void but donation of a cadaver is allowed, sale of human organs is void, things
which are not appropriated like air is void but if appropriated it can be the object of a valid sale.
2. The thing must be licit not contrary to law
Examples: sale of prohibited drugs or shabu is void, sale of marijuana is void, sale of wild flowers or wild animals is void
3. Must be determinate Read Article 1460
RULES AS TO OBJECT OF COS
Q: A obliged himself to deliver and transfer ownership over the palay that will be harvested from a specific parcel of rice land in May 2008. What if by May 2008, no palay was harvested?
a.
What is the status of the sale? b.
May the seller A be held liable for damages for failure to comply with his obligation?
A:
a. Always consider that in a COS there are only 3 requisites. As long as
these 3 were complied, there is a valid sale. In fact, by express provision of law, sale of things having potential existence (emptio rei sperati) is valid. b. Not necessarily because there are excuses to non-performance such
as pestilence, typhoon, flood and therefore his failure to comply is an excuse. But if the reason of the seller is because of his negligence, he cannot find support under Art. 1174.
Sale of Hope (Emptio Spei) Example: Sale of a lotto ticket
Q: Sale of a land to B with a right to repurchase within 1 year which A delivered. On the 3rd month, B sold the land to C. However, on the 9th month, A offered to repurchase the land.
(a) What is the status of the sale between A and C? (b) Who will have a better right over the land?
(Sale with a right to repurchase)
A: (a) Be guided by the fact that a COS is a consensual contract. The mere meeting of the minds as to the object and the price, then there is a valid and perfected sale. Hence, this is a valid sale even if the object of the sale is a sale with a right to repurchase. Article 1465 provides that things subject to a resolutory condition may be the object of a COS.
Atty. Uribe: Mas tamang sabihin since the ownership thereof is subject to a resolutory condition. Hindi naman yung thing is the subject of resolutory condition, it is the ownership over the thing.
If A exercises the right to repurchase and such would be a valid exercise of such right then the ownership of B would be extinguished. The exercise of the right is considered a resolutory condition as to the ownership of B. The fact that the object of the sale is subject to a repurchase will not affect the validity of the sale.
(b) As a rule, it would be A as a seller a retro because he has the right to repurchase assuming his repurchase is valid. C may have a better right if he can claim that he is an innocent purchaser for value. Example: maybe
the right to repurchase was not annotated at the back of the title of the land and he has no actual knowledge. If that is the case, C may have a better
right.
SALE OF RIGHT / ASSIGNMENT OF RIGHT
Assignment of right is not necessarily a sale. If there is a valuable consideration for the assignment, it is a sale. If there is no valuable consideration, it may be a donation or dacion en pago.
Examples of right: credit, shares of stock
Requisite of a right . the only requirement is that the right must not be intransmissible
G.R.: As a rule, rights and obligations arising from contracts are transmissible.
Exceptions:
1. Intransmissible by Nature
2. Intransmissible because of Stipulation 3. Intransmissible because of Law
CAUSE OR PRICE CERTAIN IN MONEY OR ITS EQUIVALENT
Q: A deed of sale was entered into by A and B. The price agreed upon was 1M yen.
(a)
May that be a valid sale? (b)
Can the seller compel the buyer to pay in yen?
A: (a) Yes, it is valid. Basis is Article 1458 because the only
requirement of the law is in money . Even Japanese yen is in money. The law states that it may not even be in money, it may be equivalent like promissory notes whether or not negotiable or letters of credit.
(b) If the contract was entered into today, yes it is valid because of R.A. 8183 which repealed R.A. 529 in 1996. If COS was entered before R.A. 8183, the seller cannot compel even though the contract is valid. The payment has to be made in Philippine money.
Consider the date of the sale. If parties failed to stipulate as to which currency, it has to be in Philippine currency.
Price Must be Certain Q: Who can fix the price?
A: (1) The best way is for the parties to agree as to the price. (2) They may agree that one of them will fix the price.
Q: May the sale be perfected if the agreement of the parties was forone of them to fix the price?
A: Yes, it may be perfected only if the price fixed by the party who was
asked to fix the price was accepted by the other party. If not accepted, there was no meeting of the minds.
Note: The perfection will only be considered at the time of the acceptance of the price fixed by the other party not from the time of the first agreement of the parties.
Q: What if a 3rd person was asked to fix the price A and B agreed that X will fix the price, may the sale be void?
A: Yes, the sale may be void if the third person does not want to fix the price or unable to fix the price. Hence, there was no meeting of the minds. Q: If the 3rd person fixed the price but it was too high or too low or maybe there was fraud committed by the 3rd person or he was in
connivance with one of the parties, may the sale be void?
A: No, because the remedy of the other party is to go to court for the court to fix the price.
Note: Lesion or gross inadequacy of the price does not as a rule invalidate a contract unless otherwise specified by law.
Exception: when otherwise provided by law. Example: Article 1381.
Note: Under the law on sales, if there is gross inadequacy, it may reflect vitiation of consent so the SC would normally enjoin the lower courts to be warned of the possibility of fraud in case of lesion. Lesion must be proven as a fact. It is not presumed.
If there is gross inadequacy, it maybe because actually they intended another contract and that would make the sale a simulated sale and therefore the sale is void.
Example: The value of the property is P1M but only P10,000 was written in the contract because they intended it to be a donation . void.
TIME OF THE PERFECTION OF THE CONTRACT
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Auction Sale
Auction sale is perfected upon the fall of the hammer or any other
customary manner. Thus, before the fall of the hammer in an auction sale, the bidder even if he has already made a bid, he can still withdraw the bid as long as he would do that before the fall of the hammer. Otherwise, (if after the fall of the hammer), there is already a perfected sale.
Q: Can the auctioneer withdraw the goods before the fall of the hammer?
A: As a rule, yes because the sale has not been perfected at the moment unless the bidding or auction has been announced to be without reserve. Note: Before perfection, there is one contract which maybe perfected.
Before perfection meaning in the negotiation stage . this contract is known as the option contract.
Option Contract Sanchez vs. Rigos
Facts: Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2 years within which to decide. (Note: The optionee or promisee or offeree is not bound to purchase but he has the option to buy or purchase). In this case, Sanchez has the option. Before the lapse of 2 years, Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option agreement because no option money (consideration) was given by Sanchez. According to Rigos, the option contract is void.
Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was withdrawn, a perfected COS was created even without option money. In this case, there was no option contract because it was merely an option agreement. Therefore, there was merely an offer on the part of Rigos and once the offer was accepted before it was withdrawn, regardless of whether option money was given and in this case no option money was given, a perfected COS was created.
Note: Iba pag may option money
Q: 2 years within which to decide assuming there was option
money, before the offeree could decide to buy, the offeror withdraw on the 6th month.
(a)
Can the offeree on the 10th month say I would like to buy ?
(b)
Can the buyer compel the seller to sell? A: (a) No.
(b) No, an action for specific performance will not prosper because when he said he will but there was not more offer to be considered. Na-withdraw na eh.
Q: If the offeree files an action for damages, may that action prosper there being option money given?
A: Yes, because with the option money, an option contract is perfected, the offeror is bound to give the offeree, 2 years within which to decide and failure to that he is liable not based on perfected COS but on perfected contract of option.
Option Money (OM) vs. Earnest Money (EM)
OM is not part of the price while EM is part of the price and at the same time, it is a proof of the perfection of the contract.
G.R.: A COS may be in any form. Article 1483 provides that a COS may be
in writing, partly in writing xxx. This provision is exactly the same as Article 1356 in contracts which provides that contracts may be obligatory in
whatever form they may have been entered into provided all the essential requisites are present. But then again even Article 1356 just like Article 1475 would provide for exceptions.
Exceptions: The law may require a particular form for its validity. The Cattle Registration Decree is an example -where the law itself provides for a particular form for the validity of the sale. But the law may require particular form for its enforceability of the sale and that would be 1403 or the statute of frauds. Concretely, the sale of a parcel of land if not in writin g
is valid but unenforceable. It is not void. Note that the price of the land is irrelevant if immovable.
Example: Before, the sale of a land for P300 is valid and enforceable even if not in writing. But presently, it has to be in writing to be enforceable. The price is still irrelevant.
If the object of the sale is movable, you have to consider not the value of the thing but the price agreed upon. The value may be different from the price. You can sell a thing worth P1,000 for P400 but the law provides for the price. If the price is at least P500 and the sale is not in writing, it will be
unenforceable. Paredes vs. Espino
Facts: Paredes was a prospective buyer. Espino owns a land in Palawan. Paredes is from Northern Luzon. Their negotiation was thru letters and telegrams. Espino sent a letter to Paredes stating that he and his wife agreed to sell the land to Paredes, that the deed of sale will be executed upon the arrival of Paredes in Palawan. When Paredes arrived, Espino said he is no longer interested in selling. Paredes filed a case to compel Espino to sell the land. Espino contended that the contract is unenforceable
because it is not in writing. He contended that under the statute of frauds it is unenforceable. His contention was sustained by the trial court.
Held: This contract is no longer covered by the statute of frauds because there was a letter. Article 1403 provides that a note or memorandum signed by the part charged would be sufficient to take that contract out of the
operation of the statute of frauds. In this case, the defendant wrote a letter with his signature on it. The letter took that contract out of the operation of the statute of frauds and therefore he may be compelled to execute the final deed of sale.
RIGHTS AND OBLIGATIONS OF THE VENDOR
In a deed of sale (DOS), there can be hundreds of obligations of
the vendor but those obligations would be because of the stipulation. But there are only few obligations imposed by law. The 3 most important: 1.
To transfer ownership 2.
To deliver
There are other obligations: 4.
Obligation to take care of the thing sold with the diligence of a good father of a family prior to delivery.
5.
From the time of the perfection up to the time of delivery then there would be obligation to pay for the expenses for the
execution and registration of the sale and obligation to pay the capital gains tax would be on the seller as a rule.
6.
Obligation to deliver the fruits which is related to the obligation to deliver the thing
OBLIGATION TO DELIVER THE FRUITS
BE: A sold a mango plantation to B but they stipulated that delivery
will be after the signing of the deed of sale. After the expiration of the 6-month period, B demanded for the delivery. The vendor was able to
deliver 1 month after the date when he was supposed to deliver themango plantati on. During this period, the vendor harvested mango
fruits and sold them to X. The vendor was able to deliver only after theother fr uits were harvested and sold to Y. Can B recover the mango
fruits from Y during the 6th month period?
SA: Determine first whether B is entitled to the fruits because if he is not entitled, then he cannot recover the fruits. Is he entitled to the fruits after 6month
period during the 1-month period prior to delivery? Yes, in fact, under
1537, the fruits of the thing sold from the time of perfection shall pertain to the buyer.
OBLIGATION TO TAKE CARE OF THE THING
G.R.: The thing sold should be determinate because if generic (1460, 2nd paragraph) then there is nothing to be taken cared of. It will become determinate only upon delivery.
Exceptions: There are sales transactions wherein the vendor would not have this obligation:
a.
Constructive delivery -brevi manu There would be no
obligation on the part of the seller to take care of the thing from the time of perfection because at the time of
perfection, the buyer was already in possession of the thing. Maybe he borrowed the thing. Example: he borrowed the car and he decided to buy it the thing was already in his possession.
OBLIGATION TO PAY EXPENSES / TAXES
These obligations may be the subject of stipulation. By
agreement, it would be the buyer who will pay xxx Normally, dito hindi natutuloy ang sale dahil hindi magkasundo kung sino magbabayad ng tax. OBLIGATION TO TRANSFER OWNERSHIP
BE: May a person sell something which does not belong to him?
Would the sale be valid? Would the buyer acquire ownership over the thing sold, if seller does not own the thing?
SA: Yes. Ownership over the thing sold is not an essential requisite for the sale to be valid. But if the seller does not own the thing, he may have a problem on his obligation to transfer ownership. The problem would be
Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian Rosapapan November 2008
whether or not the buyer would acquire ownership over the thing sold if the person who sold the thing is not the owner.
Q: Who would have the right to sell and therefore they can transfer ownership by way of sale?
A: First, is the owner. Even if he is not the owner, he may have the right to sell because:
(1)
He was given the authority by the owner. Example: Agent (2)
He may be the owner but he may have the authority of the law to sell, known as Statutory Power to Sell (Article 1505). Examples: Notary public in pledge, liquidators, guardians and receivers.
(3)
Those who have the authority of the court. Example:
Sheriff. Note: it is as if they have the authority of law because not even the judge can validly sell something if it is not consistent with the law.
Q: May a buyer acquire ownership over the thing sold if the seller has no right to sell?
A: The answer by way of exception is yes. But the general rule here is
under 1505 the buyer acquires no better title than what the seller had. If the seller is neither the owner nor does he have the authority to sell, the buyer acquires no better title than what the seller had. If his right is only as a lessee that is the most that can be transferred to the buyer. If he has no title then no title can be transferred to the buyer.
Exceptions: (When the buyer can acquire a better title than what the seller had. Even if the seller does not have the right to sell, the buyer may acquire ownership over the thing sold because the law so provides and not because the seller was able to transfer ownership to the buyer.)
1. By Estoppel 2. Estoppel by Deed 3. Estoppel by Record 4.
Sale by an Apparent Owner 5.
Negotiable Document of Title 6.
Purchases from a Merchant s Store xxx
1. By Estoppel by the principle of estoppel, a person is precluded from denying that another person has authority to sell because of his acts. Also known as Estoppel in Pais which is a kind of equitable estoppel because of the acts / representation of the owner, he may not later on deny the authority of the 3rd person.
2. Estoppel by Deed
BE: A and B co-owners of land sold (sale is verbal) to X their land. X subsequently sold the land to Y. Would Y be considered to have
acquired ownership over the land?
SA: Under 1434 which is considered as Estoppel by Deed (technical
estoppel) when the seller who was not the ownerat the time of the sale, acquires ownership, automatically, ownership passes to the buyer by
operation of law. However, Article 1434 requires delivery to the buyer. And under the facts, 1434 would not apply because:
a)
There was no showing there was payment
b) No showing that there was delivery of the land to X.
It cannot be said that by operation of law, Y likewise acquired ownership by way of estoppel by deed.
3. Estoppel by Record
Jurisprudence: Sale by nephew of the owner of the land. Since the
nephew could not deliver the land, the buyer sued the nephew for estafa. For the accused to be acquitted, he asked his uncle to testify that he actually had the authority to sell. When the uncle testified in court, the nephew is acquitted. After acquittal, the buyer demanded from the uncle the delivery of the land. The uncle refused, claiming that sa totoo land, I did not authorized my nephew .
Q: Case was filed against the uncle, would that action prosper?
A: SC said yes because he cannot be allowed now to claim that his nephew was not authorize to sell after he testified in court that he gave such authority.
This is estoppel by record which is considered a technical estoppel. 4. Sale by an Apparent Owner
A. Factor s Act B. Recording Laws
C. Any other provision of law enabling the apparent owner of the goods to dispose of them as if he was really the owner.
A. Factor s Act
Even if agent has no right to sell, a third person may acquire ownership because he may rely on the power of attorney as written.
B. Recording Laws
*most common question in the bar exam Read: Mapalo vs. Mapalo
5. Negotiable Document of Title
If goods are covered by a negotiable document of title and it was
thereafter negotiated. If the buyer bought it in good faith and for value, he will be protected under the law. He will acquire ownership even if the seller did not have the right to sell.
Example: The seller may have acquired title by violence. Binugbog nya yung owner ng goods. Pero kung negotiable document of title yan and
properly negotiated, lalo na kung bearer document of title, then the buyer may acquire ownership even if the seller has no right to sell.
6. Purchases from a Merchant s Store / Markets / Fairs Sun Brothers vs. Velasco
Facts: Sun Brothers was the owner of a refrigerator. Sun Brothers was
engaged in the business of selling refrigerator. Sun Brothers sold a ref to Lopez on installment basis. As stipulated, Sun Brothers reserved ownership until full payment. Lopez only paid P300 out of P1,500. The balance to be paid on installment. Lopez then sold the ref to Velasco.
Q: Would Velasco acquire ownership?
A: No because Article 1505 provides that the buyer acquired no better title than what the seller had. However, Velasco was the owner of a store. On the next day, Velasco sold the ref to Ko Kang Chu who paid in full. When Sun Brothers learned this transaction, it filed an action to recover the ref from Ko Kang Chu.
public sale of one pawnshop. Can F recover the ring from the buyer in that public sale?
SA: Yes, Article 559 provides that even if the buyer is in good faith so long as the owner is willing to reimburse the buyer of the price paid in that sale. Note: Again in 1505, there is no right to recover as long as the buyer
bought it in good faith from a merchant s store, there can be no recovery as a matter of right.
Q: How transfer of ownership is effected?
A: Under the law, as far as things are concerned, it is effected by delivery: (a)
Actual
(b) Constructive
There can be no transfer of ownership without delivery. Notes:
(a)
There may be a period agreed upon by the parties within which the buyer would have to decide. Even if he failed to signify his acceptance by the mere lapse of the period, he is deemed to have accepted (impliedly accepted) hence, ownership passes to him. (b)
Even before the lapse of the period, he may be considered to have accepted if he did an act wherein he would be considered to have adopted the transaction then ownership passed to him.
Example: Even if he has 10 days within which to decide but on the 2nd
day, he sold the car to another. Obviously, he is deemed to have accepted the thing because he did an act which is
inconsistent with the ownership of the seller like he donated or destroyed the thing.
(c)
If there is no period agreed upon, the law says if he did not signify his acceptance he will be considered to have accepted after the
lapse of a reasonable time. Reasonable time will depend on the circumstances of the sale, purpose of the sale, nature of the thing sold. Example: Perishable goods.
Sale or Return
Q: Ownership passes upon delivery?
A: Yes. However, the buyer is given the right to revest the title back to the seller normally within a certain period. Example: Clauses in subscription magazine which says that you can return within 30 days without payment. BE: A car was sold for P150,000. P75,000 paid upon the execution of DOS. The balance payable on a monthly basis. P75,000 was paid. The car was delivered to the buyer. However, before he could pay the balance, the car was destroyed due to a fortuitous event or was burned xxx Can he still be compelled to pay the balance?
Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian Rosapapan November 2008
SA: Yes. Upon the delivery of the car to the buyer, there being no retention of ownership by the seller. (Note: Wala sa facts na na-retain ng seller and ownership). Therefore, ownership passed to the buyer. Under the principle of res perit domino Article 1504 the owner bears the loss and hence it can be compelled to pay the price.
G.R.: Res perit domino 1504.
Note: Determination of when ownership passed is important because if at
the time of the loss, the buyer is not yet the owner, as a rule, the buyer will not bear the loss like in sale on approval and he has 10 days within which to decide and the thing was lost through a fortuitous event within the 10-day period without fault on his part, the seller will bear the loss.
Exceptions:
1. Read Lawyers Cooperative vs. Tabora 2. Delay in the Delivery
When there is delay in the delivery due to the fault of one of the
parties, whoever was at fault will bear the loss. Note that either buyer or seller may be at fault.
Example 1: The buyer and the seller may have agreed that the goods are to be obtained by the buyer at the warehouse of the seller on a specific date. On the date agreed upon, the seller demanded the buyer to get the goods. Despite such, the buyer failed to get the goods. On the next day, the warehouse was destroyed due to fortuitous event.
Q: Who is the owner at that time?
A: The seller but there was delay on the part of the buyer hence under 1504 it is the buyer who will bear the loss.
Example 2: The seller himself maybe the one at fault. Thus, he is in delay in delivering the goods to the buyer.
Q: Why would this be an exception to the res perit domino rule?
A: Ang premise dito, the ownership has already passed to the buyer but the goods are still with the seller. Can this happen? Yes, because of
constructive delivery. If there was constructive delivery, ownership passes to the buyer but physical possession is still with the seller. They may have agreed this time that the seller will be the one to deliver the goods to the buyer at a certain date. When the date arrived, despite demand from the
buyer, there was no delivery on the part of the seller. Even if the goods are destroyed the next day due to fortuitous event, take note ang owner ay ang buyer na but who will bear the loss? The seller because he was in delay in delivering the goods.
DOUBLE SALE (ARTICLE 1544)
BE: F sold a registered parcel of land to R who did not register the sale. Thereafter, F sold the very same parcel of land to C who
registered and obtained a new TCT in his name. Who would have a better right?
SA: Atty. Uribe: I fully agree with the UP Law Center s answer. It depends on whether or not C registered the sale in good faith. Registration is only one of the requirements good faith is equally an important requirement. Note: In 1544 (double sale), as to which rule applies will depend on the thing sold if movable or immovable.
A: If movable, the buyer who first took possession in good faith will have the better right. If immovable, the buyer, who first registered in good faith, will have the better right. If there was no registration, it will be the first who to ok
possession in good faith. If no possession in good faith, the buyer who has the oldest title in good faith.
Even the 1st buyer is required to be in good faith. Obviously, the first buyer would have the oldest title. Yung good faith ditto obviously would not pertain to absence of knowledge of the 2nd sale kasi syempre 1st buyer sya. He is nonetheless required to have bought the thing in good faith. Good faith means that he had no knowledge of the defect of the title of the seller. Warning: Please be careful when you recite you register the sale not the land.
Read: Bautista vs. Sioson Carumba vs. CA
Facts: Sale of land to B who took physical possession but did not register. He is the first buyer. However, the seller (A) is a judgment debtor in one case to a certain creditor named C. The land became the subject of an execution sale. The buyer became C who registered the sale.
Q: Who would have a better right between C and B (C had no knowledge of the sale)?
A: SC Said . B because this land was not registered under the Torrens System. 1544 would not apply to unregistered lands.
OBLIGATION TO DELIVER THE OBJECT OF THE SALE
Determine the subject matter if it is a thing or a right because there are different modes of delivery as to thing and as to right. Things
Kinds of delivery of things as a consequence of sale known as tradition under the law:
1. Actual Delivery / Material Delivery / Physical Delivery / Real Delivery the thing is in the possession and control of the vendee. Take note
control . Take note to the vendee .
Q: What if the thing was delivered to a 3rd person?
A: Jurisprudence SC said . yes, there maybe actual delivery if the third person has authority to receive from the vendee. Thus, making him an
agent of the vendee and that would still be actual delivery.
Note: Philippine law does not only require actual delivery constructive delivery may result in transfer of ownership.
2. Constructive by the execution of a public instrument if the contrary intention does not appear on the document. By the mere execution of the public instrument that is equivalent to delivery. Hence, ownership passes to the buyer.
Kuenzle & Streiff vs. Macke & Chandler
Facts: The original owner here Stanley and Griffindor (parang Harry Potter .) and the property involved here are fixtures of a saloon. Macke and Chandler are judgment creditor of Stanley and Griffindor. Because of a judgment in favor of Macke and Chandler, the sheriff levied upon these properties which was still in the possession of Stanley and Griffindor. The properties under execution were questioned by Kuenzle and Streiff.
Kuenzle and Streiff claimed that these things were sold to them prior to the levy. If they claimed that the properties were sold to them, the properties
should be in their possession. Take note that Stanley and Griffindor were still in possession of the goods physically. Hence, there was no actual delivery.
Held: In order that ownership would pass, it has to be in a public instrument if that would be by constructive delivery.
Kinds of Constructive Delivery
1. Delivery of the Keys of the place where the goods are located like a warehouse.
Prof. De Leon: this also called as symbolic delivery.
2. By Mere Consent or Agreement of the Parties if at the time of the sale, possession to the goods cannot be transferred to the buyer. There must be a reason why it cannot be transferred at the time of the sale. This is also known as tradition longa manu.
Example 1: The thing was the subject matter of a lease with a 3rd person until the expiration of the lease, the thing cannot be delivered.
Example 2: The thing was the subject matter of commodatum. As a rule, period of commodatum has to be respected.
3. Brevi Manu this is a kind of constructive delivery because the buyer was already in possession of the thing sold at the time of the perfection of the sale so he will continue to be in possession after the sale, no longer as a lessee but this time as the owner. So dati lessee lang sya that is why he was in possession or maybe depositary lang sya or maybe he was the
agent at the time prior to the sale.
4. Constitutum Possessorium the seller will continue to be in the possession of the thing after the sale but no longer as an owner but in another capacity like lessee.
Bautista vs. Sioson
Because a lease agreement was entered into by the buyer and seller after the sale then the buyer became the lessor and the seller became lessee. Therefore, the lessee would continue with the possession no longer as an owner.
Rights
Kinds of Delivery of Incorporeal Property / Quasi Tradition:
1. Execution of Public Instrument
Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian Rosapapan November 2008
2. Placing the Title of Ownership in the Possession of Vendee a right would normally be covered by a certificate.
Example: delivery of the certificate of shares of stocks. 3. Use by the Vendee of His Rights with the Vendor s Consent
Example: Sale of shares of stocks . the vendee may not always have the
right to exercise his rights under the shares of stocks. Concretely, if there is a stockholders meeting, the books of the corporation will be closed for 30 days before the meeting. Thus, if the sale occurred when the books are already closed, no one will be recognized except those registered owners. So if you are the buyer of those stocks, you can only use your right with the consent of the vendor.
RULES ON SALE AS TO QUANTITY / QUALITY OF THE THING SOLD
Q: In a sale involving 1,000 pairs of shoes with a specific design as agreed upon. The seller delivered 1,200 pairs of shoes instead of only 1,000. Can the buyer reject everything?
A: No. He has the right to reject only the excess. Reject the 200 but he can be compelled to accept the 1,000.
Q: What if instead of 1,000, 800 was only delivered?
A: The buyer cannot be compelled to receive 800 because partial
performance is non-performance. You cannot compel the creditor to accept
partial fulfillment as a rule because it can be a subject of a stipulation that there can be partial delivery.
Q: The obligation to deliver 1,000 cavans of Milagrosa rice. Instead of delivering 1,000 cavans of Milagrosa, the seller delivered 1,100 cavans of both Milagrosa and Burmese rice. May the buyer reject everything?
A: Yes, if the goods are indivisible. Meaning each sack of rice, Milagrosa and Burmese rice were mixed. However, if it is clear that per sack it is Milagrosa rice and the 100 sacks, it is clear that those are Burmese rice that would not be considered as indivisible. He can be compelled to accept 1,000 sacks Milagrosa and he has the right to reject 100 sacks Burmese rice.
SALE OF REALTY
Q: Sale of a parcel of land. Price agreed upon is P1M. More or less 100 sqm. The actual area delivered by the seller was only 95 sqm. What are the remedies of the buyer?
A: (1) Specific performance would be a remedy if the seller is still in the position to deliver the balance. Siguro yung katabing lupa sa seller din, hence, he can afford to give additional 5 sqm.
(2) Q: If specific performance is not possible, is proportional reduction a remedy?
A: It depends on whether the sale is considered as a sale with a statement of an area of a rate of a certain measure or if it is a lump sum sale. Q: Under the facts, 95 sqm was delivered, would rescission be a
remedy?
A: As a rule no because rescission would only be a remedy if the area lacking is more than 10% of that area agreed upon. So kung 100 sqm,
dapat 11 sqm or 15 sqm ang kulang, so out of 100 kung 85 lang ang nadeliver, then rescission is a matter of right.
PLACE OF DELIVERY
Read 1524, 1525 and 1198
The seller delivered the goods to the place of business of the buyer. If the buyer refuses to receive the goods, the buyer will be considered in delay and therefore will be liable to the seller because of unjust refusal. Q: May the buyer be considered in delay for his refusal to accept if
there is no place stipulated in the contract?
A: It depends on the kind of thing. Determine if it is determinate or generic. If the thing is determinate, the law provides that it will be the place where the thing is located at the time of the perfection of the contract.
Q: What if the object of the sale is a generic thing? A: Seller s place of business or residence.
Note: If there is no stipulation when to be delivered, the seller cannot be compelled to deliver.
Q: What if at the time of the perfection of sale, though the thing is determinate, it was on board a ship while in transit. Where will be the place of delivery?
A: Depending on the shipping arrangement agreed upon by the parties. F.O.B. Free on Board
C.I.F. Cost, Insurance, Freight
F.O.B. and C.I.F are rules of presumption which would have to give way to the real intention of the parties. So after all, the F.O.B. or C.I.F. arrangements do not really determine the place of delivery, they only make rules of presumption.
So in a C.I.F. arrangement, it is only presumed that the place of delivery is the port of origin.
In a F.O.B. destination, it is only presumed that the point of destination is the place of delivery.
Q: What really determines the place of delivery?
A: SC said this indication as to the intention of the parties as to the place of delivery is the manner and place of payment. If there is an agreement as to where and how the price is to be paid that would be the place considered for purposes of delivery and therefore for transfer of ownership.
Read 1582
Obligations which cannot be Waived: 1.
Obligation to transfer 2.
Obligation to deliver
Obligation which can be Waived: 1.
Obligation to warrant the thing Kinds of Warranties under the Law: 1.
Express 2. Implied
1. Express any affirmation of fact or any promise by the seller relating to the thing, the natural tendency is to induce to purchase the thing.
Requisites: (a)
There is an affirmation of fact (b)
The fact must pertain to the thing either to the quality, character or title of the thing
Any other matter may not be considered as an express warranty.
there is an express warranty.
Example: I guaranty / warranty you that you will be happy if you buy this car at P100,000 . this does not result in an express warranty
Again, if the affirmation of fact pertains to the quality of the thing, it is an express warranty.
Example: These 10 sacks of fertilizer would result in 200 cavans of rice.
The statement of the seller s opinion is not as a rule considered an express warranty.
Example: This is the best piña cloth . it may turn out that there are better piña cloth.
As long as the seller is not an expert on that field, that would be treated merely as an opinion and there can be no liability for breach of an express warranty.
BE: A sold a land to B for P1M in Antipolo. As agreed upon
P100,000 will be paid upon the signing of the DOS. The balance will be paid within 30 days from the time the occupants (squatters) of the land are evicted. It was so stipulated that if within 6 months, the squatters have not yet been evicted, the seller should return the P100,000. Another stipulation states within the 6-month period, the value of the land doubled. Despite the filing of an eviction suit by the seller and the lapse of the 6-month period, the squatters were still occupying the land. The seller offers to return the P100,000 to the buyer. The buyer refused to accept the P100,000 and told the seller
never mind even if the squatters are still there. I will still buy the land . So the buyer offered to pay the balance P900,000 and
demanded that a DOS be executed by the seller. The seller refused to accept the P900,000. What he did is to file an action to rescind the contract. Would the action prosper?
SA: If the answer is based on rescission, the action will not prosper because rescission may only be invoked by the aggrieved party. The seller is not an aggrieved party.
2. Implied
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Prof. De Leon: because of this implied warranty, it cannot be said that Philippine law does not adopt caveat emptor buyer beware . (Faye s Caveat .: Please check the book of Prof. De Leon regarding this statement. Thanks .)
Even if there is no stipulation as to these warranties, the law itself would provide for these warranties and hence if there are hidden defects he would have remedies under the law or even if he was deprived of the thing he bought he would have a remedy against the seller. Hence, it is not correct to say that Philippine law has adopted caveat emptor. But there are certain instances when there would be no such implied warranty against hidden
defects. There may be warranty as to title or against eviction but there is no warranty against hidden defects under certain circumstances.
Warranty Against Eviction / Title
Q: If the seller was able to transfer ownership to the buyer may the seller nonetheless be held liable for breach of warranty against eviction?
A: Yes. These are 2 different obligations: the obligation to transfer ownership and the obligation to warrant the thing.
Example: This warranty against eviction would include the warranty that the buyer from the moment of the sale have and enjoy the legal and peaceful possession over the thing sold.
Requisites of warranty against eviction:
1. There has to be final judgment depriving him of such thing either wholly or partially. In other words, a case was filed by a 3rd person against the buyer which resulted in a favorable decision as to the plaintiff resulting in the deprivation of the property by the buyer.
2. Deprivation must be either:
(2.1) Based on a 3rd person s prior right over the thing prior to the sale or
(2.2) Based on an act after the sale but imputable to the vendor. 3. There should be no valid waiver
4. The action to hold the vendor liable should be filed within the period prescribed by law.
WARRANTY AGAINST HIDDEN DEFECTS Requisites:
1. The defect must exist at the time of the sale. If the defect started after th e
sale there can be no such liability.
2. The defect must be hidden. If the defect is patent and the buyer
nonetheless bought the thing then he can no longer hold the seller liable. If the seller is not aware of the hidden defects, he can be held liable. If he was aware, his liability will be greater because that makes him a bad faith seller.
Q: Even if there is such a hidden defect, is it possible that the vendee cannot hold the vendor liable despite the fact that there was hidden defect even if he was not informed because maybe the seller was not aware?
A: Yes, he may not be able to hold the seller liable if he is an expert on the thing. He is expected to know the defect.
3. The defect must result in the thing being unfit for the purpose of the buyer or at least it diminish the fitness of the thing such that the buyer would not have bought it at the price had he known of such defect.
the vendee hold the vendor liable for this breach of warranty? Does it matter if the loss was due to a fortuitous event or maybe the loss was due to the fault of the buyer himself, nonetheless, can he hold the vendor liable?
A: Yes. The vendee can hold the vendor liable for breach of warranty
against hidden defects even if the thing was lost due to fortuitous event or due to the fault of the vendee himself because of the hidden defects. But of course, if the cause of the loss was the defect itself, the liability is greater than if the cause of the loss was a fortuitous event or fault of the buyer. If there would be a problem here as to the extent of the liability of the vendor, he should first consider the cause of the loss, maybe it was lost due to the defect itself or lost through fortuitous event or lost through the fault of
the vendee. After that, he should determine whether the vendor was aware of the defects or he was not aware. Again, if he was aware, damages may be recovered. If he was not aware, he may not be held liable for damages unless he can only be held liable for interest.
If the defect was the cause of the loss, the vendor would be liable for the return of the price, not only the price less value but also to refund the expenses and damages because the vendor was aware of the defects.
If the vendor was not aware of the defects, he cannot be held liable for damages but he would only be held liable for the price.
If the cause of the loss of the thing was a fortuitous event, he can only be held liable for the price less value.
ANY CHARGE OR NON APPARENT ENCUMBRANCE NOT DECLARED OR KNOWN TO THE BUYER
Q: Would there be an encumbrance over an immovable which is a form of easement or servitude?
A: An example of this is a road right of way.
Q: If the buyer bought the land which turned out to have a road right 3rd
of way in favor of a person, can he claim breach of warranty against any charge or non apparent encumbrance?
A: Of course there are requisites: (1)
The encumbrance or easement or burden or the road right of way has to be non apparent.
Q: If there is an encumbrance, what are the remedies of the buyer? A: (a) He can seek for the reduction of the price.
(b) Rescission -the law requires that the action for rescission must be filed within 1 year from the date of the contract. If after 1 year, no more rescission.
(c) If he became aware more than a year, he may file an action for
damages, But the law requires that the action for damages has to be filed within 1 year also but from the time of the discovery of encumbrance. If he filed it for example, after 2 years from discovery no recovery of damages. WARRANTY OF QUALITY
Prof. Deleon, Prof. Vitug, Prof. Baviera: there is another warranty which is WARRANTY OF QUALITY which includes:
Warranty of Fitness (2)
Warranty of Merchantability
To some authors the warranty of quality is considered under the warranty of hidden defects.
Atty. Uribe: I cannot agree that the warranty of quality is in the warranty of hidden defects. I agree with Prof. De Leon, Prof. Vitug and Prof, Baviera that there is a warranty of quality.
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
The thing bought may not actually have any defect and for 1 million buyers it would be fit for their purpose. However, it may not be fit for the purpose of 1 buyer and if all the requisites for this warranty are present, then he may hold the seller liable for breach of warranty of fitness for a particular
purpose although there is no hidden defect but it is not fit for the purpose of the buyer.
In order for the seller may be held liable: 1.
The buyer has to inform the seller of the particular purpose for which the thing is to be use and
2.
The seller manifested that the thing would be fit for the purpose and the buyer relied on such representation of the seller.
Note: If the thing is sold under the trade name there can be no warranty of fitness for a particular purpose.
WARRANTY OF MERCHANTABILITY
It pertains to the fact that it is fit for the general purpose. If the thing was sold by description or by sample, it is considered that there is such a thing as warranty of merchantability.
SALE OF ANIMALS WITH DEFECTS RULES:
1. The defect is a redhibitory defect it is such kind of defect that even by examination of expert it cannot be discovered.
Q: If one of the animals has redhibitory defect, can the buyer rescind the entire contract pertaining to all the animals?
A: G.R.: No. He can only rescind the contract pertaining to the animal with redhibitory defect. He cannot rescind the entire contract pertaining to all animals.
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Exception: If he can prove that he would not have bought the others had he known the defect of one then he can rescind the entire contract. Q: Who has the burden of proof that he would not have bought the others had he known of the defect of one?
A: Normally, it would be the buyer. But the law under certain circumstances would provide for this presumption that it is presumed that he would have bought the others had he known of the defect of one.
Examples: He bought the animals in teams or in pairs then the presumption arises.
-Love birds (Ang mga love birds, kapag namatay yung isa later on mamatay din yung isa. Minsan nga mgsuicide pa sya pag mag isa na lang sya. Iuuntog nya ulo nya sa cage nya. .)
Instances whether there would be no warranty against hidden defectsand therefore caveat emptor may be invoked:
1. Sale which is an as is where is sale which means sale where it is found xxx bahala ka sa buhay mo if you want to buy the thing and you cannot
later on claim that there were hidden defects. (Faye: pls. research the complete meaning of as is where is sale. Atty. Uribe will ask the meaning. .)
2. Sale of 2nd hand items 3. Sale of animals in fairs 4. Sale in public auction
Note: There would still be warranty against eviction. Note: Rules on warranty also apply to judicial sale.
Q: In sale by authority of law or in execution sale, can there be breach of warranty against eviction?
A: Yes. The judgment debtor and not the sheriff shall be liable.
The law would specifically exempt certain persons from liability for breach of warranty like sheriff, auctioneer, mortgagee, pledge and other persons who sell by virtues of an authority of law like notary public because they are not really selling for themselves, they are selling on behalf of another
person.
RIGHTS AND OBLIGATIONS OF THE VENDEE 1.
Obligation to accept the thing delivered. 2.
Obligation to pay the price (if warranted, with interest) 1. Obligation to accept the thing delivered
Q: If the buyer received the goods delivered, does it mean that he already accepted?
A: No because receiving is preliminary to accepting. In fact, this is consistent to the right provided by law to the buyer which is the right of inspection or the right of examination. Thereafter, he may reject the goods if defective.
2. Obligation to pay the price Q: When?
A: (1) As stipulated
(2) If there is no stipulation, it would be at the time and place of delivery.
Right to Inspect / Examine This may be waived.
MACEDA LAW
Study Maceda Law and its essential features (see book of Prof. Baviera) Q: Are the remedies under the Maceda Law alternative? Can the buyer be able to exercise 2 or more remedies all at the same time?
A: Yes. Remedies under the Maceda Law are cumulative. REMEDIES FOR BREACH OF CONTRACT
REMEDIES OF AN UNPAID SELLER (ARTICLE 1526) (1)
Right to retain the thing in his possession (possessory lien) (2)
Right of stoppage in transitu / right to resume possession of the goods
(3)
Right of resale (4)
Right to rescind
Q: Are there other remedies aside 1526?
A: Yes. The seller may opt to file an action for specific performance or an action for damages.
Unpaid seller is one who has not been fully paif of the price.
Note: remedies of the unpaid seller are not necessarily alternative. The right of resale and the right to rescind may only be exercised if the seller has possessory lien.
POSSESSORY LIEN
Q: Why is it called possessory lien?
A: because there another lien in the law. This is the lien under the rules on concurrence and preference of credit.
Note: The buyer is not required to be insolvent.
Q: When would the seller be considered to have lost his lien? A:
(1)
If he waives his right (2)
If the buyer lawfully obtained possession over the goods (3)
When the thing is delivered to a common carrier and the seller did not prefer his ownership and possession over the goods.
STOPPAGE IN TRANSITU Requisites:
(1)
Insolvency of the buyer (2)
The seller must have parted possession over the goods (3)
The goods must be in transit How right is exercised: (1)
(2)
This may be exercised by mere notice to the common carrier
If the seller validly exercised the right of stoppage in transitu, he will be considered to have regained his possessory lien.
RIGHT OF RESALE
Q: When would the seller have this right? A:
(1)
If the goods are perishable (2)
The right is expressly reserved in the contract
(3) The buyer has been in default for an unreasonable time.
Note: The seller should send a notice of the intention to resell to the buyer. Note: The resale may be a private sale or a public sale. The only limitation here is that the seller cannot buy directly or indirectly.
RECTO LAW
Pls. read Sales by Prof. Baviera EXTINGUISHMENT OF SALE
Pls. read Sales by Prof. Baviera 1.
Payment 2.
Novation 3.
Loss of the thing Under the law on sales 1.
The exercise of the right of resale will result in the
extinguishment of the 1st sale. The ownership of the 1st buyer will be terminated and such ownership will be vested to the 2nd buyer 2.
Rescission or cancellation will extinguish COS 3. Redemption Kinds of Redemption 1. Conventional 2. Legal LEASE Note:
· Read the Definition of Lease under Articles 1643, 1644, 1713.
Faye Marie C. Martinez Chato Cabigas Jessica A. Lopez Dian Rosapapan November 2008
· Consider also on Formalities: Articles 1647, 1724 in
relation to 1403 on Statute of Frauds and 1403, 1878 on Agency to Lease.
· Assignment and Sublease: Articles 1649, 1650
· Implied new lease or tacita recunducion: Article 1670 (important)
· Rights and Obligation of the Lessor and Lessee: Articles
1673, 1678, 1680, 1723 (take note several questions in the bar have appeared under these provisions)
· Period of the Lease if the parties failed to Fixed the Period: Articles 1682, 1687
· Rights of Third Person: Article 1729 (ex: rights of owner of materials against the owner of the building)
Note: The first thing to consider in lease is to consider the kind of lease. Kinds of Lease:
1. Lease of Things
2. Lease of Work or Service 3. Lease of Right
Note: In lease of Service, there are four (4) of them but three (3) will not be covered by Civil Law, which are Household Service and Contract of Labor
(covered by Labor Law), and Contract of Carriage (covered by Commercial Law). The only kind of Lease of Service that will be discuss under the Civil Law is the Contract for a Piece of Work.
Definition:
Q: If a party binds himself to give another the enjoyment or use of thing, does that make the contract one of lease of things?
A: No, the most important distinction here with that of commodatum is that in lease, it must be for a price certain, otherwise if there is no valuable consideration for the use or enjoyment of the thing it will be commodatum. Distinguish a Contract for Piece of Work from Contract of AgencyRead: Frensel vs . Mariano
Note: In Agency, the control of the principal over the agent is so pervasive that the principal can control not only the result but also the manner and method of the performance of the obligation which is not present in this case and therefore Merit was not considered an agent of Mariano.
Q: As to the relationship of the taxi driver with his operator, is this a contract of lease?
A: SC, ruled that this is in fact a lease but not a lease of thing, but lease of service specifically an employment contract, this is because of the control of the operator over the taxi driver, as to when, what time the drive operates the vehicle.
Note: Again, to distinguish lease contract from other legal relationship you have to consider the characteristic of the contract. The best way to
remember the kinds of contract is to know by heart what are the real contract (mutuum, commodatum, deposit, pledge) and formal contract
(antichresis, donation). Aside from that it may be safe to consider as a rule all the other contract as consensual contract, where no particular form is required except in exceptional case: e.g. sale of large cattle.
As a rule lease, therefore is a consensual contract by mere
