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June 11, 2013: Lesson 1 - Sale  No, the contract transfers no real rights; it merely causes
Define Sale
 Sale is a contract where one party (seller or vendor)
obligates himself to transfer the ownership of and to deliver
a determinate thing, while the other party (buyer or
vendee) obligates himself to pay for said thing a price
certain in money or equivalent.
What are the elements of the Contract of Sale?
1. Essential Elements are the elements without which there
can be no valid sale
a. Consent or meeting of the mind
b. Determinate subject matter
c. Price certain in money or its equivalent
2. Natural elements are those which are inherent in the
contract, and which in the absence of any contrary
provision, are deemed to exist in the contract
a. Warranty against eviction
b. Warranty against hidden defects
3. Accidental elements are those which may be present or
absent in the stipulation, such as the place or time of
payment, or the presence of conditions.
What are the stages in the contract of sale?
 The stages are
1. Generation or negotiation – where the offer and
counter offer happens
2. Perfection – where there is a meeting of the mind
3. Consummation – where there is a transfer of
ownership
Is a contract of sale a mode of acquiring ownership?
certain obligation to arise. It is a source of obligation.
Is it necessary that the seller must be the owner at the time of the
perfection of the contract?
 No, it is sufficient that he is the owner at the time the object
is delivered. Hence, right of ownership arises at the
consummation of the contract.
What are the essential characteristics of the Contract of Sale?
 The essential characteristics are:
1. Consensual as distinguished to formal contract. It is
perfected by mere consent.
2. Bilateral as distinguished to unilateral. Both parties
are bound by obligation
3. Onerous as distinguished to aleatory. There is a
consideration of value
4. Commutative since the values exchanged are
almost equivalent to each other as distinguished to
barter.
5. Principal as distinguished to accessory. It stands on
its own
6. Nominate as distinguished to in-nominate. It has its
name
June 17, 2011: Lesson 2 –Subject Matter of the Contract of Sale
Assigned Cases:

1. Obania vs CA; Gr. No. L-36249, March 29, 1985; 135 SCRA
537
2. Clarin vs Rulona; Gr. No. L-30786, February 20, 1984; 127
SCRA 512
3. Sostenes vs CA; Gr. No. L-56483, May 29, 1984; 129 SCRA
513
4. Gardner vs CA; Gr. No. L-59952, August 31, 1984, 131 SCRA
585
5. PHHC vs CA, Gr. No. L-61623, December 26, 1984, 133 SCRA
737
6. Guiang vs Kintanar, Gr. No. L-49634-36, July 25, 1981, 106
SCRA 49
7. Pichel vs Alonzo; Gr. No. L-36902, January 30, 1982; 111
SCRA 341
8. Raza vs Rolando, Gr. No. L-58552, September 30, 1982, 117
SCRA 576
What are the essential elements of a contract of sale?
 The essential elements of the contract of sale are:
1. Meeting of the minds
2. Subject matter
3. Price
What is the subject matter of a contract of sale?
 The subject matter of the contract of sale must be licit and
determinate. Licit means lawful.
What are the two kinds of illicit subject matter?
 The two kinds are
1. By nature (per se) – they are unlawful anywhere
you go and no civilized society can accept it.
2. Per accidens – it is unlawful by reason of law or
public policy.
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What are the requisite of the subject matter of a contract of sale?
 The requisites are
1. Licit
2. Determinate
3. Right of ownership upon delivery
What is delivery?
 Delivery is the denotative act that transfer ownership
Can future things be subject matter of sale?
 Yes, provided it has a potential existence having hope and
expectancy to exist and not mere vain hope and
expectancy.
June 18, 2013: Quiz on the assigned cases (digest 5 cases)
June 24, 2013: Lesson 3: Price
How can you consider a price certain?
1. If it can be certain in reference to another thing certain
a. A pension or death benefit is not certain because
you cannot be certain of one’s life.
b. What does it mean by “another thing certain?”
 The other thing must have a determinate
price. There must be an actual preference
and no confusion or doubt
2. If it is left to the judgment of a third person
a. Must it be necessary that a 3rd person is an expert?
 It is not necessary since the law does not
qualify. However, in commercial transaction
it must be an expert and the rules in
evidence provides that the testimony of an
expert has a greater weight.

b. Is the decision of a third person absolutely
binding?
 No, there must be a qualification?
1. If by stipulation of both parties and
both, including the 3rd person, are
in good faith then the decision of
the 3rd person is binding
2. If the third person is unwilling and
unable on his own volition, then,
the contract is inefficacious having
no legal effect. There is no
consideration which is the price.
3. If the third person acted in bad
faith, there is a perfected contract
and effective contract because
there is a consideration which is the
price, hence, they can ask the court
for reformation or recession of
contract.
4. If the third person is prevented by
any one of the party which causes
the default, there is no
consideration. The aggrieved party
cannot compel for specific
performance the other party. The
only remedy is to ask the court for
damages.
When shall you ask for specific performance?
 When there is bad faith.
In what form shall payment be done?
 The payment must be in money or its equivalent.
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Differentiate sale from barter.
 If the thing is more valuable than the money then it is
barter but if it is equivalent or less valuable than money,
then it is sale. Nonetheless, there is no longer distinction in
commercial transactions
What is legal tender?
 It is a mode of exchange where the obligor can compel the
oblige to accept by way of fulfillment of an obligation.
Is check or other negotiable instrument a legal tender?
 No, the legal tender in the Philippines is peso and one
cannot compel a person to accept a check or other
negotiable instrument as payment unless
1. They were in cashed, and
2. they losses its value because of the fault of the
creditor or seller
Does gross inadequacy makes a contract of sale null and void?
 It does not by itself make the contract of sale null and void,
unless the parties intended it as a donation
Is it possible that there is a transfer of ownership in a simulated
contract?
 Yes, if it can be shown that there is an intention of another
contract like donation or loan.
Is price be determined alone by one of the contracting parties?
 No, price shall never be left to the determination of one of
the contracting parties, otherwise there will never be
meeting of the minds.
June 25: Lesson 4: Perfection of a Contract of Sale

How is the contract of sale perfected?
 It is perfected if there is a meeting of the minds
When is there a meeting of the minds?
 It is the acceptance of the offer or agreement on the offer
and counter offer.
Is ownership automatically transferred in the perfection of
contract?
 No, transfer of ownership happens at the consummation or
the delivery of the determinate thing.
What is the legal effect of a perfected contract?
 It gives rise to a personal right and not a real right. The
personal right is the right to demand or compel for the
performance of an obligation. The buyer can demand for
the delivery of the object and the seller can demand for
payment. However, these are subjected to rules governing
contracts such as those that seek for formalities.
Distinguish real right and personal right?
 Real right is where one can assert ownership or claim over
the subject matter and can transfer such ownership in the
contract of sale while personal right is the right to compel
another to what is incumbent upon him, subject to norms
of law.
What is the effect of unenforceable contract?
 It produces a legal effect since the contract is valid and that
they can compel each other but when one refuses to
perform his or her obligation they cannot ask the court to
compel them to perform the contract but they can ask the
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court for execution of a written contract to make the
contract enforceable.
What is a written contract?
 It is anything which is written and needs not be an notarized
contract
Is there an exception to the unenforceable contract?
 Yes, if
1. If the contract is already executed, or
2. If already partially executed like when there is an
earnest money.
What is the theory of cognition?
 The perfection of the contract is only made when it is only
made known to or comes to the knowledge of the offeror.
Is it considered perfect if it was made known to the agent?
 It depends to the extent of authority given to the agent.
July 1, 2013: Quiz
Quiz Questions:
1. What is a contract of Sale? How will you distinguished it
from a contract to Sell? Give an illustration for each.
2. What is an option money? Is it the same as earnest
money? Explain
3. When is a contract of Sale perfected? Does the
unenforceability of a contract of Sale affect the obligation
of the vendor and vendee to the contract? Give reasons
for your answer.
4. Enumerate and explain the features of a contract of sales
5. What may be the subject of a contract of sale? Discuss
fully.

July 2, 2013: Lesson 5: Delivery
Distinguish option money from earnest money.
 Option money is a unilateral contract but not a contract of
sale while earnest money is a bilateral contract and there is
a contract of sale.
What is delivery?
 It is what transfer ownership to the buyer.
Is it necessary that there is a physical delivery?
 No, delivery is not limited to physical delivery. There is also
a constructive delivery.
Case example:
 A offers to B a car worth P100,000.00. It was agreed that A
will deliver the car on January 15, 2013. On January 1, 2013,
B paid the car. On January 3, 2013, the car was levied for
the loan of A. The sheriff delivered the car to C who was
the highest bidder. Can B question the validity of the
attachment?
 In a perfected contract, a personal right arises which can be
invoked only to the other party and not to a third party. B
cannot question the attachment since B has no legal
relationship to C provided that C is in good faith.
Is mere possession sufficient enough to say that there is delivery?
 No, there must be control and possession.
What are the kinds of delivery?
 The kinds of delivery are:
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1. Actual
2. Constructive
a) Symbolic
i. Legal formalities
ii. Traditio symbolica
b) Traditio longga manu
c) Traditio brevi manu
What are the requisites of symbolic delivery?
 The requisites are:
1. There must be a control by the seller before
transferred
2. There must be a transfer of control to the buyer by
the seller
3. The seller has the clear intention to transfer
Is the presence of a public document sufficient to show transfer of
ownership?
 No, fiction yields to reality. Even if there is a public
document, if the requisites of delivery are not present then
there is no transfer of ownership.
July 8, 2013: Lesson 6 – Forms of Delivery
Case readings
1. Pan Pacific vs Ca, 482 SCRA 164
2. Villamarrice vs CA, 487 SCRA 571
3. Platinum Plans Philippine vs Romeo Cucueco, 488 SCRA 156
4. Pilipinas Shell vs Gobenseng, 496 SCRA 305
5. JMA House vs Sta. Monica, 500 SCRA 526
6. Dela Cena vs Briones, 508 SCRA 62
7. E Rommel Realty vs Sta Lucia Realty, 508 SCRA 12
8. Manila Metal Container Corporation vs PNB, 511 SCRA 444
9. Daus vs De Leon, 404 SCRA 74
10. Chua vs CA, 401 SCRA 54

What is delivery?
 Itis a mode of acquiring ownership and not the contract of
sale. It can be actual or constructive.
When can there be an actual delivery? Constructive delivery?
 It is when the buyer is placed in the control and possession
of the thing that there is an actual delivery.
 In constructive delivery, it needs not be actual or material
delivery. It can be by mere formalities, signs and gesture
that there is delivery.
What are the kinds of constructive delivery?
 The kinds of constructive delivery are:
1. Legal formalities
2. Traditio Simbolica
3. Traditio Lunga Manu
4. Traditio Brevi Manu
5. Traditio Constitutum Possessorium
What are legal formalities? Is it the same for legal formalities in
the enforceability of contract?
 It is a mode of delivery by means of public document. It is
not the same with the enforceability of a contract and
should not be confused with.
Case Example
 A sold a land to B which was executed in a mere piece of
paper. Is the contract enforceable? Is there a valid delivery?
 Yes, the contract is enforceable but there is no delivery.
While it is valid as to enforceability, there is no valid
delivery, since, what the law require is to be in a public
document.
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When a document shall become public?
 It is when authenticated by the person who has the
authority to make a document as a public document.
When is there a constructive delivery?
1. The seller must be in absolute control
2. The buyer must be in absolute control after delivery
3. There is a clear intention to transfer ownership
Case Example
 While B is in USA, A offered to sell a lot to B by the phone. A
showed pictures to B through the internet. B paid A and B
signed the deed of sale in June 1, 2010 which was signed by
the consul. When B went home, he found out that the land
was squatted. B filed a declaration of nullity of the deed of
sale. A alleged that there is already a deliver. Is A correct.
 No, fiction must yield to reality. Fiction takes effect only if
there is no legal impediments what so ever. At the case at
bar, there is no clear intention to transfer ownership due to
the presence of the squatter and B was not in control in
case the land was delivered.
What is the meaning of tradition?
 Traditio, or delivery, is a mode of acquiring ownership, as a
consequence of certain contracts such as sale, by virtue, of
which, actually or constructively, the object is placed in the
control and possession of the vendee.
When shall there be a traditio simbolica?

 With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or depository
where it is stored. (Art. 149, par. 2)
 It is when the symbol is delivered.
When shall there be a traditio lunga manu?
 It is when the delivery of the movable property is made by
mere consent or agreement of the contracting party.
 Case Example
o A bought a subdivision in Tarlac to B while they
were in Baguio. They agreed that A can stay in the
house starting today. (There is already a delivery)
Distinguish traditio brevi manu from traditio constitutuum
possesorium.
 In traditio brevi manu,the buyer had already the possession
of the object even before the purchase while in traditio
constitutuum possesorium, there is a possession of
ownership which would be changed later on.
 A is an owner of an apartment. B is a lessor. Later on B buys
the apartment in January 1, 2006. When is the delivery?
 It is a tradition brevi manu where in there is already a
possession of the property which in turn becomes a
possession in the concept of ownership. There is already
delivery when the thing is already in possession for any
other reason.
What is a quasi-tradition?
 It is a mode of delivery that deals with incorporeal rights
such or delivery of rights
When is delivery if the sale requires legal formalities?
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 If the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract.
When is delivery made if the object is “on sale or return?”
 Ownership is transferred when the object is delivered to the
buyer but when the buyer returns the object the ownership
is revested back to the seller.
What are the rules when the delivery is on approval, trial or
satisfaction? (Art. 1502)
 If in trial, there is delivery when he signifies his approval or
acceptance to the seller or does any act adopting the
transaction
 If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, and, if not time has
been fixed, on the expiration of a reasonable time.
Reasonable time is a question of fact.
What is the difference between a contract “on sale or return” and
a delivery of property with option to purchase?
 In contract “on sale or return” ownership is transferred at
once, in option to purchase, there is no transfer of
ownership till the owner agrees to buy
July 9, 2013: Lesson 7 – Capacity to Buy
What are two kinds of incapacity to buy?
 The two kinds are
1. Absolute Incapacity when party cannot bind himself
in any case

2. Relative Incapacity when certain persons, under
certain circumstances, cannot buy certain property.
Who are absolutely incapacitated?
 Those absolutely incapacitated are minors, insane or
demented and deaf-mute who cannot read
Who can assail the validity of the sale between those absolutely
incapacitated?
 The incapacitated themselves or their parents or guardians
can assail the validity of the sale.
What is the exemption for minors?
 When minors buy, the contract is generally voidable, but in
case of necessaries, “where necessaries are sold delivered
to a minor or other person without capacity to act, he must
pay reasonable price therefor. Necessaries are those
referred to in Article 290. (Art. 1489, par.2)
What is the rule on the sale between husband and wife?
 The husband and the wife cannot sell property to each
other, except
1. When a separation of property was agreed upon in
the marriage settlement; or
2. When there has been judicial separation of
property under Article 191.
Does the rule be the same if the relation is that of a common law?
 It shall apply by analogy. It is the more reason to apply the
rule because it is illogical to penalized a legally married
persons and awarding those who are not married.
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Case Example:
 A and B are married. A sold a property to B in January 5,
2010. C is a creditor of A in January 1, 2010. Can C assail the
validity of the sale?
 Yes, C can assail the validity of sale since he is a prejudiced
party when the sale was made.
 What if C is a creditor in January 10, 2010?
 C can no longer question the sale by reason of void ab initio
since he is not prejudiced by the sale.
Who are those relatively incapacitated?
 Those relatively incapacitated are
1. The guardian, the property of the person or persons
who may be under his guardianship
2. Agents, the property whose administration or sale
may have been entrusted to them unless the
consent of the principal has been given
3. Executors and administrators, the property of the
estate under administration
4. Public officers and employees, the property of the
State or any subdivision thereof, or of any
government owned or controlled corporation or
institution, the administration of which has been
entrusted to them
5. Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of
justice, the property and rights in litigations or
levied upon an execution before the court within
whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the
act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights

which may be the object of any litigation in which
they may take part by virtue of their profession
6. Any others specially disqualified by law
Why are guardians disqualified?
 It is not benefit but in order to protect the fiduciary
relationship
What property is disqualified to the administrator or executor?
 It is not the inheritance but those forming part of the
estate. Estate is the mass of the property whether real or
personal property left by the descendant.
Case example:
 A is the estate administrator of B. C, D, E are the inheritant
of B. C sold his inheritant right to A. Is the sale of C valid?
 Yes, the sale is valid since what is prohibited is the sale of
the estate of B.
Is a broker an agent?
 It depends to the agency of the broker. An agency must be
in writing in order to be valid
What are prohibited for the agent?
 It is only those property of the principal which is the subject
matter of the agency unless the principal gives his consent
July 15, 2013: Cordillera Day – No Class!!!
July 16, 2013: Quiz: Digest the 10 cases
July 22, 2013: Lesson 8 – Conditional Delivery
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What is the primary obligation of a vendor?
 Delivery is the primary obligation of the vendor. There is
delivery when there is control and possession.
Notwithstanding the execution of public document, when
there is no control and possession of the buyer there is no
delivery.
What is a freedom of contracts?
 It is one of the characteristics of contracts where in the
parties can freely stipulate on the provisions governing the
contract provided they are not contrary to law, morals,
culture, public order and public policy.
Can parties stipulate that there is no transfer of ownership until
certain conditions have been fulfilled?
 Yes, they can stipulate. The right of possession or ownership
may be thus reserved notwithstanding the delivery of the
goods to the buyer or to the carrier or other bailee for the
purpose of transmission to the buyer.
Case Example
 A delivers a car to B. The condition is B cannot be the owner
unless he upgrades the car. When is delivery?
 There is delivery when B upgrades the car. If B does not
fulfill the condition, there is no transfer of ownership even
though the car is already delivered to B. Transfer of
ownership is always governed by the intention of the
parties.
What is a bill of lading?
 A bill of lading is a commercial document that innumerate
and describes the subject matter of the deed of sale. In
itself is a deed of sale.
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What is a bill of exchange?  As a general rule, the buyer acquires only so much of
 It is a document that evidences the amount paid by the whatever the seller has at the time of the sale, except:
buyer 1. By the provision of any factor’s law, recording laws,
or any other provision of law enabling the apparent
To whom can bill of lading be issued? owner of goods to dispose of them if he were the
 It can be delivered to true owner thereof;
1. the bearer 2. By the validity of any contract of sale under
2. the order of a specific person statutory power of sale or under the order of a
court of competent jurisdiction;
Case Example 3. Purchases made in a merchant’s store or in fairs, or
 B bought a Toyota ca to S. The car is in Laguna. If the car is markets, in accordance with the Code of Commerce
to be delivered it should be accompanied by a bill of lading. and special laws.
The bill of lading states that “deliver to S” but the car is
delivered to B. Is there a delivery? Case Example
 The property is delivered but S reserved the right of  B sold to A a property who is a minor and A sold to C in
ownership over the thing value and good faith. Is there a transfer of ownership?
 If the bill of lading is retained by S but the bill of lading state  Yes, there is a transfer of ownership.
that “deliver to B?”  If the sale is declared void, what is the effect?
 There is delivery but the right of possession was reserved by  If the buyer acquires it in value and good faith, there is a
S transfer.
 What if the bill of lading does not acknowledge the bill of
exchange? Who bears the loss?
 No delivery.  The owner bears the risk of loss.

What is the role in delivery with bill of lading and bill of exchange? Case Example
 In order that there is transfer of ownership there must be  A sells to B a car in January 1, 2010. The car was lost in
physical delivery of the property and the delivery of the bill December 30, 2009.
of lading. In bill of exchange, there must be an  A bears the loss.
acknowledgement of receipt of all the documents.  A sells to B a car in January 1, 2010. B will pick it up in
January 10, 2010. The car was stolen in January 3, 2010 by
What is the effect if goods are sold by a person who is not the C.
owner thereof, and who does not sell them under authority or  The creditor bears the risks. The buyer is the creditor,
with consent of the owner? hence, B bears the loss.

July 23, 2013: Lesson 9 – Negotiable Documents
What is a document of title?
 A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the
order of any person named in such document
What are the examples of a document of titles?
 The examples are
1. Any bill of lading
2. Dock warrant
3. Quedan
4. Warehouse receipt or order
5. Any other document used as proof of possession or
as authority to transfer the goods represented by
the document
When is a document of titles negotiable?
 It is negotiable if delivered to the bearer or to the order of a
certain person. To the order of a certain person is different
to “to be delivered.”
What is the effect if the document states that it had been
delivered?
 The document is non-negotiable
What is negotiation?
 It is the act of transferring.
What is the distinction of negotiable document and non-
negotiable document?
 It is negotiable document if deliverable while non-
negotiable document is no longer deliverable
P a g e | 11
 It is negotiable either by mere delivery or by endorsement
by delivery while in non-negotiable, it can be transferred
only by assignment.
 In negotiable document, the transferee acquire directly the
obligation of the bailee to hold for him while in non-
negotiable, the transferee does not acquire directly the
obligation of the bailee to hold for him and to acquire the
direct obligation of the bailee, the transferee must notify
the bailee but the title of the transferee may be defeated by
the levy of an attachment of execution upon the goods by a
creditor of the transferor prior to the notification to the
baille.
When is mere delivery made?
 There is mere delivery if deliverable to bearer
How can be further negotiated?
 It can be negotiated in blank, to bearer or to a specified
person. Once it is made to a specified person, it can no
longer be negotiated.
What is the effect if made to a specific person?
 It can no longer be negotiated.
Who may negotiate?
 A negotiable document of title may be negotiated
1. By the owner
2. By any person to whom the possession or custody
of the document has been entrusted by the owner
What are the warranties by the person who negotiate?
 The warranties are
1. That the document is genuine
2. That he has a legal right to negotiate or transfer it

3. That he has knowledge of no fact which would
impair the validity or worth of the document; and
4. That he has a right to transfer the title to the goods
and that the goods are merchantable or fit for a
particular purpose.
July 29, 2013: Quiz
1. Who is an unpaid seller? When is a seller deemed unpaid?
2. What are the kinds of constructive delivery?Explain each
and give example
3. What are the warranties by the person who negotiate?
Explain each?
4. When is good considered in transitu?
5. What is a document of title? Give two distinctions
between negotiable document and non-negotiable
document.
July 30, 2013: No Class
August 5, 2013: Lesson 10 – Negotiation and Delivery
How do document of titles negotiated?
 It is by mere delivery
How is endorsement made?
 It is made to the order of a specified person
Case Example
 A negotiated a document of title to B stating that “pays to
the order of B.” B negotiated again to C stating that “pays
to the order of C.” Can C file a case against B and A for
breach of warranty?
P a g e | 12
 The obligation of B is merely to indorse and the warranty is
limited only to those enumerated in the document. Failure
of the bailee or the previous endorsers to comply with their
obligations does not make the present endorsers liable.
Note that, negotiation is not an act of delivery it is merely
for convenience of claiming.
 A document of title contained the words “deliver to
bearer.” The document was stolen by T; T subsequently
indorsed it to S, a purchaser in good faith. Is the negotiation
to S valid?
 Yes, notwithstanding the theft by T. S is a purchaser for
value in good faith, that is, S did not know that the
document had been stolen by T
What is a breach of duty?
 It is when there is a valid possession of the negotiable
document but the negotiation is not in the concept of
ownership.
When is negotiation valid even there is a breach of duty?
 It is when the person to whom the document was
negotiated paid
1. For value, and
2. In good faith without notice of the breach of duty,
or loss, theft, fraud, accident, mistake, duress or
conversion.
What is garnishment? When can’t you attach by garnishment?’
 Garnishment is when goods are deposited to the court as an
attachment.Generally, the goods cannot be attached or
levied, except when the document is surrendered to baille
or the negotiation of document enjoined. The baille then
cannot be compelled to surrender the goods, except if the

document is surrendered to him or the document is
impounded by the court.
What is the protection given to the creditor of the owner of the
negotiable document?
 The creditor is entitled to such
1. aid from the courts of appropriate jurisdiction by
injunction and otherwise in attaching such
document or
2. in the satisfying the claim by means thereof as
allowed at law or in equity in regard to property
which cannot readily be attached or levied upon by
ordinary legal process
How should delivery be made? Is it for the buyer to get or the
seller to deliver?
 It depends
1. It depends to the agreement of the parties
2. If there is no agreement, it depends to the usage of
the trade
3. If there is no usage, the buyer must get them at the
seller’s business place or recidence
What is the rule when the goods are in possession of a third
person?
 The seller’s obligation to deliver is not fulfilled unless the
third person acknowledges to the buyer that he holds the
goods on the buyer’s behalf.
P a g e | 13
What are the rules when the quantity isles than that agreed upon?
More than that agreed upon? Mixed with a different goods?
 If less than that agreed upon, the buyer may
1. Reject all
2. Accept what have been delivered, at the contract
rate
 If more than that agreed upon, the buyer may
1. Reject all
2. Accept the goods agreed upon and reject the rest
3. Get all and pay for them at the contract rate
 If mixed, the buyer may
1. Accept the goods which are in accordance with the
contract, and reject the rest
2. Reject all, if the sale is indivisible
August 6, 2013: Lesson 11 – Unpaid Seller
When is a seller deemed an unpaid seller?
 The seller is an unpaid seller, if:
1. When the whole of the price has not been paid or
tendered
2. When the bail of exchange or other negotiable
instrument has been received as conditional
payment, and the condition on which it was
received has been broken by reason of the dishonor
of the instrument, the insolvency of the buyer, or
otherwise.
When is there an effect of payment, if the seller refuses to accept
payment?
 There is an effect of payment when there is a tender of
payment and there is consignment if the seller refuses to
accept. Mere tender of payment does not produce the
effect of payment.

Case Example:
 B sold a car to S for P10,000.00. They agreed that S shall pay
it in installment for P1,000.00 per month. In the last month,
S did not pay. Is S considered to substantially performed his
duty and that B is not an unpaid seller.
 No, the law clearly states that the “whole of the price,”
hence, the defense of substantial performance is untenable
as long as no whole payment is made B are considered as an
unpaid seller.
What is the importance of identifying a seller as unpaid seller?
 It is because, under the law, unpaid seller has certain rights
as against the goods or against the buyer.
What are the rights of unpaid seller against the buyer?
 This is a procedural aspect where the seller can demand
compliance or fulfillment for what is incumbent upon the
buyer or sue the buyer for specific performance and
collection of damages.
What are the rights of the unpaid seller against the goods?
 The rights of an unpaid seller against the goods are
1. Possessory lien or right to retain the goods
2. Rights of stoppage in transitu
3. Right of resale
4. Right of rescission
Are these right alternative or cumulative?
 They are cumulative, since the law does not prohibit the
exercise of more than one right at the same time. In fact
Art. 1530, allows the exercise of right of stoppage and
possessory right simultaneously.
P a g e | 14
When is possessory lien may be exercised?
 It is only when the goods are still in his possession. The
seller may exercise possessory lien if:
1. The goods are sold without stipulation as to credit
2. The goods have been sold on credit, but the term of
the credit has expired
3. The buyer becomes insolvent
What is “stipulation as to credit?”
 The invoice provides the term of delivery. Credit is the term
by which delivery is to be made
What is the remedy of the buyer, if there is not stipulation as to
credit?
 The transaction is deemed to be with a term, hence, the
buyer may seek the assistance of the court to determine the
term.
Case example:
 S sold B a specific diamond ring to be paid 6 months later.
By mutual agreement, B is made already the owner but S
will act as the depositary of the ring in the meantime. If the
term expires, and B has not yet paid, may S still continue
possessing the ring even he is no longer the owner?
 Yes, for he has not been paid. His no longer being the owner
is not important, for the law says: “ the seller may exercise
his right of lien notwithstanding that he is in possession of
the goods as agent or bailee for the buyer.
 A sold the diamond ring to B. They agreed that A shall hold
the ring for B until payment is made in one month. B gave a
golden box to A for safe keeping for the ring. After one
month, B was not able to pay. Can A exercise possessory
right over the golden box?

 No, A can only exercise possessory right over the subject
matter of the contract. Seller cannot extend their rights to
goods which is not the subject matter of the contract of
sale.
Is it necessary that the buyer be declared judicially insolvent?
 No, as long as his liability is more than his assets.
When shall the unpaid seller loses his possessory right?
 The unpaid seller loses his possessory right if
1. He delivers the goods to a carrier or other bailee for
the purpose of transmission to the buyer without
reserving the ownership in the goods or the right to
the possession
2. The buyer or his agent lawfully obtains possession
of the goods
3. He waives his right
What is the implication of CIF and FOB?
 If CIF, the seller remains the owner since the purchase price
include the transportationbut if FOB, the buyer is the one
claiming for ownership.
Case Example:
 A is based on Manila a car to B who is based in Davao. In
January 1, 2010, a delivered the car FOB in a ship. While the
ship is still on the port, A discovered that B is insolvent. Can
A exercise possessory right over the goods?
 No, there was no reservation for right of possession or
ownership since it was effectively delivered to B. It is FOB
and the right of ownership belongs to B.
P a g e | 15
How is waiver done?
 It can be manifested by the conduct of the seller (implied)
or by express waiver of such right.
When is good considered in transitu? Not in transitu?
 Goods are in transit:
1. From the time when they are delivered to a carrier
by land, water, or air, or other bailee for the
purpose of transmission to the buyer, until the
buyer, or his agent in that behalf, takes delivery of
them from such carrier or other bailee
2. If the goods are rejected by the buyer, and the
carrier or other bailee continues in possession of
them, even if the seller has refused to receive them
back
 Goods are not in transit:
1. If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination
2. If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledge
to the buyer or his agent that he holds the goods on
his behalf and continues in possession of them as
bailee for the buyer or his agent; and it is
immaterial that further destination for the goods
may have been indicated by the buyer
3. If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that
behalf.

What are the remedies of the unpaid seller for the exercise of the
right of stoppage?
 The unpaid seller may
1. Obtain actual possession of the goods or
2. Give notice of his claim to the carrier or other bailee
in whose possession the goods are.
What is the obligation of the carrier after notice of stoppage?
 The carrier must
1. Redeliver the goods to, or according to the direction
of the seller.
2. If, however, a negotiable document of title
representing the goods has been issued by the
carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the
seller unless such document is first surrender for
cancellation.
How is the right of stoppage exercised?
 The notice may be given to the person in actual possession
of the goods or to his principal. In the latter case the notice,
to be effectual, must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
August 17: Midterm Examination 
September 2, 2013: Lesson 12 – Right of Resale and Right to
Rescind
What are the remedies of the unpaid seller?
 The remedies are
1. Right of lien
2. Right of stoppage in transitu
P a g e | 16
3. Right to resale
4. Right to rescind
When shall you exercise the right of resale?
 The right of resale can be exercised if
1. The goods nature are perishable or
2. Where the seller expressly reserves the right of
resale
3. In case the buyer should make default, or where the
buyerhas been in default in the payment of the
price for an unreasonabletime
When are goods perishable?
 Goods are perishable if they are of a nature that they
deteriorate rapidly
Is the requisite notice depends upon the perishable characteristics
of the goods?
 No, requisite notice does not depend upon the perishable
character of the goods.
 If the basis is goods is of perishable nature or by express
stipulation, notice is not necessary but if the basis is
unreasonable default of the buyer, then notice is necessary.
What is the purpose of the notice?
 Notice is for the interest of the seller in order to determine
the issue whether the buyer is in default. It is not because
notice is necessary but to remove doubt as to whether the
buyer is in default or not.
What is the effect of a deficiency to the price?
 The deficiency in the price may be obtained as damages
against the original buyer. This happens when the resale
price is lower than the original selling price.

When shall a buyer acquires a good title as against the original
buyer?
 When the resale is made as required by law, the buyer
acquires a good title as against the original buyer.
Why is a buyer in default cannot demand for performance of the
contract?
 It is because a buyer in default loses the benefit of the
period unless he gives sufficient securities.
How can the sale be done?
 The sale can be done either by:
1. Private Sale or
2. Public Sale
In a public sale, can the owner be the buyer?
 No, by reason of public policy and by express provision of
law.
What is the nature of power to rescind?
 Under Article 1191, the power to rescind is implied in
reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
What are the two kinds of rescission?
 The two kinds of rescission are:
1. Rescission proper or resolution under Article 1190
2. Rescission as a right of an unpaid seller
Distinguish the two kinds of rescission?
Rescission as a right of the Resolution
unpaid seller
The right of one of the It is a right of either contracting
P a g e | 17
contracting party (unpaid seller) party base on damage
by reason of failure to comply
with the obligation to pay
There is no need for restitution There must be restitution
because an unpaid seller has
nothing to return
It is exercised by the unpaid It is exercised by either party
seller
Why is right to rescind inherent?
 Article 1190 expressly provides and there is a need to
protect the right of the unpaid seller in case of non-
compliance of the buyer of what is incumbent upon him.
When is rescission exercised by the unpaid seller?
 It is when he expressly reserved the right to do so in case
the buyer should make default, or where the buyer has
been in default in the payment of the price for an
unreasonable time.
How is rescission exercised by the unpaid seller?
 Rescission is exercised by
1. Giving notice which must be communicated and
notarized or
2. Some overt act an intention to rescind.
Are overt acts or implied acts needed to be communicated?
 No, it is not necessary but it is essential to communicate in
order to settle the issue whether or not the buyer is in
default.
Case Example
 By virtue of a deed of sale, A sold his car to B. The car was
not delivered to B. B, in turn, sold the car to C by virtue of a

deed of sale. Is the conveyance to C affects the right of A as
unpaid seller.
 No, it will not affect the right of A as unpaid seller.
 Under the law, the unpaid seller’s right of lien or stoppage
in transitu is not affected by any sale, or other disposition of
the goods which the buyer may have made, unless the seller
has assented thereto.
To whom should the fruits belong?
 To the buyer.
 The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they
were upon the perfection of the contract.
 All the fruits shall pertain to the vendee from the day on
when the contract was perfected.
September 9-10, 2013 – No Class but read the rules on double sale
Obligation to Deliver
What are included in the obligation to deliver?
 The obligation to deliver the thing sold includes that of
placing in the control of the vendee all that is
mentioned in the contract
What is the rule on sale of real estate by the unit?
 If the sale of real estate should be made with a statement of
its area, at the rate of a certain price for a unit of measure
or number
1. the vendor shall be obliged to deliver to the vendee,
if the latter should demand it, all that may have
been stated in the contract;
2. but, should this be not possible, the vendee may
choose between
P a g e | 18
a) a proportional reduction of the price and
b) the rescission of the contract,
3. provided that, in the latter case, the lack in the area
be not less than one-tenth of that stated.
 The same shall be done, even when the area is the same, if
any part of the immovable is not of the quality specified in
the contract.
When can a vendee exercise rescission?
 Rescission can be exercise in the following cases
1. The lack in the area not delivered is not less than
one-tenth of that stated.
2. The inferior value of the thing sold exceeds one-
tenth of the price agreed upon.
3. The vendee would not have bought the immovable
had he known of its smaller area or inferior quality.
What is the rule if there is a greater area or number in the
immovable than that stated in the contract?
 If, in the case of unit sale, there is a greater area or number
in the immovable than that stated in the contract,
1. The vendee may accept the area included in the
contract and reject the rest.
2. If he accepts the whole area, he must pay for the
same at the contract rate.
What is the rule governing the sale of real estate on lump sum?
 In the sale of real estate, made for a lump sum and not at
the rate of a certain sum for a unit of measure or number,
1. There shall be no increase or decrease of the price,
although there be a greater or less area or number
than that stated in the contract.
2. The same rule shall be applied when two or more
immovables are sold for a single price;

3. But if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its
area or number should be designated in the
contract,
a) The vendor shall be bound to deliver all that
is included within said boundaries, even
when it exceeds the area or number
specified in the contract; and,
b) Should he not be able to do so, he shall
suffer a reduction in the price, in proportion
to what is lacking in the area or number,
unless the contract is rescinded because the
vendee does not accede to the failure to
deliver what has been stipulated.
What is the rule in double sale?
 If the same thing should have been sold to different
vendees,
1. The ownership shall be transferred to the person
who may have first taken possession thereof in
good faith, if it should be movable property.
2. Should it be immovable property,
a) The ownership shall belong to the person
acquiring it who in good faith first recorded
it in the Registry of Property.
b) Should there be no inscription, the
ownership shall pertain to the person who
in good faith was first in the possession; and
c) In the absence thereof, to the person who
presents the oldest title, provided there is
good faith.
When shall the rule in double sale not apply?
 It shall not apply in following cases
P a g e | 19
1. Subsequent judicial attachment or executions which
shall not prevail over prior unregistered sales where
possession had been already conveyed by the
execution of a public instrument
2. The double sale is not made by the same person or
his authorized agent
3. Where one sale was an absolute sale but the other
was a pacto de retro transaction where the period
to redeem has not yet expired
4. Where one of the sales was one subject to a
suspensive condition which condition was not
complied with.
September 16, 2013 - Recitation
September 17, 2013: Lesson 13 – Conditions and Warranties
What are the conditions and warranties?
 The contract of sale has three elements, namely: essential,
natural and accidental. The natural elements are the
conditions and warranties of a contract of sale.
What is a condition?
 Condition is a future and uncertain event, upon the
happening of which, the effectivity or extinguishment of an
obligation or right subject to it depends and the failure of
which is an end and gives no effect.
What is a right of action?
 It is a right of an aggrieved party to enforce a right through
court’s intervention.
What is an express warranty?
 Any affirmation of fact or any promise by the seller relating
to the thing is an express warranty if the natural tendency

of such affirmation or promise is to induce the buyer to
purchase the same, and if the buyer purchases the thing
relying thereon.
Distinguish warranty and condition?
 In condition it is bilateral since it can be imposed by the
buyer or the seller but in warranty it is unilateral since it is
only the seller who makes the warranty. In condition, the
buyer or the seller may not be compelled to impose
condition but in warranty, the seller is always compelled to
warrant the goods.
Distinguish warranty from dealer’s talk?
 Warranty and dealer’s talk are both affirmation of facts but
if the affirmation of fact is to which the buyer is ignorant
then it is a warranty and if the affirmation of facts expects
an opinion from the buyer then it is a dealer’s talk.
When shall there be a false representation?
 If the main purpose is to deceive the buyer, then it is a false
representation. In dealer’s talk, there is no cause of action
but in false representation there is a cause of action such as
estaffa.
Why is it called an implied warranty?
 It is because there is no affirmation of facts or promise
made but it forms part of the obligation.
What does the seller’s warrants?
 The seller warrants that:
1. He has the right to sale or transfer the property at
the time ownership is transferred and
2. That the buyer shall from that time have and enjoy
the legal and peaceful possession of the thing
P a g e | 20
What are the implied warranties?
 The implied warranties are
1. Warranty against eviction and
2. Warranty against hidden diffect
When shall eviction take place?
 Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the
vendor, the vendee is deprived of the whole or of a part of
the thing purchased.
What are the conditions of a breach of warranty against eviction?
(Requisites)
 The conditions of a breach of warranty against eviction are
1. The buyer is deprived of possession in whole or in
part
2. The deprivation is by virtue of a final judgment
3. The deprivation is by virtue of a right prior to the
sale or imputable to the seller effected by the seller
4. The vendor was summoned or has been previously
notified of the complaint for eviction at the instance
of the purchaser
When is a judgment final?
 It is when the aggrieved party loses any remedy in the
ordinary course of law
Case Example:
 On January 1, 2010, A sold his land to B in an installment
basis. On February 1, 2010, the land was expropriated by
the government. Is A liable for the eviction of B?
 No, because the eviction is not prior to the sale.
September 23, 2013 – Quiz
1. What is redhibitory defect? (Art. 1576) Give example

2. What is the period to enforce actions arising from breach
of warranty against hidden defect? (Art. 1571) Give
example.
3. Is good faith a defense for warranty against hidden defect?
Explain (Art. 1566)
4. What are the liabilities of vendor if the thing should be lost
in consequence of hidden defect? (Art. 1568 and 1569)
5. What are the rules for sales involving animals? (Art. 1572 –
1581)
September 24, 2013: Lesson 14 – Obligations of the Vendee
What are the obligations of the vendee?
 The obligations of the vendee are
1. To accept delivery
2. Pay the price
How is acceptance manifested?
 Acceptance is manifested
1. If the buyer intimates – express acceptance on the
part of the buyer that he had accepted and taken
possession of the goods
2. If he does an act inconsistent to the acts of
ownership
3. If he retains and does not return at a reasonable
time
Is the buyer bound to accept delivery by installment?
 As a general rule a buyer of good is not bound to accept
delivery by installments, except
1. If there is an express stipulation to the contrary
2. The nature of the contract requires delivery by
installment.
What are the rules governing the defect of delivery?
P a g e | 21
 The defect in one installment should not affect the other
unless the defect is so material, in that case, the vendee
may rescind and ask for damages
 If the defect is not material and there is substantial
compliance, the vendee may ask for compensation such as
rebate or discount.
When is delivery deemed complete?
 Delivery is deemed complete if the vendee has the right to
examine them before acceptance.
What are the instances that right of examination is not exercised?
1. When there is stipulation
2. When the goods are delivered C.O.D – unless there is an
agreement or a usage of a trade permitting such
examination
What are the instances that a buyer may refuse acceptance?
 The instances are:
1. Justifiable refusal – when good are not in
accordance with the contract or not fit for the
purpose
2. Unjustifiable refusal – title passes to the buyer even
if he refuses.
How shall refusal be manifested?
 Refusal shall be manifested
1. By mere notification to the seller of refusal and the
buyer is not duty bound to return the goods to the
seller
2. The buyer may make himself a voluntary depositary
– in which case he must safely take care of them in
the mean time

Is consignation applicable only to money?
 No, consignation is also applicable to things.
When must payment be made?
 Payment is made
1. At the time and place stipulated in the contract
2. If there is no stipulation, at the time and place of
the delivery of the thing sold.
Is suspension and refusal the same?
 No refusal presupposes a lump sum payment while refusal
presupposes a payment by installment.
What is the remedy if there is refusal?
 If one of the parties cannot comply the aggrieved party may
ask for reformation.
What are the valid grounds for suspension of payment?
 The buyer may suspend the payment of the price
1. If there is a well-grounded fear
2. The fear is because of
a) a vindicatory action or action to recover or
b) a foreclosure of mortgage
Is it necessary that there is an actual suit so that payment may be
suspended?
 No, reasonable fear is sufficient enough to suspend
payment.
Is an act of trespassing a justifiable ground for suspension of
payment?
 No, mere act of trespassing is not a justifiable ground.
Can a seller rescind a contract base on reasonable fear?
P a g e | 22
 Yes, a seller may rescind the contract base on reasonable
fear.
Is it automatic rescission, if there is a reasonable fear?
 No, he must sue for rescission first, if there is reasonable
fear of the loss of immovable property sold and its price.
Is it possible for an automatic rescission involving sale of
immovable property?
 Yes, it is possible provided there must be a notarial demand
or judicial demand
Be responsible to read Chapter 6 and Chapter 7
September 30, 2013: Lesson 15 – Pacto de Retro
What are the two kinds of redemption?
 The two kinds are
1. Conventional which is a subject matter of
agreement or stipulation
2. Legal which is created by law
What is conventional redemption?
 It takes place when the vendor reserves right to repurchase
the thing sold.
 It is the pacto de retro in a contract of sale
Is pacto de retro a sale in all circumstances?
 No. In some circumstances, it will not be deemed as pacto
de retro but an equitable mortgage.
What is equitable mortgage?
 One which although lacking in some formality, form or
words, or other requisites demanded by a statute
nevertheless reveals the intention of the parties to charge a

real property as security for a debt, and contains nothing
impossible or contrary to law.
Distinguish pacto de retro from equitable mortgage.
Pactor de Retro Equitable Mortgage
It transfer ownership It does not transfer ownership
It is a principal contract It is an ancillary contract
It consolidate ownership by It has to go to the process of
operation of law foreclosure so that ownership
shall be consolidated to the
highest bidder.
What are the instances that a pacto de retro is presumed to be an
equitable mortgage?
 The following are the instances
1. When the price of a sale with right to repurchase is
usually 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.
How shall a vendee acquire ownership in a pacto de retro sale?
P a g e | 23
 Technically, the vendee has nothing to do in order that he
may acquire ownership because by operation of law
ownership is consolidated upon the expiration of the period
of redemption. The subsequent registration is not the one
that transfer ownership, such registration is for the purpose
of binding third person.
What is the tax that a seller must pay in order that the contract
must be presumed equitable mortgage?
 It is the real property tax which is the tax in the use and
enjoyment of the property.
Why is it presumed to be an equitable mortgage when the vendor
retains for himself the property?
 It is because the essence of a contract of sale is delivery. In
this case there is no delivery.
Who may exercise conventional redemption?
 It is the seller who exercises conventional redemption.
What is the cause of action if there is dispute as to whether the
contract is an equitable mortgage or pacto de retro?
 Ask for reformation of instrument to correct it so as to
make it express the true intention of the parties.
With in what period of time that an action may commence?
 For conventional redemption, it is within the period
stipulated.
 In the absence of an express agreement, it shall last for 4
years from the date of the contract.
 In no case that a period of redemption shall exceed 10 years
if there is a time agreed upon.
 Within 30 days from the finality of the decision declaring
the contract as a pacto de retro.
 P a g e | 24

Does an excess in the period of stipulation make the contract

void?
 No, it is not the right which is voided but it is the excess of
the period which is voided.

Case example:
 A, B, and C are co-owners of a land. They entered into a
pacto de retro sale to D with 6 months to redeem the land?
It is only A who made a redemption of the land before the 6
months ended. Can D refuse the redeption?
 If A is only redeeming a portion of the land, D may refuse
since it is a joint obligation.
 If the whole land is being redeemed by A then D cannot
refuse.
 If there was already a partition, then A cannot refuse D if D
wishes to redeem his portion.

October 9, 2013: FINAL EXAM

“perfer et obdura; dolor hic tibi proderit olim”

Be patient and tough; some day this pain will be useful to you.