Art 1458-1544

Art. 1458.
A contract whereby one of the contracting parties (known as sellers),

obligates himself to transfer the ownership of and to deliver a determinate thing, and
the other party (known as buyer), obligates himself to pay therefor a price certain in
money or its equivalent
Essential elements/requisites
• Consent of contracting parties
• Subject matter which should be a determinate thing
• Price certain in money or its equivalent
Natural elements
• Warranty against eviction
• Warranty against hidden defects and encumbrances
Accidental elements
• refer to particular stipulations of the parties such as terms, place and time of
payment, and other conditions agreed upon.
Kinds of Sale
1. ABSOLUTE –the contract is not subject to any condition and title passes to the
buyer upon delivery of the thing.
2. CONDITIONAL –the contract contemplates a contingency, usually payment of the
price.
Characteristics of a contract of sale
• Consensual –perfected by mere consent of the parties.
Ex. Buying and selling
• Principal –it can exist by itself without being dependent upon another contract.
Ex.
• Bilateral –the parties are bound by reciprocal obligations.
Ex. The seller delivers; the buyer pays
• Onerous –valuable considerations are given by both parties to acquire rights.
Ex.
• Commutative –the parties exchange almost equivalent values.
Ex. The seller gives the thing sold, and receives the price and vice versa
• Nominate –it has a special name given to it by law.
Ex, contract of sale
Sale distinguished from Dacion en pago
Sale Dacion en pago

No pre-existing credit There is pre-existing credit
Creates obligations Extinguishes obligations
Cause of consideration is Cause of consideration is the
price from the seller’s point of extinguishment of obligation
view; and the delivery of the from the debtor’s point of
object from the buyer’s point view; and the delivery of
of view object given in place of the
credit from the creditor’s
point of view
There is greater freedom in Less freedom in fixing the

fixing the price price
Sale distinguished from payment by cession
Sale Payment by cession
No pre-existing credits There are pre-existing credits
Creates obligations Extinguishes obligations
Cause of consideration is Cause of consideration is the
price from the seller’s point of extinguishment of obligation
view; and the delivery of the from the debtor’s point of
object from the buyer’s point view; and the assignment of
of view the things to be sold from the
creditor’s point of view
There is greater freedom in Less freedom in fixing the
fixing the price price
Ownership of the thing is The creditors do not become
transferred to the buyer owners of the properties
assigned to them
Sale distinguished from contract for a piece of work
Sale Piece of work

Contract for the delivery at a Goods are to be manufactured
certain price of an article specially for the customer and
which the vendor in the upon his special order, and not
ordinary course of business for the general market.
manufactures or procures for
the general market, whether
the same is on hand or not.
Movable whose price is Not governed by the Statute

P500.00 or more is governed of Frauds even if the amount
by the Statute of Frauds is at least P500.00
Sale distinguished from barter
Sale Barter
Cause of consideration is Cause or consideration is
money another thing
Movable whose price is Not governed by the Statute
P500.00 or more is governed of Frauds even if the amount
by the Statute of Frauds is at least P500.00
Consideration is partly in money and partly in another thing
Rules to determine whether the contract is a sale or barter:
1. The contract shall be one of sale or barter depending upon the manifest intention of
the parties
2. If the intention of the parties does not clearly appear:
a) Contract is barter –if the value of the thing given as part of the consideration
exceeds the monetary consideration
b) Contract is sale –if the monetary consideration is more than or equal to the value of
the thing given as part of the consideration
Sale distinguished from Contract to Sell
Sale Sell
The title to the property passes to the vendee Ownership is, by agreement, reserved to the
upon the delivery of the thing sold vendor and is not to pass to the vendee until
full payment of the purchase price
The seller does not yet agree or consent to
transfer ownership of the property subject of
the contract to sell until the happening of an
event such as full payment of the purchase
price
Non-payment of the price is a negative Full payment of the purchase price is a positive
resolutory condition. suspensive condition.
The vendor loses ownership of the property Failure to pay the price is not a breach but an
and cannot recover it until and unless the event that prevents the obligation of the vendor
contract of sales is resolved or rescinded. to convey title from becoming effective
The risk of loss is on the buyer The risk of loss is on the seller
Sale distinguished from Agency to Sell
Sale Agency to Sell

Title to the goods is transferred to the Title to the goods is retained by the owner
buyer upon delivery of the thing sold despite the delivery of the goods to the
agent
The buyer is required to pay the price The agent is required to turn over to the
principal the price of the goods which he
received from the buyer
The recipient/ buyer of the property may The principal retains control of the
do with the property as he pleases property
Rules on the object of the contract of sale
1. Requisites of object of a contract of sale
• The thing must be within the commerce of men
• The thing must be licit (ART. 1459). It must not be contrary to law, morals, good
customs, public order or public policy.
• The thing must be determinate
When thing is considered Illicit or Unlawful

A thing maybe illicit PER SE or illicit PER ACCIDENS
• Illicit per se –meaning by itself, such as decaying fruits for human consumption and shabu
• Illicit per accidens –meaning a thing is made illicit because of a provision of law, such as sale
of lottery tickets.
ART. 1460. A thing is determinate if its is particularly designated or physically
segregated from all others of the same class.
The requisite that a thing is determinate is satisfied if at the time the contract is entered
into, the thing is capable of being made determinate without the necessity of a new or
further agreement between parties.
Rules on the object of the contract of sale
2. ART. 1459. The vendor must have the right to transfer the ownership of the thing at
the time that it is delivered.
Thus, it is not necessary that the vendor must be the owner at the time of sale.
3. ART. 1461. Things having a potential existence may be the object of a contract of
sale.
Thus, one can sell the young of animals that thereafter will be born or the future
harvest from a farm.
However, the thing must come into existence; otherwise, the sale will not be
effective for not having a subject matter
Distinction between SALE OF AN EXPECTED THING (emptio rei speratae)
and SALE OF THE HOPE ITSELF (emptio spei)
Emptio rei speratae Emptio spei

The sale of a future thing Deals with a present thing – the hope of
expectancy
The thing sold must come into The sale produces effects even if the
existence; otherwise, the sale will not thing hoped for does not come into
be effective existence.
However, the sale of vain hope or
expectancy is void, such as the sale of a
losing sweepstake ticket already drawn.
4. The goods which form the subject of a contract of sale may be either:
a. Existing goods owned or possessed by the seller:
Thus, the sale of bathroom fixtures currently stored in the seller’s warehouse is a
sale of existing goods.
b. ART. 1462. Goods to be manufactured, raised, or acquired by the seller after the
perfection of the contract of sale, called “future goods”, or goods whose acquisition by
the seller depends upon a contingency which may or may not happen.
Example:
1. The garments to be sewn or to be purchased by the seller are goods to be
manufactured or acquired by the seller.
2. There may also be a sale of chickens that may be raised in a poultry farm.
3. F promised to give G a specific car if G completes his course in mechanical
engineering. G may sell the car to H although the acquisition by G of the car is
subject to a contingency.
5. ART. 1463. The sole owner of a thing may sell an undivided interest therein.
Such sale shall produce the effect of making the seller and the buyer co-owners of
the thing sold.
Example:
S is the sole owner of an apartment. He sells ½ undivided interest therein to B.
Such sale shall produced the effect of making S and B co-owners of the property with
each party becoming an owner of ½ undivided interest.
6. Sale of fungible goods
Fungible goods –refer to interchangeable goods such as grain, oil, etc., that allow one to be replaced by another
without loss of value.
ART. 1464. There may be a sale of an undivided share of a specific mass of fungible goods though the seller
purports to sell and the buyer purports to buy a definite number, weight or measure of the goods in the mass, and
though the number, weight or measure of the goods in the mass is undetermined.
Rules if the quantity sold is different from the quantity of the mass:
a) If the quantity, number, weight, or measure, of the mass is more than the quantity sold, the parties shall become
co-owners.
Ex.
S sells to B 200 sacks of corn from a mass stored in the warehouse of S. The mass, however, actually consists of 300
sacks of corn. Thus, S and B will become co-owners of the whole mass to the extent of 2/3 for B and 1/3 for S.
b) If the quantity of the mass is less than the quantity sold, the buyer becomes the owner of the whole mass, with
the seller being bound to make good the deficiency from goods of the same kind and quality, unless a contrary
intent appears.
Ex.
S sells to B 300 sacks of yellow corn from a mass stored in the warehouse of S. The mass, however, actually consists
of 280 sacks of yellow corn . In this case, B becomes the owner of all the 280 sacks of yellow corn and S is bound to
deliver to B an additional 20 sacks of yellow corn to complete the quantity agreed upon.
ART. 1465. Things subject to a resolutory condition may the object of a contract of
sale.
Ex.
S sold his lot to B with S being given the right to repurchase the lot within 5 years from
the date of sale. The sale and the right to repurchase were registered in the Register of
Deeds where the lot is located. Two years after the sale, B sold the lot to X. X became
the owner of the lot subject to the right of S to repurchase it within the 5-year period
from the time he sold it to B.
Price
- the sum stipulated as the equivalent of the thing sold
- every incident taken into consideration for the fixing of the same, put to the debit of the
vendee, and agreed to by him
Rules on price
1. Certainty of price
The price of the thing sold must be certain; otherwise, the sale is void by reason of the
absence of meeting of minds between the parties.
The price is considered certain under the following rules:
a. If the parties have agreed upon a definite amount for the sale.
EX.
S sold to B a specific watch. The parties agreed that B would pay P2,500 for it. The price is
certain because the parties have agreed on a definite amount for the thing sold
ART. 1473. The fixing of the price can never be left to the discretion of one of the contracting
parties. However, if the price fixed by one of the parties is accepted by the other, the sale is
perfected.
EX.
S sold his car to B at a price to be fixed by S ten days after their agreement. On the tenth day,
S fixed the amount at P100,000. If B accepts the said price, the sale is perfected as there is a
meeting of minds. If B does not so accept, no sale is perfected.
b. If it be certain with reference to another thing certain. (Art.1469)

Ex. S sells to B a certain ring the price of which is the price of 20 bags of Island cement being
sold at a certain price.
c. If the determination of the price is left to the judgment of a specified person. (ART. 1469)
1. If such person are unable or unwilling to fix the price, the contract shall be inefficacious, unless
the parties subsequently agree upon the price.
2. If the third person acted in bad faith or by mistake, the courts may fix the price.
3. If such third person are prevented from fixing the price or terms by the fault of the seller or buyer,
the party not at fault may have such remedies against the party at fault as are allowed the seller or
d. ART. 1472. If the price is that which the thing sold would have on a definite day, or in a
particular exchange or maker, or when an amount is fixed above or below the price on
such day, or in such exchange or market, provided said amount is certain
EX.
S sells to B 500 shares of stock of San Miguel-B shares at the price equivalent to the closing
price of the shares on April 24,2015, at the PSE. This is of course on the condition that there
will be trading of the said shares on the day agreed upon; otherwise, the sale is of no effect. Or
the parties may agree that the price of the shares will be 20% above or 20% below the price of
the shares in the exchange on the said day.
Effect of the price cannot be determined
ART. 1474. The sale shall be inefficacious. However, if the thing or any part thereof has
been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What
is reasonable price is a question of fact dependent on the circumstances of each particular case
2. Gross inadequacy of price
ART.1470. Gross inadequacy of price does not affect a contract of sale, except as it may
indicate a defect in the consent, or that the parties really intended a donation or some other act
or contract.
There is gross inadequacy of price if a reasonable man will not agree to dispose of his
property.
EX.
S sells to B for P180,000 a certain car whose actual value is P300,000.
• The fact that the price is inadequate does not affect the validity of the contract.
• However, if S agreed to the car at P180,000 because B used insidious words or
machinations so that S would sell the car for the said price, then S may seek the annulment
of sale on the ground of vitiated consent due to fraud.
3. Simulated price
ART. 1471. If the price is simulated (the parties make it appear that a price certain in
money is to be paid or has been paid) the sale is void, but the act may be shown to have
been in reality a donation, or some other act or contract.
EX.
S and B entered into a contract where they made it appear that S sold his car to B for
P100,000. In reality however, B did not give S P100,000.
• The sale here is void by reason of the absence of an essential requisite which is the price.
• The parties may however, show that S really donated the car to B, in which case, the
contract shall be one of donation, not a sale.
• Or if what B gave to S was a particular diamond ring, then the contract shall be one of
barter, not sale
When a contract of sale is perfected
- At the moment there is a meeting of minds upon the things which is the object of the
contract and upon the price.
- ART. 1475. From that moment, the parties may reciprocally demand performance, subject
to the provisions of law governing the form of contracts.
Form of a contract of sale

1. ART. 1483. A contract of sale may be in any of the following forms:
a) In writing
b) By word of mouth
c) Partly in writing and partly by word of mouth
d) May be inferred from the conduct of the parties
2. The sale involving the following must be in writing to be enforceable:

a) Sale of real property or of any interest therein (regardless of the price)
b) Sale of goods, chattels or things in action the price of which is P500 or more (ART. 1403).
Things in action –credit, shares of stock, and other incorporeal properties.
3. Sale of a piece of land through an agent
ART. 1874. The authority of the agent to sell a piece of land must be in writing; otherwise,
the sale is void.
a) If the authority of the agent to sell a piece of land is not in writing – the sale is void
whatever may have been form it was entered into.
b) If the authority of the agent is in a private instrument and the sale was:
• Entered into orally – the sale is unenforceable (ART. 1403)
• In a private instrument – the sale is valid
• In a public instrument – the sale is valid.
c) If the authority of the agent is in a public instrument and the sale was:
• Entered into orally – the sale is unenforceable (ART. 1403)
• In a private instrument – the sale is valid
• In a public instrument – the sale is valid.
Note: in order, however, that the sale be recorded in the Register of Deeds, both the authority
of the agent and the sale must be in public instrument (ART. 1358, paragraphs 1&3)
Rules in case of sale by auction (ART. 1476)
1. Sale by auction in lots
- Each lot is the subject of a separate contract of sale
2. When sale by auction is perfected
- When the auctioneer announces its perfection (a) by the fall of the hammer, or (b) in any
other manner
• Rights of parties before perfection
a. Any bidder may retract his bid
This is so because a bid is merely an offer and an offer may be withdrawn at anytime
before acceptance
b. The auctioneer may withdraw the goods from the sale unless the auction has been
announced to be without service
Withdrawal of the goods is equivalent to a rejection of the offer made by any bidder
• Rights of parties after perfection
- The winning bidder cannot retract his bid nor can the auctioneer withdraw the goods since
there is already a perfected contract.
- Withdrawal form the contract by either party constitutes a violation of the Principle of
Mutuality of Contracts (ART. 1308)
3. Right of seller to bid
The seller may bid at the auction provided the following requisites are present:
a. The right to bid must have been reserved expressly by or on behalf of the seller.
b. His right to bid must not be prohibited by law or stipulation
For instance, in the exercise by the unpaid seller of his right to resell the goods, he cannot
buy the goods directly or indirectly (ART. 1533)
c. Notice must be given that the sale is subject to a right to bid by or on behalf of the seller.
Effect of employment by the seller of “by bidders” or “puffers” without notice
By bidders or puffers –persons employed by the seller to bid in his behalf, the purpose of
which is to raise the price, but the said persons are not in themselves bound by their bids
ART. 1574.Any sale whereby the seller employs “by bidders or “puffers” without notice may
be treated as fraudulent by the buyer.
- Thus, the buyer may annul the sale on the ground of vitiated consent due to fraud.
When ownership of the thing sold is transferred
- ART. 1477.The ownership of the thing sold is transferred upon the actual or constructive
delivery therof.
- The time when ownership is transferred is important to determine the party who shall bear
the loss.
- ART. 1478. The parties may, however, stipulate, that ownership in the thing sold shall not
pass to the purchaser until he has fully paid the price.
Promise to buy and/ or sell
• Bilateral promise
- This takes place when one party promises to buy and the other party promises to sell a
determinate thing at an agreed price.
- This is reciprocally demandable since this is as good as a perfected contract of sale.
- ART. 1403. For enforceability, observance of the proper form is required, if the object of
sale is a movable with the price of at least P500, or real property or an interest therin,
regardless of the price. In other words, the promises should be in writing.
Promise to buy and/ or sell
• Unilateral promise
- the promise to buy or sell a determinate thing at a certain price is made by only one of the
parties
- The parties may be accepted or not and shall have the following effects:
i. If not accepted by the promisee (policitacion)
- This does not produce any legal effect.
ii. If accepted by the promise
- ART. 1479. Supported by a consideration distinct from the price, the promise is binding
upon the promisor.
- Not supported by any consideration distinct from the price, the promise is not binding upon
the promisor.
- Accordingly, the promisor can withdraw his promise by informing the promise of such
withdrawal even before the lapse of any option period given to the promisee.
A unilateral promise to buy or sell, even if accepted, is only binding if supported by a
consideration.
In other words, “an accepted unilateral promise” can only have a binding effect if supported by a
Examples:
• B promised in writing to buy and S promised in writing to sell his car for P100,000.
- The promise each party is reciprocally demandable.
• S promised to sell his car to B for P100,000 giving B one week to decide whether to buy or
not.
- If B does not accept the promise, such non-acceptance does not create any obligation on the
part of the parties.
- If B accepts the promise, S will be bound by the promise if B gives consideration, say P500
because a contract of option is perfected.
- So S cannot disposed the property within the period that he gave to B for the exercise of his
option.
- B may or may not buy the car since he is not obliged to buy but is merley given the option
to buy it.
Q: How much will B pay if he eventually decides to buy the car? P100,000 or P99,500?
A: P100,000 because the amount paid by B as option money is not part of the purchase price
Earnest money
- money given as part of the purchase price and as proof of the perfection of the contract
- Also called “arras” or something of value to show that the buyer was really in earnest, and
given to the seller to bind the bargain.
Option money
- Consideration paid for the purpose of holding one to his promise to buy or sell a
determinate thing for a certain period of time, which consideration is separate and distinct
from the purchase price
- Consideration for an option contract is not always monetary but could consist of other
things or undertakings of value.
- Consideration is not monetary, said consideration must be clearly specified as such in the
option contract or clause
Earnest money Option money
Part of the purchase price Separate and distinct from the
purchase price
Paid upon the perfection of a Paid for a sale that is yet to be
contract of sale perfected
Examples:
• B is interest in buying the car of S for P100,000 payable within 30 days from the date of
sale. To show that he is really earnest, B gives S P1,000 upon the execution of their
agreement, which amount S accepts.
- There is here a perfected contract of sale between B and S
- Accordingly, on due date for the payment of the price, B will have to pay S the amount of
P99,000 only.
Note: No perfected sale for prior payment of earnest money without property owner’s consent
of sale.
Rules on preservation of, injury to or benefit from the thing sold before or after
perfection
1. Duty of seller to preserve thing after perfection but before delivery
- ART. 1163. The seller is obliged to take care of the thing with the diligence of a goods
father of a family unless the law or the stipulation of the parties requires another standard of
care.
2. Right of the buyer to the fruits
- ART. 1537. The buyer has right to the fruits of the thing from the time of the perfection of
the contract.
- Unless a contrary stipulation has been agreed upon or a later date is set by the parties when
such right will accrue such as when the obligation to deliver arises at some future date.
- ART. 1164. However, the buyer shall acquire no real right over the thing and its fruits until
the same have been delivered to him.
3. Loss of or injury to the thing
a. Loss before perfection (including deterioration in quality)
- In case of complete loss, the sale is void because of the absence of the object.
- In case of partial loss, the buyer may choose between:
• Withdrawal from the contract (rescission), and
• Demanding the remaining part and paying its appropriate price (ART. 1493,1494)
b. Loss after perfection
First view
- Buyer bears the risk of loss (ART. 1480). He must pay the price.
- After perfection but before delivery, the buyer bears the risk of loss or injury to the thing
since any benefit during the same period inures to him.
- Therefore, the loss of the thing through a fortuitous event extinguishes the seller’s
obligation expect in the following cases:
• When the seller delays
• When the law provides that the seller shall be liable even in case of fortuitous event
• When the parties have stipulated that the seller shall be liable even in case of fortuitous event
• When the nature of the seller’s obligation requires the assumption of risk (ART. 1262)
Second view
- Sellers bears the risk of loss (ART. 1504). The buyer is not obliged to pay the price.
- After perfection, the goods remain at the seller’s risk until the ownership of the goods is
transferred to the buyer by actual or constructive delivery.
- However, notwithstanding that the ownership is not transferred to the buyer, the goods are
the buyer’s risk:
• If the is an agreement to that effect
• If ownership of the goods is retained by the seller merely to secure the performance by
the buyer of his obligation under the contract
• When actual delivery has been delayed through the fault of the buyer
NOTE: The weight of authority is on the second view because it is consistent with the
principle of “res perit domino” which means “The loss of property falls upon the owner”
Sale by sample; description; and sample and description
1. Sale by sample
- The parties contract solely with reference to the sample.
- the seller warrants that the bulk of the goods delivered corresponds with the sample shown
to the buyer.
2. Sale by description
- The parties contract solely with reference to the description.
- the seller warrants that the bulk of the goods delivered corresponds with the description of
the goods presented to the buyer
3. Sale by sample and description
- The seller warrants that the bulk of the goods delivered corresponds with both the sample
and the description, and not only one.
- ART. 1481. the buyer shall have reasonable opportunity of comparing the bulk with the
description or the sample
Rescission by buyer
- ART. 1481. If the goods delivered do not correspond with the sample, description, or sample and
description, as the case may be, the buyer may ask for the rescission of the sale
Recto Law: ART. 1484
Remedies of vendor in installment sales of personal property, and contracts purporting to be
leases of personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
Remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay
- This remedy applies regardless of the number of installments defaulted.
2. If the vendee’s failure to pay covers two or more installments, he may, at his option, avail
himself of the first remedy, or do either of the following:
• Cancel the sale
ART. 1486. When the sale is cancelled or rescinded, the vendor shall return to the vendee
the sums received minus reasonable rent.
However, the parties may stipulate that the installments or rents paid shall not be returned
provided the stipulation is not unconscionable
• Foreclose the chattel mortgage on the thing sold, if one has been constituted
In this case, he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary is void.
NOTE: The above remedies are alternative, not cumulative. Accordingly, the availment by the
vendor of one remedy will not entitle him to make use of the others.
Example:
S sold his only car to B for P100,000 payable in 10 equal monthly installments of P10,000
each. As security, B executed a chattel mortgage on the car.
Q: After paying the 1st 3 installments, B defaulted in the payment of the 4th installments. What
remedy or remedies are available to S?
A: S can exact fulfillment of the obligation. He can demand payment of the installment
defaulted only unless there is an acceleration clause (the whole shall become upon default of
the payment of an installment) or that the default of the buyer is under such circumstance as to
make him lose the right to make use of the period given to him. (ART. 1198)
Q: May S cancel the sale or foreclose the chattel mortgage on the car?
A: No, because the remedy of cancelling the sale or foreclosing the chattel mortgage
constituted on the thing is available only when the buyer’s default covers 2 or more
installments.
Example:
each. As security, B executed a chattel mortgage on the car.
Q: B defaulted in the payment of 4th and 5th installments and as a result, S foreclosed the
chattel mortgage constituted in the car. At the foreclosure sale, the car was sold only for a net
amount of P50,000. Can S recover the deficiency of P20,000 from B?
A: No, since S chose the third remedy, he shall have no further action against the buyer for
any deficiency.
Example:
O, the owner of a forklift, leased the same to T. The lease contract provided, among other terms and conditions, the
following: (1) Lease period – 2 yrs; (2) monthly rental P2,000; (3) T is given the option to buy the forklift at the end
of the term of the lease with the monthly rental being considered as installments payments. After 8 months, T
defaulted his payment of rental on the 9th, 10th, 11th, months. Accordingly, O terminated the lease contract and
repossessed the forklift.
Q:May O recover the rental in arrears from T?
A: No, The contract between O and T which is a lease of personal property with option to buy is considered a
sale of personal property in installments. Accordingly, ART. 1484 is applicable. Hence, O has no further action
When deficiency may be recovered
1. In case of sale on straight term
2. If security foreclosed is other than the chattel mortgage constituted on the thing sold
3. In the case of sale on execution of judgment in favor of the seller
Example:
S sold his only ring to B for P50,000 under the following terms: down payment of P30,000;
balance payable at month end. As security, B executed a chattel mortgage on the ring. B
defaulted in the payment of the balance. By reason thereof, S foreclosed the chattel mortgage
on the ring. However, only P15,000 was realized in the foreclosure sale.
Q: Can S still proceed against B to collect the deficiency of P5,000?

A: Yes, because ART. 1484 does not apply to a sale on straight term which is a sale where the
balance is to be paid in its entirety after the payment of an initial sum. This is an application of
the general rule that if the foreclosure sale in chattel mortgage results in deficiency, the same
way be recovered by the creditor. ART. 1484 is an exception to such general rule, no
deficiency may be recovered.
Example:
each. As security, B executed a chattel mortgage on the car and another chattel mortgage on
his piano. After paying the 1st 2 installments, B defaulted in the payment of the 3rd, 4th, and 5th
installments. As a consequence, S foreclosed the chattel mortgage on the piano which was
sold for P75,000.
Q: May s recover the deficiency of P5,000?

A: Yes, because the prohibition on the recovery of the deficiency applies only when the chattel
mortgage foreclosed was on the thing sold, which was the car.
Q: May S foreclosed the chattel mortgage on the car in order to recover the deficiency?
A: No, because S will just be going around the law.
Example:
each. As security, B executed a chattel mortgage in the car. After paying the 1st 2 installments,
B defaulted in the payment of the 3rd, 4th, 5th installments. As a consequence, S brought a court
action against B to recover the balance. The court rendered judgment in favor of S and against
B who was ordered to pay. Since B had no other property except the car, S moved for the
attachment of the car and its sale to satisfy the judgment. At the execution sale, the car was
sold only for a net amount of P75,000.
Q: May S recover the deficiency of P5,000?

A: Yes, because the prohibition to recover the deficiency applies only if S had the chattel
mortgage on the car foreclosed. The prohibition does not apply if the thing is sold in an
execution sale. In the instant case, S had the car sold to satisfy the judgment
Sale of Real Property in Installments (R.A No. 6552) (The Maceda Law)
- The law is known as the “Realty Installment buyer Act”
- Its objective is “to protect buyers of real estate on installment payments against onerous and
oppressive conditions.
1. Transactions covered
- Sale or financing of real estate on installment payments, including residential condominium
apartments, but excluding industrial lots, commercial buildings, and sales to tenants under
RA No. 3844 as amended by R.A No. 6389 (land Reform Law), where the buyer has paid at
least two years of installments
2. Rights of the buyer
a. Grace period to pay installment in case of default
1) If at least 2 years of installments had been paid at the time of default.
• To pay, without additional interest, the unpaid installments due within the total grace
period earned by him, which is fixed at the rate of 1 month grace period for every 1
year of installments paid. This right shall be exercised by the buyer only once in
every 5 years of the life of the contract and its extensions, if any.
1) If at least 2 years of installments had been paid at the time of default.
• If the contact is cancelled, he shall be entitled to the refund of the cash surrender
value of the payments on the property equivalent to 50% of the total payments
made, and after 5 years of installments , an additional 5% every year but not to
exceed 90% of the total payments made.
When cancellation shall take place.

- The actual cancellation shall take place after 30 days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by notarial act and upon full
payment of the cash surrender value to the buyer.
NOTE: Down payment, deposits or options on the contracts shall be included in the
computation of the total number of installments.
2) If less than 2 years of installments had been paid at the time of default
• The buyer shall be given a grace period of not less than 60 days from the date the
installment became due to pay.
When cancellation shall takes place

- If the buyer fails to pay the installment due upon the expiration of the grace period, the
seller may cancel the sale after 30 days from the receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by notarial act.
b. Additional rights
1) The buyer shall have the right during the grace period before the cancellation of the contract:
• To sell his rights to another by notarial act;
• To assign his rights to another, by notarial; or
• To reinstate the contract by updating the account.
2) To pay in advance any installment or the full unpaid balance any time without interest
3) To ask for the annotation of the full payment of the purchase price in the certificate of title covering the
property.
Example:
B bought from S Realty, Inc. a residential house and lot for P600,000. the terms of the contract
provided for the following: down payment of P60,000; balance payable in 15 years in
installments of P3,000 per month. After paying the down payment and 84 monthly
installments, B defaulted in the payment of the 85th and succeeding installments. As a
consequence, S Realty Inc. cancelled the sale.
Q: How much cash surrender value is B entitled to receive?

A: B shall be entitled to receive a cash surrender value of P187,200 computed as follow:
60%(P60,000 + (P3,000 x 84 months)). Since B has paid more than 5 years of installments ,
he shall be entitled to a cash surrender value equivalent to 50% plus 5% for the 6 th year and
another 5% for the 7th year for a total of 60%
NOTE: Maceda Law is not applicable to a loan transaction

Installment sale of subdivision lots and condominium
(P.D. No. 957, otherwise known as the Subdivision and Condominium Buyer’s Protective Decree)
1. Transactions covered, what “sale” or “sell” includes

a. Every disposition, or attempt to dispose, for a valuable consideration, of a subdivision
lot, including the building and other improvements thereon, if any, in a subdivision
project or a condominium unit in a condominium project.
b. Contract to sell, contract of purchase and sale, exchange, attempt to sell, option for
sale, or purchase, a solicitation of a sale, or an offer to sell, directly or by an agent, or
by circular, letter, advertisement or otherwise.
2. Subdivision lot and condominium unit, concept
a. Subdivision lot –any of the lots, whether residential, commercial, industrial, r
recreational, in a subdivision project
b. Condominium unit –a part of the condominium project intended for any type of
independent use or ownership, including one or more rooms or spaces located in one or
more floors (or part or parts of floors) in a building or buildings and such accessories
as may be appended.
2. Subdivision lot and condominium unit, concept
c. Rights of buyer in case of default
- The rights of the buyer in the event of his failure to pay the installments due for
reasons other than the failure of the owner or developer to develop the project shall
be governed by R.A. No. 6552, otherwise known as the Realty Installment Buyer
Act or the Maceda Law
- No installment payment made by the buyer shall be forfeited in favor of the owner
or developer when the buyer, after due notice to the owner or developer, desists
from further payment
- Such buyer may, at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with interest thereon at
the legal rate
NOTE: A reading of the P.D No. 957 indicates an expansion of the application of the Maceda
Law so as to include subdivision lots whether residential, commercial, industrial or
recreational, in a subdivision project, and condominium units in any condominium project
intended for any type of independent use or ownership, including one or more rooms or spaces
located in one or more floors in a building or buildings and such accessories as may be
Requisites for cancellation of contract to sell under the Maceda Law
- Under the Maceda Law, the actual cancellation of a contract to sell takes place after 30 days
from receipt by the buyer of the notarized notice of cancellation, and upon full payment of
the cash surrender value to the buyer.
- In other words, before the contract to sell can be validly and effectively cancelled, the seller
has (1) to send a notarized notice of cancellation to the buyer and (2) refund the cash
surrender value.
- Until and unless the seller complies with these twin mandatory requirements, the contract
to sell between the parties remain valid and subsisting.
- Thus the buyer has the right to continue occupying the property subject of the contract to
sell, and may still reinstate the contract by updating the account during the grace period and
before the actual cancellation of the contract
Capacity to buy or sell
1. Who may enter into a contract of sale
- ART. 1489. As a general rule, all those may oblige themselves may enter into a contract of
sale.
2. Kinds of incapacity in a contract of sale
a. Absolute incapacity
- This applies to persons who cannot bind themselves and includes minors, insane or
demented persons, and deaf-mutes who do not know how to write. (ART. 1327)
- A contract of sale entered into by a person suffering from absolute incapacity is
voidable.
- However, when necessaries are sold to a minor or other incapacitated person, he
must pay a reasonable price. The sale is valid but the minor has the right to recover
any excess above a reasonable value paid by him
- Necessaries include everything indispensable for sustenance, dwelling, clothing,
medical attendance, education and transportation (ART. 194, Family Code)
- The sale of real estate effected by minors who have already passed the ages of
puberty and adolescence and are now in the adult age, when they pretended to have
already reached their majority, while in fact they have not, is valid, and they cannot
b. Relative incapacity
- This applies to certain person who, under circumstances, cannot purchase certain property
- The following are cases of relative incapacity:
1) The husband and the wife cannot sell property to each other, except:
• When a separation of property was agreed upon in the marriage settlements (pre-
nuptial or ante-nuptial agreement
• When there has been a judicial separation of property
• NOTE: A sale between husband and wife that does not fall under the exceptions is
void.
2) Persons prohibited from acquiring by purchase
a. The Guardian, the property of the person or persons under his guardianship
b. Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given.
c. Executors and administrators, the property of the estate under administration
d. Public officers and employees, the property of the state or of any subdivision thereof,
or of any government owned or controlled corporation or institution, the administration
of which has been entrusted to them; this provision applies to judges and government
experts who, in any manner whatsoever, take part in the sale.
2. Persons prohibited from acquiring by purchase
e. Justices, judges, prosecuting attorneys, clerks of court, and other officers and
employees connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court 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 make take part virtue of their profession
f. Other persons disqualified by law
The contract mentioned above have following status:

g. For items (a) to (c), the contract is voidable since only private interests are involved
h. For items (d) and (e), the contract is void since they are imbued with public interest
NOTE: It may be observed that the persons above mentioned occupy positions of trust and
confidence
Obligations of the Vendor
1. To transfer the ownership of the thing sold
- Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment the
thing is delivered to him.
2. To deliver the thing sold
- ART. 1537. the vendor is bound to deliver the thing sold and in 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 which the contract is perfected
- As a rule, the creditor has a right to the fruits of the thing from the time the obligation to
deliver the thing arises (Art. 1164).
- In contract of sale, the fruits shall pertain to the buyer from the day on when the contract
was perfected (ART. 1537)
- The seller and buyer may, however, stipulate that the fruits of the thing sold shall pertain to
the buyer at some future time such as when the obligation is one with a period.
Obligations of the Vendor
3. To warrant the thing sold (ART. 1495)
- The vendor is liable for breach of warranty against eviction and warranty against hidden
defects or encumbrances (ART. 1547)
4. To take care of the thing sold with the diligence of a good father of a family unless the law
or the stipulation of the parties requires another standard of care. In case of loss,
deterioration or improvement of the thing before delivery, the rules under ART. 1189 shall
be observed, the vendor being considered the debtor. (ART. 1538)
5. To pay for the expenses of the deed of sale, unless there is a stipulation to the contrary
(ART. 1487)
The following rules shall be observed in case of the improvement, loss or deterioration of the
thing during the pendency of the condition:
1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be recovered;
3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne
by the creditor;
4) If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either case;
5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor;
6) If it is improved at the expense of the debtor, he shall have no other right than that granted
to the usufructuary.
Obligation to transfer ownership and deliver
1) Ownership by vendor at time of perfection of contract and essential
- The vendor need not be the owner of the thing at the time of perfection of the contract
- He has a right to transfer the ownership thereof at the time it is delivered
- When a property belonging to a person is unlawfully taken by another, the former has the
right of action against the latter for the recovery of the property
EX:
B, vendee, gave his consent to the purchase and sale of certain goods on the assertion of S,
vendor, stated in the contract, that the goods were already on the way. The goods did not
arrive.
Q: Has S the right to demand from B the payment of the price?
A: No. The assertion made by S is a warranty the non-fulfillment of which constitutes a
breach of contract and deprives him the right to demand of B the payment of the price of the
sale.
2) Transfer not essential to perfection of contract.
- The transfer of ownership and the delivery of the thing sold are not essential to the
perfection of the contract.
- But if the seller does not deliver at the time stipulated, the buyer may ask for the rescission
3) No obligation to make delivery during period of redemption
- The purchaser in execution sales however, is not entitled to immediate possession of the
property sold.
- The effective conveyance of the land is accomplished by the deed which is issued only after
the period of redemption has expired
- In other words, the debtor is not obliged to make delivery during the period of redemption
- In all cases of extra-judicial foreclosure sale, the mortgagor may redeem the real property
sold within one year from the date of registration of the sale
- In judicial foreclosure of real estate mortgage, the general rule is that the mortgagor cannot
exercise his right of redemption after the sale is confirmed by the court.
4) Right of vendee to transfer of certificate of title
- In a sale of registered land, the vendee has a right to receive and the vendor the
corresponding obligation to transfer to him, not only the possession and employment of the
land but also the certificate of title
5) Right of buyer to recover the price paid.
- purchaser is entitled to recover the money paid by him where the contract is set aside by
reason of the mutual material mistake of the parties as to the identity or
quantity of the land sold. And where the purchaser recovers the purchase price from a vendor
who fails or refuses to deliver the title, he is entitled, as a general rule, to interest on the
money paid from the time of payment
Delivery or Tradition, concept
- It is a mode of acquiring ownership whereby the object of the contract is placed in the
control and possession of the vendee, either actually or constructively.
- In its natural sense, something in addition to the delivery of property or title; it means
transfer of possession
- In the Law of Sales, absolute giving up the control and custody on the part of the vendor
and the assumption of the same by the vendor
Intention to Transfer Ownership
In all forms of delivery, the act of deliver shall be coupled with the intention of delivering the
thing. The act without the intention is insufficient
Requisites of Delivery
1. Identity
2. Integrity
3. Intentional
Kinds of delivery or tradition
1. Actual or real delivery
- This is delivery by physically placing the thing sold in the hands of the vendee (in case of
movables) or physically placing it in his possession and control (in the case of immovable)
2. Constructive or legal delivery
a. By legal formalities
- When the sale is made through a public instrument, the execution shall be equivalent
to the delivery of the thing sold, if from the deed the contrary does not appear or
cannot be clearly inferred. (ART. 1498) This kind of delivery applies to both
movable and immovable property.
- The execution of a public instrument only gives rise to a prima facie presumption of
delivery.
b. Symbolic delivery (traditio simbolica)
- Delivery that takes place by delivering the keys of the place or depository where the
movable is stored or kept (ART. 1498). Also referred to as tradition clavium
c. Traditio longa manu
- Delivery of a movable by mere consent or agreement of the parties if the thing
cannot be transferred to the possession of the vendee at the time of sale (ART. 1499)
- Literally, “delivery by the long hand”; usually made by pointing at the thing
d. Traditio brevi manu
- Delivery that takes place when the vendee is already in possession of the thing sold
even before the sale and thereafter continues in possession thereof in the concept of
an owner (ART. 1499)
- This applies to movables only. Literally, “delivery by the short hand”
e. Traditio constitutum possessorium
- Delivery that takes place when the vendor continues in possession of the thing sold
after the sale but in another capacity such as that of a lessee or depositary (ART.
1500)
- This applies to both movable and immovable property
- Literally, “delivery by agreement of possessors”
3. Delivery of incorporeal property (quasi-tradition)
• By constructive tradition –delivery of incorporeal property by the execution of a public
document
• Placing the titles of ownership in the possession of the vendees (such as delivering the
stock certificate covering the shares of stock sold)
• Use by the vendee of his rights, with the consent of the vendor, (ART. 1504) (such as when
the buyer of a book copyright prints the book on authority of the seller)
4. Tradition by operations of law
Sale of return and Sale on approval
1. Sale or return
- ART. 1502.The ownership of the goods is transferred to the buyer on delivery, but the
buyer has the option to revest their ownership on the seller by returning them within the
time fixed in the contract, or if no time has been fixed within a reasonable time
2. Sale on approval or on trial or on satisfaction
- Ownership of the goods remains with the seller despite delivery but shall be transferred to
the buyer in the following cases:
a. When he signifies his approval or acceptance of the goods
b. When he does an act adopting the transaction
- Thus, the buyer is deemed to have approved of the goods if he starts consuming
or using them
c. If he does not signify his approval or acceptance of the goods but retains the goods
without giving notice of rejection within the time fixed in the contract, or within a
reasonable time, and such time has expired. (ART. 1502)
Distinctions between “sale or return” and “sale on approval or on trial or satisfaction”
Sale or return Sale on approval or on trial or satisfaction
Ownership of the goods passes to the buyer Ownership passes to the buyer upon his
upon delivery acceptance of the goods or the expiration of
the time given to him to signify his
acceptance
The risk of loss is on the buyer The risk of loss is on the seller
The buyer may return the goods even if he is The buyer has no right to return the goods if
satisfied of its quality he is satisfied of its quality
Examples:
1. Sale or return
On May 2, S delivered an electronic calculator to B under a “sale or return” arrangement. S
gave B up to May 7 to return the electronic calculator. On delivery, B became the owner of the
calculator. If on or before May 7, B does not return the calculator, the sale to him will become
absolute. If B returns the calculator on or before May 7, ownership thereof is revested in .
Q: Suppose that before B could return the calculator, the same is destroyed in a fire, must B
still pay its price?
A: Yes, because upon delivery, he became the owner of it, so the risk of loss was with him.
The same rule applies, with more reason, if the loss was due to his fault.
Examples:
2. Sale on approval
On June 3, Se delivered a computer to B under a “sale on approval” basis. S gave B up to June
10 to try the computer and decide to purchase it if it proves satisfactory. If the computer
proves satisfactory after trial by B and B signifies his approval to S, the ownership of the
computer is passed on to B upon his communication of his approval to S. If does not signify
his approval of the computer but retains possession of the computer even after June 10,
ownership thereof is likewise passed on to him.
Q: Suppose that before the time to B has expired and B has not yet signified his approval to S,
the computer is destroyed in a fire, will B obliged to pay its price?
A: No, because the risk of loss is with S who retained ownership of the computer despite its
delivery to B. However, if the cause of the loss is due to the fault of B, then B must pay for its
price.
Transfer of ownership by delivery of specific goods to carrier or other bailee
General rule: Delivery of specific goods to a carrier or other bailee for the purpose of
transmission to the buyer transfers ownership to the buyer.
Exceptions: ownership of specific goods is retained by the seller despite delivery to carrier or
other bailee in the following cases:
1. When there is a stipulation to that effect
2. When by the terms of the bill of lading, the goods are to be delivered to the seller or his
agent or the order of the seller or his agent
3. When by the terms of the bill of lading, the goods are to be delivered to the order of the
buyer or his agent, but the bill of lading is retained by the seller or his agent
4. When the seller draws on the buyer a bill of exchange for the price of the goods and
transmits the bills of exchange and the bill of lading to the buyer to secure acceptance
or payment of the bill or exchange, but the buyer dishonors such bill of exchange.
(ART. 1503)
However, if the bill of lading is negotiated to a purchaser for value in goods
faith, ownership of the goods is passed on to him. (Art. 1503)
Sale by person who is not the owner of the thing sold
- When the thing are sold by a person who is not the owner, the buyer acquires no better title
than the seller had, except in the following cases:
1. When the sale is made under authority or with the consent of the owner
2. When the owner is precluded by his conduct from denying the seller’s authority to sell
3. When the sale is made under the provisions of any factor’s acts, recording law or any other
provisions of law enabling the apparent owner to dispose of the goods as if he were the
true owner (ART. 1505)
4. When the sale is made under a statutory power of sale or under the order of court of
competent jurisdiction (ART. 1505)
5. When the purchase is made in a merchant’s store, or in fairs, or markets (ART. 1505)
EXAMPLES:
1. S stole the ring of O and sells the same to B who does not have any knowledge that the
ring was stolen.
Q: Did B acquire title to the ring?
A: No, because the title of S is that of a thief and B, buyer acquires no better title than S had
over it.
- O may therefore recover the ring from B without any obligation on his part to reimburse B
- Whoever loses a movable or has been unlawfully deprived thereof may recover it from the
person in possession of the same without such possessor being entitled to reimbursement,
except if the acquisition in good faith had been made in a public sale or auction.
2. Suppose the ring found its way into a jewelry store and it was from that jewelry store that
B bought the ring in good faith.
Q: Did B acquire title to the ring? Can O recover the ring from B?
A: Yes, because when the purchase is made from a merchant’s store, fair or market, title to the
thing is transferred to the buyer notwithstanding that the seller is not the owner thereof.
- This is so because a contrary ruling would be in restraint of trade
- No, he cannot recover even if he offers to reimburse. The right to reimburse is available to
EXAMPLES
3. O authorized s to sell his ring. Thereafter, S sells the ring of O to B.
A: Yes, because the sale was made under the authority of the owner.
4. O gave his ring to S for safekeeping. Later, S sold the ring to B in the presence of O but
without O’s express authority. O did not make any objection while S was selling the ring to
B.
A: Yes, because O is precluded by his conduct from denying S’s authority to sell the ring.
5. Owner of certain parcel of land, sold the same to B in a public instrument. B, however,
did not register the sale. Subsequently, O sold the land to C who was not aware of the
previous sale to B and who registered the transfer of the land to his name with the Register
of Deeds.
Q: Who has a better right to the land, B or C?
A: C has a better right to the land. While O was no longer the owner of the land at the time he sold it to C (since
ownership was transferred to B by the execution of the public instrument), still O was the apparent owner in the
records of the Register of Deeds.
- This enabled him to dispose of it as if he were the true owner thereof.
-
When seller’s title to the goods is voidable
- If the seller’s title is voidable but the same has not been avoided at the time of sale, the
buyer acquires a good title to the goods, provided he buys them in good faith, for value, and
without notice of the seller’s defect of title (ART. 1506)
EX:
S, a minor of 17 years, sold his wristwatch for P1,500 to B, 30 years old. The guardian of S
was not aware of the sale; hence, no action for annulment has yet been filed. Subsequently, B
sold the wristwatch to T, who acquired it in good faith.
Q: Did T acquire title to the wristwatch?
A: Yes, because although the title of B was voidable, T acquired the wristwatch in good faith,
for value, and without notice that the title of B was defective.
Document of title to goods, concept
- Document of title to goods include any document used in the ordinary course of business in
the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing
or purporting to authorize the possessor of the document to transfer or receive, either by
indorsement or by delivery, goods represented by the document (ART. 1636)
Common forms of documents of title
1. Bill of lading
- Refers to written acknowledgement of the receipt of the goods by a carrier, and an
agreement to transport and to deliver the goods at a specified place to a person named
therein, or to his order or to bearer.
- Other terms used are receipt for transportation, forwarder’s receipt, shipping receipt
- It is an instrument in writing, signed by a carrier or his agent, describing the freight so as to
identify it, stating the name of the consignor, the terms of the contact for carriage, and
agreeing or directing that the freight to be delivered to the order or assigns of a specified
person at a specified place
Common forms of documents of title
2. Dock warrant
- A warrant given by a dock owner to the owner of the goods imported and warehoused on
the dock upon the faith of the bill of lading, as a recognition of the title to the goods of the
owner of such goods.
3. Warehouse receipt or order
- A written acknowledgement by a warehouseman of the receipt of the goods which are
placed in his possession
- This is also a contract between the owner of the goods and the warehouseman whereby the
latter agrees to store the goods and the former to pay the compensation for storage.
Classes of documents of title
1. Negotiable documents of title
- It is stated that the goods will be delivered to bearer, or to the order of any person named in
such document. (ART. 1507)
EX:
a. Bearer document of title –”Deliver the goods to bearer”
b. Order document of title –”Deliver the goods to the order of Dionisio Diamante” or
“Deliver the goods to Dionisio Diamante or his order”
2. Non-negotiable documents of title
- It is stated that the goods are to be delivered to a specified person
EX: “Deliver the goods to Dionisio Diamante”
How negotiable document of title negotiated
1. By delivery
a) If by the terms of the document of title, the carrier, warehouseman or other bailee
issuing it undertakes to deliver the goods to bearer. (ART. 1508)
EX:
D deposits his goods in the warehouse of W. W issues a warehouse receipt which provides that the goods are
“Deliverable to bearer”. D may negotiate the warehouse receipt to another by mere delivery.
Effect of special indorsement of a document of title which states that the goods are deliverable
to bearer.
A document of title which is a bearer document of title on its face becomes an order document
of title if specially indorsed. Consequently, it may be further negotiated by the indorsee only
by indorsement completed by delivery (ART. 1508)
This is a feature of a negotiable document of title that distinguishes it from a negotiable

instrument payable to bearer. A negotiable instrument payable to bearer remains a bearer
instrument even if specially indorsed.
b) If by the terms of the document of title, the carrier, warehouseman or other bailee
issuing it undertakes to deliver the goods to the order of a specified person and such
person or a subsequent indorsee of the document has indorsed it in blank or to bearer
EX:
D deposits his goods in the warehouse of W. W issues a warehouse receipt which provides that
the goods are “Deliverable to order of D”. If D indorses the warehouse receipt in blank, he just
writes his signature and nothing else, or he writes “Deliver to bearer” and signs his name, and
delivers the warehouse receipt to A, A may negotiate the instrument by mere delivery
2. By indorsement plus delivery
- If by the terms of the document of title, the goods are to be delivered to the order of a
specified person, the document of title may be negotiated by him only by indorsement
coupled with delivery. (ART. 1509). Such indorsement may take any of the following
forms:
a) Blank indorsement –consists of signature of the indorser without specifying the name
of the indorsee. The document may be further negotiated by mere delivery.
b) To bearer –where the indorsement states that the goods are deliverable to bearer. The
document may be further negotiated by mere delivery.
c) Special indorsement –where the name of the indorsee is specified. The document may
be negotiated further through the indorsee’s indorsement plus delivery
EX: D indorses the warehouse receipt as follows: “Deliver to A.(Sgd.)D”

Effect if negotiable document of title is marked “non-negotiable”
- A negotiable document of title even if marked “non-negotiable” remains to be negotiable
(ART. 1510)
- Under the Warehouse Receipts Law, any provision inserted in a negotiable receipt that it is
non-negotiable is declared void
- When the document of title is to order, the bailee is obliged to take it up before delivering
the goods. Accordingly, he is liable to the holder of an order document if the goods are
delivered to the consignee without surrender of the document even though the latter was
marked “not negotiable.”
Delivery of an order document of title without indorsement
- The delivery of an order document of title without any indorsement does not constitute
negotiation, but mere assignment by the holder to the purchaser or donee. (ART. 1511)
Transfer of a non-negotiable document of title

- A non-negotiable document of title cannot be negotiated. It can only be transferred or
assigned. Its indorsement does not constitute negotiation and gives the transferee no additional
rights. (ART. 1511)
Who may negotiate negotiable document of title (ART. 1512)
1. By the owner thereof
EX:
D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse receipt
which states that “The goods are to be delivered to the order of D”. D, as owner of the
warehouse receipt, may negotiate it to another.
Who may negotiate negotiable document of title (ART. 1512)
2. By the person to whom the possession or custody of the document has been entrusted by
the owner in the following cases:
a) If by the terms of the document, the bailee issuing the document, undertakes to deliver
the goods to the person to whom the possession or custody of the document has been
entrusted
EX:
which states that “the goods are to be delivered to the order of D or to the person to whom this
document has been entrusted by D”. Thereafter, D entrusted the document to X. X may
negotiate the document to another person.
b) If, at the time of such entrusting the document, it is in such form that it may be
negotiated by delivery.
EX:
which states that “the goods are to be delivered to bearer”. Thereafter, D entrusted the
document to X. X may negotiate the document to another person.
Rights acquired by a person to whom a negotiable document of title is negotiated (ART. 1513)
1. The title of the person negotiating the document, over the goods covered by the document
2. The title of the depositor or shipper over the goods covered by the document
3. The direct obligation of the bailee issuing the document to hold possession of the goods
for him according to the terms of the document as fully as if such bailee had contracted
directly with him
Rights of the transferee of a document of title
1. Non-negotiable document of title
- The transferee of non-negotiable document of title acquires the following rights:
a) As against the transferor, the title to the goods subject to the terms of any agreement
with the transferor
b) The right to notify the bailee (warehouseman or carrier) of the transfer to him of the
document of title
• Effect of notification
Upon notification to the bailee of the transfer to him of the document, the
transferee acquires the direct obligation of the bailee to hold possession of the goods for
him according to the terms of the document
• Effect of lack of notification
Before notification, the title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
1) The levy of an attachment or execution upon the goods by the creditor of the
transferor
2) A notification to such bailee by the transferor or a subsequent purchaser from the
transferor of a subsequent sale of the goods by the transferor
EXAMPLE:
D deposited his goods on June 1 with W, warehouseman, who issued a non-negotiable
warehouse receipt for the goods to D. On June 2, D assigned the warehouse receipt to A. On
June 5, A assigned the warehouse receipt to H. Neither A nor H notified W of the transfer of
the document to H. On June 7, A sold the goods covered by the warehouse receipt to X who
immediately informed W of the sale to him of the goods.
Q: Who has a better right to the goods? H or X?
A: X has a better right to the goods because the notification he made to W of the sale made to
him by A defeated H’s title to the goods and right to acquire the direct obligation of W to hold
possession of the goods in favor of H even if the transfer of the document took place ahead of
the sale of the goods by A to X.
- Upon the transfer of the warehouse receipt to him , H should have immediately notified W.
2. Negotiable document of title
- The transferee to whom a negotiable document of title has been transferred but not
negotiated acquires the following rights:
a) As against the transferor, the title to the goods subject to the terms of any agreement
with the transferor. (ART. 1514)
b) The right to notify the bailee (warehouseman or carrier) of the transfer to him of the
document of title (ART. 1514)
• Effect of notification
Upon notification to the bailee of the transfer to him of the document, the
transferee acquires the direct obligation of the bailee to hold possession of the goods for
him according to the terms of the document. (ART. 1514)
• Effect of lack of notification
Before notification, the title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
1) The levy of an attachment or execution upon the goods by the creditor of the
transferor
2) A notification to such bailee by the transferor or a subsequent purchaser from the
- The transferee to whom a negotiable document of title has been transferred but not
negotiated acquires the following rights:
c. The right to compel the transferor to indorse the document unless a contrary intention
appears. (ART. 1515)
• Effect of indorsement
1) The negotiation takes effect upon the indorsement
2) Upon indorsement, the transferee acquires the direct obligation of the bailee to hold
possession of the goods. No further notification by the transferee to the bailee is
required upon such indorsement completed by delivery. (ART. 1513,1514) for the
transferee to acquire such direct obligation
EXAMPLE:
On July 1, D deposited his goods with W, warehouseman, who issued to D a warehouse
receipt which states that the goods are to be delivered to the order of D. Thereafter, d indorsed
the warehouse receipt to A.
a. Assume that on July 5, A delivered the warehouse receipt without any indorsement to H, a
purchaser for value. On July 7, A notified W that he had sold the goods to X. At the time of
such notification, W had not yet learned of the transfer of the document made by A to H?
Q: Who has a better right to the goods? H or X?
A: X has a better right.
- If a negotiable document of title is not negotiated but is merely transferred, the transferee
does not acquire the direct obligation of the bailee at the time of transfer.
- In the above case, H should have notified W of the transfer of the warehouse receipt to him
ahead of the notification to W of the sale made by A to X.
- If a negotiable document of title is merely transferred and not negotiated, it shall be treated
as if it were non-negotiable.
EXAMPLE:
On July 1, d deposited his goods with W, warehouseman, who issued to D a warehouse receipt
which states that the goods are to be delivered to the order of D. Thereafter, d indorsed the
warehouse receipt to A.
b. Suppose that on July 5, a instead indorsed the warehouse receipt to H, a purchaser for
value. On July 7, A notified W that he had sold the goods to X. At the time of such
notification, W had not yet learned of the indorsement of the warehouse receipt made by A
to H.
Q: Who has better right to the goods? H or X?
A: H has a better right.
- This is so because upon the indorsement of the warehouse receipt to him, H acquired the
direct obligation of W to hold the goods for him as if he had contracted directly with W.
- If the transfer was by negotiation, there is no need for the transferee to notify the bailee
which, in this case, is the warehouseman.
Warranties of a person transferring or negotiating a document of title (ART. 1516)
- A person who for value negotiates or transfers a document of title by indorsement or
delivery, including one who assigns for vale a claim secured by a document of title unless a
contrary intention appears, warrants the following:
1. That the document is genuine.
- Thus, if the transferee cannot obtain the goods from the warehouseman because the
warehouse receipt is forged, he can hold liable the person transferring or negotiating the
document to him.
2. That he has a legal right to negotiate or transfer it.
Example: D deposited goods with W who issued to D a warehouse receipt stating that the
goods are deliverable to bearer. D entrusted the warehouse receipt to A for safekeeping.
However, A negotiated the warehouse receipt to H. Later, W refused to deliver to H on the
ground that his title is defective. H can hold A liable because he warranted that he had a legal
right to negotiate the warehouse receipt.
Warranties of a person transferring or negotiating a document of title (ART. 1516)
3. That he has knowledge of no fact which would impair the validity or worth of the
document.
- Thus, a transferor is not liable if at the time he transferred the document, he had no
knowledge that the same was already worthless because goods represented by it had been
lost.
4. That he has right to transfer the title to the goods and that the goods are merchantable or fit
for a particular purpose, whenever such warranties would have been implied if the contract
of the parties had been to transfer without a document of title the goods represented
thereby.
- These refer to the warranty against eviction and warranty against hidden defects
Effect of failure of bailee or previous indorsers to fulfill their obligations
- The indorser shall not be liable for any failure on the part of the bailee who issed the
document or previous indorsers to fulfill their respective obligations. (ART. 1517)
Problems:
D, depositor; W, warehouseman. An order negotiable warehouse receipt was issued for the
goods. Thereafter, D indorsed the receipt to A, A to B, B to H, holder.
1. When H presented the receipt to W, W failed to deliver the goods to him because they
were lost through his negligence.
Q: Is D, A or B liable to H for the failure of W to deliver the goods?
A: No, because an indorser is not liable for failure of the bailee to fulfill his obligation (ART.
1517)
2. Supposing that the receipt presented by H to W was forged for which reason W refused to
deliver the goods to H.
Q: Will D, A or B be liable to H?
A: Yes, because an indorser warrants that the document of title is genuine. (ART. 1516)
Problems:
D, depositor; W, warehouseman. An order negotiable warehouse receipt was issued for the
goods. Thereafter, D indorsed the receipt to A, A to B, B to H, holder.
3. Supposing that D stole the goods of T and deposited them in W’ warehouse.

Q: May H obtain delivery of the goods from W assuming that H is a holder for value and
without notice?
A: No, because H acquired only whatever rights D had over the goods, which was the same
right acquired by the indorsers subsequent to D. (ART. 1513)
- A depositor who has no title to the goods cannot confer title to them by depositing them
with a warehouseman or other bailee and obtaining a receipt therefor notwithstanding that
the purchaser of the goods is an innocent purchaser for value.
4. Q: Refer to No.3. Will D, A or B be liable to H by reason of non-delivery of the goods to

H?
A: Yes, because an indorser warrants that he has the right to transfer the title to the goods.
(ART. 1515, par. 4)
Non-impairment of the validity of negotiation although it was made in breach of duty,
etc. (ART. 1518)
- The validity of the negotiation, if the person to whom the document is negotiated or a
person to whom the document is subsequently negotiated was a purchaser for value in
goods in faith and without notice, is not impaired by the following:
1. That the negotiation was made in breach of duty of the person negotiating.
2. That the owner of the document was deprived of the possession of the same by loss, theft,
fraud, accident, mistake, duress or conversion.
EXAMPLE:
S delivers his goods to C, a common carrier, for shipmen. C issues to S a bill of lading for the
goods which states that they are to be delivered to bearer. However, the bill of lading is stolen
by T who thereafter negotiates it by mere delivery to H, a purchaser for value in good faith
and without notice of T’s defective title.
Q: Is the negotiation of T to H valid?
A: Yes, because the validity of the negotiation is not impaired by the fact the the owner of the
document was deprived thereof by theft. (ART. 1518). Accordingly, H can obtain possession
of the goods.
Attachment or surrender of goods covered by a document of title
1. Negotiable document of title (ART. 1519)
a. As a general rule, the goods covered by a negotiable document of title cannot be
attached or levied upon, except:
a. When the document is surrendered to the bailee; or
b. The negotiation of the document is enjoined
b. The bailee cannot be compelled to surrender the goods, except:
a. When the document is surrendered to him; or
b. The document is impounded by the court.

- The goods covered by a non-negotiable document of title may be attached or levied upon in
execution although the document is not surrendered to the bailee.
Remedy of creditor of debtor-owner of goods covered by a negotiable document of title
- The creditor can ask the courts for an order attaching the document of title or enjoining the
delivery of the goods to the debtor-owner. (ART. 1520)
Time and Place of delivery of the thing sold
1. Place of delivery
a. Place stipulated
b. If there is no stipulation, place fixed by usage or trade.
c. In the absence of both, the seller’s place of business if has one; if non, the seller’s
place of residence. However, in the case of sale of specific goods, which to the
knowledge of the parties when the contract was made were in some other place,
that place shall be the place of delivery. (ART. 1521)
2. Time for delivery of goods
a. Time stipulated
b. If there is no stipulation, delivery must be made within a reasonable time from the
execution of the contract. (ART. 1521)
Time and Place of delivery of the thing sold
3. Goods in possession of a third person.
- The seller has not fulfilled his obligation to deliver the goods unless such third person
acknowledges to the buyer that he holds the goods on the buyer’s behalf. (ART. 1521)
4. Demand or tender of delivery
- It must be made at a reasonable hour to be effectual. (ART. 1521)
5. Expenses of delivery
- The seller bears the expenses of and incidental to putting the goods into a deliverable state,
unless otherwise stipulated. (ART. 1521)
When seller is not bound to deliver the thing sold
1. If the vendee has not paid him the price. (Art. 1524)
2. If no period for the payment of the price has been fixed in the contract. (ART. 1524)
3. If a period has been fixed for the payment of the price, the vendor is bound to deliver the
thing sold. However, he is not bound to deliver if the vendee loses the right to make use of
the period (ART. 1536) as follows:
a. When the vendee becomes insolvent, unless he gives guaranty or security for the
payment of the price.
b. When the vendee fails to furnish the guaranties or securities that he has promised
c. When the guaranties or securities have been impaired through his own acts or when
through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory.
d. When the vendee violates any undertakings in consideration of which the vendor
agreed to the period.
e. When the vendee attempts to abscond. (ART. 1198)
Rights of the buyer when quantity or quality of goods delivered is different from that
which the seller contracted to sell (ART. 1522)
1. When the quantity delivered is less than that which the parties had agreed upon, the buyer
may:
a. Reject the goods.
- This is based on the rule the creditor cannot be compelled to accept partial payment
b. Accept the goods
- However, if he accepts the goods knowing that the seller is not going to perform the
contract in full, he must pay for them at the contract rate.
- If the buyer has used or disposed of the goods before he knows that the seller is not
going to perform his contract in full, the buyer shall not be liable for more than the
fair value to him of the goods so received.
EXAMPLE:
B ordered 500 cans of sardines from S at P8.00 per can. On due date, however, s could deliver
only 450 cans. The rights of B shall be as follows:
a. B may reject the 450 cans.
b. B may accept the 450 cans.
- If he accepts the 450 cans believing that S could no longer deliver the balance of 50 cans,
then he only has to pay the 450 cans received at the contract rate of at P8.00 per can pr a
total of P3,600.00.
- If he accepts the 450 cans believing that s would still deliver the deficiency and he has
disposed of the 450 cans received, then he only has to pay the fair value of the goods,
which amount may be lower, but not greater, than the contract rate.
2. When the quantity is more than that which the parties agreed upon, the buyer may:
a. Accept the goods agreed upon and reject the rest.
- Thus, if in the example in No.1, S delivered 520, B may accept only 500 cans and reject the
excess of 20 cans.
b. Accept the whole of the goods delivered and pay for them at the contract rate.
- Thus, B may accept all the 520 cans and pay for them at the contact rate at P8.00 per can.
c. Reject the whole of the goods if they are indivisible
Example:
B ordered a container of orange concentrate weighing 20 gallons from S. S delivered a sealed
container weighing 25 gallons.
• B may reject the whole 25 gallons because although 5 gallons can be removed from the
container being delivered, still the while container is indivisible because punching a hole on
it to extract the extra 5 gallons will destroy the integrity of the product.
3. When the seller delivers the goods agreed upon but are mixed with goods of different
description, the buyer may:
a. Accept the goods agreed upon and reject the rest, if the sale is divisible.
b. Reject the whole of the goods, if the sale is indivisible.
Examples:
c. B ordered 10 sacks of rice from S. S delivered 8 sacks of rice and 2 sacks of corn. B may
reject all because the quantity of rice being delivered is incomplete, while the 2 sacks of
corn are of a different description.
d. If S delivered 10 sacks of rice and 2 sacks of corn, b may accept the 10 sacks of rice and
reject the 2 sacks of corn.
e. If S delivered 12 sacks with each sack containing a mixture of rice and corn, B may reject
the whole delivery even if the ratio of rice to corn is 10:2 in each sack.
Unpaid seller, concept
• An unpaid seller is one who has not been paid or tendered the whole of the price or who has
received a bill of exchange or other negotiable instrument as conditional payment by reason
of the dishonor of the instrument, the insolvency of the buyer, or otherwise (ART. 1525)
Rights of an unpaid seller

1. Possessory lien, or a lien on the goods or right to retain them while he is in possession
of them (ART. 1526)
a. When available
• This right is available to the seller and notwithstanding that he may be in possession
of the goods as agent or bailee for the buyer in the following instances:
1) Where the goods have been sold without any stipulation as to credit
2) Where the goods have been sold on credit, but the credit term has expired
3) Where the buyer is insolvent. (ART. 1527)
b. Lien where there is partial delivery
• Where an unpaid seller has made part delivery of the goods he may exercise his right of
lien on the remainder, unless such part delivery has been made under such
1. Possessory lien, or alien on the goods or right to retain them while he is in possession of
them (ART. 1526)
c. When lien is lost
• The unpaid seller loses his lien on the goods in the following cases:
 When 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 thereof.
 When the buyer or his agent lawfully obtains possession of the goods
 By waiver thereof (ART. 1529)
Note: The unpaid seller having a lien on the goods does not lose his lien by reason only that
he has obtained judgment or decree for the price of the goods (ART. 1529)
2. Right of stoppage in transit
- This right involves the right of the unpaid seller to resume possession of the goods at any
time while they are in transit, and he will then become entitled to the goods as he would
have had if he had never parted with the possession. (Art. 1530)
a. When right available

- This right is available after the unpaid seller has parted with the possession of the goods
and the buyer is or becomes insolvent. (Art. 1530)
- Requisites for the existence of the right:
 Buyer must be insolvent
 Seller must be unpaid
 Goods are in transit
 Seller must actually take possession of the goods sold or give notice of his claim to the
carrier or other person in possession
 Seller must surrender the document of title, if any, issues by the carrier or bailee;
 Seller must bear the expenses of delivery after the exercise of the right
b. How exercised
- The unpaid seller may exercise this right:
1) By obtaining actual possession of the goods.
2) By giving notice of his claim to the carrier or other bailee in whose possession the goods
are.
• This notice may be given either to the person in actual possession of the goods or to his
principal. If given to the principal, 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 delivery to the buyer.
• When notice is given to the carrier or other bailee for the buyer, he must redeliver the goods
to, or according to the instructions of, the seller, with the seller bearing the expenses of
delivery. However, if a negotiable document of title representing the goods has been issued,
the carrier or other bailee shall not be obliged or justified in delivering the goods to the
seller unless such document is first surrendered to him. (Art. 1532)
c. Effects of exercise of right of stoppage in transit
1) The goods are no longer in transit
2) The contract of carriage ceases; the carrier shall be liable as depositary or other bailee
3) The carrier must redeliver the goods to, or according to the instructions of, the seller.
- However, if a negotiable document of title has been issued for the goods, the carrier
will not be bound to deliver the goods unless the document of title is first
surrendered to him for cancellation (Art. 1532)
d. When goods are in transit
1) From the time they are delivered to the carrier or other bailee for the purpose of
transmission to the buyer, until the buyer or his agent, takes delivery of them from such
carrier r 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 received them back. (Art. 1531)
e. When goods no longer in transit
1) If the buyer obtains delivery of the goods before arrival at the appointed destination
2) If the carrier or other bailee acknowledges to the buyer or his agent, that he is holding
the goods in his behalf, after arrival of the goods at their appointed destination.
3) If the carrier or other bilee wrongfully refuses to deliver the goods to buyer or his
agent. (Art. 1531)
3. Right of resale
a. When right available
- This right is available to an unpaid seller when the following requisites are present:
1) The buyer has defaulted in the payment of the price.
2) The seller has the right of lien or has stopped the goods in transit
3) Title to the goods has passed on to the buyer
4) The grounds must be any of the following:
a) The goods are of a perishable nature
b) The seller has expressly reserved the right to resell the goods in case the buyer
should make default
3. Right of resale
b. How resale is made
- The seller may resell the goods in a public or private sale.
- He is bound to exercise reasonable care and judgement in making the resale.
- He cannot directly or indirectly, buy the goods. (Art. 1533)
c. Effects of resale
1) The seller shall not be liable to the original buyer upon the contract of sale or for any profit
made by such resale
2) He may recover damages from the buyer for any loss occasioned by the breach of contract
of sale
3) The new buyer acquires a good title against the original buyer. (Art. 1533)
d. Importance of notice to the original buyer
- Notice need not be given to the original buyer of the intention to resell the goods for the buyer of the
resale.
- However, if the basis of the resale is not perishable nature of the goods or upon an express provision in
a contract of sale, the giving or failure to give notice shall be relevant in any issue involving the
question whether the buyer has been in default for an unreasonable time before the resale was made.
- It is not likewise essential to the validity the resale that notice of the time and place of such resale
4. Right to rescind the sale
a. When available
- This right is available to an unpaid seller when the following requisites are present:
1) The buyer has defaulted in the payment of the price
2) The seller has the right of lien or has stopped the goods in transit
3) Title to the goods has passed on to the buyer
4) The grounds must be any of the following:
a) The seller has expressly reserved the right to rescind the sale in case the buyer
should make default
b) The buyer has been in default in the payment of the price for an unreasonable time.
b. How rescission is made
1) By giving notice to the buyer of the intention to rescind
2) By doing an overt act manifesting the intention to rescind
- It is not necessary that such overt act be communicated to the buyer, but the giving or
failure to give notice shall be relevant in any issue involving the question whether the buyer
has been in default for unreasonable time before the right for rescission was asserted. (Art.
1534)
4. Right to rescind the sale
c. Effects of Rescission
1) The seller shall not be liable to the buyer upon the contract of sale
2) He may recover from the buyer damages for any loss occasioned by the breach of contract
of sale
3) The seller resumes ownership of the goods.
Effect on possessory lien on right of stoppage in transit if buyer has sold or disposed of
the goods
- The seller’s possessory lien or right of stoppage in transit is not affected by any sale or
disposition of the goods made by the buyer except in the following cases:
1. When the seller has assented to the sale by the buyer
2. When a negotiable document of title representing the goods has been negotiated to a
purchaser for value in good faith. (Art. 1535)
Sale of real estate with a statement of its area at the rate of a certain price per unit of
measure or number
- The vendor shall deliver the area mentioned in the contract of sale.
- However, if the actual area is more or less than the area specified in the contract, or if a part
of the immovable is not of the quality specified therein, the following rles shall be
observed:
1. If the actual area is less than that stated in the contract (Art. 1539). The buyer may:
a. Ask for a proportionate reduction in the price if the lack in area is less than one-tenth of
that stated in the contract, unless the vendee would not have bought the thing had he
known of its smaller area, in which case, he may opt to rescind the sale
b. Rescind the sale if the lack in area is not less than one-tenth of that stated.
2. If the actual area is more than stated in the contract (Art. 1540). The buyer may:
a. Accept the area stated in the contract and reject the rest
b. Accept the whole area and pay for them at the contract rate
3. If the area is the same but a part of the immovable is not of the quality specified in the
contract. (Art. 1539). The buyer may:
a. Ask for a proportionate reduction of the price if the inferior value of the thing does not
exceed one-tenth of the price agreed upon, unless the buyer would not have bought the
thing had he known of its inferior quality, in which case, he may opt to rescind the sale
b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed
upon.
EXAMPLE:
S sold to B a lot consisting of 1,500 square meters at the rate of P1,000.00 per square meter.
1. Suppose the actual area being delivered is only 1,400 sq. m.

Q: What are the rights of B?
A:
a. B may ask for a proportionate reduction in the price since the lack in area is less than on-
tenth of that stated in the contract. (1/10 of 1,500sq.m. is 150; while the lack in area is 100)
Thus, B has to pay only 1,400 sq.m. at P1,000.00 per sq.m or a total of P1,400,000.00
b. B may ask for rescission if he would not have bought the lot had he known of its smaller
EXAMPLE:
2. Suppose the area being delivered by S is only 1,300 sq.m

Q: What is the right of B?
A: B may ask for the rescission of the contract because the lack in area consisting of 200 sq.m
is not less than on-tenth of the area agreed upon
3. Suppose the area being delivered by S is 1,600 sq.m

Q: What are the rights of B?
A:
a. B may accept the area being delivered (1,600 sq.m) and pay for them at the contract rate.
b. B may accept only 1,500 sq.m and reject the rest.
EXAMPLE:
4. Assume the area being delivered is the same as that stated in the contract, 1,500 sq.m
a. Suppose 200 square meters should be priced only at P950.00 per sq.m because of
inferior quality.
Q: What are B’s rights?
A: Since the inferior value of P50.00 (P1,000 – P950) does not exceed one-tenth of the price
agreed upon which is P100 (P1,000 x 1/10):
1) B may ask for a proportionate reduction in the price by paying only P1,490,000.00
(1,300xP1,000)+(200xP950), or
2) He may ask for rescission if he would not have bought the lot had he known that a part
thereof is of inferior value.
b. Suppose 200 sq.m should be priced only at P800.00 per sq.m because of inferior quality.
Q: What are B’s rights?
A: In this case the inferior value (P200.00P exceeds 1/10 of the value agreed upon; hence, B
may ask for the rescission of the contract.
Sale of real estate for a lump sum and not at the rate of a certain sum for a unit of
measure or number (Art. 1542)
1. Area to be delivered
- The vendor is bound to deliver all that it is included within the boundaries stated in the
contract although there be greater or less area or number than that stated in the contract.
2. The price to be paid by vendee.
- The vendee shall pay the lump sum stipulated with not increase or decrease in the price
although there be greater or less than that stated in the contract.
3. Buyer’s remedies if the vendor does not deliver the area within the boundaries stated in the
contract:
a. Buyer may ask for proportionate reduction in the price, or
b. Rescind the contract
EXAMPLE:
B bought from S a lot for a lump sum of P1,500,000.00. Aside from mentioning the
boundaries of the lot, the deed of sale also states the area at 1,500 sq.m
1. Suppose the area contained within the boundaries is actually 1,400 sq.m, then all that S has
to deliver is 1,400 sq.m.
- B will have to pay the same amount of P1,500,00.00, there is no proportionate reduction in
the price.
2. Suppose the area contained within the boundaries s actually 1,600 sq.m, then S will have
to deliver such area with no increase in the price that B must pay. If S wants to deliver
only P1,500 sq.m, B has the right:
• To rescind the contract, or
• Ask for a proportionate reduction in the price, hence, he has to pay only P1,406,250.00
(1,500/1,600 x P1,500,000)
Rules of preference in case of double sale
1. Movable property
• Ownership shall be transferred to the person who first took possession of the property in
good faith (first possessor in good faith)
• The possession referred to here may either be actual or constructive.
2. Immovable property
a. Ownership shall belong to the person who in good faith registered the sale in the Registry
of Property. (First registrant in good faith)
b. If there was no registration, ownership shall belong to the person who first took possession
thereof in good faith (First possessor in good faith). The possession referred to here is
either actual or constructive.
c. In the absence of both registration and possession, ownership shall belong to the person
who presents the oldest title in good faith (Art. 1544)
Note: Good faith is essential, being the basic premise of preferential rights granted to the
person claiming ownership of the immovable.
Examples: Movable Property
• S sold his computer to B who told S that he would obtain delivery of the computer after 3
days. Before the 3rd day, S sold that same computer to X who immediately took physical
possession of the computer. X was not aware of the previous sale to B. Neither was B
aware of the sale made to X because the sale to X had not yet taken place at the time that B
purchased the computer.
Q: Who has a better right to the computer? B or X?
A: X because he first took possession of the computer in good faith.
• S sold his ring to B in a public instrument. However, B informed S that he would obtain
actual delivery of the ring after 3 days. The day after the sale to B, S sold the same ring to
X in a private instrument. X immediately took actual possession of the ring. X was not
aware of the previous sale to B. Neither was B aware of the sale to X at the time that B
purchased the ring since the sale to X had not yet taken place.
Q: Who has a better right to the ring B or X?
A: B because although he did not take actual possession of the ring, the sale to him was in a
public instrument the execution of which resulted in the constructive delivery of the ring to
him.
Examples: Immovable Property
• On May 1, S sold his lot to X. The deed of sale was in a private instrument. On May , S
sold the same lot to Y in a public instrument. On May 5, S sold again the said lot to Z in a
public instrument. Z immediately registered the sale with Register of Deeds. X, Y and Z did
not know of the sale made to the other two and none of them took physical possession of
the lot.
Q: Who has a better right to the lot?

A: Z because he was the first to register the sale in good faith
Q: Suppose Z did not register the sale or he registered the sale but he was in bad faith
(meaning, he was aware of one or both of the previous sales), who has a better right to the lot?
A: Y will have better right because he was the first to take possession in good faith. Since the
sale to him was in a public instrument, the lot was deemed constructively delivered to him.
Q: Suppose all the sales were in a private instrument and all buyers are in good faith, who has
a better right to the lot?
A: Since no one registered the sale or topk possession of the lot. X shall be the owner because
he has the oldest title.

Art 1458-1544

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Art 1458-1544

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Art. 1458.

A contract whereby one of the contracting parties (known as sellers),

Sale Dacion en pago

There is greater freedom in Less freedom in fixing the

Sale Piece of work

Movable whose price is Not governed by the Statute

Sale Agency to Sell

When thing is considered Illicit or Unlawful

Emptio rei speratae Emptio spei

b. If it be certain with reference to another thing certain. (Art.1469)

Form of a contract of sale

2. The sale involving the following must be in writing to be enforceable:

Q: Can S still proceed against B to collect the deficiency of P5,000?

Q: May s recover the deficiency of P5,000?

Q: May S recover the deficiency of P5,000?

When cancellation shall take place.

When cancellation shall takes place

Q: How much cash surrender value is B entitled to receive?

NOTE: Maceda Law is not applicable to a loan transaction

1. Transactions covered, what “sale” or “sell” includes

The contract mentioned above have following status:

This is a feature of a negotiable document of title that distinguishes it from a negotiable

EX: D indorses the warehouse receipt as follows: “Deliver to A.(Sgd.)D”

Transfer of a non-negotiable document of title

3. Supposing that D stole the goods of T and deposited them in W’ warehouse.

4. Q: Refer to No.3. Will D, A or B be liable to H by reason of non-delivery of the goods to

2. Non-negotiable document of title

Rights of an unpaid seller

a. When right available

1. Suppose the actual area being delivered is only 1,400 sq. m.

2. Suppose the area being delivered by S is only 1,300 sq.m

3. Suppose the area being delivered by S is 1,600 sq.m

Q: Who has a better right to the lot?

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