Important Tips on the Law on Sales

8/9/2019 Important Tips on the Law on Sales

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ATENEO DE DAVAO UNIVERSITYSchool of Business and Governance

CPA Revie Cen!er

Business "a

I#PORTANT TIPS ON T$E "A% ON SA"ES&Ar!s' ()*+,(-./0 CIVI" CODE1

1. Con!rac! of Sale De2ned: Sale is a contract where one party (seller or vendor) obligates himself totransfer the ownership of and to deliver a determinate thing, while the other party (buyer or vendee)obligates himself to pay for said thing a price certain in money or its equivalent. (Art. 1!", #ivil #ode)

$. E!34olo53 of !he ord 6Sale%:

&oman law, a sale is termed as %vendi!o%. 'rench refers to contract of sale as ven!e, *talians refer toit as vendi!a and the Spaniards call it a %ven!a%. +he ilipino term for sale is 7ilihan.

.' Essen!ial Charac!eris!ics of !he Con!rac! of Sale8a) #onsensual (as distinguished as real), because the contract is perfected by mere consent- See Article

11! on principle of consensuality.b) /ilateral reciprocal 0 because both parties are bound by obligations dependent upon each other.

( reiterated by Article 111)c) 2nerous, because to acquire the rights, valuable considerations must be given.d) #ommutative, as a rule, because the values e3changed are almost equivalent to each other.

(42+5: /y way of e3ception, some contracts of sale are aleatory, that is, what one receives may intime greater or smaller than what he has given. 53ample: +he sale of genuine sweepsta6es tic6et.)

e) rincipal (as distinguished from an accessory contract), because for the contract of sale to be validlye3ist, there is no necessity for it to depend upon the e3istence of another valid contract.

f) 4ominate because the #ode refers to it by a special designation or name, that is the contract of sale.

. Ele4en!s of !he Con!rac! of Sale:

a) 5ssential elements (those without which there can be no valid sale)- #onsent or meeting of the minds, that is consent transfer ownership in e3change for the price- 7eterminate sub8ect matter (generally, there is no sale of generic thing, moreover, if the parties

di9er as to the ob8ect, there be no meeting of the minds).- rice certain in money or its equivalent (this is the cause or consideration) (+he price need not

be in money)- #apacity of the contracting parties. *n other words, the contracting parties must have the legal

capacity to engage in lawful commerce.

a) 4atural elements (those which are inherent in the contract, and which in the absence of any contraryprovision, are deemed to e3ist in the contract)- arranty against eviction, deprivation of the property bought)- arranty against ;idden 7efects

a) Accidental elements (those which may be present or absent in the stipulation, such as the place ortime of payment, or the presence of conditions)

!. S!a5es in !he Con!rac! of Sale:

a)


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e) As to the presence or absence of conditions:0Absolute Sale (no conditions imposed)0#onditional Sale (As when there is a sale with a pacto de retro, a right to

repurchase or redeem- or when there are suspensiveconditions, or when the things sold merely possess potentiale3istence, such as sale of future harvest of a designated

parcel of land.)

f) As to the legality of the ob8ect:0Sale of a licit ob8ect0Sale of an illicit ob8ect

g) As to whether wholesale or retail:- holesale, if to be resold for a pro>t the goods being unaltered when resold,

the quantity being large.- &etail, if otherwise

h) As to pro3imate inducement for the sale:- Sale by description- Sale by sample- Sale by description and sample (Art.1"1)

i) As to when the price is tendered:- #ash sale- Sale on the installment plan

?uery:

A sold a piano to /, by private instrument, for 1@,@@@. *n that contract of sale, which is the ob8ect,and which is the cause

Answer: +here are at least two viewpoints here, the latter of which appears to be preferable.

'*&S+ B*5 0 +he ob8ect (sub8ect matter) of the sale is the piano, while the cause (consideration) isthe 1,@@@ ( or, as the same authority puts in, the giving of the 1,@@@, at least insofar as the seller A isconcerned.

*nsofar as the buyer / is concerned, the ob8ect is the 1,@@@. hile the cause (consideration forwhich he parted with his money) is the piano (or, as the same authority puts in, the giving of the piano)

S5#247 B*5 0 *nsofar as both the seller and the buyer are concerned, there is only one sub8ectmatter, namely, the piano. +he cause or consideration for the seller is the price paid- for the buyer, it is thedelivery to him of the piano.

C. Sale Dis!in5uished fro4 Da!ion in Pa34en!

SA"E DATION IN PAY#ENT

1. +here is no pre0e3isting credit.

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- *n the #ontract of Sale, title over the property generally transfer to the buyer upon delivery- inthe #ontract of Sell, ownership is retained by the seller, regardless of the delivery and it will notpass until full payment of the price.

- *n a contract of Sale, after delivery has been made, the seller has lost ownership and cannotrecover it unless the contract is resolved or rescinded. *n a #ontract to Sell, since the sellerretains ownership, despite delivery, he is enforcing the contract if he see6s to oust the buyer forfailure to pay.

roblem:%A% agrees to sell a sewing machine to %/% for ,@@@ in cash, and places the machine aboard thetruc6 of %/%, while %/% goes home to fetch money. /efore %/% returns, %#% appears and claimownership of the sewing machine, e3hibiting a document signed by %/% selling the machine to %#%. Are8ects %#Ds% claim alleging that he is still the owner. 7ecide with reasons.

Answer:

*t is submitted that the claim of %A% that he is still the owner of the sewing machine is correct. hileit is true that there is already a perfected contract of sale between %A% and %/% and that apparently,there is already an actual delivery when the former placed the sewing machine onboard the truc6 ofthe latter, nevertheless, such delivery did not vest ownership thereof in the vendee. *n other words,we have here a simple case of reservation of the vendor of his right over the thing sold. +hat this canbe done e3pressly or impliedly. *n the case at bar, the agreement between %A% and %/% is that thesale must be in cash. ;ence, it can be easily inferred that at the precise moment while %A% waswaiting for %/% return with the ,@@@ purchase price, which the latter was supposed to fetch in hishouse, his intention, in spite of actual delivery, was to reserve ownership in himself and to vest suchownership in the vendee only upon the actual payment of the purchase price. /eside we have here aclear case of a #ontract to Sell. ell0settled is the rule that in a #ontract to Sell, as distinguishedfrom a #ontract of Sale, ownership is reserved to the vendor and not to pass to the vendee until fullpayment of the purchase price.

Princi;les a;;lica7le !o !he ele4en!s of a Con!rac! of Sale

. The o7;ec!ed 5oodill of a 7usiness

Re@uisi!es for !hin5s ;o!en!ial e>is!ence8

-The object need not be in actual existence at the time of perfection of the contract;

-The object is capable of potential existence;-The thing sold must be determinate or capable of being determinate;

-The thing sold belong to the vendor at the time of the perfection of the sale

1$.Sale of e>;ec!ed !hin5 and sale of 4ere ho;e or e>;ec!anc31' Ar!' ()-(Sale of e>;ec!ed !hin5 &E4;!io Rei S;era!ae1Sale of ho;e i!self &E4;!io S;ei1

NOTE: *f the e3pected thing in (a1 does no! 4a!erialie0 !he sale is no! e:ec!ive . *n the second, itdoes not matter whether the e3pected thing materialiGed or not- what IS I#PORTANT IS T$AT T$E$OPE ITSE" VA"ID"Y EISTED. +he >rst deals with future thing 0 that which is e3pected- the seconddeals with the present thing 0 certainty the hope or e3pectancy already e3ist.

E>a4;le of E4;!io S;ei: Sale of a valid sweepsta6es tic6et. hether the sweepsta6e tic6et winsor not, the sale is valid.

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NOTE: *f the hope or e3pectancy itself is in vain, the sale is itself B2*7. /e it noted that this is notan aleatory contract for while in aleatory contract there is an element of chance, here there is completelyno chance.

E>a4;le: Sale of a losing tic6et for a sweepsta6e already drawn.

Gra;hic Dis!inc!ion 7e!een e4;!io s;era!ae e4;!io s;eiPoin! of Dis!inc!ion E4;!io Rei S;era!ae E4;!io S;ei

2b8ect of Sale +hings having potential e3istence +here is hope or e3pectancy

53istence of #ondition #onditional AbsoluteBalidity of #ontract of Sale Balid Balid as long as the sale is not

vain hope or e3pectancy59ect of failure of ob8ect to come

into e3istence.#ontract become ine9ective *t does not invalidates sale

1 Goods 4a3 7e fu!ure or e>is!in5 5oods.

+he 4ew #ivil #ode enumerates di9erent 6inds of future goods:a) 53isting


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*llustrative (7ecided) #ases:

#ase *L #o. granted to A the e3clusive right to sell in the Bisayas a certain number of beds which the

company was manufacturing at the invoice price of the beds in =anila, with a discount of $@M, the price tobe paid at the end of H@ days. hat contract is perfected 0 a contract of sale or a contract of agency to sell

A4S5&: +he contract perfected here is a contract of sale. +he essential features of sale arepresent in this case. +here is the obligation on the part of L #ompany to supply the beds and the obligationon the part of A to pay the purchase price. +hese features e3clude the legal conception of a contract ofagency to sell where the agent receives the thing in order to sell it without paying the price but with theobligation to deliver to the principal the price which he may have obtained from sale of the thing to thirdperson, then if he does not succeed in selling it, he returns it. *n the contract between L #o., and A, thelatter, on receiving the beds, was necessarily obliged to pay the price within the term >3ed, without anyother consideration and regardless as to whether he had or had not sold the beds.

#ase **

*n a case where the consignor or >rm delivers goods to a distributor for resale to customers, retainingthe ownership of such goods, and the price and term are still sub8ect to the control of the >rm, but with theunderstanding that the distributor is not the agent or legal representative of the >rm for any purpose

whatsoever, what 6ind of contract was perfected 0 a contract of sale or a contract of agency to sell 53plain.

A4S5&: +he contract is still a contract of agency to sell. Since the company retained ownership ofthe goods, even as it delivered possession to the dealer for resale to customers, the price terms of whichwere sub8ect to the companyDs control, the relationship between the company and dealer is one of agency.

Su44ar3 as !he Re@uisi!es Na!ure of !he O7


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4ote: #eanin5 of con!rac! of 7ar!er or e>chan5e8 One of !he ;ar!ies 7inds hi4self !o 5ive one!hin5 in considera!ion of !he o!herHs ;ro4ise !o 5ive ano!her !hin5' &Ar!' (-.+1 In con!ras! !o !hecon!rac! of sale0 !he vendor 5ives a !hin5 in considera!ion for a ;rice.

Gra;hic dis!inc!ion 7e!een con!rac! of sale and con!rac! of 7ar!erPoin! of Dis!inc!ion Con!rac! of Sale Con!rac! of Bar!er

3ed or agreed upon a de>nite amount- or

(b) *t be certain with reference to another thing certain (See Art. 1C$), as where the buyer agrees topay the price as indicated in the invoices-(c) +he determination of the price is left to the 8udgment of a speci>ed person or persons (Art. 1H)

+he last two cases are applicable only when no speci>c amount has been stipulated by the parties.

F)' Rules if ;rice is !o 7e de!er4ined 73 a !hird ;erson:

(a) +he price >3ed by the third person is binding e3cept when he acts in bad faith or by mista6e-(b) *n such case, the courts may >3 the price-(c) *f the third person is unable or unwilling to >3 the price, the contract shall be ineFcacious (without

e9ect), unless the parties subsequently come to an agreement - and(d) *f the third person is prevented from >3ing the price by the fault of the seller or buyer, the party not

in fault may choose between rescission and ful>llment with damages in either case. (Art. 1H)

22. The 2>in5 of !he ;rice 4a3 no! 7e lef! !o !he discre!ion of one of !he con!rac!in5 ;ar!ies0 as i!canno! 7e said !ha! !here is 4ee!in5 of 4inds u;on !he 2>ed ;rice' (Art. 1@") But if theother accepts price xed, the sale is deemed perfected.

23. If !he ;rice canno! 7e de!er4ined0 !he con!rac! is ineJcacious. ;owever, if the thing or any partthereof has been delivered to and appropriated by the buyer, he is under obligation to pay reasonableprice thereof. (Art. 1C)

24. E:ec! of Gross Inade@uac3 of Price:

*t does not a9ect the contract of sale e3cept when the inadequacy may indicate that there is a defect inthe consent, or that the parties really intended a donation or some other act or contract.

*nadequacy of the cause (lesion) may only be an e9ect of vitiated consent and so the contract becomes

voidable under Article 1@. *f damage or lesion is su9ered by ward or absentee more than N of thevalue of the property, contract is rescissible under Articles 1"1 pars. 1 O $.

25. Simulation of the rice (Art. 1C1)+here is simulation of the price in a contract of sale when for the purpose of deceiving others, the partiesthereto made it appear in document either:a) +here is a price when actually there is none at all. *n this case being absolutely simulated contract is

void. (Art. 1H)b) +hat the price stated is di9erent from the actual price. +his merely relative simulation of the price

and does not render the contract of sale null and void. +he parties are bound by their trueagreement as long as the same does not pre8udice a third person and is not contrary to law, morals,good customs, public order or public policy ( Arts. 1! O 1H)

26. hen price of securities, grains, liquids and other things considered certain: a. +he price >3ed is that which things sold would have on a de>nite day-

b. +he price >3ed is that which the thing sold would have in a particular e3change or mar6et-and

c. or the price >3ed is an amount above or below the price on such day or on such e3changeor mar6et.

27. Perfec!ion of sale: The contract of sale is perfected at the moment there is meeting of the mindsupon the thing which is the object of contract and upon the price .

28. E:ec!s of ;erfec!ion of sale8

(a) 'rom the moment consent is given, the reciprocal obligations of the parties arise and they mayreciprocally demand the performance, sub8ect to the Statute of 'raud-

(b) +he ownership of the thing sold is not transferred until it is delivered, actually or constructively, tothe buyer (Art. 1CC)- and

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(c) *n case one of the contracting parties does not comply with what is incumbent upon him, the in8uredparty may sue for ful>llment or rescission with the right to damages in either case. (art. 111)

29. erfection of Sale*t is consensual and for this reason principle of consensuality applies. #ontracts are perfected by mereconsent, and from that moment the parties bound not only to the ful>llment of the what has beene3pressly stipulated but also to all the consequences which, according to their nature, may be 6eepingwith good faith, usage and law (Art. 11!). 2bligations arising from contracts have the fore of law

between the contracting parties and should be complied with in good faith (Art. 11!).

Since sale is reciprocal, the parties may reciprocally demand performance sub8ect to the provision of lawgoverning forms.

30. Perfec!ion of Sale 73 Auc!ion:

Sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, orin any customary manner. Jntil such announcement is made, any bidder may retract his bid- and theauctioneer may withdraw the goods from the sale unless the auction has been announced withoutreserve (meaning the seller did not reserve the right to bid)

3. !ross i"ade#uac$ of price i" cases of auctio" sales %here there is ri&ht to redeem is "otmaterial as i" forced sales, 'ud&me"t de(tors ou&ht "ot to expect their properties to (e soldo" its maret *alue. +he nature of such sales precludes any reasonable e3pectation of obtainingprices such as are procured in ordinary sales where the elements of free bargaining is in full play. *t hasli6ewise been held by the Supreme #ourt in 7/ vs. Bda de =oll, S#&A "$ that if there is right toredeem in foreclosure sale, inadequacy of the price is not material because the lesser the price, theeasier it will be for the owner to e9ect the redemption.

32. +he o%"ership of the thi"& sold shall (e tra"sferred to the *e"dee upo" the actual orco"structi*e deli*er$.( Art. 1CC)

2wnership of a thing is not transferred by mere perfection of the contract of sale but by A#+JAK or#24S+&J#+*B5 delivery.

33.+he parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fullypaid the price. (PACTU# RESERVATI DO#INI)

34. E:ec! of an acce;!ed unila!eral ;ro4ise !o sell or 7u3 a !hin5 for a ;rice cer!ain:

(a) Such unilateral promise also 6nown as option contract does not bind the promissor and may bewithdrawn at any time-

(b) *f the promise, however, is supported by a consideration distinct from the price, its acceptancegives rise to the perfection of the contract.

#ase:

L unilaterally promised to sell to P his car for !@,@@@.@@ within a period of one month. P acceptedthe promise. 2n the 1Hthday, P received a note from L telling him that he is withdrawing the promise.

*ssues:(a) #an P hold L liable for damages if he persists on withdrawing the promise hy(b) Assume that P gave an option money when he accepted the promise, and on the 1Hthday, he

bac6ed out, can L compel him to buy the car 53plain

Answers:

(a) 4o. An accepted unilateral promise to buy or to sell a determinate thing or a price certain isbinding upon the promissor if the promise is supported by a consideration distinct from the price.(Art. 1C ($) O Art. 1$) *n the case at bar, no consideration distinct form the price has beendelivered to L, the o9er or promise can be withdrawn anytime.

(b) 4o, because the option to buy or not to buy depends upon P.

35. E:ec! of a 7ila!eral ;ro4ise !o 7u3 and sell a !hin5 for a ;rice cer!ain:

hen the promise is bilateral, that is, one party accepts the otherDs promise to buy and the latter, theformerDs promise to sell, a determinate thing for a price certain, it has practically the same e9ect as aperfected contract of sale since it is reciprocally demandable. /ut there is no contract of sale yet until it

is e3ecuted.

Gra;hic Dis!inc!ion 7e!een Pro4ise !o Bu3 and Sell and Unila!eral Pro4ise !o Bu3 and SellPoin! Dis!inc!ion Pro4ise !o 7u3 and sell Unila!eral Pro4ise !o 7u3 and

Sellarties *nvolved Seller and /uyer Seller or buyer59ect &eciprocally demandable /inding on promissory if supported

by consideration distinct formprice

Application of Article 1! in relation to Article 1C of the 4ew #ivil #ode


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Article 1! of the 4ew #ivil #ode which presumes the e3istence of a consideration in every contractapplies to contracts in general, whereas the second paragraph of Article 1C thereof refers to sales andmore speci>cally to an accepted unilateral promise to buy and sell.

Polici!a!ion simply means an unilateral promise to buy or sell which is not accepted. +hat being thecase, it is a mere o9er and has not yet been converted into a contract. +herefore, of no 8udicial e9ect.

36. Rules i!h re5ards !o an3 inllment, with indemnity for damages in either case-

(!) *f the thing is improved by its nature, or by time, the improvement shall inure to thebene>t of the creditor-

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(H) *f it is improved at the e3pense of the debtor, he shall have no other right than thatgranted to the usufructuary.

Art. 1$H$. An obligation which consists in the delivery of a determinate thing shall bee3tinguished if it should be lost or destroyed without the fault of the debtor, and before hehas incurred in delay.

hen by law or stipulation, the obligor is liable even for fortuitous events, the loss of thething does not e3tinguish the obligation, and he shall be responsible for damages. +he samerule applies when the nature of the obligation requires the assumption of ris6.

(H) *f the thing is generic, the loss with or without the vendorDs fault, of anything of the same 6ind doesnot distinguish his obligation to deliver. (Art 1$H$)

$. S;ecial Rules on sales 73 descri;!ion and sale 73 sa4;le

(1) *n the contract of sales of goods by description or by sample, the contract may be rescinded ifthe bul6 of goods delivered do not correspond with the description or by the sample-

($) *f the contract be by sample as well as by description, it is not suFcient that the bul6 of goodscorrespond with sample if they do not correspond with the description-

() +he buyer shall have reasonable opportunity of comparing bul6 with the description or sample(Art. 1"1)

llment upon the vendeeDs failure to pay-

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($) #ancel the sale, if the vendee shall have failed to pay two or more installments- or() 'oreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to

pay two or more installments.

)' Na!ure of !he a7ove re4edies in Rec!o "a:+hese remedies are al!erna!iveand are not to be e3ercised cumulatively or successively and the

election of one is a waiver of the right to resort to the others.

*' Ri5h! of !he vendor !o recover !he un;aid 7alance of !he ;urchase ;rice:(a) +he vendor who has chosen speci>c performance or to e3act ful>llment of the obligation is not

limited to the proceeds of the sale, on e3ecution, of the mortgaged goods. ;e may still recover fromthe purchaser the unpaid balance of the price, if any on real or personal properties of the purchasernot e3empt by law from attachment or e3ecution-

(b) *f the vendor chooses rescission or cancellation of the contract upon the vendeeDs failure to pay twoor more installments, the latter can demand the return of payments already made unless there is astipulation about forfeiture. (See Art. 1H")

(c) *f the vendor has chosen the third remedy of foreclosure of the chattel mortgage, he shall have nofurther action against the vendee for the recovery of any unpaid balance of the price and anyagreement to the contrary is void. +he foreclosure is caused by selling the mortgaged personalproperty at public auction and applying the proceeds of the sale to the satisfaction of the claimsecured by the mortgage.

-' Re@uisi!es 7efore Ar!' ()+) 4a3 7e a;;lied:

(a) +here must be a contract.(b) +he contract must be of sale.(c) hat is sold in personal property(d) +he sale must be in installment

/' Ins!ances here Ar!' ()+) 4a3 no! 7e a;;lied:

(a) *t does not apply in real property mortgage.(b) *t does not apply to sale of personal property in straight terms, a sale on straight terms being one,

which the balance, after the payment of initial sum should be paid in totality at the time speci>ed.

Illus!ra!ions:

#ase * :

A/# #orporation, a dealer in appliances sold to =r. +, a Bideo0#7 for 1!,@@@ payable on installmentat the rate of 1,$@@.@@ per month. =r. + e3ecuted a chattel mortgage over the thing sold. hen =r. +defaulted in the payment of his obligation, A/# #orporation foreclosed the mortgage. At the sale, only 1@,@@@ was realiGed. #an the seller recover the de>ciency

Answer: 4o, because in case of foreclosure of the chattel mortgage and there is de>ciency, the sellercannot recover the de>ciency. +his is an absolute prohibition in the &ecto Kaw, amending Art. 1", 4##.

#ase ** :

L purchased on installment basis a car from A/# #orp. ;aving failed to pay his installments, thecorporation sued L for replevin (an action for recovery of personal property) and seiGed the unit, sold itbut it failed to realiGe the balance of L in the sheri9Ds sale. #an A/# #orp. recover the balance hy

Answer: Pes, where the mortgagee in installment sales of personal property chose speci>c performancein a replevin suit with damages, it is entitled to an alias writ of e3ecution for the portion of the 8udgmentthat has not been satis>ed.

+he rule is that in installment sales, if the action instituted is for speci>c performance and themortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosureof the mortgage. ;ence, the seller creditor is entitled to a de>ciency 8udgment.

+' "ease of Personal Pro;er!3 i!h O;!ion !o Bu3is considered as sale of property in installments.(Art. 1"!) As a rule, payment of installments should be returned unless parties stipulate that thesame shall not be returned. Article 1"H provides that a stipulation that the installments or rents paidshall not be returned to the vendee or lessee shall be valid insofar as the same may not beJ4S#24#*24A/K5 under circumstances.

=' E>;enses for !he e>ecu!ion and re5is!ra!ionshall be borne by the vendor in the absence of anyagreement between the parties to the contrary.

(' REA"TY INSTA""#ENT BUYER PROTECTION ACT ACEDA "A%1 KR'A' NO' -**F also nonas AN ACT TO PROVIDE PROTECTION TO BUYERS O REA" ESTATE ON INSTA""#ENT

PAY#ENTS

Sec!ion ('+his Act shall be 6nown as the %&ealty *nstallment /uyer Act.%

Sec!ion F'*t is hereby declared a public policy to protect buyers of real estate on installment paymentsagainst onerous and oppressive conditions.

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Sec!ion .' *n all transactions or contracts involving the sale or >nancing of real estate on installmentpayments, including residential condominium apartments but e3cluding industrial lots, commercial buildingsand sales to tenants under &epublic Act 4umbered +hirty0eight hundred forty0four, as amended by &epublicAct 4umbered Si3ty0three hundred eighty0nine, where the buyer has paid at least two years of installments,the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) +o pay, without additional interest, the unpaid installments due within the total grace periodearned by him which is hereby >3ed at the rate of one month grace period for every one year ofinstallment payments made: rovided, +hat this right shall be e3ercised by the buyer only once inevery >ve years of the life of the contract and its e3tensions, if any.

(b) *f the contract is canceled, the seller shall refund to the buyer the cash surrender value of thepayments on the property equivalent to >fty per cent of the total payments made, and, after >veyears of installments, an additional >ve per cent every year but not to e3ceed ninety per cent of thetotal payments made: rovided, +hat the actual cancellation of the contract shall ta6e place afterthirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of thecontract by a notarial act and upon full payment of the cash surrender value to the buyer.

7own payments, deposits or options on the contract shall be included in the computation of the total numberof installment payments made.lawphi1

Sec!ion )' *n case where less than two years of installments were paid, the seller shall give the buyer agrace period of not less than si3ty days from the date the installment became due.

*f the buyer fails to pay the installments due at the e3piration of the grace period, the seller may cancel thecontract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescissionof the contract by a notarial act.

Sec!ion *'Jnder Section and , the buyer shall have the right to sell his rights or assign the same toanother person or to reinstate the contract by updating the account during the grace period and beforeactual cancellation of the contract. +he deed of sale or assignment shall be done by notarial act.

Sec!ion -'+he buyer shall have the right to pay in advance any installment or the full unpaid balance of thepurchase price any time without interest and to have such full payment of the purchase price annotated inthe certi>cate of title covering the property.

Sec!ion /'Any stipulation in any contract hereafter entered into contrary to the provisions of Sections , ,! and H, shall be null and void.

Sec!ion +'*f any provision of this Act is held invalid or unconstitutional, no other provision shall be a9ectedthereby.lawphi1

Sec!ion ='+his Act shall ta6e e9ect upon its approval.

Approved: August $H, 1C$.

Salien! ea!ures of !he a7ove la8

((' *n transactions involving !he sale or 2nancin5 of real es!a!e on ins!all4en! ;a34en!sincludin5 residen!ial condo4iniu4 a;ar!4en!s0 under the =aceda Kaw, (&.A.42. H!!$), !heri5h!s of !he 7u3er ho has ;aid a! leas! !o &F1 3ears ins!all4en!s and su7se@uen!l3defaul!ed in !he succeedin5 ins!all4en!s are !he folloin5

(a To pay w!out additional interest, the unpaid installment within total grace period earned by him "#edat the rate of one$month grace period for e%ery one year of installments made. The right howe%ershall be e#ercised by him only once in e%ery & years of the life of the contract and its e#tensions, ifany' and

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender %alue of thepayments on property equi%alent to &) of the total payments made and after & years ofinstallments, and additional &) e%ery year but not to e#ceed *) of the total payments made.(Section , &.A. 4o. H!!$ (=aceda Kaw), &ealty *nstallment /uyer rotection Act)

+he above law e>cludes from its operation sales o" i"stallme"ts of i"dustrial lots a"d

commercial (uildi"&s a"d sales to te"a"ts u"der the -/. 7own payments, deposits or optionson the contract shall be included in the computation of the total number of installments payable.

'urther, &.A. 4o. H!!$ applies to the purchase of subdivisions and condominiums in relation toSection $ of .7. 4o. !C otherwise 6nown as Subdivision and #ondominium /uyersQ protective decree

(F' E:ec! of 7u3er on real!3 ins!all4en!s has ;aid less !han F 3ears of ins!all4en!s:

+he seller shall give him a grace period of not less than H@ days from the date the installment becamedue. *f he fails to pay the installments due at the e3piration of the grace period, the seller may cancelthe contract after @ days from receipt of the buyer of the notice of cancellation or the demand forrescission of the contract by notarial act.

42+5:

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Jnder S5#+*24 $ of 7 !C otherwise 6nown as Subdivision and #ondominium /uyersrotective Act:

'ailure to pay installments. R +he rights of the buyer in the event of this failure to pay theinstallments due for reasons other than the failure of the owner or developer to develop thepro8ect shall be governed by &epublic Act 4o. H!!$.

here the transaction or contract was entered into prior to the e9ectivity of &epublic Act 4o.

H!!$ on August $H, 1C$, the defaulting buyer shall be entitled to the corresponding refundbased on the installments paid after the e9ectivity of the law in the absence of any provision inthe contract to the contrary.

residential 7ecree 4o. !C 0 T$E SUBDIVISION AND CONDO#INIU# BUYERSHPROTECTIVE DECREE

Pur;ose8 According to the Supreme #ourt, (*n Sps. #o #hien v. Sta. Kucia &ealty O7ev., *nc., et al.,


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2ne of the purposes of .7. !C is to discourage and prevent unscrupulousowners, developers, agents and sellers from reneging on their obligations andrepresentations to the detriment of innocent purchasers. +he law mandates ;KJ&/ toclose regulate, supervise and monitor the real estate industry, particularly residentialdevelopments such as subdivisions and condominium pro8ects. +o this end, .7. !Cprovides for the issuance, suspension, revocation and even the outright denial of

registration and license to developers, agents and the pro8ect itself, as well as penaltiesfor the non0compliance with the requirements provided therein. *t does not, however,provide for the nulli>cation of a contract, due to the lac6 of registration and license at themoment of e3ecution, which in this case was thereafter undisputedly issued by ;KJ&/.As correctly averred by respondent Alsons, the requirement for registration and license isprimarily directed at preventing fraudulent schemes from being perpetrated on the publicwho see6 to have their own abode. 4o fraud has been alleged, much less proven, bySpouses #o #hien in the present case. +he lac6 of certi>cate and registration, withoutmore, while penaliGed under the law, is not in and of itself suFcient to render a contractvoid. Such a de>ciency, however, together with other relevant factors may be dulyconsidered in nullifying a contract, should the circumstances so demand.

+he ;ousing and Kand Jse &egulatory /oard (;KJ&/) is a national government

agency tas6ed as the planning, regulatory and quasi08udicial body for land use

development and real estate and housing regulation. +hese roles are done via a triad of

strategies namely, policy development, planning and regulation.

The Su7division and Condo4iniu4 Bu3ers Pro!ec!ive Decree &PD =*/1 iscovered 73 !he folloin5 fea!ures-

a) &egulate sale of subdivision lots and condominiums units to buyers-b) 7e>nes sale to be covered by registration-c) 7e>nes duties and responsibilities of ownerTdeveloper or of condominium and

subdivision pro8ects

andd) 7e>nes rights of condominiumTsubdivision unitsTlot buyers.

Ri5h!s of Bu3er under PD =*/ Before Bu3in51. #hec6 if the ro8ect has a #erti>cate of &egistration and Kicense to Sell.

Pou should as6 the bro6erTagent of the ownerTdeveloper if the pro8ect is registered andhas a Kicense to Sell issued by ;KJ&/:V +his can be veri>ed at the 2n0line ?ueriesT;KJ&/ website (www.hlurb.gov.ph) for thelist of pro8ects covered with #erti>cate of &egistration and Kicense to Sell as well as anyencumbrance thereon, e.g. #ease and 7esist 2rder, Suspension of Kicense, etc.-V 2r you may visit or call the nearest ;KJ&/ &egional 2Fcefor this information.$. Bisit the subdivisionTcondominium, where the house and lot or condo unit to bepurchased is located to 6now its natural topography, viG: susceptibility to landslide,

Eooding, erosion, etc.-*f the pro8ect is covered with a Kicense to Sell, you may already enter into a #ontract withthe ownerTdeveloper. ;owever, there are things which must be chec6ed:1. +he date of completion of the pro8ect as indicated in the Kicense to Sell-$. *f the property is mortgaged, it should have a #learance to =ortgage from the ;KJ&/-. +he facilities and amenities represented in the advertisement EyersT brochures are inaccordance with the approved subdivision and condominium plan on >le with ;KJ&/.%hen Bu3in51. #hec6 if the bro6erTagent is registered with ;KJ&/T7+*-$. Berify if the property has not been sold to other buyers with the &egister of 7eeds-. #hec6 into your source of income whether you can a9ord to pay the equity and themonthly installments-

. #hec6 if the materials of the house or condo unit conform with the developmentstandards and approved construction speci>cations submitted to ;KJ&/-!. #hec6 whether the developer would payfor the water and electric meters, thesubdivision perimeter fence, etc-.H. #hec6 who would eventually operate the subdivisionTcondominium water system.Before Si5nin5 !he Con!rac! !o Sell1. 7onQt sign any blan6 form of the #ontract-$. &ead thoroughly all the contents of the #ontract more especially the terms andconditions in >ne print-. Secure a copy of the #ontract and all other documents that you have signed-. =a6e sure that the #ontract would be registered by the ownerTdeveloper to the&egister of 7eeds-

13
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!. ay directly to the ownerTdeveloper or the mar6eting agent authoriGed by saidownerTdeveloper only- andH. As6 an oFcial receipt on all payments for your >le.

Ri5h! !o a Clean Ti!le+he buyer of a subdivision lot or condominium unit shall have a right to a clean title of

said lot or unit upon the full payment of the purchase price. *f the lot or unit ismortgaged, the ownerTdeveloper shall redeem the mortgage within si3 months from fullpayment so that the title could be delivered to the buyer. +he only fee collectible fromthe buyer is the registration fee for the deed of sale in the &egistry of 7eeds.&ealty ta3es can be assessed on the buyer if he has actually ta6en possession andoccupied the lot or unit prior to the transfer of the title in his name.

+hese are so provided under Sections $! and $H of 7 !C, Subdivision and#ondominium /uyers rotective 7ecree, thus:

S5#+*24 $!. *ssuance of +itle. I +he owner or developer shall deliver the title of the lotor unit to the buyer upon full payment of the lot or unit. 4o fees, e3cept those requiredfor the registration of the deed of sale in the &egistry of 7eeds, shall be collected for the

issuance of such title. *n the event a mortgage over the lot or unit is outstanding at thetime of the issuance of the title to the buyer, the owner or developer shall redeem themortgage or the corresponding portion thereof within si3 months from such issuance inorder that the title over any fully paid lot or unit may be secured and delivered to thebuyer in accordance herewith.

S5#+*24 $H. &ealty +a3. I &eal estate ta3 and assessment on a lot or unit shall be paidby the owner or developer without recourse to the buyer for as long as the title has notpassed to the buyer- rovided, however, that if the buyer has actually ta6en possessionof and occupied the lot or unit, he shall be liable to the owner or developer for such ta3and assessment e9ective the year following such ta6ing of possession and occupancy.

Non,orfei!ure of Pa34en!sA buyerQs payment for a subdivision lot or condominium unit cannot be forfeited by theowner or developer when he desists paying on the ground that the pro8ect is not developper approved plans and within the time limit for development. ;e must, however, notifythe owner or developer of his decision to suspend payments.

+he said buyer has the option to demand a refund of the total amount paid with legalinterest. +he total amount includes amortiGation interest but delinquency interest ise3cluded. Section $ of 7 !C Subdivision and #ondominium /uyers rotective 7ecreeprovides, thus:S5#+*24 $. 4on0'orfeiture of ayments. I 4o installment payment made by a buyer in asubdivision or condominium pro8ect for the lot or unit he contracted to buy shall beforfeited in favor of the owner or developer when the buyer, after due notice to the

owner or developer, desist from further payment due to the failure of the owner ordeveloper to develop he subdivision or condominium pro8ect according to the approvedplans and within the time limit for complying with the same. Such buyer, may at hisoption, be reimbursed the total amount paid including amortiGation interest but e3cludingdelinquency interest, with interest thereon at the legal rate.

ailure !o Pa3 Ins!all4en!s*n case the buyer fails to pay his installments for other reasons not attributable to thenon0development of the pro8ect i.e. he failed to raise the needed money, he may avail ofhis rights under &epublic Act H!!$, &ealty *nstallment /uyer rotection Act. +his is soprovided under Section $ of 7 !C, thus:S5#+*24 $. 'ailure to ay *nstallment. I +he rights of the buyer in the event of his failure

to pay the installment due for reason other than the failure of the owner or developer todevelop the pro8ect shall be governed by &epublic Act 4o. H!!$.

S5#+*24 $. 'ailure to pay installments. R +he rights of the buyer in theevent of this failure to pay the installments due for reasons other than the failureof the owner or developer to develop the pro8ect shall be governed by &epublic Act4o. H!!$.here the transaction or contract was entered into prior to the e9ectivity of&epublic Act 4o. H!!$ on August $H, 1C$, the defaulting buyer shall be entitled tothe corresponding refund based on the installments paid after the e9ectivity of thelaw in the absence of any provision in the contract to the contrary.

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here the transaction or contract was entered into prior to the e9ectivity of &epublic Act4o. H!!$ on August $H, 1C$, the defaulting buyer shall be entitled to the correspondingrefund based on the installments paid after the e9ectivity of the law in the absence ofany provision in the contract to the contrary.

Sanc!ions for Viola!in5 PD =*/

A violation of the provisions of the decree and its implementing rules andregulations will carry administrative and penal sanctions. +he liability e3tends tocontrolling persons in cases where the violator is a partnership or corporation. +heviolation usually carries administrative and criminal penalties. +he ;KJ&/ as a quasi0

8udicial entity has 8urisdiction over administrative aspect of the case while the criminalaspect is lodge before the >scalQs oFce and accordingly if there is a >nding of probablecause a criminal action is >led in the civil courts.Section ", and @ of 7 !C provides:

S5#+*24 ". Administrative 'ines. I +he Authority may prescribe and impose >nes note3ceeding ten thousand pesos for violations of the provisions of this 7ecree or of any ruleor regulation thereunder. 'ines shall be payable to the Authority and enforceable through

writs of e3ecution in accordance with the provisions of the &ules of #ourt.

S5#+*24 . enalties. I Any person who shall violate any of the provisions of this7ecree andTor any rules or regulation that may be issued pursuant to this 7ecree shall,upon conviction, be punished by a >ne of not more than twenty thousand ( $@, @@@.@@)pesos andTor imprisonment of not more than ten (1@) years: rovided, that in the case ofcorporations, partnership, cooperatives, or associations, the resident, =anager orAdministrator or the person who has charge of the administration of the business shall becriminally responsible for any violation of this 7ecree andTor the rules and regulationspromulgated pursuant thereto.

S5#+*24 @. Kiability of controlling persons. I 5very person who directly or indirectly

controls any person liable under any provision of this 7ecree or of any rules or regulationissued thereunder shall be liable 8ointly and severally with and to the same e3tent assuch controlled person unless the controlling person acted in good faith and did notdirectly or indirectly induce the acts constituting the violation or cause of action.

' Ca;aci!3 !o sell and 7u38 &%ho can en!er in a Con!rac! of SaleL1

nancial capacity of the family of the *

incapacitated person (Art. 1. 'amily #ode.)

Winds of *ncapacity

a) Absolute incapacity I if a person is prohibited by law to enter into a contract of sale in all cases-and

b) &elative incapacity I *f a person under circumstances is not allowed to buy or sell properties toanother.

Persons dis@uali2ed !o sell and 7u3:

(a) +he husband and wife cannot sell property to each other, e3cept:&(1 hen a se;ara!ion of ;ro;er!3 as a5reed u;on in !he 4arria5e se!!le4en!? or&F1 hen !here has 7een ed by law

(c) +he seller in an auction sale may not bid unless notice is given reserving such right. (Art. 1CH ()-

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(d) An unpaid seller cannot buy, directly or indirectly the goods sold by him, in case of resale (Art. 1!)

+he prohibition under 4os. 1 O $ is applicable to sales in legal redemption, compromises andrenunciations. Art. 1$).#ontracts entered in violation of pars. 1 to are B2*7A/K5.#ontracts entered in violation of pars. 0H are B2*7 being contrary to public policy.

))' Is !he ;rohi7i!ion a;;lica7le !o a 4an and a o4an ho are livin5 !o5e!her i!hou! !he7ene2! of 4arria5eL %h3L

Pes, because to give them that right would amount to giving better rights and privileges to peoplewho are violating the law. +he prohibition can also be gleaned from Art. "C of the 'amily #ode as ite3panded the prohibition against between husband and wife to those persons who are living togetheras husband and wife without the bene>t of marriage.

)*' Reasons 7ehind !he ;rohi7i!ion a5ains! sellin5 of ;ro;er!ies 7e!een hus7and and ife:(a) to prevent the commission of fraud or pre8udice to third persons-(b) to prevent one from unduly inEuencing the other-(c) to avoid indirect donations

4ote : A stranger who questions the validity of sale between spouses must bear a relation withthem li6e a creditor.

?uery: =ay a lawyer purchase a property of his client sub8ect litigation duringthe pendency of the litigation hy

Answer: 4o, it is e3pressly prohibited by law. *t is also prohibited by reason ofpublic policy.

)-' Rules re5ardin5 ris of loss in con!rac!s of sale:

(a) If !he !hin5 is los! 7efore ;erfec!ion, the seller and not the one who intends to purchase bearsthe loss in accordance with the principle that the thing perishes with the owner (res permit domino).

(b) If !he !hin5 is los! a! !he !i4e of ;erfec!ion , the contract is void or ine3istent (Art. 1@ +helegal e9ect is the same as hen !he o7c thing or a mass of speci>c goods such as 1@@ cavans of rice

in a particular warehouse) is only partially lost, the vendee may choose between withdrawingfrom the contract and demanding the remaining part, paying its proportionate price. (Art. 1H)

(c) If !he !hin5 is los! af!er ;erfec!ion 7u! 7efore deliver3 , that is even before ownership istransferred to the buyer, the ris6 of loss by a fortuitous event without the sellerQs fault is

borne by the buyer as an e>ce;!ionto the rule of res perit domino.(Art. 1"@).No!e: +his is in conEict with Article 1!@ which provides that unless otherwise agreed, the

goods remain at the sellerQs ris6 until ownership therein is transferred to the buyer.

(d) If !he !hin5 is los! af!er deliver3 , the buyer bears the ris6 of loss following the rule of res permitdomino.

(1) here the seller reserves ownership of goods merely to secure the performance by the buyerof his obligations under the contract, the goods are at the buyerDs ris6 from the time of delivery.

($) here the actual delivery has been delayed through the fault of either the buyer or the seller,the goods are ris6 of the party at fault. (Art. 1!@)

(e) *f the ob8ect refers to a thing or speci>c thing and it should have been lost in part only, the vendeemay choose between withdrawing from the contract and demanding the remaining part, paying itsprice in proportion to the total sum agreed upon. (Art 1)

(f) here speci>c goods are lost or changed in character in part or wholly without 6nowledge of theseller, the buyer may at his option treat the sale as (1) avoided- or ($) consider valid as to e3istinggoods or so much thereof which has not deteriorated. ( Art. 1)

)/' O7li5a!ions of !he Vendor:

(a) to transfer ownership (cannot be waived)(b) to deliver (cannot be waived)

(c) to warrant the ob8ect sold (this can be waived or modi>ed since warranty is not an essential elementof a contract of sale-

(d) to preserve the thing from perfection to delivery otherwise he can be held liable for damages.

)+' E:ec! of ailure !o deliver in !i4e8

*f the seller promised to deliver at a stipulated time and such period is of the essence of the contract, butdid not comply with his obligation on time, he has no right to demand payment of the price. As a matterof fact, the vendee0buyer may as6 for rescission of the sale.

)=' Onershi; is !ransferred 5enerall3 onl3 73 deliver3.

*' 9inds of Deliver3 &Tradi!ion1

(1) Ac!ual or real(Art. 1C)

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&F1 "e5al or cons!ruc!ive(a) le5al for4ali!ies(Art. 1")(b) s347olica !radi!ion or !radi!io s347olica(such as the delivery of the 6ey of the place where

the movable sold is being 6ept) (Art. 1" par. $)-(c) !radi!io lon5a 4anu (by mere consent or agreement) if the movable sold cannot yet be

transferred to the possession of the buyer at the time of the sale (Art. 1)(d) !radi!io 7reva 4anu( if the buyer had already the possession of the ob8ect even before the

purchase, as when the tenant of the car buys the car, that his possession as an owner). ( Art.

1)(e) !radi!io cons!i!u!u4 ;ossessoriu4(opposite of tradito breva manu) possession as owner

changed, for e3ample possession as a lease. *.e, * sold my car but continued to possess it as alessee of the purchaser (Art. 1!@@)

() Muasi,!radi!ion0 delivery of rights, credits or incorporeal property made by:(1) /y the e3ecution of a public instrument, or($) by placing titles of ownership in the hands of the buyer-() or allowing the buyer to ma6e use of the rights. (Art. 1!@1)

*(' Sale or Re!urn0 it is a contract by which property is sold but the buyer who becomes the owner of theproperty on delivery has the option to return the same to the seller instead of paying the price.

*F'Sale on Trial or A;;roval 0 *t is a contract in the nature of option to purchase if goods provesatisfactory, the approval of the buyer being a condition precedent. *n this 6ind of contract, the title shallcontinue in the seller until the sale has become absolute:

(a) Jpon the buyerDs approval or acceptance made 6nown to the seller-(b) Jpon the buyerDs doing any other act adopting the transaction- or(c) Jpon the retention by the buyer of the goods beyond the time >3ed (or a reasonable time) without

giving notice of re8ection. (Art. 1!@$)

4ote : *n sale or return, the ris6 of loss or in8ury rests upon the buyer while in sale on approval, theris6 still remains in the seller.

Poin! of Dis!inc!ion Sale or Re!urn Sale on Trial or A;;roval+ransfer of ownership of theob8ect of sale

+ransferred to vendee upondelivery

4o transfer of ownership tovendee upon delivery

2ption to return 53isting 53isting

&is6 of deterioration Bendee:(1) At fault0right to return is

lost.($) 4ot at fault0 no e9ect on

right to return

*.' Cases hen deliver3 does no! !ransfer onershi; over !hin5 sold.1. here a contrary intention appears by the terms of the contract:

(a) *n case of e3press reservation by the seller of his title, until certain conditions have been ful>lled(Art. 1!@, par. 1) particularly the full payment of the purchase price. (Art. 1C")-

(b) *n case of implied reservation of title as when goods are deliverable to the order of the seller orhis agent- and

(c) *n sale on approval, or trial or on satisfaction (Art. 1!@$)-$. here the seller failed to ma6e such contract with the carrier on behalf of the buyer as may be

reasonable under the circumstances (See Art. 1!$, par. $)- and. here the seller failed to give notice to the buyer as may enable him to insure the goods during theirtransit if under the circumstances it is usual to insure them.

(4ote: 4os. $ O are also e3ceptions to the general rule that delivery to the carrier is deemeddelivery to the buyer)

No!es:

a) Article 1!@ refers to sale of Speci>c ed and agreed upon atthe time a contract of sale is made.

b) +his provision provides that as a general rule, the ownership in the goods passes to the buyer upontheir delivery to the carrier. 53ception are provided above no. !.

c) c goods sold to the buyer generally passes ownership to the

buyer. &es perit domino rule. 7elivery transfers ownership. ;ence, if the thing is lost beforedelivery, the loss shall not be imputable to the buyer. See (Arts. 1!@ and 1!@). +his is in conEictwith Article 1"@. *f the contract is already perfected and even before the delivery of the thing, theloss of the thing without fault on the part of the seller is borne by the buyer.

d) *n Art. 1"@0 the law spea6s of non0fungibles and fungibles sold independently and for a single priceor for a price >3ed without consideration of their weight, number or measure. +he rules on Arts.11", 11C, 1$H, 1!" supports Article 1"@, which also refer to a prestations speci>c ordeterminate in character.

e) *n Art. 1!@, the previous article refers to speci>c goods. Speci>c goods as de>ned under Article1HH means goods identi>ed and agreed upon at the time of the contract of sale.

I#P"IED RESERVATION O O%NERS$IP

1. hen there is implied reservation ownership such as in the following:

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a. here the goods are shipped and by the bill of lading the goods are deliverable to seller orhis agent, the seller thereby reserves ownership in the goods. (Art. 1!@ paragraph $)

b. here goods are shipped and by the bill of lading the goods are deliverable to the order ofthe buyer or his agent, but the possession of the bill of lading is retained by the seller oragent, the seller thereby retains a right to the possession of the goods as against the seller.(Art. 1!@ par. )

c. here the seller draws on the buyer for the price and transmits the bill of e3change and thebill of lading together to the buyer to secure acceptance or payment of the bill of e3change,

the title is regarded as retained in the seller until the bill of e3change is paid. +he fact thatthe bill of lading and bill of e3change are attached together indicates that the seller intendsto ma6e the delivery of the goods conditional upon the payment or acceptance of the draft.

*)' %ha! !i!le is ac@uired 73 !he vendee or 7u3er if !he o7ed person, to order or tobearer. ?uedan is warehouse receipt usually for sugar received by warehouseman.

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SA"IENT PROVISIONS WAREHOUSE RECEIPTa. It is a written acknowledgement by a warehouse that he has received and holds certain goods therein

described in store for the person to whom it is issued.b. It is a simple written contract between the owner of the goods and the warehouseman to pay the

compensation for that service.c. It is a bilateral contract. It imports that goods are in the hands of a warehouseman and is a symbolical

representation of the property itself.

If goods are stolen and deposited by the thief with a warehouseman, the warehouseman shall not be liable to

the holder of the receipt even if he delivers the goods to the real owners without the receipt being surrendered tohim. (Secs. 11 and 141, WRL)

MEANING OF NEGOTIABLE UNER THE ACT

It indicates that in the passage of warehouse receipts through the channels of commerce, the law regards the

property which they describe as following them and gives to their regular transfer by indorsement the effect ofmanual delivery of the things specified in them.

ISTINCTION between the right of a person to whom a receipt has been negotiated and rights of a person towhom a receipt has been transferred.

a. Rights of a person to whom a receipt has been negotiated (Sec. 41):1. the title of the person negotiating the receipt over the goods covered by the receipt;. the title of the person !depositor or owner" to whose order by the terms of the receipt the goods were to

be delivered over such goods; and#. the direct obligation of the warehouseman to hold possession of the goods for him, as if the

warehouseman directly contracted with him.

b. Rights of a person to whom receipt has been transferred (Sec. 4!): may be defeated by levy and e$ecution1. %he title of the goods as against the transferor with respect to a negotiable warehouse receipt not duly

negotiated !merely steps into the shoes";

. If the receipt is non&negotiable, such person also ac'uires the right to notify the warehouseman of thetransfer thereof; and#. %he rights, thereafter, to ac'uire the obligation of the warehouseman to hold the goods for him.

(n unpaid seller)s lien or right of stoppage in transitucannot defeat the right of the holder in good faith of

*+R.

Sec. !" #$ Wa%e'se Rece* La+

If goods are delivered to a warehouse man by the owner or by a person whose act in conveying the

title to them to a purchaser in good faith for value would bind the owner, and the negotiable receipts is issued forthem.

+hile in possession of such warehouseman, the goods cannot be attached or levied upon under

e$ecution *-//:1. %he document be first surrendered; or. Its negotiation is en0oined; or1. %he document is impounded by the court.

Reason: the law protects an innocent purchaser for value in the negotiation of *+R.

oods covered by *+R cannot be attached or levied upon unless receipt is surrendered.

WAREHOUSEMAN

( person lawfully engaged in the business of storing goods for compensation for such service.

TO WHOM ELIERE

upon demand made by the holder of receipt or depositor provided such demand is accompanied by :a. an offer to satisfy the +2)s lien;b. an offer to surrender the receipt, if negotiable, with such endorsement as would be necessary for the

negotiation of the receipt; andc. a readiness and a willingness to sign, when the goods are delivered, if such signature is re'uested by

the warehouseman.

WARRANTIES ON SALE OF RECEIPT- (Sec. 44)

a. that the receipt is genuine;b. that he has legal right to negotiate or transfer it;c. that he has knowledge of no fact which would impair the validity or worth of the receipt; and

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d. that he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particularpurpose whenever such warranties would have been implied, if the contract of the parties had been totransfer without a receipt the goods represented thereby.

3onttinuation of 4iscussion on *egotiable 4oument of %itle:

*/' $o 4a3 a ne5o!ia7le docu4en! of !i!le ne5o!ia!ed 73 deliver3L

A negotiable document of title may be negotiated by deliver3:(1) here by the terms of the document the carrier, warehouseman or other bailee issuing the same

underta6es to deliver the goods to the bearer-($) here by the terms of the document the carrier, warehouseman or other bailee negotiating the

same underta6es to deliver to deliver the goods to the order of a speci>ed person, and such personor a subsequent indorsee of the document has indorsed it in blan6 or to the bearer-

here by the terms of a negotiable document of title, the goods are deliverable to bearer or wherethe negotiable document of title has been indorsed in blan6 or bearer, any holder may indorse thesame to himself or to any speci>ed person, and in such are the document shall thereafter benegotiated only by the indorsement of such indorsee. (Art. 1!@")

*+' $o 4a3 a ne5o!ia7le docu4en! of !i!le 7e ne5o!ia!ed 73 indorse4en!

A negotiable document of title may be negotiated by the indorsement of the person to whose order thegoods are by the terms of the document deliverable. Such indorsement may be in blan6, to bearer or toa speci>ed person. *f indorsed to a speci>ed person, it may be again negotiated by the indorsement ofsuch person in blan6, to bearer or to another speci>ed person. Subsequent negotiations may be made inli6e manner. (Art. 1!@)

*=' Jnder Article 1!$@, the words non0negotiable placed in the document of title which is negotiable incharacter have no e9ect and the document continues to be negotiable.

-' A non0negotiable document of title cannot be negotiated (Art. 1!11)

-(' %ho 4a3 ne5o!ia!e a ne5o!ia7le docu4en! of !i!leL

(1) /y the owner thereof-($) /y any person to whom the possession or custody of the document has been entrusted by the owner,

if by the terms of the document the bailee issuing the document underta6es to deliver the goods tothe order of the person to whom the possession or custody of the document has been entrusted, or ifat the time of such entrusting the document is such form that it may be negotiated by delivery (Art.1!1$)

-F' %ha! are !he ri5h!s0 hich are ac@uired 73 a ;erson !o ho4 a ne5o!ia7le docu4en! of!i!le has 7een dul3 ne5o!ia!edL

A person to whom negotiable document of title has been duly negotiated acquires thereby:

(1) Such title to the goods as the person negotiating the document to him had or had ability toconvey to a purchaser in good faith for value and also such title to the goods as to the person towhose order the goods were to be delivered by the terms of the document had and had ability toconvey to a purchaser in good faith for value-

($) +he direct obligation of the bailee issuing the document to hold possession of the goods for himaccording to the terms of document as fully as if such bailee had contracted directly with him(Art. 1!1).

ith the foregoing, one who purchases goods covered by a negotiable document title issued toa thief acquires no right over the goods as the thief has no right to transfer notwithstanding thatsuch purchaser acquires title where the owner, by his conduct, is stopped from asserting histitle.

A negotiated a warehouse receipt issued by to / representing goods. Said goods were stolenand deposited by A to for safe6eeping. not aware about the defect issued a negotiablewarehouse receipt to A. Assuming said receipt was negotiated to a holder or purchaser in goodfaith, the latter can never acquire title because the goods are stolen.

-.'%ha! are !he i4;lied arran!ies of !he ;erson ho ne5o!ia!es a docu4en! of !i!le 73

indorse4en! or deliver3L

A person, who for value negotiates or transfers a document of title by indorsement or delivery,including one who assigns for value a claim secured by a document of title unless a contraryintention appears, warrants:1. +hat the document is genuine-$. +hat he has legal right to negotiate or transfer it-. +hat he has 6nowledge of no fact which would impair the validity or worth of the document- and. +hat he has right to transfer the title of the goods are merchantable or >t for a particular

purpose, whenever such warranties would have been implied if the contract of the parties hadbeen to transfer without a document of title of goods represented thereby (Art. 1!1H)

-)' *ndorsers are not guarantors. +he indorsement of a document of title amounts merely to aconveyance by the indorser, not a contract of guaranty. An indorser of a document of title shall not

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be liable to the holder of for e3ample the bailee fails to deliver the goods because they were lost dueto his fault or negligence.

-*' Jnder Article 1!1", a negotiable document may be negotiated by any person in possession thereof *whatever manner it is obtained or acquired. *n other words, it may be negotiated by the thief or>nder and the holder thereof would acquire good title thereto if he paid for value in good faithwithout notice of the sellerQs defect of title. +his e3ists an alleged inconsistency considering underArticle 1!1$ as a thief nor >nder can neither negotiate document of title because he is not the owner

thereof. +he conEict can be resolved easily by locating the sub8ect matter of the provisions. *f whatwas stolen is the negotiable document of title representing goods lawfully or validly acquired orobtained, then Article 1!1" applies provided the acquirer obtained it for value and in good faith.

--' Ar!' (*(+' The validi!3 of !he ne5o!ia!ion of a ne5o!ia7le docu4en! of !i!le is no! i4;aired73 !he fac! Art. 1!1. *f goods are delivered to a bailee by the owner or by a person whose act inconveying the title to them to a purchaser in good faith for value would bind the owner and anegotiable document of title is issued for them they cannot thereafter, while in possession of suchbailee, be attached by garnishment or otherwise or be levied under an e3ecution unless thedocument be >rst surrendered to the bailee or its negotiation en8oined. +he bailee shall in no case becompelled to deliver up the actual possession of the goods until the document is surrendered to himor impounded by the court.

-/' Art. 1!$@. A creditor whose debtor is the owner of a negotiable document of title shall be entitled tosuch aid from courts of appropriate 8urisdiction by in8unction and otherwise in attaching such

document or in satisfying the claim by means thereof as is allowed at law or in equity in regard toproperty which cannot readily be attached or levied upon by ordinary legal process.

As a general rule, attachment or levy of goods covered by negotiable document of title is prohibited.+he only recogniGed e3ceptions to the general rule are as follows: a) *f the document is surrenderedto him- or ($) negotiation is en8oined.

*nstances when bailee can be compelled to surrender goods. +he rule is baille cannot be compelled tosurrender the goods in his possession covered by a negotiable document of title. ;e may do so,however: ( a) if document is surrendered to him or ($) the document is impounded by the court.

-+' Art. 1!$1. hether it is for the buyer to ta6e possession of the goods or of the seller to send them tothe buyer is a question depending in each case on the contract, e3press or implied, between theparties. Apart from any such contract, e3press or implied, or usage of trade to the contrary, the place

of delivery is the sellerDs place of business if he has one, and if not his residence- but in case of acontract of sale of speci>c goods, which to the 6nowledge of the parties when the contract or the salewas made were in some other place, then that place is the place of delivery.

here by a contract of sale the seller is bound to send the goods to the buyer, but no time forsending them is >3ed, the seller is bound to send them within a reasonable time.

here the goods at the time of sale are in the possession of a third person, the seller has not ful>lledhis obligation to deliver to the buyer unless and until such third person ac6nowledges to the buyerthat he holds the goods on the buyerDs behalf.

7emand or tender of delivery may be treated as ine9ectual unless made at a reasonable hour. hatis a reasonable hour is a question of fact.

Jnless otherwise agreed, the e3penses of and incidental to putting the goods into a deliverable statemust be borne by the seller. (n)

Art. 1!$$. here the seller delivers to the buyer a quantity of goods less than he contracted to sell,the buyer may re8ect them, but if the buyer accepts or retains the goods so delivered, 6nowing thatthe seller is not going to perform the contract in full, he must pay for them at the contract rate. *f,however, the buyer has used or disposed of the goods delivered before he 6nows that the seller isnot going to perform his contract in full, the buyer shall not be liable for more than the fair value tohim of the goods so received.

here the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyermay accept the goods included in the contract and re8ect the rest. *f the buyer accepts the whole ofthe goods so delivered he must pay for them at the contract rate.

here the seller delivers to the buyer the goods he contracted to sell mi3ed with goods of a di9erentdescription not included in the contract, the buyer may accept the goods which are in accordancewith the contract and re8ect the rest.

*n the preceding two paragraphs, if the sub8ect matter is indivisible, the buyer may re8ect the wholeof the goods.

+he provisions of this article are sub8ect to any usage of trade, special agreement, or course ofdealing between the parties. (n)

P"ACE O DE"IVERY

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1. here there is an agreement, e3press or implied, the place of delivery is that agreed upon-$. here there is no agreement, the place of delivery is determined by usage of trade-. here there is no agreement and there is also no prevalent usage, the place of delivery is the

sellerQs place of business-. *n any other case, the place of delivery is the sellerQs residence- and!. *n case of speci>c goods, which to the 6nowledge of the parties at the time the contract was

made were in some other place, that place is the place of delivery, in the absence of anyagreement or usage of trade to the contrary.

-=' Jnder Article 1!$, the general rule delivery to the carrier is delivery to the buyer when the seller isauthoriGed or required to send the goods to the buyer (See. Art. 1!$1) 53ceptions are in case ofe3press and implied reservations ( Art. 1!@)

Seller duties if required to deliver the goods to the buyera) +o enter on behalf of buyer into such contract with the carrier reasonable under circumstances.

*f he omits to do so, (1) the buyer may decline to treat delivery to carrier as delivery to himself incase goods are lost or damaged in course of transit, or ($) the buyer may hold the sellerresponsible in damages ( par $ of Art. 1!$) *f buyer e3ercised the >rst option, the transfer ofownership will be deemed not to have ta6en place- and

b) +o give notice to buyer regarding necessity to insure goods, if under the circumstances it is usualto insure them. *f seller fails to so, the ris6 will be borne by him.

E>;lain 'O'B0 C'I''0 'A'S'0 C '0 E &Poin! of Ori5in1 and E> doc-

1. 'O'B0 +he initials for the words, %'ree on /oard%. +his means that the goods are to be deliverablefree of e3pense to the buyer to the point where they are '.2./.

$. C'I''0 +he initials stand for the words %cost, insurance and freight.% +hey signify that the price >3edcovers not only the cost of the goods, but the e3pense of freight and insurance to be paid by theseller up to the point especially named.

. 'A'S' 0 +he initials mean %free alongside vessel% (named port of shipment). Jnder this term, theseller pays all charges and bears the ris6 until the goods are placed alongside overseas vessel andwithin reach of its loading tac6le.

. C , +he initials signify that the price >3ed includes cost and freight to the named point ofdestination.

!. E> ac!or3, E> %arehouse0 e!c'(named point of origin) 0 Jnder this term, the price quoted appliesonly at the point of origin, and the seller agrees to place the goods at the disposal of the buyer at theagreed place on the date within the period >3ed.

H. E> Doc(named port of importation). 0 Jnder this term, the seller quotes a price including the costof the goods on the doc6 at the named port of importation.

ce;!ion8 If !he !i4e for such ;a34en! has 7een 2>ed in !he con!rac!0 !he !hin5 4us! 7edelivered !hou5h !he ;rice has no! 7een ;aid 3e!'

/(' De2ne an un;aid seller under Ar!' (*F*

An unpaid seller is one 0a) who has not been paid or tendered the whole price- orb) who has received a bill of e3change or other negotiable instrument as conditional payment and the

condition on which it was received has been bro6en by reason of dishonor of the instrument. (Art.1!$!)

/F' Ri5h!s of !he un;aid seller8

5ven if the ownership in the goods has already passed to the buyer, they are:

1) A lien on the goods or right to retain them for the price while in his possession-$) A right of stopping the goods in transitu in case of insolvency of the buyer-) A right of resale- and) A right to rescind the sale.

*f the unpaid seller still retains ownership in the goods, he cannot be said to have lien (on his goods)./ut he does have, in addition to his other remedies, right of withholding delivery (Art. 1!$H)

H!. Cases here !he un;aid seller e>ercises his ri5h! of ;ossessor3 lien81. hen the goods have been sold without any stipulation as to credit-$. here the goods have been sold on credit, but the term of the credit has e3pired- and. here the buyer becomes insolvent.+he seller may e3ercise his right o lien notwithstanding that he is in possession of the goods as agentor bailee for the buyer. (Art. 1!$C)

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HH' An un;aid seller loses his lien !o !he 5oods:1. hen he delivers the goods to a carrier or other bailee for the purpose of transmission to the

buyer without reserving ownership of the goods or the right of possession thereof-$. hen the buyer or his agent lawfully obtains possession of the goods-. hen the unpaid seller waives his lien.

=ere 8udgment by a court obtained by the unpaid seller for the price of the goods is not a groundfor the loss of his lien. (Art. 1!$)

HC. =eaning of the RIG$T TO STOPPAGE IN TRANSITU

+he ri&ht of stoppa&e i" tra"situis the right of the unpaid seller who has parted with the possessionof the goods, when the buyer is or becomes insolvent, to stop them and resume possession while theyare in transit. +he unpaid seller will become entitled to the same rights to the goods as if he had neverparted with possession (Art. 1!@)

H"' Re@uisi!es in !he e>ercise of !he ri5h! of s!o;;a5e in !ransi!u:

1. +he seller must be unpaid (Art. 1!$!)$. +he buyer must be insolvent-. +he goods must be in transit (Art. 1!1). +he seller must either actually ta6e possession of the goods sold or give notice of his claim to the

carrier or other person in possession (Art. 1!$ p. 1)!. +he seller must surrender the negotiable document of title, if any, issued by the carrier or bailee

(ibid, p. $)H. +he seller must bear the e3penses of delivery of the goods after the e3ercise of the right. (*bid.)

H' #anner of hich un;aid seller 4a3 e>ercise !he ri5h! !o s!o; !he 5oods in !ransi!u8

1. 5ither by ta6ing actual possession of the goods-$. /y giving notice of his claim to the carrier of business in whose possession the goods are.

+he seller must surrender the negotiable document of title, if any issued by the carrier or bailee. (Art.1!$)

C@' Ins!ances here 5oods are considered no! alread3 in !ransi!u:

+he goods are no longer in transit after delivery to the buyer or his agent in that behalf and in thefollowing cases:

a) *f the buyer or his agent obtains possession of the goods at a point before the destination originally>3ed-

b) *f the carrier or bailee ac6nowledges to hold the goods on behalf of the buyer- andc) *f the carrier or bailee wrongfully refuses to deliver the goods to the buyer. (Art. 1!1)

C1. Ri5h! !o Resale:

+his right can be the unpaid seller only when he has right of lien or right to stop goods intransitu and under any of the three following cases:

a. here the goods are perishable in nature-b. here the right to resell is e3pressly reserved in case the buyer should ma6e a default- and-c. here the buyer delays in the payment of the price for an unreasonable time.

/F' E:ec! of Resale:

+he seller is not liable for any pro>t made by such resale- but if he sells for less than theprice, he has the right to sue for the balance. As against the original buyer, the new buyer

acquires a good title to the goods.

4ote: *t is not essential to the validity of a resale that notice of an intention to resell the goods be givenby the seller to the original seller. 53cept where the resale is based on the default of the buyer in thepayment of the price, as notice in this case is relevant in any question whether the buyer had been in defaultfor unreasonable time before the resale was made.

4o notice is required for the time and place of such resale to the buyer.

Seller is not allowed to directly or indirectly buy the goods in a public or private sale.

C' Cases hen an un;aid seller e>ercises his ri5h! !o rescind:

5ither of the two situations, namely:

1. hen the right to rescind is e3pressly reserved- or$. hen the buyer defaults or delays in the payment of the price for an unreasonable time.

*n the case of rescission, the seller resumes ownership in the goods. hile the seller shall not beliable to the buyer upon the contract of sale, the latter, however, may be made liable to the seller fordamages for any loss occasioned by the breach of contract. (Art. 1!)

4ote - An unpaid seller has right to rescind only if he has either a right of lien ora right to stop goods in transitu.

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C. E:ec! of Rescission:+he seller resumes ownership of the goods. hile the seller shall not be liable to the buyerupon the contract of sale, the latter however may be made liable to the seller for damages forany loss in occasioned by the breach of contract (par. 1, Art. 1!)

C!. $o !o rescind

An election by the seller to rescind may be manifested by notice to the buyer or some other over actshowing an intention to rescind. #ommunication of such election to the buyer is not necessary.

CH. E:ec!s of Sale of Goods su7


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a) *f the actual area, for e3ample is 1,1@@ sq. meters 0 +he vendee may accept the area included inthe contract (1,@@@ sq. meters) and the rest (1@@ sq. meters). *f he accepts the whole area, hemust pay for the same at the contract rate of 11@,@@@. (Art. 1!H)

b) *f the actual area is @@ sq. meters 0 +he vendee may choose between a proportionate reductionof the price ( @,@@@) and the rescission of the contract, provided in the latter case the lac6 in thearea be not less than 1T1@ or more of that stated. (See Art. 1!)

$) +he sale is made for lump sum 0 +here shall be no increase or decrease of the price. (Art. 1!$)

&eason: +he law presumes that the purchaser had in mind a determinate price for the real estateand that he ascertained the area and quality before the contract was perfected. +his rule applieswhen two or more immovable properties are sold for a single price (See Art. 1!1). *t does not applyif the de>ciency is so material as to go to the essence of the contract, for under such circumstances,gross mista6e may be inferred.

+' Art. 1!. *f the same thing should have been sold to di9erent vendees, the ownership shall betransferred to the person who may have >rst ta6en possession thereof in good faith, if it should bemovable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who ingood faith >rst recorded it in the &egistry of roperty.

Should there be no inscription, the ownership shall pertain to the person who in good faithwas >rst in the possession- and, in the absence thereof, to the person who presents the oldest title,

provided there is good faith.

%ho is dee4ed !o 7e !he oner in sales of !he sa4e !hin5 !o di:eren! vendee 73 !he sa4evendor : RU"ES ON DOUB"E SA"ES

(1) *f the property sold is movable, the vendee who >rst too6 possession in good faith shall acquire theownership.

($) *f the property sold is immovable, the ownership shall belong to:a) +he vendee who >rst registered the sale in good faith in the &egistry of roperty (&egistry of

7eeds)-b) *n the absence of registration, the vendee who in good faith, >rst too6 possession- andc) *n the absence of both registration and possession, the vendee who presents the oldest title

(who >rst bought the property), provided there is good faith. (Art. 1!)Case I8

A, the owner of a parcel of land sold the same to /, but the document was not registered. 2ne year

later, he sold it again to # who registered. 2ne year later, he sold it again to # who registered the documentand obtained a title over the same. ho has a better right over the parcel of land hy

Answer: # has a better right. Jnder the law, if an immovable property is sold to two persons, theownership shall belong to the person acquiring it who, in good faith, >rst recorded it in the &egistry ofroperty. (Art. 1!) +he facts do not show that # acquired the land in bad faith. Since he was the one who>rst registered the sale in good faith and acquired title thereto, he has a better right.

Case II8*n a simple case of double sale of an immovable property, the owner sold it for a buyer merely in a

private instrument. Kater on, it was sold to another, this time in a public instrument and registered at that.+he second buyer, however, 6new of the >rst sale. /etween the >rst and the second buyer, who has a betterright hy

+he >rst buyer has a better right. =ere registration of the sale is not suFcient. rst registered is >ctitious or forged-b) +he vendor is not the owner of the property- orc) +he sale is not made by the same vendor

"1. 9inds of arran!ies in !he con!rac! of sale8

A) E>;ress or Pro4issor3 %arran!30 +hey are any aFrmation of fact or any promise by the sellerrelating to the thing, the natural tendency of which is to induce the buyer to purchase the thing andthe buyer thus induced purchases the same.

/) I4;lied %arran!ies: +hey are agreements or stipulations the e3istence of which is presumedalthough not e3pressed in any words in the contract.

&epublic Act C otherwise 6nown as the #onsumerQs Act of the hilippines provides for additionalprovisions or rules applicable to e3press and implied warranties.

+(' %ha! are I4;lied Con!rac!s8

a) arranty against eviction 0the seller warrants that he has a right to sell the thing at the timewhen the ownership is to pass and that the buyer shall from that time have and en8oy the legalpeaceful possession of the thing-

b) arranty against hidden defects or un6nown encumbrances 0 +he seller guarantees the thingsold is free from any hidden faults or defects or any charge or encumbrance not declared or6nown to the buyer. (Art. 1!C)

c) arranty of 'itness or =erchantability 0 +he seller warrants that the seller guarantees that thething sold is reasonably >t for the 6nown particular purpose for which it was acquired by thebuyer or, where it was bought by description, that it is of merchantable quality. (Art. 1!H!)

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4ote: the rule on warranty does not apply to a sheri9, auctioneer, mortgage, pledgee or otherperson who sells by virtue of authority in fact or law. *n other words, the persons enumerated are notliable to a third person with a legal and equitable interest in the thing sold. (Art. 1!C, par. $)

+F' #eanin5 of evic!ion8

*t is a 8udicial process whereby the vendee is deprived of the whole or part of the thing purchased by

virtue of a >nal 8udgment based on a right prior to the sale or an act imputable to the vendor. (Art.1!")

+.' Re@uisi!es for %arran!3 of Evic!ion

a) +he vendee is deprived in whole or in part of the thing purchased-b) ;e is deprived by virtue of a >nal 8udgment (Art. 1!!C)c) +he 8udgment is based on a right prior to the sale or an act imputable to the vendor-d) +he vendor was summoned in the suit for eviction at the instance of the vendee (Art. 1!!")- ande) +here is no waiver on the part of the vendee. (Art. 1!")

+)' 9inds of %aiver of Evic!iona) Conscien!e. 0 +he waiver is voluntarily made by the vendee without the 6nowledge and

assumption of ris6s of eviction. +he vendor shall only pay the value of which the thing sold hadat the time of eviction- and

b) In!encionada. 0 +he vendee ma6es the waiver with 6nowledge of the ris6s of eviction andassumption of its consequences. (Art. 1!!) +he vendor is not liable for eviction if he acted ingood faith. (Art. 1!!)

+*' Ri5h!s of !he vendee in case of evic!ion occurs8

a) +he return of the value which the thing sold had at the time of the eviction, be it greater or lesserthan the price of the sale-

b) +he income or fruits if he has been ordered to deliver them to the party who won the suit againsthim-

c) +he costs of the suit which caused the eviction, and, in a proper case, those of the suit broughtagainst the vendor for the warranty-

d) +he e3penses of the contract, if the vendee has paid them- ande) +he damages and interests, and the ornamental e3penses, if the sale was made in bad faith. (Art.

1!!!)

4ote: *n case of partial eviction, the vendee has the option either to enforce the vendorDs liability foreviction (Art. 1!!!) or to demand rescission of the contract. (Art. 1!!H)

*n case the vendee is totally evicted from the thing sold, he cannot avail of the remedycontemplates that the one demanding it is able to return whatever he has received under the contract.

"H. %arran!3 a5ains! Redhi7i!ion0 is the avoidance of a sale on account of some service or defect in thething sold, which renders its use impossible, or so inconvenient and imperfect that it must be supposed thatthe buyer would not have purchased it has he 6nown of the vice.

+/' Re@uisi!es of %arran!3 A5ains! Redhi7i!or3 Defec!s &$idden0 Ph3sical defec!s18

a) +he defect must be serious or important-b) *t must be hidden-c) *t must e3ist at the time of the sale-d) +he vendee must give notice of the defect to the vendor within a reasonable time (Art. 1!"H)e) +he action for rescission or reduction of the price must be brought within the proper period 0 H

months from the delivery of the thing sold (Art. 1!C1) or within @ days from the date of delivery incase of animals (Art. 1!CC, par. 1@ and-

f) +here must be no waiver of warranty on the part of the vendee.

++' %hen is defec! considered i4;or!an!8a) *f it renders the thing sold un>t for which it is intended-b) *f it diminishes its >tness for such use to such e3tent that the vendee would not have acquired it had

he had been aware thereof or would have given a lower price for it. (Art. 1!H1)

". Defec! is hidden hen i! as no! non and could no! have 7een non !o !he vendee'$ence0 !here is no arran!3 if !he defec! is ;a!en! and visi7le.

=' Re@ui!es of %arran!3 a5ains! hidden encu47rances8a) +he encumbrance must be important (the vendee would not have purchased the property had he

been aware of its e3istence)-b) +he encumbrance is not registered, unless e3pressly warranted free from burdens. &eason:

&egistration constitute constructive notice-c) +he vendee had no 6nowledge of the encumbrance whether it is registered or not. &eason:

2therwise, there is no warranty- andd) +he action for rescission or damages must be brought within the proper period (supra)- in case of

immovable property encumbered with any non0apparent burden or easement0within one year fromthe e3ecution of the drrd of sale. (Art. 1!H@)

*f the period of one year has elapsed, the vendee of an immovable may only bring an action fordamages also within one year from the discovery of the non0apparent burden or servitude.

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1. arra"t$ of 1erca"

Documents

Important Tips on the Law on Sales