UNIVERSITY OF THE PHILIPPINESCOLLEGE OF LAW

SALES

I. INTRODUCTION

Textbook: BAVIERA, Araceli, Sales

DEFINITION OF SALE – Art. 1458

NATURE OF THE OBLIGATIONS

ESSENTAIL REQUISITES OF A CONTRACT OF SALE

1. Consent

2. Subject Matter

3. Price

Dizon v. CA 302 SCRA 288 (1999)

STAGES OF CONTRACT OF SALE

1. Negotiation

2. Perfection

3. Consummation

CHARACTERISTICS OF A CONTRACT OF SALE

1. Nominate and Principal

2. Consensual – Art. 1475

3. Bilateral and Reciprocal – Arts. 1169 and 1191

4. Onerous

5. Commutative –Arts. 1355 and 1470

SALE IS TITLE AND NOT MODE

SALE DISTINGUISHED FROM OTHER CONTRACTS

1. Donation – Arts. 725 and 1471

2. Barter – Arts. 1468, 1638 to 1641

Fule v. CA 286 SCRA 698 (1998)

3. Contract for Piece of Work – Arts. 1467, 1713 to 1715

Celestino v. Collector 99 Phil 841 (1956)

Commissioner v. Engineering Equipment 65 SCRA 590 (1975)

4. Agency to Buy or Sell – Art. 1466, 1868

Quiroga v. Parsons 38 Phil 501 (1918)

Puyat v. Arco 72 Phil 402 (1941)

5. Dacion en Pago – Art. 1245

Dao Heng Bank v. Sps. Lilia & Reynaldo Laigo 571 SCRA 4343 (2008)

6. Lease – Arts. 1484 and 1485

CONTRACT OF SALE/CONTRACT TO SELL

Luzon Brokerage v. Maritime Building 43 SCRA 93 (1972)

Dignos v. CA 158 SCRA 375 (1988)

II. PARTIES TO A CONTRACT OF SALE

CAPACITY OF PARTIES – Arts. 1489 – 1492

ABSOLUTE INCAPACITY – Arts. 1327, 1397, 1399

Necessaries – Art. 1489, 290

RELATIVE INCAPACITY: Married Persons

1. Contracts with Third Parties – Arts. 73, 96 and Family Code

2. Between Spouses – Arts. 133, 1490 and 1492

Medina v. Collector 1 SCRA 302 (1961)

3. Applicability to Common-Law Spouses – Art. 133

Matabuena v. Cervantes 38 Phil 284 (1971)

Cruz v. CA 281 SCRA 491 (1997)

SPECIAL DISQUALIFICATIONS – Arts. 1491 –1492

1. Guardians, Agents and Administrators

Philippine Trust Co. v. Roldan 99 Phil 392 (1956)

2. Lawyers

Rubias v. Batiller 51 SCRA 120 (1973)

3. Judges

Macariola v. Asuncion 114 SCRA 77 (1982)

III. SUBJECT MATTER

REQUISITES OF A VALID SUBJECT MATTER – Arts. 1459 to 1465

1. Must be licit – Arts. 1347, 1459, 1575, 1409

Martinez v. CA 56 SCRA 647 (1974)

2. Must be determinate or determinable – Art. 1460

Melliza v. City of Iloilo 23 SCRA 477 (1968)

Atilano v. Atilano 28 SCRA 231 (1969)

3. Must be existing, future or contingent – Arts. 1347, 1348 and 1462

Emption rei speratae – Arts. 1461 and 1347

Pichel v. Alonzo 111 SCRA 34 (1981)

Emptio spei – Art. 1461

Subject to resolutory condition – Art. 1465

4. Quantity of subject matter not essential for perfection – Art. 1349

PARTICULAR KINDS

1. Generic things – Arts. 1246 and 1409 (6)

Yu Tek v. Gonzales 29 Phil 384 (1915)

2. Future goods – Art. 1461

3. Sale of undivided interest or share – Arts. 1463-1464

4. Sale of things in litigation – Arts. 1381 (4), 1358 (2)

IV. OBLIGATION OF THE SELLER TO TRANSFER OWNERSHIP

SALE BY A PERSON NOT THE OWNER AT TIME OF DELIVERY – Arts. 1462,

1505, 1459

EXCEPTIONS: When ownership transfers by non-owner

1. Estoppel – Arts. 1434

Hernaez v. Hernaez 32 Phil 214 (1915)

Siy Cong Bien V. HSBC 56 Phil 598 (1932)

Jalbuena v. Lizarraga 33 Phil 77 (1915)

2. Recording Laws; Torrens System – PD 1529

3. Statutory Sale - Order of Courts

4. Sale in Merchant’s Store, Market or Fair

Sun Bros. V. Velasco 54 OG 5143 Aug 1958

Masiclat v. Centeno GR No 8420, May 21, 1956

SALE BY A PERSON HAVING A VOIDABLE TITLE – Arts. 1506, 559

Tagatac v. Jimenez 53 OG 3792 No. 12 June 1957

De Garcia v. CA 37 SCRA 129 (1971

EDCA Publishing v. Santos 184 SCRA 614 (1990)

Aznar v. Yapdiangco 13 SCRA 486 (1965)

V. PRICE

MEANING OF PRICE – Arts. 1469 – 1474

REQUISITES FOR A VALID PRICE

1. Must be real – Arts. 1471

a. When price simulated

b. Effects when price simulated

c. False consideration – Art. 1353 and 1354, 1355

Mapalo v. Mapalo 17 SCRA 114 (1966)

Ong v. Ong 139 SCRA 133 (1985)

Bagnas v. CA 176 SCRA 159 (1989)

Morales v. CA 27 SCRA 484 (1969)

d. Non-payment of price

2. Must be in money or its equivalent – Arts. 1458, 1468

Republic v. Phil. Resources 102 Phil 960 (1958)

3. Must be certain or ascertainable at time of perfection – Arts. 1469

Toyota Shaw v. CA 244 SCRA 320 (1995)

HOW PRICE IS DETERMINED

1. By third person – Art. 1469

2. By the courts – Art. 1469

3. By reference to a definite day – Art. 1472

4. By reference to another thing certain

5. Never by one party – Arts. 1473, 1182

INADEQUACY OF PRICE – Arts. 1355, 1470

WHEN NO PRICE AGREED – Art. 1474

MANNER OF PAYMENT MUST BE AGREED UPON

Velasco v. CA 51 SCRA 439 (1973)

EARNEST MONEY V. OPTION MONEY – Art. 1482

Limson v. CA 357 SCRA 209 (2001)

San Miguel Properties v. Huang 336 SCRA 737 (2000)

VI. FORMATION OF CONTRACT OF SALE

PREPARATORY – Art. 1479

1. Offer – Art. 1475

Villonco v. Bormaheco 65 SCRA 352 (1975)

a. Forms of offer –Arts. 1319, 1325, 1326

Zayco v. Serra 44 Phil 326 (1923)

b. Forms of acceptance – Arts. 1319

c.. Vices vitiating consent – Arts. 1330, 1338, 1331

2. Option Contract – Arts. 1479 , 1324

De la Cavada v.Diaz 37 Phil 962 (1918)

Carcellar v. CA 302 SCRA 718 (1999)

a. Meaning of Consideration:

Villamor v. CA 202 SCRA 607 (1991)

Soriano v. Bautista 6 SCRA 946 (1962)

b. An option to buy is not a contract of purchase and sale

Adelfa Properties v. CA 310 Phil 623 (1995)

c. Without consideration void as option but valid as offer

Sanchez v. Rigos 45 SCRA 368 (1972)

d. Proper exercise of option Nietes v. CA 46 SCRA 654 (1972)

e. There must be acceptance of option

Vasquez v. CA 199 SCRA 102 (1991)

3. Right of First Refusal

Equitorial Realty v. Mayfair 264 SCRA 483 (1996)

Paranaque Kings v. CA 268 SCRA 727 (1997)

Ang Yu v. CA 238 SCRA 602 (1994)

Rosencor v. Inquing 354 SCRA 119 (2001)

4. Mutual Promise to Buy and Sell – Art. 1479

De la Cavada v. Diaz 37 Phil 982 (1918)

PERFECTION - Arts. 1475, 1319, 1325, 1326

1. When deviation allowed

Villonco v. Bormaheco 65 SCRA 352 (1975)

2. Sale by Auction – Arts. 1476, 1403 (d), 1326

3. Perfection – Art. 1475

National Grains Authority v. IAC 171 SCRA 131 (1989)

Peoples Homesite and Housing v. CA 133 SCRA 777 (1984)

4. Place of Perfection – Art. 1391

5. Expenses of Execution and Registration – Art. 1487, 1521

FORMALITIES OF THE CONTRACT

1. Form not important – Arts. 1483, 1356, 1357, 1358

Dalion v. CA 182 SCRA 872 (1990)

Secuya v. vda de Selma 326 SCRA 244 (2000)

2. Exceptions: When form important

A. Form important for enforceability

a. Statute of Frauds – Arts. 1403, 1405

Paredes v. Espino 22 SCRA 1000 (1968)

Baretto v. Manila 46 Phil 964 (1924)

Inigo v. Estate of Maloto 21 SCRA 246 (11967)

B. Form important for validity

a. Sale of realty through an agent – Art. 1874

City Lite v. CA 325 SCRA 385 (2000)

b. Sale of large cattle – Art. 1581, sec. 529 Revised Adm. Code

c. Electronic Commerce Act – RA 8792 sec. 7, 8, 11

VII. TRANSFER OF OWNERSHIP

MANNER OF TRANSFER – Arts. 1477, 1496

Kuenzle v. Macke 14 Phil 610 (1909)

WHEN DELIVERY DOES NOT TRANSFER TITLE

1. Sale on return

2. Sale on approval, trial or satisfaction – Art. 1502

3. Express Reservation – Art. 1478

Luzon Brokerage v. Maritime Bldg. 43 SCRA 93 (1972)

4. Implied Reservation – Art. 1503

5. When sale not valid

6. When seller is not the owner

KINDS OF DELIVERY

1. Real delivery – Art. 1497

Bean v. Cadwallader 10 Phil 606 (1908)

Ocejo v. International Bank 37 SCRA 631 (1918)

Cebu Winland Dev.Corp. v. Ong Siao Hua 588 SCRA 120 (2009)

2. Constructive Delivery

a. Symbolic Delivery – Art. 1498

Aviles v. Arcega 44 Phil 924 (1922)

Phil. Suburban v. Auditor General 63 SCRA 397 (1975)

Sarmiento v. Lesaca 108 Phil 900 (1960)

Florendo v. Foz 21 Phil 388 (1991)

Masallo v. Cesar 39 Phil 134 (1918)

Asset Privatization Trust v. T.J. Enterprises 587 SCRA 481 (2009) b Traditio Longa Manu – Arts. 1498, 1499, 1513, 1514

Board of Liquidator v. Floro 110 Phil 482 (1960)

c. Tradition Brevi Manu – Art. 1499

Abuan v. Garcia 14 SCRA 759 (1965)

d. Traditio Constitutom Possessorium – Art. 1500

Bautista v. Sioson 39 Phil 615 (1919)

e. Delivery to a Common Carrier – Arts. 1523

“FOB Sales”

Behn Meyer v. Yangco 38 Phil 602 (1918)

“CIF Sales”

General Food v. Nacoco 100 Phil 637 (1956)

“FAS”

Effect of form of bill of lading – Art. 1503

DOUBLE SALES – Art. 1544

1. General Rule – Prior tempore, prior jure

Carbonell v. CA 69 SCRA 99 (1976)

2. Requisites for Double Sale

Cheng v. Genato 300 SCRA 722 (1998)

3. Who is purchaser in good faith

Agricultural and Home Extension v. CA 213 SCRA 536 (1992)

4. Priority of registration over possession

5. Sale of Movables – Arts. 1544 , 1497 to 1501

Rivera v. Ong 37 Phil 355 (1917)

6. Sale of Immovables – Art.1 1544 par. 2

Carbonell v. CA 69 SCRA 99 (1976)

7. Sale by virtue of execution and attachment – Art. 1544

Carumba v. CA 31 SCRA 558 (1970)

8. Meaning of “Better Right”

Hanopol v. Pilapil 7 SCRA 452 (1963)

9. Unregistered land – PD 1529 sec. 113

Dagupan v. Macam 14 SCRA 179 (1965)

10.When one sale is forgery

Espiritu v. Valerio 9 SCRA 761 (1963)

11.First in possession in good faith

Quimson v. Rosete 87 Phil 159 (1950)

Sanchez v. Ramos 40 Phil 614 (1919)

12.Oldest title – Art. 1544 pars. 3

VIII. RISK OF LOSS

GENERAL RULE – Art. 1263, 1189

WHEN LOSS OCCURRED BEFORE PERFECTION

Roman v. Grimalt 6 Phil 96 (1906)

WHEN LOSS OCCURRED AT TIME OF PERFECTION – Arts. 1493 and 1494

Norkis v. CA 193 SCRA 694 (1991)

WHEN LOSS OCCURRED AFTER PERFECTION BUT BEFORE DELIVERY –

Arts. 1164, 1262

General Rule: Res perit domino

Loss by fault of a party – Arts. 1480, 1504. 1538, 1636

Loss by fortuitous events – Arts. 1480, 1163, 1165, 1504, 1538, 1189

Fruits or improvements – Arts. 1537

WHEN OWNERSHIP IS TRANSFERRED – Arts. 1504

Sun Bros. V. Perez 7 SCRA 977 (1963)

Lawyer’s Coop v. Tabora 13 SCRA 762 (1965)

Song Fo v. Oria 33 Phil 3 (1915)

IX. DOCUMENTS OF TITLE

DEFINITION - Art. 1636

PURPOSE OF DOCUMENTS OF TITLE

Siy Cong Bieng v. HSBC 56 Phil 598 (1932)

NEGOTIABLE DOCUMENTS OF TITLE

1. How negotiated – Arts. 1508, 1509

2. Who can negotiate – Art. 1512

3. Rights acquired by negotiation – Art. 1505

4. Effects of Negotiation – Art. 1513

5. Unauthorized Negotiation – Art. 1518

NON-NEGOTIABLE DOCUMENTS OF TITLE

1. How transferred or assigned – Art. 1514

2. Effects of Transfer – Art. 1514

WARRANTIES OF SELLER OF DOCUMENTS OF TITLE - Art. 1516

RULES ON LEVY/GARNISHMENT OF GOODS – Arts. 1514, 1519, 1520

X. REMEDIES OF AN UNPAID SELLER

DEFINITION OF UNPAID SELLER – Art. 1525

REMEDIES OF UNPAID SELLER

1. Possessory Lien – Arts. 1526 – 1529, 1503, 1535

a. Partial delivery

b. Loss of lien

c. Revival of lien

2. Stoppage in transitu – Arts. 1530 – 1535, 1632 (2)

a. Requisites

b. When considered in transit

c. Sale of goods in transit

3. Right of Resale – Art. 1533

a. Time to resell

b. Right to sue buyer for damages

4. Right to Rescind – Art. 1534

XI. PERFORMANCE OF CONTRACT

DELIVERY OF THING SOLD

1. Place, time and manner of delivery – Arts. 1521, 1169, 1524

Smith Bell v. Matti 44 Phil 874 (19220

2. When time is of essence

Soler c. Chesky 43 Phil 52 (1922)

Republic v. Litton 94 Phil 52 (1953)

3. Effects of delivery – Art. 1477, 1478

4. When not bound to deliver – Arts. 1524, 1536,1198

5. Sale of Movables – Arts. 1522, 1537, 1480

a. Delivery by installment – Art. 1583

b. Delivery of wrong quantity – Art. 1522

6. Sale of Immovables – Arts. 1539, 1540

Azarraga v. Gay 52 Phil 599 (1928)

a. Where price is at certain rate per unit – Art. 1539, 1540

Cebu Windland Dev. Corp. v. Ong Siao Hua 588 SCRA 120 (2009)

b. Sale for a lump sum – Art. 1542

7. Inspections and Acceptance

a. Right of inspection – Art. 1584

b. Manifestation of acceptance – Art. 1585

b. Breach of warranty – Art. 1586

c. Refusal to accept –Art. 1587 – 1589

La Fuerza v. CA 23 SCRA 1217 (1968)

PAYMENT OF PRICE

1. Liability for interest – Arts. 1582

2. Suspension of payments – Arts. 1590, 1560, 1664

De la Cruz v. Legaspi 98 Phil 43 (1955)

Bareng v. CA 107 Phil 641 (1960)

3. Sale of real property – Arts. 1592, 1560

a. Effect of non payment – Art. 1191

Laforteza v. Machuca 333 SCRA 643 (1992)

Luzon Brokerage v. Maritime Bldg. 43 SCRA 93 (1972)

b. Maceda Law: Sales of Residential Realty on Installment (RA 6552)

Valarao v. CA 394 SCRA 155 (1999)

Active Realty v. Daroya 382 SCRA 152 (2002)

XII. WARRANTIES

EXPRESS WARRANTIES

1. Distinguish from condition – Arts. 1545

2. Distinguish from opinion, dealer’s talk – Art. 1546, 1340, 1341

Songco v. Sellner 37 Phil 254 (1917)

3. Distinguish from false representation – Art. 1342

Gochangco v. Dean 47 Phil 687 (1925)

PMC v. Gojuco 48 Phil 621 (1926)

IMPLIED WARRANTIES – Art. 1547

1. Seller has right to sell

2. Warranty against eviction – Arts. 1548 – 1560

3. Warranty against non-apparent servitudes – Art. 1560

4. Warranty against hidden encumbrance or defects – Arts. 1561 – 1580

5. Additional warranties for consumer products – RA 7394, Art. 68

6. Warranty in sale of animals – Art. 1568

7. Implied Warranty of Quality – Art. 1562 (1), 1564

8. Sale by sample or description – Art. 1574, 1562 (2), 1481

EFFECTS OF WARRANTIES

EFFECTS OF WAIVERS

BUYERS OPTIONS IN CASE OF BREACH OF WARRANTY – Art. 1599

Ong v. CA 567 SCRA 53 (2008)

XIII. BREACH OF CONTRACTS

REMEDIES OF THE SELLER – Art. 1636, 1594- 1599

Sale of Movables

1. Action for the price – Art. 1595

2. Action for damages – Art. 1596

3. Rescission – Art. 1597, 1534, 1593

RECTO LAW: Sale of Movables on Installment – Arts. 1484 – 1486

1. Meaning of “Installment Sale”

Levy Hermanos v. Gervacio 69 Phil 52 (1939)

2. Remedies available to the unpaid seller

Delta Motor Sales v. Niu Kim Duan 213 SCRA 259 (1992)

3. Remedy of specific performance

Tajanlangit v. Southern Motors 101 Phil 606 (1967)

4. Nature of the remedy of rescission

Nonato v. IAC 140 SCRA 255 (1985)

5. Meaning of “action”

Cruz v. Filipinas Investment and Finance Corp. 23 Corp 791 (1968)

6. What constitutes “foreclosure”

Third party mortgage

Ridad v. Filipinas Investment 120 SCRA 246 (1983)

The “barring” effect of foreclosure

Northern Motors v. Sapinoso 33 SCRA 356 (1970)

Sale of Immovables

1. Anticipatory Breach – Art. 1591

Legarda v. Saldana 55 SCRA 324 (1974)

2. PD 957 sec. 23, 24

Casa Filipina v. OP 241 SCRA 165 (1995)

Relucio v. Brillante Garfin 187 SCRA 405 (1990)

3. Maceda Law: RA 6552 - Sale of Immovables on Installment

Mclaughlin v. CA 144 SCRA 693 (1986)

Luzon Brokerage v. Maritime 86 SCRA 305 (1978)

REMEDIES OF THE BUYER

1. In case of movables – Arts. 1598 – 1599

2. In case of immovables – Art. 1911’ PD 957 Sec. 23, 24

3. Suspension of Payment – Art. 1590

XIV. EXTINGUISHMENT OF THE SALE

CAUSES – Arts. 1600, 1231

CONVENTIONAL REDEMPTION – Art. 1601

Villarica v. CA 26 SCRA 189 (1968)

Bautista v. Unangst 557 SCRA (2008)

EQUITABLE MORTGAGE – Arts. 1602 - 1604

1. Definition of Equitable Mortgage

Tan v. Valdehueza 66 SCRA 61 (1976)

2. Rationale of Equitable Mortgage

3. Badges of Equitable Mortgage

4. Pactum Commissorium – Art. 2088

DISTINGUISH FROM OPTION TO BUY– Art. 1602

Adiarte v. Tumaneng 88 Phil 333 (1951)

PERIOD OF REDEMPTION

1. When no period agree upon – Art. 1606

2. When period agreed upon

Anchuel v. IAC 147 SCRA 4343 (1987)

3. When there is a period of non-redemption

Tayao v. Dulay 13 SCRA 758 (1965)

EXERCISE OF THE RIGHT TO REDEEM – Art. 1616

Gargollo v. Duero 1 SCRA 1311 (1961)

1. By whom exercised – Arts. 1610 - 1613

2. From whom to redeem – Art. 1615

3. Effect of redemption – Arts. 1617, 1618

4. Effect of non-redemption – Art. 1607

LEGAL REDEMPTION – Art. 1619

1. Period to redeem – Art. 1623

Conejero v. CA 16 SCRA 775 (1966)

Butte v. Manuel Uy – 4 SCRA 526 (1962)

Castillo v. Samonte 106 Phil 1023 (1960)

Doromal v. CA 66 SCRA 575 (1975)

2. Instances of legal redemption

a. Co-owners – Art. 1620

b. Co-heirs – Art. 1088

c. Adjoining landowners of rural land – Art. 1621

d. Adjoining landowners of urban land – Art. 1622

Ortega v. Orcine 38 Phil 276 (1971)

f. Under Public Land Act – CA 141 sec. 118

g. Under Extrajudicial Foreclosure – Act 3175 sec. 6

h. Under Agrarian Land Reform Code – RA 6389 sec. 12

XV. BULK SALES LAW

A. ScopePeople v. Wong CA O>G> 4867 (1954)

B. Coverage of Bulk Sales

C. Compliance requirements under the law

D. Effects of non-compliance Sec. 4,7,11

People v. Mapoy 73 Phil 678 (1942)

XVI. RETAIL TRADE LIBERALIZATION ACT OF 2000

A. Constitutionality

Inchong v. Hernandes 101 Phil 1155 (1957)

B. Scope and definition

King v. Hernandez 4 SCRA 792 (1962)

C. Elements

D. Application of Grandfather Rule on 100% Filipino ownership of corporate entity

E. Anti-Dummy Act – CA No. 108 as amended by PD 715

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