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S A L E S [EH402]

TITLE VI SALES

Chapter 3
Effects of the Contract When the Thing Sold has been Lost

Article 1493
- This refers to a case of loss of the object even BEFORE the
perfection of the contract
- There would be no cause or consideration, hence the contract is
void
- Seller will have to bear the loss
Q: What are the remedies of the buyer when the object has been PARTLY or
PARTIALLY LOST?
A: choose between (1) withdrawal or rescission (2) specific performance as
to remainder by payment of proportional price
Article 1494
- Speaks of loss of specific goods
- Remedies of buyer:
o Cancellation (avoidance)
o Or specific performance as to the remaining existing
goods (if the sale was divisible)


Chapter 4
Obligations of the Vendor

Article 1495
- Obligations of the vendor:
o To transfer ownership (cannot be waived)
o To deliver (cannot be waived)
o To warrant the object sold (this can be waived or
modified since warranty is not an essential element of
a contract of sale)
o To preserve the thing from perfection to delivery,
otherwise he can be held liable for damages

Q: what happens when seller fails to deliver at a stipulated period, and such
period is of the essence of the contract?
A: He has no right to demand payment of the price.

Q: what is the effect of non delivery?
A: buyer may ask for the RESOLUTION or RESCISSION of the contract

Duty to Deliver at Execution Sale
Judgment debtor is NOT required to deliver the property sold
right away. The reason is, he has a period of ONE YEAR within which to
REDEEM the property. In the mean time, the buyer should not take actual
physical possession of the property.

Note that the period of redemption commences to run not from
the date of the auction or tax sale but form the day the sale was registered in
the office of the Register of Deeds.

Article 1496
- Ownership is acquired from the moment of delivery or in any
other manner signifying an agreement that possession is
transferred.

Note: Owner of the money used in purchasing an object is immaterial. What
is material is the name of the purchaser who appears in the deed of sale.

Section 2
DELIVERY OF THE THING SOLD

Article 1497
- Speaks for real or actual delivery
- DELIVERY when an object is placed in the CONTROL and
POSSESSION of the vendee

Q: What instance is ownership NOT transferred despite delivery?
A: Ownership is not transferred, although there has been perfection and
delivery, if it was intended that no such transfer of ownership will take place
until full payment of the price. Such stipulation may be made expressly or
impliedly.

Note: Purchases made at a MARKET are valid even if the seller was not yet
the owner, and delivery of the same would transfer ownership because of
the doctrine of OSTENSIBLE OWNERHIP. --- the market seller appears to be
the owner, and if he is not, the true owner is NEGLIGENT for having allowed
him to appear as the owner

Kinds of Delivery or Tradition
1. Actual or Real
2. Legal or Constructive
a. Legal formalities
b. Symbolical tradition and tradition simbolica ex.
Delivery of the key
c. Traditio longa manu pointing; by mere consent or
agreement if the movable sold cannot b transferred at
the time of the sale
d. Traditio brevi manu- buyer already had the possession
of the object even before the purchase; tenant of a car
buys the car
e. Tradition constitutum possessorium possession as
owner changed; possession as a lessee
3. Quasi-tradition delivery of rights, credits, or incorporeal
property, made by:
a. Placing title of ownership in the hands of a lawyer
b. Or allowing the buyer to make use of the rights

Article 1498
- Deals with two kinds of Constructive Delivery:
o Thru legal formalities applies to real and personal
proerty
o Thru tradition Simbolica
Constructive delivery requires THREE THINGS before ownership may be
transmitted:
1. Seller must have control over the thing
2. Buyer must be put under control
3. There must be the intention to deliver the thing for purposes of
ownership (not merely to allow inspection)

Note: When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of
the contract. However, in order that this delivery may have the effect of
tradition, it is essential that the vendor shall have had such CONTROL over
the thing sold, that is, it could have been possible that at the moment of the
sale its MATERIAL delivery could have been made. Note that the key word is
CONTROL, not POSSESSION of the land.

Rules on Constructive Delivery
1. If a seller has no actual possession, he cannot transfer ownership
by constructive delivery
2. There can be no constructive delivery by means of a public
instrument if there is a stipulation to that effect
3. The Civil Code does not provide that the execution of the deed is
a conclusive presumption of the delivery of possession. What it
says is that the execution thereof shall be equivalent to delivery
there is only a DISPUTABLE PRESUMPTION (execution of a the
contract is only PRESUMPTIVE DELIVERY)

Article 1499
- Deals with tradition longa manu and tradition brevi manu
- This article speaks of MOVABLE property

Article 1500
- Speaks of tradition constitutum possessorium
- The basis here is consent
- Where a seller continues to occupy the land as tenant, the
possession , by fiction of law, is deemed to be constituted in the
buyer

Article 1501
- Deals with the delivery of INCORPOREAL PROPERTY:
o By constructive tradition execution of public
instrument
o By quasi-tradition placing of titles of ownership in the
possession of the buyer, or the use by the buyer of his
rights, with the sellers consent

Article 1502
- First paragraph refers to a transaction ON SALE OR RETURN:
o this is a sale that depends on the DISCRETION of the
BUYER
o it is a sale with a RESOLUTORY CONDITION
o ownership passes to the buyer on delivery, but he may
revest the ownership in the seller by returning or
tendering the goods within the time fixed in the
contract

Note: In this case, the buyer has no right to return if he has materially abused
the condition of the thing. The sale in this case becomes absolute. But if the
objects deteriorate without the fault of the buyer, the buyer can still return,
provided that the reasonable period of returning has not yet elapsed

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Q: What is the difference between a contract on sale or return and a
delivery of property with option to purchase?
A: In the first, ownership is transferred at once; in the second, there is no
transfer of ownership till the owner agrees to buy.

(Read page 125 of Paras for Bar question)

- Second paragraph refers to a transaction ON APPROVAL or ON
TRIAL or SATISFACTION
o Buyer may IN TIME become the owner under the
conditions specified in the law; otherwise, the seller is
still the owner
o This is a sale really dependent on the QUALITY of the
goods
o It is a sale with SUSPENSIVE CONDITION
o When ownership passes to the buyer:
When buyer signifies his approval or acceptance
(expressed or implied)
Does not signify approval or acceptance but buyer
retains the goods without giving notice of rejection

Some Rules on Sale on Approval or Trial or Substitution:
1. Risk of loss remains with the seller if the sale has not yet become
absolute. Except:
a. If the buyer is at fault
b. If buyer had expressly agreed to bear loss
2. Buyer must give goods a trial except when it is evident that it
cannot perform the work intended
3. Period for buyer to signify acceptance commences to run only
when all the parts essential for the operation of the object have
been delivered
4. If it is stipulated that a THIRD PERSON must satisfy approval or
satisfaction, the provision is valid, but the third person must be in
good faith. If refusal to accept is not justified, seller may still sue
5. Generally, the sale and delivery to a buyer who is an expert on the
object purchased is NOT obviously a sale on approval, trial or
satisfaction

Article 1503
- Deals with instances where reservation of ownership is made
despite delivery
- The most controlling element is the INTENTION
- This article applies only to the sale of SPECIFIC GOODS

Instances when seller is still owner despite delivery:
1. Express stipulation
2. If under the bill of lading, the goods are deliverable to seller or
agent or their order. (Reason --- the buyer cannot get the object)
Note: this is not conclusive. There can be an
agreement in the contract that the buyer should receive and
dispose of the goods.
3. If bill of lading, although stating that the goods are to be delivered
to buyer or his agent, is KEPT by the seller or his agent. (Reason ---
the buyer also cannot get the object)
4. When the buyer although the goods are deliverable to order of
buyer, and although the bill of lading is given to him, DOES NOT
HONOR the BILL OF EXCHANGE sent along with it. But innocent
third parties should not be adversely affected.

Article 1504
- Provides for the rules with regards to the risk of loss:
- GR: the risk of loss of SPECIFIC GOODS IS borne by the SELLER
until ownership is transferred
- Once ownership is transferred, buyer bears the risk whether
actual delivery has been made or not, except that:
o Where the delivery of the goods has been made to the
buyer or to a bailee for the buyer, but ownership in the
goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the
contract, the goods are at the buyers risk from the
time of such delivery
o Where actual delivery has been delayed through the
fault of either the buyer or seller the goods are at the
risk of the party in fault

Note: Under American law, there is no need for delivery to transfer
ownership insofar as specific goods are concerned if the contract is one of
sale, and not a contract to sell.

Generally, whoever has the beneficial interest should bear the risk.

Article 1505
- Stresses the GENERAL RULE that no one can give what he does
not have
- Therefore, even if a person be a bonafide purchaser, he succeeds
only to the rights of the vendor. (if the seller is not the owner, the
sale is null and void)
- EXCEPTIONS:
o When the owner of the goods by his conduct
precluded from denying the sellers authority
o Second paragraph nos. 1,2 and 3 (refer to codals)
Provisions of any factors acts, recording
laws, etc.
Validity of any contract of sale under
statutory power of sale or under order of
court
Purchases made in a merchants store or in
fairs or markets

Q: What is a store?
A: it is any place where goods are kept and sold by one engaged in buying
and selling. It is an element that there must also be goods or wares stored
therein or on display and that the firm or person maintaining said office is
actually engaged in the business of buying and selling.

Some Recording Acts:
1. Sale of large cattle- sale should be registered, and a certificate of
transfer obtained
2. Land registration law
3. Sale of vessels record at each principal port of entry

Article 1506
- Effect if Seller has only a voidable title: the buyer acquires a good
title to the goods, provided he buys them in god faith, for value,
and without notice of the sellers defect of title

Q: What is the reason behind this law?
A:
1. Before a voidable contract is annulled, it is considered valid
2. Where one of two innocent parties must suffer, he who placed
the offender in a position to do wrong must suffer

Purchase from a Thief:
- The true owner can get back the object without reimbursement
- But if buyer acquired object at a public auction, even if he in good
faith, the owner can still get it from him, but his time he would be
entitled to reimbursement
- However, when no crime is committed, and only a civil liability
arises, the seller cannot recover from the third person the goods,
for here there was neither a losing nor an unlawful
deprivation

Article 1507
- NEGOTIOABLE DOCUMENT OF TITLE:
o a document of title in which it is stated that the goods
referred to therein will be delivered to the bearer,
o or to the order of any person named in such document

What Document Title Includes
a. Bill of lading
b. Dock warrant
c. Quedan
d. Warehouse receipt or order
e. Any other document used as proof of possession or as
authority to transfer the goods represented by the
document

Note: Mere typographical or grammatical error DOES NOT destroy the
negotiability of a document, for what should be considered is the INTENT.
Moreover, a mere incorrectness in the description of the goods when there
can be no doubt of the goods referred to will not destroy the negotiability of
the document.

Article 1508
- This article provides for 2 ways of negotiating a negotiable
document of title by delivery:
o By mere delivery sufficient if the document is
deliverable to the bearer

However, even though the document is deliverable to
the order of a specified person, if the latter has
indorsed it in blank by simply signing his name without
specifying any person to whom the goods are to be
delivered or indorsed it to bearer, the document may
now be negotiated by mere delivery.

o By indorsement coupled with delivery

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Note: if the document was indorsed to a specified person, negotiation can be
effected only by the indorsement of the indorsee (SPECIAL INDORSEMENT).

Distinction between Special Indorsement and Indorsement in Blank
a. Special indorsement is one which specifies the person to whom, or
to whose order, the instrument is to be payable, and the
indorsement of such indorsee is necessary to the further negotiation
of the instrument
b. Indorsement in blank is one in which specifies no indorsee, and an
instrument so indorsed is payable to vearer, and may be negotiated
by delivery

Article 1509
- This article refers to negotiation by INDORSEMENT and DELIVERY
- Example:
The document says deliver to the order of Mr. X To negotiate it,
Mr. X must sign his name at the back and then deliver. Mere
delivery without signing is not sufficient. When he signs he may:
1. Just sign his name (blank indrosement)
2. Or say deliver to Mr. Y
3. Or say deliver to bearer

Note: Mr. Y can in turn indorse it in blank, to bearer, or to another
specified person
Q: what is the effect of undated indorsement?
A: nothing. It is NOT NECESSARY to date an indorsement because no
additional protection is given thereby to businessmen.

Q: what is the effect of indorsement and delivery?
A: it ipso facto transfer possession and ownership of the property referred
therein.

Article 1510
- If the words non-negotiable or not negotiable or words of
similar import are placed upon a document of title which is
actually a negotiable document, such words will not affect the
said document.

Article 1511
- A non-negotiable document may still be given or assigned to
another but this does not have the effect of a negotiation. It is a
mere transfer or assignment
- A non-negotiable document cannot be negotiated and the
endorsement of such a document gives the transferee no
additional right

Article 1512
- Provides for who may negotiate a negotiable document of title:
o Owner thereof
o Any person to whom the possession or custody of the
document has been entrusted by the owner

Q: who bears the loss in case of unauthorized negotiation?
A: if trustee betrays the trust and negotiates the document to another in
good faith, the real owner cannot impugn the validity of the negotiation. As
between two innocent persons, he who made the loss possible should bear
the loss, without prejudice to his right to recover from the wrongdoer.

Article 1513
- Provides for the rights of person to whom negotiable document is
negotiated:
o Acquires such title to the goods (refer to codal
provision)
o Acquires the direct obligation of the bailee issuing the
document to hold possession of the goods for him
according to the terms of the document as fully as if
such bailee had contracted directed with him

Article 1514
- Speaks of the RIGHTS OF A MERE TRANSFEREE, not the rights of a
person to whom the document was negotiated
- Note that the transferee DOES NOT ACQUIRE DIRECTLY the
obligation of the bailee to hold for him. To acquire the DIRECT
OBLIGATION of the bailee, the transferee or transferor must
notify the bailee

Q: Who can defeat the rights of a transferee?
A: prior to the notification to such bailee by the transferor or transferee, the
title of transfer may be defeated by the (1) LEVY OF AN ATTACHMENT OF
EXECUTION upon the goods by a creditor of the transferor, or (2) BY
NOTIFICATION TO SUCH BAILEE BY THE TRANSFEROR, or a (3) SUBSEQUENT
PURCHASER FORM THE TRANSFEROR.

Article 1515
- Provides for the Rule if Indorsement is needed for negotiation.
- If one merely delivers without indorsement, there will be no
negotiation. Nevertheless one may compel the other to indorse
such provided that:
o He pays the value for the document
o No contrary intention appears

Article 1516
- Provides for the warranties in negotiation or transfer:
o That the document is genuine
o That he has a legal right to negotiate or transfer
o That he has knowledge of no fact which would impair
the validity or worth of the document
o That he has a right to transfer the title to the goods
and that the goods are merchantable
- In summary, the warranties are:
o About the document
o About the right to the document
o About the goods represented by the document

Q: who provides for these warranties?
A: the warranties are made by:
1. A person who negotiates
2. A person who assigns or transfers for value
Article 1517
- Failure of the BAILEE or the PREVIOUS INDORSERS to comply with
their obligation DOES NOT make the present indorsers liable

Q: Why is this so?
A: Because the indorser warrants only the things mentioned in the preceding
article.

Article 1518
- Validity of the negotiation of a negotiable document of title is
NOT impaired by the fact that the negotiation:
o Was a breach of duty on the part of the person making
the negotiation
o Or by the fact that the owner of the document was
deprived of the possession of the same by LOSS,
THEFT, FRAUD, ACCIDENT, MISTAKE, DURESS, or
CONVERSION
- Provided that the person whom the document was subsequently
negotiated was a BUYER IN GOOD FAITH

Article 1519
- Article speaks of two important things if the document is
negotiable:
1. Generally, no attachment or levy, except:
a. If the document is SURRENDERED to the bailee
b. Or the NEGOTIATION of the document ENJOINED
2. The bailee (or depositary or carrier) CANNOT BE COMPELLED to
surrender the goods except:
a. If the document is SURRENDERED TO HIM
b. Or the document is IMPOUNDED BY THE COURT

Article 1520
- Creditors are protected when the document concerned is
negotiable

Q: How is protection made?
A: Attachment is not easily made. They are entitled to such aid from courts
by injunction and otherwise in attaching such document.

Article 1521
- This article provides for:
1. Place of delivery (this depends on the )
a. Agreement (express or implied)
b. If no agreement get the USAGE of trade
c. If no usage the BUYER must get them at the SELLERS
BUSINESS PLACE OR RESIDENCE

Exception: Contract of sale of specific goods in the place
where the specific goods are found

Note: There is sufficient delivery when a fortuitous event prevents delivery
at the actual place agreed upon, forcing a delivery at a place near the original
one. Further, there is also sufficient delivery when the original place is
changed, but the buyer accepted the goods at a different place without
complaint so long as the seller was in good faith.

2. Time of delivery
a. Delivery (if to be made by seller) must be within a
REASONALBE TIME (if no express agreement)
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b. Circumstances to consider to conclude what
reasonable time is:
i. Character of the goods
ii. Purpose intended
iii. Ability of seller to produce the goods
iv. Transportation facilities
v. Distance thru which the goods must be
carried
vi. Usual course of business in that particular
trade
c. If a delivery is to be made at once, promptly, or as
soon as possible, a reasonable time must necessarily
be given
d. PREMATURE delivery generally is NOT ALLOWED
because a term is for the benefit of both parties

3. Manner of Delivery when Goods are in the Hands of a Third Person
a. Third person should acknowledge that he holds the
goods on behalf of the buyer, otherwise, the seller
shall not yet be complied with his duty to deliver

Note: the rule does not apply in case a (1) NEGOTIABLE
DOCUMENT of title has been issued and (2) when the goods are
still to be manufactured.

Q: Who pays expenses for putting the goods in a deliverable state?
A: The seller, unless otherwise agreed

Q: when must demand or tender of delivery be made?
A: In the absence of agreement, at a reasonable hour.

Article 1522
- Provides for the rules when the quantity is less or more than what
was agreed

Rule when the Quantity is LESS than that Agreed Upon
a. Buyer may REJECT
b. Or buyer may ACCEPT what have been delivered, at the
CONTRACT rate

Q: When estoppels does not apply:
A: when the buyer has used or disposed of the goods delivered before he
knows that the seller is not going to perform his contract in full, the buyer
shall not be liable for more than the FAIR VALUE to him of the goods so
received.

Rule when the Quantity is MORE than the Agreement
a. Buyer may REJECT ALL
b. Buyer may ACCEPT the goods agreed upon and reject the rest
c. If he gets all, he must pay for them at the CONTRACT RATE

Note: For this rule to apply, the quantity must have been fixed by prior
agreement

Q: When is there IMPLIED ACCEPTANCE?
A: When the buyer exercises acts of ownership over the excess goods

Rule when the QUALITY is DIFFERENT
Where the seller delivers to the buyer the goods agreed upon MIXED with
goods of a different description, the buyer may:
1. Accept the goods which are in accordance with the contract and
2. Reject the rest

Note: if the sale is indivisible, the buyer may reject the whole of the goods.

Article 1523
- The articled deals with delivery to a carrier on behalf of the
buyer
- GR: delivery to carrier is delivery to buyer, if it is the duty of the
seller to send the goods to the buyer

Kinds of Deliver to Carrier
1. C.I.F. (Cost, insurance freight) since the selling price includes
insurance and freight, it is understood that said insurance and
freight should now be paid by the seller; all charges up to the
place of destination must be paid by the seller

If the goods then are not delivered at the stipulated place of
destination, seller should be held liable.

2. F.O.B. (Free on Board) there are 3 types:
a. F.O.B. at the place of shipment the buyer must pay
the freight
b. F.O.B. alongside the vessel from the moment the
goods are brought alongside the vessel, the buyer
must pay for the freight or expenses
c. F.O.B. at the place of destination - the seller must pay
the freight

GR (in free on board or free alongside sales): property PASSES as
soon as the goods are delivered aboard the carrier or alongside
the vessel, and that the buyer as the owner of the goods is to bear
all expenses after they are so delivered.

Note however: F.O.B. or F.A.S. may be used only in connection
with the fixing of the price, and in such a case, they will NOT be
construed as fixing the place of delivery

Article 1524
- The vendor shall not be bound to deliver the thing sold, if the
vendee has not paid him the price, or if no period for the payment
has been fixed in the contract

Q: What is the effect if period is fixed for payment?
A: if a period has been fixed for the payment the seller must deliver the thing
sold even if said period has not yet arrived. He will then have to wait for the
end of the period before he can demand the price, except if the buyer has
lost the benefit of the term.

Article 1525
- provides for the meaning of an UNPAID SELLER:
o If only part of the price has been paid or tendered
o When there is mere delivery of a negotiable
instrument (why? Because this may be dishonored)

Q: Who are considered a seller?
A: it includes (1) an agent of the seller to whom the bill of lading has been
indorsed, (2) consignor or agent who has himself paid, or is directly
responsible for the price, (3) or any other person who is in the position of a
seller.

Article 1526
- Rights of an unpaid seller:
o Possessory Lien
- It is the right to retain the goods for the price while
seller is in possession of them
- This is lost after the seller loses possession but his
lien as an unpaid seller remains
- He is still a preferred creditor with respect to the
price of the specific goods sold
- His preference can only be defeated by the
governments claim to the specific tax on the goods
themselves
- This is the vendors lien on the PRICE

o Right of Stoppage in Transitu
- Available if seller has parted with the possession

o Right of Resale

o Right to Rescind the sale

Article 1527
- When seller has possessory lien (retain possession of them until
payment or tender of the price in the following cases):
o Where the goods have been sold without any stipulation as
to credit
o Where the goods have been sold on credit, but the term of
credit has expired
o Where the buyer becomes insolvent

Article 1528
- Refers to a possessory lien even after a PARTIAL DELIVERY
- The lien however may be waived expressly or impliedly
- Waiver of the lien or the right of retention


Article 1529
- This article refers to the instances when the lien is lost:
o When he delivers the goods to a carrier or other bailee for
the purpose of transmission to the buyer without reserving
the ownership in the goods or the right to the possession
thereof
o When the buyer or his agent lawfully obtains possession of
the goods
o By waiver thereof
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- The lien lost is only the POSSESSORY LIEN and not the vendors
lien on the PRICE

Note: A negotiable warehouse receipt automatically transfers both title and
right of possession to the goods in the buyer

Article 1530
- Right of stoppage in transit is available to the unpaid seller:
o if he has parted with the possession of the goods
o and if the buyer is or becomes insolvent (the sellers right
exists even though the buyer was already insolvent at the
time of the sale)

Note: the insolvency referred to need NOT be judicially declared. It is enough
that the obligations exceed a mans assts.

Article 1531
- Goods are considered in transit when:
o From the time when they are delivered to a carrier, or
other bailee for the purpose of transmission to the
buyer, until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee
o If the goods are rejected by the buyer, and the carrier
or other bailee continues in possession of them, even if
the seller has refused to receive them back
- Goods are NO LONGER in transit when:
o If the buyer, or his agent, obtains delivery of the goods
before their arrival at the appointed destination
o If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges
to the buyer or his agent that he holds the goods on
his behalf and continues in possession of them as
bailee for the buyer or his agent
o If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent

Note: the right to get back the goods exists only when the goods are still in
transitu.

Taking of the property in transit by an unauthorized agent of the buyer does
not extinguish the right of stoppage in transitu.


Article 1532
- Provides for how the right of stoppage in transitu may be
exercised:
o Obtaining actual possession of the goods
o Giving notice of his claim to the carrier or other bailee
in whose possession the goods are

Note: there must be intent to repossess the goods

Q: to whom should the notice be given?
A: Either (1) to the person in actual possession of the goods, or (2) to his
principal

Effects of the Exercise of the Right
1. The goods are no longer in transitu
2. The contract of carriage ends; instead, the carrier now becomes a
mere bailee, and will be liable as such
3. The carrier should not deliver anymore to the buyer or the latters
agent; otherwise, he will clearly be liable for damages
4. The carrier must redeliver to, or according to the direction of, the
seller

Article 1533
- Rights of resale exists:
o Perishable goods goods that deteriorate rapidly
o Express stipulation
o Unreasonable default

Note: the article confers on the seller a right to resell (to enforce his lien
after title has passed) but does not impose upon him the duty to resell

- Seller shall not thereafter be liable to the original buyer upon the
contract of sale or for any profit made by such resale, but may
recover from the buyer damages for any loss occasioned by the
breach of the contract

Article 1534
- This article refers to the right to RESCIND THE TRANSFER OF TITLE
and to RESUME THE OWNERSHIP IN THE GOODS
- This applies in case there has been:
o Express stipulation or reservation
o Unreasonable default
- Note: damages may be recovered for the breach of contract

Q: what should be done in order to rescind the transfer of title?
A: There must be notice to the buyer or there must be an overt act showing
an intention to rescind. (ex. Replevin suit is an implied rescission of the sale
of the goods sought t be recovered.)

Article 1535
- Effect if buyer has already sold the goods:
o Generally, the unpaid sellers right of LIEN or STOPPAGE IN
TRANSITU remains even if the buyer has sold otherwise
disposed of the goods
o Exceptions:
When the seller has given his consent thereto
When the purchaser or the buyer is a purchaser for
value in good faith of a negotiable document of title

Article 1536
- The debtor shall lose every right to make use of the period
(Art.1198):
o When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or
security for the debts
o when he does not furnish to the creditor the
guaranties which he promised
o when by his own acts he has impaired said guaranties
or securities after their establishment, and when
through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory
o when debtor violates any undertaking
o when debtor attempts to abscond

Article 1537
- Vendor is bound to deliver the thing sold and its accession and
accessories
- All the fruits shall pertain to the vendee from the day on when the
contract was perfected. However, a contrary stipulation may be
agreed upon, or a later date may be set

Article 1538
- Provides for the effect of loss, deterioration or improvements
before delivery (Article 1189):
o If lost without fault of vendor: obligation shall be
extinguished
o If lost (perishes, goes out of commerce, disappears in
such a way that its existence is unknown or it cannot
be recovered) through fault of vendor: obliged to pay
damages
o When the thing deteriorates without fault of vendor:
impairment is to be borne by buyer
o Deteriorates through fault of vendor: buyer may
choose between the rescission of the obligation and its
fulfillment, with indemnity for damages in either case
o if the thing is improved by nature or by time, the
improvement shall inure to the benefit of the buyer
o if it is improved at the expense of the debtor, he shall
have no other right than that granted to the
usufructuary

Article 1539
- refers to sale of real estate BY THE UNIT (UNIT PRICE CONTRACT)
- in this case, payment will be made only on the basis of contractual
items actually performed, in accordance with the given plans and
specifications
- If what can be delivered is less than what was in the contract the
vendee may choose between:
o A proportional reduction of the price
o Rescission of the contract (the lack in area be not less
than 1/10 of that state; or vendee would not have
bought had he known of its smaller or inferior quality)
- Provision shall apply if any part of the immovable ins not of the
quality specified in the contract
- Rescission shall only take place at the will of the vendee

Article 1540
- If area is actually greater than what was stipulated, vendee may:
o Accept the area included in the contract and reject the
rest
o Or if he accepts the whole area, he must pay for the
same at the contract rate
Article 1541
- The provisions of the two preceding articles shall apply to judicial
sales
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Article 1542
- In a LUMP SUM CONTRACT: there shall be no increase or decrease
of the price, although there be a greater or less area or number
than that stated in the contract
- With regards to conflict between boundaries and area,
boundaries will prevail

Q: what happens if vendor does not deliver what is included in the
boundaries?
A: buyer can either rescind the contract for the sellers failure to deliver what
has been stipulated or he may pay a reduced proportional price.

Q: what happens if the land included in the boundaries happens to be less
than what was stipulated?
A: Buyer cannot rescind the contract and he is not entitled to pay a reduced
price for the civil code presumes that purchaser has ascertained its area and
quality before the perfection of the contract.

Q: what is the meaning of more or less?
A this can be considered as covering INCONSIDERABLE or SMALL differences
one way or the other. the use of such phrases in designating the quantity
covers only a reasonable excess or deficiency

Aritlce 1543
- The actins arising from article 1639 and 1642 shall prescribe in six
months, counted from he hay of delivery

Article 1544
- Provides for the rules of preference in case of double sale
o Personal property possessor in good faith
o Real Property
Registrant in good faith
Possessor in good faith
Persons with the oldest title in good faith
Note:
In all the rules, there must be GOOD FAITH; otherwise, the order
of preference does not apply
REGISTRATION here requires actual recording; If the land is
registered under the Land Registration Act, and it is sold but the
subsequent sale is registered not under the Land Registration Act
but under Act 3344, as amended, such sale is not considered
registered
The registration of a forged deed of sale cannot grant the
preference adverted to in this Article inasmuch as among other
things, there was no good faith
Possession here is either actual or constructive (ex. Symbolic or
constructive possession can be acquired by the execution of a
public document)
Title in this article means title because of the sale, and not any
other title or mode of acquiring property
This article applies to a double donation and to sales made by a
principal and his agent of the same property (but does not apply
when property was first donated, then sold)

Instances when Article 1544 DOES NOT apply:
1. This does not apply to subsequent judicial attachments or
executions which should not prevail over prior unregistered sales
where possession had already been conveyed by the execution of
a public instrument

Note however: when the property sold on execution is registered
under the Torrens system, registration is the operative act that
gives validity to the transfer or creates a lien on the land, and a
purchaser on execution sale, is not required to o behind the
registry to determine the conditions of the property.

Exception to his is where the purchaser had knowledge, prior to
or at the time of the levy, of such previous lien or encumbrance.

2. Instances where double sale was not made by the same person or
his authorized agent
3. Where one sale was an absolute one but the other was a pacto de
retro transaction where the period to redeem has not yet expired
4. Where one of the sales was one subject to suspensive condition
which condition was not complied with

Remember:
With respect to the principle actual knowledge is equivalent to
registration of the sale about which knowledge has been
obtained --- the knowledge may be that of either the FIRST or the
SECOND buyer.
Between an unrecorded sale of prior date of real property by
virtue of a public instrument and a recorded mortgage thereof at
a later date, the unrecorded sale is preferred for the reason that if
the original owner has parted with his ownership and free
disposal of that things so as to be able to mortgage would, in such
case, be of no moment.

Section 3
CONDITIONS AND WARRANTIES

Article 1545
- Applies only to CONDITIONAL sales
- Article speaks f presence of conditions and warranties:
o Conditions may be waived
o Conditions may be considered warranties
- If condition is not performed, party may refuse to proceed with
the contract or he may waive performance of the condition

Article 1546
- EXPRESS WARRANTY: Any affirmation of fact or any promise by
the seller relating to the thing is an express warranty if the natural
tendency of such affirmation or promise is to INDUCE the buyer to
purchase the same, and if the buyer purchases the thing relying
thereon

Q: When is there a warranty?
A: a good test:
a. If buyer is ignorant, there is a warranty
b. If the buyer is expected to have an opinion and the seller has no
special opinion, there is no warranty

Note: Dealers talk (excellent) cannot be considered as an express
warranty. A little exaggeration is apparently allowed by the law as a
concession to human nature.

Article 1547
- In a contract of sale, unless a contrary intention appears , there is
what is called implied warranties against EVICTION and against
HIDDEN DEFECT
- In general, the actions based on the implied warranties prescribe
in 10 years since these obligations are imposed by law

Subsection 1
WARRANTY IN CASE OF EVICTION

Article 1548

Q: when does eviction take place?
A: it takes place whenever by a final judgment based on a right prior to the
sale, or an act imputable to the vendor, the vendee is deprived of the whole
or of a part of the thing purchased.

- Warranty in case of eviction is a natural element of a contract,
hence, vendor answers for the eviction
- Vendors liability for warranty against eviction is GENERALLY
WAIVABLE and may be renounced by the vendee
- Since the government cannot be held liable the owner of the
property sold under execution at the instance of the judgment
creditor is liable for eviction, unless otherwise decreed in the
judgment.
- The buyer is allowed to enforce the warranty against the seller or
against the seller of his own immediate seller
- Even if buyer does not appeal judgment of eviction, seller remains
liable for eviction (For as long as the buyer is defeated in any case,
the seller would be liable)

Note: What is important is the imputability or fault of the seller, hence, seller
is still liable even if the act be made after the sale. (ex. Double sale)

Responsibility of the Seller
Responsible for:
1. his own act, and
2. Those of his predecessors-in-interest
He is not responsible for dispossession due to:
1. Acts imputable to the buyer himself
2. Fortuitous events

Essential Elements for Eviction
1. There is a final judgment
2. Purchaser has been deprived in whole or in part of the thing sold
3. The deprivation was by virtue of a right prior to the sale effected
by the seller
4. The vendor has been previously notified of the complaint for
eviction at the instance of the purchaser

Plaintiff in Suit
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In general, it is only the buyer in good faith who may sue for the
breach of warranty against eviction

Defendant in Suit
Suit for breach can be directed only against the IMMEDIATE seller,
not sellers of the seller unless such sellers had promised to warrant in favor
of the later buyers or unless the immediate seller has expressly assigned to
the buyer his own right to sue his own seller.

Article 1549
- The vendee need not appeal from the decision in order that the
vendor may become liable for eviction.
- However, the decision of the court must be FINAL

Article 1550
- When adverse possession had been commenced before the sale
but the prescriptive period is completed after the transfer, the
vendor SHALL NOT be liable for eviction

Q: Why is this so?
A: This is because, the title arising out of the adverse possession is not yet
perfected, in which case, the vendee through the use of diligence could
efficiently interrupt the running of the prescriptive period

Article 1551
- If the property is sold for non-payment of taxes due and not made
know to the vendee before the sale, the vendor is liable for
eviction
- Note that the prior absence of knowledge is important

Article 1552
- Judgment debtor is also responsible for eviction in judicial sales,
unless it is otherwise decreed in the judgment.
- A purchaser in good faith at a judicial sale is entitled to recover
the purchase money from the officer if the funds are still in his
hands or from the judgment debtor

Article 1553
- Provides for the effect of stipulation waiving liability for eviction:
o If seller was in GOOD FAITH the exemption is VALID,
but without prejudice to Art. 1554
o If seller was in BAD FAITH stipulation is VOID

Article 1554
- Waiver by the buyer may have been made:
o WITHOUT knowledge of risk of eviction (waiver
consciente): PRESUMPTION
o WITH knowledge of risk of evictions (waiver
intencionada): MUST BE CLEARLY PROVED

Effects of Waiver
1. In the first case, VALUE AT THE TIME OF EVICTION should be
returned (why? Solution indebiti)
2. In the second case, nothing need be returned. PROVIDED that said
stipulation is understood by the parties merely pro forma, and
PROVIDED FURTHER that it is proved that the vendor never
intended to be bound by said warranty

Article 1555
- In case of eviction, the vendee shall have the right to demand of
the vendor:
o Return the VALUE which the thing sold had at the time
of the eviction
o INCOME or FRUITS (should be declared or ordered to)
o COST OF SUIT which caused the eviction (does not
include transportation and other incidental expeses)
o EXPENSES of the contract, if vendee has paid them
o DAMAGES and INTERESTS and ornamental expenses, if
the sale was made in bad faith

Q: Why is rescission not a remedy in case of TOTAL eviction?
A: This is because vendee can no longer restore the subject matter of the sale
to the vendor. Note that there should be mutual restitution in case of
rescission.

Article 1556
- This article deals with a case of PARTIAL EVICTION
- Remedy here is EITHER:
o Rescission
- if one chooses rescission, there should be no new
encumbrances, like a mortgage
o Enforcement of warranty
- if the circumstances set forth in paragraph 1 are not
present (as when there are encumbrances), the only
remedy is to enforce the warranty

Article 1557
- Finality of judgment is necessary before one can enforce warranty
- A judgment becomes final if on appeal, the decision decreeing the
eviction is affirmed; or if within the period within which to appeal,
no appeal was made

Article 1558
- The vendor shall not be obliged to make good the proper
warranty, unless he is summoned in the suit for eviction at the
instance of the vendee
- This is the preparation for the suit a condition sine qua non

Note: the notice must be the notice for the suit for eviction, NOT the notice
in the suit for the breach of the warranty

Q: What is it necessary to serve the summons?
A: Objective of summon is to give the vendor the opportunity to show that
the action against the buyer is unjust.

Article 1559
- The defendant vendee shall ask that the vendor be made a co-
defendant
- In an eviction suit, it is permissible for the buyer to file a cross-
claim against the seller for the enforcement of the warranty
should the buyer lose. In this case, if the buyer wins, there is no
necessity for the enforcement of the warranty since there has
been no breach thereof.
- This article applies only when the buyer is the DEFENDANT

Article 1560
- Provides for the rules in case of NON-APPARENT SERVITUDES
(hidden defect but remedy is the similar to that provided in the
case of eviction):
- Remedies: if made within a year
o Rescission
o Damages
- If after one year
o Damages only

Q: what is the effect if the burden or easement is registered?
A: NO remedy is available if the burden is registered, EXCEPT if there is an
express warranty that the thing is free from all burdens and encumbrances

- Article is applicable whether the sale is:
o In a public instrument
o In private instrument
o Made orally

Note: there is no need of first compelling the seller to execute a public
instrument before the action is brought.

Subsection2
WARRANTY AGAINST HIDDEN DEFECTS OF OR
ENCUMBRANCES UPON THE THING SOLD

Article 1561
- Vendor shall be responsible for warranty against the hidden
defects

Requisites to Recover Because of Hidden Defects
1. The defect must be hidden (not know and could not have been
known)

Note: the defect need not be hidden If vendee is an expert who,
by reason of his trade or profession, should have know the defect.
Further note that difference in grade or quality does not
necessarily mean that the defect is hidden.

2. The defect must exist at the time the sale was made
3. The defect ordinarily have been excluded from the contract
4. The defect must be important (renders thing UNFIT or
considerable DECREASES FITNESS)

Note: the use must have been stated in the contract itself, or can
be inferred from the nature of the object or from the trade or
occupation of the buyer

5. The action must be instituted within the statute of limitations


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Article 1562
- Implied warranty or condition as to the quality or fitness of the
goods in the following circumstances: (refer to provision)
o Buyer makes known to the seller the particular
purpose for which the goods are acquired and buyer
relies on the sellers skill or judgment, there is an
implied warranty that the goods shall be reasonably fit
for such purpose
o Good are bought by description from a seller who
deals in goods of that description, there is an implied
warranty that the goods shall be of MARCHANTABLE
quality

Q: What does merchantable quality means?
A: It means fit for the GENERAL PURPOSE of a thing, and not necessarily the
particular purpose for which it has been acquired.

Note: where the agreement involved is the QUANTITY of goods alone, the
obligation is absolute and does not depend upon the quality of the goods
delivered.

Article 1563
- In the case contract of sale f a specified article under its PATENT
or other TRANE NAME, there is NO WARRANTY as to its fitness for
any particular purpose, unless there is a stipulation to the
contrary

Article 1564
- An implied warranty or condition as to the quality or fitness for a
particular purpose may be annexed by the usage of trade

Article 1565
- There is an implied warranty of merchantability in case of a
contract of SALE BY SAMPLE

Article 1566
- Vendor is responsible to the vendee for any hidden faults or
defects in the thing sold, even though he was not aware thereof

Q: Why is the seller responsible even if he is in good faith?
A: Because he has to repair the damage done. The object of the law is
reparation, not punishment.

Good faith consists in an honest intention to abstain from taking any
unconscientious advantage of another.

Article 1567
- Remedies in case of Hidden Defects:
o Withdrawal or rescission (accion redhibitoria) plus
damages
o Proportionate reduction (acion quanti minors or
estimatoria) reduction in the price, plus damages
- This warranty in sales is applicable to LEASE

Article 1568
- Provides for the effect of loss of the thing because of the hidden
defects:
o If vendor was aware of defect: return the price, refund
the expenses of the contract, plus damages
o If vendor was not aware: return the price and interest
and reimburse the expense of contract (no damages)

Article 1569
- Speaks of a situation where there is a hidden defect known to the
vendor but the loss was due to fortuitous even or thru the fault of
the buyer

Q: What can the seller obtain from the buyer in such situation?
A: He can obtain the DIFFERENCE (price minus value at loss) represents
generally the DECREASE IN VALUE due to the HIDDEN DEFECT. Hence, he can
obtain the amount by which the seller was enriched at the buyers expense.
Note however that the decrease in value due to wear and tear should not be
compensated.

Article 1570
- The preceding articles apply to judicial sales, however, no liability
for damages will be assessed against the judgment debtor in view
of the compulsory nature of the sales.

Article 1571
- Provides for the prescriptive period: 6 MONTHS FROM DELIVERY
- Mere notification will not stop the running of prescription
- One should notify then sue

Article 1572
- Provides for the rule with regards to sale of two or more animals
together:
o Generally, a defect in one should not affect eh sale of
the others
o This is true whether the price was a lump sum, or
separate for each animal
o Exception: if it appears that vendee would not have
purchased the sound animal without the defective
one. This is presumed when a team, yoke, pair or set is
bought.

Article 1573
- Provision of article 1572 is applicable to the sale of other things

Article 1574
- There is no warranty against hidden defects of animals sold at
fairs or at public auctions, or of livestock sold as condemned

Article 1575
- Speaks of two kinds of void sales with respect to animals:
o Sale of animals suffering from contagious diseases
o If the use or service for which they are acquired has
been stated in the contract, and they are found to be
unfit thereof
Article 1576
- REDHIBITORY DEFECT: hidden defect of animals, even in case a
professional inspection has been made, should be of such nature
that expert knowledge is not sufficient to discover

Article 1577
- Prescriptive period of redhibitory defect based on the faults or
defects of animals: 40 DAYS FROM THE DATE OF DELIVERY TO
THE VENDEE
- This action can only be exercised with respect to faults and
defects which are determined by law or by local customs

Article 1578
- If the animal should die within three days after its purchase, the
vendor shall be liable if the disease which cause the death existed
at the time of the contract

Article 1579
- if the sale be rescinded, the animal shall be returned in the
CONDITION IN WHICH IT WAS SOLD AND DELIVERED (must
generally be the same), the vendee being answerable for any
injury due to his negligence, and not arising from the redhibitory
fault or defect

Article 1580
- Remedies of buyer of animals with redhibitory defects:
o Withdrawal or rescission (plus damages)
o Proportionate reduction in price (plus damages)
- Prescriptive period for either remedy is 40 days from date of
delivery to the buyer

Article 1581
- The form of sale of large cattle shall be governed by special laws