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SALES: 2.

when at the time of the execution of the


public instrument, the subject matter was not
REVIEWER subject to the control of the seller, then the
ART. 1477 legal effects of delivery would not happen
3. such control or ability to transfer physical
TWO TYPES OF DELIVERY possession and enjoyment must subsist for a
1. Actual or physical delivery reasonable length of time after the
 Thing sold is placed under the control and instrument’s execution
possession of the buyer Kinds of Constructive Delivery
2. Constructive delivery
 any “manner signifying an agreement that the 1. Tradicion Symbolica
possession is transferred from the vendor to the 2. Tradicion Instrumental
vendee.” 3. Tradicion brevi manu
 essence of most forms of constructive delivery is 4. Tradicion constitutum possessorium
the existence of an agreement between the seller 5. Tradicion longa manu
and the buyer, and that the latter is understood to 6. By operation of law
have control of the subject matter of sale. 7. Quasi-tradicion
a. Execution of public instrument
 in the case of both movables and immovables,
b. If not applicable by placing the titles of
when the sale is made through a public
instrument, the execution thereof shall be ownership in the possession of the
equivalent to the delivery of the subject matter of vendee
sale, if from the deed the contrary does not appear c. By the vendee’s use of his rights as
owner with consent of the vendor
or cannot clearly be inferred.16 In several cases
 the Court held that the notarized deed of sale has EFFECTS AND COMPLETENESS OF DELIVERY For
two functions: (a) It operates as a formal or tradition to produce the twin legal consequences of
symbolic delivery of the property sold; and (b) It transferring ownership to the buyer and effecting the fulfi
authorizes the buyer to use the document as proof llment of the primary obligations of the seller, two
of ownership. principles must apply, namely:
 Therefore, the general rule is that the execution of
a public instrument has the same legal effects as (a) Delivery must be made pursuant to a valid sale;
actual or physical delivery, i.e., it transfers the and
ownership of the subject matter to the buyer, and (b) Delivery must be effected when seller has
constitutes valid compliance by the seller of his ownership over the subject matter of sale so
primary obligations under the sale delivered.
 The author therefore takes exception to the ruling ART. 1478
in Ten Forty Realty and Dev. Corp. v. Cruz,25
where the Supreme Court held that “[N]owhere Despite delivery, ownership will not transfer to the buyer
in the Civil Code is it provided that the execution in case of express reservation, such as when the parties
of a Deed of Sale is a conclusive presumption of stipulate that ownership will not transfer until the
delivery of possession of a piece of real estate. purchase price is fully paid (ART. 1478), or until certain
This Court has held that the execution of a public conditions are fulfilled
instrument gives rise only to a prima facie ART. 1479 (OPTION CONTRACT)
presumption of delivery. Such presumption is
destroyed when the delivery is not effected  Article 1479 of the Civil Code governing options,
because of legal impediment ... negated by the provides that “An accepted unilateral promise to buy
failure of the vendee to take actual possession of or to sell a determinate thing for a price certain is
the land sold binding upon the promissor if the promise is
 Where Execution of Public Instrument does not supported by a consideration distinct from the price.
produce the effects of delivery  Article 1324 of the Civil Code, which covers offers
1. First, when in the execution of a public and acceptance in general, provides that: “When the
instrument, there is a stipulation to the offeror has allowed the offeree a certain period to
contrary accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, More pointedly, the
except when the option is founded upon a subject matter of an option
consideration, as something paid or promised.” contract is the accepted
 When the option is founded upon a proper promise to sell or accepted
consideration, then the offer may not be withdrawn at promise to buy
any time during the option period; it has essentially Obligation to do
become a “contracted offer,” bounded by the Option is an unaccepted fixes definitely the relative
principles of mutuality and obligatory force. offer: It states the terms rights and obligations of
 An option contract is an agreement granting privilege and conditions on which both parties at the time of
to buy or sell within an agreed time and at a the owner is willing to sell its execution, and leaves no
determined price. It must be supported by a his land, if the holder elects choice to either party
consideration distinct from the price. to accept them within the whether to withdraw or to
time limited. proceed with the contract.
OPTION CONTRACT SALE The offer and the
acceptance are concurrent,
Onerous contract. It must have a consideration since the minds of the
contracting parties meet in
Consideration: anything of Price certain in money or
value its equivalent or “valuable the terms of the agreement
consideration”
Consensual contract. The elements of a valid option contract are therefore as
since the meeting of the minds as to the subject matter follows:
and the price would also give rise to the option contract,
a) CONSENT or the meeting of the minds upon:
even when the separate consideration for the option itself
b) SUBJECT MATTER: an option right to an
has not been paid. This is clear from the wordings of
Article 1324 which describes the separate consideration unaccepted unilateral offer to sell/accepted promise
of an option as “something paid or promised. to sell, or unaccepted unilateral offer to buy/accepted
Although a separate Bilateral-reciprocal promise to buy: (i) a determinate or determinable
consideration must exist object; (ii) for a price certain, including the manner
for an option contract to be of payment thereof;
valid, unlike a sale, it is c) PRESTATION: A consideration separate and distinct
essentially a unilateral from the purchase price for the option given.
contract, since only the
optioner is obliged under  without a consideration separate from the purchase
an option contract, even price, an option contract would be void, as a contract
when the optionee has not
 “even if the promise is accepted, private respondent
paid the separate
consideration was not bound thereby in the absence of a distinct
consideration
there can be a valid option  Sanchez doctrine (i.e., that the option contract not
contract even when no supported by a separate consideration; is void as a
separate consideration is contract, but valid as an offer), can only apply if the
paid by the optionee, as in option has been accepted and such acceptance is
the case when the option if communicated to the offeror.
included within another  Right of first refusal
valid contract, such a
lease or a mortgage Mutual Promises to Buy and Sell
Subject matter: not the The thing itself which is
subject matter of the the object of the  The promise to sell a determinate thing coupled with
sought sale, but rather the transaction a correlative promise to buy at a specifi ed price is
option to purchase such binding as an executory agreement.106 Even in this
subject matter, case the certainty of the price must also exist,
essentially an intangible otherwise, there is no valid and enforceable contract
subject matter or a right to sell
ART. 1482 (EARNEST MONEY) 4. When sales are effected through electronic
commerce
 Under Article 1482 of the Civil Code, whenever
earnest money is given in a sale, it shall be considered ART. 1480 (LOSS/DETERIORATION) see also 1493
as part of the price and as proof of the perfection of and 1494
the contract. 143 The rule is “no more than a
1. Before perfection
disputable presumption” and prevails only “in the
- such loss, deterioration, fruits and improvements
absence of contrary or rebuttal evidence.
shall pertain to the purported seller, since he owns
the thing.
OPTION MONEY EARNEST MONEY 2. At the time of perfection
money given as a distinct part of the purchase price - Under Article 1493 of the New Civil Code, if at
consideration from the and proof of perfection of the time the sale is perfected, the subject matter
price contract has been entirely lost, the contract shall be
applies to a sale not yet given only where there is “without any effect.” But if the thing should have
perfected already a sale been lost in part only, the buyer may choose
when the would-be buyer between withdrawing from the contract and
gives option money, he is demanding the remaining part, paying its price in
When earnest money is proportion to the total sum agreed upon
not required to buy, but
given, the buyer is bound
may even forfeit it - Article 1493 does not hold a sale at “perfection”
to pay the balance
depending on the terms of to be void when the object thereof is lost; it uses
the option the phrase “without any effect.” Strictly speaking,
If the buyer decides not to the physical existence or non-existence of the
If the sale does not
buy the thing, he cannot subject matter is not important for perfection of
materialize, EM must be
recover the OM he paid as the sale. However, if the subject matter is lost,
returned unless there is a
consideration for the there is really no point is pursuing the contract
stipulation to the contrary
contract of option
since the seller is not in a position to comply with
his obligation to deliver the subject matter.
ART. 1483 (FORM) Therefore, the law decrees the same effect as if
the sale is void.
 Article 1483 provides that, subject to the provisions 3. After perfection but before delivery
of the Statute of Frauds, “a contract of sale may be - If we were to take Tolentino’s position, the effect
made in writing, or by word of mouth, or partly in of both Articles 1480 and 1538 would be that the
writing and partly by word of mouth, or may be risk of loss is still to be borne by the seller from
inferred from the conduct of the parties.” In other the time of perfection up to before delivery of
words, Article 1483 stresses that sale being a thing, but he would no longer be liable for
consensual contract, no form is really required for its damages if the thing is lost through fortuitous
validity event.
 Sales coverage in Statute of Frauds: - Before delivery, if the determinate subject of the
1. A sale agreement which by its terms is not to be sale is lost through the fault of the seller, the
performed within a year from the making thereof; buyer need not pay the price, but can recover
2. An agreement for the sale of goods, chattels or damages for breach of contract.
things in action, at a price not less than 5500.00; - However, should the determinate subject matter
3. A sale of real property or of an interest therein. be lost through fortuitous event, the seller is
 XPNS to Stat of Frauds excused from his obligation to deliver the thing,
1. When there is a note or memorandum thereof in and not being in breach of his obligation, he
writing, and subscribed by the party charged or cannot be held liable for damages by the buyer.
his agent - The buyer is then not obliged to pay the price
2. When there has been partial consummation of the because of the inability of the seller to comply
sale with his obligation
3. When there has been a failure to object to the - the risk of loss would have been borne by the
presentation of evidence aliunde as to the seller, and the provisions of Articles 1480 and
existence of a contract
1538 do not contradict the adopted principle STRUCTURING PROPER DOCTRINE ON LOSS,
under the new Civil Code of res perit domino. DETERIORATION, FRUITS AND
IMPROVEMENTS
LOSS, DETERIORATION, FRUITS AND
IMPROVEMENTS (not sure see Structuring…)  Prior to perfection, both title and benefi cial interests
pertain to the seller and therefore he must bear the risk
 Under Article 1538 of the New Civil Code, in case of
of loss, deterioration, and benefi ts from the fruits and
deterioration or improvement of the thing before its
improvements.
delivery, the rules in Article 1189 shall be observed,
 After delivery which effectively transfers title and
the seller being considered the debtor.
benefi cial interest to the buyer, buyer bears both the
 Under Article 1189 of the Civil Code, as it is
risk of loss and deterioration, as well as benefi ts from
applicable to a sale, the following rules shall govern
the fruits and improvements of the subject matter of
the deterioration of the thing during the pendency of
sale.
a condition suspending the effi cacy of the seller’s
 It is only after perfection and before delivery that
obligation to deliver the subject matter:
title and benefi cial interests actually do not pertain to
1. if the things is lost without the fault of the debtor,
the same person since title remains with the seller, but
the obligation shall be extinguished
benefi cial interest actually pertains to the buyer. This
2. if the thing is lost through the fault of the debtor,
is clear from the provisions of the New Civil Code
he shall be obliged to pay damages; it is
which govern the responsibilities of the obligor in an
understood that the thing is lost when it perishes,
obligation to deliver a determinate thing, all for the
goes out of commerce, or disappears in such a
benefi t of the obligee:
way that its existence is unknown or it cannot be
(a) Every person obliged to give something is also
recovered
obliged to take care of it with the proper diligence of
3. When the thing deteriorates without the fault of
a good father of a family
the seller, the impairment is to be borne by the
(b) The obligee has a right to the fruits of the thing
buyer;
from the time the obligation to deliver it arises;
4. If the thing deteriorates through the fault of the
(c) When what is to be delivered is a determinate
seller, the buyer may choose between the
thing, the obligor who incurs fraud, negligence, or
rescission of the obligation and its fulfi llment,
delay, or contravene the tenor of their agreement, are
with indemnity for damages in either case;
liable for damages;
5. If the thing is improved by its nature, or by time,
(d) The obligation to give a determinate thing
the improvements shall inure to the benefi t of the
includes that of delivering all its accessions and
buyer;
accessories, even though they may not have been
6. If the thing is improved at the expense of the
mentioned
seller, he shall have no other right than that
 To perhaps oversimplify the unifying doctrine on the
granted to the usufructuary.
risk of loss, deterioration and improvement, the same
shall always be for the account of the person or party
4. After delivery
who has both title and benefi cial interest over the
- when ownership of the goods has been
property or subject matter of the sale. When title and
transferred to the buyer, the goods shall be at the
benefi cial interest do not merge in the same party,
buyer’s risk.
then he who bears the risk of loss or deterioration, and
- XPNS:
who benefi ts from the improvement of the thing,
a. when the delivery of the goods has been made to
should be the party who at that point in time is
the buyer and the ownership in the goods has been
understood to have the benefi cial interest over the
retained by the seller merely to secure
subject matter.
performance by the buyer of his obligations under
the contract, although ownership is not yet with
the buyer, the goods are still at the buyer’s risk.
b. if actual delivery had been delayed through the
fault of either the buyer or seller, the goods are at
the risk of the party at fault.
ART. 1481 (SALE BY DESCRIPTION AND/OR  The general rule is that when the seller has chosen
SAMPLE) specifi c performance, he can no longer seek for
rescission nor foreclosure of the chattel mortgage
- In a sale of goods by description or sample, the sale
constituted on the thing sold. Although it can be
may be rescinded if the bulk of the goods delivered
reasoned that even if the seller had chosen specifi c
do not correspond with the description or the sample,
performance, but the same has become impossible, he
and if the contract be by sample as well as by
may still choose rescission pursuant to the provisions
description, it is not suffi cient that the bulk of goods
of Article 1191 of the Civil Code, which provides that
correspond with the sample if they do not also
the non-defaulting party to a reciprocal obligation
correspond with the description.84 By their very
“may also seek rescission, even after he has chosen
nature, sales of goods by sample and/or description,
fulfi llment, if the latter should become impossible;”
should allow the buyer a reasonable opportunity of
 the seller is deemed to have chosen specifi c
inspection or of comparing the bulk with the sample
performance when he fi les an action in court for
or the description before accepting their delivery
recovery
ART. 1484 RECTO LAW: SALES OF MOVABLES
Remedy of Rescission
ON INSTALLMENTS
 Deemed choses this remedy when seller sends a
 Under Article 1484 of the New Civil Code, in a sale
notice of rescission, or takes possession of the subject
of personal property the price of which is payable in
matter of the sale, or when he fi les an action for
installments, the seller may exercise any of the
rescission
following remedies:
 When a seller chooses the remedy of rescission, then
1. Exact fulfi llment of the obligation, should the
generally he is under obligation to make restitution,
vendee fail to pay any installment;
which would include the return of any amount of the
2. Cancel the sale, should the vendee’s failure to pay
purchase price that the buyer may have paid.
cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold,  However, under the terms of Article 1486 of the Civil
if one has been constituted, should the vendee’s Code which provides that “a stipulation that the
failure to pay cover two or more installments. In installments or rents paid shall not be returned to the
this case, he shall have no further action against vendee or lessee shall be valid insofar as the same
the purchaser to recover any unpaid balance of may not be unconscionable under the circumstances.”
the price. Any agreement to the contrary shall be Remedy of foreclosure
void
 The Court held that the provisions of the Recto Law  seller is deemed to have chosen the remedy of
cannot apply to a sale where there is an initial foreclosure is only at the time of actual sale of the
payment, and the balance payable in the future, subject property at public auction pursuant to the
because the same is not a sale on installment but foreclosure proceedings commenced
actually a “straight sale.” Since such a sale is not  It is the foreclosure and actual sale at public action of
covered by the Recto Law, the barring effects of the the mortgaged chattel that shall bar further recovery
law cannot be made to apply, and the seller may by the seller of any balance on the purchaser’s
recover the unpaid balance of the purchase price outstanding obligation not satisfi ed by the sale; prior
against the buyer even when the latter shall have lost to that point in time, the seller has every right to
by foreclosure the subject matter of the sale. receive payments on the unpaid balance of the price
 When the contract governing the sale of movables is from the buyer
a contract to sell, then the rules on rescission and  The extent of the barring effect of foreclosure was
substantial breach are not applicable, since when the then all-encompassing and did not limit itself to the
suspensive condition upon which the contract is based balance of the purchase price.
fails to materialize, it would extinguish the contract,  “any unpaid balance” should be interpreted as having
and consequently there is no contract to rescind reference to the defi ciency judgment to which the
 The remedies have been recognized as alternative, mortgagee may be entitled where, after the mortgaged
not cumulative, in that the exercise of one would bar chattel is sold at public auction, the proceeds obtained
the exercise of the others therefrom are insuffi cient to cover the full amount of
the secured obligation which in the case at bar as
Remedy of Specific performance
shown by the note and by the mortgage deed, include MACEDA LAW: SALES OF REAL ESTATE ON
interest on the principal, attorney’s fees, expenses of INSTALLMENTS
collection, and the costs
 Maceda Law does not cover all sales of realty on
ART. 1485 (LEASE WITH OPTION TO installments, but primarily residential real estate.
PURCHASE)  It expressly covers “all transactions or contracts
involving the sale or fi nancing of real estate on
 Under Article 1485 Civil Code, the provisions of
installment payments, including residential
Article 1484 are expressly made applicable to
condominium apartments
“contracts purporting to be leases of personal
 Maceda Law clearly includes in its provisions both
property with option to buy, when the lessor has
contracts of sale and contracts to sell
deprived the lessee of the possession or enjoyment of
the thing.”  excluded from the coverage of the Law:
1. Sales covering industrial lots;
 Article 1486 provides that “a stipulation that the rents
2. Sales covering commercial buildings (and
paid shall not be returned to the lessee shall be valid
commercial lots by implication); and
insofar as the same may not be unconscionable under
3. Sales to tenants under agrarian reform laws.
the circumstances.”
 The Court has recognized that sellers who do not wish
to enter into conditional contracts of sale have often
resorted to lease with options to purchase, but that Rights Granted under Maceda Law
nevertheless the underlying contract would not - depend on whether or not he has paid less than or
prevent the transfer of ownership of the subject matter more than two (2) years of installments.
to the buyer-lessee upon fulfi llment of the condition
of the full payment of the “rents 1. At least two years paid (or more than 2 years of
 The issue that arises when it comes to purported installments paid) and he defaulted on the
contracts of lease with option to purchase is whether succeeding installments
the taking back of possession or enjoyment of the a. To pay, without additional interest, the unpaid
property leased as treated byArticle 1485 carries the installments due within the total grace period
concept of rescission or foreclosure. earned by him, which is fi xed at the rate of one
o if the taking back of possession or enjoyment of (1) month grace period for every one (1) year of
the leased movable is treated as a rescission, then installment payments;
the barring effect of rescission is applicable,
which means that even after taking back The right to make use of the grace period can be
possession or enjoyment, and forfeiting all rentals exercised by the buyer only once in every fi ve (5)
previously paid, the lessor-seller will be able to years of the life of the contract and its extensions, if
collect damages as may be warranted by the any
circumstances
o if the taking back of possession or enjoyment of b. If the contract is cancelled, the seller shall
the leased movable is equivalent to foreclosure, refund to the buyer the cash surrender value of the
then although the seller-lessor may forfeit in his payments on the property equivalent to 50% of
favor all rentals previously paid, if such has been the total payments made and, after fi ve (5) years
stipulated, he can no longer collect any further of installments, an additional 5% every year but
amounts against the buyer-lessee, whether in the not to exceed 90% of the total payments made.
form of damages, attorney’s fees, or even unpaid
but accrued rentals, and not even the expenses How cancellation is effected:
incurred in repairing the movable
The actual cancellation of the contract shall take
place after thirty (30) days from receipt by the
buyer of the:
o notice of cancellation or the demand for
rescission of the contract by a notarial act
o upon full payment of the cash surrender value
to the buyer
2. Less than 2 years installments paid
a. Buyer shall still be entitled to a grace period of
sixty (60) days from the date the installment
became due.
b. If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may
cancel the contract after thirty (30) days from
receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a
notarial act. (rights may be assigned before 30
days)
ART. 1487 the expenses for the execution and
registration of the sale shall be borne by the vendor unless
there is a stipulation to the contrary
ART. 1488 The expropriation of property for public use
is governed by special laws

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