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