C. DOUBLE SALES Article 1497.
The thing sold shall be understood as
-------------------------------------
→ exist when the same determinate thing should have
been sold validly on different occasions by the same
vendor to different vendees in good faith
→ the rules speak of the preferential right – possession in
the concept of an owner
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in
good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith.
(1473)
I. REQUISITES:
1. two (or more) transactions must constitute valid
sales;
2. two (or more) sales transactions must pertain to
exactly the same subject matter;
3. two (or more) buyers at odds over the rightful
ownership of the subject matter must each
represent conflicting interests
4. two (or more) buyers at odds over the rightful
ownership of the subject matter must each have
bought them from the very same seller
Cases:
San Lorenzo Development Corp. v. CA
» there is no double sales if the sale to one party is the
land itself while the other is a mere promise to sell the
land
Sigaya v. Mayuga
» it is necessary that the conveyance must have been
made by a party who has an existing right in the thing and
the power to dispose it
Skunac Corp. vs. Sylianteng
» Art. 1544 has no application where the sales involved
are initiated not by just one but two vendors
II. DOUBLE SALES: MOVABLE PROPERTY
Article 1544(1). If the same thing should have been sold
to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in
good faith, if it should be movable property.
----------------------------------------------------------------
delivered, when it is placed in the control and possession
of the vendee. (1462a)
Article 1498. 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, if from the deed the contrary does not appear or
cannot clearly be inferred.
With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or
depository where it is stored or kept. (1463a)
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred
to the possession of the vendee at the time of the sale, or
if the latter already had it in his possession for any other
reason. (1463a)
Article 1500. There may also be tradition constitutum
possessorium. (n)
Article 1501. With respect to incorporeal property, the
provisions of the first paragraph of article 1498 shall
govern. In any other case wherein said provisions are not
applicable, the placing of the titles of ownership in the
possession of the vendee or the use by the vendee of his
rights, with the vendor's consent, shall be understood as a
delivery. (1464)
Rule: 1st possessor in good faith
»→ Q: Why?
A: Because delivery transfers ownership. Art. 1544
is the preferential right in the form of an owner.
III. DOUBLE SALES: IMMOVABLE PROPERTY
Article 1544 2nd par. Should it be immovable property,
the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
3rd par. Should there be no inscription, the ownership
shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
(1473)
Rules of Preference:
1st – to the person acquiring it who in good faith first
recorded it in the Registry of Property
2nd – in default thereof, to the person who in good faith
was first in possession
3rd – in default thereof, to the person who presents the
oldest title, provided there is good faith
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Primus Tempore, Potior Jure
→ first in time, stronger in right
– first buyer always has priority rights over subsequent
buyers; his good faith remains all throughout despite his
subsequent acquisition of knowledge of the subsequent
sale
Who is a Purchaser in Good Faith?
→ one who believes that the person from whom they
receive the thing is the rightful owner who can convey
title to the property
– he must:
1) exercise due diligence (check if the 1title is
fake, if 2there is a notice of lis pendens or
encumbrance, or 3if the seller is the owner)
2) conduct an investigation
3) weigh the surrounding facts and circumstances
like what any prudent man in a similar
situation would do
»→ Q: When is inscription on the title enough?
A: GR: When there is nothing to indicate any cloud
or vice in the ownership of the property, or any
encumbrance thereon
- e.g.: 1seller is the registered owner, 2he is in
possession, and at the time of the sale, 3buyer was not
aware of any claim or interest of some other person
in the property, or of any defect or restriction in the
title of the seller, or in his capacity to convey title to
the property
- XPN: there exist important facts that would
create suspicion in an otherwise reasonable man to go
beyond the present title and to investigate those that
preceded it.
»→ Q: Who bears the burden of proof in proving good
faith or bad faith?
A: the one alleging such
----------------------------------------------------------------
1st rule: Acquisition and Registration
→ the requirement is two-fold: 1acquisition in good faith
and 2registration in good faith.
– good faith must concur with the registration
– bad faith = registration amounts to no registration at
all
2nd rule: Possession in Good Faith
→ means both actual physical delivery and constructive
delivery
3rd rule: Title
→ the lawful cause or ground of possessing that which is
ours
– buyer acquires “title” not from the issuance of TCT
but from the purchase of the same through the
execution of the Deed of Sale
IV. SALE BY VIRTUE OF EXECUTION AND
ATTACHMENT
Spouses Suntay v. Keyser
1. The Spouses properly relied on the Certificate of
Title of Bayfront
Every person dealing with a registered land may safely
rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go
beyond the certificate to determine the condition of the
property.
In the case at bench, the subject property was registered
land under the Torrens System with Bayfront as the
registered owner. At the time that the Notice of Levy was
annotated on January 18, 1995, the title had no previous
encumbrances and liens. Evidently, it was a clean title.
The Certificate of Sale, pursuant to an auction sale, was
also annotated on April 7, 1995, with Bayfront still as the
registered owner. Because “the act of registration is the
operative act to convey or affect the land insofar as third
persons are concerned,” it follows that where there is
nothing in the certificate of title to indicate any cloud or
vice in the ownership of the property, or any encumbrance
thereon, the purchaser is not required to explore farther
than what the Torrens title upon its face indicates.
2. Levy on execution is superior to the subsequent
registration of the deed of absolute sale.
The doctrine is well-settled that a levy on execution duly
registered takes preference over a prior unregistered sale.
Even if the prior sale was subsequently registered before
the sale in execution but after the levy was duly made, the
validity of the execution sale should be maintained
because it retroacts to the date of the levy. Otherwise, the
preference created by the levy would be meaningless and
illusory.
In this case, the contract to sell between Keyser and
Bayfront was executed on October 20, 1989, but the deed
of absolute sale was only made on November 9, 1995 and
registered on March 12, 1996. The Notice of Levy in
favor of Spouses Suntay was registered on January 18,
1995, while the Certificate of Sale on April 7, 1995, both
dates clearly ahead of Keyser’s registration of its Deed of
Absolute Sale. Evidently, applying the doctrine of primus
tempore, potior jure (first in time, stronger in right),
Spouses Suntay have a better right than Keyser.
V. UNREGISTERED LAND
– also check the tax declaration → can be a prima facie
evidence of ownership
PD 1529, Section 113. Recording of instruments
relating to unregistered lands. No deed, conveyance,
mortgage, lease, or other voluntary instrument affecting
B. de Leon | SALES (2017) | Atty. RRD 2
land not registered under the Torrens system shall be
valid, except as between the parties thereto, unless such
instrument shall have been recorded in the manner herein
prescribed in the office of the Register of Deeds for the
province or city where the land lies.
(a) The Register of Deeds for each province or city shall
keep a Primary Entry Book and a Registration Book. The
Primary Entry Book shall contain, among other
particulars, the entry number, the names of the parties, the
nature of the document, the date, hour and minute it was
presented and received. The recording of the deed and
other instruments relating to unregistered lands shall be
effected by any of annotation on the space provided
therefor in the Registration Book, after the same shall
have been entered in the Primary Entry Book.
(b) If, on the face of the instrument, it appears that it is
sufficient in law, the Register of Deeds shall forthwith
record the instrument in the manner provided herein. In
case the Register of Deeds refuses its administration to
record, said official shall advise the party in interest in
writing of the ground or grounds for his refusal, and the
latter may appeal the matter to the Commissioner of Land
Registration in accordance with the provisions of Section
117 of this Decree. It shall be understood that any
recording made under this section shall be without
prejudice to a third party with a better right.
(c) After recording on the Record Book, the Register of
Deeds shall endorse among other things, upon the original
of the recorded instruments, the file number and the date
as well as the hour and minute when the document was
received for recording as shown in the Primary Entry
Book, returning to the registrant or person in interest the
duplicate of the instrument, with appropriate annotation,
certifying that he has recorded the instrument after
reserving one copy thereof to be furnished the provincial
or city assessor as required by existing law.
(d) Tax sale, attachment and levy, notice of lis pendens,
adverse claim and other instruments in the nature of
involuntary dealings with respect to unregistered lands, if
made in the form sufficient in law, shall likewise be
admissible to record under this section.
(e) For the services to be rendered by the Register of
Deeds under this section, he shall collect the same amount
of fees prescribed for similar services for the registration
of deeds or instruments concerning registered lands.
VI. WHEN A SALE IS FORGERY
GR: forged deed is null and void; therefore, it cannot
convey a title
XPN: innocent purchaser for value (from forger →
innocent buyer)
– qualifying point: there must be a complete chain of
registered titles
– must be unbroken
D. CONDITIONS AND WARRANTIES
1. EXPRESS – an affirmation of fact or any promise
made by a vendor in relation to the thing sold.
– has the natural tendency to induce the vendee to
purchase the thing
Article 1546. 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. GR:No affirmation of
the value of the thing, nor any statement purporting to be
a statement of the seller's opinion only, shall be construed
as a warranty, XPN:unless the seller made such affirmation
or statement as an expert and it was relied upon by the
buyer. (n)
» Requisites:
1. there must be an affirmation of fact or any
promise by the seller relating to the thing
2. the natural tendency of such is to induce the
buyer to purchase the same (principal factor)
3. buyer purchases the thing relying thereon
4. the affirmation or promise must be made before
the perfection of the COS
a. Distinguished from Condition
– an operative act that sets into motion the
compliance by either party of his own obligation.
Article 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is not
performed, such party may arefuse to proceed with the
contract or bhe may waive performance of the condition.
If the other party has promised that the condition should
happen or be performed, such first mentioned party may
also treat the nonperformance of the condition as a breach
of warranty.
Where the ownership in the thing has not passed, the
buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
warranted expressly or by implication in the contract of
sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing. (n)
1st par.: the operative act which converts condition to
warranty is the promise of the obligor that the condition
would happen or be performed
– ergo, non-performance = breach
– for rescission: breach must be substantial
2nd par.: payment is conditioned upon delivery
B. de Leon | SALES (2017) | Atty. RRD 3
 b. Distinguished from Opinion, Dealer’s Talk
Article 1546. 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. GR:No affirmation of
the value of the thing, nor any statement purporting to be
a statement of the seller's opinion only, shall be construed
as a warranty, XPN:unless the seller made such affirmation
or statement as an expert and it was relied upon by the
buyer. (n)
Article 1340. The usual exaggerations in trade, when the
other party had an opportunity to know the facts, are not
in themselves fraudulent. (n)
Article 1341. GR:A mere expression of an opinion does
not signify fraud, XPN:unless made by an expert and the
other party has relied on the former's special knowledge.
(n)
Decisive Test: Whether the vendor assumes to assert a
fact of which the vendee is ignorant
Opinion, Dealer’s Talk and Usual Exaggerations are not
necessarily true but if you tell it as a fact or truth and it
was relied upon by the buyer, it becomes an express
warranty.
c. Distinguished from False Representation
Article 1342. Misrepresentation by a third person does
not vitiate consent, unless such misrepresentation has
created substantial mistake and the same is mutual. (n)
2. IMPLIED – a natural element of a COS that is deemed
included in such contract by operation of law
– no prior knowledge and stipulation needed
– GR: parties may waive or modify such warranty
XPN: specific implied warranties that cannot be
waived by express provision of law. i.e. against eviction
Implied Warranties:
(1) Seller has the Right to Sell
(2) Warranty Against Eviction
(3) Warranty Against Non-apparent Servitude
(4) Warranty Against Hidden Defects
(5) Warranty in Sale of Animals
(6) Implied Warranty of Quality
Article 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the seller that he
has a right to sell the thing at the time when the ownership
is to pass, and that the buyer shall from that time have and
enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from
any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable a
sheriff, auctioneer, mortgagee, pledgee, or other person
professing to sell by virtue of authority in fact or law, for
the sale of a thing in which a third person has a legal or
equitable interest. (n)
a. Seller has Right to Sell
Article 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the seller that he
has a right to sell the thing at the time when the ownership
is to pass, and that the buyer shall from that time have and
enjoy the legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from
any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable a
sheriff, auctioneer, mortgagee, pledgee, or other person
professing to sell by virtue of authority in fact or law, for
the sale of a thing in which a third person has a legal or
equitable interest. (n)
1st par.: the seller warrants his right to sell the thing
during the consummation stage since ownership is
transferred to the buyer by delivery.
– “caveat emptor” because the buyer acquires no better
title than the seller has
3rd par.: not applicable because it is established that they
are not the owners and they only sell through operation of
law
b. Warranty Against Eviction – “eviction”: vendee is
deprived of the whole or of a part of the thing
purchased.
Article 1548. Eviction shall take 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.
The vendor shall answer for the eviction even though
nothing has been said in the contract on the subject.
The contracting parties, however, may increase, diminish,
or suppress this legal obligation of the vendor. (1475a)
B. de Leon | SALES (2017) | Atty. RRD 4
1st par.: eviction presupposes actual delivery and not
constructive only because there will not be deprivation of
the thing if the delivery is only constructive.
Requisites:
(1) The vendee is deprived, in whole or in part,
of the thing;
(2) The eviction is by a final judgement;
(3) The final judgement is based on a prior right
to the sale or an act imputable to the vendor;
(4) The vendor is summoned in the suit for
eviction at the instance of the vendee; and
(5) There is no waiver of warranty by the
vendee
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. (n)
– this is because it does not make you a purchaser in good
faith and for value
– prescription: Ordinary – 10yrs.
Extraordinary – 30yrs.
Article 1549. The vendee need not appeal from the
decision in order that the vendor may become liable for
eviction. (n)
Article 1551. If the property is sold for nonpayment of
taxes due and not made known to the vendee before the
sale, the vendor is liable for eviction. (n)
Article 1552. The judgment debtor is also responsible for
eviction in judicial sales, unless it is otherwise decreed in
the judgment. (n)
Article 1557. The warranty cannot be enforced until a
final judgment has been rendered, whereby the vendee
loses the thing acquired or a part thereof. (1480)
Article 1559. The defendant vendee shall ask, within the
time fixed in the Rules of Court for answering the
complaint, that the vendor be made a co-defendant.
(1482a)
Pertinent Rules Regarding Waiver:
Article 1553. Any stipulation exempting the vendor from
the obligation to answer for eviction shall be void, if he
acted in bad faith. (1476)
Article 1554. If the vendee has arenounced the right to
warranty in case of eviction, and eviction should take
place, the vendor shall only pay the value which the thing
sold had at the time of the eviction. Should the vendee
have bmade the waiver with knowledge of the risks of
eviction and assumed its consequences, the vendor shall
not be liable. (1477)
(a) Seller acted in bad faith = void
(b) Buyer’s waiver is without knowledge of the
risks = seller must pay the value of the thing
sold at the time of eviction
(c) Buyer’s waiver is with knowledge of risks =
seller shall not be liable
Remedies in Case of Eviction:
Article 1555. When the warranty has been agreed upon or
nothing has been stipulated on this point, in case eviction
occurs, the vendee shall have the right to demand of the
vendor:
(1) The return of the value which the thing sold had at the
time of the eviction, be it greater or less than the price of
the sale;
(2) The income or fruits, if he has been ordered to deliver
them to the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in
a proper case, those of the suit brought against the vendor
for the warranty;
(4) The expenses of the contract, if the vendee has paid
them;
(5) The damages and interests, and ornamental expenses,
if the sale was made in bad faith. (1478)
Article 1556. Should the vendee lose, by reason of the
eviction, a part of the thing sold of such importance, in
relation to the whole, that he would not have bought it
without said part, ahe may demand the rescission of the
contract; but with the obligation to return the thing
without other encumbrances that those which it had when
he acquired it.
b
He may exercise this right of action, instead of enforcing
the vendor's liability for eviction.
The same rule shall be observed when two or more things
have been jointly sold for a lump sum, or for a separate
price for each of them, if it should clearly appear that the
vendee would not have purchased one without the other.
(1479a)
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. (1481a)
Warranty Against Eviction is Not Applicable When:
(1) There is no deprivation of property
(2) The reason of the deprivation of the property was
not deliberately caused by the seller
(3) Art. 1558
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 c. Warranty Against Non-Apparent Servitude
– “servitude”: a real right of which the owner of the
property has to abstain or to allow somebody else to do
something on his property for the benefit of another.
– easements of: 1right of way, 2light and view, 3 lateral
and subjacent, 4riparian
Article 1560. If the immovable sold should be
encumbered with any non-apparent burden or servitude,
not mentioned in the agreement, of such a nature that it
must be presumed that the vendee would not have
acquired it had he been aware thereof, ahe may ask for the
rescission of the contract, unless he should prefer the
b
appropriate indemnity. Neither right can be exercised if
the non-apparent burden or servitude is recorded in the
Registry of Property, unless there is an express warranty
that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution of
the deed, the vendee may bring the action for rescission,
or sue for damages.
One year having elapsed, he may only bring an action for
damages within an equal period, to be counted from the
date on which he discovered the burden or servitude.
(1483a)
Requisites:
(1) The immovable sold should be encumbered with
any non-apparent servitude, not mentioned in the
agreement;
(2) The nature of the non-apparent servitude is such
that it must be presumed that the vendee would
not have acquired it had he been aware thereof;
(3) The non-apparent servitude is not recorded in the
Registry of Property, unless there is an express
warranty that the thing is free from all burdens
and encumbrances;
(4) The action is brought by the vendee within the
prescriptive period.
d. Warranty Against Hidden Encumbrance or
Defects
Article 1547. In a contract of sale, unless a contrary
intention appears, there is:
(2) An implied warranty that the thing shall be free from
any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
Article 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing sold
may have, should they render it aunfit for the use for
which it is intended, or should they bdiminish its fitness
for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would
have given a lower price for it; but said vendor shall not
be answerable for 1patent defects or those which may be
visible, or for 2those which are not visible if the vendee is
an expert who, by reason of his trade or profession,
should have known them. (1484a)
Article 1566. The GR:vendor is responsible to the vendee
for any hidden faults or defects in the thing sold, even
though he was not aware thereof.
This provision shall not apply XPN:if the contrary has been
stipulated, and the vendor was not aware of the hidden
faults or defects in the thing sold. (1485)
– Caveat Emptor is inapplicable because the present law
rightfully places obligations on the vendor to deal fairly
and justly with the vendee, and requires the vendor to
expose the quality of the goods sold, when the faults are
hidden, so that the vendee may inspect and examine them,
and if the vendor fails to do this or fails to obtain from the
purchaser a warranty o exclusion, he must pay the
damages.
– considered redhibitory if it is hidden, unknown to the
buyer, and existing prior to the sale
Requisites:
(1) The defect renders the thing sold unfit for the use
for which it is intended, or diminishes its fitness
for such use to such an extent that had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price for
it;
(2) The defect is not patent or visible;
(3) The defect exists at the time of the sale;
(4) The vendee is not an expert who, by reason of
his trade or profession, should have known it;
(5) There is no stipulation to the contrary OR if
there is a stipulation to the contrary, the vendor
is aware of the hidden defect of the thing sold;
(6) The vendee notifies the vendor of the defect
within a reasonable time;
(7) The action is based on breach of the vendor’s
implied warranty against hidden defects must be
instituted within six months from the date of the
delivery of the thing sold
Remedies:
Article 1567. In the cases of articles 1561, 1562, 1564,
1565 and 1566, the vendee may elect between
a
withdrawing from the contract and bdemanding a
proportionate reduction of the price, with damages in
either case. (1486a)
Lost in Consequence of Hidden Defects:
Article 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor was
a
aware of them, he shall bear the loss, and shall be obliged
to return the price and refund the expenses of the contract,
B. de Leon | SALES (2017) | Atty. RRD 6
with damages. If he was bnot aware of them, he shall only
return the price and interest thereon, and reimburse the
expenses of the contract which the vendee might have
paid. (1487a)
Lost through Fortuitous Event or Fault of the Vendee:
Article 1569. If the thing sold had any hidden fault at the
time of the sale, and should thereafter be lost by a
fortuitous event or through the fault of the vendee, the
latter may demand of the vendor the price which he paid,
less the value which the thing had when it was lost.
If the vendor acted in bad faith, he shall pay damages to
the vendee. (1488a)
Article 1570. The preceding articles of this Subsection
shall be applicable to judicial sales, except that the
judgment debtor shall not be liable for damages. (1489a)
Article 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months,
from the delivery of the thing sold. (1490)
e. Additional Warranties for Consumer Products
R.A. 7394 Article 68. Additional Provisions on
Warranties. – In addition to the Civil Code provisions on
sale with warranties, the following provisions shall
govern the sale of consumer products with warranty:
a) Terms of express warranty. – Any seller or
manufacturer who gives an express warranty shall:
1) set forth the terms of warranty in clear and
readily understandable language and clearly
identify himself as the warrantor;
2) identify the party to whom the warranty is
extended;
3) state the products or parts covered;
4) state what the warrantor will do in the event of a
defect, malfunction of failure to conform to the
written warranty and at whose expense;
5) state what the consumer must do to avail of the
rights which accrue to the warranty; and
6) stipulate the period within which, after notice of
defect, malfunction or failure to conform to the
warranty, the warrantor will perform any
obligation under the warranty.
b) Express warranty – operative from moment of sale. –
All written warranties or guarantees issued by a
manufacturer, producer, or importer shall be operative
from the moment of sale.
1) Sales Report. – All sales made by distributors of
products covered by this Article shall be reported
to the manufacturer, producer, or importer of the
product sold within thirty (30) days from date of
purchase, unless otherwise agreed upon. The
report shall contain, among others, the date of
purchase, model of the product bought, its serial
number, name and address of the buyer. The
report made in accordance with this provision
shall be equivalent to a warranty registration
with the manufacturer, producer, or importer.
Such registration is sufficient to hold the
manufacturer, producer, or importer liable, in
appropriate cases, under its warranty.
2) Failure to make or send report. – Failure of the
distributor to make the report or send them the
form required by the manufacturer, producer, or
importer shall relieve the latter of its liability
under the warranty: Provided, however, That the
distributor who failed to comply with its
obligation to send the sales reports shall be
personally liable under the warranty. For this
purpose, the manufacturer shall be obligated to
make good the warranty at the expense of the
distributor.
3) Retail. – The retailer shall be subsidiarily liable
under the warranty in case of failure of both the
manufacturer and distributor to honor the
warranty. In such case, the retailer shall shoulder
the expenses and costs necessary to honor the
warranty. Nothing therein shall prevent the
retailer from proceeding against the distributor or
manufacturer.
4) Enforcement of warranty or guarantee. – The
warranty rights can be enforced by presentment
of a claim. To this end, the purchaser needs only
to present to the immediate seller either the
warranty card or the official receipt along with
the product to be serviced or returned to the
immediate seller. No other documentary
requirement shall be demanded from the
purchaser. If the immediate seller is the
manufacturer's factory or showroom, the
warranty shall immediately be honored. If the
product was purchased from a distributor, the
distributor shall likewise immediately honor the
warranty. In the case of a retailer other than the
distributor, the former shall take responsibility
without cost to the buyer of presenting the
warranty claim to the distributor in the
consumer's behalf.
B. de Leon | SALES (2017) | Atty. RRD 7
 5) Record of purchases. – Distributors and retailers
covered by this Article shall keep a record of all
purchases covered by a warranty or guarantee for
such period of time corresponding to the lifetime
of the product's respective warranties or
guarantees.
6) Contrary stipulations – null and void. – All
covenants, stipulations or agreements contrary to
the provisions of this Article shall be without
legal effect.
c) Designation of warranties. – A written warranty shall
clearly and conspicuously designate such warranty as:
1) "Full warranty" if the written warranty meets the
minimum requirements set forth in paragraph
(d); or
2) "Limited warranty" if the written warranty does
not meet such minimum requirements.
d) Minimum standards for warranties. – For the
warrantor of a consumer product to meet the minimum
standards for warranty, he shall:
1) remedy such consumer product within a
reasonable time and without charge in case of a
defect, malfunction or failure to conform to such
written warranty;
2) permit the consumer to elect whether to ask for a
refund or replacement without charge of such
product or part, as the case may be, where after
reasonable number of attempts to remedy the
defect or malfunction, the product continues to
have the defect or to malfunction.
The warrantor will not be required to perform the above
duties if he can show that the defect, malfunction or
failure to conform to a written warranty was caused by
damage due to unreasonable use thereof.
e) Duration of warranty. – The seller and the consumer
may stipulate the period within which the express
warranty shall be enforceable. If the implied warranty on
merchantability accompanies an express warranty, both
will be of equal duration.
Any other implied warranty shall endure not less than
sixty (60) days nor more than one (1) year following the
sale of new consumer products.
f) Breach of warranties. –
1) In case of breach of express warranty, the
consumer may elect to ahave the goods repaired or bits
purchase price refunded by the warrantor. In case the
repair of the product in whole or in part is elected, the
warranty work must be made to conform to the express
warranty within thirty (30) days by either the warrantor or
his representative. The thirty-day period, however, may
be extended by conditions which are beyond the control
of the warrantor or his representative. In case the refund
of the purchase price is elected, the amount directly
attributable to the use of the consumer prior to the
discovery of the non-conformity shall be deducted.
2) In case of breach of implied warranty, the
a
consumer may retain in the goods and recover damages,
or breject the goods, cancel and contract and recover from
the seller so much of the purchase price as has been paid,
including damages.
Article 69. Warranties in Supply of Services. –
a) In every contract for the supply of services to a
consumer made by a seller in the course of a business,
there is an implied warranty that the service will be
rendered with due care and skill and that any material
supplied in connection with such services will be
reasonably fit for the purpose for which it is supplied.
b) Where a seller supplies consumer services in the course
of a business and the consumer, expressly or by
implication, makes known to the seller the particular
purpose for which the services are required, there is an
implied warranty that the services supplied under the
contract and any material supplied in connection
therewith will be reasonably fit for that purpose or are of
such a nature or quality that they might reasonably be
expected to achieve that result, unless the circumstances
show that the consumer does not rely or that it is
unreasonable for him to rely, on the seller's skill or
judgment.
Article 70. Professional Services. – The provision of this
Act on warranty shall not apply to professional services of
certified public accountants, architects, engineers,
lawyers, veterinarians, optometrists, pharmacists, nurses,
nutritionists, dietitians, physical therapists, salesmen,
medical and dental practitioners and other professionals
engaged in their respective professional endeavors.
Article 72. Prohibited Acts. – The following acts are
prohibited:
a) refusal without any valid legal cause by the total
manufacturer or any person obligated under the warranty
or guarantee to honor a warranty or guarantee issued;
b) unreasonable delay by the local manufacturer or any
person obligated under the warranty or guarantee in
honoring the warranty;
B. de Leon | SALES (2017) | Atty. RRD 8
c) removal by any person of a product's warranty card for
the purpose of evading said warranty obligation;
d) any false representation in an advertisement as to the
existence of a warranty or guarantee.
Article 73. Penalties. –
a) Any person who shall violate the provisions of Article
67 shall be subject to fine of not less than Five hundred
pesos (P500.00) but not more than Five thousand pesos
(P5,000.00) or an imprisonment of not less than three (3)
months but not more than two (2) years or both upon the
discretion of the court. A second conviction under this
paragraph shall also carry with it the penalty or revocation
of his business permit and license.
b) Any person, natural or juridical, committing any of the
illegal acts provided for in Chapter III, except with
respect to Article 67, shall be liable for a fine of not less
than One thousand pesos (P1,000.00) but not more than
Fifty thousand pesos (P50,000.00) or imprisonment for a
period of at least one (1) year but not more than five (5)
years, or both, at the discretion of the court.
The imposition of any of the penalties herein provided is
without prejudice to any liability incurred under the
warranty or guarantee.
f. Warranty in Sale of Animals
Requisites:
(1) The defect must be redhibitory;
(2) The defect is one determined by law or local
customs or usage;
(3) The sale is not one in fairs, public auction nor
does it refer to animals sold as condemned;
(4) The action is brought within the prescriptive
period;
(5) There is no waiver of warranty by the vendee
When Two or More Animals are Sold Together:
Article 1572. If two or more animals are sold together,
whether for a lump sum or for a separate price for each of
them, GR:the redhibitory defect of one shall only give rise
to its redhibition, and not that of the others; XPN:unless it
should appear that the vendee would not have purchased
the sound animal or animals without the defective one.
The latter case shall be presumed when a team, yoke pair,
or set is bought, even if a separate price has been fixed for
each one of the animals composing the same. (1491)
Article 1573. The provisions of the preceding article with
respect to the sale of animals shall in like manner be
applicable to the sale of other things. (1492)
Article 1577. The redhibitory action, based on the faults
or defects of animals, must be brought within forty days
from the date of their 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. (1496a)
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.
(1497a)
Article 1581. The form of sale of large cattle shall be
governed by special laws. (n)
Article 1574. There is no warranty against hidden defects
of animals sold at fairs or at public auctions, or of live
stock sold as condemned. (1493a)
Article 1575. The sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if the use
or service for which they are acquired has been stated in
the contract, and they are found to be unfit therefor.
(1494a)
Redhibitory Defect:
Article 1576. If the hidden defect of animals, even in case
a professional inspection has been made, should be of
such a nature that expert knowledge is not sufficient to
discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith
should fail to discover or disclose it, he shall be liable for
damages. (1495)
Remedies:
Article 1579. If the sale be rescinded, the animal shall be
returned in the condition in which it was sold and
delivered, the vendee being answerable for any injury due
to his negligence, and not arising from the redhibitory
fault or defect. (1498)
Article 1580. In the sale of animals with redhibitory
defects, the vendee shall also enjoy the right mentioned in
article 1567; but he must make use thereof within the
same period which has been fixed for the exercise of the
redhibitory action. (1499)
(a) Withdraw from the contract + damages
(b) Demand a proportional reduction of the
price + damages
B. de Leon | SALES (2017) | Atty. RRD 9
 g. Implied Warranty of Quality or Fitness
– quality: goods are in satisfactory state or condition
– fitness: they are reasonable fit or suitable for the
use or purpose for which they are intended, as measured
against the goods of similar kind.
– GR: there is an implied warranty as to the quality or
fitness of goods under a COS
XPN: “As Is, Where Is” – parties enter into a COS
without warranty as to the quality or fitness of the
goods; buyer waives his right over such warranty
XPNs to the XPN:
(1) Reliance on Seller’s Skill or Judgement
(2) Sale by Sample
(3) Sale by Description
1
Reliance on Seller’s Skill or Judgement:
Article 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of the
goods, as follows:
(1) Where the buyer, expressly or by implication, makes
known to the seller the particular purpose for which the
goods are acquired, and it appears that the buyer relies on
the seller's skill or judgment (whether he be the grower or
manufacturer or not), there is an implied warranty that the
goods shall be reasonably fit for such purpose;
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. (n)
Requisites:
(1) That the seller is the manufacturer or grower
of the goods, or is primarily engaged in the
business of selling the goods;
(2) That the buyer made known to the seller,
expressly or impliedly, the particular purpose
for which the goods are intended;
(3) That the buyer relied on the skill or judgement
of the seller.
Sale by 2Sample or 3Description:
Article 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of the
goods, as follows:
(2) Where the goods are brought by description from a
seller who deals in goods of that description (whether he
be the grower or manufacturer or not), there is an implied
warranty that the goods shall be of merchantable quality.
(n)
Article 1565. In the case of a contract of sale by sample,
if the seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from any
defect rendering them unmerchantable which would not
be apparent on reasonable examination of the sample. (n)
Article 1481. In the contract of sale of goods by
description or by sample, the contract may be rescinded if
the bulk of the goods delivered do not correspond with the
description or the sample, and if the contract be by sample
as well as description, it is not sufficient that the bulk of
goods correspond with the sample if they do not also
correspond with the description.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the sample. (n)
– “merchantable quality”: goods in satisfactory quality
that is enough to be saleable
Remedies:
(1) Withdraw from the contract + damages
(2) Demand proportionate reduction of the price +
damages
(3) Annulment of contract upon proof of error of
fraud
(4) Action for quasi-delict
3. BUYER’S OPTION IN CASE OF BREACH OR
WARRANTY – applies to movable properties only
Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in
diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action
against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy
in anyone of these ways, no other remedy can thereafter
be granted, without prejudice to the provisions of the
second paragraph of article 1191.
Where the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach of
warranty awhen he accepted the goods without protest, or
b
if he fails to notify the seller within a reasonable time of
the election to rescind, or cif he fails to return or to offer
to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was
transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from
B. de Leon | SALES (2017) | Atty. RRD 10
returning or offering to return the goods to the seller and NEGOTIABLE NEGOTIABLE
rescinding the sale. INSTRUMENT DOCUMENT
Function
Where the buyer is entitled to rescind the sale and elects Operates as a proof of
to do so, he shall cease to be liable for the price upon Operates as a substitute for
possession or control of the
returning or offering to return the goods. If the price or money
goods
any part thereof has already been paid, the seller shall be
Governing Law
liable to repay so much thereof as has been paid,
Civil Code, Warehouse
concurrently with the return of the goods, or immediately Negotiable Instruments
Receipt Law, and Code of
after an offer to return the goods in exchange for Law
Commerce
repayment of the price.
Special Endorsement of a Bearer Instrument
Where the buyer is entitled to rescind the sale and elects A bearer instrument is Has the effect of
to do so, if the seller refuses to accept an offer of the always a bearer instrument converting the bearer
buyer to return the goods, the buyer shall thereafter be even if special endorsement instrument into an order
deemed to hold the goods as bailee for the seller, but is made instrument
subject to a lien to secure the payment of any portion of Placing “Non-Negotiable”
the price which has been paid, and with the remedies for Makes the instrument no No effect; can still be
the enforcement of such lien allowed to an unpaid seller longer negotiable negotiated by the holder
by article 1526.
Implied Warranties:
(5) In the case of breach of warranty of quality, such loss, Article 1516. A person who for value negotiates or
in the absence of special circumstances showing transfers a document of title by indorsement or delivery,
proximate damage of a greater amount, is the difference including one who assigns for value a claim secured by a
between the value of the goods at the time of delivery to document of title unless a contrary intention appears,
the buyer and the value they would have had if they had warrants:
answered to the warranty. (n)
(1) That the document is genuine;
VIII. DOCUMENTS OF TITLE
→ a formal document which is issued or addressed to a (2) That he has a legal right to negotiate or transfer it;
carrier, warehouseman, or other bailee; covers the goods
referred to therein; and confers and proves title to the (3) That he has knowledge of no fact which would impair
goods. the validity or worth of the document; and
– facility for delivery and a mode of constructive
delivery (4) That he has a right to transfer the title to the goods and
– evidence of ownership of the goods that the goods are merchantable or fit for a particular
→ negotiable: if by its terms the goods referred therein purpose, whenever such warranties would have been
will be delivered to the bearer, or to the order of any implied if the contract of the parties had been to transfer
person named therein. without a document of title the goods represented thereby.
non-negotiable: if by its terms the goods referred (n)
therein will be delivered to a specific person only.
Article 1517. The indorsement of a document of title
Article 1636. In the preceding articles in this Title shall not make the indorser liable for any failure on the
governing the sale of goods, unless the context or subject part of the bailee who issued the document or previous
matter otherwise requires: indorsers thereof to fulfill their respective obligations. (n)

(1) "Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse receipt or
order for the delivery of goods, or any other document
used in the ordinary course of business in the sale or
transfer of goods, as proof of the possession or control of
the goods, or authorizing or purporting to authorize the
possessor of the document to transfer or receive, either by
indorsement or by delivery, goods represented by such
document.
Negotiation Not Impaired by Fraud:
Article 1518. The validity of the negotiation of a
negotiable document of title is not impaired by the fact
that the negotiation was a breach of duty on the part of the
person making the negotiation, 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, if the person to whom the document was
negotiated or a person to whom the document was
subsequently negotiated paid value therefor in good faith

B. de Leon | SALES (2017) | Atty. RRD 11

without notice of the breach of duty, or loss, theft, fraud,
accident, mistake, duress or conversion. (n)
Rules on Levy or Garnishment of Goods that are Covered
by a Document of Title:
Article 1519. If goods are delivered to a bailee by the
owner or by a person whose act in conveying the title to
them to a purchaser in good faith for value would bind the
owner and a negotiable document of title is issued for
them they cannot thereafter, while in possession of such
bailee, be attached by garnishment or otherwise or be
levied under an execution unless the document be first
surrendered to the bailee or its negotiation enjoined. The
bailee shall in no case be compelled to deliver up the
actual possession of the goods until the document is
surrendered to him or impounded by the court. (n)
Article 1520. A creditor whose debtor is the owner of a
negotiable document of title shall be entitled to such aid
from courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity in
regard to property which cannot readily be attached or
levied upon by ordinary legal process. (n)
– if an injunction has been issued but the negotiable
document of title is negotiated to an innocent person, the
transfer is effectual.
IX. REMEDIES OF AN UNPAID SELLER
Article 1525. The seller of goods is deemed to be an
unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid or
tendered;
(2) When a bill of exchange or other negotiable
instrument has been received as conditional payment, and
the condition on which it was received has been broken
by reason of the dishonor of the instrument, the
insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an
agent of the seller to whom the bill of lading has been
indorsed, or a consignor or agent who has himself paid, or
is directly responsible for the price, or any other person
who is in the position of a seller. (n)
Remedies:
Article 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods may have
passed to the buyer, the unpaid seller of goods, as such,
has:
(1) A lien on the goods or right to retain them for the
price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of
stopping the goods in transitu after he has parted with the
possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this
Title.
Where the ownership in the goods has not passed to the
buyer, the unpaid seller has, in addition to his other
remedies a right of withholding delivery similar to and
coextensive with his rights of lien and stoppage in transitu
where the ownership has passed to the buyer. (n)
1. LIEN – possessory lien: seller is entitled to retain
possession of the goods until the price has been paid or
tendered in full.
When Entitled to Retain Possession:
Article 1527. Subject to the provisions of this Title, the
unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or
tender of the price in the following cases, namely:
(1) Where the goods have been sold without any
stipulation as to credit;
(2) Where the goods have been sold on credit, but the
term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding
that he is in possession of the goods as agent or bailee for
the buyer. (n)
When Unpaid Seller Loses His Lein:
Article 1529. The unpaid seller of goods loses his lien
thereon:
(1) 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;
(2) When the buyer or his agent lawfully obtains
possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does
not lose his lien by reason only that he has obtained
judgment or decree for the price of the goods. (n)
B. de Leon | SALES (2017) | Atty. RRD 12
If Delivery Has Been Made in Part:
Article 1528. Where an unpaid seller has made part
delivery of the goods, he may exercise his right of lien on
the remainder, unless such part delivery has been made
under such circumstances as to show an intent to waive
the lien or right of retention. (n)
Article 1535. Subject to the provisions of this Title, the
unpaid seller's right of lien or stoppage in transitu is not
affected by any sale, or other disposition of the goods
which the buyer may have made, unless the seller has
assented thereto.
If, however, a negotiable document of title has been
issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in
good faith to whom such document has been negotiated,
whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such
document, of the seller's claim to a lien or right of
stoppage in transitu. (n)
2. STOPPAGE IN TRANSITU – entitles the unpaid
seller to retain goods stopped until the price of the whole
goods sold is paid.
Article 1530. Subject to the provisions of this Title, when
the buyer of goods is or becomes insolvent, the unpaid
seller who has parted with the possession of the goods has
the right of stopping them in transitu, that is to say, he
may resume possession of the goods at any time while
they are in transit, and he will then become entitled to the
same rights in regard to the goods as he would have had if
he had never parted with the possession. (n)
Requisites:
(1) The seller is unpaid;
(2) The buyer of the goods is or becomes
insolvent;
(3) The unpaid seller has parted with the
possession of the goods;
(4) The goods are in transit;
(5) The unpaid seller either obtains actual
possession of the goods, or gives notice of
his claim to the carrier or other bailee in
whose possession the goods are.
When Goods are In Transit and When Not:
Article 1531. Goods are in transit within the meaning of
the preceding article:
(1) From the time when they are delivered to a carrier by
land, water, or air, 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;
(2) 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 within the meaning of the
preceding article:
(1) If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the appointed
destination;
(2) 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; and it is immaterial that further
destination for the goods may have been indicated by the
buyer;
(3) If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or
airplane chartered by the buyer, it is a question depending
on the circumstances of the particular case, whether they
are in the possession of the carrier as such or as agent of
the buyer.
If part delivery of the goods has been made to the buyer,
or his agent in that behalf, the remainder of the goods may
be stopped in transitu, unless such part delivery has been
under such circumstances as to show an agreement with
the buyer to give up possession of the whole of the goods.
(n)
How This Right May be Exercised:
Article 1532. The unpaid seller may exercise his right of
stoppage in transitu either by aobtaining actual possession
of the goods or by bgiving notice of his claim to the
carrier or other bailee in whose possession the goods are.
Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter
case the notice, to be effectual, must be given at such time
and under such circumstances that the principal, by the
exercise of reasonable diligence, may prevent a delivery
to the buyer.
When notice of stoppage in transitu is given by the seller
to the carrier, or other bailee in possession of the goods,
he must redeliver the goods to, or according to the
directions of, the seller. The expenses of such delivery
must be borne by the seller. If, however, a negotiable
document of title representing the goods has been issued
by the carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the seller
unless such document is first surrendered for cancellation.
(n)
B. de Leon | SALES (2017) | Atty. RRD 13
Article 1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the goods,
where he expressly reserved the right to do so in case the
buyer should make default, or where the buyer has been
in default in the payment of the price for an unreasonable
time. The seller shall not thereafter be liable to the buyer
upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the
contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested by
notice to the buyer or by some other overt act an intention
to rescind. It is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to
give notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before
the right of rescission was asserted. (n)
Effects of Subsequent Sale of Goods to Unpaid Seller’s
Possessory Lien or Right of Stoppage in Transitu:
Article 1535. Subject to the provisions of this Title, GR:the
unpaid seller's right of lien or stoppage in transitu is not
affected by any sale, or other disposition of the goods
which the buyer may have made, XPNs: 1unless the seller
has assented thereto.
2
If, however, a negotiable document of title has been
issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in
good faith to whom such document has been negotiated,
whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such
document, of the seller's claim to a lien or right of
stoppage in transitu. (n)
3. RESALE – special right because court intervention is
not needed
Instances When the Seller is Allowed to Resell the Goods
and the Effects of Resale:
Article 1533. Where the agoods are of perishable nature,
or where bthe seller expressly reserves the right of resale
in case the buyer should make default, or where cthe
buyer has been in default in the payment of the price for
an unreasonable time, an unpaid seller having a right of
lien or having stopped the goods in transitu may resell the
goods. 1He shall not thereafter be liable to the original
buyer upon the contract of sale or for any profit made by
such resale, but 2may recover from the buyer damages for
any loss occasioned by the breach of the contract of sale.
Where a resale is made, as authorized in this article, 3the
buyer acquires a good title as against the original buyer.
Not Essentials to the Validity of Resale:
Par. 3 It is not essential to the validity of resale that
notice of an intention to resell the goods be given by the
seller to the original buyer. But where the right to resell is
not based on the perishable nature of the goods or upon an
express provision of the contract of sale, the giving or
failure to give such notice shall be relevant in any issue
involving the question whether the buyer had been in
default for an unreasonable time before the resale was
made.
Par. 4 It is not essential to the validity of a resale that
notice of the time and place of such resale should be
given by the seller to the original buyer.
Essentials to the Validity of Resale:
Par. 5 The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this
requirement may make a resale either by public or private
sale. He cannot, however, directly or indirectly buy the
goods. (n)
4. RESCISSION
When Can Rescission Be Exercised and the Effects::
Article 1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the goods,
where ahe expressly reserved the right to do so in case the
buyer should make default, or where bthe buyer has been
in default in the payment of the price for an unreasonable
time. The 1seller shall not thereafter be liable to the buyer
upon the contract of sale, but 2may recover from the buyer
damages for any loss occasioned by the breach of the
contract.
Essentials for the Validity of Rescission
Par. 2 The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested by
notice to the buyer or by some other overt act an intention
to rescind. It is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to
give notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before
the right of rescission was asserted. (n)
Rescission Requires Mutual Restitution:
Article 1385. Rescission creates the obligation to 1return
the things which were the object of the contract, 2together
with their fruits, and 3the price with its interest;
consequently, it can be carried out only when he who
demands rescission can return whatever he may be
obliged to restore.
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Neither shall rescission take place when the things which
are the object of the contract are legally in the possession
of third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded
from the person causing the loss. (1295)
Article 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may
maintain an action against him for damages for non-
acceptance.
The measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events from
the buyer's breach of contract.
Where there is an available market for the goods in
question, the measure of damages is, in the absence of
special circumstances showing proximate damage of a
different amount, the difference between the contract
price and the market or current price at the time or times
when the goods ought to have been accepted, or, if no
time was fixed for acceptance, then at the time of the
refusal to accept.
If, while labor or expense of material amount is necessary
on the part of the seller to enable him to fulfill his
obligations under the contract of sale, the buyer
repudiates the contract or notifies the seller to proceed no
further therewith, the buyer shall be liable to the seller for
labor performed or expenses made before receiving notice
of the buyer's repudiation or countermand. The profit the
seller would have made if the contract or the sale had
been fully performed shall be considered in awarding the
damages. (n)
5. WITHHOLD DELIVERY
X. RIGHTS AND OBLIGATIONS OF THE VENDEE
Article 1582. The vendee is bound to 1accept delivery and
to 2pay the price of the thing sold at the time and place
stipulated in the contract.
If the time and place should not have been stipulated, the
payment must be made at the time and place of the
delivery of the thing sold. (1500a)
Principal Obligations of the Vendee:
1) To accept delivery; and
2) To pay the price of the thing sold
Time and Place of Acceptance and Payment:
GR: at the time and place stipulated in the contract
XPN: if no stipulation, at the time and place of the
delivery of the thing sold.
A. ACCEPT DELIVERY
I. Delivery of Goods by Installment
Article 1583. XPN:Unless otherwise agreed, GR:the buyer of
goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be delivered
by stated installments, which are to be separately paid for,
and the aseller makes defective deliveries in respect of one
or more installments, or the bbuyer neglects or refuses
without just cause to take delivery of or pay for one or
more installments, it depends in each case on the terms of
the contract and the circumstances of the case, whether
the breach of contract is so material as to justify the
injured party in 1refusing to proceed further and 2suing for
damages for breach of the entire contract, or whether the
breach is severable, giving rise to a 1claim for
compensation but not to a right to treat the whole contract
as broken. (n)
GR: the buyer of the goods is not bound to accept
delivery thereof by installments
XPN: unless otherwise agreed
→ installment contract – delivery of goods in
installments or separate lots
Default on the Part of Either Party:
The determination of what constitutes default and the
applicable remedy will depend upon the 1agreement of the
parties and the 2circumstances of the case.
→ in the absence of any stipulation, a failure to pay and
to make a delivery may constitute breach
In cases of installment contracts, if:
a. seller makes defective deliveries in respect of
one or more installments; or
b. buyer neglects or refuses without just cause to
take delivery of or pay for one or more
installments
it will depend on each case of the contract to determine
whether the breach is:
a. material – to justify the injured party in refusing
to proceed further and suing damages
b. severable – giving a rise to claim for
compensation but not a right to treat the whole
contract as broken.
II. Buyer’s Opportunity to Examine the Goods
Article 1584. Where goods are delivered to the buyer,
which he has not previously examined, he is not deemed
to have accepted them unless and until he has had a
reasonable opportunity of examining them for the purpose
of ascertaining whether they are in conformity with the
contract if there is no stipulation to the contrary.
B. de Leon | SALES (2017) | Atty. RRD 15
Unless otherwise agreed, when the seller tenders delivery
of goods to the buyer, he is bound, on request, to afford
the buyer a reasonable opportunity of examining the
goods for the purpose of ascertaining whether they are in
conformity with the contract.
Where goods are delivered to a carrier by the seller, in
accordance with an order from or agreement with the
buyer, upon the terms that the goods shall not be
delivered by the carrier to the buyer until he has paid the
price, whether such terms are indicated by marking the
goods with the words "collect on delivery," or otherwise,
the buyer is not entitled to examine the goods before the
payment of the price, in the absence of agreement or
usage of trade permitting such examination. (n)
1st par.: when not deemed to have been accepted
GR: if goods are delivered to the buyer, which he has not
previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity
of examining them
XPN: unless there is a stipulation to the contrary
2nd par.: reasonable opportunity to examine
GR: the seller is bound, should the buyer request, to
afford the buyer a reasonable opportunity of examining
the goods
→ purpose: to ascertain whether they are in conformity
with the contract
→ such opportunity must be availed of within a
reasonable time in order not to prejudice the seller
(payment of raw materials, workers, and other
damages)
XPN: unless otherwise agreed
3rd par.: collect on delivery
GR: the buyer is not entitled to examine the goods before
the payment of the price in the case of collect on delivery
→ payment of the price is a condition sine qua non to
the buyer’s entitlement to examine the goods
XPN: unless there is an agreement or usage of trade
permitting such examination
III. Obligation to Accept Delivery
Article 1585. The buyer is deemed to have accepted the
goods when he 1intimates to the seller that he has
accepted them, or 2when the goods have been delivered to
him, and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when,
3
after the lapse of a reasonable time, he retains the goods
without intimating to the seller that he has rejected them.
(n)
Badges of Acceptance by the Buyer:
a) he intimates to the seller that he has accepted
them
b) that the goods have been delivered to him, and
he does any act in relation to them which is
inconsistent with the ownership of the seller
c) after the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has
rejected them
→ acceptance of the buyer signifies his confirmation of
the contract; while actual receipt refers only to the act
of getting, taking, or retrieving of the goods delivered
IV. Notice Should be Given After the Breach of
Warranty
Article 1586. XPNs: 1In the absence of express or implied
agreement of the parties, GR:acceptance of the goods by
the buyer shall not discharge the seller from liability in
damages or other legal remedy for breach of any promise
or warranty in the contract of sale. 2But, if, after
acceptance of the goods, the buyer fails to give notice to
the seller of the breach in any promise of warranty within
a reasonable time after the buyer knows, or ought to know
of such breach, the seller shall not be liable therefor. (n)
V. Obligations if there is Refusal to Accept the Goods
Delivered to Him
Article 1587. Unless otherwise agreed, where goods are
delivered to the buyer, and he refuses to accept them,
having the right so to do, he is not bound to return them to
the seller, but it is sufficient if he notifies the seller that he
refuses to accept them. If he voluntarily constitutes
himself a depositary thereof, he shall be liable as such. (n)
GR: where goods are delivered to the buyer, and he
refuses to accept them, having the right so to do, he is
bound:
1. to notify the seller of his refusal to accept the
goods
2. to take care of the goods, but he is not bound to
return them to the seller
3. to be held liable as a depositary of the goods if
he constituted himself as such
XPN: unless otherwise agreed
VI. Effects of Acceptance
Article 1588. If there is no stipulation as specified in the
first paragraph of article 1523, when the buyer's refusal to
accept the goods is without just cause, the title thereto
passes to him from the moment they are placed at his
disposal. (n)
Article 1523(1). Where, in pursuance of a contract of
sale, the seller is authorized or required to send the goods
to the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of
B. de Leon | SALES (2017) | Atty. RRD 16
transmission to the buyer is deemed to be a delivery of the
goods to the buyer, except in the cases provided for in
article 1503, first, second and third paragraphs, or unless a
contrary intent appears.
The acceptance of the thing sold by the buyer signifies the
formal transfer of ownership to him.
→ title to the goods passes to the buyer from the
moment they are placed at his disposal even if he
refuses to accept – as long as his refusal is without just
cause.
→ delivery of the goods to a carrier is deemed to be a
delivery of the goods to the buyer and the title thereto
passes to him from the moment they are placed at his
disposal
GR: the acceptance of the goods by the buyer does not
discharge the seller from liability in damages or other
legal remedy for breach of any promise or warranty in the
contract of sale
XPNs:
1. the presence of an express or implied agreement
of the parties to the contrary
2. the buyer fails to give notice to the seller of the
breach in any promise of warranty within a
reasonable time after the buyer knows, or ought
to know of such breach
B. PAY PRICE / REMEDIES
– the rule on fortuitous event does not apply when the
obligation is pecuniary in nature, like the buyer’s
obligation to pay
I. Obligation to Pay Interest
Article 1589. The vendee shall owe interest for the period
between the delivery of the thing and the payment of the
price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or
income;
(3) Should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price.
(1501a)
II. Suspension of Payments
Article 1590. Should the vendee be adisturbed in the
possession or ownership of the thing acquired, or should
he have breasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has
caused the disturbance or danger to cease, unless the
a
latter gives security for the return of the price in a proper
case, or bit has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the
suspension of the payment of the price. (1502a)
Article 1664. The lessor is not obliged to answer for a
mere act of trespass which a third person may cause on
the use of the thing leased; but the lessee shall have a
direct action against the intruder.
There is a mere act of trespass when the third person
claims no right whatever. (1560a)
Art. 1590 provides for justified cause for the buyer to
retain or hold the payment of the purchase price, but these
are not exclusive.
When the vendee may suspend payment:
a) he is disturbed in the possession or ownership of
the thing acquired
b) he has reasonable grounds to fear such
disturbance is by a vindicatory action or a
foreclosure of mortgage
When the vendee cannot suspend payment:
a) the vendor gives security for the return of the
price in a proper case
b) it has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to
make the payment
Duration: only until the vendor has caused the disturbance
or danger to cease
III. Sale of Real Property
Article 1560. If the immovable sold should be
encumbered with any non-apparent burden or servitude,
not mentioned in the agreement, of such a nature that it
must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the
appropriate indemnity. Neither right can be exercised if
the non-apparent burden or servitude is recorded in the
Registry of Property, unless there is an express warranty
that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution of
the deed, the vendee may bring the action for rescission,
or sue for damages.
One year having elapsed, he may only bring an action for
damages within an equal period, to be counted from the
date on which he discovered the burden or servitude.
(1483a)
Article 1591. Should the vendor have reasonable grounds
to fear the loss of immovable property sold and its price,
he may immediately sue for the rescission of the sale.
B. de Leon | SALES (2017) | Atty. RRD 17
Should such ground not exist, the provisions of article
1191 shall be observed. (1503)
Article 1191. The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there
be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
(1124)
Principle of Anticipatory Breach
→ right of the seller to rescind the contract of a sale of
immovable property when a circumstance gives rise to
a reasonable ground to fear that such property and its
price might be lost
IV. When Vendee in a Sale of Immovable Property
May Still Pay Despite the Expiration of the Period to
Pay
Article 1592. In the sale of immovable property, even
though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the
demand, the court may not grant him a new term. (1504a)
1st: this contemplates a contract of sale of an immovable
property with a stipulation in the contract that failure to
pay the price at the time agreed upon will cause the
rescission of the contract
2nd: this is only applicable to an absolute contract of sale
3rd: this permits the buyer to pay, even after the expiration
of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by
notarial act.
4th: this applies also to a contract of absolute sale of
immovable property where no stipulation for automatic
rescission is made
Failure of the Vendee to Pay the Price at the Time Agreed
Upon:
1. Rescission under Art. 1592
→ previous rules apply
→ Art. 1191 is subordinated to the provisions of this
Article when applied to sales of immovable property
→ still, in case of non-payment, the vendor has the
right to demand for rescission of the contract either
judicially or extrajudicially.
2. R.A. 6552: Realty Installment Buyer Protection Act
(Maceda Law)
AN ACT TO PROVIDE PROTECTION TO BUYERS
OF REAL ESTATE ON INSTALLMENT
PAYMENTS. (Rep. Act No. 6552)
Section 1. This Act shall be known as the "Realty
Installment Buyer Act."
Section 2. It is hereby declared a public policy to protect
buyers of real estate on installment payments against
onerous and oppressive conditions.
Section 3. In all transactions or contracts involving the
sale or financing of real estate on installment payments,
including residential condominium apartments but
excluding industrial lots, commercial buildings and sales
to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the
buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid
installments due within the total grace period earned by
him which is hereby fixed at the rate of one month grace
period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer
only once in every five years of the life of the contract
and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the
buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments
made, and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent
of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract
by a notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the contract shall
be included in the computation of the total number of
installment payments made.lawphi1™
B. de Leon | SALES (2017) | Atty. RRD 18
Section 4. In case where less than two years of
installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the
installment became due.
If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall have the
right to sell his rights or assign the same to another person
or to reinstate the contract by updating the account during
the grace period and before actual cancellation of the
contract. The deed of sale or assignment shall be done by
notarial act.
interest of the vendor, if the vendee, upon the expiration
of the period fixed for the delivery of the thing, ashould
not have appeared to receive it, or, bhaving appeared, he
should not have tendered the price at the same time,
unless a longer period has been stipulated for its payment.
(1505)
Automatic rescission of the sale shall take place in the
interest of the vendor if the vendee, upon the delivery of
the thing:
a) should not have appeared to receive it; or
b) having appeared, he should not have tendered the
price at the same time, unless a longer period has
been stipulated for its payment

Section 6. The buyer shall have the right to pay in

advance any installment or the full unpaid balance of the
purchase price any time without interest and to have such
full payment of the purchase price annotated in the
certificate of title covering the property.

Section 7. Any stipulation in any contract hereafter

entered into contrary to the provisions of Sections 3, 4, 5
and 6, shall be null and void.

Section 8. If any provision of this Act is held invalid or

unconstitutional, no other provision shall be affected
thereby.lawphi1™

Section 9. This Act shall take effect upon its approval.

Approved: August 26, 1972.

Purpose: to protect the buyers of real estate on installment

payments against onerous and oppressive conditions.
→ a party should not, after its opportunity to enjoy the
benefits of an agreement, be allowed later to disown the
arrangement when the terms thereof ultimately would
prove to operate against its hopeful expectations

Applicability: all transactions or contracts involving the

sale or financing of real estate on installment payments,
including residential condominiums but excluding
industrial lots, commercial buildings and sales to tenants.
→ it is also applicable to a contract to sell involving
immovable property
→ applies only when the buyer defaults in the payment
of succeeding payments, not when the buyer did not
pay any installment at all

V. Automatic Rescission of the Sale of Movable

Property

Article 1593. With respect to movable property, the

rescission of the sale shall of right take place in the
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