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CIVIL LAW

REVIEW II -

LAW ON

SALESAtty. Crisostomo Uribe - Course Outline (Dec.

2009)

Donnell R. Agaton | Recoletos de Manila - College

of Law

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Art. 1458 (CC) By the contract of sale, one of

the contracting parties obligates himself to

transfer ownership of and to deliver a

determinate thing, and the other to pay

therefor a price in money or its equivalent.

When one of the parties delivers a thing and

the other pays a price it constitute a contract

of sale?

Not necessarily. Not all delivery of a thing andthe concomitant payment of a price constitute acontract of sale. It could be a contract of lease.What is necessary is the intent of the parties totransfer ownership over the subject matter of thecontract of sale.

Note: Sale is a contract and therefore, theprovision on obligations and contract under thecivil code may generally apply.

What are the characteristics of a contract of

sale?

1. Consensual

2. Perfected by meeting of the minds as to theprice and the object.

except: in cattle registration decree tobe a perfected contract it requires to be in apublic instrument, registered and a certificateof title be issued.

3. It is a principal contract such that it can standon its own for its perfection and validity.

4. It is onerous where both parties are obliged togive something.

5. Commutative because there is equivalence ofvalue to be performed by both parties.

except: aleatory contracts or sale ofhope. The obligation of a party will only ariseupon the happening of a certain event orconditions. The performance of one of theparties or both is contingent on theoccurrence of a particular event.

e.g. sale of lotto ticket iscontingent

upon the numbers would appear in the draw.

Insurance contracts.

6. Nominate contract - has a particularname to distinguish it from others.

As to nature:

1. movable or immovable - This is importantbecause one must determine the object of thesale.

Statute of Frauds:

a. movable

b. immovableMaceda Law Recto Law

2. A thing or a right - important as to the mode ofdelivery.

3. Va l i d , Vo i d a b l e , Vo i d , u n e n f o r c e a b l e

Rescissible etc.

What are the distinctions between absolute

sale and conditional sale?

Absolute Sale Conditional Sale

The seller does not reserve his title overthe thing sold, ownership passes upon delivery whether the buyer has actually paid a single centavo or not.

Conditions are imposed by the seller in order that ownership will pass.

Ownership automatically passes from the moment the condition happened.

Contract to sell

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A receipt was issued by A to B for the sum of

75k as partial payment for a car, the balance tobe paid at the end of the month. Is this acontract of sale?

This is a contract of sale. This is not a contractto sell because in a contract to sell ownership isreserved by the seller, such that despite deliveryto the buyer, the buyer did not acquireownership over the thing upon delivery.

In a contract to sell, upon the happening of thecondition or conditions imposed by the seller,ownership does not automatically pass to thebuyer. Though a contract to sell is a special formof a conditional sale, it is a peculiar kind of salebecause despite the happening of all theconditions, and despite actual delivery to thebuyer, the buyer does not automatically acquireownership.

Upon the happening of the condition in acontract to sell, the buyer is only given the rightto compel the seller to execute a final deed ofsale.

Dation in payment

Art. 1245 Dation in payment, whereby propertyis alienated to the creditor in satisfaction of adebt in money, shall be governed by the law onsales.

For dation in payment to be governed by the lawon sales it is required that one of the pre existingobligation must be in money, if the otherconsideration is not in money covered by dationin payment, it will not be governed by the law onsales, such will be governed by the law onnovation.

Practically there is a change in the object of thecontract. Example: If A owes B 100k and Awould offer a car to V, and if B accepts, suchwould be dation in payment. This would begoverned by the law on sales because the preexsiting obligation is in money.

However, if A is obliged to deliver a horse butinstead delivered a car and B accepts, thiswould be dation in payment but not under Art.

1245 but by novation by changing the object ofthe obligation.

As to nature, dation in payment is a special formof payment, while sales is a contract.

In dation in payment there must be a preexisting obligation. Since this is a special form ofpayment, there has to be an obligation. There isno pre exiting obligation in a contract of sale.

Massachusetts Rule

It is a rule where a contract was entered into fora contract for a piece of work. For example, aperson who entered a store to buy shoes, butsince there is no size that would fit such person,the store offered to make a pair of shoesspecially made for him. In a contract of sale, theshoes ordinarily sold are for the general market,while the shoes specially made, is a contract forpiece of work.

A obliged himself to deliver to B a car work

250k. B on the other hand, obliged himself to

deliver to B a watch plus cash in the amount

of 150k. What is the nature of the transaction

between A and B?

Depending on the intention of the parties, A andB may consider as one of sale or barter. If theintention of the parties are not clear base on theagreement, the nature of the contract woulddepend on the value of the watch. If the value ofthe watch is greater than 150k, it will be barter,but if the value of the watch is equal or less than150k, then it would be sale. The value f the caris irrelevant.

A gave B the exclusive right to sell his denim

jeans, promising B 20% discount on sales.

However, it was stipulated in their agreement

that B shall pay the price of this jeans 60

days from delivery. After the jeans was

deliver to B and before B could sell the

jeans, the store was burned without the fault

of anyone. Thus, can B still be compelled to

pay the price of this jeans?

Under Art. 1466, in construing a contractcontaining provisions characteristic of both the

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contract of sale and of the contract of agency tosell, the essential clauses of the wholeinstrument shall be considered.

If assuming this is a contract of agency theownership does not pass to B, the owner-sellershall bear the loss and noting that B is notnegligent under the facts. If however it is acontract of sale, then ownership passes to B,and since he is the owner, he bears the loss.

Since both are characteristic of a contract ofsale and agency, the provisions of Art. 1466however shall be applied. Here, the essentialclauses of the whole instrument must beinquired into. One of the clauses or conditionagreed upon by the parties is that B had to paythe price within 60 days. As such, that wouldmake the contract as one of sale and not ofagency. This is because 60 days from delivery,whether or not B has sold those jeans to otherpersons, he is already obliged to pay the price.Being a contract of sale therefor and therehaving a delivery, ownership passes to thebuyer. Hence, the buyer bears the loss.Therefore he cannot be compelled to pay theprice of the jeans.

Essential elements of a contract of sale?

1. Consent of the contracting parties

2. O b j e c t o r s u b j e c t m a t t e r w h ic h i s a determinate thing or determinatesubject matter (may either be a thing or right).

Service cannot be a subject matter of a

contract of sale.

3. Cause or consideration

As to the seller: the price in money or

its equivalent.

What is the effect of a contract of sale when

there is no consent given by one or both of

the parties?

If consent is not given by one or both of theparties, the contract is void because one of theessential elements is lacking. Under the law, it isconsidered as a fictitious contract. A fictitiouscontract would normally be that the signature of

the parties in the sale was forged. If thesignature of the seller was forged, that would bea fictitious contract. The alleged seller will nothave participation in the execution of thecontract.

Simulated Contract

HEre the parties actually have participation.They (the parties) voluntarily sign the deed ofsale, however they do not intend to be bound bythe terms of the contract, or they may intend tobe bound but not under a contract of sale but onsome other contract.

2 Kinds of simulated contracts

1. Absolutely simulated Contracts - Here, theparties do not want to be bound by thecontract, the common reason is to defraudcreditors. For example, the debtor wold sellhis remaining properties in a simulatedcontract to make it appear that he has noproperty, that may be reached by hiscreditors.

2. Relatively simulated contracts - Here it mayappear to be in a valid deed of sale but theyactually intend to enter into another contractsuch that it is actually a donation or tocircumvent the provisions of the legitime.

If consent is given, would it mean that the

contract is valid?

Not necessarily, because when consent is givenby an incapacitated person, such is void orvoidable as the case may be. This is becausethere are specific rules followed depending onthe basis of incapacity.

What are the kinds of incapacity

1. Absolute incapacity - A party cannot validlygive consent to any contract.

2. Relative incapacity - The party is prohibited inentering into specific contracts or specificpersons or things.

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a. Sale between spouses - The SC wouldconsistently consider this contract as void,except:

a1. when the spouses in their marriage

settlement, and agreed they constitute

complete separation of property. They

can enter into a contract of sale with

each other.

a2. Even if they did not execute amarriage settlement, if during their marriageobtained a judicial declaration of completeseparation of property.

a. sale by persons mentioned under Art. 1491,namely:

b1. The guardian, the property of the

person or persons who may be under

his guardianship;

b 2 . A g e n t s , t h e p r o p e r t y wh o s e a d m i n i s t r a t i o n o r s a l e m a yh a v e b e e n entrusted to them, unless theconsent ofthe principal has been given;

b3, Executors and administrators, the

p r o p e r t y o f t h e e s t a t e u n de r

administration;

b4. Public officers and employees, the

p r o p e r t y o f t h e S t a t e o r o fa n y s u b d i v i s i o n t h e r e o f , o r o f

a n y government-owned or controlled corporation, or institution, the

administration of which has been intrusted to them; this provision shall apply to judges and government

experts who, in any manner whatsoever, takepart in the sale;

b 5 . J u s t i c e s , j u d g e s , p r o se c u t i n g attorneys, clerks of superior andinferior courts, and other officers and

employees connected with the administration of justice, the property

and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise

their respective functions; this prohibition

includes the act of acquiring by assignment andshall apply to lawyers, with respect to theproperty and rights which may be the

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object of any litigation in which they maytake part by virtue of their profession.

b6. Any others specially disqualified by

law.

c. Aliens are prohibited from acquiring privatelands by purchase, except:

c1. former natural born citizens

Note: Even if consent is given by onecapacitated but such consent is vitiated consent,the contract is merely voidable either by fraud,mistake, intimidation, undue influence andviolence.

If the party giving consent is in the name ofanother person, but without the authority of suchperson or authority of the law, such contractshall be unenforceable.

Two kinds of capacity

1. Juridical capacity

It is the fitness to be the subject of legal

relations.

If the party has no juridical capacity, the

contract is definitely void.

All living natural persons have juridical

capacity.

An alleged corporation which has not

been registered with the SEC has no

juridical capacity.

2. Capacity to act

It is the power to do acts with legal

effects.

Without capacity to act, normally the

contract shall be voidable.

Particular restriction with respect tocapacity to act is minority or insanity, deafmutes who does not know how to read andwrite or persons suffering from

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civil interdiction.

H o w e v e r, i f s u c h m i n o r a c tu a l l y misrepresented as to his age, he willbe bound to such contract, under the principleof estoppel.

Note that when sale of items which are

necessary would bind that minor, but

not as to the actual contract price but

only the reasonable price of those

items.

Object of Subject matter of a contract of sale

(determinate thing or right)

1. Thing - Requisites of sales as to things:

a. The thing must be within the commerce ofmen, such as sale of navigable rivers, sale ofcadavers, sale of internal organs.

2. Must be licit (not prohibited by law)

3. They must be determinate

Sale of a car and sale of a mitsubishi

lancer glx forest black 2007 model.

A thing is considered determinate only

when it is particularly designated or

physically segregated from all others

of the same class.

Sale of a car shall be void, but the sale

of a mitsubishi lancer glx forest black

2007 model is a valid sale because under Art. 1460 (2) of the new civil code provides that the requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable ofbeing made determinate without the necessity of a

new or further agreement between the

parties.

If A and B agreed that A would sell and

transfer ownership over a palay that would

be harvested in a specific rice field and in a

specific season. However, upon the arrival of

the period nothing has been harvested. What

is the status of the sale? Since nothing has

been harvested, would the contract be

considered void? May the seller be held

liable for damages?

Things having the potential existence may bethe object of a valid sale. As long as the the 3essential requisites of a contract of sale ispresent, then there is a valid contract of sale.

The seller may not be liable for damagesbecause there are excuses for non performanceof obligation because it was due to fortuitousevent, as such it is excused. If however, thefailure to produce palay is through negligence,he is liable.

Sale of a lotto ticket is it a valid sale?

If before the draw such is a valid sale of theticket whether the winning numbers appeared ornot.

If after the draw, would depend on whether it is awinning or a losing ticket. Sale of a vain hope isa void sale as in the latter case.

In an agreement between A and B where A

sold a parcel of land to B, with a right to

repurchase within 1 year. On the third

month,, B sold the same parcel of land to C.

On the 11th month, A offered to repurchase

the land. Who had the better right between A

and C? or, will the sale between B and C be a

valid sale noting that the sale is with a right

to repurchase?

Sale is a consensual contract. As long as thereis a meeting of the minds as to the object and asto the price, then there is a valid and perfectedsale. This is a valid sale even if the object of thesale is with a right to repurchase. Further, underArt. 1465 Things subject to a resolutorycondition may be the object of the contract ofsale. Note: It is the ownership of a thing whichcan be the subject of a resolutory condition andnot the thing.

Since, A had the right to repurchase, A had thebetter right. However, when C is a innocentpurchaser for value as when there is noannotation at the back of the title of the parcel ofland that it is subject to a right to repurchase,and in such case C will have a better right.

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Sale of a right is otherwise known as?

Assignment of a right.

Is assignment of a right a sale?

Not necessarily. If the asssignment is with avaluable consideration, it is a sale, if gratuitousor by dation in payment it is not a sale as it isnot for consideration. Examples are sale of acredit or sale of shares of stock are consideredconsidered as rights.

F u r t h e r m o r e , t h e r i g h t m u s t n ot b e instransmissible. For a right to be theobject of a contract of sale, the same must notbe instransmissible. Under the law the only threegeneral reasons why a right may not betransmissble are 1) by nature, 2)by stipulation,3)law.

Rights which are purely personal cannot be asubject of sale by nature are intransmissible,rights where personal qualifications of a personare considered. With respect to stipulations,they may be transmissible by nature but bys t i p u l a t i o n t h e y m a y b e c o n s i de r e d instransmissible. Sublease of a propertymay be transmistted to another but bystipulation, it cannot be done and henceinstransmissible. In partnership, the rights in aspecific property, where the law requires thatassignment cannot be done without the consentof all the partners, the assignment of one cannotbe done without the consent of all the partners.

Is the sale of rights perfected by mere

consent?

Yes. By mere meeting of the minds, and withoutthe execution of a specific instrument, the saleshall be valid. However, to bind third personssuch sale must be recorded in the registry ofproperty.

In a deed of sale, where the price stated in

the deed was 100 lapad (10,000 yen) = 1

million yen, as such the sale not being in

Philippine peso, a valid sale? Can the seller

compel the buyer to pay in that currency?

That would be a valid sale even if the currencyis not Philippine currency, as the law requiresonly that it be in money or it may even be itsequivalent like promissory notes, or letters ofcredit.

If the contract would be entered into after RA

529 was repealed by RA 8183 in 1996, then theseller can be compelled to pay in a currencyother than Philippine peso. Otherwisethe seller cannot compel the buyer to pa injapanese currency.

Can there be a valid payment in 10,000 1

peso coins?

Yes, but the seller cannot be compelled toaccept because under Philippine law 1 pesocoins only have legal tender power up to 50pesos.

Sale of shares of stocks valued at 5000 but

there was no date as to the value of the

shares

The price must be certain as one of therequirement in order that the sale shall be valid.The date is very material because the value ofthe shares changes depending on the date.

Even if the date has been fixed but the time hasnot been considered such as the opening andclosing with respect to such exchange wouldaffect the validity of the sale. Because if thevalue upon the opening is 50 pesos but in theclosing it is only 39 pesos, then such is notcertain when the time is not considered.

Who can fix the price of the sale?

It is best that the parties shall agree as to theprice of the sale, but the parties may agree as towho may fix the price.

May the sale be perfected if one of the

parties is designated to fix the price?

It is valid provided the person designated to fixthe price, the price fixed must be accepted bythe other party. As to the price, if one of theparties designated fixed it at 1 million but theother party did not accept, there is no perfected

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contract of sale, because the latter did notaccept, there being no meeting of the minds.

May a third person be tasked by the original

parties to fixed the price?

It is void when the third person does not want tofix the price or unable to fix the price.

If such third person was able to fix the price butit is too high or it is too low and there is fraudemployed, the contract is not void, the remedyof such party is to go to court to fix the price.

May a sale be valid if the price of a car is

valued at 1 peso?

Yes, because under the law gross inadequacyas to the price does not invalidate the contract,except as otherwise provided by law.

An example of this exception is that of lesionwhere such would invalidate the contract of saleunder Art. 1381 where the guardian sells theproperty of the ward and there is lesion of morethan 25% of the value of such thing suchcontract is rescissible. If the buyer should be theguardian Art. 1481 should apply and the contractshall be void.

If there is a gross inadequacy and the partiesintend another contract, then such would be asimulated sale, and as such the contract shallbe void, as when the real purpose of the sale isdonation.

Is there a need for delivery in order that a

contract of sale be perfected?

As a consensual contract there is no need fordelivery in order that a contract of sale will beperfected. The only question is here the timewhen the contract is perfected.

Option sale

An option sale is perfected upon the fall of thehammer or any other customary manner bywhich the same may be considered perfected.Before the fall of the hammer, the buyer whomade his bid may actually withdraw his bid.

With respect to the auctioneer, he may withdrawas a rule, before the fall of the hammer. Unlessthe bidding has been announced to be withoutreserved as far as the auctioneer is concerned.

Option contracts

In the case of Sanchez vs. Rigos, Rigos offeredto sell a parcel of land to Sanchez for a certainprice, and Rigos gave Sanchez 2 years withinwhich to decide whether he will buy it or not. Inoptions the optionee or offeree he is not boundto purchase, but he has the option. ThereforeSanchez has the option on whether to buy theland or not. Before the lapse of the 2 yearperiod, Sanchez told Rigos that he is buying theland, but Rigos refused to sell it and said that hewas not bound by this agreement because therewas no option money given by Sanchez for lackof consideration.

But the SC said that since Sanchez the offereeaccepted the offer and considered to buy withinthe period before the offer was withdrawn aperfected contract of sale was created evenwithout the option money given by the offeree.In this case there was no option contract, andthis is merely an option agreement wherebywhat was given is merely an offer on the part ofR i g o s , t h e r e f o r e b e f o r e t h e o pt i o n w a s withdrawn regardless whether anoption money is given, a perfected contract ofsale was created.

Assuming there was option money, before theofferee decide to buy the offerror withdraw onthe 6th month, but on the 10th month the offereedecided that the offeror now want to buy. Canthe offeree compel the seller to sell the offerhaving been withdrawn before it was accepted?No. The action for specific performance will notprosper because the offeree who decided tobuy, when the offerror withdraw the same, thereis no more offer to be considered.

But the offeree can claim for damages becausethe offerror is bound to give the offeree 2 yearswithin which to decide. He is liable not under aperfected contract of sale but on a perfectedcontract to offer.

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Option money distinguished from earnest

money

Option money is not considered part of theprice; earnest money is considered as part ofthe price but also considered as proof of aperfected contract of sale.

Note however, as decided by the SC, when theoption money will be treated by the parties aspart of the price, the same shall be bindingbetween the parties. Without stipulation, it is notconsidered part of the price. Option money is aconsideration for the option.

Earnest money

Earnest money may be called by any othername but if it is considered by the parties as partof the price, such would be considered asearnest money.

However, even if there is earnest money, it doesnot mean that there is already a perfectedcontract of sale. If it is merely a proof of aperfected contract of sale. Even if there isearnest money given, if the contracting partieshave not agreed as to the total amount of thepurchase price, then there will never be acontract of sale.

Even though they have agreed as to the totalamount of the price and an earnest money isgiven, and were able to agree as to the totalamount of the price, but not as to the object thenthere will be no perfected contract of sale.Earnest money is not the only requirement in aperfected contract of sale.There is a perfected sale by the mere

meeting of the minds, does it mean that it is

already enforceable?

Not that upon perfection the parties to suchcontract, the parties already have the right tocompel the parties to perform their respectiveobligations. But perfection is subject toformalities required by law like the statute offrauds.

There may be a meeting of the minds, but thesame shall be unenforceable.

As a rule, there is no actual form as provided inArt. 1483 that a contract of sale may be inwriting, or by word of mouth, or partly in writingand partly by word of mouth , or may be inferredfrom the conduct of the parties for as long as theessential requisites are present. But however,when the law itself provides for a particular formthen the same must be complied with in orderfor it to be enforceable, such as the statute offrauds and the cattle registration decree.

Statute of Frauds

In sale of a parcel of land which is not in writing,is a valid contract but unenforceable.

If the object of the sale is a movable, the valueof the price agreed upon must be consideredand not the actual value of the price must beconsidered. If the price is at least 500 pesos andthe same is not in writing, the same isunenforceable. Even if the price is less than 500pesos the same must be in writing when thesame is not to be performed within 1 year.

In the case of Paredes vs. Aquino, Paredes herewas a prospective buyer and Aquino was theowner of a parcel of land. The negotiation wasmade through letters and telegrams. Ultimatelythe owner made a letter signed by him toParedes stating that he and his wife alreadyagreed to sell the land at the specific price.However, the execution of the sale shall bemade upon arrival of Paredes in Palawan, asthe latter is from Northern Luzon. When Paredesarrived in Palawan, the seller said that he wasno longer interested in selling the land. Hence,Paredes filed an action to compel Aquino to sellthe land. Aquinos defense on the other handwas he Statute of Frauds, since there was nodeed of sale, there was no perfected contract ofsale. The SC ruled that the contract was nolonger covered by the statute of frauds sincethere was already a letter. Under the law,specifically under Art. 1403 even if the contractdoes not comply with the statute of frauds, thesame shall be enforceable and no longercovered under the operation of the statute offrauds when the same was made through somenote or memorandum, be in writing, andsubscribed by the party charged, or by his

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agent. Hence, Aquino can be compelled toexecute a final deed of sale.

In a deed of sale there can be 100s ob

obligations of the vendors because of the

stipulation. There are only few obligations

imposed by law to the vendors, and these

are:

1. The obligation to transfer ownership

2. The obligation to deliver

3. The obligation to warrant the thing

4. The obligation to take care of the thing soldwith the diligence of a good father of thefamily from the time of perfection upto thetime of delivery.

5. The obligations to pay the capital gains tax

6. The obligations to deliver the fruits

Obligations to deliver the fruits

A sale of a mango plantation between A and

B, A agreed to deliver to B the fruits only

after 6 months from the perfection of the

sale. Despite the arrival of the period, the

seller took him 1 month to deliver the fruits

to the buyer. A however, sold the fruits to a

third person X in good faith. Can B recover

the fruits from X? What are the remedies of

the buyer as against the seller?

Under the law under Art. 1537, The vendor isbound to deliver the thing sold and itsaccessions and accessories in the condition inwhich they were upon the perfection of thecontract.

All the fruits shall pertain to the vendee from theday on which the contract was perfected.

Art. 1537 however should be considered inrelation to Art. 1164 which provides that thecreditor has a right to the fruits of the thing fromthe time the obligation to deliver it arises.However, he shall acquire no real right over ituntil the same has been delivered to him.

From the foregoing therefore the vendor actuallyhas rights to the fruits but not from the time ofperfection. B is only entitled to the fruits of thething from the end of the 6 month period base

on their agreement because until such timethere is no obligation to deliver which arise.

Secondly, the buyer cannot compel the buyer toreceive the fruits because he shall not acquirereal rights over such fruits until the delivery ofthe thing. The buyers remedy is going after theseller.

Obligation to take care of the thing

The premise in this kind of obligation of theseller is a determinate thing. If the thing sold is ageneric thing, there is nothing to be taken careof, it will become determinate only upon delivery.

One scenario where the seller does not have theobligation to take care of the thing from the timeof perfection, when the buyer already was inpossession of the thing at the time of perfection.

Obligation to pay expenses or capital gains

tax

Through stipulation, the parties can agree as towho is going to pay the tax.

May a person sell something which does not

belong to him? (Bar Question)

Yes. Ownership over a thing is not a requisite inorder for a sale to become valid. But if the sellerdoes not own the thing he may have a problemi n p e r f o r m i n g h i s o b l i g a t i o n t ot r a n s f e r ownership. The problem actually iswhether or not the buyer acquire ownership overthe thing sold by the person selling who doesnot own the thing. Thus, only those personswho have the right to sell can transferownership.

The owner or even if not the owner a person hasbeen given authority by the owner, therefore hewill have the right to sell, or the law authorizes aperson the power to sell (art. 1505 statutorypower to sell) (e.g. the notary public, thepledgee under pledge, under the mortgage lawthe liquidators have authority to sell, theguardian, receivers etc), those who have theauthority of the court (sheriff in an executionsale or foreclosure sale).

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May the buyer actually acquire ownership

over the thing sold if the seller has no right

to sell?

Under Art. 1505 the buyer does not acquirebetter title than what the seller had. If the selleris neither the owner or does not have authorityto sell, the buyer acquires no better title thanwhat the seller had. As an exception, the buyercan acquire better title than what the seller had,even if the seller is not the owner or does nothave the right to sell, when:

a. by estoppel in pait - by the principle ofestoppel a person will be precluded fromdenying that a person has authority to sell bythe owners acts or representations. Thisestoppel is other wise known as estoppel inpait (equitable kind of estoppel).

a. estoppel by deed (technical estoppel)-Art.

1434. When a person who is not the owner ofa thing sells or alienates and delivers it, andlater the seller or grantor acquires titlethereto, such title passes by operation of lawto the buyer or grantee.

a. Estoppel by record (technical estoppel)-

a. A sale by an apparent owner -

a. Purchases from a merchant store

A and B are co-owners of a parcel of land. A

and B sold it to X verbally. X sold the land for

150,000 to Y. Would Y be considered to have

acquired ownership over the parcel of land?

Under Art. 1434 or otherwise known as estoppelby deed or technical estoppel. When the sellerwho was not the owner at the time of the saleacquired ownership, automatically ownershippasses to the buyer by operation of law.

However, under Art. 1434 does not applybecause the law requires the delivery of theparcel of land to X the buyer, and under thefacts art. 1434 would not apply because 1. therewas no showing that there was delivery/paymentalready due to the verbal nature of the salehence unenforceable. Hence it could not be said

that by operation of law, Y likewise acquiredownership by estoppel by deed.

Sale by the nephew of the owner of a parcel

of land. Since the nephew could not deliver

the land to the buyer, the buyer filed a

complaint for estafa. In this criminal case, for

the accused to be acquitted, he asked his

uncle to testify that he actually had the

authority to sell. When the uncle testified in

court, the nephew was acquitted because

after all, he had the authority to sell. After the

acquittal of the nephew and the buyer

demanded from the uncle for the delivery,

the uncle refused for in reality he said that

he did not authorized his nephew. So when a

civil case was filed to compel the uncle to

deliver and transfer ownership over the

thing, will that action prosper?

Yes, because the owner cannot be allowed nowthat his nephew was not authorized when hetestified in court that he gave such authority.This is considered as estoppel by record andalso considered technical estoppel.

Discuss Sale by an apparent owner?

As provided by factors act, recording laws, andother laws which enable the apparent owner ofgoods to dispose of them as if he were the realowner.

Under the Factors (an old name for agent)

Act, even if the agent has no right to sell a

specific thing a third person may actually

acquire ownership because he can only rely

on the power of attorney as written. If for

example an agent through a special power of

attorney was given the power to purchase a

car, however in the verbal instruction the

agent was authorized to sell that car only to

o n e o f t h e m e m b e r s o f a c e r t

a i n organization. But the agent sold the car

to a person other than to a member of the

organization as directed by the principal.

Would that buyer acquire ownership even if

the agent has no right to sell to that buyer?

Yes. Under Art 1900 so far as third persons areconcerned, they only have to rely on the SPA aswritten even if the seller agent was not

13

authorized as instructed, the buyer acquireownership over the thing subject of the sale.

The elder brother Miguel Mapalo donated

half of his land to his younger brother

because the latter was about to get married.

Instead of the younger brother asked his

elder brother to sign a deed of donation, he

asked the latter to sign a deed of sale not

only half of the land but the entire parcel of

land. He was therefore able to register the

property in his name. After 10 years,

however, he sold this entire parcel of land to

the Narcisos. Obviously, the younger brother

is not authorized to sell with respect to the

other half, because what was only given is

only half of the land. But the Narcisos

claimed that they bought the land on an

apparent owner because the entire property

was registered in the ame of the seller. Did

the Narcisos acquired ownership because

they bought the entire property from an

apparent owner?

Not necessarily, because the seller must notonly be an apparent owner but buyer must alsobe a buyer in good faith. The buyers in this caseis not in good faith because before they boughtthe land, they went first to the house of MiguelMagpalo to inquire on whether he (youngerbrother) would allow his younger brother to sellthat parcel of land. Therefore they are in badfaith because they knew and because Miguelalso had the right to the half portion of the landwhen they bought the entire parcel of land.Therefore they did not acquire ownership overthe entire parcel of land (Mapalo vs. Mapalo)

The owner of a parcel of land covered by a

TCT or OCT, mortgaged a parcel of land to

the creditor and delivered the TCT or OCT.

This mortgagee forged the signature of the

owner in a deed of sale. Thus, he was able to

register the property in his name with that

forged deed. Thereafter, the mortgagee who

was a buyer in the forged deed, sold that

land to a third person who had no knowledge

of the transaction between the mortgagor A

and mortgagee B. Did the mortgagee

acquired ownership? Did the buyer acquired

the property over the parcel of land? When

can a buyer said to be in good faith?

The mortgagee did not acquire ownership byvirtue of a deed of sale. A forged deed is a voidinstrument and cannot be the source of a validtitle to the buyer. This forged deed however, canbe the root of a valid title under the mirrorprinciple when the buyer bought it from themortgagee in whose name it was registered,and relied on the TCT, then if he acquired theproperty in good faith, then he had acquiredownership over the parcel of land under Art.1505 in relation to PD 1529, when the buyerbought a parcel of land relying on the TCT aloneand buying it in good faith then he will have abetter right than the owner.

By the mere fact that the buyer did not know theexecution of the time of the deed necessarilymean he is already a buyer in good faith? Notnecessarily because the law requires that hehad fully paid without knowledge of defect in thetitle of the seller. He may have acquiredknowledge after the execution of the deed ofsale but before payment, he can no longer beconsidered a buyer in good faith.

*The owner of a parcel of land entrusted the

secretary to take hold of the TCT only for

safekeeping. Thus the secretary forged the

signature of his boss in a deed of sale. Thus

he was able to register the property in his

name, and sold this parcel of land to a third

person, and such person is considered to be

i n g o o d f a i t h , t h e n h e h a s a c

q u i r e d ownership over the thing sold even

if the seller had nor right to sell. This is

because the buyer bought it from an

apparent owner who disposed of the thing as

if it was really owned by him.

*Under the New Civil Code on negotiable

documents of title, if goods are covered by a

negotiable document of title and there was a

n e g o t i a t i o n o f t h i s d o c u m e n t

a s a consequence of a sale, if the buyer

bought the good in good faith and for value,

he will be protected under the law, and

acquire ownership over the goods even if the

seller do not have the right to sell. The seller

may have acquired over the document of title

through violence, but if it is negotiable

document of title especially if it is a bearer

14

instrument, then the buyer may acquire

ownership over the goods even if the seller

had no right to sell.

S u n b r o t h e r s w a s t h e o w n e r

o f t h e refrigerator (they are engaged in

the business of selling refrigerators) and

sold it to Lopez in an installment basis.

As stipulated Sun brothers reserved

ownership over the refrigerator until full

payment. The buyer Lopez paid only 300 and

the remaining balance to be paid on a

monthly basis. However, Lopez sold the

refrigerator to Velasco the very next day in

his store to Co Cang Chiu. Sun brothers after

learning of the s a l e , fi l e d a n a c t i o n

t o r e c o v e r t h e refrigerator. Would the

action prosper? Did Co Cang Chiu acquired

ownership over the refrigerator? Can Sun

brothers recover the refrigerator by

reimbursing the price paid by Co Cang Chiu?

As to Velasco, the rule under Art. 1505 is thatthe buyer cannot acquire better title than whatthe seller had.

As to Co Cang Chiu, he acquired ownershipover the refrigerator because he bought it in amerchant store. Under 1505 last paragraph, ifthe owner bought the thing in good faith from amerchant store he acquires ownership over thething. Note, he must have no knowledge of thedefect in the title of the goods.

As to the issue on whether Sun Brothers recoverthe refrigerator from Co Cang Chiu byreimbursing the price paid. The SC held thatSun brothers cannot. This is because under Art1505, the ownership of the buyer who boughtthat thing in the merchant store and in good faithand for value, is absolute in character.

Art. 559 does not apply to this scrnario becauseSun Bros. was not unlawfully deprived nor is thething lost. If the thing was lost or the owner isunlawfully deprived, such owner can recover thesame even if it was sol through a public sale orin a merchant store but such owner mustreimburse the person who bought in in goodfaith and for value. (Sun brothers and companyvs. Jose Velasco and Co Cang Chu)

Art. 559. The possession of movable property acquired in

good faith is equivalent to a title. Nevertheless, one who

has lost any movable or has been unlawfully deprived

thereof may recover it from the person in possession of the

same.

If the possessor of a movable lost or which the owner has

been unlawfully deprived, has acquired it in good faith at a

public sale, the owner cannot obtain its return without

reimbursing the price paid therefor. (464a)

One painting owned by A was stolen from

her. Later on she noticed that the painting

was in the room of B, and asked how he

acquired the painting, he said that he

acquired the same in a gallery auction. Can

the owner of the painting from whom the

painting was stolen recover the same from

B?

A gallery auction is not a public sale. Since it isnot a public sale, the owner can recover theproperty even without reimbursement.

If it is a public sale, the owner can recover thepainting provided the owner reimburses thebuyer of the price paid in that sale.

A diamond ring was robbed in a bus, and

this same diamond ring has become the

object of a public sale of a pawnshop. Can

the owner recover the ring from the buyer in

the public sale initiated by the pawnshop?

Yes, if the buyer is in good faith, and so long theowner is willing to reimburse the buyer of theprice paid in that sale, he may recover thesame.

Can the owner recover a thing from the

buyer who bought in a merchant store?

No. The owner cannot recover the thing from thebuyer even if the same was lost or the ownerwas unlawfully deprived thereof, and even if theowner wishes to reimburse the buyer for theprice paid. As a matter of right, the buyer ingood faith acquires absolute title over the thing.

How is transfer of ownership over a thing

effected?

It is effected by delivery, actual or constructive.

15

Everytime there is delivery, the buyer

acquires ownership upon delivery?

Not necessarily. This is not an absolute thatupon delivery as a consequence of sale, there istransfer of ownership. There are kinds of salethat despite delivery, the buyer does not acquireownership. Examples of which are:

a. Conditional sale - Here ownership is reservedby the seller, such that despite deliveryownership does not pass to the buyer. Thebuyer does not acquire ownership upondelivery but rather upon the happening of thecondition (usually upon full payment of theprice).

a. A sale on Trial, sale on satisfaction or sale onapproval - Upon delivery, even if there is noactual delivery, there is no transfer ofownership at the time of delivery. The buyerwill acquire ownership over the thing soldwhen the buyer signifies his acceptance orapproval over the thing sold. Even If he doesnot signify his approval ownership may stillpass to him if: 1) there is a period agreedupon by the parties with which to decide andupon lapse of the period he had impliedlyaccepted or 2) even before the lapse of aperiod, he may be considered as to haveimpliedly accepted if he did an act wherein hewould be considered to have adopted thet r a n s a c t i o n t h e n o w n e r s h i p wo u l d b e considered to have pass on thebuyer (e.g. even if he has 10 days withinwhich to decide, after two days however fromdelivery, he sold the car to another) 3) theremay be no period the buyer is deemed tohave accepted after the lapse of areasonable time. What is r e a s o n a b l et i m e w i l l d e p e n d o n t h ecircumstances surrounding the sale, thepurpose of the sale, or the nature of the thingsold.

In Sale or Return, ownership passes to the

buyer upon delivery?

In this kind of sale ownership passes to thebuyer upon delivery. However in this kind ofsale, the buyer is given the right to reimbursethe title back to the seller.

A car was sold at 150,000, 75,000 was paid atthe execution of the deed of sale, the balancepayable on a monthly basis. The car wasdelivered to the buyer. However, before he couldpay the balance, the car was destroyed, can thebuyer still be compelled to pay the balance?

He can still be compelled to pay the balance.This is because upon delivery of the car to thebuyer, there being no retention or reservation ofownership by the seller, ownership passes to thebuyer. Under Art 1504, res perit domino rule, theowner bears the loss.

In sale on approval, who bears the loss?

The seller and not the buyer even if there is nodelivery, because the owner is still the seller.Under the res perit domino rule, the owner bearsthe loss.

A set of AMJUR was sold to Tabora on

installment basis. On the day these books

were delivered to the office of Atty. Tabora,

the entire block where the office of the latter

is located was burned together with the

AMJUR. Atty Tabora refused to pay the

balance despite demand by lawyers co.

Lawyers co therefore filed a case. Two

defenses were raised 1) res perit domino rule

because there is a stipulation in the contract

that the seller shall retain ownership over the

books until full payment, and if lawyers co

was the owner then it should bear the loss.

Is the argument correct?

No. If there was a stipulation in the contract thatownership shall be retained by lawyers co untilfull payment was made, there was also astipulation that the risk of loss shall pertain tothe buyer at the time the books were deliveredwhatever the cause of the loss. This is anexception to the res perit domino rule.

Assuming there was no stipulation that the

risk of loss shall pertain to the buyer upon

delivery, may the buyer still be held to

answer for the loss?

Under Art. 1504, when the owner reserved thetitle to the property only to secure the payment

16

of the price of the buyer, then by law, risk of lossshall only pertain to the buyer. This is known asa security title. Therefore, even if the buyer didnot acquire title upon delivery, he bears the loss.

Whenever there is delay in the delivery of the

thing sold, who bears the loss?

It depends who may be at fault for the delay inthe delivery. It may be the seller or the buyer.If for example, there is a stipulation that the

buyer must retrieve the goods on the

warehouse of the seller on a specific date.

On that date agreed upon, the seller

demanded the buyer to get the goods at the

warehouse. Despite such, the buyer failed to

o b t a i n t h e g o o d s . T h e n e x t d

a y, t h e warehouse was burned. Who then

shall bear the loss?

Here the seller was still the owner, however, thebuyer was already in delay in retrieving thegoods, hence, under Art. 1504, the buyer bearsthe loss, as an exception to the res perit dominorule.

If the seller is the one at fault, who bears the

loss?

The premise here, the ownership should havebeen passed to the buyer but the goods are stillwith the seller (this could happen by constructivedelivery but physical possession is still with theseller), even so, the seller shall bear the lossbecause he was the one at fault for the delay inthe delivery of the thing sold despite demand bythe buyer.

An owner of a registered land sold the land

to B. B did not register the sale. A few days

thereafter, A sold again the same parcel of

land to C, who this time registered the sale.

Who between B and C have a better right to

this parcel of land?

It depends on whether or not C register the salein good faith.

Note: In Art. 1544 pertaining to double sales, asto which rule to apply would depend on thenature of the thing sold whether it is immovableor a a movable. If it is a sale of a movable.

If the thing sold is a movable, the first personwho took possession over the thing shall have abetter right.

If the thing sold is an immovable, the buyer whofirst register in good faith will have the betterright, if there was no registration, then theperson who first took possession, if no one is inpossession then it will be the buyer with theoldest title in good faith. Good faith here doesnot pertain to knowledge of a defect of title ofthe second buyer since he is the first buyer,good faith here means he has no knowledge ofthe defect on the title of the seller.

If a thing is sold to two or more persons,

what will be the effect of: 1) the first buyer

was the first to register with knowledge of

the second sale; 2) the second buyer was the

first to register with knowledge of the first

sale. Who will have a better right in these to

scenarios?

1. In the first scenario, his knowledge of thesecond sale does not make him a registrant inbad faith. Knowledge should pertain to onewhich is prior sale in order to make one aregistrant in bad faith. Hence, here he has abetter right.

2. As to the second scenario, he is considered aregistrant in bad faith because of his priorknowledge of a former sale. Hence, he willnot have a better right.

If a person bought the thing without

knowledge of the prior sale and registered

the same, would that mean he is a registrant

in good faith?

Not necessarily. This is because he may haveacquired knowledge prior to the registration. butafter buying. What is required by law is not abuyer in good faith, but a registrant in good faith.

Bautista vs. Sioson

The owner sold a registered parcel of land to

B who did not register, neither did he took

physical possession. After the sale they

executed a lease agreement in which the

17

buyer is now the lessor and that the seller

became the lessee. Hence, the seller

continued to be in possession of the land

not as a concept of an owner but of a lessee.

After the sale and the contract of lease, A

sold this parcel of land to C, who also did

not register the same, and this time C took

physical possession. Who between B and C

had a better right?

B would have a better right because when Bexecuted a lease contract with A, B is incontemplation of law in possession of theproperty, which is legal possession, he obviouslyis therefore a possessor in good faith, the firstwho took possession in good faith. Though Chad physical possession over the property, he isconsidered to be the one second in possession.B therefore was considered to have a betterright.

Note: Legal possession is sufficient to determineas to who have a better right between twopersons.

Carumba vs. CA

Sale of a parcel of land to B who took

possession of the land. However, this seller

a judgment debtor to one of his creditor.

Because of a judgment in favor of a creditor

C, the parcel of land had become the subject

of an execution sale. Then the buyer became

C who registered the sale. Who will have a

better right between B and C and C had no

knowledge of the first sale?

B would have a better right because this parcelof land was registered under the TorrensSystem. Art.1544 does not apply to unregisteredlands. Only those lands which are registeredunder the Torrens System can be covered bythe provisions of Art. 1544.

It could be noticed that C had registered theland, but the same is not covered under thetorrens system because, there is anothersystem of registration of unregistered lands.There is a different book covered by this kind ofregistration, hence, Art 1544 would not apply.

Therefore, if ARt. 1544 would not apply, B wouldhave a better right because there was actualdelivery to him. Therfore, under the general rule,upon delivery, ownership passes to the buyer.When ownership had passed to the buyer whenthe property was sold in the execution sale, thebuyer would not get anything from the executionsale because he merely steps into the shoes ofthe judgment debtor. Since the judgment debtorhad no ownership over the land at the time ofsale, the he did not acquire ownership by virtueof that sale.

Note: To determine that the land is under thetorrens system, the ownership is proven byTCTs or OCTs, otherwise if proof of ownershipare mere tax declarations, it will not beconsidered as registered land.Obligation to deliver to object of the sale

In this obligation one must distinguish first thesubject matter of the sale whether it is a thing ora right.

Ownership passes upon meeting of the

minds as a consequence of sale?

False, there must be delivery.

As to delivery of things as a consequence of

sale known as tradition, there are two modes

recognized by law, what are these?

1. Actual - Material delivery or real delivery

To have a valid actual delivery the thing

must be subject to possessio n and

control of the vendee.

If the thing sold was delivered to a third

person, there may stil l be actuald e l i v e r y w h e n s u c h t h i r d p e r s on h a s authority to receive from the vendee.

As suchhe becomes an agent of the vendee,thus, there is actual delivery.

2. Constructive delivery

a. By the execution of a public instrument (if thecontrary intention does not appear on thedocument) by the mere execution of the

18

public instrument, that is already equivalent todelivery. Hence, ownership passes to thebuyer.

a. Delivery of Keys (Tradicion Symbolica)

a. By mere consent or agreement of the partiesprovided at the time of the sale; possession ofthe goods cannot be transferred to the buyer(e.g. when the thing was the subject matter ofthe lease, because before expiration of thelease the thing cannot be transferred to thebuyer).

a. Tradicion Brevi Manu - Here, the buyer wasalready in possession the property, but thereis a change as to the status of possessionsuch as that of a lessee, depositary or agentto possession in the concept of an owner.

a. Tradicion Constitutum Possesorium - Herethe seller would still continue to be inpossession of the thing after the sale but nolonger in the concept of an owner but inanother capacity.

The original owner here, X & Y whose

properties are fixtures in a salon, while Z &

D was a judgment creditor of X & Y. Because

of judgment rendered by a court in favor of

Z, the sheriff levied upon the properties of X

and Y which was still in the latters physical

p o s s e s s i o n . T h i s e x e c u t i o n s

a l e w a s questioned by A & B on the

premise that these goods were already sold

to them prior to the levy. Hence, if these

goods were sold to them prior to the levy,

ownership already passed to A & B, and

as such there is nothing more to be

levied upon. But the d e b t o r w a s v e r

y m u c h i n p h y s i c a l possession.

May A & B be considered as owners of

the land despite them not being in actual

physical possession of the good sold, and

make them to have a better right over the

judgment creditors over an execution sale?

Even if there was no physical possession andthere was no actual delivery, there may be aconstructive delivery by the execution of a publicinstrument. Unfortunately in this case, the deedof sale was merely in a private instrument.

In order for the ownership to pass, it had to be ina public instrument (constructive delivery).

If for example the seller and the buyer

pursuant to their agreement delivered the

goods to a common carrier, upon delivery of

the goods to a common carrier, would that

result in transfer of ownership immediately?

If delivery to the common carrier is delivery tothe buyer, then ownership passes to the buyerupon delivery to the common carrier. Such is ageneral rule, the exceptions are:

1. if there was stipulation that ownership will notpass to the buyer until full payment.

2. Even if the deed of sale does not provide forsuch stipulation, the seller may have obtaineda bill of lading which provides that the goodsare deliverable to the seller himself or hisagent. Thus despite delivery of the goods tothe ship, there is no transfer of ownershipbecause it would still be the seller who wouldhave the right to obtain the goods from thecommon carrier.

Kind s o f Deliver y o f Incorporea l propertie s

(Quasi T radicion)

What are the three modes of deliveries as to

rights?

1. Execution of a public instrument; (from thedelivery of certificates, ownership passes)

2. Use by the vendee of his rights with thevendors consent (e.g. in sales of shares ofstock, the vendee may not always necessarilyhave the right to exercise the stockholdersrights over the share, the buyer can onlyexercise such right with the consent of thevendor).

In a sale of 1000 pairs of shoes, as agreed

upon by the parties. The seller delivered

1200 pairs of shoes instead of only 1000.

May the buyer refused to accept everything?

19

Under the law, he would only have the right toreject the excess, but he can be compelled toaccept the 1000.

Assuming if what was agreed upon was

1000, and the seller delivered only 800, can

buyer be compelled to receive the 800?

No, because under the law, partial performanceis non performance. As a rule, a creditor cannotaccept partial performance of the obligation,except when there is a stipulation that partialdeliveries is allowed, or when the obligationpertains to one which is partly liquidated andpartly unliquidated, obligation to different termand conditions.

The buyer accepted only 800 at 1000 per pair

of shoes, it so happened the seller can no

longer deliver the balance of 200, since what

was previously stipulated was 1000 pair of

s h o e s . H o w m u c h c a n t h e b u y

e r b e compelled to pay?

It depends on whether the buyer was aware thatthe seller could no longer the balance or whenhe accepted he was not aware that the sellercould no longer deliver the balance.If he was aware that the seller can no longerdeliver the balance, then he can be compelled topay at the contract rate. In this case, 800,000.

If he had no knowledge or awareness that theseller can no longer deliver the balance when heaccepted, then under the law the buyer can onlybe compelled to pay the fair value of this thing.

An obligation to deliver 1000 cavans of a

specific rice (milagrosa). However, the seller

delivered 1200 cavans of both milagrosa and

combodian rice. May the buyer have the right

to reject everything?

Yes he would have the right to reject everythingif the goods are deemed indivisible. Meaning ineach sack of rice, cambodian rice and milagrosarice are mixed.

However, if in each sack it is clear from eachthat it is milagrosa or combadian then, thatwould not be considered as indivisible, and he

can only be compelled the part which ismilagrosa, and reject the combodian rice.

Sale of a parcel of land and the price agreed

upon is 1 million at 100 sq. m., the actual

area delivered was only 95 square meters,

what are the remedies of the buyer?

1. Specific performance if it is possible for theseller to deliver the balance such when theadjacent land is still owned by the seller; or

2. proportional reduction of the price is with aspecific amount given to a specific measure.If the sale is a lump sum sale, then anydeficiency in the area, there is no right toproportional reduction of the price. Further,even if there is an increase in the areadelivered, there will also be no additionalincrease in the price.

3. Rescission - As a rule it will not be a remedybase on the facts. Because rescission willonly be a remedy if the area lacking is morethan 10% of the area agreed upon. But evenif the area lacking is not more than 10%,rescission will be a remedy if the buyer canprove that he would not have bought the landhad he known that it was less than 100 sq. m.

Note: Rescission and proportional reduction ifthe property delivered is of inferior quality. If byagreement the parties intend to sell a rice field,but it turned out that 20% of the land is notactually a rice field and cannot be planted bypalay. The remedy of the buyer is to make aproportional reduction of the price if he stillwould want the land or rescission would be aremedy if the area which is inferior is more than10% of the total area of the land.

Place of Delivery

Generally, ownership passes at the place of delivery.

Where should the thing or goods be delivered?

The seller delivered the goods to the place of business

of the buyer and the buyer refused to accept the

goods. From that moment does it mean that the buyer

is already in delay because he refused to accept the

goods?

It depends on whether there is a stipulation as to the place

of delivery or not. If there was such a stipulation, and the

20

place agreed upon was not the place of business of the

buyer, of course he would have the right to refused to

accept the delivery of the goods in his place of business.

In other words, with respect to the place of delivery the first

thing that should be considered is the:

1. stipulation

2. place fixed by usage or trade

3. place of business of the seller

4. sellers place of residence

5. If the thing is not in the place of business seller nor

buyer, known both to the parties, but in some other

place. The place of delivery shall be where the thing is

located at the time of perfection of the contract.

Places fixed by usage or trade

If there is no stipulation as to the place of delivery, the law

provides that, it will be the place fixed by the usage or

trade.

Shipping Arrangements; place of delivery

1. F.O.B. (Free On Board) Arrangement (Point of

Destination)

If there is no place stipulated as to the place of delivery and

the goods are to be shipped on an FOB basis, the place of

delivery shall be the place ownership is deemed to pass. In

an FOB arrangement, the parties should have agreed to a

specific port whether it is the port of origin or it could be the

port of destination.

In an FOB port of origin, the place of delivery shall be

considered to be the port of origin. It would be the port of

origin because FOB mean Free On Board, and Free On

Board means that the moment the goods arrived at the port

of origin, the seller will be free from any expense on

transportation of the goods to the buyer. From the port of

origin, it will be the buyer who will shoulder the expenses

for the transportation. It would appear since the buyer who

shoulder the expenses, it is the buyer who is the owner of

the goods as it reached the port of origin. If he is already

the owner under this FOB arrangement therefore, the place

of delivery shall be the port of Manila.

In FOB port of destination arrangement, the seller would

have to shoulder the expenses for the transportation of the

goods, upto and until the arrival of the goods at the port of

destination. Hence, delivery passes at the port of

destination.

2. C.I.F. (costs, insurance,freight) Arrangement (Point of

Origin)

In a CIF arrangement, the place of delivery is considered to

be the port of origin because, the price paid by the buyer

would already include the costs, insurance, and freight.

The buyer pays for the freight, it appears therefore that

ownership passes at the port of origin, hence, delivery is

made at the port of origin.

Is it possible in a CIF arrangement or in an FOB

arrangement, the place of delivery shall be the port of

destination?

These delivery arrangements only make rules of

presumption. It must give way to the real intention of the

parties as to the place of delivery, without expressly

stipulating as to the place of delivery. The intention of the

parties as to the place of delivery shall be determined by

the place and manner of the payment of the price. Where

the price is paid, that is determinative of the place of

delivery.

Under Art. 1582, as to the place of payment, if there is no

place agreed upon where payment should be made, the

place of payment should be made to the place of delivery.

In one case, it was stipulated in the contract that the seller

can demand the payment of the price, upon the arrival of

the goods at the port of destination in a CIF arrangement.

The SC ruled that the place of delivery is the port of

destination because it is only at that port that the seller can

demand on the payment of the price. They have agreed on

a CIF arrangement (port of destination) for the purpose of

fixing of the price, because generally, CIF means port of

origin, however out of the price, it will be the port of

destination, and payment shall include the cost, the

insurance and the freight. The place of delivery being the

port of destination, ownership passes in the port of

destination. Effectively the freight shall be shouldered by

the buyer, but that amount will be taken to the price fixed

by the seller.

In another case, the parties agreed in an FOB

arrangement, but it was stipulated in the contract that the

seller can demand the payment of the price by presenting

the bill of lading to the buyer. The bill of lading can be

presented at the port of origin to the buyer because a bill of

lading can be taken from the common carrier at the port of

origin. Despite of an FOB arrange, the place of delivery is

the port of origin. FOB port of destination is arranged in this

case because the buyer would want to have the seller to

shoulder all the expenses for the transportation of the

goods up to the port of destination.

Obligations of the Seller; W arranty

Does Philippine law adopt the common law principle of

caveat emptor (buyer beware)?

As a rule, Philippine Law does not adopt the common law

principle of buyer beware because of the implied

warranties. Even in the absence of stipulation, this

warranties are deemed attached to the contract, and the

buyer may hold the seller liable for breach of warranty.

However, it is only a general rule. There are instances

where there can be no implied warranty. Examples, where

there is no implied warranties are:

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1. In sale of animals in fair (no warranty against hidden

defects) (but with warranty against eviction or title)

2. public auctions (no warranty against hidden defects) (but

with warranty against eviction or title)

3. as is where is sales (no warranty as to the fitness of the

thing, but there is still warranty against eviction)

4. sale of second hand items

When would and affirmation of fact or promise of a

vendor be the basis in holding the seller liable for

breach of an express warranty?

The law requires that an affirmation of fact or promise of

the seller must relate to the thing itself. In other words, it

must relate to the character of the thing, or to the quality of

the thing, or its title.

Secondly, it is required that such affirmation of fact must

have the natural tendency to induce a person to purchase

the thing;

Thirdly, the buyer purchase the thing relying on the

affirmation of fact or promise made by the seller.

If the seller told the buyer that this is the best fertilizer

in this world, would that be the basis in holding the

seller liable if it would came out that there are other

brands of fertilizer that are much better than what was

sold to this buyer?

That cannot be the basis in holding the seller liable

because, that will be treated merely as an opinion.

Unless such opinion is made by an expert, such statement

cannot be the basis in holding the seller liable under this

express warranty.

In a sale of a car, the seller told the buyer that even

only with one liter of gasoline, you can drive this car

for 50 km. Is this an express warranty?

This is an example of an express warranty, and failure of

the car to consume gas at 1km/50km may hold the seller

liable for breach of his express warranty.

Does it mean that the word guarantee is used, means

there is an express warranty?

No. Such word if it does not go into the character of the

thing, the quality of the thing or its title, such would not

pertain to an express warranty.

In December 1985, Salvador and the Star Semi

Conductor Company, executed a deed of conditional

sale wherein the former agreed to sell his 2000 sq. m.

lot in Cainta, Rizal to the latter for the price of 1million,

payable 100,000 down. The balance 60 days after the

squatters in the property have been removed. If the

squatters have not been removed after 6 mos., the

100,000 down payment shall be returned by the vendor

to the vendee. Salvador filed ejectment suits against

the squatters but despite of the decision of the Court

in his favor, the squatters would still would not leave.

In August 1986, Salvador offered to return the 100,000

down to the vendee on the ground that he was unable

to remove the squatters to the property. SSC refused

to accept the money and demanded that Salvador

execute a deed of absolute sale of its property in its

favor, in which time it will pay the balance of its price.

The value of the land had doubled at that time,

Salvador consigned the 100k in court and filed an

action for rescission of the deed of conditional sale,

plus damages. Will the action prosper?

Under the facts, Salvador is not an aggrieved party, hence

he will not have any remedy under the law. In fact, he was

the one who failed to evict the squatters.

The payment of the balance as agreed upon is made to

depend upon the removal of the squatters within 6 mos.

Clearly, if not, impliedly from the facts, that is an obligation

of the seller, and such is the condition for the payment.

Since such condition did not happen, wherein the squatters

failed to flee, would such condition for the payment of the

balance would not arise.

Under Art. 1545, it is the buyer who is given options under

the law, due to the non happening of the conditions due to

the fault of the seller. The options of the seller are: 1) Not to

proceed with the sale because the condition did not

happen; 2) Waive the happening of the condition and

proceed with the sale. In this case the second option was

chosen by the buyer. 3) Treat the non happening of the

condition as a breach of warranty, which can be the basis

of holding the seller liable for damages.

Implied W arranties

1. Warranty against eviction

2. Warranty against hidden defects

3. Warranty of quality (Warranty of fitness for a particular

purpose)

Is warranty against hidden defects include warranty of

fitness for a particular purpose?

No because, in an implied warranty of fitness for a

particular purpose, the thing may not have any hidden

defect. As to 1 million buyers they will be fine, but, as to 1

person as to him, it may not be fit for his purpose.

1. Warranty against eviction

What is included in warranty against eviction?

1. That the seller has the right to sell at the time ownership

is to pass; and

2. that the buyer will have and enjoy the legal and peaceful

possession.

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May the buyer hold the seller liable for breach of

warranty against eviction if the buyer was deprived of

enjoyment and peaceful possession, even if he was

not deprived of ownership?

Yes. Because there can be a judgment in favor of a third

person who would have the right to the possession of the

thing but he is not the owner. One such person is a lessee.

Once the court consider a lease contract as a valid and

binding lease, even as against the buyer, the buyer can be

deprived of the possession but he is not deprived of

ownership. Thus, this could be a breach of warranty

against eviction because then, he would warrant that the

buyer would have a legal and peaceful possession of the

thing.

What requisites provided by law in order to hold the

seller liable for breach of warranty against eviction by

the buyer?

1. There must be a final judgment depriving the buyer of

the thing in whole or in part;

2. The seller must be notified (or summoned or considered

as party defendant)

3. The reason why the buyer was deprived of the thing

must be based on a right of a third person existing even

prior to the sale or even if such right of the third person

after such sale that must be baed on act imputable to

the vendor.

Will a mere letter of a third person claiming a right over

a property, which letter was received by the buyer, can

the buyer hold the seller liable?

Of course not. The law requires that there must be final

judgment depriving the buyer of the thing in whole or in

part.

In case there is a judgment, and such judgment was in

favor of a third person against the buyer, is it required

for the buyer to appeal in order to hold the seller

liable?

No such appeal is required on the part of the buyer. But if

the seller does not want to be liable, then he should

appeal.

A scenario where the buyer was deprived of the thing

based on a right of a third person existing even prior to

the sale?

One example is in double sales where the second buyer

was deprived of a thing because of a right of a first buyer,

having the thing first registered in his name in good faith.

A scenario where a buyer was deprived of a thing after

the sale which is imputable to the vendor?

In double sales where the first buyer was deprived of the

thing because of a right of a second buyer which is

imputable to the vendor, such when the buyer was

deprived if such thing because of an execution sale due to

failure of the seller to pay real property tax if the tax

accrued before the sale.

If the buyer was deprived of the thing based on the

judgment of the court that a third person acquired the

property by acquisitive prescription, can the seller be

held liable for breach of warranty against eviction?

It depends on whether the prescribe period had already

been completed at the time of the sale or not. For example,

if this is based on the 10 year acquisitive prescription with

color of title, if the occupant in whose favor the court

decided who acquired the property resulting in the

deprivation of the buyer of such property was already in

possession for 7 years at the time of the sale, but the buyer

never even bothered to examine the parcel of land. When

he arrived after 12 years there is a judgment in favor of the

occupant because the occupant was able to complete the

10 year period prescribe by law without interruption. Here,

the buyer cannot hold the seller liable. This is no longer the

fault of the seller when the occupant was able to complete

the period. If the buyer only wrote a letter demanding the

occupant to vacate the premises that would have

interrupted the running of the prescriptive period. It is the

fault of the buyer why he is deprived of this land.

If the seller would be liable under this warranty against

eviction, what are the possible liabilities of the seller?

Under the law, value of the thing at the time of eviction not

the price, including the fruits, costs, income and expenses

and damages and interest.

A person can only be held liable for damages if he is in bad

faith. A seller may be held liable for damages in relation to

this warranty against eviction if he was in bad faith.

When would the seller be considered to be in bad

faith? If the seller knew of the defect of his title at the

time of the sale, therefore he is a seller in bad faith?

Not necessarily, he may have known of the defect in his

title, but he had informed the buyer. Even if he knew of the

defect in his title and he did not inform the buyer of such

defect, he need not be in bad faith because probably the

buyer was already aware of the defect of his title.

If the seller executed a waiver even in case of eviction,

where such buyer agree that he will not hold the seller

liable for the deprivation of such thing, can the seller

be held liable?

Yes, if the seller is in bad faith, because under the law,

such waiver is void, and therefore the seller can be held

liable.

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If the buyer executed a waiver, and the seller acted in

good faith, may the seller be held liable?

Yes, the seller may be held liable when the waiver is known

as waiver consciente. It is a waiver consciente when the

buyer executed a waiver not knowing the defect of the title

of the seller, at the same time the seller does not likewise

knew of such defect. The seller is liable for only the value

of the thing at the time of eviction, excluding the other

liabilities.

If the waiver is an intencionada waiver, with full knowledge

of the possibility of eviction. In other words, he knows the

defect in the title of the seller when he bought and when he

executed the waiver. Of course the buyer can no longer

hold the seller liable for breach of warranty against eviction.

If there is no waiver, and the buyer was deprived, will

the seller be held liable?

Of, course, the only difference is the extent of the liability of

the seller whether he is in good faith or bad faith. If seller is

in bad faith, he will be even liable for damages in case of

eviction.

W arranty against hidden faults or defects

What are the requirements in order for the seller to be

held liable for breach of warranty against hidden

defects?

1. The defect must be hidden and not patent.

2. The defect must have already existed at the time of the

sale.

If the buyer discovered the defect on the thing bought

10 days after the sale, the seller will be liable for

breach of warranty against hidden defects?

Not necessarily because the defect may be patent, hence

the seller cannot be held liable. Secondly, the defect may

exist at the time after the sale, therefore the seller cannot

be held liable for breach of warranty against hidden

defects.

In case the seller is held liable for breach of warranty

against hidden defects, what are the possible liability

of the seller?

1. If the thing was lost or destroyed due to a fortuitous

event or it was lost or destroyed due to the fault of the

buyer, may the seller still be held liable?

Yes the seller will still be held liable because the thing

had hidden defects.

If the cause of the loss was due to the fault of the

buyer or to a fortuitous event, the liability of the seller

is to return the price less value at the time of the loss

whether the seller is on good faith or bad faith.

Damages will only be granted if the seller is in bad

faith. He is in bad faith when the seller did not inform

the buyer of the defect.

2. If the thing was lost due to the defect itself

The liability will be greater if the cause of the loss was

due to the defect itself, than when the cause of the

loss was due to the fault of the buyer or to a fortuitous

event.

In case of defect the seller has to return the price in

good faith or in bad faith.

Damages will only be granted if the seller is in bad

faith. He is in bad faith when the seller did not inform

the buyer of the defect.

Note: Damages and interest cannot concur in case of loss

due to the defect. When the seller is in bad faith (vendor

was aware of the defect) damages is granted, if in good

faith (vendor was not aware of the defect) interest shall be

granted.

In warranty against eviction, interest and damages concur.

If the thing was lost or destroyed due to a fortuitous

event, fault of the vendee, or due to the defect itself,

how can the buyer prove that the thing had hidden

defects, when the thing was lost?

It is a matter of proof. The buyer might have allowed an

expert to examine the thing before the loss of the thing. He

has a proof of the defect of the thing before its loss.

Even if the thing with hidden defects was lost or

destroyed, is it possible that the seller will not be liable

for a single centavo, even without a waiver?

When the loss was due to a fortuitous event or fault of the

vendee, and the vendor was not aware of the defect. In this

scenario the liability of the seller is only to return the price

less value. But when the value is greater than the price, the

seller would no longer return the price less value hence no

liability. The value may be greater than the price when the

seller sold the thing less than its value or the thing was sold

at its value but there was appreciation of the value. Lesion

does not affect the validity of the sale.

Included in this warrant against hidden defects, would

pertain to any charge or non-apparent encumbrance not

declared or known to the buye r .

1. In relation to a sale of a parcel of land, and such is

subject to a right of way, will the seller be liable in

relation to breach of warranty?

Not necessarily. Maybe it was known to the buyer or it

was declared to the buyer. Even if it is not declared

and not known to the buyer but the encumbrance is

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apparent, hence the seller cannot be held liable for

breach of warranty. Even if not known or was declared

to the buyer or the encumbrance is non apparent, the

seller may be liable when the encumbrance is

registered.

The sale of a parcel of land was entered into January 2,

2009. The buyer filed an action for breach of warranty

against hidden defects pertaining to any charge or non

apparent encumbrance unknown to the buyer, because

of a right of way only last friday, will the a