Sales and Credit Transactions (RA 386) Lecture Notes PDF

Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao Since 1977 RFBT.3403 VILLEGAS/APRADO/MAGUM...

Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao Since 1977 RFBT.3403 VILLEGAS/APRADO/MAGUMUN Sales and Credit Transactions (RA 386) MAY 2023 LECTURE NOTES Sale form they have been entered into, provided all the essential Sale is a contract where one party (seller or vendor) requisites for their validity are present. obligates himself to transfer the ownership of and to deliver Exceptions: a determinate thing, while the other party (buyer or 1. If the law requires a document or other special vendee) obligates himself to pay for said thing a price form, the contracting parties may compel each certain in money or its equivalent (Art. 1458). other to observe that form (NCC, Art. 1357). 2. Under Statute of Frauds, the following contracts ELEMENTS OF A CONTRACT OF SALE must be in writing; otherwise, they shall be unenforceable: 1. Essential elements – for validity: a. Sale of personal property at a price not a. Consent – meeting of the minds to transfer less than P500; ownership in exchange for the price; b. Sale of a real property or an interest b. Determinate subject matter – determinate thing therein; which is the object of the contract; and c. Sale of property not to be performed c. Consideration – price certain in money or its within a year from the date thereof; or equivalent. d. When an applicable statute requires that 2. Natural elements – those which are inherent in the the contract of sale be in a certain form contract, and which in the absence of any contrary [NCC, Art. 1403(2)]. provision, are deemed to exist in the contract. 3. Sale of large cattle which requires that the same 3. Accidental elements – dependent on parties’ be recorded with the city/municipal treasurer and stipulations. that a certificate of transfer be issued. Otherwise, the sale is not valid. CHARACTERISTICS OF A CONTRACT OF SALE 1. Consensual – A sale is perfected by mere consent, Absolute sale v. Conditional sale manifested by the meeting of the minds as to the offer and ABSOLUTE SALE CONDITIONAL SALE acceptance on the subject matter, price and terms of The title to the property is The seller is granted the payment. not reserved to the seller right to unilaterally 2. Bilateral – The seller will deliver and transfer a or the seller is not granted rescind the contract determinate thing to the buyer and the latter will pay an the right to rescind the predicated on the ascertained price (or its equivalent). contract based on the fulfillment or non- 3. Commutative – The thing sold is considered the fulfillment or non- fulfillment, as the case equivalent of the price paid and the price paid is the fulfillment, as the case may may be, of the equivalent of the thing sold. be, of the prescribed prescribed condition. 4. Principal – Its existence does not depend upon the condition. existence and validity of another contract. 5. Onerous – The thing sold is conveyed in consideration of DISTINCTIONS OF THE CONTRACT OF SALE WITH the purchase price, and vice versa. OTHER CONTRACTS 6. Nominate – It has a specific name given by law. 1. Sale v. Barter STAGES OF A CONTRACT OF SALE SALE BARTER 1. Negotiation – begins from the time the prospective contracting parties manifest their interest in the Nature A thing is A thing is contract and ends at the moment of agreement of the given in given in parties; exchange of a exchange of 2. Perfection– takes place when the parties agree upon price certain another the essential elements of the contract; and in money or thing. 3. Consummation – occurs when the parties fulfill or its perform the terms agreed upon in the contract equivalent. culminating in the extinguishment thereof. Consideration The transaction is NATURE AND FORM OF CONTRACT is partly in characterized by the manifest The contract of sale is perfected at the moment there is a money and intention of the parties. meeting of minds upon the thing which is the object of the partly in If intention is If intention is contract and upon the price. From that moment, parties another thing not clear, and not clear, and may reciprocally demand performance, subject to the the value of the value of provisions of the law governing the forms of contracts. thing is equal thing is more Formal requirement for the validity of a contract of or less than sale amount of than amount General Rule: A contract of sale may be made in writing, money = Sale of money = or by word of mouth, or partly in writing and partly by word Barter of mouth, or may be inferred from the conduct of the parties (NCC, Art. 1483). Contracts shall be obligatory, in whatever Page 1 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC 2. Sale v. Lease SPECIAL DISQUALIFICATIONS SALE LEASE 1. Aliens who are disqualified to purchase private Obligation to Use of thing is for agricultural lands (Art. XII Secs. 3&7, 1987 absolutely transfer specified period only Constitution). ownership of thing with obligation to 2. Unpaid seller having a right of lien or having stopped return. the goods in transit is prohibited from buying the goods Consideration is the Consideration is either directly or indirectly in the resale of the same at price. the rental. public/private sale which he may make [NCC, Art. 1533(5); Art. 1476(4)]. Seller needs to Lessor need not 3. The officer holding the execution or deputy cannot be the owner of be owner become a purchaser or be interested directly or thing to transfer indirectly on any purchase at an execution (Sec. 21 Rule ownership. 39, Rules of Court). 3. Sale v. Contract for Piece-of-work 4. In sale by auction, seller cannot bid unless notice has been given that such sale is subject to a right to bid in SALE Contract for behalf of the seller (NCC, Art. 1476). piece-of-work Existence Manufacturing Manufacturing SUBJECT MATTER in the ordinary upon special 1. THINGS course of order of a. Determinate or determinable business. a customer. b. Lawful or licit c. Should not be impossible (within the commerce of To whom For the general For the general men) made market market 2. RIGHTS - must be transmissible. e.g. right of redemption, right of usufruct, sale of credit, 4. Contract of Sale v. Contract to Sell right to inheritance already assigned, etc. Contract of Contract to Sell KINDS OF OBJECT OF SALE Sale 1. Existing Goods - Owned or possessed by seller at the Transfer of Ownership is Ownership is time of perfection. Ownership transferred to transferred 2. Future Goods - Goods to be manufactured, raised, acquired by seller after perfection of the contract or the buyer upon upon full whose acquisition by seller depends upon a delivery of the payment of the contingency (NCC, Art. 1462). object to him. purchase price. Contracts There is only There are two Emptio rei speratae Emptio Spei Involved one contract contracts: Sale of thing having Sale of mere hope or Executed 1. Contract to potential existence. expectancy. between the sell; seller and the 2. Deed of Uncertainty is w/ regard Uncertainty is w/ regard buyer absolute sale to quantity & quality to existence of thing. Payment Non-payment Full payment Contract deals w/ future Contract deals w/ present as a of the price is a of the price is thing thing –hope or expectancy Condition resolutory a positive Sale is valid only if the Sale is valid even though condition. suspensive expected thing will exist. expected thing does not come condition. into existence as long as the hope itself validly existed e.g. lotto CAPACITY OF PARTIES All persons, whether natural or juridical, who can bind themselves, have legal capacity to buy and sell [NCC, Art. PRICE 1489(1)]. The sum stipulated as the equivalent of the thing sold and Exceptions: also every incident taken into consideration for the fixing of 1.Minors, insane and demented persons and deaf- the price put to the debit of the buyer and agreed to by him. mutes who do not know how to write; It must be: 2.Persons under a state of drunkenness or during 1. Real, not fictitious; hypnotic spell; 2. Paid in money or its equivalent; 3.Sale by and between spouses; 3. For valuable consideration; 4.Sale between guardians and wards; 4. Certain or ascertainable at the time of the perfection 5.Sale between agents and principals [Art. 1491 (2) of the contract; and of NCC]; 5. In some cases, must not be grossly inferior to the 6.Sale between executors and administrators of value of the thing sold. estate of the deceased [NCC, Art. 1491 (3)]; 7.Sale involving property of the government [NCC, Earnest Money Art. 1491(4)]; It is the payment made to a seller by the buyer to show his 8. Sale of property in litigation [NCC, Art. 1491(5)] good faith. It will constitute as part of the purchase price, if 9.Sale by Public Officers and Employees; Court the sale is finally consummated. If the sale is not concluded, Officers and Employees, and Others specially the earnest money should be returned to the would-be- disqualified by law (NCC, Art. 1491). buyer unless there is a stipulation to the contrary. Page 2 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC Option Contract a. Placing titles of ownership in the hands of the It is a continuing offer or preparatory contract by which the buyer; and owner stipulates with another that the latter shall have the b. Allowing buyer to make use of rights. right to buy the property at a fixed price within a certain 4. TRADITION BY OPERATION OF LAW – Execution of time, or under, or in compliance with, certain terms and a public instrument is equivalent to delivery. But to be conditions, or which gives to the owner of the property the effective, it is necessary that the seller have such right to sell or demand a sale. control over the thing sold that, at the moment of sale, its material delivery could have been made. OBLIGATIONS OF THE BUYER 1. Payment of the price EFFECTS OF THE CONTRACT WHEN THE THING 2. Accept delivery of thing sold SOLD HAS BEEN LOST 3. Bear expenses for the execution and registration of It is understood that the thing is lost when it: the sale and putting the goods in a deliverable state, 1. Perishes; if such is the stipulation. 2. Goes out of commerce; or 3. Disappears in such a way that its existence is OBLIGATIONS OF THE SELLER unknown or cannot be recovered [NCC, Art. 1189(2)] 1. Deliver the thing sold (NCC, Arts.1458&1459); 2. Deliver fruits & accessions/accessories accruing from Exception: In an obligation to deliver a generic thing, the perfection of sale; loss or destruction of anything of the same kind does not 3. Transfer the ownership; extinguish the obligation (NCC, Art. 1263) 4. Warranties; 5. Take care of the thing, pending delivery, with proper Effect when the loss occurred before perfection diligence; The thing perishes with the owner – Res perit domino (NCC, 6. Pay for the expenses of the deed of sale unless there Art. 1504). is a stipulation to the contrary. Effect when the loss occurred at the time of DELIVERY perfection of the contract of sale The thing shall be understood as delivered when it is General Rule: Contract is considered void or inexistent placed in the control and possession of the vendee. because the object did not exist at the time of the Effect of Delivery transaction. General Rule: Title /ownership is transferred Exception: In case of partial loss, the buyer may choose XPN: When the contrary is stipulated as in the case of: between withdrawing from the contract and demanding the 1. Pactum reservatii in domini – Agreement that remaining part. If he chooses the latter, he shall pay the ownership will remain with seller until full remaining part’s corresponding price in proportion to the payment of price (contract to sell); total sum agreed upon (NCC, Art. 1493). 2. Sale on acceptance/approval; 3. Sale on return; or Effect when the loss occurred after perfection but 4. There is implied reservation of ownership before delivery Who bears the risk of loss is governed by the stipulations in Kinds of Delivery the contract. 1. ACTUAL or REAL – Thing sold is placed under the control and possession of buyer/agent; First View: Article 1262 of the Civil Code, if the thing is lost 2. CONSTRUCTIVE or LEGAL – Does not confer physical or destroyed without the fault of the seller, the obligation to possession of the thing, but by construction of law, is deliver is extinguished but the obligation to pay subsists. equivalent to acts of real delivery. Second View: Under this view, the rule on loss under Article Requisites: 1189 of the Civil Code points that the loss would be for the a. The seller must have control over the thing; account of the seller. b. The buyer must be put under control; c. There must be intention to deliver the thing for Effect when loss occurred after delivery purposes of ownership. General Rule: Res perit domino applies – the buyer is now the owner, hence, the buyer bears the risk of loss (NCC, Art. i. Tradicion Symbolica – delivery of certain symbols 1504). representing the thing; ii. Tradicion Instrumental – delivery of the instrument Exception: Where actual delivery has been delayed through of conveyance; the fault of either the buyer or seller, the goods are at the iii. Traditio Longa Manu – Delivery of thing by mere risk of the party at fault [NCC, Art. 1504 (1) (2)]. agreement; when seller points to the property DOUBLE SALE without need of actually delivering; There is double sale when the same object of the sale is sold iv. Tradicion Brevi Manu – the buyer, being already in to different vendees (NCC, Art. 1544). possession of the thing sold due to some other cause, merely remains in possession after the sale Requisites: is effected, but now in concept of owner. e.g. From 1. 2 or more sales transactions must constitute valid lessee to becoming an owner; sales transactions; v. Constitutum Possessorium– the seller remains in 2. 2 or more sales transactions must pertain to exactly possession of the property in a different capacity. the same subject matter; e.g. From owner to lessee 3. 2 or more buyers at odds over the rightful ownership of the subject matter must each represent conflicting 3. QUASI-TRADITION – delivery of rights, credits or interests; incorporeal property, made by: Page 3 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC 4. 2 or more buyers at odds over the rightful ownership Coverage: Residential Real Estate; residential of the subject matter must have bought from the condominium apartments except: very same seller a. Industrial lots; b. Commercial buildings Rules on preference (NCC, Art. 1544) c. Sale to tenants under agrarian laws; and 1. MOVABLE – Owner who is first to possess in good d. Sale of lands payable in straight terms faith; Important features of Maceda Law: 2. IMMOVABLE – a. After having paid installments for at least two years, a. First to register in good faith the buyer is entitled to a mandatory grace period of b. No registration – first to possess in good faith one month for every year of installment payments c. No registration & no possession in good faith – made, to pay the unpaid installments without interest. person who presents oldest title in good faith If the contract is cancelled, the seller shall refund to the Purchaser in good faith buyer the cash surrender value equivalent to fifty 1.Buys the property without notice that some other percent (50%) of the total payments made, and after person has a right to, or interest in such property; and five years of installments, an additional five percent 2.Pays a full and fair price for the same at the time of (5%) every year but not to exceed ninety percent such purchase, or before he has notice of the claim or (90%) of the total payments made. interest of some other person in the property b.In case the installments paid were less than 2 years, the Principle of prius tempore, potior jure - first in time, seller shall give the buyer a grace period of not less than stronger in right 60 days. If the buyer fails to pay the installments due Knowledge by the first buyer of the second sale cannot at the expiration of the grace period, the seller may defeat the first buyer’s rights except when the second buyer cancel the contract after 30 days from receipt by the first registers in good faith the second sale. Conversely, buyer of the notice of cancellation or demand for knowledge gained by the second buyer of the first sale rescission by notarial act. defeats his rights even if he is first to register, since such Unpaid Seller knowledge taints his registration with bad faith to merit the One is considered as unpaid seller when: protection of Art. 1544 (2nd par.) of NCC, the second realty 1. The whole of the price has not been paid or tendered; buyer must act in good faith in registering his deed of sale. or 2. A bill of exchange or other negotiable instrument has INSTALLMENT SALES LAW or “RECTO LAW” been received as conditional payment, and the This law covers contracts of sale of personal property by condition on which it was received has been broken by installment (Act No. 4122). It is also applied to contracts reason of the dishonor of the instrument, the purporting to be leases of personal property with option to insolvency of the buyer or otherwise (Art. 1525). buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. Remedies: 1. Action for price; Requisites of Recto Law: 2. Action for damages; 1. Valid contract of sale; 3. Possessory lien – seller is not bound to deliver the 2. Subject matter is personal property; object of the contract of sale if buyer has not paid him 3. Payable in installments; and the price. This presupposes that the sale is on credit. 4. In the case of the second and third remedies, that 4. Right of stoppage in transitu (Art. 1530) there has been a failure to pay two or more 5. Right to resell the goods installments (NCC, Art. 1484). PERFORMANCE OF CONTRACT Alternative remedies in case of sale of personal Rule when the seller delivers goods lesser than what property in installments he has contracted to sell 1. Specific Performance: Exact fulfillment should the 1. The buyer may reject the goods delivered and he shall buyer fail to pay have no liability; 2. Rescission: Cancel the sale if buyer fails to pay 2 or 2. The buyer may accept the goods delivered, but he will more installments. pay the contract rate, if he has knowledge that the 3. Foreclosure: Foreclose on chattel mortgage if buyer seller is not going to deliver all the goods contracted fails to pay 2 or more installments. He shall have no for; further action against the purchaser to recover any 3. If, however, the buyer has used or disposed of the unpaid balance of the price. Any agreement to the goods delivered before he knows that the seller is not contrary shall be void. Of the three remedies, only going to perform his contract in full, the buyer shall not this third remedy bars the recovery of unpaid be liable for more than the fair value to him of the balance. goods so received (NCC, Art. 1522). REALTY INSTALLMENT BUYER ACT or Rule when the seller delivers goods greater than what “MACEDA LAW” he has contracted to sell It is embodied in R.A. 6552 which provides for certain 1. The buyer may accept only the goods which were protection to particular buyers of real estate payable on included in the contract and reject the excess; or installments. The law declares as "public policy to protect 2. The buyer may accept the entire goods delivered and buyers of real estate on installment payments against he shall pay for them at the contract rate (NCC, Art. onerous and oppressive conditions.” 1522) Rule when the seller delivers goods which are mixed Transactions/sale covered by the Maceda Law with other goods of different description not included in the contract Page 4 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC 1. The buyer may accept the goods which are in d. Warranty against Hidden Defects (NCC, Art.1561) accordance with the contract and reject the rest (NCC, i. Defect is important or Serious; Art. 1522); or a. The thing sold is unfit for the use which it is 2. The buyer may also accept them all if he so desires, but intended; and he must pay for them all. b. Diminishes its fitness for such use or to such an extent that the buyer would not have Rule if the subject matter is indivisible acquired it had he been aware thereof. The buyer may reject the whole of the goods (NCC, Art. ii. Defect is Hidden; 1522). iii. Defect Exists at the time of the sale; iv. Buyer gives Notice of the defect to the seller Duty of the seller with regard to accessions and within reasonable time; accessories v. Action for rescission or reduction of the price is The seller has the duty to preserve the thing and its brought within the proper period; accessions and accessories from the time of the a. 6 months – from delivery of the thing sold perfection of the contract of sale (NCC, Art. 1537). (NCC, Art. 1571); and b. Within 40 days – from the delivery in case Rule when the sale of immovable is by unit of of redhibitory action on the sale of defective measure or number animals. (NCC, Art. 1577). General Rule: The seller must deliver all that may have been vi. There must be no waiver of warranty on the part stated in the contract. of the buyer. Exception: If impossible to deliver all, the buyer may choose between: Specific implied warranties in sale of goods a. Proportional reduction of the price; or 1. Warranty of fitness for the purpose – that the goods b. Rescission of the contract provided the deficiency is are suitable for the special purpose of the buyer which not less than 1/10 of the area stated in the contract will not be satisfied by mere fitness for general (NCC, Art. 1539). purposes. 2. Warranty of merchantability- that goods are Prescription period for the action of rescission of contract: 6 reasonably fit for the general purpose for which they months from the day of delivery. are sold. WARRANTIES CONDITION A statement or representation made by the seller of goods, An uncertain event or contingency upon the happening of as part of the contract of sale, having reference to the which the obligation or right of the contract depends. In character, quality, or title, of the goods, and by which he such case, the obligation of the contract does not attach promises or undertakes to insure that certain facts are or until the condition is performed. shall be as he then represents. Effect of non-fulfillment of a condition Kinds of warranties The other party may: 1. Express warranties. Any affirmation of fact or any 1. Refuse to proceed with the contract; or promise by the seller relating to the thing if the natural 2. Proceed w/ contract, waiving the performance of the tendency of such affirmation or promise is to induce condition. the buyer to purchase the same, and if the buyer Condition v. Warranty purchases the thing relying thereon (Art. 1546). CONDITION WARRANTY Prescriptive period: Purports to the existence Purports to the 1. That specified in the contract or of performance of obligation. 2. 4 years, if no stipulation obligation. Must be stipulated to Need not be stipulated; 2. Implied Warranties. Warranties deemed included in form part of the may form part of all contracts of sale by operation of law (NCC, Art. obligation. obligation by provision of 1547). law a. Warranty that seller has right to sell – refers to May attach itself to Relates to the subject consummation stage. Not applicable to sheriff, obligation of seller to matter itself or to auctioneer, mortgagee, pledgee (NCC, Art. 1547); deliver possession and obligation of the seller as and transfer. to the subject matter of the b. Warranty against dation (Art. 1548) sale. i. Final Judgment; ii. Buyer is Evicted in whole or in part from EXTINGUISHMENT OF SALE the subject matter of sale; A contract of sale is extinguished by: iii. Basis of eviction is a right Prior to sale or 1.Same causes as how an obligation is extinguished, act imputable to seller; namely: iv. Seller has been Summoned in the suit for a. Payment or performance; eviction at the instance of buyer; or made b.Loss of the thing due; 3rd party defendant through 3rd party c. Condonation or remission of the debt; complaint brought by buyer; and d.Confusion or merger of the rights of creditor and v. No waiver on the part of the buyer. debtor; c. Warranty against non-apparent burden or e. Compensation; servitude (NCC, Art. 1560) f. Novation; g.Annulment; h.Rescission; Page 5 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC i. Fulfillment of resolutory condition; or 5. Sale of adjacent small urban lands bought merely for j. Prescription speculation (NCC, Art. 1622). 2.Conventional Redemption 3.Legal redemption EQUITABLE MORTGAGE One which lacks the proper formalities, form or words or REDEMPTION other requisites prescribed by law for a mortgage, but It is a mode of extinguishment wherein the seller has the shows the intention of the parties to make the property right to redeem or repurchase the thing sold upon return of subject of the contract as security for a debt and contains the price paid. nothing impossible or contrary to law A. Conventional Redemption Essential requisites of equitable mortgage Seller reserves the right to repurchase thing sold coupled 1. Parties entered into a contract of sale; with obligation to return the purchase price of the sale, 2. Their intention was to secure an existing debt by expenses incurred under the contract, other legitimate way of a mortgage. payments and, necessary & useful expenses made on the thing sold (Art. 1601 in relation to Art. 1616 of the Civil Presumption of Equitable Mortgage Code). A sale with conventional redemption is deemed to be an equitable mortgage in any of the following cases (NCC, Art. Other person can exercise the right to repurchase 1602) The right to repurchase may be exercised by any person to 1. Price of the sale with right to repurchase is unusually whom the right of repurchase may be transferred, or in case Inadequate; of legal redemption, by the person so entitled by law. 2. Seller Remains in possession as lessee or otherwise; 3. Upon or after the expiration of the right to Period of Redemption repurchase another instrument extending the period 1. No period agreed upon – 4 years from date of of redemption or granting a new period is executed; contract; 4. Purchaser Retains for himself a part of the purchase 2. When there is agreement – should not exceed 10 price; years; but if it exceeded, valid only for the first 10 5. Seller binds himself to pay the Taxes on the thing years (NCC, Art. 1606); sold; 3. When period to redeem has expired & there has 6. In any other case where the real intention of the been a previous suit on the nature of the contract – parties is that the transaction shall Secure the seller still has 30 days from final judgment on the payment of a debt or the performance of any other basis that contract was a sale with pacto de retro; obligation; or 4. When period has expired & seller allowed the period 7. Art. 1602 shall also apply to a contract purporting to of redemption to expire – seller is at fault for not be an Absolute sale (Art. 1604) having exercised his rights so should not be granted a new period. Pactum Commissorium A stipulation for automatic vesting of title over the security Obligations of the vendor a retro if he desires to redeem in the creditor in case of debtor’s default. The creditor The vendor a retro must pay or reimburse the vendee a cannot appropriate the things given by way of pledge or retro the following: mortgage or dispose of them, otherwise that would result in 1. Price of the sale; pactum commissorium. The proper remedy is foreclosure of 2. Expenses of the contract; the mortgage. If there is no foreclosure, the debtors retain 3. Other legitimate expenses; and the ownership. 4. Necessary and useful expenses. ASSIGNMENT OF CREDITS Written notice mandatory for the right of redemption to Assignment is the process of transferring gratuitously or commence onerously the right of the assignor to the assignee, who Written notice is mandatory for the right of redemption to would then be allowed to proceed against the debtor. commence and the notice must be in writing stating the execution of the sale and its particulars. It may be made in The assignment involves no transfer of ownership but a private or public document. merely effects the transfer of rights which the assignor has at the time to the assignee. B. Legal Redemption It is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who Effects of Assignment acquires the thing by purchase or by dation en pago or by 1. Transfers the right to collect the full value of the other transaction whereby ownership is transmitted by credit, even if he paid a price less than such value; onerous title (NCC, Art. 1619). 2. Transfers all accessory rights; 3. Debtor can set up against the assignee all the Instances of legal redemption defenses he could have set up against the assignor. 1. Sale of a co-owner of his share to a stranger (NCC, Art. 1620) Effectivity against Third Persons 2. When a credit or other incorporeal right in litigation If personal property is involved — a public instrument is is sold (NCC, Art. 1634); needed to make the assignment effective against third 3. Sale of an heir of his hereditary rights to a stranger persons. (NCC, Art. 1088); If real property is involved –– registration in the Registry of 4. Sale of adjacent rural lands not exceeding 1 hectare Property would be needed. (NCC, Art. 1621); Page 6 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC The assignee merely steps into the shoes of the assignor, 2. Accessory Contract – it has no independent the former acquiring the credit subject to defenses (e.g. existence of its own; cannot exist without a valid fraud, prescription, etc.) available to the debtor against the contract; assignor. The assignee is deemed subrogated to the rights 3. Unilateral Contract – The obligation is solely on the as well as to the obligations of the seller. He cannot acquire part of the creditor to return the thing pledged upon greater rights than those pertaining to the assignor. fulfillment of obligation; 4. Subsidiary Contract – The obligation incurred does Credit Transactions not arise until the fulfillment of the principal obligation. Credit Requisites of a contract of pledge It is a person’s ability to borrow money by virtue of confidence or trust reposed in him by the lender that he will 1. Constituted to secure the fulfillment of a principal pay what he may promise. obligation (NCC, Art. 2085); 2. Pledgor is the absolute owner of the thing pledged; Credit transaction (NCC, Art. 2085); It refers to an agreement based on trust or belief of 3. Persons constituting the pledge have the free someone on the ability of another person to comply with his disposal of their property, and in the absence obligations. thereof, that they be legally authorized for the purpose (NCC, Art. 2085); and It includes all transactions involving the purchase or loan of 4. That the thing pledged be placed in the possession of goods, service, or money in the present with a promise to the creditor, or of a third person by common pay or deliver in the future. agreement (NCC, Art. 2093). 5. Pledge must be embodied in a public instrument to affect third persons SIMILARITIES OF PLEDGE AND MORTGAGE The following must appear in the public instrument 1. Both are constituted to secure a principal in order to affect third persons: obligation; they are only accessory contracts (NCC, a. A description of the thing pledged; and Arts. 2086, 2052); b. Statement of date when the pledge was 2. Both pledgor and mortgagor must be the absolute executed (NCC, Art. 2096). owner of the property (NCC, Arts. 2085, par. 2); 3. Both pledgor and mortgagor must have the free However, failure to make the pledge in a public instrument disposal of their property or be authorized to do so; will not affect its validity. It is still valid between the parties, and but it will not bind third person if the said provision is not 4. In both, the thing proffered as security may be sold complied with. at public auction, when the principal obligation becomes due and no payment is made by the debtor. In connection with Item 2, the thing pledged may be alienated by the pledger or owner, subject to the pledge. The Indivisibility of pledge, mortgage and antichresis ownership of the thing pledged is transmitted to the vendee As a rule, a pledge, mortgage or antichresis is indivisible. The or transferee as soon as the pledgee consents the alienation, mortgage is indivisible even if the obligation of the debtor is but the latter shall continue in possession. joint and not solidary. Objects of Pledge Obligations that can be secured by pledge, mortgage and antichresis 1. All movables which are within commerce may be 1. Valid obligations; pledged, provided they are susceptible of possession. 2. Voidable obligations; 2. Incorporeal rights evidenced by proper document 3. Unenforceable obligations; can be pledged. It is, however, required that the 4. Natural obligations; and actual instrument be delivered to the pledgee. More, 5. Conditional obligations if the instrument is a negotiable document, it must be endorsed (NCC, Art. 2095). PLEDGE When two or more things are pledged It is a real contract which is not perfected until delivery of the object of the obligation (NCC, Art. 1316). When two or more things are pledged, the pledgee may choose which he will cause to be sold, unless there is a A promise to constitute a pledge or mortgage, if accepted, stipulation to the contrary (NCC, first sentence, Art. 2119). gives rise only to a personal right binding upon the parties and creates no real right in the property (NCC, Art. 2092). The restriction on the right of the pledgee under the 1st What exists is only a right of action to compel the fulfillment sentence of Art. 2119 is that he may only demand the sale of the promise but there is no pledge yet. of only as many of the things as are necessary for the payment of the debt (NCC, second sentence, Art. 2119) Characteristics: Prohibition on double pledge 1. Real Contract – It is perfected by delivery of A property already pledged cannot be pledged again while the thing pledged; the first pledge is still subsisting. Page 7 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC Obligations of the PLEDGEE provisions of NCC, Art. 2107. 1. Take care of the thing pledged with the diligence of Foreclosure of the thing pledged a good father of a family (NCC, Art. 2099); 2. The pledgee cannot deposit the thing pledged to a If the debtor failed to pay on maturity date, the thing pledged third person unless there is stipulation to the contract or mortgaged may be sold at public auction as provided by (NCC, Art. 2100). law so that the proceeds may be used for payment of the 3. Apply the fruits, income, dividends, or interests obligation. produced or earned by the property, to interests or expenses first, then to the principal (NCC, Art 210 Options of an unpaid creditor 2); 4. Pledgee cannot use the thing pledged without 1. Foreclose the thing pledged; or authority (NCC, Art. 2104); 2. Abandon the pledge and file a claim for collection XPNs: (NCC, Art. 2087). a. If the pledgor had given him authority or permission to use it; or Procedure for the public sale of a thing pledged b. If the use of the thing is necessary for its preservation but only for that purpose 1. The obligation must be due and unpaid; 5. Return the thing pledged upon payment of debt 2. The sale of the thing pledged must be at public auction; Return of the pledge, when demandable 3. There must be notice to the pledgor and owner, stating the amount for which the sale is to be held; If there are reasonable grounds to fear the destruction or 4. The sale must be conducted by Notary Public impairment of the thing pledged, without the fault of the pledgee, the pledgor may demand the return of the thing, Who can bid in a public auction upon offering another thing in pledge, provided the latter is of the same kind as the former and not of inferior quality, 1. The public; and without prejudice to the right of the pledgee under the 2. Pledgor/owner/debtor – They shall be preferred if provisions of the following article. The pledgee is bound to same terms as the highest bidder is offered; and advise the pledgor, without delay, of any danger to the thing 3. Pledgee/creditor – He must not be the only bidder, pledged (NCC, Art. 2107). otherwise, his bid is invalid and void Return of the thing pledged Effect of sale of the thing pledged The return of the thing pledged to the pledgor by the pledgee It extinguishes the principal obligation; shall extinguish the pledge. Any stipulation to the contrary 1. If the price of the sale is more than the amount of shall be void (NCC, Art. 2110). the debt, the excess will go the pledgee; 2. If the price of the sale is less than the amount of the Presumption of return to the pledgor/owner by the debt, the pledgee is not entitled to recover the pledgee deficiency in all cases even if there is a stipulation to that effect (NCC, Art. 2115). There is a prima facie presumption that the thing pledged has been returned by the pledgee to the pledgor or owner, in any Effect when the thing pledged was not sold at the first of the following circumstances: public auction 1. If the thing is found in the possession of the pledgor or owner after the pledge had been perfected; or When the property was not sold at the first auction, there will 2. If the thing is found in the possession of a third be another setting for the second auction following the same person who received it from the pledgor or owner formalities. after the perfection of the pledge [NCC, Art. 2110(2)]. If no sale was effected in the second public auction, the pledge is allowed to appropriate the thing pledged. Renunciation of the pledge by the pledgee REAL ESTATE MORTGAGE The renunciation or abandonment of the pledge by the pledgee requires a statement in writing to that effect (NCC, Real estate mortgage (REM) is a contract whereby the debtor first sentence, Art. 2111). Acceptance or return of the thing secures to the creditor the fulfillment of the principal is not necessary for the validity of the renunciation. obligation, specially subjecting to such security immovable property or real rights over immovable property in case the Obligations of PLEDGOR principal obligation is not fulfilled at the time stipulated. 1. To advise the pledge of the flaws of the thing (NCC, Arts. 2101 and 1951); Characteristics of real estate mortgage 2. Not to demand the return of the thing until after full payment of the debt, including interest due thereon 1. It is a real right; and expenses incurred for its preservation (NCC, Art. 2. It is an accessory contract; 2105). 3. It is indivisible; 4. It is inseparable; NOTE: Pledgor may be allowed to substitute the thing 5. It is real property; pledged which is in danger of destruction or impairment with 6. It is subsidiary; another thing of the same kind and quality, subject to 7. It is a limitation on ownership; 8. It can secure all kinds of obligations; Page 8 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC 9. The property cannot be appropriated; and a. Excess – The mortgagor is entitled to excess 10. The mortgage is a lien. b. Deficiency – The mortgagee is entitled to recover the deficiency. Kinds of real mortgages PLEDGE v. REAL ESTATE MORTGAGE 1. Voluntary or Conventional mortgage – It is constituted voluntarily by the contracting parties; Basis Pledge REM 2. Legal mortgage – It is required by law to be Contract Real contract Consensual executed in favor of certain persons (NCC, Arts. contract 2125, par. 2; 2082 and 2083); Kind of Subject matter is Subject matter 3. Equitable mortgage – The intention of the parties Property personal property is personal is to make the immovable as a security for the property performance of the obligation but the formalities of a Delivery Property delivered to Not necessary real mortgage are not complied with. pledgee or by consent to a third person. Requisites for a valid constitution of a real estate Possession Possession of the Possession of mortgage thing pledged is the thing vested in the creditor mortgaged 1. That they be constituted to secure the fulfillment of remains with the a principal obligation; debtor. 2. That the mortgagor be the absolute owner of the Fruits Pledgee has the right Mortgagee does thing mortgaged; to receive the fruits of not possess such 3. That the person constituting the mortgage have the the thing pledged, right. free disposal of their property, and in the absence with the obligation of thereof, that they be legally authorized for the applying the same to purpose; the interest of the 4. It must appear in a public instrument (NCC, Art. debt, if owing, and 2125); the balance, if any, to 5. Recording in the Registry of Property is necessary to the principal. bind third persons. Authority Pledgor can sell the Mortgagor can to Sell thing pledged only sell the property A stipulation forbidding the owner from alienating the with the consent of mortgaged even immovable mortgaged shall be void. the pledgee. without the consent of the Rights of mortgagor mortgagee. To alienate the mortgaged property but the mortgage shall CHATTEL MORTGAGE remain attached to the property (NCC, Art. 2130) By a chattel mortgage, personal property is recorded in the Extent of Mortgage Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, 1. Natural accessions; is delivered to the creditor or a third person, the contract is 2. Improvements; a pledge ant not a chattel mortgage. 3. Growing fruits; 4. Rents or income not yet received when the obligation A chattel mortgage can only cover obligations existing at becomes due; and the time the mortgage is constituted and not to obligations 5. Amount of indemnity granted or owing to the subsequent to the execution of the mortgage. proprietor from: a. Insurance proceeds; or b. Expropriation price (NCC, Art. 2127). Characteristics of chattel mortgage XPNS: 1. It is a real right; 1. Express stipulation excluding them; or 2. It is an accessory contract; 2. Evidence sufficiently overthrowing the presumption that 3. It is indivisible; the mortgagor owns the mortgaged property 4. It is unilateral; 5. It does not convey dominion but is only a security. Causes of Action of Mortgagee-Creditor Requisites for a valid constitution of a chattel Mortgage-creditor has a single cause of action against the mortgage mortgage-debtor, which is to recover the debt, but he has the option to either: 1. That they be constituted to secure the fulfillment of 1. File a personal action for collection of sum of a principal obligation; money; or 2. That the mortgagor be the absolute owner of the 2. 2. Institute a real action to foreclose on the thing mortgaged; mortgaged property. 3. That the person constituting the mortgage have the free disposal of their property, and in the absence NOTE: The remedies are alternative, not cumulative. thereof, that they be legally authorized for the purpose; Foreclosure of Mortgage 4. It must be recorded in the chattel mortgage registry. Page 9 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC PLEDGE v. CHATTEL MORTGAGE 7. Indivisible in nature (NCC, Art. 2090) Basis Pledge Chattel Form of a contract of antichresis and its contents Mortgage Delivery Delivery is necessary. Delivery is not 1. Covers only the fruits of real property but not the necessary immovable itself; Governing NCC, Art. 2112 Procedure for 2. Delivery of the immovable is necessary for the Law the sale of the creditor to receive the fruits and not that the contract thing given as shall be binding; security is 3. Amount of principal and interest must be specified in governed by Act writing (NCC, Art. 2134); No. 1508, Sec. 4. Express agreement that debtor will give possession 14. to the creditor and that the creditor will apply the Excess If the property is sold, If the property is fruits to the interest and then to the principal (NCC, the debtor is not foreclosed, the Art. 2134). entitled to the excess excess goes to unless otherwise the debtor. ANTICHRESIS v. PLEDGE agreed. Recovery of The creditor is not The creditor is Basis Antichresis Plegde Deficiency entitled to recover the entitled to Kind of Real property Personal deficiency recover the Property property notwithstanding any deficiency from Perfected By mere By delivery stipulation to the the debtor consent (Real) contrary except if the (Consensual) chattel Necessity Principal and interest Need not be in mortgage is a of Putting must be specified in writing, oral security for the into writing, otherwise evidence may be purchase of Writing contract is void. allowed to prove property in the same. installments. Effect in Debtor loses control of the subject matter Possession Possession remains Possession is the of the contract. with the creditor. vested in the Debtor’s debtor. Control Contract Real contract Real contract Registration Must be in a public Must be ANTICHRESIS v. REAL ESTATE MORTGAGE instrument containing recorded in a description of the public Basis Antichresis REM thing pledged and the instrument to Delivery Property is delivered Debtor usually date thereof to bind bind third to creditor. retains third persons. persons. possession of Validity Not valid unless a Not valid against the property against 3rd description of the third persons Right to Creditor acquires only Creditor has no persons thing and the date of unless fruits the right to receive right to receive pledge appear in a registered the fruits of the fruits, but public instrument. (although property; does not mortgage binding between produce a real right creates real right the parties). unless registered in against the the Registry Property property Obligation Creditor obliged to Creditor has no to pay pay the taxes and such obligation ANTICHRESIS taxes charges upon the estate unless It is a contract whereby the creditor acquires the right to stipulated otherwise. receive the fruits of an immovable of the debtor, with the Obligation There is an express There is no such obligation to apply them to the payment of interest, if owing, to apply stipulation that the obligation on the and thereafter to the principal of his credit (NCC, Art. 2132). fruits to creditor shall apply part of the the the fruits to the mortgagee. Characteristics of antichresis interest payment of the interest, if owing, and 1. Accessory contract; thereafter to the 2. Formal contract – the amount of the principal and principal of the debt. of the interest must both be in writing (NCC, Art. Subject Real property 2134); matter 3. It deals only with immovable property; 4. It is a real right; 5. The creditor has the right to receive the fruits of the immovable; 6. It can guarantee all kinds of valid obligations (NCC, Arts. 2091 & 2139); and Page 10 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC SALES MC QUESTIONS 1. Statement No. 1 - In a contract of sale, after delivery 8. In the preceding question, if the land contains 445 has been made, the seller has lost ownership and square meters, which of the following is correct? cannot recover it unless the contract is resolved or a. S is bound to deliver 500 square meters and B to rescinded. pay P50,000 Statement No. 2 – In a contract to sell, title over the b. S is bound to deliver 445 square meters and B to property generally passes to the buyer upon delivery. pay P44,500 a. Statement No. 1 is true; Statement No. 2 is false. c. B may rescind the sale because the lack in area is b. Statement No. 1 is false; Statement No. 2 is true. more than 1/10 of the total area c. Both are true d. None of the above d. Both are false e. None of the above 9. It is the waiver made voluntarily by the vendee without knowledge and assumption of the risks of eviction. 2. B, in good faith, bought a diamond ring from a public a. consciente d. reivindicatoria auction. Later, M identified the ring as the one she had b. intentionada e. accion pauliana lost about a year ago in a theft incident. There is no c. publiciana question that M is the true owner. In this case – a. B should return the ring but is not entitled to 10. It is the warranty that the goods are reasonably fit for reimbursement. the general purpose for which they are sold. b. B should return the ring but is entitled to a. Merchantability c. surety reimbursement. b. fitness d. answer not given c. B should not return the ring even if there is reimbursement. 11. It is the right to be subrogated, upon the same terms d. B should not return the ring but should pay the and conditions stipulated in the contract, in the place of owner thereof. one who acquires a thing by purchase or dation in e. None of the above. payment or by any other transaction where ownership is transmitted by onerous title. 3. The period of prescription for redhibitory defect based a. legal title c. equitable mortgage on frauds or defects of animals. b. legal pre-emption d. legal redemption a. ten years from the violation of the obligation. b. six months from the delivery of the object. 12. It is a contract by which one person transfers his rights c. 40 days from date of delivery to the buyer. and actions against a third person in consideration of a d. 4 years from the perfection of the contract price certain in money or its equivalent. a. dation in payment c. payment by cession 4. The thing perishes with the owner. b. assignment of credit d. barter a. genus nun quam peruit b. res perit domino 13. The period of prescription wherein the debtor may c. waiver consciente exercise his right or redemption. d. caveat emptor a. 40 days e. caveat venditor b. 30 days d. 2 years c. six months e. 10 years 5. When an earnest money has been paid by the buyer to the seller, then: 14. S1 – One who sells an inheritance without enumerating a. there is necessarily a valid contract of sale the things of which it is composed, shall only be b. it forms part of the purchase price answerable for his character as an heir. c. the Statute of Frauds cannot possibly apply S2 - The interest in mutuum must be in writing to be d. all of the above enforceable. e. none of the above a. Both are true c. S1 is true, S2 is false b. Both are false d. S1 is false, S2 is true 6. Which of the following obligations of the vendor cannot be waived: 15. FPJ Appliance Store is selling Starstruck vacuum a. to allow the buyer to examine the goods sold cleaners on a two-week trial. Ping asked the store to b. to transfer ownership to the buyer deliver to him one vacuum cleaner. Which of the c. to pay the expenses of the deed of sale following is correct. d. to warrant the thing sold a. Ping becomes the owner of the vacuum cleaner e. correct answer not given upon delivery. b. The sale shall be absolute if Ping will not return the 7. S sold to B a parcel of land for a lump sum of P50,000. vacuum cleaner after two weeks. The contract states that the area is 500 square meters. c. Ping can return the vacuum cleaner to the store Subsequently, it was ascertained that the area included even if he finds nothing wrong with the quality of within the boundaries is really 550 square meters. the said cleaner. a. S is bound to deliver 500 square meters and B to d. Ping has to pay the price of the vacuum cleaner if pay P50,000 the vacuum cleaner is destroyed by a fortuitous b. S is bound to deliver 500 square meters and B to event. pay P55,000 e. Answer not given c. S or B can rescind the sale because there is no meeting of the minds 16. Britney bought a Toyota Vios car on installment plan, d. None of the above and as a security, she executed a chattel mortgage on it. She failed to pay three installments. The seller was Page 11 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC able to foreclose (sold in pubic auction) the mortgaged had already been sold out. With Aubrey, the agreement car, but the sum he obtained was less than what Britney was that the store shall deliver, at a specified date for a still owed him. It had been previously agreed in the price of P4,000.00, a pair of shoes made specially for deed of sale that Britney would be liable for any her, in accordance with a design submitted by her. deficiency in this matter. May the seller still recover the a. both are contracts of sale deficiency? b. both are not contracts of sale a. Yes, the agreement between the seller and the c. Troy’s contract is sale, Aubrey’s contract is a piece buyer is the law between the parties. of work b. Yes, in chattel mortgage, the seller is allowed to d. Troy’ contract is piece of work, Aubrey’s contract is recover the deficiency but not in pledge. sale c. Yes, otherwise the buyer will be liable for damages e. Troy’s contract is barter, Aubrey’s contract is a piece for breach of contract of work d. No, the seller has already opted to foreclose, hence, he is no longer entitled. 20. X sold to Y his vehicle for P500,000.00. Upon receipt of e. No, there being no previous notice to the buyer of the payment, X gave the car keys to Y. However, before the foreclosure. reaching the car, it was bumped by a speeding truck f. a, b and c destroying it totally. g. d and e a. Under the situation, Y shall bear the loss since there h. Answer not given is already a delivery of the vehicle. b. X shall suffer the loss for Y has yet to have control 17. Greg and Brad entered into an agreement wherein Greg of the vehicle. will deliver a particular BMW car to Brad for the price of c. Y can insist on the rescission of the contract of sale P3M. Upon the execution of the contract, Brad advanced for the loss of the vehicle. the entire P3M to Greg. It was, however, stipulated that d. Both parties shall equitable suffer the loss. the car shall be delivered to Brad on March 28, 2005. e. Y is not liable to pay the price, the object of the Unfortunately, before the arrival of that date, the BMW contract is already lost. was completely destroyed without any fault of Greg. Can Brad recover the P3M he had already advanced to 21. X, a minor, bought a car for P1M from Y. Several days Greg? after, Y went to X and insisted that the sale is not valid a. Yes, the loss is imputable to the vendor, Greg considering that at the time of the execution of the b. Yes, the ownership of car belongs to Greg when the contract of sale, X, was a minor, and that real value of car was completely destroyed. the car is only P500,000.00. c. No, the car was lost without any fault of Greg. a. Under the situation, the contract between X and Y d. No, the ownership of the car belongs to Brad when is deemed void by reason of the minority of X. the car was completely destroyed. b. The contract between X and Y is merely rescissible e. Answer not given there being damage to the seller. c. The contract between X and Y is merely voidable by 18. Junjun offered to sell for P2M his house and lot to reason of the minority of X. Tonton who was interested in buying the same. In his d. The contract is valid for the same involves letter to Tonton, Junjun stated that he was giving necessaries and X can recover the excess of the Tonton a period of one month within which to raise the consideration given. amount and that as soon as Tonton is ready, they will e. The contract is unenforceable, it not being in writing sign a deed of sale. One week before the expiration of the one-month period, Junjun went to Tonton and told 22. Suppose what was sold to the minor were necessaries him that he is no longer willing to sell his property such as clothing and medical attendance. unless the price is increased to P3M. a. Under the situation, the contract between X and Y a. Tonton can compel Junjun to sell the property for is deemed void by reason of the minority of X. P2M because the one-month period has not yet b. The contract between X and Y is merely rescissible elapsed. there being damage to the seller. b. Tonton can compel Junjun to sell the property at c. The contract between X and Y is merely voidable by P2M if he already signified his acceptance before the reason of the minority of X. expiration of the one-month period. d. The contract is valid but the minor must pay a c. Tonton cannot compel Junjun to sell the property at reasonable price therefor. P2M because he never signified his acceptance of e. The contract is unenforceable, it not being in writing Junjun’s offer. d. Tonton cannot compel to sell the property at P2M 23. As a general rule, if the price is simulated, the sale is – even if he signified his acceptance to Junjun’s offer a. a. Valid d. Rescissible because that is not binding on the latter, being b. b. Voidable e. Unenforceable merely an accepted unilateral promise. c. Void e. Both b and c f. Both a and b 24. Which of the following circumstances would sufficiently g. Both c and d raise the presumption of an equitable mortgage instead h. Answer not given of a contract of sale? a. Sandy sold her house to Carol but remained in 19. Mendrez shoe store, Inc. entered into separate possession as lessee. contracts with two movie stars, Troy and Aubrey. With b. Francis who sold his land to Steven with a right of Troy, the agreement was that the store shall deliver, at repurchase for P25,000.00 when its market value is a specified date and for a price of P3,000.00, a pair of P250,000.00 at the time of the sale. Mendrez shoes which the store had been manufacturing for the general public, but at the time of the contract, Page 12 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC c. Celine, who retained P25,000.00 of the P35,000.00 purchase price of the computer set he sold to 30. F4 Company granted Jerry the exclusive right to sell in Charles. Mindanao a certain number of F4 T-Shirts, which the d. All of the above company was manufacturing at the invoice price in e. Only a and b Manila, with a discount of P20 percent, the price to be paid at the end of 60 days whether or not the T-shirts 25. I. A bearer negotiable document of title can be are sold. The contract between Jerry and F4 company is negotiated by mere delivery. a: II. A negotiable document of title if marked “non- a. Contract of agency to sell negotiable” can still be further negotiated. b. Contract of sale III. The general rule is that the vendor should not c. Contract to sell deliver the thing sold if the vendee has not paid the d. Emptio rei speratae price. e. Emptio spei a. All are true. e. II/III are true; I is false b. All are false. f. II/III are false; I is true 31. Which of the following is not an implied warranty in a contract of sale? c. I/II are true; III is false g. I/III are true; II is false a. Warranty against eviction d. I/II are false; III is true h. I/III are false; II is true b. Warranty against hidden defect c. Warranty as to fitness 26. A bought a piece of land on a rate of a certain price for d. Warranty as to merchantability a unit of measure basis. The contract stated a certain e. All of the above number of square meters but the land included in the f. None of the above boundaries happen to be less. What are the options/rights of A? 32. The unpaid seller of goods has the right to retain a. The additional square meters must be given to A. possession of the goods until payment in the following b. A has no further action since rescission is not a cases. Which is the exception? remedy following the principle of caveat emptor. a. Where the goods have been sold without any c. A has no further action since the law is explicit that stipulation there shall be no other further action by the buyer b. Where the goods have been sold on credit but the against the seller. term of credit has expired d. A may pay only a proportionate reduction of the c. Where the buyer becomes insolvent price. d. When the buyer or his agent lawfully obtains e. A may rescind the contract, provided that the lack possession of the goods of area be not less than one-tenth of that stated. e. None of the above f. Both a, d and e. g. Both b and c 33. Pedro sold his land to Petra. Later on Pedro sold the h. None of the above same to Carlo. Petra in turn sold the same land to Dennis, who took possession of the land in good faith. 27. I. The contract of sale is a real contract. Carlo, a purchaser in good faith registered the sale of II. The contract of sale is a preparatory contract. the land in his favor. Who is the owner of the land? III. The contract of commodatum is perfected from time a. Carlo because he is the first registrant of the delivery of the object of the contract. b. Ownership of the land shall not be transferred as a. All are true. e. II/III are true; I is false there is double sale b. All are false. f. II/III are false; I is true c. Pedro shall be liable only for damages to Petra c. I/II are true; III is false g. I/III are true; II is false d. Dennis as his predecessor in interest was the first d. I/II are false; III is true h. I/III are false; II is true buyer e. None of the above 28. I. Possession of an immovable, in case of double sale 34. Antonio sold a piece of land to Renato binding himself of real property, is superior than registration of the sale not to sell the same to another person. On the following of real property. day, Antonio sold the land to Carlos who immediately II. In case of personal property, the buyer who took took possession in good faith. In the case at bar, the possession thereof in good faith is the owner of the proper remedy of Renato is to: thing. a. institute an action for the annulment of the sale to III. The vendee need not appeal the decision in order Carlos; that the vendor may become liable for eviction. b. institute an action for the recovery of the land; a. All are true. c. institute an action for damages against Antonio; b. All are false. d. answer not given c. I/II are true; III is false d. I/II are false; III is true 35. Seller sold to a buyer a piece of jewelry at a price of e. II/III are true; I is false P20,000. The contract provides that the buyer will pay f. II/III are false; I is true the seller cash of P15,000 and for the balance, the buyer g. I/III are true; II is false will give the seller a microwave oven worth P5,000. h. I/III are false; II is true What is the nature of the contract? a. Sale 29. It is a remedy in case of a hidden defect where b. Partly sale and partly barter withdrawal or rescission of the contract with damages c. Barter is allowed. d. Commodatum a. Accion redhibitoria d. Accion quanti minoris b. Accion subragatoria e. Accion consciente c. Accion pauliana Page 13 of 19 www.teamprtc.com.ph RFBT.3403 TEAM PRTC 36. Ownership of the thing is transferred/acquired/ d. From the time thing bought is delivered retained: a. Retained by the seller in “sale or return” 44. The seller warrants that he is the owner at the time of b. Transferred to the buyer upon constructive or actual the sale. delivery of the thing sold The seller is liable for breach of warranties only if was c. Acquired by the buyer upon perfection of the in bad faith. contract a. Both statements are true. d. Transferred to the buyer upon acceptance of the b. Both are false. price c. First is true, second is false. d. First is false, second is true. 37. Connie transferred to Violeta a parcel of land for the price of P100,000; P30,000 to be paid in cash and for 45. X sold a parcel of land to Y with the agreement that the difference, she will convey her car worth P70,000. payment is to be made on February 14, 205. It was What kind of contract is this? stipulated that failure to pay on said date, the sale a. Lease contract c. Obligation to sell would automatically be rescinded. Y failed to pay and b. Contract to sell d. Barter asked for extension of time to pay. Decide: a. Y may still pay and the sale is not rescinded if there 38. Lucy is a lessee of a store in a shopping mall. She orally was no demand for rescission. sells/assigns his right to Salome. She then allows b. The sale is rescinded as per agreement. Salome to occupy the stall. The delivery here is called: c. The sale is rescinded only after demand for payment a. Quasi-traditio d. Traditio brevi manu by the seller. b. Actual delivery e. Answer not given d. Y may still pay despite rescission of the sale. c. Traditio longa manu 46. A, B, and C as brothers purchased from their parents 39. Pacto de Retro sale as distinguished from mortgage: specific portions