Law on Sales Notes PDF

lOMoARcPSD|13083919 LAW ON Sales - notes Obligation and Contracts (Asian College) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Queen Cruz ([email protected]) ...

lOMoARcPSD|13083919 LAW ON Sales - notes Obligation and Contracts (Asian College) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 LAW ON SALES – ARTICLE 1458- 1637 Art. 1458- by the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional. a. Absolute sale- no condition is imposed b. Conditional sale- subject to condition.- pacto de retro. Seller or vendor/ buyer or purchaser or vendee. Characteristics – 1. Consensual- perfected by mere consent 2. Bilateral- both parties are bound to fulfill obligation 3. Onerous- thing sold is conveyed in consideration of the price and vice versa. 4. Commutative- thing sold is equivalent of the price paid 5. Nominate – contract is with a name /designated by the civil code 6. Principal – does not depend for its existence and validity upon another contract. Essential requisites- 1. consent or meeting of minds 2. object or subject matter 3. cause or consideration Two kinds of contract of sale: 1. Absolute – sale is not subject to any condition whatsoever and where title or ownership passes to the buyer upon delivery of the thing sold 2. conditional – where sale contemplates a contingency( Art. 1461-things having potential existence or sale of a mere hope or expectancy-subject to the condition that the thing will come into existence—grains of a field , milk of a cow/ piece of land if he wins a case for the recovery of a land pending in the court. Art. Art. 1462- goods to be manufactured , raised or acquired by the seller ; Art. 1465- par. 2- subject to a resolutory condition- vendor a retro. Aleatory sale- element of chance or risk is present is aleatory- insurance- life annuity – sale of future crops. STAGES IN THE CONTRACT OF SALE: 1. PERIOD OF NEGOTIATION- called generation, where parties discuss the sales contract they will agree upon, its terms and conditions, etc… 2. PERFECTION of the contract – parties consent to the sale including accidental elements… it is the period when the minds of the parties have met on the subject matter and cause of the contract. 3. CONSUMMATION of the sale- when the contract is executed because the object is delivered and the price was paid. Sale vs. dacion in payment(dacion en pago)- (property is alienated to the creditor in payment of debt in money- governed by law on sales. But distinctions are: 1. Sale- no pre-existing obligation or credit. 2. Sale- cause is the price- DEP- cause is the extinguishment of the debt. 3. Sale- greater degree of freedom in fixing the price- DEP limited in view of threat of suit for non-payment of credit 4. Sale- object may be existing or future; DEP object is always existing and specific. 5. Sale gives rise to obligation when there is meeting of the minds of the parties upon the object and cause; DEP mode of extinguishing an obligation in the form of payment. Sale vs. Contract to Sell- Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 1. Sale- ownership is transferred to the buyer upon delivery of the object to the latter while CTS- ownership is retained by the seller until the purchase price is fully paid. 2. CTS- delivery of the object does not confer ownership upon the buyer. 3. Sale- only one contract executed between seller and buyer- CTS- there are two contracts; first- the contract to sell- conditional sale and second – the final deed of sale which is executed after full payment of the purchase price. Art. 1459- thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. – a. determinate; b. licit or lawful; c. not be impossible. – must be within the commerce of man. all rights which are not intransmissible or personal may ALSO BE THE OBJECT OF SALE—right to usufruct; right to conventional redemption—services may be the object of a contract but they cannot be the object of a contract of SALE. intransmissible rights – right to vote, right to public office, marital and parental rights. PERSONAL- right to be a partner in a partnership, right to act as an agent of another, right of the bailee to use the thing loaned in a contract of commodatum. ILLICIT THINGS- Per Se( of its nature) – decayed or rotten food unfit for consumption; sale of human flesh for satisfaction of one’s lust. Illicit per accidens - lottery tickets, prohibited drugs; prohibition of sale of lands to aliens or sale of future inheritance. Right of vendor to transfer ownership: 1. one can sell only what he owns; sufficient if right exists at time of delivery ** SELLER NEED NOT BE THE OWNER OF THE THING AT THE TIME OF PERFECTION OF THE CONTRACT OF SALE AS LONG AS HE CAN TRANSMIT OWNERSHIP AT THE TIME OF DELIVERY OR HE WILL BE LIABLE FOR DAMAGES. Art. 1460- thing is determinate- WHEN particularly designated or physically segregated from all others of the same class. It is sufficient that the thing is determinable or capable of being made determinate without the necessity of a new or further agreement between the parties to ascertain its identity, quantity or quality. ++It may cover also generic thing, as long as this is determinate as to its kind as well as quantity and quality and in accordance with the maxim GENUS NUNQUAM PERIT, the loss of a thing of the same species even without the fault of the seller will NOT extinguish the latter’s obligation. (1,000 piculs of brown sugar) ( 100 bags of well milled rice). Art. 1461- things having potential existence may be the object of sale—the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. THE SALE OF A VAIN HOPE OR EXPECTANCY IS VOID. e.g. milk of a cow, grain in the field, wine a vine is expected to produce - land if he wins the case in court - sale of a fake sweepstakes ticket – void – can never win- BUT the sale of a valid sweepstakes ticket is valid- object of the contract is the HOPE ITSELF. sale is valid even if buyer does not win a prize. - Sale of wool that shall thereafter grow upon the sheep -sale of young animals not yet in existence but expected to exist. - sale of goodwill that the trade may develop. EMPTIO SPEI- when what is bought is a thing which does not as yet exist, and which may never exist at all, or the quantity or value of which is so indeterminate that it may , as we say, come to nothing. E.g. X sells to Y for P3K all the fish that he may catch at a particular day; sale of a sweepstakes ticket which is a valid sale, whether or not it wins. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 But if what is sold is a lottery ticket that did not win in a draw already held, the hope sold is vain and makes the sale VOID unless the buyer buys said ticket as souvenir. EMPTIO SPEI SIMPLICIS- if the intention of the parties is that the purchase money shall be paid in any case, whether the hoped for equivalent comes to anything or not. EMPTIO REI SPERATAE- if it is that it shall not be paid unless something at any rate is forthcoming, or shall only be paid in proportion to what the purchaser actually gets. –e.g. sale of an offspring of a particular pregnant animal and sale of a yield of a farm or orchard.—THIS IS FAVORED IN CASE OF DOUBT. ** period is intended in sale of future things- deemed implied which begin from the moment of consent and last until the time when the thing which was considered as a future thing is to come into existence. COURTS MAY HOWEVER FIX THE PERIOD IF DURATION IS DIFFICULT TO DETERMINE. – courts shall fix the duration of the period when it depends upon the will of the debtor. Art. 1462- Goods which form the subject of a contract of sale may be either: a. existing goods or goods owned or possessed by the seller b. “future goods” or goods to be manufactured or acquired after perfection of the contract - like milk bottles with name of buyer pressed in the glass- raised – future harvest of palay from rice field. or acquired – sale of a definite parcel of land the seller expects to buy. c. there may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.- Pedro takes the CPA EXAMS. Manuel , Pedro’s father promises to give Pedro a Toyota corolla car if Pedro should top the Exams. Pedro can sell the expected car to Arturo, subject to the suspensive condition of topping the cpa exams. ** property or goods which at the time of the sale are not owned by the seller but which thereafter are to be acquired by him , cannot be the subject of an EXECUTED SALE but may be the subject of a Contract for the future sale and delivery thereof even though the acquisition of the goods depends upon a contingency which may or may not happen. ** a sale of future goods even though the contract is in the form of a present sale, is VALID ONLY as an executory contract to be fulfilled by the acquisition and delivery of the goods specified. Art. 1463- the sole owner of a thing may sell an undivided interest therein. – buyer becomes co-owner Art. 1464- Sale of undivided share of a specific mass- fungible goods – goods of which any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit- grains, oil, wine, gasoline.  e.g. X owns 1,000 cavans of palay in a warehouse. If X sells to B 250 canvans of such palay which cavans are not segregated from the whole mass, B becomes a co-owner of the said mass to the extent of ¼ while X ¾-- if the warehouse happens to contain only 200 cavans- X must deliver the whole 20 0 and supply the deficiency of 50 cavans of the same kind and quality. HOWEVER, in the same example if the number of cavans in the warehouse is unknown or undetermined and S sells only ¼ share of the contents. X will only be obligated to deliver ¼ of the contents in the warehouse with no obligation to deliver any deficiency. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 Art. 1465- things subject to a resolutory condition may be the object of the contract of sale. – Pacto de retro sale. (Winkleman vs. Veluz- 43 Phil. 604) Art. 1466- In construing a contract containing provisions characteristics of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. **Distinguishing characteristics in Sale from Agency to sell( a person binds himself to render some service or to do something in representation of or on behalf of another with the consent or authority of the latter. : a. Sale – buyer receives goods as owner; in agency to sell- agent receives the goods as the goods of the principal who retains ownership over them b. Sale- buyer has to pay the price; Agency to sell, the agent has simply to account for the proceeds of the sale he may make on the principal’s behalf c. sale- buyer, as a general rule, cannot return the object sold, in agency to sell, the agent can return the object in case he is unable to sell the same to 3rd persons d. sale – the buyer can deal with the thing sold as he pleases, being the owner, in agency to sell, the agent in dealing with the thing received, must act and is bound according to the instructions of his principal. Art. 1467-a contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a CONTRACT OF SALE--- BUT if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a CONTRACT FOR A PIECE OF WORK(governed by Arts. 1713-1731 and provisions of the Labor Code). Contract for a piece of work- contractor binds himself to execute a piece of work for the employer in consideration of a certain price or compensation. the contractor may either employ his labor or skill, or also furnish the material. a. in a contract for work, labor or materials or for a piece of work, the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, while in a CONTRACT OF SALE- the thing transferred is one which would have existed and been the subject of sale to some other person, even if the order had not been given. b. in the first case, the risk of loss before delivery is borne by the worker or contractor, not by the employer- In the second case – the risk of loss is borne by the buyer. c. Contract for a piece of work, unlike contract of sale, are not within the Statutes of Frauds. SCHOOLS OF THOUGHT— 1. English rule – A SALE if the material is more valuable and it is a WORK if the skill is more valuable. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 2. NEW YORK RULE- SALE- if the article already exists and it is a WORK if it does not exist but is ordered, even if the article is being manufactured for the general public 3. MASSACHUSSETS RULE- it is a SALE if the article is manufactured for the general public even if not yet available and it is a WORK if the article is ordered specially for the customer and is not for the general market.-ADOPTED IN THE PHILIPPINES. Art. 1468- Contract of barter or exchange – one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing- in sale – vendor gives a thing in consideration for a price in money. ** if consideration consists partly in money and partly in another thing- transaction shall be characterized by the manifest intention of the parties ** such intention does not clearly appear—it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent—OTHERWISE IT IS A SALE. Art. 1469- When price is considered certain—  price in a contract of sale ought to be settled for there can be no sale without a price- and ascertainable in money or its equivalent and money is to be understood as currency and its equivalent means PN, checks and other mercantile instruments.  price is certain if : 1. the parties have fixed or agreed upon a definite amount 2. it be certain with reference to another thing certain 3. the determination of the price is left to the judgment of a specified person or persons. (3rd person) – exceptions: a. 3rd person acted in bad faith or by mistake b. when 3rd person disregards specific instructions or the procedure laid down by the parties, or the data given him, fixed an arbitrary price. effect if price is NOT fixed by 3rd person designated 1. 3rd person- refuses/cannot fix price( without fault of the seller or buyer)- contract shall become ineffective unless parties subsequently agree upon the price 2. 3rd person is prevented from fixing the price- with fault of the seller or buyer- PARTY NOT AT FAULT may obtain redress against the party in fault- options— Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 rescission or fulfillment with damages in either case. if fulfillment—the court shall fix the price. Art. 1470- Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. ** the fact that a price is inadequate(even grossly inadequate) does not invalidate the sales contract as a general rule. Exceptions: 1. If it is shown that consent is vitiated by fraud, mistake or undue influence- contract is voidable. 2. if the inadequate consideration stated in the contract is false to hide another contract-- example land sold only for P1.00- same will be considered a Donation. 3. In judicial sales, it has been held that where the inadequacy in the price is shocking to the conscience of man, the sale may be judicially set aside. Art. 1471- if the price is simulated, the sale is VOID, but the act may be shown to have been in reality a donation or some other act or contract. a. low price – defect in the consent- fraud, mistake or undue influence. b. price is simulated- or false- vendor really intended to transfer the thing gratuitously- then sale is VOID, but the contract shall be valid as a donation c. where parties do not intend to be bound at all- contract is not shown to be a donation or any other act or contract transferring ownership because the parties do not intend to be bound at all- the ownership of the thing is not transferred- the contract is VOID AND INEXISTENT. (art. 1345-simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter , when the parties conceal their true agreement. )- PURPOSE IS TO DECEIVE THIRD PERSONS. ( Art. 1409(2) (VOID OR INEXISTENT CONTRACTS- THOSE WHICH ARE ABSOLUTELY SIMULATED OR FICTITIOUS). INVOLUNTARY OR EXECUTION SALES- effect of gross inadequacy of price. 1. Judicial or execution sale- one made by a court with respect to the property of a debtor for the satisfaction of his unpaid indebtedness. mere inadequacy of price is NOT a sufficient ground for the cancellation of an execution sale. a. where price is so low as to be shocking to the conscience – judicial sale will be set aside Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 b. where seller given the right to repurchase – the validity of the sale is NOT necessarily affected where the law gives to the owner the right to redeem. Art. 1472-Price of securities, grains, liquids and other things- considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provide said amount be certain.  Applies to fungible items , the prices of which are subject to fluctuations of the market.  THE AMOUNT OR PRICE MUST BE CERTAIN – otherwise the sale is inefficacious because the price cannot be determined.  Art. 1473- fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.  Art. 1474- where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is INEFFICACIOUS. However, if the thing or any part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is reasonable price is a question of fact dependent on the circumstances of each particular case.  Art. 1475- contract of sale- perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance , subject to the law governing the form of contracts.(this article is merely echoes Art 1315-obligation and contracts- contracts are perfected by mere consent, and from that moment the parties are bound not only the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage and law.  In case one of the contracting parties does not comply – the injured party may sue for fulfillment or recission with payment of damages in either case.  Offer by the seller/buyer must be certain and acceptance by the other party must be absolute- if acceptance is qualified(or conditional) , it constitutes a counter offer which must be absolutely accepted to perfect the contract.  An acceptance made by letter or telegram does not bind the offeror except from the moment it came to his knowledge.  Business advertisement of things for sale are not definite offers, but mere invitations to make an offer. But if the advertisement of a thing for sale, describes in detail such thing , states its price as payable in case or installments, specifying the mode of installment payment and there being no other terms, the advertisement amounts to an offer which the reader, if he agrees with the terms of the sale as advertised, may readily accept, thus perfecting the contract of sale subject to legal requirements, if any, as to form.  Sale by telephone or radio-phone- deemed valid in civil law, and their perfection should be governed by the same rule governing the perfection of contracts between present persons because although this is really a case of contract between absent persons, the means of communication is so rapid that the situation is the same as if the parties were immediately present before each other. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919  Art. 1476- sale by auction – a. Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale b. Sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner. Until each announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. c. A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provide by law or by stipulation d. Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening the rule may be treated as fraudulent by the buyer. ** right of seller to bid in the auction or agent provided: 1. Such right was reserved; 2. Notice was given that the sale is subject to a right to bid on behalf of the seller and 3. The right to bid by the seller is not prohibited by law or stipulation. ** sale is subject to the terms and conditions announced by the auctioneer, and bidders are bound thereby whether they actually heard them or not. Sale is perfected when the hammer falls or in any other customary manner. BEFORE THE FALL OF THE HAMMER, any bidder may withdraw his bid because there is as yet no perfected contract and for the same reason the auctioneer who represents the vendor, may withdraw the goods from sale, UNLESS THE AUCTION HAS BEEN ANNOUNCED TO BE WITHOUT RESERVE. IF A right has been reserved to reject any or all bids it must be exercised by the auctioneer, as the agent of the vendor, before acceptance of any bid, for once a bid has been accepted the contract becomes perfected and binding upon the parties. ** paragraph 3- the seller may bid because having expressly reserved the right to bid, such reservation is one of the conditions of the auction announced by the auctioneer and is binding upon all bidders. – in Art. 2113- on pledge—at the public auction, the pledgor or owner may bid and he shall, moreover, have a better right if he should offer the same terms as the highest bidder. – the Pledgee may also bid, but his offer shall not be valid if he is the ONLY BIDDER. ** paragraph 4- WHERE THE SELLER DIRECLY OR INDIRECTLY BIDS WITHOUT NOTICE THAT HE HAS RESERVED A RIGHT TO BID, the lack of such notice constitutes FRAUD vitiating the successful bidder’s consent. This is justified because the seller’s bid is not genuine but merely to raise the bid price to the prejudice of bona fide buyers. EMPLOYMENT OF PUFFERS OR BY-BIDDERS-a secret bidder for the seller. The rule is that when no reservation is openly made for the seller, the latter should not b id and if he does bid through a puffer, the sale at auction may be treated as fraudulent and therefore, subject to annulment. Art. 1477- ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (actual or real delivery OR constructive – Tradition brevi manu, tradition longa manu, constitutum possessorium or quasi – tradition. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 Art. 1478- the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. Delivery of the thing sold is essential. without it the purchaser may not enjoy the thing sold to him. It is only after the delivery of the thing sold that the purchaser acquires a real right or ownership over it. The ownership of things is transferred by delivery. This is true even if the purchase price has not yet been paid or the purchase has been made on credit. However,the parties may stipulate that despite the delivery, the ownership of the thing shall remain with the seller until the purchaser has fully paid the price. Non-payment of the price, after the thing has been delivered, prevents the transfer of ownership only if such is the stipulation of the parties. Art. 1479- a promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. a. Accepted unilateral promise to sell b. Accepted unilateral promise to buy c. Bilateral promise to buy and sell reciprocally accepted Option Money- consideration distinct from the price acceptance of which will give rise to a perfected contract. ** a unilateral promise or offer to sell or to buy a thing which is not accepted creates no juridical effect or legal bond. Such unaccepted offer is called POLICITATION. ** OPTION MONEY may or may not be credited to the agreed price. Article 1480- any injury to or benefit from the thing sold ,after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by articles 1162-1165 and 1262. This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number or measure. Should fungible things be sold for a price fixed according to weight, number or measure, the risk shall not be imputed to the vendee until they have been weighed, counted or measured, and delivered ,unless the latter has incurred in delay. Risk of loss or deterioration:4 rules: 1. If the thing is lost before perfection- the seller bears the loss- res perit domino- thing perishes with the owner. 2. If the thing is lost at the time of perfection-contract is void or inexistent. Same as when the object is lost before the perfection of the contract of sale. 3. If the thing is lost after perfection but BEFORE DELIVERY, before ownership is transferred to the buyer, the risk of loss is shifted to the buyer as an exception to the rule of res perit domino. 4. If the thing is lost AFTER DELIVERY, the buyer bears the risk of loss following the general rule of res perit domino. Art 1480- contemplates of two rules: 1. First applies to non-fungible things and fungible things sold independently and for a single price or for a price fixed without consideration of their weight, number or measure. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919  First rule- follows the roman rule- the risk of the thing sold passes to the buyer, even though the thing has not yet been delivered to him. Ergo, if a house is destroyed wholly or partly by fire the loss falls upon the buyer who must pay the price, even though he has not received the thing. Seller is not liable for anything which happens without his fraud or negligence. BUT IF AFTER THE SALE ANY ALLUVIUM has accrued to the land, the benefit goes to the buyer for the benefit ought to belong to him who has the risk. IN OTHERWORDS,THE BUYER ASSUMES THE RISK OF LOSS CAUSED BY FORTUITOUS EVENT(1174) without the fault of the seller (1262) that is inspite of the exercise of due diligence on his part(Art.1163) and before he has incurred in delay (Art. 1165,1170 and 1262), after the perfection of the contract to the time of delivery (art. 1480). with respect to the fruits, the buyer has a right to the same from the time the obligation to deliver the thing arises(art.1164) IF THE RISK OUGHT TO BELONG TO THE BUYER BEFORE delivery, THE BENEFIT OUGHT TO BELONG TO HIM WHO HAS THE RISK. Art. 1480 par. 1 applies only where the thing is determinate. It also applies to fungible things sold for a price not fixed in relation to weight, number or measure because in such case the fungible things have been particularly designated or physically segregated. Art. 1481- In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as by description, if is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description. The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample. Art. 1482- whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract Earnest money- money given by the buyer to the seller to bind the bargain. It is actually a partial payment of the purchase price and is considered as proof of the perfection of the contract. – it must be deducted from the total price. Earnest money vs. Option Money: 1. Earnest money is part of purchase price; Option money is money given as distinct consideration for the option contract. 2. Earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected. 3. When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy. 4. B UT OPTION MONEY MAY BECOME EARNEST MONEY IF THE PARTIES SO AGREE. Art. 1483- subject to statute of frauds, and any other applicable statute, A CONTRACT OF SALE may be made in writing , or by word of mouth, or partly in writing, or by word of mouth, or may be inferred from the conduct of the parties. *general rule- contract may be entered into in any form provided all the essential requisites for its validity are present. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 * statute of frauds- 1. Sale of personal property at a price not less than P500 must be in writing otherwise it cannot be enforced in court litigation; 2. sale of real property or an interest therein regardless of the price involved- in writing 3. sale of property not to be performed within a year from date thereof regardless of the nature of the property and the price involved. ** where statute requires that contract of sale be in certain form for its validity. ** in certain cases , a certain form(public instrument) is required for the convenience of the parties in order that the sale may be registered in the Registry of Deeds to make effective as against 3rd persons.  Sale of piece of land or interest therein when made through an agent is void unless the agent’s authority is in writing.  To be effective against 3rd persons- registered with Register of Deeds/ public instrument. ** STATUTE OF FRAUDS APPLICABLE ONLY TO EXECUTORY CONTRACTS- where no performance, delivery and payment has as yet been made by both parties AND NOT TO CONTRACTS WHICH HAVE TOTALLY or PARTIALLY PERFORMED. Art. 1484- in a contract of sale of personal property, the price of which is payable in installments, the vendor may exercise any of the following remedies: a. Exact fulfillment of the obligation, should vendee fail to pay-specific performance. b. Cancel the sale, should the vendee’s failure to pay cover two or more installments-purchaser can demand return of payments already made unless there is a stipulation on forfeiture. c. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (RECTO LAW) ** remedies above are ALTERNATIVE and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to others. ** attachment- process whereby the property of a defendant is placed in custody of the law to await final determination of a suit. ** Execution – a remedy for the enforcement of a final judgment of a court. ** MACEDA LAW- RA 6552- provides protection to buyers of real estate on installment payments- authored by senator Ernesto maceda--- known as REALTY INSTALLMENT BUYER PROTECTION ACT- it provides in section 2 that it is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions it applies to all transactions or contracts involving the sale or financing of real estate on installment payments including residential condominium apartments but excluding the following: a. sale or financing of industrial lots; b. sale or financing of commercial buildings; and c. sale of tenants under the land reform code. – the MACEDA LAW STATES, THAT: “ WHERE THE BUYER OF THE REAL ESTATE INCLUDED WITHIN THE LAW, HAS PAID AT LEAST 2 YEARS OF INSTALLMENTS, THE BUYER IS ENTITLED TO THE FOLOWING RIGHTS IN CASE HE DEFAULTS IN THE PAYMENTS OF SUCCEEDING INSTALLMENTS “: 1. To pay, without additional interest , the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made; provided, that this right shall be exercised by the buyer only once in every 5 years in the life of the contract and its extensions, if any. 2. If the contract is cancelled , the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made and, after 5 years of installments, an additional 5% every year but not to Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 exceed ninety percent (90%) of the total payments made; provided, that the actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. ** DOWN PAYMENTS , DEPOSITS OR OPTIONS ON THE CONTRACT SHALL BE INCLUDED IN THE COMPUTATION OF THE TOTAL NUMBER OF INSTALLMENT PAYMENTS MADE. ** IN CASE where less than 2 years of the installments were paid, the seller shall give the buyer a grace period of not less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. ** under sections ¾ of RA 6552- - rights of buyer who have paid at least 2 years installment or less),- the buyer shall have the right to sell his rights or assign the same to another person, or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. ** the buyer shall , under the MACEDA LAW- have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Art. 1485- the preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. ** leases of personal property with option to buy on the part of the lessee who takes possession or enjoyment of the property leased are REALLY SALES OF PERSONALTY payable in installments. (prevents contravention of Art. 1484). **it has been ruled that even if the parties use the word LEASE if they intend a sale by installments, the contract shall be construed as a sale. This is true even for sales tax purposes. And the intention to so treat the transaction would be more strengthened if the contract gives the lessee the option to buy, where the rentals paid are applied to the purchase price. Art. 1486- In cases referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. ** in case remedy No. 2 – cancellation or rescission is elected by the seller of a personal property by installments, once rescission is effected, there shall be mutual restoration of things received, the seller to return the price with interest and the buyer to return the thing sold with fruits, if any. BUT AS AN EXCEPTION TO THIS RULE—Art. 1486 states that it is valid to STIPULATE that whatever payments made by the buyer may be forfeited as long as the same shall not be unconscionable. IF THE AMOUNT SUBJECT TO FORFEITURE IS DISPROPORTIONATE TO THE PERIOD DURING WHICH THE BUYER USED THE PROPERTY, THE COURT MAY DECREASE THE AMOUNT TO BE FORFEITED. THIS APPLIES ALSO TO RENTS PAID. Art. 1487- the expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary. COVERS—a. notarial fees; b. documentary stamps; c. attorney’s fees; d. registration fees ** in case of lease--- the expenses for the deed of lease shall be borne by the LESSEE. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 Art. 1488- The expropriation of property for public use is governed by special laws. ** procedure for the exercise of the powers of Eminent Domain is provided for in Rule 67 of the Rules of Court. Expropriation must be decreed by competent authority and for public use and always upon payment of just compensation. CAPACITY TO BUY OR SELL Art. 1489- all persons who are authorized in this code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Whre necessaries are sold and delivered to a minor or other persons without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290- (now article 194, Family code, Exec. Order 209, July 6,1987) NECESSARIES – needed for sustenance, dwelling, clothing and medical attention in keeping with financial capacity of the family of the incapacitated person. **general rule – all persons, whether natural or juridical who can bind themselves by contract have also legal capacity to buy and sell. ** ABSOLUTE INCAPACITY- Persons who cannot bind themselves ** RELATIVE – exists only with reference to certain persons or a certain class of property.- Articles 1490-1491.  Contracts entered into by a minor and other incapacitated persons( insane or demented persons, deaf-mutes who do not know how to write)- ARE VOIDABLE.  Art. 1327(VOIDABLE CONTRACTS) - cannot give consent to a contract- unemancipated minors and insane and demented persons and deaf-mutes who do not know how to write; married women under conditions set forth in Art. 114 in transactions involving conjugal partnership.  SPECIAL DISQUALIFICATIONS – HUSBAND AND WIFE cannot sell to each other nor can they donate to each other- void contracts.  INSOLVENTS before they are discharged  Due to fiduciary relationships-guardians or judges with regard to property of ward or under litigation  Those under civil interdiction  Prodigals, deaf and dumb unable to read and write  Those of unsound mind event though they have lucid intervals.  Vices of consent- mistake, fraud, violence ,intimidation ,undue influence.- voidable contracts. Art. 1490-(RELATIVE INCAPACITY) husband and wife cannot sell property to each other EXCEPT: 1. When a separation of property was agreed upon in the marriage settlements 2. When there has been a judicial separation of property under article 191. (Art. 135, family code)  Sale between husband and wife is inexistent and void  Prohibited also to donate to each other during the marriage.  Intended to protect 3rd persons. Art. 1491(RELATIVE INCAPACITY) persons who cannot acquire by purchase even at a public auction or judicial auction, either in person or through the mediation of another: a. The guardian- property of ward (voidable) b. Agents, property whose administration or sale may have been entrusted to them unless consent of principal is given (voidable) Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 c. Executors and administrators, property of the estate under administration(voidable) d. Public officers and employees , the property of the state or of any subdivision thereof or of any GOCC or institution, the administration of which has been intrusted to them. This apply to judges, and government experts who, in any manner whatsoever take part in the sale. (VOID) e. Justices, judges, prosecuting attorneys, clerks of superior and inferior 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 and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (VOID) f. Others specially disqualified - 1. Aliens who are disqualified to purchase private agricultural lands ; 2. Unpaid seller having a right of lien or having stopped the goods in transit who is prohibited from buying the goods either directly or indirectly in the resale of the same at a public or private sale which he may make. (VOID) g. The officer conducting an execution sale of property to enforce a court judgment rendered against the owner thereof cannot become a purchaser or be interested directly or indirectly in any purchase at such sale. (VOID) Art. 1492- the prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. ** Indirect violation of article 1491 cannot be done- article 1491 may be violated under the guise of a renunciation(waiver), compromise or exercise of a legal redemption in sale. These acts cannot be executed if the persons involved are the same as those PROHIBITED FROM ENTERING INTO CONTRACTS OF SALE IN Article 1491. WHAT CANNOT BE DONE DIRECTLY CANNOT AND SHOUJLD NOT BE DONE INDIRECTLY otherwise legal prohibitions may be set at naught or rendered useless. COMPROMISE- contract whereby parties , by reciprocal concessions, avoid a litigation or put an end to one already commenced – amicable settlement of a controversy. RENUNCIATION – a creditor gratuitously abandons his right against his debtor. Equivalent to condonation and remission. LEGAL REDEMPTION(BY OPERATION OF LAW)- the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment or by any other transaction whereby ownership is transmitted by onerous title. Examples: 1. Heir sell his hereditary rights to a stranger before partition, any or all co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale within 1 month from time they were notified in writing of the sale by the vendor; 2. Sale of rural land- adjoining owners shall have a right of redemption area of which does not exceed 1 hectare; or 3. Sale of urban land- so small and major portion cannot be used for any practical purpose, bought merely for speculation- owner of any adjoining land has a right or pre-emption at a reasonable price. Art. 1493- if at the time contract of sale is perfected, thing- object of the contract is entirely lost, the contract shall be without any effect(inexistent and void). - BUT if lost in part only, the VENDEE may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. ** thing is lost- perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered. KINDS OF LOSS IN CIVIL LAW—1. Physical loss- animal dies or house is burned; Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 2. Civil loss – thing disappears in such a way that its existence is unknown- ring falls into the deep ocean; carabao strays and could not be found anymore; 3. Legal loss- goes out of commerce—law prohibits a thing to be an object of contract- carabao for slaughter Art.1494- where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale: 1. As avoided 2. As valid in all of the existing goods or in so much thereof as have not deteriorated and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible. ** applies only on sale of specific-determinate thing/goods , and to such sale, which particularly covers, besides partial loss or destruction, total or partial deterioration of the goods. – Article 1494 does not apply where the goods have, without the knowledge of either party deteriorated from decay, but such goods were sold “AS IS”. OBLIGATIONS OF THE VENDOR Art. 1495- the vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. a. Transfer ownership of the determinate thing sold b. To deliver the thing\to warrant eviction and hidden defects c. To take care of the thing, pending delivery, with proper diligence d. To pay for the expenses for the execution and registration of the deed of sale, unless there is a stipulation to the contrary. e. To warrant the thing sold f. To place goods in deliverable state and bear the expenses unless agreed otherwise. g. To allow the buyer reasonable time to examine the goods sold. Art. 1496- the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Ways of effecting delivery: a. Actual or real delivery( Art. 1497) b. Constructive or legal delivery( Art. 1498) c. By delivery in any manner signifying an agreement that the possession is transferred to the vendee Constructive delivery: a. execution of a public instrument( Art. 1498) b. symbolical tradition or tradition symbolica c. tradition longa manu ( Art. 1499) d. tradition brevi manu( Art. 1499) e. traditio constitutum possessorium( Art. 1500) f. by quasi-delivery or quasi-traditio(Art. 1501) Art. 1497- the thing sold shall be understood as delivered , when it is placed in the control and possession of the vendee. – TRADITION.—Material/Actual or Real Delivery ** in case of movable properties- from hand to hand ** in case of immovable properties – by the exercise of certain acts commonly called the taking of possession( i.e. building a house thereon; cultivation and planting on land) Art. 1498- sale through a public instrument, execution thereof shall be equivalent to the delivery of the thing. with regard to the movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 ** SYMBOLIC DELIVERY/constructive – 2 kinds under this Article a. Delivery by legal formalities – done by execution of a public instrument; this applies to movable and immovable properties. b. Tradicio Simbolica or symbolic delivery – delivery of keys of the place where goods are found or stored to the buyer. Applies only to movable properties. ** the execution of a public instrument merely raises a presumption of delivery of possession--- consequently… 1. The parties may stipulate that delivery shall be effected at a date later than the execution of the instrument such as delivery of a land sold shall be made 5 months after the execution of the public instrument to enable the seller to gather the fruits of the plantations therein. 2. If the buyer cannot take effective possession of the land sold because it is in the adverse possession of a third persons who refused to surrender possession to the buyer in which case despite the execution of the public instrument , the seller has not complied with his obligation to deliver the land sold, for the fiction of law ( that execution of public instrument is equivalent to delivery) must yield to actual facts. Art 1499- delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason. ( MAY ALSO APPLY TO IMMOVABLES) ** mere pointing of a finger to the object of sale- Traditio Longa Manu ** tradition brevi manu- vendee already in possession of the thing sold- lessor sells the thing leased to the lessee; X Borrows Book from Y, Y delivers the book to X—later, X decides to buy book- book is deemed delivered to X who at the time of perfection of the contract of sale, is already in the possession of X. Art. 1500- tradition constitutum possessorium( or TRADITIO DE CONSTITUTO) - opposite of tradition brevi manu- the vendor continues in possession of the property sold not as owner but in some other capacity as for example, when the vendor stays as a tenant on the property sold. Art. 1501- incorporeal property- provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor’s consent, shall be understood as delivery. Incorporeal rights: a. execution of public instrument; b. placing of titles of ownership in the possession of the vendee c. allowing the vendee to use his rights as new owner with the consent of the vendor.(QUASI-TRADITIO) Art. 1502- goods delivered to buyer ON SALE OR RETURN to give buyer an option to return the goods instead of paying the price, ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or if no time has been fixed, within a reasonable time. When goods are delivered to buyer on approval or on trial or on satisfaction, or other similar terms ,the ownership therein passes to buyer: 1. When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; 2. If he does not signify his approval or acceptance to seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed on the expiration of a reasonable time. What is a reasonable time is a question of fact. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 Sale or return vs. sale on trial or on satisfaction 1. Subject to resolutory condition ; suspensive condition 2. Depends entire on the will of the buyer; depends on the character or quality of goods 3. Ownership passes to the buyer on delivery and subsequent return reverts ownership in seller; ownership remains in the seller until the buyer signifies his approval or acceptance to seller 4. The risk or injury rests upon buyer ; risk still remains with the seller Art. 1503- in sale of specific goods- seller may by terms of contract reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be reserved notwithstanding delivery of goods to the buyer or to a carrier or other bailee for the purpose of transmission to buyer. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent or to the order of the seller or of his agent, the seller reserves the ownership in the goods. But if, except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller’s property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligation under the contract. Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer. Where seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby ,. If,however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank or to the buyer by the consignee named therein , one who purchases in good faith, for value the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful. ** as a general rule delivery be it only constructive, passes title in the thing sold and delivery to carrier is deemed to be a delivery to the buyer. 2. On the otherhand, if the seller directs the carrier to redeliver the goods at their destination to the seller himself, or to his order, it indicates an intention that the carrier shall be the bailee for the seller and ownership will remain in the seller. ** general rule under this article and exception- ownership passes to the buyer upon delivery to carrier. following are exceptions: 1. If a contrary intention appears by the terms of the contract 2. In the cases provided in 2nd,3rd and last paragraph of Art. 1503 SUCH THAT: 1.goods are shipped and by the bill of lading the goods are deliverable to the seller or his agent or to the order of the seller or his agent-seller reserves the ownership. This principle is applicable even though the goods are shipped on the buyer’s vessel 3. The seller may not only retain the goods until the buyer performs his obligation under the contract, but he may, even in violation of the contract, dispose of them to 3rd persons. If the seller does this, of course, he is liable in damages to the buyer but the second purchaser from the seller acquires a better right. ** seller draws on the buyer for the prices and transmits the bill of exchange and the bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the title is regarded as retained in the seller until the bill of exchange is PAID. This indicates that the seller intends to make the delivery of the goods conditional upon the payment or acceptance of the draft. The buyer is bound to return the bill of lading if he Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 does not honor the bill of exchange. If he wrongfully retains the bill of lading, he acquires no additional right thereby. Art. 1504- unless otherwise agreed, the goods remain at the seller’s risk until the ownership is transferred to the buyer, but when the ownership therein is transferred to the buyer, the goods are at the buyer’s risk whether actual delivery has been made or not, except that: 1. Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure the performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the time of such delivery; 2.Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. ** general rule- thing is lost by fortuitous event, the risk is borne by owner of the thing at the time of loss( res perit domino) exceptions under this article: 1. Seller reserves the ownership of goods merely to secure the performance by the buyer of his obligations under the contract, the ownership is considered transferred to the buyer who, therefore assumes the risk from the time of delivery 2. Where actual delivery has been delayed through the fault of either the buyer or seller, the goods are at the risk of the party at fault with respect to any loss which might not have occurred but for such fault. In this case, the law punishes the party at fault. Exception to res perit domino—Art 1480- if the thing is lost after perfection of the contract but before its delivery, that is even before the ownership is transferred to the buyer, the risk of loss by a fortuitous event without the seller’s fault is borne by the buyer as an exception to the rule of res perit domino. Consequently, the buyer’s obligation to pay the price subsists if he has not yet paid the same or if he had, he cannot recover it from the seller although the latter’s obligation to deliver the thing is extinguished by its loss. ** ** conflict between art. 1504 and 1480- can be resolved only by legislation. ** SOME AUTHORS by way of reconciling- opines that Article 1504 refer to sale of goods, while Article 1480 should refer to sale of things other than goods. ** however- NOLLEDO- believes – that it should be resolved in favor of the express mandate of 1504- which settles the rule of res perit domino- thing perishes with its owner- in case of loss of the thing after perfection but before delivery—IT IS A SETTLED DOCTRINE that whoever is the owner at the time of the loss shall bear the risk of loss – subject to exceptions- and it is only through delivery – whether actual r constructive that OWNERSHIP IS TRANSFERRED. Art. 1505- where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell. Nothing in this title however, shall affect: 1. The provisions of any factor’s acts, recording laws, or any other provision of law enabling the apparent owners of goods to dispose of them as if he were the true owner thereof. 2. The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction 3. Purchases made in a merchant’s store, or in fairs, or markets, in accordance with the code of commerce and special laws. **SALE BY A PERSON NOT THE OWNER**- fundamental doctrine that no one can give what he does not have ( nemo dat quod non habet). Sale is a derivative mode of acquiring ownership and the buyer gets only such rights as the seller had, A SPRING CANNOT RISE ABOVE ITS SOURCE. Exceptions to the rule are: 1. Where the owner of the goods is , by his conduct, precluded from denying the seller’s authority to sell Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 2. Where the law enables the apparent owner to dispose of the goods as if he were the true owner thereof- LAW ON AGENCY; NIL; WAREHOUSE RECEIPTS LAW; PROPERTY REGISTRATION DECREE 3. Where the sale is sanctioned by statutory or judicial authority- possession of movable property acquired in good faith is equivalent to title. 4. Where sale is made at merchant’s stores, fairs, or markets 5. Where the seller has a voidable title which has not been avoided at the time of the sale. ( art. 1506) 6. Where seller subsequently acquires title over the goods. Art. 1506- where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value , and without notice of the seller’s defect of title Art. 1507- a document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document is a negotiable document of title. Art. 1508-1520 documents of title – GO TO NEG. INSTRUMENTS LAW (ANNEX) Art. 1521- whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller’s place of business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. -where in the contract- seller is bound to send the goods to buyer- but no time for sending is fixed- the seller is bound to send them within a reasonable time - goods at time of sale – in possession of 3rd person, seller has not fulfilled his obligation to deliver to buyer unless and until such 3rd person acknowledges to the buyer that he holds the goods on the buyer’s behalf - demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. Reasonable hour- question of fact. - unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. Rules on place of delivery 1. Place agreed upon by agreement, express or implied; 2. No agreement- place of delivery based on usage of trade; 3. No agreement-no prevalent usage, place of delivery is the seller’s place of business; 4. In any other case, place of delivery is the seller’s residence; 5. For specific goods- in some other place- that place is the place of delivery in the absence of agreement or usage of trade. Art.1522– 1. Delivery of goods less than quantity contracted- buyer may reject goods so delivered. Or accept the goods and (a). pay price at the contract rate if he know that no more were to be delivered OR (b). the fair value of the goods, if he did not know that the seller is going to be guilty of a breach of contract. 3. Delivery of goods more than quantity contracted- seller delivers larger quantity than contracted- BUYER MAY ACCEPT THE QUANTITY contracted for and reject the excess. HOWEVER, IF HE ACCCEPTS all the goods- he is liable for the price of all of them. 4. Delivery of goods mixed with others- goods delivered are mixed with goods of different description not included in the contract- BUYER MAY ACCEPT THOSE WHICH ARE IN ACCORDANCE with the contract and reject the rest. Buyer may of course, accept them all if he so desires. 5. Effect of indivisibility of subject matter- in case of delivery of a larger quantity of goods or of mixed goods- BUYER MAY REJECT THE WHOLE OF THE GOODS. Indivisibility may be by nature, by law or stipulation or intention of the parties. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 **rules may be controlled by usage or agreement. Art. 1523- Delivery to carrier on behalf of buyer- 1. GENERAL RULE – when seller is authorized or required to send the goods to the buyer, the general rule is that delivery of such goods to the carrier constitutes delivery to the buyer, whether the carrier is named by the buyer or not. 2. EXCEPTIONS - those provided for in paragraphs 1,2,3 of art. 1503 and when contrary intent appears, as when the parties did not intend the delivery of the goods to the buyer through the carrier.(GO TO ART. 1503) Art. 1503- 1. Bill of lading covering goods consigned to buyer is issued deliverable to the seller or his agent; 2. A bill of lading is issued deliverable to the buyer or his agent but the seller or his agent retains possession of the bill of lading 3. If a bill of lading is issued but the seller expressly retains ownership or possession until the purchase price is fully paid. FOB- free on board- goods are to be delivered free of expense to the buyer to the point where they are FOB- point of shipment or point of destination. Quoted price include the cost, WITHOUT INSURANCE AND FREIGHT. **FOB Point of destination- upon delivery of the goods to the carrier, the seller who pays the freight, retains ownership. ** FOB point of shipment- the buyer gets the ownership upon delivery of the goods to the carrier. CIF- Cost, Insurance and Freight- means that the price fixed covers not only the cost of the goods, but also the expenses of freight and insurance to be paid by the seller up to the point agreed. ** Upon delivery of the goods to the carrier, the ownership pertains to the buyer. ** In C & F (Cost and Freight) , the quoted price includes only the Cost and Freight WITHOUT INSURANCE. And governed by rules in CIF. FAS- Free Alongside Ship – the quoted price excludes insurance, freight. And is governed by the same rules IN FOB. Art. 1524- vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract. ** general rule- obligation to deliver subject matter of a contract arises from the moment of its perfection and from that time the obligation may be enforced. – BUT CONTRACT OF SALE IS BILATERAL-and from it arises not only the obligation to deliver the thing but also that of paying the price. RECIPROCAL OBLIGATION. ** Consequently, if the vendor is bound to deliver the thing sold, it is no less certain that the vendee must pay the price, if he does not pay the price, the consideration for the obligation of the vendor is absent and if the consideration is absent, the obligation likewise does not exist or at least is suspended. ** When delivery be made before payment of price rule is – that the thing shall not be delivered unless the price be paid: EXCEPTION- is that the thing must be delivered though the price be not first paid, if 1. Where time of payment has been fixed in the contract. Art. 1525- the seller of goods is deemed to be an unpaid seller within the meaning of this title: 1. When the whole of the price has not been paid or tendered ; 2. When a bill of exchange or other negotiable instrument has been received as conditional payment, and Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise. In articles 1525 and 1535 the term seller includes an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller.  Unpaid seller- one who is not paid the whole of the price or one to whom a bill of exchange or other negotiable instrument has been given as conditional payment and the condition is broken by reason not only of dishonor of the instrument but also by other reasons like insolvency of the buyer. ** tender of payment of buyer- destroys seller’s lien- but seller is still considered an unpaid seller and can bring an action for the payment of the goods sold. ** payment of part of price- does not destroy a seller’s lien- seller remains an unpaid seller even if the title has passed to the buyer. ** payment by negotiable instrument- shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired. Art. 1526- remedies of an unpaid seller: 1. A lien on the goods or right to retain them for the price while he is in possession of them; 2. In case of the insolvency of the buyer, a right of stopping the goods in transit after he has parted with the possession of them; 3. A right of resale as limited by this title; 4. A right to rescind the sale as likewise limited by this title. Where the ownership has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the ownership has passed to the buyer. Art. 1527- subject to provisions of this title, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: 1. Where the goods have been sold without any stipulation as to credit 2. Where the goods have been sold on credit , but the term of credit has expired 3. Where the buyer becomes insolvent The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. ** the rights given by this article, though denominated a lien, is in truth GREATER THAN A LIEN. The lien holder’s position is very nearly that of the pledge with power to sell at private sale in case of default.. the power survives till payment of the price. ** the unpaid seller’s lien is effective not only against the buyer himself but against all parties claiming through the buyer, whether or not they are purchasers for value without notice. The buyer’s interest in the goods as owner is limited or qualified by the seller’s lien to which it is subject. ** where no credit period is granted to the buyer, the seller may continue retaining the goods making his lien effective until the buyer pays the price. Unless a contrary intention appears, arrangements for credit in a sale usually indicate that during the period of credit the buyer is to receive possession of the goods without paying for them at the time of delivery. Credit arrangements accordingly waive the seller’s lien during the agreed period of credit, and entitle the buyer, during that period, to demand a delivery of the goods without making or tendering corresponding payment. AFTER THE TERM OF THE CREDIT has expired, the buyer is by the terms of the contract bound immediately to pay the price and the seller to deliver the goods, and it is a general principle of contracts that wherever the parties to a bilateral agreement are each under an immediate obligation to perform, the performances are concurrently conditional. ** the seller’s lien is lost by an unconditional surrender of possession. After such surrender of possession directly to the buyer without collecting the price, sellers have Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 often been held to thereafter as to this item not lien holders but merely GENERAL CREDITORS. ** INSOLVENC Y OF BUYER REVIVES SELLER’S LIEN- insolvency of the buyer is another situation where the lien of the seller in possession is revived, even though the time for payment of the price has not yet arrived. This doctrine is only an application of a general principle in law of contracts that when one party to a bilateral contract is incapacitated from performing his part of the agreement, the other party is also excused from performing. ** it is immaterial that the seller holds the goods as bailee for the buyer. Indeed, this is always the situation where the seller’s lien is in question; for the property(title) having passed, the seller is necessarily holding the buyer’s goods and, therefore acting as bailee for him. And though the seller has charged the buyer storage for the goods, the LIEN STILL MAY BE ASSERTED. Art. 1528- where an unpaid seller had made part deliver of the goods, he may exercise his right of lien on the remainder, unless such part deliver has been made under such circumstances as to show an intent to waive the lien or right of retention.  When part of the goods are delivered, the seller has a lien upon the remainder, not simply for the proportion of the price which is due on account of the goods so retained, but for whatever portion of the price is unpaid. IT IS SAID IN CASES that if delivery of the part is “intended as a symbolical delivery of the whole, and a waiver as to any right of retention as to the remainder, the LIEN IS LOST.”  Doubtless , is possible for a seller to agree to give up his lien, but it is probable that the intent to make such an agreement would need to be pretty explicit in order to deprive the seller of his right. Art. 1529- the unpaid seller of goods loses his lien thereon: 1. When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods or the right to the possession thereof; 2. When the buyer or his agent lawfully obtains possession of goods; 3. By waiver thereof The unpaid seller of goods , having a lien thereon, does not lose his lien by reason only that he has obtained judgment for decree for the price of the goods. o If buyer gets both title and possession from the seller, THE LIEN IS LOST. o It is NOT REVIVED if the goods are re-delivered to the seller for a special purpose, as for PACKING OR REPAIRING. o The wrongful taking of the goods by the buyer without the assent of the seller does NOT DESTROY THE LIEN. o An unconditional delivery to an agent or bailee for the buyer is, so far as the seller’s lien is concerned ,the same as delivery to the buyer himself. Art 1530- when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit , that is to say, he may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. Requirements for the existence of the right to stop goods in transit: 1. There must be an unpaid seller 2. The title to the goods must have passed 3. Goods must be in transit from the seller to the buyer 4. The buyer must be insolvent( NEED NOT BE JUDICIALLY DECLARED; repudiation of the contract by the buyer is not enough.  INSOLVENCY- Judicial declaration is NOT NECESSARY. It is enough that the buyer has ceased to pay his debts in the ordinary course of business or cannot pay Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 his debts as they become due , whether insolvency proceedings have been commenced or not.  The right is allowed the seller after the property has passed. Before that time, the seller’s ownership of the goods is sufficient to protect him. Art. 1531- goods are in transit within the meaning of the preceding article: 1. After delivery to a carrier(land, water or air) or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf, takes delivery of them from such carrier or other bailee. 2. If the goods are rejected by the buyer , and the carrier or other bailee continues in possession of them even if the seller has refused to receive them back. When goods considered no longer in transit: 1. After delivery to the buyer or his agent in that behalf; 2. If the buyer or his agent obtains possession of the goods at a point before the destination originally fixed 3. If the carrier or bailee acknowledges to hold the goods on behalf of the buyer 4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer. Attornment- an acknowledgement of the bailee that he holds the goods for a new party. Delivery to ship- a. chartered by buyer- not delivery to buyer except if carrier chartered is agent of buyer hence goods are no longer in transit since delivery to chartered vessel is delivery to buyer b. ship owned by the buyer – delivery to agent hence delivery to principal/buyer  It is clear that when goods are delivered by an unpaid seller to the carrier or a bailee for transmission to the buyer, while no delivery to the buyer or his agent is made, the goods are still IN TRANSITU whether or not , they have arrived at the point of destination.  Rejection of goods by the buyer- permitting the buyer to examine the goods on presentation even when bill of lading is stamped CANCELLED BY DELIVERY, did not terminate the transit when the buyer , after examination, immediately rejected the goods.  Interception of goods by the buyer- if buyer intercepts the goods at a point before the destination originally fixed, the seller’s right to stop the goods in transit is GONE.  Acknowledgment that carrier or bailee is buyer’s agent- holds the goods as bailee or agent of the buyer, there is constructive delivery of the goods to the buyer, making the goods no longer in transit. IF THE CARRIER OR BAILEE DID THE ACKNOWLEDGMENT IN VIOLATION OF THE SELLER’S INSTRUCTIONS,THEN THE SELLER MAY HOLD SUCH CARRIER OR BAILEE LIABLE FOR DAMAGES IN THE PROPER CASE.  WRONGFUL REFUSAL TO DELIVER THE GOODS- CARRIER OR other bailee wrongfully refuses to deliver the goods to the buyer- buyer offers to liquidate his indebtedness which is the unpaid price and the carrier or other bailee unjustifiably refuses to accept payment and make delivery- the good SHALL NO LONGER BE IN TRANSIT – even if carrier or other bailee is actually in possession thereof, - SELLER LOSSES HIS RIGHT TO STOP THE GOODS IN TRANSITU.  Partial delivery- seller can exercise right of stoppage in transitu for remainder.  LEVY OF EXECUTION OR ATTACHMENT- WILL NOT DEFEAT RIGHT TO STOP GOODS IN TRANSITU- -ownership has not transferred to buyer. The right of stoppage in transitu is paramount to any lien on the goods – seller’s credidtors have no right to seize the goods nor can the buyer’s creditors levy upon them so as to defeat the right of subsequent stoppage. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 Art. 1532- ways of exercising the right to stop the goods in transitu- stoppage in transitu : 1. By taking actual possession of the goods; or 2. By giving notice of his claim to the carrier or bailee. ** notice to be effective must be given with reasonable diligence to afford communication to his agent to prevent the delivery to the buyer- no form is essential- sufficient as to describe the goods for identification,. ** effect of outstanding bill of lading- negotiable document issued- carrier or bailee has NO OBLIGATION to deliver the goods to the seller unless such document is first SURRENDERED FOR CANCELLATION. ** the right of the purchaser for value in good faith of the document of title issued covering goods is SUPERIOR to the seller’s lien or stoppage in transit.  SELLER’S POWER to stop in transitu includes not only the power to countermand delivery to the buyer but to order redelivery to himself. The duty imposed on the carrier by the exercise of this power is, however, qualified by the existence of a lien of the carrier on the goods for charges due for their carriage , but the goods are not subject to any general lien which the carrier might have for freight due on other goods.  Where goods are covered by non-negotiable document of title- like a bill of lading- the right to stop the goods in transit may be exercised without surrendering the non-negotiable document of title.  BUT WHERE THE GOODS ARE COVERED by a negotiable document of title, the carrier has the right to refuse to deliver the goods unless the negotiable document of title is produced and surrendered. Art. 1533- 3rd right of an unpaid seller- RIGHT OF RESALE- can be exercised only if unpaid seller has the above rights ( art. 1532) and under any of the following three cases: 1. Goods are perishable in nature; 2. Right to resell is expressly reserved , incase buyer should be in default; 3. Buyer delays in the payment of the price for an unreasonable time. EFFECT OF RESALE- in case of resale, the seller is not liable for any profit made by such resale; but if he sells for less than the price, he has a right to sue for the balance. AS AGAINST THE ORIGINAL BUYER, THE NEW BUYER ACQUIRES A GOOD TITLE TO THE GOODS. ** notice of resale to buyer- necessary-- except where the goods are perishable in nature or by express provision of the contract of sale. The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make a resale either by public or private sale. He cannot , however, directly or indirectly buy the goods. Art. 1534- 4th right of an unpaid seller- RIGHT TO RESCIND the sale. – can be exercised only if he has the rights mentioned in Art. 1532( seller has a right of lien or right of stoppage in transitu) and under either of the two situations: 1. Where the right to rescind is expressly reserved in case the buyer should make a default; 2. Where the buyer delays in the payment of the price for an unreasonable time. ** EFFECT OF RESCISSION- seller resumes ownership of goods. Buyer may be made liable for damages for any loss occasioned by the breach of contract. How to effect rescission?- notice to the buyer or by some overt act showing an intention to rescind.. Bringing of a replevin suit amounts in itself to an election by the seller to rescind the sale of the goods replevined. Art. 1535- the unpaid seller’s right of lien or stoppage in transit, is NOT AFFECTED by any sale, or other disposition of the goods which the buyer may have made , unless the Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 seller has assented thereto. IF HOWEVER, a negotiable document of title has been issued for goods, no seller’s lien or right to stoppage in transit shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller’s claim to a lien or right of stoppage in transit. The general rule is set forth above that the unpaid seller’s right to lien or stoppage in transitu shall remain even if the buyer has sold or disposed of the goods: exceptions are: 1. If the seller has assented or consented to such sale or disposition; or 2. If the goods are covered by a negotiable document of title and this document is now in possession of a purchaser in good faith and for value. Art. 1536- the vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the term as provided in article 1198- Art. 1198- the debtor(vendee) shall lose every right to make use of the period: 1. When after the obligation has been contracted he becomes insolvent, unless he give a guaranty or security for the debt/price 2. When de does not furnish to the creditor the guaranties or securities which he has promised 3. When by his own acts he has impaired said guaranties or securities after their establishment and when through a fortuitous event they disappear,unless he immediately gives new ones equally satisfactory 4. When the debtor violates any undertaking, in consideration of which the creditor agreed to the period 5. When the debtor attempts to abscond. Art. 1537- the vendor is bound to deliver the thing sold and its accession and accessories in the condition in which they were upon the perfection of the contract. All the fruits shall pertain to the vendee from the day on which the contract was perfected. (This provision merely re-states the rules embodied in the subject obligations and contracts under Articles 1164 and 1166- civil code) Accessions- fruits of a thing or additions to or improvements upon a thing-young of animal, house, trees on land, etc.. Accessories- anything attached to a principal thing for its completion, ornaments or better use , picture frame, key of a house. Art. 1538- in case of loss, deterioration or improvement of the thing before its delivery, the rules in article 1189 shall be observed, the vendor being considered the debtor. Rules in case of loss,deterioration or improvement of thing BEFORE deliveryart.1189: 1. Thing is lost without fault of the debtor, obligation shall be extinguished 2. Thing lost through fault of debtor, - pay damages- thing is lost when it perishes, or goes out of commerce, or disappears and its existence is unknown or cannot be recovered 3. Thing deteriorates without fault of debtor, impairment is borne by creditor 4. Deteriorates through fault of debtor, creditor may choose between rescission of the obligation and its fulfillment, with indemnity for damages in either case 5. Thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor 6. If improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.(usufructuary may make on the property held in Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance, but he shall have no right to be indemnified therefor. He may however, remove such improvements , should it be possible to do so without damage to the property- art. 579; the usufructuary may set off the improvements he may have made on the property against any damage to the same- art. 580) Art. 1539- obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules: 1. Sale of real property by unit of measure or number- entire area stated in contract must be delivered- with a statement of its area at the rate of a certain price for a unit of measure or number 2. Where entire area could not be delivered- vendee is entitled to rescind contract. He may however enforce the contract with the corresponding decrease in price. When vendee entitled to rescind sale of realty: 1. If the lack in area is at least 1/10 than that stated or stipulated 2. If the deficiency in the quality specified in the contract exceeds 1/1l0 of the price agreed upon 3. If the vendee would not have bought the immovable had he known of its smaller area or inferior quality irrespective of the extent of the lace in area or quality. Art. 1540- if, in the case of the preceding article, there is a greater area or number in the immovable that that stated in the contract, the vendee may accept the area included in the contract and reject the rest. If he accepts the whole area, he must pay for the same at the contract rate. ** the vendee may not withdraw from the contract. Art. 1541- the provisions of the two preceding articles shall apply to judicial sales. Art. 1542- if the sale is made for a lump sum, the cause of the contract is the thing sold irrespective of its number or measure, there shall be no increase or decrease of the price although there be greater or less area or number than that stated in the contract. The same rule shall be applied when 2 or more immovables are sold for a single price. But if , besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.  In the sale of land for a lump sum, the real and true area of the said land MUST PREVAIL OVER THE AREA GIVEN OR STATED IN THE DOCUMENT OF SALE.  Where buyer ascertained area and quality of land sold and made no objection thereto and does not appear that the area was an essential element of the contract or that the parties fixed the price at so much per hectare, the fact that the land sold had a smaller area than that stated in the contract of sale does not give the vendee a right to rescind the said sale.  Mutual error- mutual mistake as to area and quality- contract was subject to annulment on the ground of mutual error.  Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 ** S sold to B a parcel of land for a lump sum of P300K. contract states that the area is 500 sq. m. subsequently it was ascertained that the area included within the boundaries is really 600 sq. m. S IS BOUND TO DELIVER ALL 600 sq. m. without increase in price. If S does not deliver also the 100 sq. m., B has the right to rescind the contract or pay a proportionately reduced price of 5/6 or P250,000 only. Art. 1543- the actions arising from articles 1539 and 1542 shall prescribe in SIX MONTHS counted from the day of delivery. Art. 1544- Rules as to preference of ownership in case of DOUBLE SALE- same thing sold to different vendees, the ownership shall be transferred to the persons who may have first taken possession thereof in good faith, if it should be MOVABLE PROPERTY. Should it be IMMOVABLE PROPERTY, ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. SHOULD THERE BE NO INSCRIPTION- ownership shall pertain to the person who in good faith was first in the possession ; and in the absence thereof, to the person who presents the oldest title PROVIDED THERE IS GOOD FAITH. RULES 1. If the property sold is movable, the ownership shall be acquired by the vendee who first takes possession in good faith. 2. IF PROPERTY SOLD IS IMMOVABLE: A. The vendee who first registers the sale in good faith in the registry of property B. In the absence of registration, the vendee who first take possession in good faith C. In the absence of both registration and possession, the vendee who presents the oldest title(who first bought the property) in good faith. Art. 1545- where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the non-performance of the condition as a breach of warranty. Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller or his obligation to deliver the same as described and was warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. ** condition- uncertain event or contingency on the happening of which the obligation of the contract depends. In such case the obligation of the contract does not attach until the condition is performed. ** sale is subject to condition and condition is not fulfilled- party may either a. Refuse to proceed with the contract b. Proceed with the contract, waiving the performance of the condition. **example- B entered into a contract with S(seller) for the purchase of certain machinery from Japan. The arrival of the goods to be shipped from japan is made a condition without any promise by S. If Machinery does not arrive, Sis not guilty of breach of contract. HOWEVER, if S PROMISES or warrants that the machinery will be shipped or that it was already on its way, the non-arrival constitutes a breach of contract. ** S promised to sell his parcel of land to B should S win a case pending in the Supreme Court. S lost the case. S may either refuse to sell the parcel of land or he may waive the performance of the condition and sell the parcel of land. Art. 1546-(EXPRESS) Warranties by the seller- either Express or Implied. Express warranty is any affirmation of fact or any promise by the seller relating to the thing, the natural tendency of which is to induce the buyer to purchase the thing, and the buyer thus induced does purchase the same. Downloaded by Queen Cruz ([email protected])  lOMoARcPSD|13083919 ** A WARRANTY is part of the contract of sale. It is, therefore, immaterial whether the seller did no know that it was false or true. No intent is necessary to make the seller liable for his warranty. Art. 1547- (implied warranties)- 1. Implied warranty as to seller’s title; 2. Implied warranty against hidden defects or unknown encumbrances. 3. Implied warranty as to fitness or merchantability. ** implied warranties NOT APPLICABLE— a. As is wher