Sales Syllabus

UNIVERSITY OF THE PHILIPPINESCOLLEGE OF LAW

SALES

I. INTRODUCTION

Textbook: BAVIERA, Araceli, Sales

Definition of Sale – Art. 1458

Nature of the Obligations

Essential requisites of a contract of sale

1. Consent

2. Determinate subject matter

3. Price

Stages of contract of sale

1. Negotiation

2. Perfection

3. Consummation

Characteristics of a contract of sale

1. Nominate

2. Principal

3. Consensual – Art. 1475

4. Bilateral and Reciprocal

5. Onerous

6. Commutative

Sale is title and not mode

Sale distinguished from other contracts

1. Donation – Arts. 745 and 1471

2. Barter – Arts. 1468, 1638 to 1641

3. Contract for Piece of Work – Arts. 1467, 1713 to 1715

Celestino v. Collector 99 Phil 841 (1956)

Commissioner v. Engineering Equipment 65 SCRA 590 (1975)

4. Agency to Buy or Sell – Arts. 1466, 1868

Quiroga v. Parsons 38 Phil 501 (1918)

Puyat v. Arco 72 Phil 402 (1941)

5. Dacion en Pago – Art. 1245

6. Lease – Arts. 1643

Filinvest Credit Corp. v. CA 178 SCRA 188 (1989)

Contract of sale/Contract to sell

Kinds of Contract of Sale

1. Absolute

2. Conditional

Luzon Brokerage v. Maritime Building 43 SCRA 93 (1972)

Dignos v. CA 158 SCRA 375 (1988)

II. PARTIES TO A CONTRACT OF SALE

Capacity of parties – Arts. 1489 – 1492

Kinds of Incapacity

1. Absolute incapacity

2. Relative incapacity

3. Specific incapacity/Special disqualifications

Absolute incapacity – Arts. 1327, 1397, 1399

Necessaries – Arts. 1489, 290 Family Code

Relative incapacity: Married Persons

1. Contracts with Third Parties – Arts. 73, 96 and Family Code

2. Between Spouses – Arts. 133, 1490 and 1492

3. Applicability to Common-Law Spouses – Art. 133

Calimlim-Canullas v. Fortun 129 SCRA 675 (1984)

Cruz v. CA 281 SCRA 491 (1997)

Ching v. Goyangko 506 SCRA 735 (2006)

Special disqualifications – Arts. 1491 –1492

1. Guardians, Agents and Administrators

Philippine Trust Co. v. Roldan 99 Phil 392 (1956)

2. Lawyers

Rubias v. Batiller 51 SCRA 120 (1973)

3. Judges

Macariola v. Asuncion 114 SCRA 77 (1982)

III. SUBJECT MATTER

Requisites of a valid subject matter – Arts. 1459 to 1465

1. Must be licit – Arts. 1347, 1459, 1575, 1409

Martinez v. CA 56 SCRA 647 (1974)

2. Must be determinate or at least determinable – Art. 1460

a. Determinate Subject Matter

b. Determinable Subject Matter

Melliza v. City of Iloilo 23 SCRA 477 (1968)

Atilano v. Atilano 28 SCRA 231 (1969)

c. Generic Non-Determinable Objects

Yu Tek v. Gonzales 29 Phil 384 (1915)

d. Sale of Undivided Interest – Arts. 1463 - 1464

e. Sale of Undivided Share in Mass

3. Must be existing, future or contingent – Arts. 1347, 1348 and 1462

Emption rei speratae – Arts. 1461 and 1347

Pichel v. Alonzo 111 SCRA 34 (1981)

Emptio spei – Art. 1461

Things subject to resolutory condition – Art. 1465

4 Quantity of subject matter not essential for perfection – Art. 1349

IV. OBLIGATION OF THE SELLER TO TRANSFER OWNERSHIP

Obligations of the Seller to transfer ownership

Sale by the owner of the subject matter - Arts. 1459, 1505

Sale by the owner at the time of perfection – Arts. 1459, 1461, 1465, 1475, 1477

Sale by the owner at the time of consummation - Art. 1505

Exceptions: Sale by a non-owner:

1. Estoppel- Art. 1434

Hernaez v. Hernaez 32 Phil 214 (1915)

Siy Cong Bien V. HSBC 56 Phil 598 (1932)

Jalbuena v. Lizarraga 33 Phil 77 (1915)

2. Recording Laws; Torrens System – PD 1529..Statutory Sale - Order of Courts

4. Sale in Merchant’s Store, Market or Fair

Sun Bros. V. Velasco 54 OG 5143 Aug 1958

Masiclat v. Centeno GR No 8420, May 21, 1956

Sale by a person having a voidable title – Arts. 1506, 559

Tagatac v. Jimenez 53 OG 3792 No. 12 June 1957

De Garcia v. CA 37 SCRA 129 (1971

EDCA Publishing v. Santos 184 SCRA 614 (1990)

Aznar v. Yapdiangco 13 SCRA 486 (1965)

Rules applicable to immovables

Property Registration Decree - PD 1529, Sec. 113

Heirs of Spouses Benito Gavino v. CA 291 SCRA 495 (1998)

V. PRICE

Meaning of Price – Arts. 1458, 1469 – 1474

Requisites for a valid price

1. Must be real – Art. 1471

a. When price simulated

b. When price is false – Art. 1353 – 1355

Mapalo v. Mapalo 17 SCRA 114 (1966)

Ong v. Ong 139 SCRA 133 (1985)

Morales v. CA 27 SCRA 484 (1969)

c. Effect of Non-payment of price

Montecillo v. Reynes 385 SCRA 244 (2002)

2. Must be in money or its equivalent – Arts. 1458, 1468

Republic v. Phil. Resources 102 Phil 960 (1958)

3. Must be certain or ascertainable at time of perfection – Art. 1469

Toyota Shaw v. CA 244 SCRA 320 (1995)

How price is determined

1. By third person – Art. 1469

2. By the courts – Art. 1469

3. By reference to a definite day – Art. 1472

4. By reference to another thing certain

5. Never by one party – Arts. 1473, 1182

Inadequacy of price – Arts. 1355, 1470

Bagnas v.CA 176 SCRA 159 (1989)

When no price agreed – Art. 1474

Manner of payment must be agreed upon

Velasco v. CA 51 SCRA 439 (1973)

San Miguel Properties v. Huang 336 737 (2000)

Earnest money v. option money – Art. 1482

Limson v. CA 357 SCRA 209 (2001)

VI. FORMATION OF CONTRACT OF SALE

Preparatory – Art. 1479

1. Offer – Art. 1475

Villonco v. Bormaheco 65 SCRA 352 (1975)

a. Forms of offer –Arts. 1319, 1325, 1326

Zayco v. Serra 44 Phil 326 (1923)

b. Forms of acceptance – Art. 1319

National Grains /authority v. IAC (1989)

c. Vices vitiating consent – Arts. 1330, 1338, 1331

2. Option Contract – Arts. 1479 (2) , 1324

De la Cavada v.Diaz 37 Phil 962 (1918)

Carcellar v. CA 302 SCRA 718 (1999)

a. Meaning of separate consideration

Villamor v. CA 202 SCRA 607 (1991)

Soriano v. Bautista 6 SCRA 946 (1962)

b. An option to buy is not a contract of sale

Adelfa Properties v. CA 310 Phil 623 (1995)

c. Without consideration void as option but valid as offer

Sanchez v. Rigos 45 SCRA 368 ( 1972)

d. Proper exercise of option Nietes v. CA 46 SCRA 654 (1972)

e. Period of Exercise of Option

Villamor v. CA 202 SCRA 607 (1991)

f. There must be acceptance of option

Vasquez v. CA 199 SCRA 102 (1991)

g. Effects of exercise of option

Limson v. CA 357 SCRA 209 (2001)

3. Right of First Refusal

Equatorial Realty v. Mayfair 264 SCRA 483 (1996)

Paranaque Kings v. CA 268 SCRA 727 (1997)

Ang Yu v. CA 238 SCRA 602 (1994)

Rosencor v. Inquing 354 SCRA 119 (2001)

Guerrero v. Ynigo 96 Phil 37 (1950)

Guzman Bocaling v. Bonnevie 206 SCRA 675 (1992)

4. Mutual Promise to Buy and Sell – Art. 1479

Coronel v. CA 263 SCRA 15 (1996)

Perfection - Arts. 1475, 1319, 1325, 1326

1. When deviation allowed

Villonco v. Bormaheco 65 SCRA 352 (1975)

2. Sale by Auction – Arts. 1476, 1403 (d), 1326

3. Perfection – Art. 1475

National Grains Authority v. IAC 171 SCRA 131 (1989)

Peoples Homesite and Housing v. CA 133 SCRA 777 (1984)

4. Place of Perfection – Art. 1391

5. Expenses of Execution and Registration – Arts. 1487, 1521

Formalities of the contract

1. Form not important – Arts. 1483, 1356, 1357, 1358

Dalion v. CA 182 SCRA 872 (1990)

Secuya v. vda de Selma 326 SCRA 244 (2000)

Requirements in Sale of Immovables – Art. 1358

Santos v. Manalili 476 SCRA 679 (2005)

2. Exceptions: When form important

A. Form important for enforceability

a. Statute of Frauds – Arts. 1403, 1405

Paredes v. Espino 22 SCRA 1000 (1968)

Baretto v. Manila 46 Phil 964 (1924)

Inigo v. Estate of Maloto 21 SCRA 246 (11967)

B. Form important for validity

a. Sale of realty through an agent – Art. 1874

City Lite v. CA 325 SCRA 385 (2000)

b. Sale of large cattle – Art. 1581, sec. 529 Revised Adm. Code

c. Electronic Commerce Act – RA 8792 sec. 7, 8, 11

d. Value of Business Forms

VII. TRANSFER OF OWNERSHIP

Manner of transfer – Arts. 1477, 1496-1501

Kuenzle v. Macke 14 Phil 610 (1909)

When delivery does not transfer title

1. Sale on return

2. Sale on approval, trial or satisfaction – Art. 1502

3. Express Reservation – Art. 1478

Luzon Brokerage v. Maritime Bldg. 43 SCRA 93 (1972)

4. Implied Reservation – Art. 1503

5. When sale not valid

6. When seller is not the owner

Kinds of delivery

1. Real or actual delivery – Art. 1497

Bean v. Cadwallader 10 Phil 606 (1908)

Ocejo v. International Bank 37 SCRA 631 (1918)

Cebu Winland Dev.Corp. v. Ong Siao Hua 588 SCRA 120 (2009)

2. Constructive Delivery

a. Execution of a Public Instrument – Art. 1498

Aviles v. Arcega 44 Phil 924 (1922)

Phil. Suburban v. Auditor General 63 SCRA 397 (1975)

Sarmiento v. Lesaca 108 Phil 900 (1960)

Florendo v. Foz 21 Phil 388 (1991)

Masallo v. Cesar 39 Phil 134 (1918)

Asset Privatization Trust v. T.J. Enterprises 587 SCRA 481 (2009) b Traditio Longa Manu – Arts. 1498, 1499, 1513, 1514

Board of Liquidator v. Floro 110 Phil 482 (1960)

c. Tradition Brevi Manu – Art. 1499

Heirs of Pedro Escanlar v. CA 281 SCRA 176 (1997)

d. Traditio Constitutom Possessorium – Art. 1500

Bautista v. Sioson 39 Phil 615 (1919)

e. Symbolic Delivery – Art. 1498, 1513

f. Delivery to a Common Carrier – Arts. 1523

“FOB Sales”

Behn Meyer v. Yangco 38 Phil 602 (1918)

“CIF Sales”

General Food v. Nacoco 100 Phil 637 (1956)

“FAS”

Effect of form of bill of lading – Art. 1503

Double Sales – Art. 1544

1. General Rule – Prius tempore, prius jure

Carbonell v. CA 69 SCRA 99 (1976)

2. Requisites for Double Sale

Cheng v. Genato 300 SCRA 722 (1998)

3. Who is purchaser in good faith

Agricultural and Home Extension v. CA 213 SCRA 536 (1992)

4. Priority of registration over possession

5. Sale of Movables – Arts. 1544 , 1497 to 1501

Rivera v. Ong 37 Phil 355 (1917)

6. Sale of Immovables – Art. 1544 par. 2

Carbonell v. CA 69 SCRA 99 (1976)

a. Sale by virtue of execution and attachment – Art. 1544

Carumba v. CA 31 SCRA 558 (1970)

b. Meaning of “Better Right”

Hanopol v. Pilapil 7 SCRA 452 (1963)

c. Sale of Unregistered land – PD 1529 sec. 113

Dagupan v. Macam 14 SCRA 179 (1965)

7. When one sale is forgery

Espiritu v. Valerio 9 SCRA 761 (1963)

8. First in possession in good faith

Quimson v. Rosete 87 Phil 159 (1950)

Sanchez v. Ramos 40 Phil 614 (1919)

9. Oldest title – Art. 1544 pars. 3

VIII. RISK OF LOSS

General Rule – Arts. 1262, 1263, 1189, 1504, 1496

When loss occurred before perfection of contract

Roman v. Grimalt 6 Phil 96 (1906)

When loss occurred at time of perfection of contract – Arts. 1493 and 1494

Norkis v. CA 193 SCRA 694 (1991)

When loss occurred after perfection but before delivery – Arts. 1262, 1460, 1452,

1496, 1504, 1538, 1189

When ownership is transferred – Arts. 1504, 1502

Bean v. Cadwallader 10 Phil 606 (1908)

Norkis v. CA 193 SCRA 694 (1991) Exceptions:

1. Stipulation to the contrary

Sun Bros. V. Perez 7 SCRA 977 (1963)

2. Security title

Lawyer’s Coop v. Tabora 13 SCRA 762 (1965)

3. Delay

IX. DOCUMENTS OF TITLE

Definition - Arts. 1507, 1636

Purpose of documents of title

Siy Cong Bieng v. HSBC 56 Phil 598 (1932)

Negotiable documents of title

1. How negotiated – Arts. 1508, 1509

2. Who may negotiate – Art. 1512

3. Rights acquired by negotiation – Arts. 1513

4. Implied Warranties – Arts. 1516, 1517

5. Creditors Right Against the Goods – Arts. 1919, 1520

Non-negotiable documents of title

1. How transferred or assigned – Arts. 1514 (3)

2. Rights acquired by transfer of document of title – Arts. 1514, 1515

2. Effects of Transfer – Art. 1514

X. REMEDIES OF AN UNPAID SELLER

Definition of unpaid seller – Art. 1525

Remedies of unpaid seller

1. Possessory Lien – Arts. 1526 – 1529, 1503, 1535

a. Partial delivery

b. Loss of lien

c. Revival of lien

2. Stoppage in transitu – Arts. 1530 – 1535, 1632 (2)

a. Requisites

b. When considered in transit

c. Sale of goods in transit

3. Right of Resale – Art. 1533

a. Time to resell

b. Right to sue buyer for damages

4. Right to Rescind – Art. 1534

XI. PERFORMANCE OF CONTRACT

Obligations of the seller:

Delivery of the thing sold

1. Place, time and manner of delivery – Arts. 1521, 1169, 1524

Smith Bell v. Matti 44 Phil 874 (1922)

2. When time is of essence

Soler c. Chesky 43 Phil 52 (1922)

Republic v. Litton 94 Phil 52 (1953)

3. Effects of Delivery – Arts. 1477, 1478 4. When seller not bound to deliver – Arts. 1524, 1536,1198

5. Sale of Movables – Arts. 1522, 1537, 1480

a. Delivery by installments – Art. 1583

b. Delivery of wrong quantity – Art. 1522

6. Sale of Immovables – Arts. 1539, 1540

a. Where price is at certain rate per unit – Arts. 1539, 1540

Cebu Windland Dev. Corp. v. Ong Siao Hua 588 SCRA 120 (2009)

b. Sale for a lump sum – Art. 1542

Obligations of the buyer:

1. Inspections and Acceptance

a. Right of inspection – Art. 1584

b. Manifestation of acceptance – Art. 1585

b. Breach of warranty – Art. 1586

c. Refusal to accept –Arts. 1587 – 1589

La Fuerza v. CA 23 SCRA 1217 (1968)

2. Payment of the price – Art. 1582

3. Liability for interest – Art. 1589

3. Suspension of payments – Arts. 1590, 1560, 1664

Bareng v. CA 107 Phil 641 (1960)

4. Sale of immovables – Arts. 1592, 1560

a. Effect of non payment – Art. 1191

Laforteza v. Machuca 333 SCRA 643 (1992)

De la Cruz v. Legaspi 98 Phil 43 (1955)

Luzon Brokerage v. Maritime 43 SCRA 93 (1972)

b. Maceda Law: Sales of Residential Realty on Installment (RA 6552)

Valarao v. CA 394 SCRA 155 (1999)

Active Realty v. Daroya 382 SCRA 152 (2002)

XII. WARRANTIES

Express Warranties

1. Distinguished from condition – Arts. 1545

2. Distinguished from opinion, dealer’s talk – Arts. 1546, 1340, 1341

Songco v. Sellner 37 Phil 254 (1917)

3. Distinguished from false representation – Art. 1342

Gochangco v. Dean 47 Phil 687 (1925)

PMC v. Gojuco 48 Phil 621 (1926)

Implied Warranties – Art. 1547

1. Warranty that seller has right to sell

2. Warranty against eviction – Arts. 1548 – 1560

3. Warranty against non-apparent servitudes – Art. 1560

4. Warranty against hidden encumbrance or defects – Arts. 1561 – 1580

5. Sale of goods by sample or description – Arts. 1574, 1562 (2), 1481

6. Warranty in sale of animals – Art. 1568

7. Implied Warranty of Quality – Arts. 1562 (1), 1564

8. Additional warranties for consumer products – RA 7394, Art. 68

Effects of Warranties

Effects of Waivers

Buyer’s Option in case of breach of warranty – Art. 1599

Ong v. CA 567 SCRA 53 (2008)

RA 7394, Sec. 68

XIII. BREACH OF CONTRACTS

Remedies of the Seller

Sale of Movables

1. Action for the price – Art. 1595

a. When ownership has passed – Art. 1595

b. When ownership has not passed – Art. 1595 (2)

When goods cannot readily be sold – Art. 1595 (3)

2. Action for damages – Art. 1596

3. Right of Rescission – Arts. 1597, 1593, 1191

Recto Law: Sale of Movables on Installment – Arts. 1484 – 1486

1. Rationale of Recto Law

Cruz v. Filipinas Investment and Finance Corp. 23 SCRA 791 (1968)

2. Meaning of “Installment Sale”

Levy Hermanos v. Gervacio 69 Phil 52 (1939)

3. Remedies available to the unpaid seller

Delta Motor Sales v. Niu Kim Duan 213 SCRA 259 (1992)

4. Remedy of specific performance

Tajanlangit v. Southern Motors 101 Phil 606 (1967)

5. Remedy of rescission

Nonato v. IAC 140 SCRA 255 (1985)

6. What constitutes “foreclosure”

Third party mortgage

Ridad v. Filipinas Investment 120 SCRA 246 (1983)

The “barring” effect of foreclosure

Northern Motors v. Sapinoso 33 SCRA 356 (1970)

Sale of Immovables

1. Anticipatory Breach – Art. 1591

Legarda v. Saldana 55 SCRA 324 (1974)

2. Failure of buyer to pay price

a. Rescission under Article 1592

b. Contracts to sell not covered by Art. 1592

Legarda Hermanos v. Saldana 55 SCRA 324 (1974)

Luzon Brokerage v. Maritime 43 SCRA 93 (1972)

Remedies of the Buyer

1. Sale of movables – Arts. 1598 – 1599

a. Right to enforce specific performance – Art. 1598

b. Remedies for breach of warranty

When ownership has not passed – Art. 1586

When ownership has passed – Arts. 1599, 1192

c. Right of Rescission – Art. 1599

2. Sale of immovables – Art. 1191

a. Suspension of Payment – Art. 1590

b. PD 957, Sec. 23 and 24

Casa Filipina Realty v. OP 241 SCRA 165 (1996)

3. MACEDA LAW RA 6552- Sale of Immovables on Installment

Luzon Brokerage v. Maritime Bldg. 86 SCRA 305 (1978)

Active Realty v. Daroya 382 SCRA 152 (2002)

XIV. EXTINGUISHMENT OF THE SALE

Causes – Arts. 1600, 1231

Conventional redemption – Art. 1601

Villarica v. CA 26 SCRA 189 (1968)

Bautista v. Unangst 557 SCRA (2008)

Equitable mortgage – Arts. 1602 - 1604

1. Definition of Equitable Mortgage

Tan v. Valdehueza 66 SCRA 61 (1976)

2. Rationale of Equitable Mortgage

3. Badges of Equitable Mortgage

4. Pactum Commissorium – Art. 2088

Distinguish from option to buy– Art. 1602

Adiarte v. Tumaneng 88 Phil 333 (1951)

Period to redeem

1. When no period agreed upon – Art. 1606

2. When period agreed upon

Anchuel v. IAC 147 SCRA 4343 (1987)

3. When there is a period of non-redemption

Tayao v. Dulay 13 SCRA 758 (1965)

Exercise of the right to redeem – Art. 1616

Gargollo v. Duero 1 SCRA 1311 (1961)

1. By whom exercised – Arts. 1610 - 1613

2. From whom to redeem – Art. 1615

3. Effect of redemption – Arts. 1617, 1618

4. Effect of non-redemption – Art. 1607

Legal redemption – Art. 1619

1. Period to redeem – Art. 1623

Conejero v. CA 16 SCRA 775 (1966)

Butte v. Manuel Uy – 4 SCRA 526 (1962)

Castillo v. Samonte 106 Phil 1023 (1960)

Doromal v. CA 66 SCRA 575 (1975)

2. Instances of legal redemption

a. Co-owners – Art. 1620

b. Co-heirs – Art. 1088

c. Adjoining landowners of rural land – Art. 1621

d. Adjoining landowners of urban land – Art. 1622

Ortega v. Orcine 38 Phil 276 (1971)

e. Under Public Land Act – CA 141 sec. 118

f. Under Extrajudicial Foreclosure – Act 3175 sec. 6

g. Under Agrarian Land Reform Code – RA 6389 sec. 12

XV. BULK SALES LAW

A. Coverage of Bulk Sales

People v. Wong CA O.G. 4867 (1954)

B. Not covered by the law

Sec. 2 (a) (b)

C. Obligations of seller when transaction is a Bulk Sale – Secs. 3, 4, 5, 7

D. Effects of non-compliance Secs. 4,7,11

People v. Mapoy 73 Phil 678 (1942)

XVI. RETAIL TRADE LIBERALIZATION ACT OF 2000

A. Constitutionality

Inchong v. Hernandes 101 Phil 1155 (1957)

B. Scope and definition

King v. Hernandez 4 SCRA 792 (1962)

C. Elements

D. Application of Grandfather Rule on 100% Filipino ownership of corporate

entity

E. Anti-Dummy Act – CA No. 108 as amended by PD 715

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