SALES

ART 1458 – By the contract of sale, one of the contracting parties obligates himself to transfer
ownership or deliver a determinate thing and therefor the other to pay a price certain in
money or its equivalent. The contract of sale may be absolute or conditional

Essential elements of a Contract of sale

1. Consent - is the meeting of the minds of the parties

2. Object- determinate subject matter
3. Price Certain in money or its equivalent – The “why?” of the contract of sale, the underlying
motivation or reason in forming a contact MUST NOT CONTRARY TO LAWS, MORALS, ETC.

Characteristics of a contract of Sale

 Consensual
 Bilateral
 Onerous
 Commutative
 Nominate
 Principal

SALE is only a TITLE (legal basis to affect the dominion or ownership)

DELIVERY is a MODE (legal means by which dominion or ownership is created)

Stages of a Contract of Sale

1. Negotiation
Period where the parties indicate their interest in forming and perfecting the contract
2. Perfection
Perfected at the moment there is a meeting of the minds upon the thing which is the object
of the contract and the price (Concurrence of the essential elements)
3. Conssumation
Parties perform their respective undertakings until its extinguishment

Contract to sell
 - a potential seller reserves the ownership or title of the thing until the happening of an
even or full payment of the price.
- The potential seller obliged himself to sell the determinate thing when at full payment is
delivered to him
- In short the full payment partakes a suspensive condition.

Option/Unaccepted offer
- is a continuing offer or contract that the owner stipulates to another party, the right to
buy the property at fixed price at a certain period
- gives the holder to demand a sale or right to sell from the owner
- Aside from consideration for the offer, the holder of the option have no binding
obligation
- Until acceptance is communicated to the owner, it is not a Contract of Sale

To determine whether it is a contract of sale, purchase or a mere option ask

Whether or not the agreement could be specifically enforced?
 Option when there is no obligations to make payment except the consideration to
support the option

Earnest Money
- Earnest money given to the contract of sale is part of the price and as proof of the
protection of the contract, binding the bargain
- Constitute as an advance payment and deducted from the total price

ART 1459 – The thing must be licit and the vendor have the right to transfer ownership
thereof at the time it is delivered
Licit means lawful; not contrary to law, morals, good customs, public order or policy.
ILLICIT Objects
 Animals with contagious disease
 Animals unfit in the terms stated in the contract
 Future Inheritance
 Sale of land to Aliens in violation of the constitution
NOTE:
The seller need not the owner at the time of the perfection of the contract`

Contract for a piece of work

 - If the property would never have existed but for the order of the person desiring it then
it is a contract for piece of work
Dacion En Pago requisites
- (animo solvendi) performance of the prestation in lieu of payment
- (aliud pro alio) There is a difference between the prestation due and the substitute
- Agreement of the parties to extinguished the obligations in performance of dation in
payment

ART 1460 –A thing is determinate if it is particularly designated or physically segregated from

all others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into
the thing is capable of being determinate without necessity of further agreement between
the parties.

ART 1461 – Things having a potential existence may be the object of the contract of sale
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that
it will come into existence.
The sale of a vain hope or expectancy is void.

EMPTIO REI SPERATAE VS. EMPTIO SPEI

EMPTIO REI SPERATAE EMPTIO SPEI
 Sale of a thing with potential existence  Sale of the hope itself
 Subject to the condition that the thing will  Sale is effective even if it the thing does
exist, If it does not there is no contract not come into existence
 The object is a future thing  The object is a present thing which is the
hope or expectancy

GENERAL RULE
A person cannot sell or convey what he does not have or own
EXCP:
1. Sale of a thing having potential existence
2. Sale of future goods
3. Contract for delivery which the vendor in the ordinary course of business manufactures
for the general market

ART 1462 – The goods which form the subject of a contract of sale may be either existing
goods, owned or possessed by the seller, or goods to be manufactured, raised or acquired by
the seller after the perfection of the contract of sale, in this TITLE called “future goods”.
 There may be a contract of sale of goods, whose acquisition by the seller depends
upon a contingency which may or may not happen.

ART. 1463 – The sole owner of a thing may sell an undivided interest therein
EX. B sold his 100 sq. m of his 400 sq. m land to C, thus they will become co- owner of the said
land

ART 1464 – In case of fungible goods, there may be a sale of an undivided interest of a specific
mass of fungible goods, even if the exact quantity is not determined at the time of sale.
The buyer becomes a co-owner of the share of FG that corresponds to the amount they
purchased
If the mass contains less than the agreed amount, the seller must make up the difference
from goods of the same kind and quality

ART 1465 – Things subject to resolutory condition may be the object of a contract of sale
EX. S and B entered a Contract of Sale with a right of repurchase of S within 1 year, In this case
the uncertain or resolutory condition is whether or not S will exercise his right of repurchase. In
the meantime, B can sell this parcel of land to C, a third person.

ART 1466 – When a contract contains an element of both a sale and agency to sell, the
essential clauses of the entire contract should be considered

Contracts of sale Vs Agency to sell

CONTRACTS OF SALE AGENCY TO SELL
The buyer receives the good as owner Agency receives the goods to sell it in behalf
of the principal owner
The buyer pays the price Agent delivers the price he got from his buyer
to the principal owner
The buyer in general rule cannot return the The agent can return the goods if he is unable
object sold to sell it

ART 1467 – A contract for the delivery at a certain price of an article may be a contract of Sale,
(goods are procured for the general market) or a Contract for a piece of work (goods are
manufactured specially and would have never existed but for the special order of the party
desiring it)

Contractor – a person who undertakes to do a specific job or piece of work for other persons,
using his own means and methods w/o submitting himself to control as to the petty details
He renders service in the course of an independent occupation
ART 1468 – If consideration of the contract are partly in money and partly in another thing,
the transaction shall be characterized by the manifest intention of the parties.
If such intention does not 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

SALE VS BARTER
SALE BARTER
A thing is given in exchange of a price certain A thing is given in exchange of another thing
in money or its equivalent
If consideration is partly in money and partly in another thing:
1. The transaction is characterized by the manifest intention of the parties
2. If there is no manifest intention:
a. Barter- value of the thing is more valuable than money
b. Sale- Value of the thing is equal or less than the amount of money

ART 1469 – The price is considered to be certain if it is determined with reference to another
thing certain or if its determination is left to the judgement of a specific person or persons .
Otherwise, the contract shall be inefficacious, unless the parties subsequently agree upon the
price.
If third person/s acted in bad faith the court may fixed the price
If third person/s are prevented from fixing he price by fault of one of the parties, seller or
buyer, The party not in fault may have such remedies against the party in fault.

REQUISITES FOR VALID PRICE

1. Real – not simulated or fictitious
2. Certain or ascertainable – certain if its expressed and agreed in terms of specific amount
of money or its equivalent.
Ascertainable – determinable with reference to another thing certain or left to tha
judgement of a special person/s.
3. In money or its equivalent
4. Manner of payment must be agreed upon

ART 1470 – Gross Inadequacy of price does not affect contract of sale except it may indicate a
defect in the consent or the party really intended a donation or some other act or contract.
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
Failure to pay consideration- consummation stage
Lack of consideration – perfection stage, void ab initio
Ex. The contract states that the price have been paid when in fact it has never been paid
Disagreement on the manner of payment is tantamount to a failure to agree on the price
thus there is lack of consent

ART 1472 – The price of securities, grain, liquids and other things is certain: if based on the
price the goods would have on specific day, or a particular exchange market. Additionally
even if the fixed price is set above or below the market price.
For example, if you are selling grain and you agree that the price will be whatever the market
price is on the day of delivery, this price is considered certain. Similarly, if you agree that the
price will be the market price plus a fixed amount, this is also considered certain.

ART 1473 – the fixing on the price can never be left on the discretion of one of the contracting
parties, unless accepted by the other party

ART 1474 – if price cannot be determined in accordance to preceding articles, the contract is
inefficacious (void) however if the goods have already been delivered to and is appropriated
by the buyer he must pay a reasonable price dependent on the circumstances

ART 1475 – The contract of sale is perfected at the moment there is a meeting of the mind of
the parties upon the thing which is the subject of the contract and upon the price.
From that moment the parties may reciprocally demands performance.

ART 1476 – In the case of Sale by auction

1. When goods are in lots (groups) each lot are separate contract of sale
2. Sale is perfected when auctioneer fall his hammer or in other customary manner.
Until such announcement of perfection, the bidder may retract his bid and auctioneer
will withdraw the goods UNLESS the auction has been announced to be without
reserved (in a "without reserve" auction, the auctioneer is committed to selling the
goods to the highest bidder once bidding starts. If the auctioneer tries to withdraw the
goods, the highest bidder has the right to demand the sale be completed)
3. A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise
provided by law or by stipulation.
4. Where notice has not been given to the public that a sale by auction is subject to a
right to bid in behalf of the seller, then the sale my be treated as fraudulent by the
buyer
 SALE OF REAL STATE FOR A UNIT OF MEASURE

 If what delivered was a less in area, inferior or different quality then;

 Area is less than 1/10 – Ask a proportional deduction in price
 If vendee would have not entered into contract knowing the deficiency, he may opt
to rescind (Accion quanti minoris)
 Lack of area is 1/10 or more than (1/10) – Rescind the sale (Accion redhibitoria)
 If what delivered was more than in area stated
 Accept the area stipulated and reject the rest
 Accept all and pay the contract rate

SALE OF REAL STATE FOR A LUMPSUM CUERPO CIRTO

- There are no increase or decrease in price but there may a greater or lesser in area
 Same rule applies when 2 or more immovables are sold for a single price
 The vendor is bound to deliver all that is included within the boundaries, Otherwise,
 Buyer may ask proportional reduction in price
 Or rescind the contract

NOTES:
The prescriptive period in filing the legal action concerning sale of real state is 6 MONTHS

RULES OF PREFERENCE IN CASE OF DOUBLE SALES

Double Sales applies when there are

 2 or more valid contracts of sale
 The same subject matter
 Same seller
 2 or more buyers
 Payment is already made to the seller

1. Movables - ownership is transferred to the one who fist took possession (actual or constructive
delivery) First possessor in good faith
2. Immovables in order of priority
1... first registrant in good faith).
2... first possessor in good faith).
3... In the absence, ownership should belong to the person who presents the oldest title in
good faith,
RULE OF CAVEAT EMPTOR “BUYER BEWARE”

- Requires the purchaser to be aware of the suppose title of the vendor

- The one who buys w/o checking the title bears the risk of loss

Who is considered purchaser in good faith?

 Buys the property w/o notice that other person may have an interest in the same property
 Pays a full and fair price before knowing other persons interest unto the property

WARRANTIES

KINDS OF WARRANTIES

Express Warranties: These are explicit promises or statements made by the seller about the
product. If the buyer relies on these promises and buys the product, the seller must honor them.
These warranties can be in the form of:

 Affirmation (a statement of fact about the product)

 Promise (a commitment related to the product)
 Representation (a description or claim about the product)

However:

 Trade exaggerations are not considered fraudulent if the buyer could verify the facts
(following the "caveat emptor" principle, which means "let the buyer beware").
 An opinion does not count as a warranty unless the seller is an expert and the buyer relies
on that expert opinion.

Implied Warranties: These are unspoken guarantees that the law assumes are part of a sale,
based on the nature of the transaction and the situation of the parties. They apply even if the
seller doesn't explicitly mention them. Here are the main types:

1. Right to Sell: The seller has the right to sell the item, and the buyer will have legal and
peaceful possession of it (warranty against eviction).
2. Hidden Defects: The item is free from hidden faults or defects, and there are no
undisclosed charges or encumbrances on it (warranty against hidden defects).
3. Fitness for Purpose: The item must be reasonably fit for the purpose for which it was
bought.
4. Merchantable Quality: The item must be of a quality that is acceptable in the
marketplace.

EVICTION
Eviction is a juridical process whenever by a final judgment based on a right prior to the sale or
an act imputable to the vendor, the vendee is deprived of the whole or a part of the thing
purchased (Article 1548).

Requisites of warranty against eviction

- Final judgement
- Buyer deprivation In part or whole of the property
- Deprivation is base on a right prior the sale imputable to the vendor
- Vendor must have been notified of the suit by the vendee

Vendors Liability If bad faith

- Value of the thing

- Income or fruits of the thing
- Cos of the suit
- Expenses of the contracts
- Damages and interests

If vendors is in good FAITH and there’s no waivers

- Value of the thing

- Income or fruits of the thing
- Cos of the suit
- Expenses of the contracts

Partial eviction in case of the ff circumstances,

a. If the buyer knew that loses a crucial part of the item that they wouldn't have bought without it
(Article 1556).
b. When two or more items are sold together, and the buyer wouldn't have purchased one without
the other (Article 1556)
The vendee may ask for either
- VICE
- Rescission

WAIVERS
Kinds of Waivers
1. Waivers Consciente /Simple
- The buyer (vendee) waives their rights without knowing and accepting the risks of
eviction. Vendor is liable only for the value at the time of eviction
2. Waiver Intencionada / Calificada
 - The buyer knowingly waives their rights and accepts the risks of eviction. Vendor have
no liability Unless acted on bad faith
-

NON APPARENT BURDEN/ EASEMENT /SERVITUDE

Easement or servitude - is an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner
2 Kinds of Easement

1. Apparent - Those which are made known and continually kept in view by external signs
2. Non- apparent – One which shows no external indication of its existence.
To held vendors liable the easement must be:

 Must be non-apparent
 Did not disclose on the contract
 Must be of nature to presume vendee would have not acquired it

When vendor is not liable

 Easement is apparent
 Recorded in the Registry of Property unless there is an express warranty that is
free from easement
 The vendee knew the easement

What is the remedy of the Vendee?

- Rescission or
- Indemnification

NOTES
Prescriptive period is 1 year from execution of deed of sale and if already elapsed another 1 year
from discovery of easement

WARRANTY AGAINST HIDDEN DEFECTS

Hidden faults or defects – pertain only to those that make the object unfit for
the use for which it was intended at the time of the sale
Requisites for the existence of warranty against hidden defects
a. The defect is important or serious.
b. It is hidden (unknown to the buyer).
c. It existed at the time of sale.
 d. The buyer notifies the seller within a reasonable time.
e. The action is brought within (6) six months of delivery (40 days for
animals).
f. There is no waiver of the warranty by the buyer.
General Rule: the vendor is liable for the defects Unless buyer waive his right to the warranty
and vendor is in Good faith

Remedies of Vendee: same as Sale of Real state remedies

Remedies are alternative
 Accion Redhibitoria - Rescission with damages
 Accion quanti minoris - Proportionate reduction in the price with damages
NOTES;
The prescriptive period for filing a legal action to enforce the seller’s liability is six (6) months from
the delivery of the thing sold.

 Loss of thing due hidden defects

1. NO WAIVER

a) Vendor is aware of hidden defects (Bad faith); liable for PED

 Price paid
 Expenses of the contract
 Damages

b) Vendor is not aware of hidden defects (Good faith); liable for PIE

 Price paid
 Interest
 Expenses of the contract

2. WITH WAIVER

 Bad Faith – Liable

 Good faith – Not liable

 Loss due to Fortuitous event or fault of vendee

a. Vendor is aware of hidden defects, liable for

 Price paid by vendee less value of the thing at point of loss

 Damages

b. Vendor is not aware; Good faith liable only for;

  the price paid by vendee less value of the thing at point of loss

WARRANTY AGAIST REDHIBITORY DEFECTS ON ANIMALS

Redhibitory vice or defect – is a defect in the article sold against which defect the seller is bound to
warrant.

Redhibition is the avoidance of a sale on account of some vice or defect in the thing sold, which
renders its use impossible, or so inconvenient and imperfect that it must be supposed that the buyer
would not have purchased.

Sale of team
General Rule: if two or more animals are sold together, the defect of one results in its return only, not
the others.
Exception: redhibition applies to all if the buyer wouldn't have bought the healthy ones without the
defective one

The vendee’s remedy may be:

a. Accion redhibitoria – Rescission of the sale; or
b. Accion quanti minoris – Proportionate reduction in the price.

Requisites to make the vendor liable in sale of animals

c. The disease existed at the time of sale;
d. The disease must have been the cause of death; and
e. The animals died within three (3) days from the time of purchase.

Sale of animals at Fairs or public auctions or as condemned provides no warranty against

hidden defects

Prescriptive period of hidden defects is within forty (40) days from the date of their delivery to
the vendee

WARRANTIES IN QUALITY

 Warranty of Fitness for a Particular Purpose:

This warranty means that the seller guarantees the item sold is suitable for the specific purpose
the buyer intends to use it for, provided certain conditions are met.
Requisites:

1. Notice of Purpose: The buyer informs the seller of the specific purpose for which they are
buying the item.
2. Reliance on Seller’s Skill/Judgment: The buyer relies on the seller’s expertise to select
the right item for that purpose.

 Warranty of Merchantability:
 The seller guarantees that goods bought by description are reasonably fit for their general
purpose.
 In sales by description, the seller warrants that goods are of merchantable, saleable, or
medium quality.
 In sales by sample, there is an implied warranty that goods are free from hidden defects
making them unmerchantable.

Remedy (Article 1567):

1. Accion redhibitoria
2. Accion quanti minoris

Principal Obligations of the Vendee (Article 1582):

1. Accept delivery of the item sold.
2. Pay the price at the agreed time and place.
3. Bear the expenses for executing and registering the sale, and preparing the goods for
delivery, if stipulated.

To Accept Delivery of the Thing Sold (Article 1585):

1. The buyer is deemed to have accepted the goods if:
a. He informs the seller of acceptance.
b. He doesn't act contrary to the seller's ownership.
c. He keeps the goods for a reasonable time without rejecting them.

Delivery of Goods in Installments (Article 1583):

 General Rule: The buyer is not obliged to accept installment deliveries.
 Exceptions: If installment delivery is agreed upon and issues arise (defective deliveries
by the seller or the buyer's neglect/refusal to accept or pay):
a. The injured party can refuse to proceed and sue for damages for breach of the entire
contract.
b. Or claim compensation for damages if the breach is separable. 😊

Examination of the Goods:

 General Rule: The buyer has the right to examine the goods before accepting and paying
for them.
Exceptions:
a. Agreement that the buyer cannot examine the goods.
b. Stipulation that goods are not delivered until payment.
c. Goods marked “collect on delivery,” unless otherwise agreed or customary.

Effect of Acceptance of Goods on Seller’s Liability:

 General Rule: Acceptance of goods by the buyer does not discharge the seller from
liability for breach of warranty or other promises in the contract.
Exceptions:
a. The seller is discharged if there is an express or implied agreement.
b. The seller is discharged if the buyer fails to notify the seller of the breach within a
reasonable time after knowing or should have known about it.

Buyer’s Refusal to Accept Delivery:

a. With Just Cause:
i. No duty to return goods unless stipulated.
ii. Title does not pass to the buyer.
iii. No obligation to pay.
iv. Buyer is liable as a depositary if he keeps the goods.
b. Without Just Cause: Title passes to the buyer when goods are placed at his disposal,
unless there is a stipulation to the contrary or the seller reserves ownership as security for
payment. 😊

To Pay the Price of the Thing:

1. The buyer owes interest between delivery and payment if:
a. Stipulated (6% if no rate specified).
 b. The item produces fruits or income.
c. The buyer defaults, from the time of demand for payment.

Suspension of Payment by the Vendee (Article 1590)

Immovable Properties
Grounds for Suspension:
1. Disturbance in the vendee’s possession or ownership of the purchased item.
2. Reasonable fear of disturbance due to a vindicatory action or foreclosure of mortgage.
The vendee can suspend payment until the vendor resolves the disturbance or danger.
Exceptions: When the vendee cannot suspend payment:
1. Vendor provides security for the return of the price.
2. Agreement stipulates payment despite disturbances.
3. Disturbance is merely an act of trespass.
Grounds for Immediate Rescission:
1. Fear of loss of the immovable sold.
2. Fear of loss of the price.
If these grounds do not exist, the vendor can choose between:
1. Fulfillment of the contract, with damages.
2. Rescission of the contract, with damages.
Pactum Commissorium: This agreement allows for automatic rescission if the vendee fails to
pay on time (Article 1592). However, it is not valid. The vendee can still pay after the expiration
period unless a demand for rescission has been made judicially or by notarial act.

Rescission by Vendor (Movables) (Article 1593)

Grounds for Rescission:
1. Vendee doesn't appear to receive the item by the agreed delivery date.
2. Vendee appears but doesn't pay at the same time, unless a longer payment period is
agreed upon.
Key Rules:
1. Vendor doesn't need to deliver the item until the price is paid, and vendee doesn't need
to pay before receiving the item unless otherwise agreed.
2. If agreed, the vendee must accept delivery and pay at the designated time and place.
3. Without a stipulation, payment and delivery occur simultaneously at the place of
delivery.
4. Delivery location is wherever the item was when the contract was made (Article 1251).
5. If only the delivery time is fixed, the vendee must pay even before delivery. If only the
 payment time is fixed, the vendee gets delivery even before paying.

Actions for Breach of Contract of Sale

Seller’s Actions:
1. Action for Price: If the buyer refuses to pay.
2. Action for Damages: If the buyer refuses to accept and pay for the goods.
3. Rescission: If the buyer repudiates the sale, cannot fulfill obligations, or breaches the
contract, provided the goods haven't been delivered yet.

Actions by the Buyer

Buyer's Actions:
1. Specific Performance: If the seller breaks the contract to deliver specific goods, the
buyer can sue to force delivery.
2. Breach of Warranty:
a. Accept or keep the goods and reduce or eliminate the price due to the breach.
b. Accept or keep the goods and sue for damages.
c. Refuse the goods and sue for damages.
d. Rescind the sale, refuse the goods, or return them if already received, and recover the
price paid.

SALES EXTINGUISHMENT
 Same Causes of all other Obligation
a. Payment or performance of obligation
b. Loss of the thing due
c. Condonation or remission of debt
d. Confusion or merger or rights
e. Compensation
f. Prescription
g. Annulment
h. Rescission
i. Fulfillment of resolutory condition
j. Novation

 Conventional redemption
- occurs when the vendor reserves the right to repurchase the thing sold (Article 1600), with
the obligation to return to the vendee (Article 1616):
 o price of the sale;
o expenses of the contract;
o necessary and useful expenses made on the thing sold; and
o any other legitimate payments made because of the sale.

This is also known as of pacto de retro sale or sale with a right to repurchase.
There cannot be conventional redemption unless it has been stipulated upon in the contract of sale.

Period of Redemption
1. No Fixed Period: If the right of redemption is agreed upon but no period is fixed, the
prescriptive period is 4 years from the contract date.
2. Fixed or Indefinite Period: If a period is fixed, or if the period is indefinite (e.g.,
repurchase "at any time"), the right must be exercised within 10 years from the contract
date. Any stipulation exceeding this period is null and void.
3. Final Judgment: If a court declares the contract to be a pacto de retro sale of an
immovable instead of an equitable mortgage, the vendor a retro can exercise the right
within 30 days from the final judgment.

Persons who may avail the right to repurchase:

1. The vendor a retro or original vendor; and
2. Creditors of the vendor.

Persons Against Whom the Right of Repurchase May Be Exercised:

1. Original vendee or vendee a retro.
2. Heirs of the vendee a retro, each for their share.
3. One heir of the vendee a retro for the entire property.
4. Possessors deriving their rights from the vendee a retro, if the right is recorded or
known.

Rules in Redemption with Multiple Parties

1. Redemption in Sale of Part of Undivided Immovable (Article 1611):
 A co-owner of an indivisible immovable who sells their share with a right to repurchase must
redeem the whole property if the third person acquires the entire property.
Scenario:
You and your siblings inherit a family farm. The farm is undivided, meaning it can't be split into separate
portions for each sibling. You decide to sell your share to an investor, but you retain the right to buy it
back (right of repurchase).
A few years later, the investor buys out your siblings' shares and now owns the entire farm. If you want
to exercise your right to repurchase, you can't just buy back your original share. You must buy the entire
farm from the investor to reclaim your ownership

2. Redemption in Joint Sale by Co-owners/Co-heirs (Article 1612):

 When multiple co-owners/co-heirs jointly sell an undivided immovable with a right to
repurchase, each can only redeem their respective share.
Scenario:
Imagine you and your siblings own an undivided piece of land, meaning it can't be split into separate
parts for each sibling. You all decide to sell the entire property together to an investor, but you retain
the right to buy it back (right to repurchase).
A few years later, you decide you want to buy back your share of the land. However, since you and your
siblings sold the property together, you can only buy back your own share, not the entire property. Each
of your siblings has the same right to repurchase their respective shares, but none of you can force the
investor to sell you the whole property unless everyone agrees to repurchase their shares together.

3. Redemption in Separate Sales by Co-owners (Article 1614):

 Each co-owner who sells their share separately can independently exercise the right of
repurchase for their own share.

Scenario:
Imagine you and two friends jointly own an apartment building. Each of you decides to sell your
respective shares to different buyers, retaining the right to buy back your own shares (right of
repurchase).
Later, you decide you want to exercise your right of repurchase. You can independently buy back
your share from the buyer without having to coordinate with your friends or buy back the entire
apartment building. Similarly, your friends can also independently exercise their rights to
repurchase their own shares from the buyers. Each co-owner deals with their respective share
and buyer individually.

4. Redemption Against Heirs of Vendee (Article 1615):

 If the vendee leaves several heirs, the action for redemption is only against each heir's
share. If the inheritance is divided and one heir receives the sold property, redemption
can be against that heir for the whole property.
Scenario
Imagine you sell a piece of land to someone who later passes away, leaving multiple heirs. Each
heir inherits a specific share of the property. If you want to exercise your right of redemption,
you can only do so against each heir's respective share.
However, if the inheritance is divided and one heir is awarded the entire property, you can
exercise your right of redemption against that heir for the whole property. This means you can
redeem the entire property from the heir who inherited it all, rather than dealing with each heir
individually.

What happens if the seller fails to his right of repurchase?

In case of the seller fails to exercise his right of repurchase within the agreed time, The
ownership of the property does not automatically transfers to the buyer and shall not be
recorded in the registry of property without judicial order after the vendors side have been
heard

Rights of Parties as to Fruits of Land at redemption (Article 1617)

Scenario 1: Fruits at Time of Sale
 If there are visible or growing fruits on the land when sold, and the buyer paid no
indemnity for them, there is no reimbursement or pro-rating of fruits at redemption.
Scenario 2: No Fruits at Time of Sale
 If there were no fruits at the time of sale but some at redemption, the fruits are shared
between the redeemer and the buyer based on the buyer's possession time in the last
year.

An equitable mortgage
is a mortgage that, despite lacking certain formalities or statutory requirements, clearly shows
the parties' intention to use real property as security for a debt and does not violate any laws.
Requisites for Presumption:
1. The parties enter into a contract labeled as a sale.
2. They intend to secure an existing debt through a mortgage.

The contract shall be presumed to be an equitable

mortgage, in any of the following cases (Article 1602)
 Inadequate Price:

 If the price for a sale with the right to repurchase is unusually low, it suggests the
transaction is actually a mortgage.

 Illustration: You sell a house worth $100,000 for just $10,000, retaining the right to
repurchase. This low price indicates it's likely a mortgage.

 Vendor Remains in Possession:

  If the vendor stays on the property as a lessee or in another capacity, it suggests a
mortgage.

 Illustration: You sell your house but continue living in it as a tenant. This indicates the
sale might be a mortgage.

 Extension of Redemption Period:

 If, after the redemption period expires, an extension is granted, it suggests a mortgage.

 Illustration: You sell your property with a one-year right to repurchase. After the year,
the buyer gives you another year to repurchase, indicating a mortgage.

 Retention of Purchase Price:

 If the purchaser retains part of the purchase price, it suggests a mortgage.

 Illustration: You sell your land for $50,000, but the buyer only gives you $40,000 and
keeps $10,000. This retention suggests a mortgage.

 Vendor Pays Taxes:

 If the vendor agrees to pay taxes on the sold property, it suggests a mortgage.

 Illustration: After selling your property, you continue paying its property taxes. This
implies the sale might be a mortgage.

 Securing a Debt:

 If the transaction indicates that the real intention is to secure the payment of a debt or
performance of an obligation, it suggests a mortgage.

 Illustration: You sell your house but agree that the buyer will use the house as collateral
for a loan you took. This suggests a mortgage.

 Doubt About Nature of Contract (Article 1603):

 If there is any doubt whether the contract is a sale with the right to repurchase or an
equitable mortgage, it is presumed to be a mortgage.

 Illustration: You enter a contract to sell your property with the right to repurchase, but
the terms are unclear. This situation is presumed to be a mortgage.

Legal Redemption
Definition: Legal redemption allows someone to step into the shoes of the buyer (subrogation)
under the same terms and conditions of the original contract. This can occur when ownership is
transferred through a sale, payment of debt (dation in payment), or any transaction where
ownership is transferred for value (onerous title).
Illustration of Legal Redemption
Imagine you own a piece of land that your neighbor has always been interested in buying. You
decide to sell it to a third party. According to legal redemption rules, your neighbor has the right
to step in and buy the land under the same terms agreed with the third party.
1. Written Notice: You provide written notice to your neighbor about your intention to sell
the land.
2. 30-Day Period: Your neighbor has 30 days from receiving the notice to exercise their
right of redemption.
3. Redemption Process: If your neighbor decides to redeem the land, they will pay the
same price and adhere to the same conditions as outlined in the original sale contract.
4. Recording the Sale: The sale cannot be recorded in the Registry of Property unless you
provide an affidavit confirming that written notice was given to all potential
redemptioners, including your neighbor.
This process helps ensure that the neighbor, who might have a vested interest in the land, has
the opportunity to purchase it before it is sold to someone else. It prevents speculation by the
third party and can resolve any potential disputes

Instances when legal redemption is denied (Article 1536)

The debtor’s right of legal redemption is denied when the assignment of the right in litigation is
made to:
 Co-owner or co-heir
 Creditors
 Possessors of the property

Instances of Legal Redemption

 Sale of a co-owner of his share to a third person
 Co-owners can redeem shares sold to a third person.
 Multiple co-owners redeeming can only do so proportionally.
 Co-owners' rights take precedence over adjoining owners.
 Example: You and two friends own a piece of land. If one friend sells their share to an
outsider, you and the other friend can buy back that share.
 Sale of adjacent rural lands not exceeding one (1) hectare
 Owners of adjoining lands can redeem small rural lands sold to a third party, unless the buyer
 owns no rural land.
 Preference goes
1. to the owner with the smaller adjacent land, then
2. the first to request redemption if lands are the same size.
 Example: You own a small farm next to a tiny rural plot. If this plot is sold, you can buy it
before others if the buyer doesn't own other rural land.
 Sale of adjacent rural-urban land
- Sale of a piece of urban land, which is so small and so situated that a major portion thereof
cannot be used for any practical purpose
- having been bought merely for speculation
Right of pre- emption goes to
1. the owner of any adjoining land has a right of pre-emption at a reasonable price,
2. If two (2) or more adjoining owners desire to exercise the right of redemption or
pre-emption ; to the owner whose intended use of the land in question appears to
be best justified.

 Legal redemption in sale of credit or other incorporeal rights in

litigation
Requisites
 sale/assignment of credit, pending litigation,
 payment of price, judicial costs, and interest
 right must be exercised by the debtor within thirty (30) days from the date the assignee
demands (

ASSIGNMENT OF CREDIT
Assignment of credit is a contract by which the owner (assignor/creditor) of a credit and
other incorporeal rights transfers, either onerously or gratuitously, to another (assignee) his
rights and actions against a third person (debtor
Accessory rights included in the assignment are:
1. Guaranty
2. Mortgage
3. Pledge
4. Preference

Effect of Payment by Debtor to the Creditor After Assignment of Credit

1. Before Knowledge of Assignment:
o If the debtor pays before knowing about the assignment, they are released from
the obligation, even if the assignment is registered (Article 1626).
2. After Knowledge of Assignment:
 o If the debtor pays after knowing about the assignment, they remain obligated to
the assignee, even without formal notification.

Warranties of the Assignor:

The assignor warrants that:
1. the credit exists; and
2. it is legal unless sold as doubtful.
Liability of the Assignor When Warranties Are Violated
1. Good Faith Assignor:
o Liability is limited to the received price, contract expenses, and legitimate
payments (Article 1628).
2. Bad Faith Assignor:
o Liability includes the received price, all expenses, and damages

Duration of Assignor's Liability for Debtor's Solvency

Provision: This does not apply if the assignor acted in bad faith.
Duration of Liability:
1. With Stipulation: Liability lasts for the term fixed by the parties.
2. Without Stipulation:
o When Payment Period Expired: 1 year from the assignment of credit.
o When Payment Period Not Expired: 1 year after credit maturity.

Sale of Hereditary Rights (Article 1630)

Definition:
 When someone sells an inheritance without listing its components, they are only
responsible for their status as an heir, not the specific assets within the inheritance.
 This type of sale is considered an aleatory contract because the buyer/ asignee takes on
the risk that the estate might not cover the deceased's debts.

Sale of Whole of Certain Rights, Rents, or Products (Article 1631)

Vendor's Warranty:
 The vendor guarantees the legitimacy of the entire rights, rents, or products sold, but
not the individual parts.
 Exceptions:
1. If the vendee is evicted from the entire property.
2. If the vendee is evicted from the part of greater value.

Liability of Vendor of Inheritance for Fruits Received (Article 1632)

Vendor's Obligation:
 The fruits (benefits) of the inheritance are included in the sale.
 If the vendor has received the fruits, they must deliver them to the vendee. If consumed,
they must reimburse the vendee. If sold, they must deliver the sale price.

Liability of Vendee for Debts and Charges on Estate (Article 1633)

Vendee's Obligation:
 The vendee must reimburse the vendor for any debts or charges the vendor paid related
to the estate.
 This is subject to any contrary agreement between the parties.

RULES ON INSTALLMENT SALES

Sale of Personal Property in Installments (Recto Law)

Purpose:
 To address abuses in foreclosure of chattel mortgages and prevent mortgagees from
seizing property, buying it cheaply at foreclosure, and suing for deficiency judgment.
Vendor's Remedies:
1. Exact Fulfillment (Specific Performance):
o Vendor can demand full payment if the vendee defaults on installments,
regardless of the number defaulted.
2. Cancel the Sale:
o If the vendee defaults on two or more installments, the vendor can cancel the
sale. The vendor must return received sums minus reasonable rent, unless a fair
stipulation states otherwise.
3. Foreclose the Chattel Mortgage:
o If the vendee defaults on two or more installments, the vendor can foreclose the
chattel mortgage. The vendor cannot pursue further action for any unpaid
balance. Any agreement to the contrary is void.

When deficiency can be recovered

Sale on Straight-Term:
Foreclosed Security Other Than Chattel Mortgage:
Sale on Execution of Judgment
SALE OF REAL PROPERTY IN INSTALLMENTS MACEDA LAW

Rights of the Buyer Under the Maceda Law

The following are the rights given to the buyer who has paid at least two (2) years of installments if
he defaults in the payment of succeeding payments:
1. Right to Grace Period for Unpaid Installments:

 Buyers who have paid at least 2 years of installments can pay the unpaid installments
without additional interest within a grace period. The grace period is one month for
every year of installment payments made. This can be used once every five years.
 Illustration: If you've paid for 3 years, you get a 3-month grace period to pay overdue
installments without extra interest, but you can only use this once in five years.

2. Cancellation Notice and Payment:

 The sale can be canceled only after 30 days from the buyer's receipt of a cancellation
notice or demand for rescission by a notarial act, along with the full payment of the cash
surrender value.
 Illustration: If you miss payments, the seller must give you a formal notice. After 30 days
of receiving it and after they pay the cash surrender value, the contract can be canceled.

3. Refund Upon Cancellation:

 If the contract is canceled, the seller must refund 50% of the total payments made. After
5 years of installments, the refund increases by 5% per year, but not exceeding 90% of
the total payments.
 Illustration: If you've paid for 6 years and the contract is canceled, the seller must refund
50% of the total payments plus an additional 5% (totaling 55%).

4. Right to Sell or Assign:

 Buyers can sell or assign their rights before the contract's actual cancellation. They can
also pay any unpaid installment or the full price in advance without interest and have it
annotated in the certificate of title.
 Illustration: If you want to sell your rights to another person before the contract is
canceled, you can do so. You can also pay off the entire remaining balance without
interest and have this payment recorded in the property title.

5. Right to Advance Payment:

  Buyers can pay any installment or the full unpaid balance at any time without interest
and have it annotated in the certificate of title.
 Illustration: If you choose to pay off the remaining balance of your property early, you
won't have to pay extra interest, and this payment will be noted in the title certificate.

Rights of the Buyer Under the Maceda Law (Less Than 2 Years of Installments)

1. Grace Period and Cancellation Notice:

 The seller must provide a grace period of at least 60 days from the due date of the
installment. If the buyer fails to pay within this period, the seller can cancel the contract
30 days after giving the buyer a written notice of cancellation or demand for rescission by
a notarial act.
 Illustration: If you miss a payment and have paid less than 2 years of installments, the
seller must give you a 60-day grace period. If you still don't pay after this period, the
seller can cancel the contract 30 days after sending you a formal notice.

2. Right to Sell or Assign Rights:

 The buyer can sell or assign their rights to another person or reinstate the contract by
updating their account during the grace period and before the actual cancellation of the
contract.
 Illustration: If you are unable to pay and have paid less than 2 years of installments, you
can sell your rights to someone else or update your account to avoid cancellation.

3. Right to Advance Payment:

 The buyer can pay any installment or the full unpaid balance of the purchase price at any
time without interest and have this payment annotated in the certificate of title.
 Illustration: If you want to pay off the remaining balance of your property early, even if
you've paid less than 2 years of installments, you can do so without paying extra interest,
and this payment will be recorded in the property title.

 Conditions for Cancellation of Sale by Seller

Cancellation Process:

 Actual cancellation occurs 30 days after the buyer receives the notice of cancellation or
demand for rescission by a notarial act.
 The seller must fully pay the buyer the cash surrender value.
  Down payments, deposits, and options on the contract are included in the total number of
installment payments.

Illustration:

If you default on your real estate installment payments, the seller can cancel the contract, but
only after giving you 30 days' notice and fully paying you the cash surrender value, which
includes all your payments and deposits.

Installment Sales Not Covered by Maceda Law

Exclusions:

 Industrial lots.
 Commercial buildings.
 Sales to tenants under the Code of Agrarian Reforms.

Implication: For these types of properties, the act does not apply, and the seller can cancel the
sale upon the buyer's default without following the conditions outlined in the Maceda Law.

Illustration:

If you are buying an industrial lot on installment and default on payments, the seller can cancel
the contract immediately, without the 30-day notice and refund conditions required for other real
estate transactions under the Maceda Law.

Installment Sale of Subdivision Lots and Condominiums (Presidential Decree 957)

1. Transactions Covered:

 This law applies to the sale or any attempt to sell subdivision lots and condominium
units.

2. Definitions:

 Subdivision Lot: Any type of lot (residential, commercial, etc.) in a subdivision.

 Condominium Unit: A part of a condo building meant for independent use.
3. Buyer's Rights in Case of Default:

 Governed by the Maceda Law.

 If the developer fails to develop the project as promised, the buyer can stop paying
without forfeiting payments.
 The buyer can choose to get a refund of all payments made, with interest (excluding late
payment interest).

Illustration:

 Covered Transactions: If you try to buy or sell a condo unit, this law applies.
 Definitions: A subdivision lot could be a residential plot; a condo unit could be your
apartment in a condo building.
 Buyer's Rights: If the developer doesn't complete the promised amenities, you can stop
payments, and the developer can't keep your money. You can get a refund with interest.