Sales Schema

8/12/2019 Sales Schema

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SALES

CONTRACT OF SALE:

Art. 14581 is the heart and soul of the contract of sale. It is where the

definition of a contract of sale is derived: A contract of sale is an agreement wherebya party called the seller (vendor) obligates himself to deliver and transfer theownership of a determinate thing to another party called the buyer (vendee) who inturn obligates himself to pay therefor, a price certain in money or its equivalent to the

former.

Phases or Stages:

Characteristics or Features:

Elements:

1 Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer theownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money orits equivalent.

A contract of sale may either be absolute or conditional.

PREPARATION,

CONCEPTION OR

GENERATION

period of negotiation andbargaining, ending at themoment of agreement of

the parties

PERFECTION

birth of the contract

CONSUMMATION OR

DEATH

fulfillment orperformance of the termsagreed upon the contract

B I L A T E R A L both parties are obliged to fulfil reciprocal obligations to one another.

CONSENSUAL perfected by mere consent.

COMMUTATIVEthing sold is considered the equivalent of the price paid and the pricepaid is the equivalent of the thing sold.

ON E R O U S thing sold is conveyed in consideration of the purchase price n the purchaseprice is paid in consideration of the conveyance of the thing delivered.

P R I N C I P A L - its existence does not depend upon the existence and validity of anothercontract.

NOM I N A T E it has specific name given by law sale.


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CAPACITY TO BUY AND SELL

GENERAL RULE: EXCEPTIONS:

All persons whoare authorized by

the Civil Code toenter into acontract and toobligatethemselves, mayalso enter into acontract of sale (Art1489).

In case of

necessaries soldand delivered tominors or otherspersons withoutcapacity to act,the sale isconsidered valid byway of exceptionand should be paidby the minor orincapacitatedperson for areasonable price.

The husband and the wifeare prohibited to sell property toeach other (Art 1490), except:

(1) When a separation of property was agreed upon in themarriage settlements; or

(2) When there has been judicial separation of property underArt 191.

This provision also applies to common law husband and wife.

Other trust relationships in which sale is prohibited:(1) Guardian/Agents/Executors and Administrators

a. Direct or indirectb. May be ratified since only private wrong is involved(2) Public Officers and Employees/Officers of the Courta. Cannot be ratified since public wrong is involved.b. Requisites for the prohibition to apply to lawyers:

i. Existence of attorney-client relationshipii. Property is the subject matter in litigationiii. Prohibition applies while the subject is in litigation

(from filing of complaint to final judgment)Exception: Contingent fee arrangement whereamount of legal fees is based on a value of property

in litigation.

The prohibitions in the two preceding articles are applicable tosales in legal redemption, compromises and renunciations(Art 1492).

RAMIFICATIONS: PARTIES TO A CONTRACT OF SALE

VENDOR VENDEE

Obligations:

(1)Transfer the ownership and todeliver a determinate thing(Art. 1458).

(2) Bound to transfer the ownership ofand deliver, as well as warrant the

Obligations:

(1) Pay the price of the thing certain inmoney or its equivalent (Art. 1458).

(2) Bound to accept delivery and paythe price of the thing (Art. 1582).

E S S E N T I A L

Meeting of the minds of theparties (vendor & vendee)

Object (certain &determinate)

Price certain.

N A T U R A L

Warranty against eviction(Art. 1548)

Warranty against hidden

defects (Art. 1561)

A C C I D E N T A L

may or may not existdepending on stipulationsof parties (e.g. conditions,

payments of interest, placeand time of payment, etc.)


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VENDOR VENDEE

thing which is the object of the sale(Art. 1495).

(3)To warrant the object sold againsteviction (Art. 1495) and against

hidden defects (Art. 1547).(4)To preserve the thing with properdiligence pending its delivery to thevendee (Art. 1163).

Transfer the ownership of the thing:

The right to ownership of the thingmust present at the time of delivery(Art. 1459) and this is so because theownership of the thing sold is

transferred to the vendee uponactual or constructive delivery(Art. 1477). However, the partiesmay stipulate that ownership in thething shall not pass to the purchaseruntil he has fully paid the price(Art 1478).

Deliver a determinate2

thing:

A determinate thing is aparticularized item. It is determinateor specific when it is particularlydesignated or physically segregatedfrom all others of the same class.

Warrant the thing which is the object ofthe sale:

In general, the acceptance of thegoods, absent any expressstipulation, does not discharge theseller from liability in case of breach

of warranties unless no notice wasgiven by the buyer of the defect or

Pay the price of thing:

According to the terms of thecontract.If payment of interest is stipulated,the buyer must pay thereof. If the

amount of interest was notstipulated, the legal rate shouldapply.When the buyer defaults, such actconstitutes a breach which is subjectto specific performance or rescissionwith damages as the case may be.Interests must also be paid afterdefault.

Accept the thing sold:The thing should be accepted at thetime and place stipulated in thecontract.

If the same were not specified, acceptance iseffected when:

The buyer intimates to the seller that he hasaccepted.

When the thing was delivered and buyerdoes any act inconsistent with theownership of the seller.

When buyer retains the thing withoutintimating to the seller that he has rejecteddelivery.

When the warrantyhas been agreedupon or nothing has been stipulatedon this point, in case evictionoccurs,the vendee shall have the right todemand of the vendor:

the return of the valueof the thing soldhad at the time of the eviction, be it

greater or less than the price of the sale;income or fruits, if he has been orderedto deliver them to the party who won the

2Art. 1460. A thing is determinate when it is particularly designated or physically segregated from allother of the same class.The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing iscapable of being made determinate without the necessity or a new or further agreement between theparties. (n)


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VENDOR VENDEE

the latter has failed to give it within areasonable time.

An affirmation of a fact may be

treated as a warranty if the sellerwho made the same is an expert andsuch was relied upon by the buyer inthe purchase of the thing (Art. 1546).

A warranty can be expressor implied.

The seller is bound to give these twoimplied warranties in a contract of saleeven though they are not expressly

stated in the contract:

(1)Warranty against eviction(2)Warranty against hidden defects

Warranty against evictionRequisites:(a) There should be a final judgment3.(b) There must be a deprivation of the

property in the buyer in whole orin part

(c) It should be based on a right priorto the sale.

(d) The warranty was not waived.

Seller shall not be liable when theadverse possession had beencommenced before the sale but theprescriptive period is completed afterthe transfer (Art. 1550).If the vendor is not summoned in thesuit for eviction at the instance ofthe vendor, he shall not be obliged tomake good the property warranty(Art. 1558).

Warranty against hidden defects ofor encumbrances upon the thing sold

Requisites:(a)The defect must be hidden.(b)It should render the thing unfit forthe use it was intended or there is

a diminution of its fitness.(c)The vendee would not have

purchased the thing or bought it

suit against him;the costs of the suit which caused theeviction, and, in a proper cases, those ofthe suit brought against the vendor forthe warranty;

the expenses of the contract, if thevendee has paid them;damages and interest, and ornamentalexpenses, if the sale was made in badfaith (Art. 1555).

Implied warranty is not applicable in thefollowing kinds of sale where theprinciple of caveat emptorapplies:

(a)Sale by sheriff;(b)as is, where is sale;(c)Sale of second hand items;(d)Public auction for tax delinquency

(Art 1547).

Should the vendee lose, by reason ofthe eviction, a part of the thing soldof such importance, in relation to thewhole, that he would not have bought

it without said part, he may demandthe rescission of the contract; butwith the obligation to return the thingwithout other encumbrances thatthose which it had when he acquiredit. He may exercise his right of action,instead of enforcing the vendorsliability for eviction (Art. 1556).

If the immovable sold should beencumbered with any non-apparentburden or servitude, not mentioned inthe agreement, of such nature that it

must be presumed that the vendeewould not have acquired it had hebeen aware thereof, he may ask forthe rescission of the sale. This thoughcannot be exercised if said burden orservitude is registered unless an

3Final judgment in this provision pertains to final and executory judgment (Art 1548).


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VENDOR VENDEE

for a lower price had he knownabout the defect (Art 1561).

In the sale of a specific article, there isno implied warranty for the specificpurpose except if given (Art 1563).

Implied warranty or condition as toquality or fitness for a particularpurpose may be annexed by the usageof trade (Art 1564).

The vendor is still held liable for

warranty against hidden defects eventhough he was not aware of it(Art. 1566).

If the thing is lost:The thing should be lost by reason ofthe hidden defect and the vendorwas in bad faith:

1) Bear the loss;2) Obliged to return the price of the

thing;3) Refund the expenses of the

contract;4) Damages.

If the vendor was in good faith:1) Return the price of the thing plus

interest;2) Expenses of the contract

(Art. 1568).

Prescriptive Period:a) Actions should be barred after 6months from the delivery of the thingsold (Art. 1570).b) 40 days in case of animals.

Other rights and obligations:

Generally, expenses for the executionand registration of the sale shall beborne by the vendor (Art. 1487).

Unless otherwise agreed, the goodsremain at the sellers risk until the

ownership therein is transferred tothe buyer.

However, when the ownership thereinis transferred to the buyer, the goods

express warranty that the thing is freefrom all burdens and encumbrances.

The vendee is given one year from

the execution of the deed to bringan action for rescission withdamages.

If the time has passed, only aclaim for damages can be put upby him (Art. 1560).

The provision in Art. 1566 shall notapply if the warranty was waived by

the vendee.

When the thing sold had any hiddendefect at the time of the sale but waslost through the fault of the vendee orby a fortuitous event, vendee bydemand of the vendor:

1) Price which he paid, less the valuewhich the thing had when it waslost.

2) Damages (if vendor was in badfaith) (Art. 1569).

When it is expressly stipulated in thecontract, expenses for the executionand registration of the sale shall beborne by the vendee (Art. 1487).

Generally, the ownership in the goodspasses to the buyer upon theirdelivery to the carrier, except:(1)When the ownership or right or

possession is reserved to the selleruntil certain conditions arefulfilled (Art. 1503, par. 1).

(2)When ownership is reserved until


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VENDOR VENDEE

are at the buyers risk whether actualdelivery has been made or not, exceptthat:

(1)Where delivery of the goods hasbeen made to the buyer or to abailee for the buyer, inpursuance of the contract andthe ownership in the goods hasbeen retained by the sellermerely to secure performance bythe buyer of his obligationsunder the contract, the goods areat the buyers risk from the timeof such delivery

(2)Where actual delivery has beendelayed through the fault ofeither the buyer or seller thegoods at the risk of the party infault (Art. 1504).

Warranties in the sale of animals:If sold together, whether in lumpsum or with separate price, its

redhibition if exclusive unless thevendee would not have purchasedthe thing without the defect one(Art. 1572).No warrant against hidden defectsin sales at fairs or at publicauctions or of livestock sold ascondemned (Art. 1574).Sale of animals with contagiousdiseases is void. Also void if theyare unfit for their stipulate use(Art. 1575).Redhibitory defect- in suchcharacter as to be hard to detecteven with professional help. But ifthe veterinarian through ignoranceor bad faith overlooks thediscovery, he shall be liable fordamages (Art 1576).If the animal should die within 3days after its purchase, it shall be

borne by the vendor if the diseasewhich caused the death existed atthe time of the contract (Art.1578).

the price has been fully paid(Art. 1478).

The buyer should be given reasonable

time to examine the thing since it willnot be deemed accepted by him untilso.

When the buyer has the right to refuse

the goods, he does not need to returnthem. He shall be considered adepositary and is to exercise thedegree of diligence require by law.

This can also be defeated by acontrary stipulation.

If the sale be rescinded, the animalshall be returned in the condition inwhich it was sold and delivered, the

vendee shall be answerable for anyinjury due to his negligence and notarising from the redhibitory fault ordefect. (Art 1579)

If the condition is not performed, thebuyer may:

1. Rescind the contract2. Proceed with the contract

waiving the performance of thecondition

If the condition is in the nature of apromise that it should happen, theperformance of such condition maybe treated by the other party as

breach of warranty (Art. 1545).

The vendee need not appeal the case tomake the vendor liable (Art. 1549).


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VENDOR VENDEE

An unpaid seller4, notwithstandingthat the ownership in the thing mayhave passed to the buyer, can:

Retain5

the goods, if the goods arestill in his possessiona. Where the goods have been

sold without any stipulationas to credit

b. Where the goods have beenmade sold on credit but theterm has expired

c. Where the buyer wasinsolvent (Art 1527)

Exercise stoppage in transit6, in

case of insolvency and if thevendor has parted with thepossession of the goods

a. Sale should be on creditb.The goods must be in transitc.The seller should be unpaidd.The buyer must be insolvent

(Art 1530)Special right of resale

a.The goods must beperishable

b.The right was reserved bythe seller (Art 1583)

Special right to rescinda.This right should have been

expressly reserved by theseller (Art 1534) [Art 1526]

Contract of sale of personal propertypayable in instalments:

Remedies of the vendor:

Exact fulfilment of theobligation should the vendeefail to pay;

Cancel the sale, should thevendees failure to pay covertwo or more instalments;

Contract of sale of personal propertypayable in instalments:

Rights of the vendee is protectedby the Recto Law (in Art. 1484-1486).

The Recto Law was passed toprevent abuse in foreclosure ofchattel mortgage where thecreditor forecloses the chattel andbuys it at a very low price and still

4A seller is considered unpaid if:

a. When the whole of the purchase price was not paidb. When the bill of exchange has been received as conditional payment and the condition on which has

been broken by reason of the dishonour of the instrument (Art. 1526).

5In case of partial delivery, the vendor can still exercise his right to retain on the remaining goods that arein his custody (Art. 1527, par 2).

6Stoppage in transit may be exercised by either:a. Obtaining actual possession of the goods or-;b. Notice to the buyer (Art 1532).


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VENDOR VENDEE

Foreclose the chattel mortgageon the thing sold, if one hasbeen constituted, should the

vendees failure to pay covertwo or more instalments. In thiscase, he shall have no furtheraction against the purchaser torecover any unpaid balance ofthe price. Any agreement to thecontrary shall be void (Art.1484).

Contract of sale of immovable propertypayable in instalments:

The seller has reasonable groundsto fear loss, he may sue forrescission;

If there is non-payment,rescission may also be sought.

demands from the debtor thedeficiency in the price of thechattel or files for a deficiencyclaim over said property.

When things (immovable) are sold oninstalments:

The buyer is protected by the Maceda

LawBuyer pays at least 2 years instalment:

Pay without interest within the graceperiod of 1 month for every year ofinstalment paid;Grace period to be exercise once every5 years;When no payment is cancelled, buyeris entitled to 50% of what he has paidplus if after 5 years of instalments,

5% for every year but not to exceed90% of total payments made;Cancellation to be effected 30 daysfrom notice and upon payment ofcash surrender value.

Buyer paid less than 2 years:1st grace period is 60 days from thedate of instalment became due;2nd grace period of 30 days fromnotice of cancellation/demand forrescission:

Buyer can still pay within the30-day period

With interestCancellation may be effected after the30-day period.

RAMIFICATIONS: ELEMENTS OF THE CONTRACT OF SALE

O B J E C T P R I C ERequisites:

Must be licit

(Art 1459).

Determinate

Things to consider:

When at the perfection of the sale, there is every intention in

the buyer to pay the price, and every expectation in the seller toreceive such price as the value of the subject matter, he (seller)obligates himself to deliver (a derivation of Art 1458).


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O B J E C T P R I C Eand must be soat the time ofthe perfection ofthe contractwithout the

necessity of anew or furtheragreementbetween theparties(Art. 1460).

What can be theobject of sale:

Things having apotentialexistence(Art. 1461):

The efficacy ofthe sale of amere hope orexpectancy isdeemedsubject to the

condition thatthe thing willcome intoexistence.

Sale of a vainhope is void.

Existing, futureand contingent:

Whether thesubject matter is a

type and naturethat exists or couldbe made to exist to

allow the sellerreasonable

certainty of beingable to comply withhis obligations

If the consideration of the transaction consists partly of moneyand partly of thing, the nature of the same shall be determinedby the manifest intention of the parties.

If the intention is not clear, it shall be barter if the value isgreater than or equal to the thing sold and shall beconsidered sale if the value of the thing given asconsideration is less than the value of the thing sold (Art.1468).

When is the price certain or ascertainable7:CERTAINexpressed and agreed in terms of specific pesos andor centavos.

ASCERTAINABLE -1.Reference to another thing or left to the judgment of a specifiedperson or persons (Art. 1469).

2.If such persons are unable or unwilling to determine the price,the parties shall agree on the price (but shall never bedependent on one party unless ratified by the other, Art.1473).

3.If the third persons acted in bad faith, the court shall fix theprice (Art. 1469).

4.By reference to a definite day, particular exchange of market incase of securities, grain, liquids and other things (Art. 1472).

5.Where the price cannot be determined in accordance with thepreceding articles, or in any other manner, the contract isinefficacious. However, if the thing or any part has beendelivered to the appropriated by the buyer, he must pay areasonable price therefor. What is a reasonable price is aquestion of fact dependent on the circumstances of each case(Art. 1474).

The validity of the contract of sale is not affected by the gross

inadequacy of the price. Exceptions:When there is a defect in the consent such as fraud,mistake or undue influence

The intention of the parties is really a donation or someother act or contract (Art. 1470).

The sale is VOID when the price is simulated. Exceptions:When the act may be shown to have been in reality a

donation or some other act or contract.If there is a real price but what is stated in the contract is

not the one intended by the parties, the price is relativelysimulated. As opposed to an absolutely simulated price, a

relatively simulated price can be remedied by a reformation(Art. 1471).

7Notes:1. There is a presumption of a valid consideration. Although this presumption can be defeated by

evidence to the contrary.2. It has also been held that the manner of payment must be agreed upon since it is part of the price.

Absence of which affects the validity of the sale since it is tantamount to an absence ofconsideration (Marnelego vs Banco Filipino Savings and Mortgage Bank).


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O B J E C T P R I C E(Art. 1462). A promise to buy and sell a determinate thing for a price

certain is reciprocally demandable.

An accepted unilateral promise to buy or sell a determinatething for a price certain is binding upon the promissor if the

promise is supported by a consideration distinct from the price(Art. 1479).

Whenever earnest money is given in a contract of sale, it shallbe considered as part of the price and as proof of the perfectionof the contract (Art. 1482)8.

CASES

8Notes:Article 1479 and 1482 tell us about option money and earnest money respectively.Option money does not become part of the price and is not refundable. It is basically giving the seller

allowance to decide with the sale.Earnest money on the other hand becomes part of the purchase price as it is indicative to the interest

of the buyer to purchase the thing. It is to be returned when the sale is not pushed through exceptwhen agreed to be retained since it is not prohibited by law.

It is also proof of the perfection of the sale.

Manila Metal Container Corporation vs PNB

Facts:

Petitioner was the owner of 8,015 square meters of parcel of land located in

Mandaluyong City, Metro Manila. To secure a P900,000.00 loan it had obtained from

respondent Philippine National Bank, petitioner executed a real estate mortgage over

the lot. Respondent PNB later granted petitioner a new credit accommodation. On

August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the

real estate mortgage and sought to have the property sold at public auction. After

due notice and publication, the property was sold at public action where respondent

PNB was declared the winning bidder. Petitioner sent a letter to PNB, requesting it to

be granted an extension of time to redeem/repurchase the property. Some PNBpersonnel informed that as a matter of policy, the bank does not accept partial

redemption. Since petitioner failed to redeem the property, the Register of Deeds

cancelled TCT No. 32098 and issued a new title in favor of PNB.

Meanwhile, the Special Asset Management Department (SAMD) had prepared a

statement of account of petitioners obligation. It also recommended the management

of PNB to allow petitioner to repurchase the property for P1,574,560.oo. PNB rejected

the offer and recommendation of SAMD. It instead suggested to petitioner to

purchase the property for P2,660,000.00, in its minimum market value. Petitioner

declared that it had already agreed to SAMDs offer to purchase for P1,574,560.47

and deposited a P725,000.00.

Issue: Whether or not petitioner and respondent PNB had entered into a

perfected contract for petitioner to repurchase the property for respondent.

Ruling: The SC affirmed the ruling of the appellate court that there was no

perfected contact of sale between the parties.

A contract is meeting of minds between two persons whereby one binds himself,

with respect to the other, to give something or to render some service. Under 1818 of

the Civil Code, there is no contract unless the following requisites concur:Consent of the contracting parties;

Objection certain which is the subject matter of the contract;

Cause of the obligation which is established.

Contract is perfected by mere consent which is manifested by the meeting of the

offer and the acceptance upon the thing and causes which are to constitute the

contract. Once perfected, the bind between other contracting parties and the

obligations arising therefrom have the form of law between the parties and should be

complied in good faith. The absence of any essential element will negate the existence

of a perfected contract of sale.


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San Miguel Properties vs. HuangIt is not the giving of earnest money, but the proof of the concurrence of all the essentialelements of the contract of sale which establishes the existence of a perfected sale.

So the question is: Was it an earnest deposit?

The court answered in the negative (NO). At the time when petitioner accepted theterms of respondents offer of March 29, 1994, their contract had not yet beenperfected. It does not satisfy Article 1482.

The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3)

consummation. The alleged indubitable evidence of a perfected sale cited by theappellate court was nothing more than offers and counter-offers which did notamount to any final arrangement containing the essential elements of a contract ofsale. While the parties already agreed on the real properties which were the objects ofthe sale and on the purchase price, the fact remains that they failed to arrive atmutually acceptable terms of payment, despite the 45-day extension given bypetitioner.

There was also failure to agree on the manner of payment. The manner of payment ofthe purchase price is an essential element before a valid and binding contract of salecan exist. Although the Civil Code does not expressly state that the minds of the

parties must also meet on the terms or manner of payment of the price, the same isneeded, otherwise there is no sale.

Agreement on the manner of payment goes into the price such that a disagreementon the manner of payment is tantamount to a failure to agree on the price.


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DOUBLE SALE (Art. 1544)

Requisites:

(a) There should be two ormore valid sales;

(b) Which involve the samething;

(c) Two or more buyersmust have conflictinginterests as to claim ofownership;

(d) Should only pertain toone seller.

Who owns the property?

If the thing is a movable:

(a) first possessor in goodfaith;

Good faith is defined as theabsence of notice that another

person has a right or interestin the property; the one whohas paid the price beforenotice that another has a claimor interest. It is a requisite allthroughout the stages.

Who owns the property?

If the thing is an immovable:

(a) First registrant in goodfaith;

(b) If there is noinscription, the firstpossessor in good faith;

(c) If there is neitherinscription nor possessionin good faith, the one withthe oldest title in goodfaith.

RADIOWEALTH FINANCE CO. VS. PALILEO

Facts:In April 1970, defendant spouses Enrique Castro and Herminio R. Castro

(spouse Castro) sold to herein respondent Manuelito Palileo a parcel ofunregistered coconut land in Surigao del Norte. The sale is evidenced by anotarized Deed of Absolute Sale, but the deed was not registered in the Registryof Property for unregistered lands in the province of Surigao del Norte. Since theexecution of the deed of sale, Palileo who was then employed in Lianga, Surigaodel Sur, exercised acts of ownership over the land through his mother RafaelaPalileo, as administratrix or overseer. Manuelito Palileo has continuously paid thereal estate taxes on said land from 1971 until the present.

In November 1976, the CFI of Manila rendered a judgment was renderedagainst defendant Enrique T. Castro to pay herein petitioner Radiowealth FinanceCompany (Radiowealth), the sum of P22,350.35 with interest rate of 16% perannum from November 2, 1975 until fully paid, and upon the finality of the

judgment, a writ of execution was issued. The Provincial Sheriff Marietta E.Eviota, through defendant Deputy Provincial Sheriff Leopoldo Risma, levied uponand finally sold at public auction the subject land that defendant Enrique Castrohad sold to Palileo in 1970. The said Provincial Sheriff executed a certificate ofsale was by the in favour of Radiowealth as the only bidder, and upon expirationof the redemption period, she also executed a deed of final sale. Both documents

were registered with the Registry of Deeds.

Learning of what happened to the land, Palileo filed an action for recoveryof the subject property. The court a quo rendered a decision in favour of Palileo,which the Court of Appeals affirmed.

Issue: Who is the rightful owner of the subject property?

Ruling:

The Supreme Court likewise affirmed the appellate courts decision on this

case. There is no doubt that had the subject property been a registered land, this


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RAMIFICATIONS RELATING TO LOSS (Arts. 1493 - 1494)

E X T I N G U I S H M E N T O F S A L E

Sales are extinguished by the same causes as all other obligations, by those statedin the preceding articles of the Title, and by conventional or legal redemption(Art. 1600).

a. Conventional Redemption (Art 1601) The right should have been reserved, Art 1616 also applies:

The price of the thing should be returned The expenses of the contract should be paid

Res Perit Domino

Ownership has not yet passed so the seller bears the risk of loss.

Before

Perfection

Res Perit Domino

Contract is merely inefficacious since loss of the thing does not affect the

validity of the sale.

At

Perfection

Res Perit Domino

Delivery extinguished ownership vis--vis the seller and creates a new

one in favor of the buyer .

After

Delivery

Who bears the loss?


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Lawful expenses should be paid Stipulations should be complied.A pacto de retro sale shall be considered equitable mortgagein the following circumstances:

When the price is unusually inadequate Vendor remains in possession as lessee or otherwise When the expiration of the right to repurchase another

instrument extending the period of redemption or grantinga new period is executed

When the purchaser retains for himself part of thepurchase price

When the vendor binds himself to pay the taxes on thething sold

According to the intention of the parties (Art 1602)

The right referred in 1601 shall prescribe in 10 years wherethere should be an agreement, and 4 years when there is none.However, the vendor may still exercise the right to repurchasewithin 30 days after the finality of the judgment rendered in thecivil action on the basis that the contract was a true sale withpacto de retro. (Art 1606)

When real property is involved, the consolidation of ownershipin the vendee by virtue of the failure of the vendor to complywith the provisions of Art 1616 shall not be recorded in theRegistry of Property without judicial order.(Art 1607)

The vendor may bring action against every possessor whoseright is derived from the vendee even if in the second contractthere has been no mention of such. (Art 1608)

Exhaustion or excussion also applies in conventionalredemption (Art 1610)

Provisions regarding to co-ownership: In the sale with a right to repurchase, the vendee of a part

of an undivided immovable who acquires the whole thereofin the case of Art 498, may compel the vendor to redeemthe whole property if the latter wishes to make use of theright of redemption. (Art 1611)

The right of redemption must only be for his respectiveshare in the case of joint contracts. (Art 1612) The vendee may demand all of the vendors or co-heirs that

they may come to an agreement upon the repurchase ofthe whole thing sold and should they fail to do so, thevendee cannot be compelled to consent to partialredemption. (Art 1613) BECAUSE THE LAWSDISCOURAGE COOWNERSHIP.

If the vendee should leave several heirs, the action forredemption shall be limited only to the respective share ofeach one. (Art 1615) If the inheritance has been divided,and the thing has been awarded to one of the heirs, theaction for redemption may be instituted against him forthe whole.

Provision on fruits: If at the time of the execution of the sale there should be

on the land, visible or growing fruits, there shall be noreimbursements for or prorating of those existing at the


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time of the redemption, if no indemnity was paid by thepurchaser when the sale was executed. Should there beno fruits at the time of the sale, and some exist at the timeof redemption, they shall be prorated between theredemptioner and vendee, giving the latter the partcorresponding to the time he possessed the land in thelast year, counted from the anniversary of the date of thesale. (Art 1617)

The vendor who recovers the thing sold shall receive free fromall charges or mortgages constituted by the vendee, but he shallrespect the leases which the latter may have executed in goodfaith, and in accordance with the custom of the place where theland is situated. (Art 1618)

b. Legal Redemption As opposed to conventional redemption, this is by operation of

law. This is the right to be subrogated upon the same terms and

conditions stipulated in the contract, in the place of one whoacquires a thing by purchase or dation in payment or by anyother transactions whereby ownership is transmitted byonerous. (Art 1619)

In case the shares of all the other co-owners or of any of them,are sold to a third person. If the price of the alienation is grosslyexcessive, the redemption shall pay only a reasonable one.Should two or more co-owners desire to exercise the right ofredemption, they may respectively have the thing owned incommon (Art 1620)

In case of owners of adjoining lands, they shall have the right ofredemption when a piece of rural land, the area of which doesnot exceed 1 ha, is alienated unless the grantee does not ownany rural land. This is not applicable to adjoining land whichare separated by brooks, drains, ravines, roads and otherapparent servitudes for the benefit of other estates. If two ormore adjoining owners desire to exercise the right of redemptionat the same time, the owner of the land adjoining land ofsmaller area shall be preferred; and should both lands have thesame area, the one who first requested the redemption (art1621)

Urban lands that are so small or so situated that a majorportion of which cannot be used for any practical purposewithin reasonable time, having been bought merely forspeculation, is about to be re-sold, the owner of any adjoiningland shall have the rights of redemption also at a reasonableprice. When two or more owners of adjoining lands wish toexercise the rights of pre-emption or redemption, the ownerwhose intended use of the land is question appears best justifiesshall be preferred. (Art 1622)

Exercise of the right shall not be allowed except: Within 30 days from the notice in writing by theprospective vendor, or by the vendor, as the case may be It shall not be recorded in the Registry of Property unless

the vendor executes and accompanies it with an affidavitof the vendor that he has given written notice thereof to allpossible redemptioners. The right of redemption of co-owners excludes that of adjoining owners:


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