SALES REVIEWER
Article 1582. Primary Obligations of the Vendee:
a. To accept the delivery of the thing
b. To pay the purchase price simultaneously upon the
delivery of the thing unless a period or term has been agreed upon.
EXCEPTION TO SIMULTANEITY OF ACTS: if parties agreed,
such as in sale by instalments.
Payment shall be made at the stipulated time and place
of delivery. If there is no stipulation at the time and place of delivery of
the thing.
*** The failure of the
vendee to pay the price after delivery if ownership had been transferred, does
not cause the ownership to revert back to the seller until and unless the
bilateral contract of sale is first rescinded. [Chua Hoi vs. Kapunan]
Article 1583. Rules in case of Contract of Sale of goods to be delivered
in stated instalments.
Two instances contemplated:
a. Seller makes defective deliveries in one or more
instalments—Buyer may reject the defective portion and accept the good ones
b. Buyer refuses w/o just cause to take delivery or pay
one or more instalments—determine whether breach is material to warrant refusal
to proceed with the entire contract of sale. When the breach is severable the
injured party can seek damages or compensation but not to rescind the whole
contract.
Article 1584. Buyer’s Right to examine goods.
a. Delivery w/o previous
examination: The buyer is not deemed to have accepted the same unless he had a
reasonable opportunity of examining them for the purpose of finding out whether
they conform with the specifications agreed upon.
b. Tender of Delivery by the
seller: If seller tenders delivery, he should give the buyer if the latter
requested, the reasonable opportunity of examining the goods to determine
whether they conform with the contract.
When right of examination not allowed?
a. If there is an express stipulation to the contrary
b. When the goods are deliveres “collect on delivery”,
the buyer cannot examine the goods unless he pays first the price. Exception:
He need not pay the price if there is a contrary agreement or the examination
is permitted by usage of trade at the place of delivery.
Article 1585. Signs or Evidence of Acceptance by the buyer of Goods
delivered to him. (CPR)
a. When he communicates
with the seller expressly manifesting his acceptance thereof.
b. When he performs
an act in relation to the goods inconsistent with the ownership of the seller.
Examples: (a) continuous possession and use of goods (b) reselling the goods
(c) mortgaging the goods
c. When after the lapse of a reasonable time following
the delivery, he retains the
goods w/o complaining to the seller or w/o intimating that he has rejected
them.
Article 1586. Acceptance of Goods. Mere Acceptance does
not necessarily discharge the seller from liability for the breach of any
promise or warranty. However to make the seller liable the buyer must notify
the seller w/in a reasonable time about the breach of promise or warranty.
Purpose of
Notice: To insulate the seller from belated claims of defects and to allow
him to make urgent investigation on the validity of claims.
Article 1587. Effects of Justifiable refusal to accept delivery by the
buyer
1. Buyer has no duty to return the goods to the seller
but must notify the seller of his refusal to accept the goods. (Risk of Loss
here is on the seller)
2. Buyer may voluntarily constitute himself as
depositary of the goods, but he will be liable for damages if he does not
fulfil the duties of a depositary as required by law. (Risk of loss is on the
buyer)
Article 1588. Effect of Unjustifiable Refusal to accept goods by the
buyer: Title or ownership passes to him from the time goods
were placed at his disposal.
Exceptions: a. If there is contrary agreement
b. If the
seller reserves ownership as security for payment of the price [1503 &
1523]
Article 1589. When vendee is bound to pay interest
(period b/w date of delivery and date of payment) after delivery:
a. if the parties stipulated
b. if the thing sold and delivered produces fruits or
income
c. if the vendee is in default, from the time demand is
made upon him either juidicially or extra-judicially.
Article 1590. When can the vendee suspend payment of the price (total or
remaining)?
1. If he is disturbed in his possession or ownership of
the thing brought
2. If he has a well-grounded fear that his possession
or ownership would be disturbed by a vindicatory action or foreclosure of
mortgage.
Length of suspension: While the danger or disturbance exists.
Situations where vendee cannot suspend payment despite presence of
disturbance (SSS-TP)
1. When the vendor has given security for the return of the price
2. When the parties have stipulated
3. When the vendor has succeeded
in eliminating the danger or disturbance
4. If disturbance is mere act of trespass
5. If vendee has fully paid
the price
**Other causes for suspension: non-compliance by vendor
of certain conditions; warranty of eviction
Article 1591. Immediate rescission in sale of immovables, if
the vendor has reasonable ground to fear the loss of the immovable.
** Vendor however has the alternative of compelling
specific performance if the ground to fear loss does not exist.
Article 1592. Exception to the general rule on rescission in case of
sale of immovables.
General
Rule on Rescission: The court may fix the period of payment when there is
just cause. Exception: Court is not
allowed to grant a new period. Once there is a judicial demand by notarial act
received by the vendee, the court may not grant him a new term. The reason is
that the vendee already enjoyed the advantage of paying beyond the time
originally fixed in the contract, during the time when no demand for rescission
either judicially or extra-judicially has taken place.
*Art. 1592 Not applicable in:
1. Sales by instalments where parties have laid down
the procedure to be followed in the event the vendee failed to fulfill his
obligation
2. A mere promise to sell where the title remains with
the vendor until full payment of the price.
Article 1593. Automatic Rescission of sale of movables. Conditions for
applicability:
1. if the vendee upon the expiration of the period
fixed for the delivery of the thing purchased, refused to receive it w/o
justifiable cause
2. if he failed to pay the price unless granted a
longer period w/in w/c to pay.
Reason why judicial or
notarial act not required: Personal things do not generally keep a stable price
in the market, any delay in their disposal may prejudice the vendor.
Actions for breach of contract of sale of goods
Article 1594. Actions available to vendor when
there is breach of contract of sale on the part of the vendee: (PDR)
1. Action for payment of the price of the
goods [1595]
2. Action for damages due to wrongful neglect
and refusal to accept and pay for the goods [1596]
3. Action for rescission if buyer has
repudiated the contract or has manifested his inability to perform his
obligation [1597]
Actions available to the vendee, in case of breach by the
vendor (SDR)
1. Action for specific performance in case of
failure of the vendor to deliver the goods [1598]
2. Action for damages for breach of warranty
but accepting the goods [1599]
3. Action for rescission for breach of warranty
where the vendee may validly refuse acceptance of the goods, or even if the
goods had already been received, he may return them [1599 par. 4]
Article 1595. Action for collection of price, available in the following
cases: (OPR)
1. When the ownership of the goods has
passed to the buyer and he wrongfully neglects or refuses to pay for the price
according to the terms of the contract
2. When the price is payable irrespective of
delivery or transfer of title, on a certain day and the buyer wrongfully
neglects or refuses to pay such price.
Defense of Buyer: He may establish the fact that the
seller has at anytime before judgment, manifested his inability not to comply
with the contract
3. When the goods cannot
readily be resold for a
reasonable price and the buyer refuses to receive the goods when offered for
delivery except when 1596 par. 4 is applicable (there is notice of stopping the
contract), with notification that the seller is holding them as bailee for the
buyer
Article 1596. Damages for non-acceptance of goods.
Measure of damages:
1. As a rule: estimated loss
directly and naturally resulting in the ordinary course of events from the
buyer’s breach (no available market)
2. When there is available
market: “difference” between contract price and market or current price at the
time when the goods ought to have been accepted or if not time has been fixed
at the time of refusal (If there are special circumstances establishing
proximate damages of a different amount than the “difference” described then
liability is based on the proximate damages) Proximate Damages: refer to
damages other than unrealized profits
* Repudiation of the contract or
notice of stopping the contract, such as in the case of a sale where goods are
to be manufactured. Buyer here shall be liable for the cost of:
1. labor performed
2. expenses for materials used before receiving the
notice of repudiation for stoppage
3. unrealized profits
Article 1597. When seller may rescind contract in case there is no
delivery yet
1. When buyer repudiated the
contract
2. When the buyer has
manifested his inability to perform his obligations
3. When the buyer has
committed a breach of the contract
* Notice must be given to
the buyer to totally rescind the contract.
Article 1598. Remedy of buyer in Contract to deliver specific goods:
Specific Performance w/o giving the seller option to retain the goods on
payment of damages.
Article 1599. Remedies of buyer when seller commits breach of warranty.
1. Recoupment—whereby the
buyer accepts the goods but he sets up against the seller the reduction or
extinction of the purchase price.
2. Action for damages—whereby
the buyer may (a) accept the goods but w/ damages or (b) refuse to accept the
goods for the breach of warranty but also with damages.
3. Rescission—whereby the
buyer seeks the cancellation of the sale and as a consequence there will be
restoration on both sides.
**Situations when buyer cannot choose or elect rescission (KNR)
1. If he knows of the breach of warranty
when he accepted the goods w/o protest
2. If he fails to notify the seller w/in a
reasonable time of the election to rescind
3. If he fails to return or offer to return the
goods to the seller in substantially the same condition as they were at the
time the ownership was transferred to him.
Extinguishment of Sales
Art. 1600- Causes for Extinguishing Sales
1. Ordinary Causes—causes
which extinguish ordinary contracts such as:
a. Payment
b. Loss of the things
c. Novation
d. Merger of rights of creditor and debtor
e. Rescission
f. Fulfillment of resolutory condition
g. Prescription
2. Special Causes—refer to
conventional redemption and legal redemption
CONVENTIONAL REDEMPTION.
Art. 1601. Requisites REV-CR
a. The vendor reserves the right to repurchase
the thing sold
b. He shall shoulder the expenses of the contract and
other legitimate payments made by the buyer.
c. He shall pay the value of the necessary and
useful expenses made on the thing incurred by the buyer
d. He shall comply with other stipulations
agreed upon.
e. He shall return the price of the sale
Characteristics
of Conventional Redemption [EAR RPR]
a. It begins to exist at the time of the perfection of
the contract. (It becomes a mere promise to sell if stipulated upon after the
sale had been consummated)
b. It is an accidental stipulation because it is a
right created by the parties
c. It is reciprocal when the right to redeem is
exercised. (both vendor and vendee has obligations with each other)
d. It gives rise to a real right when properly registered because
it affects third persons.
e. It is potestative as its exercise depends
upon the sole will of the vendor.
f. It is a resolutory condition because when it is
fulfilled, the ownership of the vendee over the thing is extinguished
PACTO DE RETRO SALE
|
PACTO DE RETRO
|
MORTGAGE
|
|
Ownership is consolidated
in the vendee if vendor does not repurchase w/in time agreed upon
|
Failure of mortgagor to
pay his obligations on time does not deprive him of his interest in the
property
|
|
No obligation on the part
of the vendee to foreclose
|
Mortgagee must foreclose
if he wants to secure a perfect title
|
|
Vendor has no more right
to redeem after expiration of period to redeem
|
Mortgagor may redeem
before foreclosure and even after, w/in one year from registration of the
sale in extra-judicial foreclosure. In judicial foreclosure redemption may be
made before confirmation of the sale by the court.
|
|
Vendee may alienate
property
|
Mortgagee cannot alienate
property
|
|
Vendee becomes
automatically the owner in case of vendor’s failure to redeem
|
Mortgagee does not
automatically become owner, there must be foreclosure sale first
|
|
Vendee is entitled to
reimbursement for necessary and useful expenses
|
Mortgagee is not entitled
to reimbursement for improvements he made
|
Art. 1602—Presumption of Equitable Mortgage. (IPERTOD)
1. When the price of a sale
with right to repurchase is unusually inadequate
2. When the vendor remains
in possession as lessee or
otherwise
3. When upon or after the expiration
of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed.
4. When the purchaser retains for himself a part of
the purchase price
5. When the vendor binds
himself to pay the taxes on
the thing sold.
6. In any other case where it may be
fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other obligation.
7. When there is doubt as to whether contract is
Pacto de retro or an equitable mortgage
Equitable Mortgage—one which lacks the proper formalities, form
of words or other requisites prescribed by law for a mortgage, but however
shows the intention of the contracting parties to make the property subject of
the contract as security for a debt and contains nothing impossible or contrary
to law.
Consequences of Declaration
of Pacto de Retro Sale as an Equitable Mortgage (PTFR)
1. The repurchase price paid
by the vendor is considered the principal
of the loan.
2. Title remains in the vendor or if the title has already been
transferred to the vendee, the same must be revested into the vendor by a deed
of reconveyance.
3. Any money fruits or other benefits
received thereafter by the vendee are considered interests on the loan.
4. If the vendor does not
redeem on time the remedy of
the vendee is to foreclose the mortgage.
Art. 1603—In case of doubt, a contract purporting to
be a sale with right to repurchase shall be construed as an equitable mortgage.
Rationale: Least
transmission of rights.
*Although in conflict
with Art. 1378, where it provides that if the contract is onerous, the doubt
shall be settled in favor of the greatest reciprocity of interests, Art. 1603
is the exception. This is justified by the condemnation of pactum commissorium
(which is a stipulation that creditor automatically becomes owner of a property
upon non-payment by the debtor)
Art. 1604—Art. 1602 also applicable to contract
purporting to be an absolute sale
Art. 1605—Vendor may ask for reformation of instrument in cases referred to in 1602 & 1604
Art. 1606—Time to redeem in conventional redemption
1. If there is a period agreed upon then this shall be
observed, but this should not exceed 10 years
2. If there is no period agreed upon, the redemption
shall be exercised within 4 years from the date of contract.
3. If an action was brought by the
seller claiming that the contract was an equitable mortgage but later on
proven that it was Pacto de retro Sale
Art. 1607—Judicial Order is required for the registration
of the consolidation of ownership of a real property in the vendee by failure
of the vendor to redeem.
Rationale: To
accord the vendor the maximum safeguards for the protection of his legal rights
under the true agreement of the parties.
Art. 1608—The vendor may exercise his right of redemption against every
possessor whose right is derived from the vendee, even if the
second contract does not mention of the right of redemption.
Art. 1609—Vendee is subrogated to the vendor’s rights and actions
As owner, vendee may:
a. transfer his rights to a 3rd person
b. mortgage the property
c. enjoy the fruits thereof
d. recover the property against every possessor
e. perform other acts of ownership
Art. 1610—Creditors of the vendor must exhaust first all the other
properties of vendor before they could exercise the right of
redemption against the vendee.
Art. 1611—Applicability.
1. The vendee entered a Pacto de Retro Sale
2. The vendee later acquired
the whole of the property.
3. The vendor in the “Pacto
de Retro Sale
If the above mentioned are
present the vendee may compel the vendor in the Pacto de Retro Sale of a part
to redeem the whole property.
Rationale:
Co-ownership is not favored, because the co-owners are reluctant to make
improvements on the property due to the state of instability in its ownership.
Art. 1612—Joint Pacto de Retro Sale
v
Each Co-Owner/Co-Heir can exercise right of
redemption with respect to their share
Art. 1613—In the case referred to in Art. 1612, vendee may demand that all the vendors or
co-heirs come to an agreement upon the repurchase of the whole thing, if
they failed to do so vendee cannot be compelled to accept partial redemption.
Art. 1614—Separate Sales of Shares of Co-owners of an undivided
immovable.
v
Each vendor may exercise their right of
redemption independently and the vendee cannot compel any of them to redeem the
whole property
Art. 1615—If the vendee dies and property is left to several heirs, the
action for redemption can only be brought to each of them independently with
respect to their share, whether or not the property is still undivided or
already partitioned.
Art. 1616—Obligations of the Vendor a Retro if he desires to redeem
a. Return to the vendee the
price of the sale
b. He shall shoulder the
expenses of the contract and other legitimate payments made by the buyer.
c. He shall pay the value of
the necessary and useful expenses made on the thing incurred by the buyer
Art. 1617—Rule in case there is no agreement on the sharing of the
fruits of the property.
1. If there are fruits at
the time of the sale and the vendee paid them, he shall be reimbursed by the
vendor.
2. Where there are no fruits
at the time of the sale but there are existing at the time of redemption, the
vendee shall be entitled to the fruits gathered for one year reckoned from the
last anniversary of the date of the effectivity of the contract of sale.
Art. 1618—The vendor who recovers the thing shall receive it free from
all charges or mortgages constituted by the vendee, but shall respect
the lease contract constituted on the property in good faith and in accordance
with the customs of the place.
LEGAL REDEMPTION (1619)
--is the right to be
subrogated upon the same terms and conditions stipulated in the contract, in
the place of one who acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted by onerous title.
Art. 1620—A co-owner of a thing may exercise the right
of redemption when the shares of all the
other co-owners or any of them are sold to a 3rd person. If the
price of alienation is grossly excessive, redemptioner shall pay only a
reasonable price.
--If two or more co-owners desire to
exercise right of redemption they may only do so in proportion to their share.
Art. 1621—Redemption by adjacent owner of rural lands. Requisites:
(RATSO)
1. The adjacent lands
involved must be rural land.
2. The rural land alienated and to be redeemed
must not exceed one hectare in area
3. The alienation must be
made in favor of a third person,
not in favor of another adjacent owner
4. The two lands involved
must not be separated by
brooks, drains, ravines, roads and other servitudes for the benefit of other
estates.
5. The vendee or grantee
must already be an owner of a
rural land. If he does not own any, redemption is not allowed.
If two or more adjoining
owners desire to exercise the right of redemption at the same time, the one
with a smaller area shall be preferred. If both have same area, the one who
first requested.
Art. 1622—Applicability: Piece of Urban Land which is so small and so situated that a major
portion cannot be used for any practical purpose w/in a reasonable time, having
bought merely for speculation and is about to resold.
*Speculation—means
buying or selling with expectation of profiting by a rise and fall in price.
Rights
recognized by Article 1622.
1. Right of Pre-emption—the right of an adjacent
owner to purchase the property before it is sold to a third person or before
the projected sale to a 3rd person is consummated.
2. Right of Redemption—the right of an adjacent
owner to redeem the property after the sale had been perfected and consummated.
|
Pre-emption
|
Redemption
|
|
Arises before sale
|
Arises after sale
|
|
No Rescission because no
sale as yet exists
|
There can be rescission of
the original sale
|
|
The action is directed
against the prospective seller
|
Action is directed against
the buyer
|
* Preference when two or
more owners of adjoining lands wish to exercise the right of redemption or
pre-emption: To the owner whose intended use is best justified.
Art. 1623—Period of Legal Pre-emption or Redemption.
v
Must be exercised within 30 days from the
notice in writing by the prospective vendor.
v
The deed of sale executed by the vendor is not
registered if not accompanied by an affidavit that he has given the required
written notice.
v
The right of redemption of co-owners is
superior to the right of adjoining owners.
Instances of Legal Redemption under the Civil Code (CHURC)
1. Sale
2. Sale
3. Sale
4. Sale
5. When a credit or other incorporeal
right in litigation is sold (1634)
Instances of Legal Redemption under special laws (THEJA)
1. Redemption in tax sales
2. Redemption of homesteads
3. A right of redemption in
cases of extra-judicial
foreclosures
4. An equity of redemption
in cases of judicial foreclosures
5. Redemption by an agricultural tenant of land sold
by the landowner
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of Credit—an agreement whereby credits, rights or actions
pertaining to a person (called assignor) are transferred by him to another
(called assignee) either onerously or gratuitously who acquires the power to
enforce the same against the debtors.
Nature of Assignment of Credits and other incorporeal rights: Has all
the elements of a contract of sale: (1) consent (2) Object which is the credit,
right , action assigned and (3) consideration which is the price paid for the
assignment, or liberality of the assignor if the assignment is gratuitous.
Distinction :
|
Basis
|
Contract of Sale
|
Assignment of Credits
|
|
Object
|
Property
|
Credit, incorporeal rights
or rights of action
|
|
Manner of Delivery of
Object
|
It need not be through
public instrument
|
It must be through a
public instrument (1625)
|
|
Subject obligated
|
The whole world
|
A definite third person
|
|
Ownership when transferred
|
Transfer of ownership need
not be upon delivery of the thing. The parties may agree that ownership be
transferred only after full payment (1478)
|
Ownership is transferred
upon delivery of the documents evidencing the credit or incorporeal rights
|
|
Consideration
|
It is always a requisite
|
It is not always a
requisite. Action may be maintained by the assignee based on his title even
if there is no consideration.
|
|
Basis
|
Dation in Payment
|
Assignment of Credits
|
|
Nature
|
It is an alienation of
property of a debtor in satisfaction of a debt in money
|
The alienation of credits
or rights, need not be in satisfaction of debtor’s debt
|
|
Object
|
Determinate property
|
Credits, incorporeal
rights or rights of action
|
|
Effect
|
Obligation is extinguished
|
Obligation is not
extinguished
|
ü
Consent of debtor is not necessary for the
assignment. He is therefore released from the obligation if he pays the
creditor before having knowledge of the assignment (1626)
ü
Scope of Assignment: All accessory rights, such
as guaranty, mortgage, pledge or preference (1627)
Art. 1628 What the Assignor of the Credit Warrants? (ELS)
1. The existence of the credit at the time of the assignment
2. The legality of the credit unless he sold the thing as
“doubtful”, meaning, he is not sure of the validity of his acquisition of the
thing sold which fact he has disclosed to the assignee
3. The solvency of the debtor, if expressly stipulated or if the
insolvency of the debtor was prior to the sale and of common knowledge
Scope of Liability in case of breach of warranty
1. In good faith: Assignor
shall pay (a) consideration of price which he received from the assignee; (b)
expenses of the contract (c) other legitimate expenses occasioned by the
assignment
2. In bad faith: Same
liabilities as in above but with damages
Art. 1629 Duration of the Liability of the Assignor in Good Faith (in
case there is no agreement)
1. One year from the date of
the assignment of the credit if the period of payment of the credit has already
expired
2. One year after maturity
of the credit if the period of payment has not yet expired
Art. 1630 Sale
--Seller shall only be
answerable for his character as an heir. He warrants the fact of his heirship
in the estate of the decedent. If it turns out that he is not an heir, then he
is liable for the breach of warranty.
Waiver of Hereditary Rights—a mode of extinction of
ownership, where there is intentional relinquishment of a known right with
knowledge of its existence and intention to relinquish it in favor of other
persons who are co-heirs in the succession
Lump-Sum Purchase of the whole of certain rights, rents or products (1631)
v
Vendor warrants the legitimacy of the whole of
the rights, rents or products but not the various parts of which the whole is
composed of.
v
Exception: If the vendee is evicted from the
whole or the part of the greater value (more than half) of the credits in which
case warranty stays.
Art. 1632—If vendor
profited from the fruits or received anything from the inheritance sold he
must restore it by paying the vendee, unless there is a contrary stipulation.
Art. 1633—Charges
and debts on the estate paid by the vendor must be reimbursed by the
vendee, unless there is a contrary stipulation.
Assignment of Credit or right in Litigation. (1634)
ü
debtor is given the right to extinguish the
obligation by reimbursing the assignee: (PIJ)
a. The price
paid for the credit or right
b. Interest on the said price from the time the
day it was paid
c. Judicial
costs incurred by the assignee
ü
When is credit or right in litigation? From the
time the complaint concerning the same is answered.
ü
Prescriptive Period: 30 days from the date the
assignee demands payment from debtor
Exceptions to the Right of Extinguishment by the debtor (1635)
ü
Assignments or sales made to: (CCP)
a. A co-heir
or co-owner of the right assigned
b. A creditor
in payment of his credit
c. The possessor
of a tenement or piece of land which is subject to the right in litigation
assigned.
Mga Komento
Mag-post ng isang Komento