Regulatory Framework and Legal Issues in Business

Sale as a contract
- There is a meeting of the minds between two parties namely Vendor and Vendee.

Contract of sale may be absolute (if silent) or conditional (needs to be stipulated)

Vendor or seller has the two obligations:

● To deliver a determinate thing
● To transfer ownership

Vendee or buyer also has two obligations:

● To accept the delivery
● To pay the price

Characteristics of a contract - CCBPRNOT

1. Consensual (as a rule)
● Valid in any form whether oral or in writing provided there is meeting of the minds
- Exception to the general rule:
1. It is a formal contract when it is a sale of land through an agent if authority is not
in writing.
● Oral yung authority niya -- contract is void
● All the things that the agent will do pertaining to that sale is also void.
● Ex. May lupa akong ipinabenta sayo kay third person. Ang authority na
ibinigay ko sayo ay salita lamang, hindi written. Kahit notarized pa yung
contract of sale niyo ni third person, void pa rin ang contract dahil ang
authority kay agent ay oral lang, when it should be in writing.
● It will only be valid kapag bumalik si agent kay owner, gagawa ng
contract in writing with signature ni owner and ni agent dahil in-appoint
ka as agent. A new legal relationship will be created between owner and
agent dahil sa written contract na pagbigay ng authority kay agent.
○ Kung ano man yung ginawa ni agent before the written contract
was made, hindi pa rin ito magiging valid. Making a written
contract with the owner and the agent does not make the past
actions of the agent valid.
- But if the owner of the land sold it orally. (Si owner mismo ang nagbenta) It is
considered valid but (a defective contract) unenforceable contract for it violates
the statute of fraud.
● Ex. Bebenta ko yung lupa kay third person for 15 million. After 1 week,
nag-iba yung isip ko at hindi na pala ibebenta ang lupa. Kahit i-demanda
ako ni third person dahil hindi ko na ibebenta yung lupa, kung hindi
naman in writing yung contract namin, hindi ito enforceable sa korte.
● Statute of Frauds: Ang batas ay nagrerekomenda na may mga certain contracts
o transactions na dapat sana ay may masunod na proper form (often in writing)
upang ito ay maging enforceable sa korte.
2. Sale of securities (ex. Shares of stock)

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

- VOID + criminal liability if the securities are not SEC registered

- Based on Securities Regulation Code

Note: Void contracts can’t be ratified. Unenforceable contracts can be ratified.

● Art. 1396. Ratification cleanses the contract from all its defects from the moment it was
constituted.

2. Commutative (as a rule)

● It is not determined by risk. The amount of debit is equal to the amount of credit.
- Exception to the rule: Aleatory sale - a sale determined by risk
● Aleatory contract: one of the parties or both reciprocally binds
themselves to give or to do something in consideration of what the other
shall give or do upon the happening of an event which is uncertain, or
which is to occur at an indeterminate time.
● Aleatory contract is a contract that through its nature or by the parties'
will offers at least to one contracting party the chance of advantage,
exposing it at the same time to the risk of losses, that depend upon an
uncertain prospective event.
● Ex. Insurance
● Debit is not equal to credit
● Ex. You bought a lottery ticket. Kahit 1,000 pa ang itaya mo, pwedeng
hindi ka pa rin manalo. There is a risk that you won’t win. Kapag hindi
ka nanalo walang babalik sa itinaya mo. Pero kapag nanalo ka kahit 20
pesos lang itinaya mo, million ang mababalik sayo. (debit ≠ credit)

3. Bilateral
● Both parties have obligations
● Entered into by two or more persons and the rights and obligations arising therefrom are
always reciprocal
4. Principal
● It can stand alone
● it does not depend on its existence or validity upon some other contracts
5. Reciprocal (as a rule)
● Simultaneous performance is required to the parties unless stipulated (there are separate
dates to perform)
● Kung walang napag-usapan, sabay ang performance ng obligation.
6. Nominal
● With name based on Civil Code -- Contract of Sale (special contract)
7. Onerous
● Always have value in return
● On the part of the vendor, the price of the goods. On the part of the vendee, the
determinate thing is received.
● Without the price nor the goods, the contract of sale is void.
8. Transmission of Ownership

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

● The ultimate obligation of the seller is to transfer ownership to the buyer.

○ Transfer of ownership at the delivery unless stipulated
● If the contract does not involve the transfer of ownership, it will never be considered a
contract of sale.

Sale and similar contracts - ABCCCD

● Agency to sell

Sale Agency to Sell

1. There is a Buyer-Seller relationship. 1. There is a Principal- Agent

relationship.

2. Effect of sale: Delivery is the transfer 2. There is no transfer of ownership.

of ownership. (unless stipulated - in
spite of delivery, there should be no
transfer of ownership)

3. Sale of land by the owner if orally is 3. Sale of land through an agent but authority
valid but results in an unenforceable of agent is oral --- VOID, sale of the agent is
contract (violation of Statute of also void even if it is notarized
Fraud)

● Barter

Sale Barter

1. Goods VS Price or Money 1. Goods VS Goods

2. Purpose of the vendor is to sell, 2. Purpose is to exchange

purpose of the vendee is to buy

Scenario: Goods in exchange of Partly Goods and Partly Money

Ex.: BMW = Nissan + 500,000
Is it sale or barter?
● The intention governs -- look for the words used in the problem.
- Considered a sale: Mr. X sold his BMW to Mr. Y for 500,000 and a Nissan car.

If the problem is silent, check the values.

- BMW is worth 1.2 million = Nissan car + 500,000
- BMV = 700,000 worth Nissan + 500,000

● IF GOODS > MONEY --- considered as barter

● IF GOODS < MONEY --- considered as sale
● IF GOODS = MONEY --- considered as sale

Note: CHECK FIRST THE INTENTION, BEFORE CHECKING THE VALUES.

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

● Contract for a piece of work

Sale Contract for a piece of work

1. Goods is for the general public 1. Goods is a special order (customized)

(Goods are ready made)

2. After perfection but before delivery, 2. Before delivery, loss due to fortuitous event
loss due to fortuitous event shall be shall be borne by the SELLER
borne by the BUYER

● Contract to sell

Sale Contract to sell

1. Absolute contract (no condition) 1. Conditional contract

unless stipulated Ex. I will sell it to you if you pass the board
exam.

2. Delivery is already the transfer of 2. Despite delivery, there is no ownership until

ownership unless stipulated there is full payment of price

Ex. If deed of sale ang pipirmahan niyo sa Ngayon ginagamit na ng iba ang contract to
pagbili ng condo, magbayad ka lang ng sell, magbibigay lang ng deed of sale kapag
downpayment sayo na yung condo and may fully paid na yung condo
deed of sale ka na kahit hindi ka pa fully paid.

● Cession and Dacion en pago

Sale Cession / Dacion

1. Purpose of delivery of goods is to 1. Delivery is to extinguish an obligation

create an obligation to pay

2. Buyer is solvent 2. Cession: debtor is insolvent

Dacion en pago: debtor is solvent

Payment by Cession
- cede: to give up all your properties for the payment of your obligation
● It is the abandonment or assignment by the debtor of all his property in favor of his creditors so
that the latter may sell them and recover their claims out of the proceeds.
● Extinguishment is not automatic
○ Ex. upon delivery and acceptance by the creditor
○ Ex. May utang ako sa inyong tig-100k, may lupa akong worth 10 million. Ibinigay ko na
lang sa inyo ang lupa upang ibenta at kayo na ang mag-hati hati sa kita

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

● 1 debtor who is insolvent and 2 or more creditors

Dation in Payment
A special form of payment where the ownership of property is transferred to his creditor to pay a debt in
money. It is important that both debtor and creditor consent to such an arrangement.
● Extinguishment is automatic
○ Ex. May utang ako sayong 10,000 and may cellphone akong worth 20,000. Tinignan mo
yung cellphone at nag-agree kayong iyon na ang pambayad sa utang --- payment in kind
● 1 debtor who is solvent and 1 creditor

Special Kinds of Sale

- Not ordinary / deviated from ordinary characteristics of sale
1. Pacto de retro sale
● Sale with right to repurchase
● conditional sale -- needs to be stipulated - may limit kung hanggang kailan pwede
i-repurchase
● Sale with resolutory condition - kapag binalik yung goods ma-extinguish yung sale
2. Aleatory sale
● Determined by risk
● Normal sale is not determined by risk
3. Sale or return
● When the seller delivers to the buyer, there is already a transfer of ownership but the
buyer can return later (within a limited period ex. 10 days from sale) even without defects
● Conditional sale --- sale with resolutory condition
○ Resolutory: kapag ni-return na extinguish yung sale
● Immediately there is sale
● Lost after delivery due to fortuitous event - buyer will bear the loss
○ si buyer na ang owner kasi nagkaroon na ng transfer of ownership
4. Sale on TAS (Trial/ Approval/ Satisfaction)
● When the seller delivers to the buyer, there is no transfer of ownership unless the buyer
informs the seller of his approval or satisfaction
● Conditional sale --- sale with suspensive condition
○ Suspensive: kapag na-approve, may sale na
● No sale yet, because approval or satisfaction of buyer needs to occur first
● Lost after delivery due to fortuitous event - seller will bear the loss
○ Wala pang approval, kaya wala pang transfer of ownership to the buyer
5. Sale by sample
● On normal sale, it is a face to face transaction
● But on sale by sample, the buyer merely relies on the sample of the seller. Hence, upon
delivery goods must conform with the sample. Otherwise, buyer rescind the sale and the
seller may be liable for damages or other remedies.
● Ex. Ang binibili kong sample ay cute, little and yellow bird. Pero ang na-deliver ay isang
eagle. Kahit mas mahal ang eagle, hindi ito ang sample na pinakita kay buyer.
6. Sale by description

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

● Buyer relies on the description of the seller. Hence, upon delivery, goods must conform
with the description. Otherwise, the buyer will rescind the sale and the seller may be
liable to damages or other remedies.
● Ex. Sale in Shopee or Lazada
7. Sale by sample and description
● Buyer relies on both sample and description. Hence, upon delivery, goods must conform
with the sample and description. Otherwise, the buyer will rescind the sale and the seller
may be liable to damages or other remedies.
8. Sale of undivided share of specific mass of fungible goods
● Fungible goods: goods that cannot be used without being consumed.
○ Ex. oil, sugar, rice, salt
● Ex. 1,000 liters of gasoline. Ang owners ay si A, B, and C. Mr. C sold his share to Mr. D
but did not specify the mass or quantity. --- SALE IS VOID
○ Undivided yung gasoline and there is co-ownership kaya void yung sale.
● Ex. I owned 30% of the gasoline and I will sell it all to you for 100,000. --- VALID
● NOTE: If the sale is of divided share, no need to specify the mass.
○ Ex. There are 3 containers owned each by A,B, and C. Mr. C sold his container to
Mr. D for 50,000. --- SALE IS VALID EVEN MASS IS NOT SPECIFIED

Elements of Sale
● Essential - Without the essential elements, there is no sale or the sale is void
1. Consent: Meeting of the minds between parties - vendor and vendee
a. Review the factors affecting consent
● Contractual or Legal incapacity
● With capacity but initiated consent -- VOID
● With capacity but simulated consend (Absolute -- VOID, Relative --
VALID but true agreement will prevail)
b. Review the stages in the life of a contract
● Negotiation
● Perfection
● Consummation
c. Review the defective contracts: Sale may be
● Rescissible
○ Sale of property identification without court approval
● Voidable
○ Sale when one party is incapacitated
● Unenforceable
○ Both parties are incapacitated
○ Sale in violation of Statute of Fraud
● Void
○ Sale of illegal objects

2. Object
Requisities: Must be

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

1. Licit or lawful
2. Determinate - buyer and seller must specify the object
3. Real / present thing or future thing with potential existence

EMPTIO SPEI EMPTIO REI SPERATAE

Sale of hope / chance Sale of future goods. Provided there is potential

Ex. Lotto tickets existence
Ex. Future harvest in a farm
--- not sale of vain hope -- VOID
Ex. Drawed letter tickets

Absolute sale (no conditions are attached to the Conditional sale

sale) - Aalamin pa sa future yung quality or
quantity

Price is fixed Price varies

3. Cause or consideration
● Price - certain in money or its equivalent
○ Certain meaning you can compute how much will be paid
○ Certain, even with reference to another thing provided it is also certain
■ Ex. Same price for that object/ merchandise in SM Manila
Supermarket -- VALID, this is certain because there is only seller
■ Same price for that object in Divisoria -- VOID, because there
are many sellers with different prices, thus it is not certain
○ Equivalent: can be another object. Provided it is stipulated as part of the
price
■ Ex. 100,000 pesos + Toyota car
● Lesion / Insufficient price
○ Ex. FMV = 100,000 , Selling price = 20,000
○ Sale is still VALID
■ Unless proven that the price is simulated, which results in a
VOID sale.
■ Unless in the case of vitiated consent, VALID but VOIDABLE.
■ Unless the real agreement is a donation, the real contract will
prevail and the contract is not contrary to the law.
● Price to be determined by
a. Third parties -- ALLOWED, provided with proper guidelines and
decision is communicated to the parties
● Ex. A is the buyer and B is the seller. C will decide an amount
between 20,000 to 100,000

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

b. One of the parties (either buyer or seller only) “Bahala ka na or it’s up to

you” -- VOID unless later, one party fixed the price and the other party
accepted it
● Price is false / uncertain / cannot be determined / illegal -- Sale is VOID
○ Ex. fake dollar
■ If at the start the seller is already knowledgeable that the money
is fake -- Sale is VOID
■ But if the seller only knew later on that the money is fake -- Sale
is VALID and the seller can sue the buyer

● Natural -Without the natural elements, the contract is still valid but may result in remedies (ex.
warranties VS eviction or hidden defects)
● Accidental - Present only when stipulated by the parties (ex. Pacto de retro sale - sale with right to
repurchase

When is a sale perfected?

a. Face to face transaction
- Upon acceptance of the offer. Provided that the offer is clear or definite and the
acceptance is complete and unconditional.
b. Sale by correspondence
- ex. Sale through shopee, E-commerce, sale through text messaging
- Apply Cognition Theory: offeror learns of the acceptance by the offeree
c. Sale with suspensive condition
- Upon the happening of the condition
- Ex. I will sell to you my car when you become a CPA
d. Sale by public auction
- Upon the fall of the hammer or other customary modes
- Puffing or by bidding (fake bidders) -- not allowed as a rule (only allowed if announced
publicly and before the public auction starts)

The following sales are void: (prohibited sales) POGEAH

Absolutely void
1. Public officials are prohibited to buy properties under their custody
2. Officers of the court are prohibited to buy properties under their litigation
- Including lawyers if property of their present client

Relatively void (there are instances where it can be valid)

3. Guardians cannot purchase property of their wards
4. Executors or administrators cannot purchase estate under their care
5. Agents cannot purchase property of their principal -- na covered ng kanilang agency
- Yung properties ng kanilang principal na hindi covered ng agency ay pwedeng bilhin ng
agent
6. Husband and wife cannot enter a contract of sale unless they are already legally separated or they
are governed by Absolute separation of property (property regime)

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

Obligation of the parties

Vendee
1. Accept delivery
2. Pay the price plus interest if stipulated or there is unreasonable delay on part of the buyer to pay.
3. Other stipulated conditions

Vendor
1. Deliver the determinate thing
2. Transfer ownership upon deliver
3. Warrants VS eviction or hidden defects
4. Pay the expenses of the sale - can be shifted to the buyer with stipulations from both parties
a. Capital Gains Tax
b. Documentary Stamp Tax
c. Other related expenses
5. Other stipulated conditions

Delivery / Traditio - the only mode to transfer ownership

Kinds of Delivery
1. Actual / Physical/ Real delivery - from one person to another (for movable or personal objects)
2. Constructive delivery
a. Execution of legal instrument or public instrument
● Ex. Deed of sale
b. Traditio Symbolica
● Ex. Delivery of the key for the sale of a car
c. Traditio Longa Manu
● by mere pointing
d. Traditio Brevi Manu
● Lessee possessor becomes the owner of the property that he/she is leasing
● Ex. Nirerentahan mo yung building and biglang binenta sayo. Technically
na-deliver na dahil nandyan ka na sa property. No need for actual delivery
because the person is already in possession
e. Traditio Constitutum Possessorium
● The owner possessor becomes the lessee after selling
● Ex. Binenta ni owner yung property pero nakiusap syang huwag muna syang
paalisin sa property, in return magbabayad pa rin siya ng renta.
3. Quasi Traditio / Delivery - for incorporeal or intangible properties (shares of stock)
● Similar to execution of a public instrument
● A term used to designate that a person is in the use of the property of another,
which the latter suffers and does not oppose.

Delivery
Very important that the seller

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

● Need not be the owner at the time of sale (or perfection stage)
● Must be the owner at the time of delivery
○ Because buyer only acquires the title of the seller at the time of delivery
○ Anti-Fencing Law: when you buy stolen goods or properties, good faith or bad
faith is not a defense.

Note: Kahit hindi pa sayo, pwede mo na ibenta basta at the time of delivery ikaw na dapat ang
owner. Otherwise, you will be liable.

Except in the following cases, the buyer acquires a better title than the seller - MEC
● Merchant store sales
- To protect commercial transactions
○ A stole the television of B and sold it to C. Tatamaan ng Anti-Fencing Law si C.
○ A stole the television of B and sold it to XYZ Store na buyer and seller ng second
hand goods. C bought the television from XYZ. C acquires a better title than the
seller.
■ May official receipt si C from XYZ store, yung official receipt is a valid
proof of ownership.
● Estopped (si real owner)
● Court ordered sales

Double sale
- the same object has been sold to two or more buyers
Who has a better title?
● If it is a MOVABLE PROPERTY (ex. Jewelries) - first to possess the object in good faith.
○ Good faith - no knowledge of prior buyer
■ Hindi na good faith kung alam niyang may naunang buyer sa kanya
○ Ex. Today the object was sold to B. The next day it was sold to C. Both for
delivery next week. Pero naunang pumunta si C at nakuha nya.
■ C is the first possessor in good faith.
○ Except in cars dahil ito ay may LTO registration. Kung sino ang nakarehistro has
better title
● If it is an IMMOVABLE PROPERTY (ex. Land)
○ The first to register in Registry of Deeds in good faith OR
○ The first to possess in good faith (ex. unang nakapag bakod sa land) OR
○ The one with the oldest title (in relation to the deed of sale)

Implied Warranties of the Seller

1. Warranty VS Eviction

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

○ Eviction: Deprivation of the thing bought either wholly or partly

○ Yung binili ay mawawala sayo dahil may taong mas may karapatan sayo

Requirements on making the seller liable: FDFD

1. Final judgment
○ There is a final court order (wala nang appeal)
2. (As a result of the final judgement) Deprivation of the thing bought either wholly
or partly
3. Fault of the seller
○ Ex. Double sale
4. Due process afforded to the seller
○ Seller is duly notified

If these 4 requirements are present, what can the buyer recover?

1. Value of the thing
■ Present market value, not the historical cost
■ Ex. Nabili ko yung lupa 5 years ago for 1 million. Ngayon nung mawala
sakin, 2 million na ang fair market value. Two million dapat ang kunin
ma-recover kay seller
2. Income
■ Present income
■ Ex. Estimated income ko for the harvest of the farm is 300,000. Nang
nawala yung lupa, kailangan isama ang income for the year ng farm sa
ma-recover ni buyer
3. Cost of the lawsuit
■ Legal expenses
4. Expenses of the sale (if buyer paid the expenses of the sale)
5. Other damages

Is this subject to waiver? NO, unless stipulated in good faith

- Ex. Ibebenta ko yung lupa na worth 10 million. Pero ito ay nakasangla nang 2
million (unpaid mortgage). Nilagay niyo sa contract na the buyer will pay for the
unpaid mortgage and in return the seller will give 3 million discount. The buyer
will only pay 7 million to the buyer and 2 million for the unpaid mortgage. Kapag
hindi nabayaran ni buyer yung unpaid mortgage at na-evict sya sa lupa,
nakalagay sa contract na hindi na ito kasalanan ni seller and the buyer can’t sue
the seller.
- Stipulated in good faith

2. Warranty VS Hidden defects / Warranty for Fitness/ Warranty for Merchantability

○ Seller warrants that the thing sold is FIT for its intended use

Requirements on making the seller liable for violating this warranty: HEEPU

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

1. Hidden / Redhibitory defect

2. defect must be Existing at the time of sale
3. defect must be Excluded from the contract
○ Not mentioned
4. Period to complain
○ Unless longer period is stipulated
○ If personal property: 6 months from delivery
○ If animals: 40 days from delivery

Note: Scenario - Animal died within 3 days from delivery because of a known
illness
○ from the time na binili mo may sakit na siya, kaya hindi ito hidden defect
○ Kapag within 3 days from delivery at namatay yung hayop, rule is pwede
mo ito ibalik
○ This is a buyer right according to the Civil Code

5. defect renders the thing Unfit for its intended use of purpose

If these 5 requirements are present, what can the buyer recover?

● Minor Defects (defect is easy to repair or cure)
○ Remedy is ACCIO QUANTI MINORIS: proportionate reduction in the
price or similar remedies
○ Plus damages whether good faith or bad faith
● Major Defects (defect is not easy to repair or cure)
○ Remedy is ACCIO REDHIBITORIA: rescind the sale due to redhibitory
defects
○ Plus damages whether good faith or bad faith

Is this subject to waiver? (waivable)

- whether expressed or implied, YES
There is no Warranty VS Hidden Defects in the following cases: ESPM
1. Expert Buyer in connection to the object bought
● Si buyer ay isang mechanical engineer and ang binili niya ay brake sa
kotse. Ang defense ni seller ay by his trade profession or education ni
buyer, he is expected to easily discover the defect.
2. in terms of Secondhand goods, there is no warranty unless stipulated
3. sale in Public Auction / Fairs / those condemned objects
4. if Mentioned in the contract

Remedies of the Parties

Vendee
1. No payment if no delivery
2. Reject improper delivery

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

○ Ex. Wrong venue

3. Suspend payment (if any of the warranties are violated)
○ Ex. issued check, pwedeng magpagawa ng Stop Payment Order
4. If defective goods: Options
○ Accept but reduce the price plus damages as an option
○ Reject plus damages (tuloy pa rin yung sale)
○ Rescind the sale plus damages (extinguished na yung sale)
■ Automatic remedy of sale -- Resolution

Vendor
1. No delivery if no payment
2. Rights of an unpaid seller (including partial payment)
○ Right of possessory lien -- hawak pa ni seller yung goods
■ lender retains physical possession of the underlying collateral during the
term of the loan or agreement
○ Right of stoppage in transitu -- nasa carrier na yung goods
■ the right of a seller of goods to stop them on their way to the buyer and
resume possession of them
○ Right of rescission
■ Automatic remedy -- Resolution
○ Right of resale
■ If perishable goods
■ If there is unreasonable delay on the part of the buyer
■ Other stipulated cases
Note: The first two are also remedies of the seller when buyer is insolvent

In sale of personal properties by installments and the buyer failed to pay:

Remedies of the seller (Alternative remedies - only choose one)
1. Exact fulfillment of the obligation
○ Sue the debtor in court for collection of money
2. Cancel the sale if buyer fails to pay at least two installments
○ Rescission of sale plus repossess of the property
3. Foreclose the chattel mortgage if chattel mortgage is constituted upon the personal
property sold and buyer fails to pay at least two installments
○ Sell of the personal property in public auction
■ If sale results in a deficiency: creditor/ seller can recover
● Except if Recto Law applies, creditor cannot recover
■ If sale results in an excess: return to the debtor

Recto Law: “Article 1484. In a contract of sale of personal property, the price of which is payable
in installments, the vendor may exercise any of the following remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay;

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

2. Cancel the sale, should the vendee’s failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee’s failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.”
If there has been no foreclosure of the chattel mortgage or a foreclosure sale, then the
prohibition against further collection of the balance of the price does not apply.

Requirements of Recto Law: (All requirements should be present for Recto Law to apply)
1. Sale of personal property in installments
2. Chattel mortgage is constituted upon the personal property
3. Buyer/ debtor fails to pay at least two installments
4. Seller foreclosed the chattel mortgage above (walang piniling remedy kundi yung
foreclosure)

Maceda Law / Realty Installment Buyers Protection Act

Sale of Real Property in installments --- for residential real properties only (not including
commercial or industrial real properties)
Provisions:
1. Grace Period Rule
○ After two years of complete payments, in case of default, buyer has grace period
of 1 month per year of payment -- as if there is no delay
■ Ex. Nakapagbayad siya ng 5 years of complete payments and na-delay
sya for four months. It is as if the buyer did not experience any delay dahil
mayroon siyang grace period na 5 months (1 month per year of payment)
-- no interest or penalty should be paid for the grace period
■ Can be exercised ONCE EVERY FIVE YEARS ONLY
■ If hindi nakapag complete payments for 2 years, in case of default, may
grace period pa rin pero 60 days lang
2. Cash Surrender Value Rule (refund)
○ After 5 years of (complete) payments, if the seller cancels the sale, seller must
give a cash surrender value or refund to the buyer amounting to the first 5 years
of payment x 50%, plus 5% for every year thereafter.
■ Ex. payment for 6th year x 55%, payment for 7th year x 60%
○ MAXIMUM CASH SURRENDER VALUE IS 90% OF THE TOTAL PAYMENTS
MADE

Extinguishment of Sales
1. By any modes of extinguishing an obligation
a. Payment / Performance
■ Seller - delivery of the thing
■ Buyer - pay the price

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

b. Loss of the Thing (due to Fortuitous Event)

■ Before perfection of sale and before delivery
● Res Perit Domino: lost to the person who was the owner of it at
the time.
● Seller bears the loss
■ After perfection of sale but before delivery
● Rule: Res Perit Creditori - In the case where the invalidity of the
underlying right is caused by a cause which is not attributable to
the debtor, the loss or damage to such invalidity falls upon the
creditor.
○ Buyer bears the loss (buyer = creditor)
■ Nakapagbayad ka na at naghihintay ka na lang ng
delivery
● Exception to the rule:
○ Seller has fault (such as fraud, negligence, delay,
contravention of the tenor)
○ Fungible goods - hanggang hindi pa na-deliver ang
fungible goods, it is the seller’s loss
○ Stipulated
■ COD
■ FOB Destination
■ Cost Insurance and Freight
■ After perfection of sale and after delivery
● Res Perit Domino
● Buyer bears the loss
c. Condonation
■ Debt is forgiven by seller or buyer
■ gratuitous abandonment by the creditor of his right to go after the debtor
for the fulfillment of the latter’s obligation to the former.
d. Confusion/ Merger of rights
■ characters of creditor and debtor are merged in the same person.
■ Ex. Nag-issue si D ng promissory note kay C. Dahil hindi na
makapag-intay si C, ni-negotiate niya ang kanyang instrument kay A.
Tapos si A naman ay pinambayad yung instrument kay B. Later on, si B
pinambayad niya yung promissory note kay D. Siya yung dating may
obligation pero ngayon si D na rin ang may karapatan mangolekta.
Nag-merge sa katauhan ni D yung pagiging debtor and creditor.
e. Compensation
■ Buyer and seller became a debtor and creditor of each other
■ each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other
f. Novation
■ Change of the obligation, object or change in the persona of buyer or
seller

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

■substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without
the consent of the creditor.
g. Other similar/ analogous modes
■ Annulment
■ Recision
■ Happening of Fortuitous Event
2. By redemption - to buy back

Conventional Redemption (pacto de Legal Redemption

retro sale)

Basis Agreement or stipulation between the Automatic, stated in Civil Code

parties

Period Either 4 years or 10 years 30 days

Conventional Redemption Rules:
1. If no agreement to redeem at the time of sale, there is no right of redemption
○ Agreement to redeem is only an accidental element
2. With agreement to redeem but no period stated -- Redeem within 4 years from sale
3. With agreement to redeem but within a period -- Redeem within the period agreed or
stipulated but not more than 10 years from sale (including all extensions)

Redemptioner to refund the following:

1. Price of the thing
2. Expenses of the sale (if buyer paid)
3. Necessary expenses in relation to the property (if any)
4. Useful expenses in relation to the property (if any)
○ Ex. Farm lot nilagyan ng irrigation - expenses pertaining to the irrigation is
reimbursable
Note: Hindi refundable ang interest, unless if it is stipulated

Legal Redemption
- Redeem within 30 days from receipt of Notice of Sale
- Kailangan matanggap yung notice of Sale para tumakbo yung 30 day-period
1. Among co-owners if any of them sells his share to third persons or strangers
2. Among co-heirs if any of them sells his share to third persons or strangers
○ Ex. A,B,C,D are co-heirs of 10 hectares of land divided equally. D sold his share
to Mr. X (a third person). A,B,C can redeem proportionately (if all wants to
redeem)
○ D sold his share to C. There is no right of redemption because the buyer is not a
third person or a stranger.
For adjoining lots (3&4):

Mariel Enriquez
Regulatory Framework and Legal Issues in Business

3. BARRIO: Among adjoining owners of rural lots, given that the lot is not more than 1
hectare and buyer is not landless
○ Ex. A and B are adjoining owners of rural lots. B sold his land to C. A can buy the
land from C given that the land of B is not more than 1 hectare and C is not
landless.
4. CITY: Among adjoining owners of urban lots so small in size that it has no better use
alone.
○ 1,000 square meters yung 1st land na owned by A, 20 sq. meters yung katabing
lupa na owned by B. B sold his land to C. The land is so small in size na mas
magandang idikit sya sa land ni A because that small land is no better use alone,
kaya A can redeem kay C. -- Bago bilhin ni C kailangan niya munang bigyan ng
notice yung adjoining lot, and within 30 days pwedeng i-redeem ni A kay C yung
lot ni B. If hindi i-redeem ni A, doon lang pwedeng ilipat ang titulo ng lupa kay C.
○ PRE-EMPTION IS ALLOWED. Bago niya i-offer sa iba, i-offer niya muna sa
ka-adjoining owner niya.
5. Sale/ Assignment of credits (and other intangibles) in litigation
○ Ex. May utang si A na 1 million kay B. A issued a check to B pero NSF pala kaya
nag bounce. B sued A for violation of Batas Pambansa blg 22 (Anti-Bouncing
Check Law). Now B wanted to borrow 300,000 from C. B assigned the 1 million
to C in exchange for 300,000 cash. A has 30 days to redeem from C by paying
300,000 plus legal expenses, if any.
■ Si A and B lang ang mayroong debtor-creditor relationship. B only
assigned to C kaya A has the right to redemption.
○ Ex. A issued a 1 million check to B and C. (Parehas silang creditor). In-assign ni
B kay C yung 500,000 share niya for only 100,000. A cannot redeem dahil
creditor niya rin si C.

Mariel Enriquez