Antigua and Barbuda Sales Tax (ABST): Presentation on draft ABST law.
Review on Law on Sales
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Transcript of Review on Law on Sales
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REVIEW ON LAW ON SALES
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IMPORTANT TIPS ON THE LAW ON SALES
(Arts. 1458-1637, CIVIL CODE)
Contract of Sale Defined: Sale is a contract
where one party (seller or vendor) obligates
himself to transfer the ownership of and to
deliver a determinate thing, while the other
party (buyer or vendee) obligates himself to
pay for said thing a price certain in money or
its equivalent. (Art. 1458, Civil Code)
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Essential Characteristics of the Contract of Sale:
Consensual (as distinguished as real), because
the contract is perfected by mere consent;
Bilateral reciprocal - because both parties are
bound by obligations dependent upon each
other.
Onerous, because to acquire the rights,
valuable considerations must be given.
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Commutative, as a rule, because the valuesexchanged are almost equivalent to each other.
(NOTE: By way of exception, some contracts ofsale are aleatory, that is, what one receives mayin time greater or smaller than what he hasgiven. Example: The sale of genuine sweepstakes
ticket.) Principal (as distinguished from an accessory
contract), because for the contract of sale to bevalidly exist, there is no necessity for it to dependupon the existence of another valid contract.
Nominate because the Code refers to it by aspecial designation or name, that is the contract
of sale.
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Elements of the Contract of Sale:
Essential elements (those without which there can beno valid sale)
Consent or meeting of the minds, that is consenttransfer ownership in exchange for the price
Determinate subject matter (generally, there is nosale of generic thing, moreover, if the parties differ as
to the object, there be no meeting of the minds). Price certain in money or its equivalent (this is the
cause or consideration) (The price need not be inmoney)
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Natural elements (those which are inherent in thecontract, and which in the absence of anycontrary provision, are deemed to exist in thecontract)
Warranty against eviction, deprivation of theproperty bought)
Warranty against Hidden Defects
Accidental elements (those which may be presentor absent in the stipulation, such as the place ortime of payment, or the presence of conditions)
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Stages in the Contract of Sale:
Generation or Negotiation
Perfection - Meeting of the Minds
Consummation - when the object isdelivered and the price is paid.
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SALE DATION IN PAYMENT
There is no pre-existing credit.
Give rise to an obligation.
The cause or consideration here is
the price, from the viewpoint of
the seller; or of the obtaining of
the object from the viewpoint of
the buyer.
There is greater freedom in the
determination of the price.
The giving of the price may
generally end the obligation of the
There is a pre-existing credit.
Extinguishes obligations.
The cause or consideration here,
from the viewpoint of the person
offering the dation, is the
extinguishing of his debt; from theviewpoint of the creditor is the
acquisition of the object offered in
lieu of the original credit.
There is less freedom in the
determination of the price
The giving of the object in lieu of
the credit may extinguishcompletely or partially the credit
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Difference between a Contract of Sale and a Contract to Sell
In a Contract of Sale, the non-payment of the price is a resolutorycondition, that is the contract of sale may by such occurrence putan end to a transaction that once upon a time existed.; In aContract to Sell, the payment in full of the price is a positivesuspensive condition. Hence if the price is not paid, it is as if theobligation of the seller to deliver and to transfer ownership neverbecame effective.
In the Contract of Sale, title over the property generally transfer tothe buyer upon delivery; in the Contract of Sell, ownership isretained by the seller, regardless of the delivery and it will not passuntil full payment of the price.
In a contract of Sale, after delivery has been made, the seller has
lost ownership and cannot recover it unless the contract isresolved or rescinded. In a Contract to Sell, since the seller retainsownership, despite delivery, he is enforcing the contract if he seeksto oust the buyer for failure to pay.
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The object of Sale must be LICIT and the Vendor must have
the right to transfer ownership at the time the object is
delivered. (Art. 1459)
The object of the sale must be determinate, that is specific,but it is not essential really that at the time of perfection, the
object be already specific. It is sufficient that it be capable of
being determinate without nee of any new agreement.
Things of potential Existence may be an object of sale. This isa future thing that may be sold. Example: "All my rice
harvest next year." Note however that future inheritance
cannot be sold, however. (Art. 1347, par. 2, Civil Code)
Other examples of things possessed of a potential existence: Young animals not yet in existence or still ungrown fruits;
The wine that a particular vineyard is expected to produce;
Expected goodwill of a business
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Sale of expected thing and sale of mere hope or expectancy). Art.
1461
Sale of expected thing (Emptio Rei Sperati)
Sale of hope itself (Emptio Spei)
NOTE: If the expected thing in (a) does not materialize, the sale is
not effective. In the second, it does not matter whether the
expected thing materialized or not; what IS IMPORTANT IS THAT
THE HOPE ITSELF VALIDLY EXISTED. The first deals with future
thing - that which is expected; the second deals with the presentthing - certainty the hope or expectancy already exist.
Example of Emptio Spei: Sale of a valid sweepstakes ticket.
Whether the sweepstake ticket wins or not, the sale is valid.
NOTE: If the hope or expectancy itself is in vain, the sale is itselfVOID. Be it noted that this is not an aleatory contract for while
in aleatory contract there is an element of chance, here there is
completely no chance.
Example : Sale of a losing ticket for a sweepstake already drawn.
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Goods may be future or existing goods.Future goods are those still to bemanufactured, raised or those acquired by
the seller after the perfection of the contract.Art. 1462
14 An undivided Interest may also be sold.Art 1463. Also things subject to a resolutorycondition may be sold. Art. 1465
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Requisites in order that a thing may be the object ofsale:
The thing must be existing, or at least, have a futureor contingent existence (Arts. 1461, 1462, 1465);
It must be determinate or determinable bydescription or segregation (Art. 140);
It must be licit or legal (Art. 1459) The vendor must have real right to transfer ownership
of the thing at the time it is delivered (Art. 1459)
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Objects of Contract of Sale:
The following may be the objects of sale:
Things having potential existence (Art. 1461, NCC);
Things that are existing or to be manufactured,
raised or acquired in the future or future goods (Art.1462, NCC)
Those whose acquisition by the seller depends uponcontingency which may or may not happen (Art.
1462, NCC); Things subject to a resolutory condition (Art. 1465)
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Requisites of price in a contract of sale:
The price must be in money or its equivalent (Art. 1458)
It must be certain or ascertainable (Art. 1469)
It must be real, i.e., not simulated, (Art. 1471)
Meaning of a price certain:
The parties have fixed or agreed upon a definite amount;or
It be certain with reference to another thing certain (SeeArt. 1472), as where the buyer agrees to pay the price asindicated in the invoices;
The determination of the price is left to the judgment of aspecified person or persons (Art. 1469)
The last two cases are applicable only when no specific
amount has been stipulated by the parties.
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Rules if price is to be determined by a third person:
The price fixed by the third person is binding except when he
acts in bad faith or by mistake;
In such case, the courts may fix the price; If the third person is unable or unwilling to fix the price, the
contract shall be inefficacious (without effect), unless the
parties subsequently come to an agreement ; and
If the third person is prevented from fixing the price by thefault of the seller or buyer, the party not in fault may choose
between rescission or fulfillment with damages in either
case. (Art. 1469)
The fixing of the price may not be left to the discretion of one
of the contracting parties, as it cannot be said that there is
meeting of minds upon the fixed price. (Art. 1308) But if the
other accepts price fixed, the sale is deemed perfected.
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If the price cannot be determined, the contract isinefficacious. However, if the thing or any partthereof has been delivered to and appropriated by
the buyer, he is under obligation to pay reasonableprice thereof. (Art. 1474)
Effect of Gross Inadequacy of Price:
It does not affect the contract of sale except whenthe inadequacy may indicate that there is a defect inthe consent, or that the parties really intended a
donation or some other act or contract.
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CONTRACT OF SALE AGENCY TO SELL
In contract of sale, the buyer
pays the price.
In sale, the buyer after
delivery becomes the owner;
In sale, the seller warrants
In an agency to sell, the agent
delivers the price which inturn he got from his buyer;
The agent who is supposed to
sell does not become the
owner, even if the property
has been delivered to him;
The agent who sells assumes
no personal liability as long ashe acts within his authority
and in the name of the
principal
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Rules to determine whether contract is sale or barter.In a contract where the consideration is partlymoney and partly goods, the following rules shall
apply:
the intention of the parties must be determined;
If the intent is not clear, then apply the following
rules:
If the sold thing is more valuable than money, thecontract is barter;
If the money and the thing are equal value, thecontract is sale;
If the thing is less valuable than money, the contractis a contract of sale (Art. 1468, NCC)
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Contract of Sale as against Contract for a Piece of Work:
By the contract for a piece of work, the contractor binds
himself to execute a piece of work for the employer (e.g., toconstruct a house) in consideration of a certain price or
compensation. The contractor may either employ his labor
or skill, or also furnish the material. (Art. 1713.)
A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether
the same is on hand at the time or not, is a contract of sale,
but if the goods are to be manufactured especially for the
customer and upon his special order (e.g. dress made on the
basis of the body measurement of the customer) and not for
the general market, it is a contract for a piece of work. (Art.
1467)
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Perfection of sale: The contract of sale is perfected at the
moment there is meeting of the minds upon the thing
which is the object of contract and upon the price.
Effects of perfection of sale:
From the moment consent is given, the reciprocal
obligations of the parties arise and they may reciprocally
demand the performance, subject to the Statute of Fraud;
The ownership of the thing sold is not transferred until it isdelivered, actually or constructively, to the buyer (Art.
1477); and
In case one of the contracting parties does not comply
with what is incumbent upon him, the injured party maysue for fulfillment or rescission with the right to damages
in either case. (art. 1191)
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Effect of an accepted unilateral promise to sell or
buy a thing for a price certain:
Such unilateral promise also known as option
contract does not bind the promissor and may be
withdrawn at any time;
If the promise, however, is supported by a
consideration distinct from the price, its
acceptance gives rise to the perfection of the
contract.
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Effect of a bilateral promise to buy and sell a thing
for a price certain:
When the promise is bilateral, that is, one party
accepts the other's promise to buy and the latter,
the former's promise to sell, a determinate thing
for a price certain, it has practically the sameeffect as a perfected contract of sale since it is
reciprocally demandable. But there is no contract
of sale yet until it is executed.
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Rules with regards to any injury to or benefit from the thing
sold, after contract is perfected but before delivery.
The vendor is obliged to take care of the thing sold with
proper diligence. (Art. 1163)
The vendor has the right to the fruits of the thing from the
time the obligation to deliver arises but shall acquire no
real right or ownership over it until the same has been
delivered to him (Art. 1164; Art. 1537) If the thing is determinate, the vendee may compel the
vendor to make the delivery, and hold him liable for
damages by reason of fraud, delay, etc., Arts. 1165 and
1170) If the thing is generic, he may ask that the obligation be
complied with at the expense of the vendor if the latter
fails to make delivery also with a right to damages in
proper case (Arts. 1165, 1170);
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If the thing is determinate, and it is lost or destroyed---
a. Through the fault of one party, the party at fault is liable
for damages;
b. Through fortuitous event, the vendor is released from the
obligation to deliver and the vendee is liable to pay the
price if he has not yet paid the same (see Arts. 1480, 1583,
1189 and 1269). Art. 1504, par. 1 however provides a rule
contrary to 1480);c. The vendor shall be responsible for any fortuitous event if
it is so stipulated, or if the same took place after he has
incurred delayed, or he has promised to deliver the same
thing to two or more persons who do not have the sameinterest, Arts. 1164, 1262)
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d. The rule under letter (b) applies to the sale of fungible
things, made independently and for a single price or
without consideration or their weight, number or
measurement (Art. 1480). Reason: In such case, thefungible things have been " particularly designated or
physically segregated"
e. It does not apply where the fungible things have been sold
for a price fixed in relation to weight, number or measure.In such case, the risk shall not be imputed to the vendee
until they have been weighed, counted or measured and
delivered;
If the thing is generic, the loss with or without the vendor's
fault, of anything of the same kind does not distinguish his
obligation to deliver. (Art 1262)
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Special Rules on sales by description and saleby sample
In the contract of sales of goods by descriptionor by sample, the contract may be rescinded ifthe bulk of goods delivered do not correspondwith the description or by the sample;
If the contract be by sample as well as bydescription, it is not sufficient that the bulk ofgoods correspond with sample if they do notcorrespond with the description;
The buyer shall have reasonable opportunityof comparing bulk with the description orsample (Art. 1481)
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Principle of Earnest Money:
Earnest Money is that given by the buyer to the seller to
bind the bargain. It is actually a partial payment of the
purchase price and is considered as proof of the perfectionof the contract.
Earnest Money vs. Option Money
Earnest money is part of the purchase price, while option
money is given as distinct consideration for an optioncontract;
Earnest money is given only if there is already a sale while
option money applies to sales not yet perfected;
When the earnest money is given, the buyer is bound topay the balance, while the would be buyer who gives
option money is not required to buy.
But option money may become earnest money if the parties
so agree.
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Remedies of vendor in Sale of Personal Property Payable in
Installments. (RECTO LAW))
The vendor of personal property payable in installments
may exercise any of the following remedies:
Elect fulfillment upon the vendee's failure to pay;
Cancel the sale, if the vendee shall have failed to pay two
or more installments; or
Foreclose the chattel mortgage, if one has been
constituted, if the vendee shall have failed to pay two or
more installments.
Nature of the above remedies in Recto Law:
These remedies are alternative and are not to be exercised
cumulatively or successively and the election of one is a
waiver of the right to resort to the others.
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Right of the vendor to recover the unpaid balance of the
purchase price:
The vendor who has chosen specific performance or to
exact fulfillment of the obligation is not limited to theproceeds of the sale, on execution, of the mortgaged
goods. He may still recover from the purchaser the unpaid
balance of the price, if any on real or personal properties
of the purchaser not exempt by law from attachment orexecution;
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If the vendor chooses rescission or cancellation of the
contract upon the vendee's failure to pay two or more
installments, the latter can demand the return of
payments already made unless there is a stipulation aboutforfeiture. (See Art. 1468)
If the vendor has chosen the third remedy of foreclosure of
the chattel mortgage, he shall have no further action
against the vendee for the recovery of any unpaid balanceof the price and any agreement to the contrary is void.
The foreclosure is caused by selling the mortgaged
personal property at public auction and applying the
proceeds of the sale to the satisfaction of the claim
secured by the mortgage.
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Requisites before Art. 1484 may be applied:
There must be a contract
The contract must be of sale, an absolute sale or
conditional;
What is sold in personal property
The sale must be in installment
Instances where Art. 1484 may not be applied:
It does not apply in real property mortgage.
It does not apply to sale of personal property in straight
terms, a sale on straight terms being one, which thebalance, after the payment of initial sum should be paid in
totality at the time specified.
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Lease of Personal Property with Option to Buy is
considered as sale of property in installments.
(Art. 1485) As a rule, payment of installments
should be returned unless parties stipulate that
the same shall not be returned.
Expenses for the execution and registration shall beborne by the vendor in the absence of any
agreement between the parties to the contrary.
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REALTY INSTALLMENT BUYER PROTECTION ACT (MACEDA
LAW)R.A. NO. 6552
In transactions involving the sale or financing of real
estate on installment payments including residential
condominium apartments, under the Maceda Law,
(R.A.NO. 6552), the rights of the buyer who has paid at
least two (2) years installments and subsequentlydefaulted in the succeeding installments are the following:
To pay w/out additional interest, the unpaid installment
within total grace period earned by him fixed at the rate of
one-month grace period for every one year of installmentsmade. The right however shall be exercised by him only
once in every 5 years of the life of the contract and its
extensions, if any; and
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If the contract is cancelled, the seller shall refund to thebuyer the cash surrender value of the payments on
property equivalent to 50% of the total payments madeand after 5 years of installments, and additional 5% everyyear but not to exceed 90% of the total payments made.(Section 3, R.A. No. 6552 (Maceda Law), Realty InstallmentBuyer Protection Act)
The above law excludes from its operation sales on
installments of industrial lots and commercial buildingsand sales to tenants under the CARP.
Down payments, deposits or options on the contract shallbe included in the computation of the total number ofinstallments payable.
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Effect of buyer on realty installments has paid less than 2
years of installments:
The seller shall give him a grace period of not less than 60
days from the date the installment became due. If he failsto pay the installments due at the expiration of the grace
period, the seller may cancel the contract after 30 days
from receipt of the buyer of the notice of cancellation or
the demand for rescission of the contract by notarial act.Sec. 24 of P.D No. 957 otherwise known as the Subdivision
and Condominium Buyers Protective Decree provides that
the rights of the buyer of subdivision lot or condominium
unit in the event of his failure to pay the installments due
to reasons other than failure of the owner or developer to
develop the project shall be governed by R.A No. 6552 or
the Maceda Law.
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Capacity to sell and buy: (Who can enter in a Contract of
Sale?)
General Rule: All persons, whether natural or
juridical, who are authorized by the Civil Code to obligethemselves may enter in to a contract of sale. Exceptions
are those who suffer absolute incapacity and relative
incapacity under Arts. 1490-1491)
NOTE : Minors and other incapacitated persons may validly
enter into contracts of sale on necessaries and the price
payable in such case shall be the reasonable price. (Art.
1489)Meaning of Necessaries: those which are needed for
sustenance, dwelling, clothing and medical
attendance in keeping with the financial capacity of the
family of the incapacitated person (Art. 194. Family
Code.)
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Persons disqualified to sell and buy:
The husband and wife cannot sell property to each other,
except:
when a separation of property was agreed upon in the
marriage settlement; or
when there has been judicial separation of property
Persons who, because of their position and relation with the
person under their charge or property under their control
are prohibited from acquiring said property either directly
or indirectly and whether in private or public sale, namely:
guardians;
agents;
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executors and administrators;
public officers and employees; and
judicial officers and employees and lawyers
others especially disqualified by law
The seller in an auction sale may not bid unless notice is
given reserving such right. (Art. 1476 (4);
An unpaid seller cannot buy, directly or indirectly the
goods sold by him, in case of resale (Art. 1533)
Note: Sales contracted in violation of Nos. 1, 2 & 3 would
make the contract voidable. If sale was contracted by those
falling under nos. 4-6 would make the contract void for beingcontrary to public policy.
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The prohibition udder Nos. 1 & 2 are applicable to sales in
legal redemption, compromises and renunciations. Art.
1492)
Compromise is a contract whereby the parties, by reciprocal
concessions, avoid a litigation or put an end to one already
commenced. (Aer. 2028). It is the amicable settlement of
a controversy.Renunciation, a creditor gratuitously abandons his right
against his creditor. The other terms used by the law are
condonation and remission.
The persons disqualified to buy referred to in Articles 1490and 1491 are also disqualified to become lessees of the
things mentioned therein.
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Art. 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract shall be
without any effect.
But if the thing should have been lost in part only,
the vendee may choose between withdrawing fromthe contract and demanding the remaining part,
paying its price in proportion to the total sum agreed
upon.
OBJECT Specific thing
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Art. 1494. Where the parties purport a sale of specific goods,
and the goods without the knowledge of the seller have
perished in part or have wholly or in a material part so
deteriorated in quality as to be substantially changed incharacter, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereofas have not deteriorated, and as binding the buyer to pay the
agreed price for the goods in which the ownership will pass, if
the sale was divisible.
Object specific goods refer to definitionGOODS IDENTIFIED AND AGREED UPON AT THE TIME
A CONTRACT OF SALE IS MADE.
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Rules regarding risk of loss in contracts of sale:
If the thing is lost before perfection, the seller and not the
one who intends to purchase bears the loss in accordance
with the principle that the thing perishes with the owner(res permit domino).
If the thing is lost at the time of perfection, the contract is
void or inexistent (Art. 1409 The legal effect is the same
as when the object is lost before the perfection of thecontract of sale (Art. 1493)
If the subject matter (i.e., a specific thing like car) is only
partially lost, the vendee may choose between
withdrawing from the contract and demanding theremaining part, paying its proportionate price. (Art. 1493)
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If the subject matter (i.e., a specific mass like
100 cavans of rice in a warehouse) have
perished in part or in whole or in materialpart so deteriorated in quality, without the
knowledge of the vendee, the vendee may
choose to avoid or cancel the contract or treat
valid the existing goods if divisible and pay
the agreed price for the remaining goods. If
the contract is indivisible, the object is treated
as specific thing. (Art. 1494)
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If the thing is lost after perfection but before delivery, that
is even before ownership is transferred to the buyer, the
risk of loss by a fortuitous event without the sellers fault is
borne by the buyer as an exception to the rule ofres peritdomino. (Art. 1480).
Note: This is in conflict with Article 1504 which provides that
unless otherwise agreed, the goods remain at the sellers
risk until ownership therein is transferred to the buyer
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If the thing is lost after delivery, the buyer bears the risk of
loss following the rule of res permit domino.
Where the seller reserves ownership of goods merely to
secure the performance by the buyer of his obligationsunder the contract, the goods are at the buyer's risk from
the time of delivery.
Where the actual delivery has been delayed through the
fault of either the buyer or the seller, the goods are risk ofthe party at fault. (Art. 1504)
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Obligations of the Vendor:
to transfer ownership (cannot be waived)
to deliver (cannot be waived)
to warrant the object sold (this can be
waived or modified since warranty is not an
essential element of a contract of sale;
to preserve the thing from perfection to
delivery otherwise he can be held liable for
damages.
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Effect of Failure to deliver in time:
If the seller promised to deliver at a stipulated time
and such period is of the essence of the contract, but
did not comply with his obligation on time, he hasno right to demand payment of the price. As a
matter of fact, the vendee-buyer may ask for
rescission of the sale.
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Ownership is transferred generally only by
delivery.
Kinds of Delivery
1. Actual or real (Art. 1497)
2. Legal or constructive
a. legal formalities (Art. 1498)
b. symbolica tradition or traditio symbolica
(such as the delivery of the key of the place
where the movable sold is being kept) (Art.
1498 par. 2);
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c. traditio longa manu (by mere consent or
agreement) if the movable sold cannot yet
be transferred to the possession of thebuyer at the time of the sale (Art. 1499)
d. traditio breva manu ( if the buyer had
already the possession of the object evenbefore the purchase, as when the tenant of
the car buys the car, that his possession as
an owner). ( Art. 1499)
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e. traditio constitutum possessorium (opposite of
tradito breva manu) possession as owner
changed, for example possession as a lease. I.e, I
sold my car but continued to possess it as a lessee
of the purchaser (Art. 1500)
f. Quasi-tradition - delivery of rights, credits or
incorporeal property made by: by placing titles of ownership in the hands of the
buyer;
or allowing the buyer to make use of the rights.
(Art. 1501)
execution of legal documents
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Cases when delivery does not transfer
ownership over thing sold.
1. Where a contrary intention appears by theterms of the contract:
a. In case of express reservation by the seller
of his title, until certain conditions havebeen fulfilled (Art. 1503, par. 1) particularly
the full payment of the purchase price.
(Art. 1478);
b. In case of implied reservation of title as
when goods are deliverable to the order of
the seller or his agent; and
(
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c. In sale on approval, or trial or on satisfaction (Art.
1502);
2. Where the seller failed to make such contract with
the carrier on behalf of the buyer as may be
reasonable under the circumstances (See Art.
1523, par. 2); and
3. Where the seller failed to give notice to the buyeras may enable him to insure the goods during
their transit if under the circumstances it is usual
to insure them.
(Note: Nos. 2 & 3 are also exceptions to the general
rule that delivery to the carrier is deemed delivery
to the buyer)
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Sale or Return - it is a contract by which
property is sold but the buyer who becomes
the owner of the property on delivery has
the option to return the same to the seller
instead of paying the price.
Note : In sale or return, the risk of loss or
injury rests upon the buyer
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Sale on Trial or Approval - It is a contract in the nature ofoption to purchase if goods prove satisfactory, theapproval of the buyer being a condition precedent. In this
kind of contract, the title shall continue in the seller untilthe sale has become absolute:
Upon the buyer's approval or acceptance made known tothe seller;
Upon the buyer's doing any other act adopting the
transaction; or Upon the retention by the buyer of the goods beyond the
time fixed (or a reasonable time) without giving notice ofrejection. (Art. 1502)
Note : In sale or return, the risk of loss or injury rests uponthe buyer while in sale on approval, the risk still remainsin the seller.
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RESERVATION OF OWNERSHIP
General rule, delivery to the buyer transfers
ownership. Exceptions:
When there is express reservation ownershipmade by the seller.
When there is implied reservation ownership
such as in the following:
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1. Where the goods are shipped and by the bill oflading the goods are deliverable to seller or his
agent, the seller thereby reserves ownership inthe goods. (Art. 1503 paragraph 2)
In this case, the carrier becomes the bailee forthe seller. The last sentence of paragraph 2 states
however that if it were not for the bill of lading,ownership would still pass to the buyer, then thesellers property or right in the specific goods
shall merely for security only, meaning the seller
is reserving his right to the goods not in theconcept of the owner but merely for purpose ofensuring that the buyer will fulfill his obligationsunder the contract of sale.
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2. Where goods are shipped and by the bill oflading the goods are deliverable to the order
of the buyer or his agent, but the possessionof the bill of lading is retained by the seller oragent, the seller thereby retains a right to thepossession of the goods as against the seller.
(Art. 1503 par. 3)
In this case, the buyer, as a consigneecannot take delivery of the specific goods until
the seller releases the bill of lading. The sellerwill not release possession of the bill of ladingto the buyer, until the latter pays the purchaseprice and fulfill any other conditions, if any.
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3. Where the seller draws on the buyer for the price andtransmits the bill of exchange and the bill of ladingtogether to the buyer to secure acceptance or payment
of the bill of exchange, the title is regarded as retainedin the seller until the bill of exchange is paid. The factthat the bill of lading and bill of exchange are attachedtogether indicates that the seller intends to make thedelivery of the goods conditional upon the payment or
acceptance of the draft. In this case, attachment of thebill of exchange to the bill of lading will serve notice tothe carrier not to deliver the goods until the buyer isable to accept or pay the bill of exchange. Should thebuyer dishonor the bill of exchange by non-acceptance
or by non-payment, he must return thee bill of lading tothe seller. If the wrongfully retains the bill of lading, heacquires no additional right.
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The last portion of par. 4 of Art. 1503 states that
if in the bill of lading the specific goods are:
a) Made deliverable to the buyer or to order of
the buyer,
b) The bill of lading is indorsed in blank, or
c) The bill of lading is indorsed to the buyer by
the consignee name therein, a subsequent
purchaser in good faith and for value of the
bill of lading or of the goods from the buyer
will acquire ownership of the goods although
the bill of exchange has been dishonored.
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Unless otherwise authorized by the buyer, seller
must make contract with the carrier on behalf
of the buyer as may be reasonable, having
regard to the nature of the goods. If the seller
fails to do so and the goods are lost or
damaged in the course of transit, the buyermay decline to treat the delivery to the carrier
as a delivery to himself, or may hold the seller
liable for damages. (Article 1523 par. 2)
A ti l 1504 it t th i i l f it d i
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Article 1504 reiterates the principle of res perit dominomeaning the owner bears the loss. Unless otherwiseagree, if the seller retains ownership of the goods sold,
then he bears the loss through fortuitous event. Ifownership of the goods is already to the transferred tothe buyer, he bears the risk.
Exceptions:
a) Reservation of owner for purpose of securingperformance by the buyer of his obligation specificallypayment in full of the purchase price, in this case,buyer bears the risk.
b) Where the actual delivery of the goods havee beendelayed through the fault either of the seller or thebuyer, the party at fault shall bear the risk of loss ofthe goods.
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What title is acquired by the vendee or buyer if the object which hebought was sold by somebody who is not the owner thereof andwho was not authorized to sell it?
The vendee, in such a case acquires no better title to the objectthan the vendor had. Reason. He is not the owner of the goodshimself and he has no authority to sell the goods from the owneror he sold the goods without the owners consent. This rule,however is subject to the following exceptions:
Where the owner ratifies the sale made by the seller
Where the true owner is estopped or precluded by his conductfrom denying the vendor's authority to sell;
Where the sale is made by the registered or apparent owner inaccordance with recording or registration laws;
Where the sale or under the order of a court of competent
jurisdiction; and Where the purchase is made in a merchant's store or in fairs, or
markets, in accordance with the Code of Commerce and speciallaws (Art. 1505)
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Where the seller of goods has a voidable title
thereto, but his title has not been avoided at
the time of the sale, a) the buyer acquires
good title to the goods, provided (2) he buys
them in good faith, for value and (3) withoutnotice of the seller defect of title. (Art. 1506)
fi i bl f i l
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Define Negotiable Document of Title:
A document of title in which it is stated that
the goods referred to therein will be deliveredto the bearer, or to the order of the any
person named in such document is a
negotiable document of tile. (Art. 1507)Nature of Document of Title: It refers to goods
and not to money. They all have this in
common: that they are receipts of a bailee,or orders upon a bailee,
C f f D t f titl
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Common forms of Document of title:
Bill of Lading- A contract or receipt for the transport of
goods and their delivery to the persons named therein, to
order or to bearer. It usually involves three persons - the
carrier, the shipper and the consignee. The shipper and
the consignee may be one and the same person.
Dock warrant- An instrument given by dock owners to an
importer of goods warehoused on the dock recognizing the
importer's title to the said goods;
Warehouse receipt - A contract or receipt for goods
deposited with the warehouseman containing the latter's
undertaking to hold and deliver the said goods to a
specified person, to order or to bearer. Quedan is
warehouse receipt usually for sugar received by
warehouseman.
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A negotiable document of title may be negotiated bydelivery:
Where by the terms of the document the carrier,
warehouseman or other bailee issuing the sameundertakes to deliver the goods to the bearer;
Where by the terms of the document the carrier,warehouseman or other bailee negotiating the sameundertakes to deliver to deliver the goods to the order of a
specified person, and such person or a subsequentindorsee of the document has indorsed it in blank or to thebearer;
Where by the terms of a negotiable document of title, thegoods are deliverable to bearer or where the negotiable
document of title has been indorsed in blank or bearer,any holder may indorse the same to himself or to anyspecified person, and in such are the document shallthereafter be negotiated only by the indorsement of suchindorsee. (Art. 1508)
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Negotiable document of title be negotiated byindorsement
A negotiable document of title may benegotiated by the indorsement of the person towhose order the goods are by the terms of thedocument deliverable. Such indorsement maybe in blank, to bearer or to a specified person. Ifindorsed to a specified person, it may be againnegotiated by the indorsement of such person inblank, to bearer or to another specified person.Subsequent negotiations may be made in likemanner. (Art. 1509)
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Who may negotiate a negotiable document of title?
By the owner thereof;
By any person to whom the possession or custody ofthe document has been entrusted by the owner, if bythe terms of the document the bailee issuing thedocument undertakes to deliver the goods to the
order of the person to whom the possession orcustody of the document has been entrusted, or if atthe time of such entrusting the document is such formthat it may be negotiated by delivery (Art. 1512)
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A person to whom negotiable document of titlehas been duly negotiated acquires thereby:
Such title to the goods as the person negotiatingthe document to him had or had ability toconvey to a purchaser in good faith for value and
also such title to the goods as to the person towhose order the goods were to be delivered bythe terms of the document had and had abilityto convey to a purchaser in good faith for value;
The direct obligation of the bailee issuing thedocument to hold possession of the goods forhim according to the terms of document as fullyas if such bailee had contracted directly with him(Art. 1513).
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What are the implied warranties of the person whonegotiates a document of title by indorsement ordelivery?
A person, who for value negotiates or transfers adocument of title by indorsement or delivery, includingone who assigns for value a claim secured by a documentof title unless a contrary intention appears, warrants:
That the document is genuine;
That he has legal right to negotiate or transfer it; That he has knowledge of no fact which would impair the
validity or worth of the document; and
That he has right to transfer the title of the goods are
merchantable or fit for a particular purpose, wheneversuch warranties would have been implied if the contract ofthe parties had been to transfer without a document oftitle of goods represented thereby (Art. 1516)
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Note : The person to whom a negotiable
document of title was issued must be the
owner of the goods, otherwise, it cannot
effect a valid negotiation. Hence, if the goods
are stolen and place to the bailee for deposit.
The negotiation of the document of titlecannot validly transfer ownership.
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But if goods are legitimately deposited, Article1518 applies. The validity of the negotiation of
a negotiable document of title is not impaired bythe fact that the negotiation was a breach ofduty on the part of the person making thenegotiation, or by the fact that the owner of the
document was deprived of the possession of thesame by loss, theft, fraud, accident, mistake,duress or conversion, if the person to whom thedocument was subsequently negotiated paid
value therefore in good faith without notice ofthe breach of duty, or loss, theft, frau, accident,mistake, duress or conversion.
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Art. 1519. If goods are delivered to a bailee by theowner or by a person whose act in conveying the
title to them to a purchaser in good faith for valuewould bind the owner and a negotiable documentof title is issued for them they cannot thereafter,while in possession of such bailee, be attached by
garnishment or otherwise or be levied under anexecution unless the document be firstsurrendered to the bailee or its negotiationenjoined. The bailee shall in no case be compelled
to deliver up the actual possession of the goodsuntil the document is surrendered to him orimpounded by the court.
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Art. 1520. A creditor whose debtor is the ownerof a negotiable document of title shall be entitled
to such aid from courts of appropriate jurisdictionby injunction and otherwise in attaching suchdocument or in satisfying the claim by meansthereof as is allowed at law or in equity in regard
to property which cannot readily be attached orlevied upon by ordinary legal process.
As a general rule, attachment or levy of goodscovered by negotiable document of title is
prohibited. The only recognized exceptions to thegeneral rule are as follows: a) If the document issurrendered to him; or (2) negotiation is enjoined.
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Instances when bailee can be compelled to
surrender goods. The rule is baille cannot be
compelled to surrender the goods in hispossession covered by a negotiable document
of title. He may do so, however: ( a) if
document is surrendered to him or (2) thedocument is impounded by the court.
Art 1521 Whether it is for the buyer to take
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Art. 1521. Whether it is for the buyer to takepossession of the goods or of the seller to send themto the buyer is a question depending in each case on
the contract, express or implied, between the parties.Apart from any such contract, express or implied, orusage of trade to the contrary, the place of delivery isthe seller's place of business if he has one, and if nothis residence; but in case of a contract of sale of
specific goods, which to the knowledge of the partieswhen the contract or the sale was made were in someother place, then that place is the place of delivery.
Where by a contract of sale the seller is bound to sendthe goods to the buyer, but no time for sending them isfixed, the seller is bound to send them within areasonable time.
Wh th d t th ti f l i th
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Where the goods at the time of sale are in the
possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyerunless and until such third person acknowledges
to the buyer that he holds the goods on the
buyer's behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour.
What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of andincidental to putting the goods into a deliverable
state must be borne by the seller. (n)
Art 1522 Where the seller delivers to the buyer a
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Art. 1522. Where the seller delivers to the buyer aquantity of goods less than he contracted to sell, thebuyer may reject them, but if the buyer accepts or
retains the goods so delivered, knowing that the selleris not going to perform the contract in full, he must payfor them at the contract rate. If, however, the buyer hasused or disposed of the goods delivered before heknows that the seller is not going to perform his
contract in full, the buyer shall not be liable for morethan the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity ofgoods larger than he contracted to sell, the buyer mayaccept the goods included in the contract and rejectthe rest. If the buyer accepts the whole of the goods sodelivered he must pay for them at the contract rate.
Where the seller delivers to the buyer the
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Where the seller delivers to the buyer thegoods he contracted to sell mixed with goods
of a different description not included in thecontract, the buyer may accept the goodswhich are in accordance with the contract andreject the rest.
In the preceding two paragraphs, if the subjectmatter is indivisible, the buyer may reject thewhole of the goods.
The provisions of this article are subject to anyusage of trade, special agreement, or courseof dealing between the parties. (n)
Under Article 1523 the general rule delivery to the carrier
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Under Article 1523, the general rule delivery to the carrieris delivery to the buyer when the seller is authorized orrequired to send the goods to the buyer (See. Art. 1521)
Exceptions are in case of express and implied reservations (Art. 1503)
Seller duties if required to deliver the goods to the buyer
To enter on behalf of buyer into such contract with thecarrier reasonable under circumstances. If he omits to do
so, (1) the buyer may decline to treat delivery to carrier asdelivery to himself in case goods are lost or damaged incourse of transit, or (2) the buyer may hold the sellerresponsible in damages ( par 2 of Art. 1523) If buyerexercised the first option, the transfer of ownership will be
deemed not to have taken place; and To give notice to buyer regarding necessity to insure goods,
if under the circumstances it is usual to insure them. Ifseller fails to so, the risk will be borne by him.
PLACE OF DELIVERY (A 1521)
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PLACE OF DELIVERY (Art. 1521)
Where there is an agreement, express or implied, theplace of delivery is that agreed upon;
Where there is no agreement, the place of delivery isdetermined by usage of trade;
Where there is no agreement and there is also no
prevalent usage, the place of delivery is the sellersplace of business;
In any other case, the place of delivery is the sellersresidence; and
In case of specific goods, which to the knowledge ofthe parties at the time the contract was made were insome other place, that place is the place of delivery, inthe absence of any agreement or usage of trade tothe contrary.
E l i F O B C I F F A S & C & F EX (P i f
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Explain F.O.B, C.I.F., F.A.S., & C & F., EX (Point ofOrigin) and Ex dock;
F.O.B - The initials for the words, "Free on Board". Thismeans that the goods are to be deliverable free ofexpense to the buyer to the point where they are F.O.B.
C.I.F. - The initials stand for the words "cost, insurance
and freight." They signify that the price fixed covers notonly the cost of the goods, but the expense of freightand insurance to be paid by the seller up to the pointespecially named.
F.A.S. - The initials mean "free alongside vessel"(named port of shipment). Under this term, the sellerpays all charges and bears the risk until the goods areplaced alongside overseas vessel and within reach of itsloading tackle.
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C & F - The initials signify that the price fixed
includes cost and freight to the named point ofdestination.
Ex Factory, Ex Warehouse, etc. (named point oforigin) - Under this term, the price quoted applies
only at the point of origin, and the seller agrees toplace the goods at the disposal of the buyer at theagreed place on the date within the period fixed.
Ex Dock (named port of importation). - Under thisterm, the seller quotes a price including the costof the goods on the dock at the named port ofimportation.
Th d h ll t b b d t d li th
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The vendor shall not be bound to deliver thething sold, if the vendee has not paid him theprice, or if no period for payment has been fixedin the contract.
As a rule, the obligation to deliver the thingsubject matter of a contract arises from themoment of its perfection and from the time the
obligation may be enforced. But a contract of saleis bilateral and so the obligation to deliver thething is accompanied the obligation by thepayment of the price. These obligations are
reciprocal. Exception: If the time for such payment has been
fixed in the contract, the thing must be deliveredthough the price has not been paid yet.
D fi id ll d A t 1525
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Define an unpaid seller under Art. 1525
An unpaid seller is one - who has not been paid or tendered the whole price;
or
who has received a bill of exchange or othernegotiable instrument as conditional payment and
the condition on which it was received has beenbroken by reason of dishonor of the instrument. (Art.1525)
Ri h f h UNPAID SELLER
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Rights of the UNPAID SELLER
Even if the ownership in the goods has already passed
to the buyer, they are: A lien on the goods or right to retain them for the
price while in his possession; POSSESSORY LIEN
A right of stopping the goods in transitu in case of
insolvency of the buyer; STOPPAGE IN TRANSITU A right of resale; and
A right to rescind the sale.
C h th id ll i hi i ht f
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Cases where the unpaid seller exercises his right ofpossessory lien:
When the goods have been sold without anystipulation as to credit;
Where the goods have been sold on credit, butthe term of the credit has expired; and
Where the buyer becomes insolvent. The seller may exercise his right o lien
notwithstanding that he is in possession of thegoods as agent or bailee for the buyer. (Art.
1527)
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An unpaid seller loses his lien to the goods:
When he delivers the goods to a carrier or otherbailee for the purpose of transmission to the buyerwithout reserving ownership of the goods or the rightof possession thereof;
When the buyer or his agent lawfully obtains
possession of the goods; When the unpaid seller waives his lien.
Mere judgment by a court obtained by the unpaidseller for the price of the goods is not a ground for the
loss of his lien. (Art. 1529)
Th i ht f t i t it i th i ht f
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The right of stoppage in transitu is the right ofthe unpaid seller who has parted with the
possession of the goods, when the buyer is orbecomes insolvent, to stop them and resumepossession while they are in transit. Theunpaid seller will become entitled to the
same rights to the goods as if he had neverparted with possession (Art. 1530)
Requisites in the exercise of the right of stoppage in transitu:
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Requisites in the exercise of the right of stoppage in transitu:
The seller must be unpaid (Art. 1525)
The buyer must be insolvent;
The goods must be in transit (Art. 1531)
The seller must either actually take possession of thegoods sold or give notice of his claim to the carrier or
other person in possession (Art. 1532 p. 1) The seller must surrender the negotiable document of
title, if any, issued by the carrier or bailee (ibid, p. 2)
The seller must bear the expenses of delivery of the goodsafter the exercise of the right. (Ibid.)
Manner of which unpaid seller may exercise the
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Manner of which unpaid seller may exercise theright to stop the goods in transitu:
Either by taking actual possession of the goods;
By giving notice of his claim to the carrier ofbusiness in whose possession the goods are.
The seller must surrender the negotiabledocument of title, if any issued by the carrier orbailee. (Art. 1532)
Instances where goods are considered not already in
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Instances where goods are considered not already intransitu:
The goods are no longer in transit after delivery to the buyeror his agent in that behalf and in the following cases:
If the buyer or his agent obtains possession of the goodsat a point before the destination originally fixed;
If the carrier or bailee acknowledges to hold the goods onbehalf of the buyer; and
If the carrier or bailee wrongfully refuses to deliver thegoods to the buyer. (Art. 1531)
Effects of Sale of Goods subject to unpaid
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j psellers right of lien or stoppage in transitu:
They are: The seller's right is not affected by any
disposition of goods made by the buyer,unless he has assented thereto.
If, however, the goods are covered by anegotiable document of title, the seller'sright cannot prevail rights of purchaser for
value in good faith to whom the documenthas been indorsed. (Art. 1535)
Right to Resale:
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Right to Resale:
This right can be the unpaid seller only when he
has right of lien or right to stop goods intransitu and under any of the three followingcases:
a. Where the goods are perishable in nature;
b. Where the right to resell is expressly reserved incase the buyer should make a default; and;
c. Where the buyer delays in the payment of the
price for an unreasonable time.
Eff t f R l
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Effect of Resale:
The seller is not liable for any profit made by
such resale; but if he sells for less than the
price, he has the right to sue for the balance.
As against the original buyer, the new buyer
acquires a good title to the goods.
Note: It is not essential to the validity of a resale that notice
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Note: It is not essential to the validity of a resale that notice
of an intention to resell the goods be given by the seller to
the original seller. Except where the resale is based on the
default of the buyer in the payment of the price, as notice
in this case is relevant in any question whether the buyer
had been in default for unreasonable time before the
resale was made.
No notice is required for the time and place of such resale
to the buyer.
Seller is not allowed to directly or indirectly buy the goods in
a public or private sale.
Cases when an unpaid seller exercises his right to
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Cases when an unpaid seller exercises his right to
rescind:
Either of the two situations, namely: When the right to rescind is expressly reserved; or
When the buyer defaults or delays in the payment
of the price for an unreasonable time.In the case of rescission, the seller resumes ownership
in the goods. While the seller shall not be liable to
the buyer upon the contract of sale, the latter,
however, may be made liable to the seller fordamages for any loss occasioned by the breach of
contract. (Art. 1534)
Note ; An unpaid seller has right to rescind only if he
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Note ; An unpaid seller has right to rescind only if he
has either a right of lien or a right to stop goods in
transitu.Effect of Rescission:
The seller resumes ownership of the goods. While
the seller shall not be liable to the buyer upon the
contract of sale, the latter however may be made
liable to the seller for damages for any loss in
occasioned by the breach of contract (par. 1, Art.
1533)
How to rescind?
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How to rescind?
An election by the seller to rescind may be
manifested by notice to the buyer or some other
over act showing an intention to rescind.
Communication of such election to the buyer is not
necessary.
Rules In Case the Area or Number
l f l
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Sale of Real Estate:
Rules in case the area or number is greater or lessthat stated in the contract of Sale of Real Estate:
The sale is made with a statement of its area at therate of a certain price for a unit of measure or number
(e.g. a parcel of land containing an area of 1,000square meters is sold at P 100.00 per square meter)
If the actual area, for example is 1,100 sq. meters - Thevendee may accept the area included in the contract
(1,000 sq. meters) and the rest (100 sq. meters). If heaccepts the whole area, he must pay for the same atthe contract rate of P 110,000. (Art. 1546)
Rules In Case the Area or Number
S l f l
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Sale of Real Estate: If the actual area is 900 sq. meters - The vendee may choose
between a proportionate reduction of the price (P 90,000)and the rescission of the contract, provided in the latter case
the lack in the area be not less than 1/10 or more of that
stated. (See Art. 1539)
The sale is made for lump sum - There shall be no increase ordecrease of the price. (Art. 1542) Reason: The law presumes
that the purchaser had in mind a determinate price for the
real estate and that he ascertained the area and quality
before the contract was perfected. This rule applies whentwo or more immovable properties are sold for a single price
(See Art. 1541). It does not apply if the deficiency is so
material as to go to the essence of the contract, for under
such circumstances, gross mistake may be inferred.
RULES ON DOUBLE SALES
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RULES ON DOUBLE SALES
If the property sold is movable, the vendee who firsttook possession in good faith shall acquire theownership.
If the property sold is immovable, the ownership shallbelong to:
The vendee who first registered the sale in good faithin the Registry of Property (Registry of Deeds);
In the absence of registration, the vendee who in goodfaith, first took possession; and
In the absence of both registration and possession, thevendee who presents the oldest title (who first boughtthe property), provided there is good faith. (Art. 1544)
RULES ON DOUBLE SALES
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RULES ON DOUBLE SALES
The rule on double sales do not apply incases:
The contract first registered is fictitious or
forged;
The vendor is not the owner of the property;
or
The sale is not made by the same vendor
CONDITIONS AND WARRANTIES
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What is a condition?
It means an uncertain event or contingency onthe happening of which the obligation of thecontract depends. In such case the obligation ofthe contract does not attach until the condition is
performed.Effect of condition: If the obligation of either party
is subject to any condition and such condition isno fulfilled, such party may either:
a. Refuse to proceed with the contract; orb. Proceed with the contract, waiving the
performance of the condition
CONDITIONS AND WARRANTIES
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Express or Promissory Warranty - They are any
affirmation of fact or any promise by the seller relatingto the thing, the natural tendency of which is to inducethe buyer to purchase the thing and the buyer thusinduced purchases the same.
It is express as this one agreed by the parties. Seller
makes any statement or promise about the goods andthe buyer completely rely on the strength of suchstatement or promise when he purchased the goods.
Be it noted that a warranty is part of the contract of sale.
It is therefore, immaterial, whether the seller did notknow that it was true or false. No intent is necessaryto make the seller liable for his warranty.
CONDITIONS AND WARRANTIES
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Effect of Opinion:
There is no sellers warranty if the seller merely expresseshis opinion as to the goods. The exception is when theseller is considered an expert on the matter and the buyerrelies on such expert opinion and buys the goods.
Art. 1340 The usual exaggerations in trade, when the otherparty has opportunity to know the facts are not inthemselves fraudulent.
Art. 1341- A mere expression of an opinion does not signify
fraud, unless made by an expert and the other party hasrelied on the formers special knowledge.
Misrepresentation in good faith is not fraudulent but mayconstitute error (Art. 1343)
Warranties in the Contract of Sale
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Warranties in the Contract of Sale
Implied Warranties: They are agreements orstipulations the existence of which is
presumed although not expressed in any
words in the contract.It automatically comes into existence when a
merchant sells goods, guaranteeing that items
sold are fit for the purpose for which goodswould ordinarily be used .
Implied Contracts:
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Warranty against eviction -the seller warrantsthat he has a right to sell the thing at the timewhen the ownership is to pass and that the buyershall from that time have and enjoy the legal
peaceful possession of the thing; Warranty against hidden defects or unknown
encumbrances - The seller guarantees the thingsold is free from any hidden faults or defects orany charge or encumbrance not declared orknown to the buyer. (Art. 1547)
Implied Contracts:
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Warranty against hidden defects or unknownencumbrances - The seller guarantees the
thing sold is free from any hidden faults or
defects or any charge or encumbrance notdeclared or known to the buyer. (Art. 1547)
Implied Contracts:
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Warranty of Fitness or Merchantability - The sellerwarrants that the seller guarantees that the thing sold isreasonably fit for the known particular purpose forwhich it was acquired by the buyer or, where it wasbought by description, that it is of merchantable quality.
(Art. 1565)
Note: the rule on warranty does not apply to a sheriff,auctioneer, mortgage, pledgee or other person who sells
by virtue of authority in fact or law. In other words, thepersons enumerated are not liable to a third personwith a legal and equitable interest in the thing sold.(Art. 1547, par. 2)
Implied Contracts:
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Implied Warranty are not applicable in the following cases:
a. As is and where is basis sale reason seller makes nowarranty at all.
b. Sale of second hand articles exception is if it is soldunder circumstances as to raise an implied warranty
c. Sale by virtue of authority in fact or law- the sheriff,auctioneer, mortgagee, pledgee or other person who
sells the object by virtue of foreclosure or execution.The rule on caveat emptor or let buyer beware applies
Warranty Against EvictionTh i i li d t t hi Th ll
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There is implied warranty as to ownership. The sellerwarrants that
a. He has the right to sell the thing either as an owneror the authorized representative of the owner.
b. He can pass legal title to the goods at the time ofdelivery;
c. The buyer shall have legal and peaceful possessionand enjoyment of the object.
Meaning of eviction:
It is a judicial process whereby the vendee is deprivedof the whole or part of the thing purchased by virtue ofa final judgment based on a right prior to the sale or anact imputable to the vendor. (Art. 1548)
EVICTION
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EVICTION
Requisites for Warranty of Eviction The vendee is deprived in whole or in part of the thing
purchased;
He is deprived by virtue of a final judgment (Art. 1557)
The judgment is based on a right prior to the sale or anact imputable to the vendor;
The vendor was summoned in the suit for eviction atthe instance of the vendee (Art. 1558); and
There is no waiver on the part of the vendee. (Art.1548)
Warranty Against EvictionW t i t i ti f t t i l
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Warranty against eviction refers to trespass in lawand not mere trespass in fact. The disturbance
refers to is disturbance of law which requires aperson to go to courts claiming the thing sold orpart thereof necessitating judgment from thecourt.
Art. 1549 Vendee has no duty to appeal from thejudgment in order to hold seller liable foreviction.
Art. 1550 If adverse possession had beencommenced before the sale but the prescriptiveperiod is completed after the transfer the vendorshall not be liable.
Warranty Against Eviction2 kinds of Prescription
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2 kinds of Prescription:
a) Acquisitive prescription right is acquired
through lapse of time.b) Extinctive prescription- when ownership or
dominion is lost through lapse of time.
Completed before the sale seller is liable because
the deprivation is based on a right prior to thesale and an act imputable to the seller.
Completed after the sale. Even if prescriptionbegun before the sale but completed after the
sale as the limit prescribed by law has beencompleted, the seller this time is not liable.Reason the vendee could easily interrupt therunning the prescriptive period by bringing the
appropriate action
Warranty Against EvictionA t 1551 f t i ti d t t
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Art.1551- refers to eviction due to non-paymentof taxes.
The vendor will be liable to the vendee foreviction if the latter is deprived of the landdue to the vendors non-payment of overdue
real estate taxes. If the vendor did not informthe vendee of the taxes in arrears at the timeof the sale, the vendor is in bad faith and willbe liable. The eviction is due to an act
imputable to the vendor.
Art. 1552 The judgment debtor is alsoresponsible for eviction in judicial sales unless
it is otherwise decreed in the judgment
Warranty Against Evictionl h d f h
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Any stipulation exempting the vendor from the
obligation to answer for eviction shall be
VOID, if he acted in bad faith. (Art. 1552)
When is in vendor in bad faith and therefore
liable in case of eviction despite the presence
of stipulation exempting him:
a. If he sells the same property to 2 or more
vendees.
b. If he knows of any cause for eviction at the
time of the sale and he did not inform the
vendee of it.
EVICTION
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EVICTION
Kinds of Waiver of Eviction
Consciente. - The waiver is voluntarily made bythe vendee without the knowledge andassumption of risks of eviction. The vendor shall
only pay the value of which the thing sold had atthe time of eviction; and
Intencionada. - The vendee makes the waiverwith knowledge of the risks of eviction and
assumption of its consequences. (Art. 1554) Thevendor is not liable for eviction if he acted ingood faith. (Art. 1553)
EVICTION
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EVICTION
Rights of the vendee in case of eviction occurs:
The return of the value which the thing sold hadat the time of the eviction, be it greater or lesser
than the price of the sale; The income or fruits if he has been ordered to
deliver them to the party who won the suitagainst him;
The costs of the suit which caused the eviction,and, in a proper case, those of the suit broughtagainst the vendor for the warranty;
EVICTION
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EVICTION
The expenses of the contract, if the vendee has paid them;
and
The damages and interests, and the ornamental expenses,if the sale was made in bad faith. (Art. 1555)
Note: In case of partial eviction, the vendee has the optioneither to enforce the vendor's liability for eviction (Art.1555) or to demand rescission of the contract. (Art. 1556)
In case the vendee is totally evicted from the thing sold,he cannot avail of the remedy contemplates that the onedemanding it is able to return whatever he has receivedunder the contract.
EVICTION
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EVICTION
Rights of the vendee in case of eviction occurs:
The return of the value which the thing sold hadat the time of the eviction, be it greater or lesser
than the price of the sale; The income or fruits if he has been ordered to
deliver them to the party who won the suitagainst him;
The costs of the suit which caused the eviction,and, in a proper case, those of the suit broughtagainst the vendor for the warranty;
EVICTION
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The vendor shall not be obliged to make goodthe proper warrant, unless he is summoned inthe suit for eviction at the instance of thevendee. (Art. 1558)
The vendee must make vendor a co-defendant.Hence the vendee has to file a third party
complaint against the vendor when sued forthe recovery of the property. (Art. 1559)
Requites of Warranty against hidden
b
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encumbrances:
Meaning of Easement or servitude:An easement or servitude imposed
upon an immovable for the benefit of
another immovable belonging to a
different owner. The immovable in favor
of which the easement is established is
known as dominant estate and that
which is subject thereto is servient
estate. (Art. 13, NCC)
Requites of Warranty against hidden
b
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encumbrances:
Types of easements:a. Continuous easements those the use of which isor may be incessant, without the intervention ofhuman act.
b. Discontinuous easements those which are usedat intervals and depend upon the acts of man.
c. Apparent easements those which are madeknown and are continually kept in view byexternal signs that reveal use and enjoyment of
the same. A right of way is an apparenteasement.
d. Non-apparent easements- those which show noexternal indication of their existence. A party wallis a non-apparent easement.
Requites of Warranty against hidden
b
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encumbrances:
The encumbrance must be important(the vendee would not have purchased
the property had he been aware of its
existence);
The encumbrance is not registered,
unless expressly warranted free from
burdens. Reason: Registration
constitute constructive notice.
Requites of Warranty against hidden
enc mbrances
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encumbrances:
The vendee had no knowledge of the encumbrancewhether it is registered or not. Reason: Otherwise,
there is no warranty; and
The action for rescission or damages must be brought
within the proper period (supra); in case of
immovable property encumbered with any non-
apparent burden or easement-within one year from
the execution of the deed of sale. (Art. 1560)
If the period of one year has elapsed, the vendee of
an immovable may only bring an action for damages
also within one year from the discovery of the non-
apparent burden or servitude
Warranty Against Redhibition
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y g
Warranty against Redhibition - is the avoidanceof a sale on account of some service or defect in
the thing sold, which renders its use impossible,
or so inconvenient and imperfect that it must be
supposed that the buyer would not have
purchased it has he known of the vice.
Requisites of Warranty Against Redhibitory
Defects (Hidden, Physical defects):
The defect must be serious or important;
It must be hidden;
Warranty Against Redhibition
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y g
It must exist at the time of the sale; The vendee must give notice of the defect to the
vendor within a reasonable time (Art. 1586)
The action for rescission or reduction of the pricemust be brought within the proper period - 6
months from the delivery of the thing sold (Art.
1571) or within 40 days from the date of delivery
in case of animals (Art. 1577, par. 10 and;
There must be no waiver of warranty on the part
of the vendee.
WARRANTY AGAINST HIDDEN DEFECTS
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When is defect considered important: If it renders the thing sold unfit for which it is intended;
If it diminishes its fitness for such use to such extentthat the vendee would not have acquired it had he hadbeen aware thereof or would have given a lower pricefor it. (Art. 1561)
Defect is hidden when it was not known and couldnot have been known to the vendee. Hence, there is
no warranty if the defect is patent and visible.
IMPLIED WARRANTIES OF QUALITY
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QWarranty ofMerchantability is
a warranty that goods are fitfor general purpose for whichthey are sold, while warrantyof fitness is a warranty that thegoods are suitable for thespecial purpose of the buyerwhich will be satisfied by merefitness for general purpose .
Meaning of Quality of Goods-includes their state orcondition (Art. 1636).
This is aimed to promote the highstandard in business and todiscourage unfair dealings.
IMPLIED WARRANTIES OF QUALITY
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Q
They are based on the
principle that HONESTY
IS THE BEST POLICY.
IMPLIED WARRANTIES OF QUALITY
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Is there warranty as to quality orfitness for any particular purpose?
None. Except if:
The buyer expressly or byimplication, manifests to the sellerthe particular purpose for whichthe goods are acquired;
The buyer relies upon the seller'sskill or judgment.
IMPLIED WARRANTIES OF QUALITY
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Implied Warranty of MerchantabilityWhere goods are bought bydescription, the seller impliedlywarrants that goods are ofmerchantable quality.
Merchantable is not a warranty ofquality in the sense of requiring aparticular grade but it does requireidentity between what is described
in the contract and what istendered, in the sense that thelatter is sold of such quality to havesome value.
IMPLIED WARRANTIES OF QUALITY
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Sale Under Patent or Trade Namethere is no warranty as to its fitnessfor any particular purpose, unlessthere is a stipulation to thecontrary. Reason is when the
buyer by defining what he wantsexercised his own judgment insteadof relying to the upon the seller.Exception: if there is a stipulation.
Thus there is implied warranty offitness for a particular purposewhen the buyer relied upon thesellers judgment rather than thepatent or trade name.
IMPLIED WARRANTIES OF QUALITY
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An implied warranty or condition as to quality orfitness for a particular purpose may be annexedby the usage of trade. (Art. 1564)
In case of a contract of sale by sample, if the selleris a dealer in goods of that kind, there is impliedwarranty that the goods shall be free from any
defect rendering them unmerchantable whichwould not be apparent on reasonableexamination of the sample.
IMPLIED WARRANTY
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The vendor is responsible to the vendee for any
hidden faults or defects in thing sold, even
though he was not aware thereof. This provision
shall not apply if the contrary has been stipulated
and the vendor was not aware of the hiddenfaults or defects in the thing sold. - Article 1566
this principle is known as caveat vendidor. A
sound price warrants a sound article.
With respect to third person, the principle of caveat
emptor still applies.
IMPLIED WARRANTY
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Caveat venditor is the general rule at present.
Caveat emptor Let the buyer beware. With
respect to third persons, caveat emptor
applies. Thus one who buy real property
without checking the vendors title where
persons other than the vendor in possession,
takes all the risk and losses consequent to
such failure in case the vendors title isdefective.
IMPLIED WARRANTY
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Alternative remedy of the buyer to enforcewarranty:
Accion redhibitoria to withdraw from thecontract.
Accion quanti minoris- demand a proportionatereduction of the price
With right of damages in either case.
This right is also given to the vendee in case ofsale of animals with redhibitory defect. Arty.1567
IMPLIED WARRANTYArt. 1568 Effect of loss of thing sold on account of hidden
d f t
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defect.
a) If the vendor was aware of the hidden defect inconsequence of which the thing sold was lost, he shallbear the loss because he acted in bad faith. In suchcase, the vendee has the right to recover:
1. Price paid
2. The expenses of the contract; and3. Damages
b) If the vendor was not aware of them, he shall be obligedonly to return:
1. Price2. the interest thereon and
3. Expenses of the contract if paid by the vendee. Nodamages as he is not guilty of bad faith.
IMPLIED WARRANTYIf the thing sold had no hidden defect; its loss
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g ;
through a fortuitous event or through fault of
the vendee is of course to be borne by the
vendee. However, the vendor is obliged to
return the price paid, less the value of the thing
at the time of loss in case where hidden defectsexisted. Under Article 1569, the vendor is still
made liable on his warranty.
The above rule shall be applicable to judicialsales, except that the judgment debtor shall
not be liable for damages. (Art.1470)
IMPLIED WARRANTY
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Prescriptive Period:
Actions arising from the provisions of the
preceding ten articles shall be barred after sixmonths, from the delivery of the thing sold.
(Art. 1471)
IMPLIED WARRANTY IN SALE OF ANIMALS
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Art. 1572. If two or more animals are sold together,
whether for a lump sum or for a separate price foreach of them, the redhibitory defect of one shall onlygive rise to its redhibition, and not that of the others;unless it should appear that the vendee would nothave purchased the sound animal or animals without
the defective one.
The latter case shall be presumed when a team, yokepair, or set is bought, even if a separate price hasbeen fixed for each one of the animals composing thesame.
IMPLIED WARRANTY IN SALE OF ANIMALS
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Art. 1573. The provisions of the preceding
article with respect to the sale of animals
shall in like manner be applicable to the sale
of other things. Art. 1574. There is no warranty agains