Presentation on Sales based on the Civil Code of the Philippines. Topics include obligations of the vendor, obligations of the vendee, and right of first refusal.

1. SALES
Obligations of the vendor
Obligations of the vendee
Right of first refusal
CIVIL LAW REVIEW 2
subtopic
presented by
Emi Leah A. Cagampang

2. Obligations of the Vendor
• Preserve the subject matter.
• Transfer the ownership of the thing.
• Deliver the thing, its fruits,
accessories, and accessions.
• Warrant subject matter against
eviction and hidden defects.

3. Preserve the subject matter.
Article 1163. Every person obliged to give
something is also obliged to take care of it with
the proper diligence of a good father of a family
unless the law or the stipulation of the parties
requires another standard of care.
To take care of the thing, pending delivery, with
proper diligence.

4. Transfer the ownership of the thing.
Article 1495. The vendor is bound to transfer
the ownership of and deliver, as well as
warrant the thing which is the object of the
sale.

5. GENERAL RULE
The seller need not be
the owner of the thing
at the time of
perfection of the
contract. It is
sufficient that the
seller has a right to
transfer ownership
thereof at the time it
is sold or delivered.
REASON: Sale by itself does not
transfer or affect ownership; the
most that sale does is to create
the obligation to transfer
ownership.
EXCEPTION
Foreclosure sale
under the doctrine
of "the mortgagee
in good faith"
based on the rule
that all persons
dealing with
property covered by
a Torrens
Certificate of
Title are not
required to go
beyond what appears
on the face of the
title. (Art. 2085)
NOTE
A perfected contract
of sale cannot be
challenged on the
ground of the seller’s
non-ownership of the
thing sold at the time
of the perfection of
the contract. It is at
delivery that the law
requires the seller to
have the right to
transfer ownership of
the thing sold.
(Cavite Development
Bank v. Sps. Lim, G.R. No.
131679, 2000)

6. Deliver the thing, its fruits, accessories, and accessions
Article 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall acquire
no real right over it until the same has been delivered to him.
Article 1166. The obligation to give a determinate thing includes that
of delivering all its accessions and accessories, even though they may
not have been mentioned.
Article 1537. The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they were upon the
perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the
contract was perfected.

7. Warranty against eviction and hidden defects
A warranty is a statement or representation
made by the seller of goods, contemporaneously and as part of
the contract of sale, having reference to the character, quality or
title of the goods, and by which he promises or undertakes to
insure that certain facts are or shall be as he then represents
them. (Ang v. CA, G.R. No. 177874, 2008)

8. Implied Warranty:
• Seller has the right to
sell.
• Warranty against eviction.
• Warranty against Non-
Apparent Servitude.
• Warranty against hidden
defects.
• Warranty against
Redhibitory Defects on
Animals.
• Warranty as to fitness or
quality of goods.
• Warranties under the
Consumer Protection Act.
(R.A. 7394)
Express Warranty:
• There must be an
affirmation of fact or any
promise by the seller;
• The affirmation of fact or
any promise must be in
relation to the thing;
• The natural tendency of
such affirmation or promise
is to induce the buyer to
purchase the same; and
• The buyer purchases the
thing relying thereon.
(Art. 1546)
Two Kinds of
Warranties

9. Obligations of the Vendee
• Inspection/buyer’s right to examine
• Accept the delivery of the thing
sold.
• Pay the price.

10. General rule: The buyer is not deemed
to have accepted the goods delivered which he
has not previously examined unless and until he
has had a reasonable opportunity to examine them
for the purpose of ascertaining whether they are in
conformity with the contract.
Exception: If there is a stipulation to the contrary
[par. 1, Art. 1584, CC]
Inspection/buyer’s right to examine

11. General rule: The seller is bound,
when he tenders delivery to the buyer, on request,
to afford the buyer a reasonable opportunity to
examine the goods for the purpose of ascertaining
whether they are in conformity with the contract.
Exception: Unless otherwise agreed upon [par. 2,
Art. 1584, CC]
Inspection/buyer’s right to examine

12. Exception to the right to examine: C.O.D.
Sales
Where goods are delivered to a carrier by the seller, in
accordance with an order from or agreement with the buyer,
upon the terms that the goods shall not be delivered by the
carrier to the buyer until he has paid the price, whether such
terms are indicated by marking the goods with the words
"collect on delivery," or otherwise, the buyer is not entitled
to examine the goods before the payment of the price, in the
absence of:
• agreement; or
• usage of trade
• permitting such examination. [par. 3, Art. 1584, CC]
Inspection/buyer’s right to examine

13. Where to accept:
• at time and place stipulated in the contract
• if none specified – at the time and place of delivery
goods (Art. 1582)
There is acceptance when:
• He intimates to seller that he has accepted
• When delivered and buyer does any act
inconsistent with ownership of seller
• Retains without intimating to seller that he has
rejected (Art. 1585)
Accept delivery of the thing sold

14. Buyer is obligated to pay the price
according to the terms agreed upon regarding
time, place and amount (Art. 1582)
• If payment of interest is stipulated – must pay; if
amount of interest not mentioned – apply legal
rate
• When buyer defaults – constitutes breach;
subject to specific performance/rescission and
damages; interest to be paid also from default
Pay the price

15. Right of First Refusal
A right of first refusal (“RFR”) covers a situation wherein a
promise on the part of the owner of a property is made that if he decides to sell the
property in the future, he will first negotiate its sale to the promisee.
It creates a promise to enter into a contract of sale in the event the seller decides to
sell his/her property and it has no separate consideration. It is not subject to specific
performance because there is no contractual relationship here and it is not an
obligation to give (not a real contract).

16. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
FACTS: Petitioners filed a complaint against
Unjiengs, alleging that Unjiengs informed them that
they are offering to sell the premises and are giving
them priority to acquire the same; that during the
negotiations, Unjiengs offered a price while
Petitioners made a counteroffer; that Petitioners
asked the Unjiengs to put their offer in writing and
to specify the terms and conditions of the offer to
sell; that when Petitioners did not receive any reply
and because of information received that defendants
were about to sell the property to another,
Petitioners were compelled to file the complaint to
compel Unjiengs to sell the property to them.

17. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
FACTS: Judgment was rendered in favor of the
Unjiengs summarily dismissing the complaint
subject to the aforementioned condition that if
the defendants subsequently decide to offer their
property for sale for a purchase price of 11
million pesos or lower, then the Petitioners has
the option to purchase the property or of first
refusal, otherwise, defendants need not offer the
property to the Petitioners if the purchase price
is higher than 11 million pesos.

18. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
FACTS: While the case was pending consideration by
the SC, the Unjieng spouses executed a Deed of Sale
to the Private Defendant (Buen Realty). Private
Defendant wrote a letter to the Petitioners
demanding to vacate the premises. Petitioners
replied stating that Buen Realty brought the
property subject to the notice of lis pendens. The
Petitioners filed a Motion for Execution to the RTC
who ordered defendants to execute the necessary
Deed of Sale of the property in litigation in favor
of the Petitioners for the consideration of 15
million. CA set aside and declared without force
and effect. Hence this case.

19. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
ISSUE: Can Buen Realty be bound by the writ of
execution by virtue of the notice of lis pendens?
RULING: No. Right of first refusal is not a
perfected contract of sale under Article 1458 of
the Civil Code In the law on sales, the so-called
“right of first refusal” is an innovative juridical
relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article
1458 of the Civil Code.

20. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
RULING: In a right of first refusal, while the object
might be made determinate, the exercise of the right,
however, would be dependent not only on the grantor’s
eventual intention to enter into a binding juridical
relation with another but also on terms, including
the price, that obviously are yet to be later firmed
up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical
relations governed not by contracts (since the
essential elements to establish the vinculum juris
would still be indefinite and inconclusive) but by
the pertinent scattered provisions of the Civil Code
on human conduct.

21. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
RULING: Even on the premise that such right of first
refusal has been decreed under a final judgment, like
here, its breach cannot justify correspondingly an
issuance of a writ of execution under a judgment that
merely recognizes its existence, nor would it
sanction an action for specific performance without
thereby negating the indispensable element of
consensuality in the perfection of contracts. It is
not to say that the right of first refusal would be
inconsequential for an unjustified disregard thereof,
given, for instance, the circumstances expressed in
Article 19 of the Civil Code, can warrant a recovery
for damages.

22. ANG YU ASUNCION vs. CA, G.R. No. 109125, (1994)
RULING: The final judgment in Civil Case No. 87-
41058 has merely accorded a "right of first
refusal" in favor of petitioners. In fine, if
petitioners are aggrieved by the failure of private
respondents to honor the right of first refusal,
the remedy is not a writ of execution on the
judgment, since there is none to execute, but an
action for damages in a proper forum for the
purpose.

23. Right of First Refusal
New doctrine: May be subject to specific performance in a specific
instance.
The RFR is only subject to specific performance insofar as it is attached to a valid
written principal contract (e.g. lease). RFR becomes one of the considerations in the
contract. If RFR is violated, and property sold to another buyer in bad faith, the sale to
the 3rd party buyer is rescissible. The price for the 3rd party buyer is to be the basis
for the price of the sale back to the one with the RFR. Lessee can exercise the right of
first refusal once the sale to the third party is set aside or rescinded. (Equatorial
Dev’t v. Mayfair Theater, G.R. No. 106063, 2006)

24. Right of First Refusal
Effect of new doctrine: Turned the world of imperfect promise
(policitacion) upside down because while valid option contract
is not subject to specific performance, right of first
refusal, which does not even have a separate consideration,
may be subject to specific performance. It recognizes recovery
of damage based on abuse of rights doctrine.
Only after the optionee fails to exercise his right of first
priority under the same terms and within the period
contemplated, could the owner validly offer to sell the
property to a third person under the same terms as offered to
the optionee. (Parañaque Kings v. CA, G.R. No. 111538, 1997)

25. RIGHT OF FIRST REFUSAL
• Accessory; cannot stand
on its own
• Does not need separate
consideration
• There must be subject
matter but price is not
important
• Conditional
• Subject to specific
performance
OPTION CONTRACT
• Principal contract;
stands on its own
• Needs separate
consideration
• Subject matter and
price must be valid
• Not conditional
• Not subject to specific
performance
Option Contract Distinguished from Right of First Refusal

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