REMEDIES OF PARTIES FOR BREACH OF CONTRACT OF SALE

SUBJECT MATTER: MOVABLES (IN GENERAL)

REMEDIES OF UNPAID SELLER

• Any man may not take law in his own hands, must seek remedy through courts

• Exception:

1. DOCTRINE OF SELF HELP

2. SPECIAL REMEDIES

• Requisites:

1. Subject matter – goods

2. Seller is unpaid – not completely paid or received negotiable instrument under a condition & condition has been breached by reason of dishonor

3. Physical possession is with seller

1. possessory lien
2. stoppage in transitu
3. special right of re-sale Can only be exercised when the 2 prior rights
4. special right to rescind have been exercised

POSSESSORY LIEN

• Seller not bound to deliver if buyer has not paid him the price

• Right to retain; cannot be availed when seller does not have custody

• Exercisable only in following circumstances:

a. goods sold without stipulation as to credit

b. goods sold on credit but term of credit has expired

c. buyer becomes insolvent

• When part of goods delivered, may still exercise right on goods undelivered

• Instances when possessory lien lost:

a. seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them

b. buyer or his agent lawfully obtains possession of goods

c. waiver

• loses lien when he parts with goods (still has stoppage in transitu)

• notice by seller to buyer not essential

STOPPAGE IN TRANSITU

• Requisites:

1. Goods are in transit

• When goods are in transit

 From the time goods are delivered to carrier for purpose of transmission to buyer

 Goods rejected by buyer & carrier continues to possess them

• When goods no longer in transit

 Reached point of destination

 Before reaching destination, buyer obtains delivery of the goods

 Goods are supposed to have been delivered to buyer but carrier refused

2. Shown by seller that buyer is insolvent (failure to pay when debts become due )

• How is right exercised:

a. Obtain actual possession of goods

b. Give notice of claim to carrier / bailee in possession thereof

• Notice by seller to buyer is not required; notice to carrier is essential

SPECIAL RIGHT TO RESELL THE GOODS

• Requisites:

1. goods are perishable

2. stipulated the right of resale in case buyer defaults in payment

3. buyer in default for unreasonable time

• notice by seller to buyer not essential

• why special – there are things which seller cannot do in ordinary sale:

1. ownership is with buyer but seller can sell goods

2. title accorded to buyer is destroyed even without court intervention

SPECIAL RIGHT TO RESCIND

• why special – ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court intervention but in ordinary sale, need to go to court to destroy transfer of ownership

• Requisites:

1. Expressly stipulated

2. Buyer is in default for unreasonable time

• Notice needed to be given by seller to buyer

REMEDIES OF BUYER

• When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT OF DAMAGES

SALE OF MOVABLES ON INSTALLMENT

REMEDIES OF UNPAID SELLER (1484)

1. Exact fulfillment should the buyer fail to pay

2. Cancel the sale if buyer fails to pay 2 or more installments

3. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments

• If buyer chooses foreclosure, no further action against buyer to recover any unpaid balance of the price

• When is the law applicable: Sale on movables by installment

• Sale on installment: payment by several partial payments in small amount

• Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment & at the same time remedy abuse of commercial houses

• Nature of remedies: alternative & not cumulative

• Coverage: sale & financing transaction & contracts of lease with option to purchase

• Action : Judicial & Extrajudicial

SPECIFIC PERFORMANCE

• If already chose specific performance, can no longer choose other remedies

• Except: after choosing, it has become impossible, rescission may be pursued

RESCISSION

• When chosen, there is correlative obligation to restitute

• But stipulation that installments paid are forfeited are valid if not unconscionable

• Deemed chosen when:

a. Notice of rescission is sent

b. Takes possession of subject matter of sale

c. Files action for rescission

• Barring effect on recovery of balance

FORECLOSURE

• Barring effect on recovery of balance

• Extent of barring effect: purchase price

• Exception: mortgagor refuses to deliver property to effect foreclosure, recover also expenses incurred in attorneys fees, etc. (Perverse Buyer-Mortgagor)

IMMOVABLES (IN GENERAL)

REMEDIES OF SELLER

1. Anticipatory breach

• Seller has reasonable grounds to fear loss of immovable sold & its price – sue for RESCISSION

2. Non – payment of price

• RESCISSION

REMEDIES OF BUYER

1. Disturbed in possession or with reasonable grounds to fear disturbance

• SUSPEND PAYMENT

2. In case of subdivision or condo projects

• If real estate developer fails to comply with obligation according to approved plan:
a) RESCIND

b) SUSPEND PAYMENT UNTIL SELLER COMPLIES

IMMOVABLES (BY INSTALLMENT)

• 1592 – Applies only to contract of sale

• Maceda Law – applies to COS & CTS & Financing

MACEDA LAW

• Coverage: REAL ESTATE – defined space vs. CONDO – not defined space (w/ common areas)

1. contract of sale

2. contract to sell

3. financing transactions

• Excluded:

1. industrial

2. commercial

3. sale to tenants under agrarian laws

• RIGHTS GRANTED TO BUYERS:

1. Buyer paid at least 2 years installment

a. Pay without interest the balance within grace period of 1 month for every year of installment payment

• Grace to be exercised once every 5 years
b. When no payment - cancelled; buyer entitled to 50% of what he has paid + if after 5 years of installments, 5% for every year but not to exceed 90% of total payments made

• Cancellation to be effected 30 days from notice & upon payment of cash surrender value

2. Buyer paid less than 2 years installment

a. 1st Grace period is 60 days from date installment became due

b. 2nd grace period of 30 days from notice of cancellation/demand for rescission

• buyer can still pay within the 30 day period
• with interest

c. No payment after 30 day period, can cancel.

• Purpose of law : Protect buyers in installments against oppressive conditions

• Notice needed – waiver thereof if oppressive

• Apply to contracts even before law was enacted

• Stipulation to contrary is void

• Other rights:

a. Sell rights to another

b. Reinstate contract by updating during grace period & before actual cancellation

c. Deed of Sale to be done by notarial act

d. To pay in advance any installment or the full balance of price anytime without interest

e. Have full payment annotated in certificate of title