Extinguishment of Sale: How to Terminate a Sales Contract

Extinguishment of sale in general

In general, a sales contract may be extinguished by the same causes as all other obligations and by conventional or legal redemption.[1]

Conventional redemption

Conventional redemption happens “when the vendor reserves the right to repurchase the thing sold, with the obligations to comply with the provisions of Article 1616[2] and other stipulations which may have been agreed upon.”[3] The right to repurchase lasts only for four years from date of the contract unless otherwise stipulated.[4] If there is an express agreement to extend the right to repurchase, it cannot exceed 10 years.[5]

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Actions for breach of sales contract of goods

Actions for price of goods by seller

In case of breach of sales contract of goods, the seller may have the following actions against the buyer for the price of goods if:

  1. The ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the sales contract;[1] or
  2. The price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although the ownership[2] in the goods has not passed.[3]

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Rights and Obligations of the Buyer in Sales Transactions

Acceptance of delivery and payment of purchase price

The buyer is obligated to accept delivery and to pay the price of the thing sold at the time and place[1] stipulated in the contract.”[2] Except as otherwise agreed upon, the buyer is not required to accept delivery by installments.[3]

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Warranty against hidden defects or encumbrance in sales transactions

Hidden defects

The seller is responsible for warranty against the hidden defects which the thing sold may have, if they render it unfit for the use for which it is intended, or if they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it.[1] The said vendor is not answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.[2]

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Seller’s warranty in case of eviction

The seller is liable for the eviction of the buyer even if there is no stipulation on the matter in their contract.[1] Notwithstanding, the seller and the buyer may increase, diminish, or suppress this legal obligation of the vendor.[2]

The seller is liable for eviction if the property is sold for nonpayment of taxes due and it is not made known to the buyer before the sale.[3]

The seller (as judgment debtor) is liable for eviction in judicial sales, except if otherwise decreed in the judgment.[4]

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Conditions and warranties in sale on seller

Sales contract with suspensive condition

If the sales contract is under a suspensive condition which is not met, the innocent party may refuse to proceed with the contract or he may waive performance of the condition.[1]

Breach of warranty

In addition to the above rule, the innocent party may also consider the non-performance of the condition as a breach of warranty if the other party has promised that the condition should happen or be performed.[2]

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Seller’s obligation to deliver

The seller is obligated to transfer the ownership of and deliver the object of the sale, as well as answer for its warranty.[1]

The buyer acquires ownership of the thing sold from the moment it is delivered to him: (a) through the various modes of delivery, or (b) in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.[2] Not mere agreements but tradition or delivery transfers the ownership of things (Non nudis pactis sed traditione dominia rerum transferentur).[3]

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