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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How to terminate a contract of agency

The contract of agency may be extinguished by the following modes:

  1. By revocation of the agency;
  2. By the withdrawal of the agent;
  3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent;
  4. By the dissolution of the firm or corporation which entrusted or accepted the agency;
  5. By the accomplishment of the object or purpose of the agency; or
  6. By the expiration of the period for which the agency was constituted.[1]

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Payment or Performance

Payment refers to either the delivery of money and/or the performance, in any other manner, of an obligation. The currency stipulated by the parties is the basis of the payment for debts in money. If it is not possible to do so, then the debt is to be paid in the currency which is legal tender in the Philippines. For obligations to give, a payment is only valid if the person making payment has free disposal of the thing due and capacity to alienate it.

As a general rule for obligations to give, a debt is only considered paid if the thing or service in which the obligation consists has been completely delivered or rendered. However, there is no valid payment to the creditor by the debtor who had been judicially ordered to retain the debt. By way of exception to the general rule, the debtor who has substantially performed in good faith its obligations has the right to recover (or demand performance against the creditor) as if there had been a strict and complete fulfillment less damages that the creditor may have been suffered. This is the rule on substantial compliance.

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