SPECIAL CONTRACTS Sales By the contract of sale one of the contracting parties obligates himself t o transfer the ownership

of and to deliver a determinate thing and the other to pay therefore a price certain in money or its equivalent. Requisites: 1. consent of the contracting parties; 2. object certain which is the subject matter of the contract; and 3. price certain in money. Characteristics: 1. 2. 3. 4. 5. 6. consensual: bilateral and reciprocal; principal; onerous; commutative; and nominate.

Distinctions Contract of Sale 1.by agreement, 1. title passes ownership is reserved in Contract to Sellto vendee upon delivery vendor and will not pass until full pay 2.full 2.non-payment is positive suspensive condition ment paymentis aanegative resolutory condition

3. Vendor has lost and cannot recover ownership until and unless contract is res 3. Title remains in olved or rescinded. vendor and when he seeks to eject because of non-payment, he is enforcing contract and not resolving the same. 2.uncertainly is hopehope) 1.sale SpeiSperatae (potentialexpancy Emptio Resthing havinghope orthe existenceand quality but not with regard to exi of a (salewith regard existence) mere of potential quantity 2.unceratinly is stence of thing with regard existence of thing 3.contractsubjectwiththe condition that theor expectancy exist. 4.sale is dealseffectfuturethough thing itself does not come into existence. produces to presentthing even thing hope thing should Rules to Determine Whether Contract Is One of sale or For a Piece of Work: a. ordered in ordinary course of business-Sale b. manufactured special and not for the market-Piece Work. Schools of Thought: 1. Massachusetts Rule - specially done at the order of the another, contract for piece of work; 2. New York rule - if things already exists Sale - if thing does not exist Piece of Work; 3. English Rule material more valuable Sale - skill more valuable - Piece of Work. Rules to Determine Whether Contract Is One of Sale or barter:

1st intent; 2nd if intent is not clear; a. thing more valuable b. 50-50 Sale c. thing less valuable than the money

Sale.

Persons Prohibited From Acquiring Property by Purchase: The following persons cannot acquire by purchase, even at a public or judicial a uction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his gua rdianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unlees the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administratio n; (4) Public officers and employees, the property of the State or of any subdivisi on thereof, or of any government owned or controlled corporation, or institution , the administration of which has been entrusted to them; this provision shall a pply to judges and government experts who, in any manner what so ever, take par t in the sale; (5) Justices, judges, prosecuting attorneys, clerks of the superior and inferior courts, and other officers and employees connected with the administration of j ustice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise there respective functions; this prohibition includes the act of acquiring by assignment and sha ll apply to lawyers, with respect to the property and rights which may be the ob ject of any litigation in which they may be the object of any litigation in whic h they may take part by virtue of their profession. (6) Any others specially disqualified by law. General Rule: the vendee acquires no better title to the object than the vendor hard. Exceptions: 1. owner of the goods is by his conduct precluded from denying the seller s author ity to sell; 2. The provision of any factors act, recording laws, or any other provision of l aw enabling the apparent owner of goods to dispose of them as if he were the tru e owner thereof; 3. The validity of any contract of sale under statutory power of sale or under t he order of a court of competent jurisdiction; 4. Purchases made in a merchant s store, or in fairs or markets in accordance with the code of commerce and special laws. Price in Certain If: 1. 2. 3. on or specified in terms of money; certain with reference to another thing certain; if the determination of the price is left to the judgment of a specified pers or persons;

4. price of securities, grain, liquids, and other things is certain when the pri ce fixed is that which the things sold would have on a definite day or in a part icular exchange or market . Such price maybe considered as floor or ceiling pric e provided it be certain. If price cannot be determined, sale is void. Earnest Money - part of the purchase price advanced by the vendee to the vendor as a token of the perfection of the contract. Who Bears the Loss of the Thing Sold: 1. Before delivery seller } Principle 2. After delivery - buyer } perit domino 3 after perfection but before delivery buyer, expect: a. when object sold consists of fungible goods for a price fixed according to weight, number or measure; b. seller is guilty of fraud, negligence, default or violation of contractu al terms; or c. object sold is generic (genus nunguam perit). Sale by Description seller sells things as being of a certain things as being of a certain kind, buyer merely relying on the seller s representation or descrip tions. Sale by Samples - seller warrants that the bulk of the goods shall correspond with the sample in kind, quality and character. Sale by Description and Sample must satisfy the requirements of both.

Remedies Available to Vendor in Case of Non-Payment of Installment in a Contract of Sale of Personal Property by ] Installment: 1. Exact fulfillment of the obligation, should be vendee fail to pay; 2. cancel the sale, should the vendee s failure to pay cover 2 or more installment s; or 3. foreclose the chattel mortgage on the things sold if one has been constituted should vendee s failure to pay cover 2 more installments. In the last case, he shall have no further action against the purchaser to reco ver any unpaid balance of the price; any agreement t o the contrary shall be void. The preceding shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor , has deprived the lessee of the po ssession or enjoyment of the thing. Any stipulation that the installments or ren ts paid shall not be returned to vendee or lessee shall be valid insofar as same may not be unconscionable under the circumstances. Realty Installment Buyer Protection Act (RA 6552) Requisites: 1. transactions or contracts of sale or financing of real estate on installment payments, including residential condominium apartments; and 2. buyer has paid at least 2 years of installments. Buyer is Entitled to the following in case of Default in Payment of Succeeding I

nstallments: 1. to pay without additional interest, unpaid installments due within grace peri od = 1 month per 1 year of payments made. May be exercised only once every 5 yea rs of life of contract and extensions. 2. when contract is canceled, seller to refund to buyer cash surrender value of payments equal to 50% of total payments made, after 5 years of installments pl us 5% every additional year there from but shall not exceed 95% of total payment s made. Requisite for cancellation: a. 30 days prior notice to buyer of cancellation of rescission by notarial act; b. Payments of the cash surrender value. . Down payments, deposits or options paid include in computation of total payments made. . In case of less than 2 years of installments, buyer s grace period for No . 1 must not be for less than 60 days from date installment became due. If buyer s fails to pay unpaid installments, seller may cancel contract. . Any stipulations to the contrary shall be void. General rule: Husband and Wife cannot sell property to each other. Exceptions: 1. when a separation of property was agreed upon in the marriage settlement; or 2. where there has been a judicial separation of property. Obligations of Vendor: 1. 2. 3. 4. to to to to transfer ownership; deliver; warrant the object sold; and preserve the thing from perfection to delivery.

General Rule: Ownership is transferred only upon delivery. Exception: Unless otherwise stipulated. Kinds of Delivery: 1. actual or real; 2. legal or constractive a. b. c. d. e. legal formalities; traditio symbolica; traditio longa manu; traditio brevi manu; traditio constitutum possessorium; delivery of rights, credits or incorporeal property, made by:

3. Quasi-tradition

a. placing titles of ownership in the hands of the buyer; or b. Allowing buyer to make use of rights.

Pactum reservati Dominii stipulation, in sale by installment plan, whereby, desp ite delivery of the property sold ownership is still with the seller until full payment of the price is made. Transactions on sale or return sale with resolutory condition; buyer has option to return the goods instead of paying the price; ownership is vested to buyer upon delivery but he may revest title to seller by returning within the period fixed . Transactions on approval or on trial or approval ownership passes to buyer when he signifies his approval or, if he does not but retains the goods without rejecti on, upon the expiration of the time fixed. Rules: a. title remains to seller; b. risks remains to seller; and c. buyer must put goods on trial. General Rule: When seller is not the owner of the thing sold, buyer acquires no better title than the seller over the thing sold. Exceptions: E 1. . when the owner estopped or precluded by his conduct from denying the v endor s authority to sell; R 2. when sale is made by registered owner or apparent owner in accordance w ith recording or registration Laws; S 3. where sale is made pursuant to a statutory power of sale or under the o rder of court; or M 4. where purchase was made in merchant store or in fairs or markets. KEY: E R S M Negotiable Document of Title document of title stating the goods referred therei n will be delivered to the bearer or to the order of any person named in such do cument. Kinds: 1. bill of lading; 2. dock warrant; 3. quedan; 4. warehouse receipts or order; and 5. any other document used as proof of possession or as authority to transfer th e goods represented by it. Warranties: 1. document is genuine; 2. that transferor has legal right to negotiate or transfer it; 3. transferor has knowledge of fact which would impair validity or worth of docu ment; and 4. transferor has the right to transfer the title to the goods and that the good s are merchantable or fit for particular purpose.

Persons Who May Negotiate; 1. by the owner thereof; or 2. by any person to whom the possession or custody of the document has been entr usted by the owner, if, by the terms of the document the bailee issuing the docu ment undertakes to deliver the goods to the order of the person to whom the poss ession or custody of the document has been entrusted, or if at the time of such entrusting the document in such form it may be negotiated by delivery. Who Are Deemed Unpaid Seller: 1. only part of the price has been paid or tendered; 2. dishonor of negotiable instrument delivered. Remedies of Unpaid Seller: 1. 2. 3. 4. possessory lien on the goods or right to return; right of stoppage in transitu; right of resale; and right to rescind sale.

Right to Retain Goods Available to Unpaid Seller, When: 1. the goods have been sold without any stipulation as to credit; 2. where the goods have been sold on credit, but the term of credit has expired; or 3. where the buyer becomes insolvent. Right to Retain Goods is Lost by Unpaid Seller, When: 1. he delivers the goods to a carrier or other bailee for transmission to the bu yer without reserving ownership in the goods or the right yo the possession ther eof; 2. buyer or his agent lawfully obtains possession of the goods; or 3. by waiver thereof. Right to Resale Available To Unpaid Seller, When: 1. perishable nature of the goods; 2. expressly reserved; 3. unreasonable default in the payment; Right to rescind Available To Unpaid Seller, When: 1. such right was reserved by seller; or 2. unreasonable default of buyer. Rules of Preference In Case of Double Sale: 1. 2. a. b. c. personal property possessor in good faith; real property registrant in good faith; possessor in good faith; or person with oldest title in good faith. Condition and Warranties Express Warranty any affirmation of fact or any promise by the seller relating t o the thing if the natural tendency of such affirmation or promise is to induce

the buyer to purchase the same if the buyer purchases the thing relying thereon. Implied Warranties In a Contract of Sale: 1. implied warranty against eviction; and 2. implied warranty against hidden defect. Requisites of Lawful Eviction: 1. there is a final judgment; 2. purchaser has been deprived in whole or in part of the thing sold; 3. deprivation was by virtue of a right prior to the sale effected by the seller ; and 4. vendor has been previously notified of the compliant for eviction at the inst ance of the purchaser. Seller Must Give In case of Eviction; V I C E D 1. value; 2. income; 3. costs; 4. expenses; and 5. damages, if seller was in bad faith. KEY: V I C E D Requisites For Recovery In case Of hidden Defect: 1. 2. 3. 4. 5. defect defect defect defect action must must must must must be hidden; exist at the same time of sale; ordinarily have been excluded from the contract; be important; and be instituted within the statute of limitations.

Accion Redhibitoria - instituted by the vendee against the vendor to avoid a sa le on account of some vice or defects in the things sold which renders it unfit for the use intended or which will diminish its fitness for such use to such an extent that had the vendee been aware thereof, he would not have acquired it. Accion Quanti Minoris action to procure the return of a part of the purchase pri ce paid by the vendee to the vendor by reason of such defect. Vendee May Suspend Payment of Price, When: 1. should he be disturbed in his possession or ownership of thing sold; and 2. should he have reasonable grounds to fear such disturbance by a vindicatory a ction or by foreclosure or mortgage. Such right does not exist when: 1. 2. 3. 4. there is stipulation to the effect; 2. vendor gives security for return of price; vendor have caused the disturbance or danger to cease; or Disturbance consist only of a mere act of trespass.

When vendee Liable for interest on the Price: 1. Should it have been so stipulated; 2. Should the thing sold and delivered produce fruits or income; and

3. Should he be in default, from the time of judicial or extrajudicial demand fo r the payment of the price. Convention Redemption - takes place when vendor reserves thee right to repurchas e the thing sold with the obligation to reimburse to the vendee the price of the sale, expenses of the contract, other legitimate payments made by reason of sal e as well as necessary and useful expenses made in the thing sold. Conventional Redemption Presumed Equitable Mortgage, When: 1. price of sale is usually inadequate; 2. vendor remains in possession as lessee or other wise; 3. another instrument extending period of redemption or granting a new period is executed; 4. purchaser retains part of purchase price; 5. vendor binds to pay taxes; 6. real intent is to secure the payment of a debt or performance of other obliga tion; and 7. when there is doubt as to whether contract is contract of sale with right of repurchase or an equitable mortgage. Obligation of Vendor a retro; 1. To return to the vendee the price of the sale; 2. To pay the expenses of the contract and other legitimate payments made by rea son of the sale; and 3. To pay all necessary and useful expenses made on the thing sold. Legal Redemption right to be subrogated upon the terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction where by ownership is transmitted by on erous title. Trust De Son Tort a trust created by the purchase of redemption of property by o ne other than the person lawfully entitled to do so and in fraud of the of the o ther. Distinctions 3. there after sale 2. noRedemptionissale directed the the prospective 1. arises beforeemption noagainst original sale seller. action can be rescission sale as yetbuyer. Therescission because action heredirected of against exists here Preis Assignment of Credit and Other Incorporeal Rights . Transferring gratuitously or onerously the right of the assignor to the assign ee, who would then be allowed to proceed against the debtor. Warranties in the Assignment of Credit: 1. credit itself; and 2. person of the debtor.

Rights included in Assignment of Credit: 1. 2. 3. 4. guaranty; mortgage; pledge; or Preference.

Indenture of assignment - assignment of goods by way of security for the paymen t of an obligation under a promissory note. Barter of Exchange . contract by virtue of which one of the parties binds him self to give one thi ng in consideration of other s promise to give another thing. Agency Contract of Agency a person binds himself to render some service or to do someth ing in representation or in behalf of another, with the consent or authority of the latter. Requisites; 1. 2. 3. 4. consent, either express or implied to establish agency; object, the execution of a juridical act in relation to a 3rd person; agent acts as representative and not for himself; and agent acts within the scope of his authority.

Kinds: 1. as a constitution a. express; or b. implied: (i) from the acts of the principal; (ii) from his silence or lack of action; (iii) failure to repudiate the agency. 2. as a form a. oral; or b. Written. 3. as to cause a. onerous for a compensation; or b. gratuitous not for a compensation. 4. as to extent a. general b. special comprises all business of principal; or comprises 1 or more specific transaction.

5. as to 3rd persons a. agent de jure; or b. agent by estoppel when a person, who is not really an agent, represents himse lf or is represented as such. Distinctions 2. not agent EstoppelAgent 1. truereally Impliedjure agent, with rights and duties as such the principal l third personsaagent Agent by , who deal with the implied agent can always hold an de 2. those who deal with an agent by estoppel cannot always hold the principal lia iable ble

Distinctions 4. agent exercises discretion is 3. concurrence contract 2. extinguishedof will principal functions 1. principleexercises ministerial power to only Contract of Lease parties necessary Contact of Agency of Services ary applied attain end for which he was appointed principal contract preparatory employment applied employee of representation at Special Power of Attorney is Necessary in the Following Cases: 1. to make payments not usually considered as acts of administration; 2. to effect novations which put an end to obligations already in existence at t ime agency was constituted; 3. to compromise to submit questions to arbitration, to renounce right to appeal from judgment, to wave objections to venue of an action or to abandon a prescri ption already acquired; 4. to waive any obligation gratuitously; 5. to enter into any contract by which ownership over an immovable is transmitte d or acquired, either gratuitously or for consideration; 6. to make gifts, except customary ones for charity or those made to employees i n the business managed by the agent; 7. to loan or borrow money, unless it be urgent and indispensable for the preser vation of the things under administration ; 8. to lease any real property to another person for more than one year; 9. to bind principal to render some service without compensation; 10. to bind principal in a contract of partnership; 11. to obligate principal as guarantor or surty; 12. to create or convey real rights over immovable property; 13. to accept or repudiate an inheritance; 14. to ratify or recognize obligation contracted before the agency; and 15. any other act of strict dominion. Principles of Agency; 1. agent must act within the scope of his authority; and 2. agent must act in behalf of his principal. Effects of Agent s Acts: 1. with authority a. in principal s behalf valid b. Agent s behalf not binding on principal; agent and stranger are the only partie s, except regarding things belonging to principal. 2. without authority a. in principal s behalf unauthorized and unenforceable but may be ratified, in wh ich case, may be validated retroactively from beginning; b. in agent s behalf valid. Authority right of an agent to effect the legal relations of his principal by th e performance of acts effectuated in accordance with the principal s manifestation of consent. Kinds: 1. express clearly defined 2. implied includes necessary acts to accomplish purpose; 3. general agent s discretion is complete; 4. special particular instructions are given; and 5. Apparent- agent or 3rd person was led by principal s conduct or word to believe that the agent was indeed authorized, when in fact he was not. Authority of Agent by Necessity by virtue of the existence of an emergency, the

authority of an agent is corresponding enlarged in order to cope with exigencies for the moment. Requisites: E C A L C 1. 2. 3. 4. 5. Existence of an emergency; Inability of the agent to communicate with the principal; Exercise of additional authority for principal s own protection; The adoption of fairly legal means, premises duly considered; and Ceasing of authority the moment emergency no longer demands the same. KEY: L A C2 E

General Rule: agent may appoint a substitute. Exception: when he has been prohibited by the principal. Agent Shall Be Responsible for the Acts of the Substitute If: 1. when he was given the power to point one; 2. When he was given such power, but without designating the person, the person appointed was notoriously incompetent or insolvent. Commission Agent one engaged in the purchase and sale for a principal of persona l property , which for this purpose, has to be placed in his possession and at h is disposal (Commercial Commission) Factor age compensation of a factor or commission agent.

Efficient and Procuring Cause principle of law in agency whereby the broker, to be entitled to compensation, must be the efficient agent or procuring cause of the sale. Ready-Willing and-Able Rule to entitled a broker to compensation, he must produce a person who is ready, willing and able both to accept and live up to the terms offered by his principal. Guaranty Commission or Del Credere - fee that is given in return for the risk t he agent has to bear in the collection of credits. Agency coupled with an Interest an agency wherein the agent has acquired some in terest of his own in the execution of the authority granted to him, in addition to his mere interest in the contract of employment with the resulting gains. Revocation of Agency: . May be revoked expressly or impliedly. Implied Revocation: 1. By the act of the principal in appointing another agent for the same business or transaction; 2. By the act of the principal in directly managing the business entrusted to th e agent; or 3. By the acc of the principal in subsequently granting a special power of attor ney as regards the same business to another agent, where he had previously grant ed a general power of attorney to one agent. General Rule: agency is revocable by the principal at will. Exceptions:

1. if a bilateral contract depends upon it; 2. If it is the means of fulfilling an obligation already contracted; 3. if partner is appointed manager of the partnership in the contract of partner ship and his removal from the management is unjustifiable; and 4. If has been constituted in the common interest of the principal and of the ag ent or in the interest of a third person who has accepted the stipulation in his favor. Modes for Extinguishment of Agency: R 1. Revocation; W 2. Withdrawal of the agent; D 3. Death, civil interdiction, insanity or insolvency of the principal or of t he agent; D 4. Dissolution of the firm or corporation which entrusted or accepted the age ncy; A 5. Accomplishment of the object or purpose of the agency; and E 6. Expiration of the period. KEY: EDWARD Loan Commodatum contract where one of the contracting parties delivers to another non- consumable things so that the other may use the same for a certain time an d return it. Mutuum or simple loan contract where one of the contracting delivers the other m oney or any other consumable thing subject to the condition that the same amount of the same kind and quality be paid and returned. Distinctions 2.thing the thing 2.nature Depositum consumable 1.use ofmustclass of the 1. purpose: safekeeping object of the contract is immaterial of be nonCommodatum 4.constituted extra4.may be gratuitous 3. alwaysconstituted judicially or extra judicially 3.cause: may or may not be gratuitous only In Commodatum, Bailee Liable for Loss Even If Caused by For tuitous Event, When: 1. devoted thing to any purpose different from that for which it has been loaned ; 2. keeps it longer than period stipulated, or after accomplishment of use; 3. thing loaned has been delivered with appraisal of its value; 4. if he lends or leases it to 3rd persons who are not members of his household; or 5. if being able to save either of the thing borrowed or his own, he chose to sa ve the latter. Contract of Precarium commodatum where bailor has right to demand the return of their thing which is the object of the contract at will. Deposit . Constituted form the moment of a person receives a thing belongings to another with the obligation of safely keeping it and of returning the same. Kinds: 1. judicial constituted by court order for attachment or seizure of property in litigation; or 2. extra- judicial a. voluntary- effected by will of depositor;

b. necessary effected in compliance with legal obligation or on occasion of any calamity or by travelers in hotels or inns with regard to their effects or passe ngers in common carriers. Distinctions 5. as abejudicialownertoorder propertyparties 4.porpose:onerousorgratuitousof thing upon demand by depositor. 3. delivered obliged 3Judicial Deposit courtof contracting 2. depositaryonly will s right 2.must gen. rule,Depositreturn the court. 1. alwaysmovable upon order Extra protection by maybe movable immovable constitutedto property safekeeping Liability of Depositary for the Loss of the Thing Deposited Through Fortuitous E vent: 1. 2. 3. 4. If If If If it is stipulated; he uses the thing without the depositors permission; he delays its return; and he allows others to use the same.

Aleatory Contracts . one of the parties or both reciprocally bind themselves to give or to do some thing in consideration of what the other shall give or to do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. Leonine Contract of another. a contract in which one party gets the loin s share to determent

Contract of Insurance one undertakes for a consideration to indemnify another ag ainst loss, damage or liability arising from an unknown or contingent event. Game of Chance ity. that which depends more on chance or hazard than on skill or abil

Contract of Life Annuity binds the debtor to pay an annual pension or income du ring the life one or more determinate persons in consideration of a capital cons isting money or other property, whose ownership is transferred to him once with the burden of the income. Guaranty Contract of Guaranty contract where a person called a guarantor, binds himself t o a creditor to fulfill the obligation of the principal debtor in case the latte r should fail to do so. Contract of Suretyship contract where a person binds himself solidarily with the principal debtor to fulfill the obligation. Distinctions 2. subsidiary 1.primary liability 1. Guaranty assumes liability by virtue of an independent agreement to pay the Surety guarantor 5. guarantor solvency 4. insurer of principal 3. liability canoriginaldebtor fails excussion 2. surety ifis collateralbenefit of to party and division in case contract obligationassumesavail of debtor regulardo so. to the undertaking orcreditor pro the liability as a debt 5. surety cannot ceeds against him. Benefit of Excussion right by which guarantor cannot be compelled to pay the cre ditor unless the latter has exhausted all the property of the principal debtor, and has exhausted all of the legal remedies against such debtor. Benefit of Division in Favor of Guarantors should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. The creditor cannot claim from the guarantors except the sha res which they are respectively bound to pay, unless solidarity has been express ly stipulated.

Benefit of Excussion Shall Not Apply If: R 1. guarantor expressly renounced it: S 2. he has bound himself solidarily with the debtor; I 3. debtor is insolvent ; A 4. debtor absconded or cannot be sued in the Philippines E 5. execution upon property of principal debtor would not result in satisfac tion of the obligation: J 6. in the case of a judicial bondsman; or P 7. when the guarantor has constituted in favor of the creditor a pledge or mortgage as additional security. KEY: J P R A I S E Rights of Guarantor Who Pays Creditor 1. Reimbursement T a. total amount of debit; I b. legal interest thereof; E c. expenses incurred by guarantor; D d. damages, if any. 2. Subrogation. Guarantor May Proceed Against Principal Debtor Even Before Payment, When: 1. 2. 3. 4. 5. 6. 7. sued for payment; debtor is insolvent; guaranty with a period and period has expired; debt is already demandable; after the lapse of ten years; there is reasonable ground to fear principal debtor will abscond; and there is imminent danger of debtor becoming in solvent.

Extinguishment of Guaranty: 1. same grounds for extinguishment of obligations; and 2. creditor accepts immovable or other property in payment of the debt; 3. release of one of the guarantors by creditor without consent of the others sh all benefit the remaining ones to the extent of the share of the guarantor relea sed; 4. extension granted to debtor by creditor; and 5. when by any act of the creditor, the guarantors cannot be subrogated to the r ights, mortgages and preference one of the latter. Pledge . Accessory, real and unilateral contract where the debtor or a third perso n movable property as security for the performance of the principal obligation, upon fulfillment of which the thing delivered, shall be returned to the debtor o r to the third person. Requisites; S 1. constituted to secure principal obligation; O 2. pledgor must be the absolute owner of the thing pledged; F 3. pledgor must have free disposal of the thing pledged or legally authorized therefore;

A 4. when the principal obligation becomes due, thing pledged may be alienated to satisfy payment of such obligation; and P 5. thing pledged must be placed in the possession of the pledge. K E Y: S O A P F Pactum Commissorium pact or agreement in a contract of pledge, mortgage, or anti chresis where when debtor cannot fulfill the obligation, creditor can appropriat e or dispose of the thing given by way of pledge, mortgage or antichresis. Effect of Sale of the Thing Pledged: . shall estinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal obligation, interests and expenses in a proper case. If the price of the sale is more than said amount, the debtor shall not be entitled to the excess, unless other wise agreed upon. If the pric e of the sale is less, neither shall the creditor be entitled to recover the def iciency not withstanding any stipulation to the countrary. Real Estate Mortgage . Accessory contract whereby debtor guarantees the performance of the principal obligation by subjecting real property or real right as security in case of non fulfillment of such obligation within the period agreed upon. S A F 1. constituted to secure fulfillment of an obligation; 2. mortgagor must be the absolute owner of property mortgaged; 3. mortgagor must have free disposal of the property mortgaged, or legally authorized to do so; A 4. when the principal obligation becomes due, property mortgaged may be alie nated to satisfy payment of such obligation; and I 5. subject matter of the contract must be an immovable property or alienab le real rights upon immovable. K E Y: S A F A I

Special Characteristics of Real Mortgage: R s R A I I R 1. Realty as subject matter only real property or alienable rights or interest therein may be the subject matter of a mortgage; 2. Real right; 3. Accessory obligation; 4. Indivisibility; 5. Inseparability; and 6. Retention of Possession. K E Y : A I I R R R

Voluntary mortgages - those agreed to between the parties, or constituted by th e will of the owner of the property in which they are created. Legal mortgages those constituted by operation of law.

Equitable mortgages- those which lack one or some of those formalities or other requisites prescribed by law, but show the intention of the parties to charge re al property or real rights as security for the payment of a debt and contains n othing which is impossible or contrary to law. Distinctions Real Estate Mortgage 1. accessory contract Sale With Right of Repurchase principal

2. ownership of possession 2.no transferand ownership is transferred to buyer, although transfer is condit ional 3. creditor has noentitled to the fruits even pendency of the mortgage vendee a retro right to the fruits during during period of redemption 4. in case of non payment,made, title consolidates or disposeaof the property when no redemption was mortgage cannot alienate in vendee retro 5. in case of non payment,made, vendee a retroacquire the property mortgaged. when no redemption was mortgagee does not acquires the property irrevocably . Pacta De Non Alienado a stipulation in a mortgage by which the mortgagor agrees not to alienate or encumber the mortgaged premises to the prejudice of the mortg agee. Antichresis . contract whereby creditor acquires the right to receive the fruits of an immov able of his debtor with the obligation to apply them to the payment of interest, if owing and there after to the principal of his credit. Distinctions Antichresis 1. creditorReal Estateto receive the fruits of the property but with the obligat has right Mortgage ion to apply them to the interest and principal debts. 2. creditor, as rule shall 1. no right to the fruits have possession 4. required toto always beand charges 3. contract must pay taxesonly for the and necessary expenses are borne 2. debtor always in possession writing purpose of binding third persons by credi obligation registered in tor 5.foreclosure is judicial but on the creditor 5. foreclosuremaybe judicial orparties may agree option of the creditor. 4. no such obligation is imposedextra judicial atthat it be extra judicial. Chattel Mortgage . Personal property is recorded in the Chattel Mortgage Register as a security f or the performance of an obligation. Distinctions Distinctions Chattel Mortgage 5. requiresrecorded thing deficiency 4.sale bestill auction for different from pledge 4. must contract foreclosure is public 3. possessionfor contract pledged 2. realat public thein forbe invalidityinstrument so 2.possessionthatliable CMRmortgagedvested in creditoras to 1. consensualof the thingdeficiency.remains with the debtorbind 3rd persons debtor not contract procedure Pledge for liable of Distinctions Chattel Mortgage 2. real Realproperty 1. personalDifferent procedure is essentialpersons. validity of the contract merely forStatepurpose of binding third for requirementthe registration for disclosure the property Mortgage of

Source: Pre Week Memory Aid in All Bar Subjects by Garcia and Garcia