SALES (Title VI, Arts.

1458-1637) sum of money or its equivalent (known as the

price).
Governing law.
What is price?
The provisions of the Code of Commerce relating to
sales have been repealed by the Civil Code. (Art.* - a sum of money or its equivalent to the
2270[2].) Today, sales are governed by the provisions determinate thing
of the Civil Code on the subject. (Book IV, Title VI,
Under the Spanish Civil Code
Arts. 1458-1637.) The distinction between the so-
called civil sales and commercial sales is eliminated.  contract was referred to as a contract of
The provisions of the Civil Code on Obligations (Title “purchase and sale.
I, Arts. 1156-1304.) and Contracts (Title II, Arts. 1305-
 As every “sale” necessarily presupposes
1422.) are applicable to the contract of sale, but
a “purchase,” this name was regarded
Articles 1458 to 1637 are special rules which are
peculiar to sales alone. as redundant. Hence, the name of Title
VI has been simplified by calling it
Sources of our law on sales. “sales” and the name of the contract
has been changed for the same reason
the Philippine law on sales, as it exists today, is
to “contract of sale.”
an admixture of civil law and common law
principles. According to the Code Commission:
“A majority of the provisions of the Uniform
Sales Law which is in force in 31 States and “It is required in the proposed Code that the
Territories of the American Union have been seller transfers the ownership of the thing sold.
adopted in the Civil Code with modifications to (Arts. 1458, 1459, 1495, 1547.)
suit the principles of Philippine Law.” In the present Code (Art. 1445.), his obligation is
merely to deliver the thing, so that even if the
seller is not the owner, he may validly sell,
Chapter 1 NATURE AND FORM OF THE subject to the warranty (Art. 1474.) to maintain
CONTRACT the buyer in the legal and peaceful possession
of the
ART. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer
the ownership of and to deliver a determinate
thing, and the other to pay therefor a price Characteristics of a contract of sale.
certain in money or its equivalent. (1) Consensual, because it is perfected by mere
A contract of sale may be absolute or consent without any further act;
conditional. (1445a) (2) Bilateral, because both the contracting
parties are bound to fulfill correlative
obligations towards each other — the seller, to
Concept of contract of sale deliver and transfer ownership of the thing sold
and the buyer, to pay the price;
The contract of sale is an agreement whereby
one of the parties (called the seller or vendor) (3) Onerous, because the thing sold is conveyed
obligates himself to deliver something to the in consideration of the price and vice versa
other (called the buyer or purchaser or vendee)
who, on his part, binds himself to pay therefor a
(4) Commutative, because the thing sold is judgment on the ground that the delivery of the
considered the equivalent of the price paid and lumber to B was not duly proved. S asserts that
vice versa. (see Ibid.) However, the contract may the case having been tried and decided by the
be aleatory6 as in the case of the sale of a hope trial court on the issue of whether or not there
was payment by B of the lumber covered by
(5) Nominate, because it is given a special name
invoices of S and counterreceipts issued by B, it
or designation in the Civil Code, namely, “sale”;
is alone on this issue that the Court of Appeals
(6) Principal, because it does not depend for its should have decided the case and not on the
existence and validity upon another contract. issue of whether or not there was delivery of
the lumber in question. The Court of Appeals
found that the counterreceipts merely certified
ILLUSTRATIVE CASES: 1. Trial Court decided that the fact of having received from S certain
there was no payment by buyer of lumber statements on claims for lumber allegedly
covered by invoices of seller but Court of delivered.
Appeals held that delivery of lumber was not Issue: Did the Court of Appeals decide the case
duly proved because counter-receipts on a new issue not raised in the pleadings
NOTE: before the lower court?

Obligations are bilateral when both parties are Held: No. The issue of delivery is no issue at all.
mutually bound to each other. They are reciprocal For delivery and payment in a contract of sale,
when the performance one is designed to be the or for that matter in quasicontracts, are so
equivalent and the condition for the performance of interrelated and interwined with each other
the other. In a contract of sale, in the absence of any that without delivery of the goods there is no
stipulation, the obligations of the seller and buyer corresponding obligation to pay. The two
are reciprocal, the obligation or promise of each
complement each other. (see Art. 1458, par. 1.)
party is the cause or consideration for the obligation
It is clear that the two elements cannot be
or promise by the other. The reciprocal obligations
would normally be, in the case of the buyer, the dissociated, for the contract of purchase and
payment of the agreed price and in the case of the sale is, essentially, a bilateral contract, as it gives
seller, the fulfillment of certain express warranties. 6 rise to reciprocal obligations
Art. 2010. By an aleatory contract, one of the parties
ILLUSTRATIVE CASE 2
or both reciprocally bind themselves to give or to do
something in consideration of what the other shall 2. To secure payment of the balance of the
give or do upon the happening of an event which is
purchase price of iron ore, buyer executed a
uncertain, or which is to occur at an indeterminate
surety bond in favor of seller, the buyer,
time. issued by buyer merely certified to receipt of
certain statement on claims for the lumber allegedly
however, claiming that such payment was
delivered. subject to a suspensive condition — the sale of
the iron ore by buyer

Facts: B, owner of a mining claim, appointed S

Facts: S filed a complaint for collection of a sum as attorneyin-fact to enter into a contract with
of money against B for lumber purchased on any individual or juridical person for the
credit and received by B. B denied all the exploration and development of said claim on a
material allegations of the complaint. The trial royalty basis. S himself embarked upon the
court rendered judgment in favor of S. On exploitation of the claim. Subsequently, B
appeal, the Court of Appeals reversed the revoked the authority granted by him to S who
assented thereto subject to certain conditions. correlative obligation, but each party anticipates
As a result, a document was executed wherein S performance by the other from the very start.
transferred to B all of S’s rights and interests
Nothing is found in the record to evidence that
over the “24 tons of iron ore, more or less” that
S desired or assumed to run the risk of losing his
S had already extracted from the mineral claims
right over the ore without getting paid for it, or
in consideration of the sum of P75,000.00,
that B understood that S assumed any such risk.
P10,000.00 of which was paid upon the signing
This is proved by the fact that S insisted on a
of the agreement, and “the balance of
bond to guarantee the payment of the
P65,000.00 will be paid from and out of the first
P65,000.00 and the fact that B did put such
letter of credit covering the first shipment of
bond, indicated that he admitted the definite
iron ores and of the first amount derived from
existence of his obligation to pay the balance of
the local sale of iron ore” from said claims.
P65,000.00. The only rational view that can be
To secure the payment of the balance, B taken is that the sale of the ore to B was a sale
executed in favor of S a surety bond. No sale of on credit, and not an aleatory contract, where
approximately 24,000 tons of iron ore had been the transferor, S, would assume the risk of not
made nor had the balance of P65,000.00 been being paid at all by B.
paid to S.

Issue: Is the shipment or local sale of the iron

Essential requisites of a contract of sale.
ore a condition precedent (or suspensive
(ELEMENTS)
condition) to the payment of the balance, or
only a suspensive period or term? (1) Consent or meeting of the minds - refers to
the consent on the part of the seller to transfer
Held: (1) Obligation of B one with a term. — The
and deliver and on the part of the buyer to pay
words of the contract express no contingency in
the buyer’s obligation to pay. There is no -The parties must have legal capacity to give
uncertainty that the payment will have to be consent and to obligate themselves.
made sooner or later; what is undetermined is
merely the exact date at which it will be made. NOTE: “Where there is merely an offer by one
By the very terms of the contract, therefore, the party without the acceptance of the other,
existence of the obligation to pay is recognized; there is no consent.”
only its maturity or demandability is deferred. NOTE: The acceptance of payment by a party is
Furthermore, to subordinate B’s obligation to an indication of his consent to a contract of
the sale or shipment of the ore as a condition sale - thereby precluding him from rejecting its
precedent would be tantamount to leaving the binding effect.
payment at his discretion (Art. 1182.), for the
sale or shipment could not be made unless he
took steps to sell the ore. THERE IS A SALE AGAINST THE WILL OF THE
OWNER

-IN CASE OF EXPROPRIATION

(2) A contract of sale is normally commutative
and onerous. — In a contract of sale, not only -3 DIFFERENT KINDS OF SALE
does each one of the parties assume a  ORDINARY EXECUTION SALE
 JUDICIAL FORECLOSURE SALE
  EXTRA-JUDICIAL FORECLOSURE SALE WHAT IS THE CAUSE IN SALE?
-The sale of conjugal property requires the -As to the SELLER -the buyer’s promise to pay
consent of both the husband and the wife. The the price
absence of the consent of one renders the sale
-As to the BUYER- the seller’s promise to deliver
null and void
the thing sold
(2) Object or subject matter. - refers to the
determinate thing which is the object of the
contract. (Art. 1460.) NATURAL AND ACCIDENTAL ELEMENTS.
A THING MUST BE DETERMINATE OF AT LEAST 1. Natural elements - are deemed to exist in
BE CAPABLE OF BEING DETERMINATE - because certain contracts,
if the seller and the buyer differ in regard to the
thing sold, there is no meeting of the minds -in the absence of any contrary stipulations, like
warranty against eviction or hidden defects
therefore, there is no sale
2. Accidental elements - may be present or
The subject matter may be: absent depending on the stipulations
-Personal or real property -like conditions, interest, penalty, time or place
of payment, etc.
-movable property

-tangible or intangible
ILLUSTRATIVE CASES:
-future property
1. Supposed sale was evidenced by a receipt
-present property
acknowledging receipt of P1,000.00.

Facts: B bought on a partial payment of

(3) Cause or consideration - refers to the “price P1,000.00, evidenced by a receipt, a portion of a
certain in money or its equivalent” subdivision from S, administrator of the testate
estate of his deceased spouse. Subsequently, S
-such as a check or a promissory note, which is
was authorized by the court to sell the
the consideration for the thing sold
subdivision. In the meantime, PT Co. became
-“its equivalent” means that payment need not the new administrator. It sold the lot to another
be in money, so that there can be a sale where which sale was judicially approved.
the thing given as token of payment has “been
B files a complaint which seeks, among other
assessed and evaluated and [its] price
things, for the quieting of title over the lot in
equivalent in terms of money
question.
NOTE: There can be no SALE without a price
Issue: Was there a valid and enforceable sale to
(Art. 1474)
B?
NOTE: The absence of price is different from the
Held: No. An examination of the receipt reveals
failure to pay the price agreed upon (Art. 1475)
that the same can neither be regarded as a
contract of sale nor a promise to sell. There was
merely an acknowledgment of the sum
P1,000.00. There was no agreement as to the (2) Moreover, since the five (5) checks were not
total purchase price of the land nor to the encashed, B should have deposited the
monthly installments to be paid by B. The corresponding amount of the said checks as
requisites for a valid contract of sale are lacking well as the installments agreed upon. A contract
to sell, as in this case, involves the performance
2. Buyer did not sign draft of Contract to Sell
of an obligation, not merely the exercise of a
because it covered seven (7) lots instead of six
privilege or a right. Consequently, performance
(6), but sent to seller five (5) checks as down
or payment may be effected not by tender of
payment which the seller did not encash.
payment alone but by both tender and
Facts: B Company and S, subdivision developer, consignation. It is consignation which is
agreed to enter into a new Contract to Sell essential to extinguish B’s obligation to pay the
whereby S will sell seven (7) lots at P423,250.00 balance of the purchase price. (see Arts. 1256-
with a down payment of P42,325.00 and the 1258.) B did not even bother to tender and
balance payable in 48 monthly installments of make consignation of the installments or to
P7,395.94. The draft of the Contract to Sell amend the contract to reflect the true intention
prepared by S was sent to B Company but B’s of the parties as regards the number of lots to
president did not sign it although he sent five be sold.
(5) checks covering the down payment totalling
P27,542.72. S received the checks but did not
encash it because B’s president did not sign the EFFECT OF ABSENCE OF PRICE/NONPAYMENT
draft contract, the reason given by the latter OF PRICE.
was that the draft covered seven (7) lots instead
(1) There can be no sale without a price.
of six (6).
-the cause in sale is, as to the seller, the buyer’s
Since no written contract was signed, S sued B
promise to pay the price, and as to the buyer,
to recover possession of the lots still occupied
the seller’s promise to deliver the thing sold.
by the latter.
(2) Non-payment of the purchase price is a
Issues: (1) May the unsigned draft be deemed to
resolutory condition for which the remedy is
embody the agreement between the parties?
either rescission or specific performance
(2) May the receipt of the five (5) checks by S
JUST READ: But the failure to pay the price in
serve to produce the effect of tender of down
full within a fixed period does not, by itself,
payment by B?
dissolve a contract of sale in the absence of any
Held: (1) Based on the facts, the parties had not agreement that payment on time is essential.
arrived at a definite agreement. The only
agreement they arrived at was the price
indicated in the draft contract. The number of TRANSFER OF TITLE TO PROPERTY FOR A PRICE,
lots to be sold was a material component of the ESSENCE OF SALE.
Contract to Sell. Without an agreement on the
matter, the parties may not in any way be (1) Obligations to deliver and to pay. - The
considered as having arrived at a contract under transfer of title to property or agreement to
the law. transfer title for a price actually paid or
promised, not a mere physical transfer of the
property IS THE ESSENCE OF SALE
NOTE: But neither is the delivery of the thing purchaser is merely to receive or pay the
bought nor the payment of the price necessary difference between the contract and the market
for the perfection of the contract of sale. BEING prices, is illegal. Such contract falls under the
CONSENSUAL, IT IS PERFECTED BY MERE definition of what is called “futures” in which
CONSENT the parties merely gamble on the rise or fall in
prices and is declared null and void by law.
ILLUSTRATIVE CASE:

Spouses exchanged their properties for no par

shares of a corporation as a result of which they KINDS OF CONTRACT OF SALE.
gained control of the corporation.
1. Absolute. – NOT SUBJECT TO ANY CONDITION
Facts: Spouses H & W, stockholders of DT
-ABSENCE OF STIPULATION
Corporation, conveyed to said DT a parcel of
land leased to E, in exchange for 2,500 shares of -Title or ownership are transferred to the buyer
stock equivalent to 55% majority in the upon delivery of the thing sold
corporation. E questioned the transaction on
the ground that it was not given the first option 2. Conditional – SALE HAS CONTINGENCY
to buy the leased property pursuant to the -BASICALLY, THE CONTRACT IS SUBJECT TO
proviso in the lease agreement. CERTAIN CONDITIONS
Issue: Is the “deed of exchange” a contract of -Usually, dull payment of purchase price
sale which, in effect, prejudiced E’s right of first
refusal over the leased property? NOTE: The delivery oof the thing sold does not
transfer ownership until condition is fulfilled
Held: No. In effect, DT Corporation is a business
conduit of H and W. What they really did was to 3. Other kinds. — There are, of course, other
invest their properties and change the nature of kinds of sale depending on one’s point of view,
their ownership from unincorporated to e.g., as to the nature of the subject matter (real
incorporated form by organizing DT to take or personal, tangible or intangible), as to
control of their properties and at the same time manner of payment of the price (cash or
save on inheritance taxes. The deed of exchange installment), as to its validity (valid, rescissible,
cannot be considered a contract of sale. There unenforceable, void), etc.
was no transfer of actual ownership interests by
H and W to a third party. They merely changed
their ownership from one form to another. The CONTRACT OF SALE AND CONTRACT TO SELL
ownership remained in the same hands. Hence, WITH RESERVED TITLE DISTINGUISHED
E has no basis for its claim of a right of first
(1) Transfer of title — In a contract of sale, title
refusal under the lease contract
passes to the buyer upon delivery of the thing
(2) Where transfer of ownership not intended sold, while in a contract to sell (or of “exclusive
by the parties. — A contract for the sale or right and privilege to purchase”), where it is
purchase of goods/commodity to be delivered stipulated that ownership in the thing shall not
at a future time, if entered into without the pass to the purchaser until he has fully paid the
intention of having any goods/commodity pass price, ownership is reserved in the seller and is
from one party to another, but with an not to pass until the full payment of the
understanding that at the appointed time, the purchase price.
In the absence of such stipulation withholding ownership over the property until
the buyer effects full payment therefore
where the buyer took possession of the
property upon execution of the contract, A stipulation in a contract providing for
indicates that what the parties contemplated is automatic rescission upon non-payment of the
a contract of absolute sale. purchase price within the stipulated period is
valid
(2) Payment of price – In the first case, non-
payment of the price is a negative resolutory ------------------------------------------------------------
condition (see Art. 1179.), and the remedy of
ILLUSTRATIVE CASES
the seller is to exact fulfillment or to rescind the
contract (see Arts. 1191, 1592.), while in the 1. Vendor “sells, transfers, and conveys” a land
second case, full payment is a positive to the vendee who may sell or assign the land
suspensive condition, the failure of which is not prior to full payment of all installments.
a breach, casual or serious, of the contract but
simply an event that prevents the obligation of Facts: The dispositive part of a deed entitled
the vendor to convey title from acquiring “Deed of Sale of Real Property” states: “for and
binding force in consideration of the sum of P140,000,
payable under the terms and conditions stated
NOTE: Where the seller promises to execute a in the foregoing premises, the VENDOR sells,
deed of absolute sale upon full payment of the transfers and conveys unto the VENDEE x x x”
purchase price, the agreement is a contract to the property in question as of December 22,
sell 1971, the date of said document.”
(3) Ownership of vendor - In the first case, the In paragraph 5 thereof, it is provided that
vendor has lost and cannot recover the “should the VENDEE prior to the full payment of
ownership of the thing sold and delivered, all the amounts aforementioned, decide to sell
actually or constructively (see Art. 1497.), until or to assign part or all of the aforementioned
and unless the contract of sale itself is resolved parcel of land, the VENDOR shall be informed in
and set aside. In the second case, however, the writing and shall have the option to repurchase
title remains in the vendor if the vendee does the property x x x. Should the VENDOR herein
not comply with the condition precedent of decide to repurchase and the property is sold or
making payment at the time specified in the transferred to a third person, the balance of the
contract consideration herein still due to the VENDOR
shall constitute automatically a prior lien on the
NOTE: There is no actual sale until and unless
consideration to be paid by the third person to
full payment of the price is made
herein VENDEE.”
If the vendor should eject the vendee for failure
Issue: Is the above instrument a contract to sell?
to meet the condition precedent he is enforcing
the contract and not rescinding it. Held: No. (1) Title to land transferred to vendee.
— “It is a deed of sale in which title to the
subject land was transferred to the vendee as of
A CONTRACT TO SELL is commonly entered into the date of the transaction, notwithstanding
so as to protect the seller against a buyer who that the purchase price had not yet been fully
intends to buy a property in installments by paid at that time. Under the first-cited
stipulation, what is deferred is not the transfer
of ownership but the full payment of the In his complaint, B, private respondent, prayed
purchase price, which is to be made in for judgment ordering S, petitioner corporation,
installments, on the dates indicated. Under the to comply with the contract and to pay
second stipulation, it is recognized that the damages.
vendee may sell the property even ‘prior to full
Issue: Is the transaction between S and B a
payment of all the amounts aforementioned,’
mere contract to sell or promise to sell, and not
which simply means that although the purchase
a contract of sale?
price had not yet been completely paid, the
vendee had already become the owner of the Held: (1) The contract is not one of sale. — “The
land. As such, he could sell the same subject to petitioner corporation’s obligation to sell is
the right of repurchase reserved to the vendor.” unequivocally subject to a positive suspensive
condition, i.e., the private respondent’s
(2) Right of vendor where land sold by vendee.
opening, making or indorsing of an irrevocable
— “In fact, the contract also provides for the
and unconditional letter of credit. The former
possibility of the vendee selling the property to
agreed to deliver the scrap iron only upon
a third person, in which case the vendor, if she
payment of the purchase price by means of an
wishes to repurchase the land, shall have a lien
irrevocable and unconditional letter of credit.
on any balance of the consideration to be paid
Otherwise stated, the contract is not one of sale
by the third person to the vendee.”
where the buyer acquired ownership over the
property subject to the resolutory condition
that the purchase price would be paid after
2. The sale of scrap iron is subject to the
delivery. Thus, there was to be no actual sale
condition that the buyer will open a letter of
until the opening, making or indorsing of the
credit in favor of the seller for P250,000.00 on
irrevocable and unconditional letter of credit.
or before May 15, 1983.
Since what obtains in the case at bar is a mere
Facts: In May 1, 1983, B (buyer) and S (seller) promise to sell, the failure of the private
entered into a contract entitled “Purchase and respondent to comply with the positive
Sale of Scrap Iron” whereby S bound itself to sell suspensive condition cannot even be considered
the scrap iron upon the fulfillment by B of his a breach — casual or serious — but simply an
obligation to make or indorse an irrevocable and event that prevented the obligation of
unconditional letter of credit not later than May petitioner corporation to convey title from
15, 1983 acquiring binding force.”

On May 17, 1983, B, through his men, started to (2) The obligation of the petitioner corporation
dig and gather scrap iron at S’s premises. S to sell did not arise. — “Consequently, the
cancelled the contract because of B’s alleged obligation of the petitioner corporation to sell
non-compliance with the essential did not arise; it, therefore, cannot be compelled
preconditions among which is the opening of by specific performance to comply with its
the letter of credit. It appeared that the opening prestation. In short, Article 1191 of the Civil
of the letter of credit was made on May 26, Code does not apply; on the contrary, pursuant
1983 by a corporation which was not a party to to Article 1597 of the Civil Code, the petitioner
the contract, with a bank not agreed upon, and corporation may totally rescind, as it did in this
was not irrevocable and unconditional, for it case, the contract.’’ Since the refusal of
was without recourse and stipulated certain petitioner to deliver the scrap iron was founded
conditions. on the “non-fulfillment by the private
respondent of a suspensive condition,’’ it made, the seller loses ownership and cannot
cannot be held liable for damages. recover the same, unless the contract is
rescinded. But in the contract to sell, the seller
Romero, J., dissenting:
retains ownership and the buyer’s failure to pay
(1) The contract reached the stage of perfection. cannot even be considered a breach, whether
— “Evidently, the distinction between a contract casual or substantial, but an event that
to sell and a contract of sale is crucial in this prevented the seller’s duty to transfer title to
case. Article 1458 has this definition: x x x. the object of the contract.”
Article 1475 gives the significance of this mutual
(4) The transaction is an absolute contract of
undertaking of the parties, thus: x x x. Thus,
sale and not a contract to sell. — “The phrase in
when the parties entered into the contract
the contract ‘on the following terms and
entitled “Purchase and Sale of Scrap Iron” on
conditions’ is standard form which is not to be
May 1, 1983, the contract reached the stage of
construed as imposing a condition, whether
perfection, there being a meeting of the minds
suspensive or resolutory, in the sense of the
upon the object which is the subject matter of
happening of a future and uncertain event upon
the contract and the price which is the
which an obligation is made to depend. There
consideration. Applying Article 1475 from that
must be a manifest understanding that the
moment, the parties may reciprocally demand
agreement is in what may be referred to as
performance of the obligations incumbent upon
“suspended animation” pending compliance
them, i.e., delivery by the vendor and payment
with provisions regarding payment. The
by the vendee
reservation of title to the object of the contract
(2) The seller has placed the goods in the in the seller is one such manifestation. Hence, it
control and possession of the vendee. — From has been decided in the case of Dignos vs. Court
the time the seller gave access to the buyer to of Appeals (158 SCRA 375 [1988].) that, absent
enter his premises, manifesting no objection a proviso in the contract that the title to the
thereto but even sending 18 or 20 people to property is reserved in the vendor until full
start the operation, he has placed the goods in payment of the purchase price or a stipulation
the control and possession of the vendee and giving the vendor the right to unilaterally
delivery is effected. For, according to Article rescind the contract the moment the vendee
1497, “The thing sold shall be understood as fails to pay within the fixed period, the
delivered when it is placed in the control and transaction is an absolute contract of sale and
possession of the vendee.” not a contract to sell.”

(3) That payment of the price in any form was -------------------------------------------------------------

not yet effected is immaterial to the transfer of
REQUISITES CONCERNING OBJECT
ownership. — “That payment of the price in any
form was not yet effected is immaterial to the 1. THINGS – it should be:
transfer of the right of ownership. In a contract
 DETERMINATE
of sale, the nonpayment of the price is a
 LICIT (LAWFUL)
resolutory condition which extinguishes the
-Not contrary to law, morals, good
transaction that, for a time, existed and
customs, public order, or public policy
discharges the obligations created thereunder
 NOT BE IMPOSSIBLE
“Consequently, in a contract of sale, after
delivery of the object of the contract has been
-meaning that the thing must be within the -RIGHT TO PUBLIC OFFICE
commerce of men
KINDS OF ILLICIT THINGS.
NOTE: If the subject matter of the sale is illicit,
Things may be illicit per se or per accidens
the contract is void and cannot, therefore, be
ratified 1. PER SE (BY NATURE)
NOTE: If the 3 things are not present then the Ex: Decayed food unfit for consumption
contract is VOID

What is an example of outside the commerce

of men? 2. PER ACCIDENS (BECAUSE OF PROVISIONS OF
LAW DECLARING IT ILLEGAL)
-Those of public ownership (roads, streets,
bridges, parks, etc.) Ex: Prohibited lottery tickets and prohibited
drugs
-those common to everybody (air, sunshine,
etc.) -Land sold to an alien because such sale is
prohibited by the constitution

Art. 1411. When the nullity proceeds from the

illegality of the cause or object of the contract, RIGHT TO TRANSFER OWNERSHIP
and the act constitutes a criminal offense, both 1. One can only sell only what he owns – for
parties being in pari delicto, they shall have no sale to be valid, the vendor must be able to
action against each other, and both shall be TRANSFER OWNERSHIP (ART. 1458)
prosecuted.
-Must be the owner or authorized by the owner
2. RIGHTS – all rights which are transmissible or
personal may also be the object of sale NOTE: THERE ARE EXEMPTIONS TO THIS RULE

Ex. Right of usufruct – right to enjoy the

property of others 2. Right must exist at time of delivery – It does
- A landowner grant a farmer to use his land in not require that the vendor must have the right
exchange oof the percentage of the profit to transfer ownership at the time of the
perfection of the contract. IT IS SUFFICIENT IF
Right of conventional redemption – right of the HE HAS THE RIGHT TO SELL THE THING AT THE
vendor to reacquire the property sold provided TIME WHEN OTHE OWNERSHIP IS TO PASS
that the seller pay the price oof the sale and
other corresponding expenses such as interests THE REASON: Future goods or goods with
acquisition depends upon a contingency
EX. Sangla/pawnshop
3. Seller who employed fraud in securing his
NOTE: Services may be the object of a contract title – Generally forged or fraudulent deed is
BUT THEY CANNOT BE THE OBJECT OF considered null, THERE ARE INSTANCES THAT
CONTRACT OF SALE SUCH document may become a VALID TITLE.
EXAMPLES OF INTRANSMISSILE RIGHTS ONE SUCH INSTANCE is where the certificate of
- RIGHT TO VOTE title was already transferred from the name of
the true owner to the forger. Subsequently, the ART. 1460. A thing is determinate when it is
land was subsequently sold to an INNOCENT particularly designated or physically
PURCHASER FOR VALUE segregated from all others of the same class.
The requisite that a thing be determinate is
The established rule is that the rights of an
satisfied if at the time the contract is entered
innocent purchaser for value must be
into, the thing is capable of being made
respected and protected, notwithstanding the
determinate without the necessity of a new or
fraud employed by the seller in securing his
further agreement between the parties. (n)
title.
SUBJECT MATTER MUST BE DETERMINATE.
-The proper recourse of the true owner of the
property who was prejudiced and fraudulently (1) When thing determinate – A thing is
dispossessed of the same is to bring an action determinate or specific (not generic) when it is
for damages against those who caused or particularly designated or physically segregated
employed the fraud, and if the latter are from all others of the same class. (see Art.
insolvent, an action against the Treasurer of the 1636[1].)
Philippines may be filed for recovery of
-The thing sold must be in sight at the time the
damages against the Assurance Fund.
contract is entered into

(2) Sufficient if subject matter capable of being

(4) Where properly sold in violation of a right of made determinate - — It is not necessary that
first refusal of another person. the thing sold must be in sight at the time the
contract is entered into. It is sufficient that the
— The prevailing doctrine is that a contract of
thing is determinable or capable of being made
sale entered into in violation of a right of first
determinate without the necessity of a new or
refusal of another person, while valid is
further agreement between the parties
rescissible.
NOTE: Thus, a person may validly sell all the
A right of first refusal is neither “amorphous nor
cavans of rice in a particular bodega or a parcel
merely preparatory’’ and can be executed
of land located at a particular street but if the
according to its terms.
bodega is not specified and the seller has more
5) Where real property, subject of unrecorded than one bodega or owns more than one parcel
sale, subsequently mortgaged by seller which of land at the particular street, and it cannot be
mortgage was registered. known what may have been sold, the contract
shall be null and void.
The mortgagee’s registered mortgage right over
the property is inferior to that of the buyer’s -------------------------------------------------------------
unregistered right. The unrecorded sale
ILLUSTRATIVE CASES:
between the buyer and the seller is preferred
for the reason that if the seller the original 1. Tobacco factory sold was specifically pointed
owner, had parted with his ownership of the out. — A tobacco factory with its contents
thing sold then, he no longer had ownership having been specifically pointed out by the
and free disposal of that thing so as to be able parties and distinguished from all other tobacco
to mortgage it again. factories was held sold under a contract which
did not provide for the delivery of the price of
the thing until a future time. (McCullough vs. 6. Subject matter are palay grains produced in
Aenille Co., 13 Phil. 284 [1909].) the farmland. — Where S initially offered to sell
palay grains in his farmland to NFA and the
2. Payment of price was withheld pending proof
latter accepted to buy 2,640 cavans, there was
by vendor of his ownership. — A sale of a
already a meeting of the minds between the
specific house was held perfected between the
parties. The object of the contract, being the
vendor and the vendee, although the delivery of
palay grains produced in S’s farmland and the
the price was withheld until the necessary
NFA was to pay the same depending upon its
documents of ownership were prepared by the
quality. The fact that the exact number of
vendee. (Borromeo vs. Franco, 5 Phil. 49
cavans of palay to be delivered has not been
[1905].)
determined does not affect the perfection of
3. Purchase price agreed upon had not yet been the contract.
paid. — A quantity of hemp delivered by the
In this case, there was no need for NFA and S to
vendor into the warehouse of the vendee and
enter into a new contract to determine the
thus set apart and distinguished from all other
exact number of cavans of palay to be sold. S
hemp was held sold, although the purchase
can deliver so much of his produce as long as it
price which had been agreed upon had not yet
does not exceed 2,640 cavans
been paid. (see Tan Leoncio vs. Go Inqui, 8 Phil.
531 [1907].) 7. Lots sold were described by their lot numbers
and area and as the ones needed according to a
4. Subject matter is sugar of specified quantity
named development plan. — The deed of sale
and given quality. — A contract whereby a party
describes the four parcels of land sold by their
obligates himself to sell for a price certain
lot numbers and area; and then it goes on to
(P3,000.00) a specified quantity of sugar (600
further describe not only those lots already
piculs) of a given quality (of the first grade and
mentioned but the lots object of the sale, by
second grade) without designating a particular
stating that said lots are the ones needed for
lot of sugar, is not perfected until the quantity
the construction of the City Hall site, avenues
agreed upon has been selected and is capable
and parks according to the Arellano Plan, the
of being physically designated and distinguished
development plan of the city, which was then in
from all other sugar
existence.
In this case, the contract is merely an executory
It was held that the specific mention of some of
contract to sell, its subject matter being a
the lots plus the statement that the lots object
generic or indeterminate thing. A thing is
of the sale are the ones needed, etc., according
generic when it is indicated only by its kind and
to the aforementioned plan, sufficiently provide
cannot be pointed out with particularity.
a basis, as of the time of the execution of the
5. Subject matter is flour of a certain brand and contract, for rendering determinate said lots
specified quantity. — Similarly, the undertaking without the need of a new and further
of a party to sell 1,000 sacks of “Mano” flour at agreement of the parties.
P11.05 per barrel, 500 to be delivered in
8. Receipt issued stated that the lot being
September and 500, in October, is a promise to
purchased was the one earlier earmarked for
deliver a generic thing and not a determinate
the buyer’s sister. — B presented the following
thing within the meaning of Article 1460.
receipt signed by S, seller, as evidence of
Hence, there is no perfected sale.
payment: “Received from B the sum of P500.00
as additional partial payment for the lot which is Even a future thing – may be the object of sale
the portion formerly earmarked for T wherein as long as it has potential or possible existence
she already paid the sum of P1,500; hence, by
Thus, a valid sale may be made of “the wine a
agreement of B and T, who are sisters, the sum
vine is expected to produce; or the grain a field
of P1,500.00 is applied as additional payment
may grow in a given time; or the milk a cow may
for and in behalf of B, thereby making the total
yield during the coming year; or the wool that
payments made by B to said lot in the sum of
shall thereafter grow upon a sheep; or what
P2,000.00.’’ The subject lot is adequately
may be taken at the next cast of a fisherman’s
described in the receipt, or at least can be easily
net; or the goodwill of a trade, or the like.
determinable. Any mistake in the designation of
the lot does not vitiate the consent of the The thing sold, however, must be specific and
parties or affect the validity and binding effect identified. They must be also owned by the
of the contract of sale. vendor at the time.”
9. Sugar quota of certain number of piculs sold
without specification of the land to which it
relates. — Section 4 of R.A. No. 1825 (An Act to
Provide for the Allocation, Reallocation and
Administration of the Absolute Quota of Sugar)
reads: “The production allowance or quota SALE OF A MERE HOPE OR EXPECTANCY.
corresponding to each piece of land under the The efficacy of the sale of a mere hope or
provisions of this Act shall be deemed to be an expectancy – is subject to the condition that the
improvement attaching to the land entitled thing contemplated or expected will come into
thereto. The intangible property that is the existence.
sugar quota should be considered as real
property by destination, an improvement The sale really refers to an “expected thing”
attaching to the land entitled thereto.” Sugar which is not yet in existence, and not to the
quota allocations do not have existence hope or expectancy which already exists, in
independently of any particular tract of land. view of the condition that the thing will come
There can be no sale simply of sugar quota of a into existence.
certain number of piculs without specification
But the sale of a mere hope or expectancy is
of the land to which it relates. Such a sale would
valid even if the thing hoped or expected does
be void for want of a determinate subject
not come into existence, unless the hope or
matter
expectancy is vain in which case, the sale is
ART. 1461. Things having a potential existence void
may be the object of the contract of sale. The
A plan whereby prizes can be obtained without
efficacy of the sale of a mere hope or
any additional consideration (when a product is
expectancy is deemed subject to the condition
purchased at the usual price plus the chance of
that the thing will come into existence. The
winning a prize) is not a lottery.
sale of a vain hope or expectancy is void

EXAMPLES: (1) S binds himself to sell for a

SALE OF THINGS HAVING POTENTIAL
specified price to B a parcel of land if he wins a
EXISTENCE.
case for the recovery of said land pending in the
Supreme Court. Here, the obligation of S to sell
will arise, if the “expected thing,’’ the land, will
PRESUMPTION IN CASE OF DOUBT.
come into existence, i.e., if he wins the case
before a decision is rendered, there is only “the In case of doubt, the presumption is in favor of
mere hope or expectancy’’ that the thing will emptio rei speratae which is more in keeping
come into existence. with the commutative character of the contract.
(2) B buys a sweepstakes ticket in the hope of -------------------------------------------------------------
winning a prize. Here, the object of the contract
is the hope itself. The sale is valid even if B does ILLUSTRATIVE CASE: Buyer executed a surety
not win a prize because it is not subject to the bond in favor of seller to secure payment of the
condition that the hope will be fulfilled. balance of purchase price of iron ore, which
balance shall be paid out of amount derived
from sale by buyer of the iron ore.

Facts: S embarked upon the exploration and

development of mining claims belonging to B.
Later, they executed a document wherein S
transferred to B all of S’s rights and interest over
the 24,000 tons of iron ore, “more or less” that
S had already extracted from the mineral claims
SALE OF THING EXPECTED AND SALE OF HOPE in consideration of a down payment of
ITSELF DISTINGUISHED. P10,000.00, and the balance of P65,000.00
1. EMPTIO REI SPERATAE – sale of thing which will be paid out of the “first shipment of
expected iron ore and of the first amount derived from
the local sale of iron ore made” from said
-sale of a thing not yet in existence subject to claims, which amount was secured by a surety
the condition that the thing will exist and on bond executed by B in favor of S.
failure of the condition, the contract becomes
ineffective and hence, the buyer has no No sale of the approximately 24,000 tons of iron
obligation to pay the price ore had been made nor had the P65,000.00
been paid.
-the future thing is certain as to itself but
uncertain as to its quantity and quality. Such Issue: Is the obligation of B to pay the remaining
sale is subject to the condition that the thing P65,000.00 subordinated to the sale or
will come into existence whatever its quantity shipment of the ore as a condition precedent?
or quality Held: No. A contract of sale is normally
commutative and onerous (see Art. 1458.): not
only does each one of the parties assume a
2. EMPTIO SPEI - the sale of the hope itself that correlative obligation (the seller to deliver and
the thing will come into existence, where it is transfer ownership of the thing sold and the
agreed that the buyer will pay the price even if buyer to pay the price), but such party
the thing does not eventually exist. anticipates performance by the other from the
-(like the sale of a sweepstake ticket), it is not very start.
certain that the thing itself (winning a prize) will
exist, much less its quantity and quality.
(1) Contingent character of obligation to pay (2) Future goods - or goods to be manufactured
must clearly appear. — Where in a sale, the (like the sale of milk bottles to be manufactured
obligation of one party can be lawfully with the name of the buyer pressed in the
subordinated to an uncertain event, so that the glass), raised (like the sale of the future harvest
other understands that he assumes that risk of of palay from a ricefield), or acquired (like the
receiving nothing for what he gives as in the sale of a definite parcel of land the seller
case of a sale of hopes or expectations (emptio expects to buy)
spei), it is not in the usual course of business to
do so, hence, the contingent character of the
obligation must clearly appear SALE OF FUTURE GOODS
(2) Surety bond negates such contingent A sale of future goods, even though the contract
character. — In the case at bar, nothing is found is in the form of a present sale, is valid only as
in the record to evidence that S desired or an executory contract to be fulfilled by the
assumed to run the risk of losing his rights over acquisition and delivery of the goods specified.
the ore without getting paid for it, or that B
understood that S assumed any such risk. This is In other words, “property or goods which at the
proven by the fact that S insisted on a bond by a time of the sale are not owned by the seller but
surety company to guarantee payment of the which thereafter are to be acquired by him,
P65,000.00; and the fact that B did put up such cannot be the subject of an executed sale but
bond indicates that he admitted the definite may be the subject of a contract for the future
existence of his obligation to pay the balance of sale and delivery thereof,” even though the
P65,000.00. acquisition of the goods depends upon a
contingency which may or may not happen.
------------------------------------------------------------
ART. 1463: the sole owner of a thing may sell
ART. 1462. The goods which form the subject an undivided interest therein.
of a contract of sale may be either existing
goods, owned or possessed by the seller, or
goods to be manufactured, raised, or acquired SALE OF UNDIVIDED INTEREST IN A THING
by the seller after the perfection of the
contract of sale, in this Title called “future 1. BY SALE OWNER – the owner of a thing may
goods.” There may be a contract of sale of sell the entire thing; or only a specific portion or
goods, whose acquisition by the seller depends an undivided interest.
upon a contingency which may or may not THE LEGAL EFFECT OF THE SALE OF UNDIVIDED
happen. (n) INTEREST in a thing is to make the buyer the
CO-OWNER of the thing sold.

GOODS WHICH MAY BE THE OBJECT OF SALE. - The owner can sell only the portion which is
allotted to him.
Goods which form the subject of a contract of
sale may be either: 2. BY CO-OWNER – being the co-owner, he can
dispose the thing of his share even without the
(1) Existing goods - or goods owned or consent of the other co-owner/s. This effect is
possessed by the seller only limited to the allotted part to him
EXAMPLE: S is the owner of a parcel of land  By such sale, the buyer becomes a co-
with an area of 1,000 square meters. As the sole owner with theseller of the whole mass
owner, S can sell to B the entire portion; or only in the proportion in which the definite
500 square meters of the land by metes and share bought bears to the mass.
bounds in which case he becomes the sole  It must follow that the aliquot share of
owner of the remaining 500 meters and B the each owner canbe determined only by
portion sold; or he may sell an undivided half of the measurement of the entire mass. If
the land without specially designating or later on it be discovered that the mass
identifying the portion sold, in which case they of fungible goods contains less than
become co-owners. As a co-owner, S or B can what was sold, the buyer becomes the
convey or transfer only the title pertaining to owner of the whole mass and
the undivided half of the land, for vital to the furthermore, the seller shall supply
validity of a contract of sale is that the vendor whatever is lacking from goods of the
be the owner of the thing sold. (Art. 1459.) same kind and quality, subject to any
stipulation to the contrary.
ART. 1464. In the case of fungible goods, there
may be a sale of an undivided share of a 3) Risk of loss. — If the buyer becomes a co-
specific mass, though the seller purports to sell owner, with the seller, or other owners of the
and the buyer to buy a definite number, weight remainder of the mass, it follows that the whole
or measure of the goods in the mass, and mass is at the risk of all the parties interested in
though the number, weight or measure of the it, in proportion to their various holdings.
goods in the mass is undetermined. By such a
(4) Subject matter. — Take note that in the sale
sale the buyer becomes owner in common of
of an undivided share, either of a thing (Art.
such a share of the mass as the number, weight
1463.) or of that of mass of goods (Art. 1464.),
or measure bought bears to the number,
the subject matter is an incorporeal right. (Art.
weight or measure of the mass. If the mass
1501.) Here, ownership passes to the buyer by
contains less than the number, weight or
the intention of the parties.
measure bought, the buyer becomes the
owner of the whole mass and the seller is EXAMPLE: S owns 1,000 cavans of palay stored
bound to make good the deficiency from goods in his warehouse. If S sells to B 250 cavans of
of the same kind and quality, unless a contrary such palay which cavans are not segregated
intent appears. (n) from the whole mass, B becomes a co-owner of
the said mass to the extent of 1/4. If the
SALE OF AN UNDIVIDED SHARE OF A SPECIFIC
warehouse happens to contain only 200 cavans,
MASS.
S must deliver the whole 200 cavans and supply
The Civil Code classifies movable goods into the deficiency of 50 cavans of palay of the same
consumable or non-consumable (Art. 418.) kind and quality. In the same example, the
number of cavans in the warehouse may be
(1) Meaning of fungible goods - It means goods
unknown or undetermined and S may sell only
that are treated as the equivalent of any other
1/4 share of the contents. The legal effect of
unit such as grain, oil, wine, gasoline, etc.
such a sale is to make B a co-owner in that
(2) Effect of sale. - The owner of a mass of goods proportion. It is obvious that in such case, the
may sell only an undivided share thereof, obligation of the seller “to make good the
provided the mass is specific or capable of being deficiency” will not arise.
made determinate. (Art. 1460.)
 property, then the sale made to B is
extinguished.
ART. 1465. Things subject to a resolutory
condition may be the object of the contract of
sale. (n)
ART. 1466. In construing a contract containing
provisions characteristic of both the contract of
sale and of the contract of agency to sell, the
SALE OF THING SUBJECT TO A RESOLUTORY
essential clauses of the whole instrument shall
CONDITION
be considered. (n)
What is a resolutory condition?

-an uncertain event upon the happening of

SALE DISTINGUISHED FROM AGENCY TO SELL.
which the obligation (or right) subject to it is
extinguished. Hence, the right acquired in virtue By the contract of agency, a person binds
of the obligation is also extinguished himself to render some service or to do
something in representation or on behalf of
One of the obligations of the vendor is to
another, with the consent or authority of the
transfer the ownership of the thing object of the
latter. (Art. 1868.)
contract. (Art. 1458.) If the resolutory condition
attaching to the object of the contract, which (1) In a sale, the buyer receives the goods as
object may include things as well as rights (Arts. owner; in an agency to sell, the agent receives
1427, 1347, par. 1.), should happen, then the the goods as the goods of the principal who
vendor cannot transfer the ownership of what retains his ownership over them and has the
he sold since there is no object. right to fix the price and the terms of the sale
and receive the proceeds less the agent’s
EXAMPLES: (1) S (vendor a retro) sold a parcel
commission upon the sales made;
of land to B (vendee a retro) subject to the
condition that S can repurchase the property (2) In a sale, the buyer has to pay the price; in
within two years from the date of sale. If S an agency to sell, the agent has simply to
exercises the right to repurchase, then the sale account for the proceeds of the sale he may
made by B to C before the lapse of the two (2)- make on the principal’s behalf;
year period falls. The rule, however, that a
(3) In a sale, the buyer, as a general rule, cannot
vendor cannot transfer to his vendee a better
return the object sold; in an agency to sell, the
right than he had himself, suffers an exception
agent can return the object in case he is unable
in case of property with Torrens title.
to sell the same to a third person;
(2) For failure to pay his debt, the land of S
(4) In a sale, the seller warrants the thing sold
(mortgagor) was sold to B, the highest bidder
(see Arts. 1547, 1548, 1561.); in an agency to
and purchaser in an extrajudicial foreclosure of
sell, the agent makes no warranty for which he
a real estate mortgage
assumes personal liability as long as he acts
Under the law (Act No. 3135, as amended.), the within his authority and in the name of the
mortgagor may redeem the property at any seller; and
time within one year from and after the date of
(5) In a sale, the buyer can deal with the thing
the registration of the sale. If S redeems the
sold as he pleases being the owner; in an
agency to sell, the agent in dealing with the
thing received, must act and is bound according
to the instructions of his principal
SALE DISTINGUISHED FROM CONTRACT FOR A
ILLUSTRATIVE CASES: 1. One given exclusive PIECE OF WORK.
right to sell beds furnished by manufacturer,
By the contract for a piece of work the
agreed to pay discounted invoice price at a
contractor binds himself to execute a piece of
certain period
work for the employer, in consideration of a
Facts: S granted B the exclusive right to sell the certain price or compensation. The contractor
former’s beds in Visayas. S was to furnish B with may either employ his labor or skill, or also
the beds which the latter might order. The price furnish the material. (Art. 1713.)
agreed upon was the invoice price of the beds
EXAMPLE: If B is buying a pair of shoes of a
in Manila with a discount of from 20% to 25%.
particular style and size from S which the latter
Payment was to be made at the end of sixty
ordinarily manufactures or procures for the
days.
general market but the same is not available, an
Issue: S claimed that the contract was an agency order for one would be a contract of sale, since
to sell while B maintained that it was a sale. the article would have existed and been the
subject of sale to some other person even if the
Held: The stipulations are precisely the essential
order had not been given. On the other hand, if
features of a contract of purchase and sale.
B places an order for a pair of shoes of a
There was the obligation on the part of S to
particular shape because his feet are deformed,
supply the beds and on the part of B, to pay
the fact that such kind of shoes is not suitable
their price.
for sale to others in the ordinary course of the
These features exclude the legal conception of seller’s business and is to be manufactured
an agency or order to sell whereby the especially for B and upon his special order,
mandatory or agent receives the thing to sell it makes the contract one for a piece of work.
and does not pay its price but delivers to the
principal the price he obtains from the sale of
the thing to a third person, and if he does not -In the first case, the risk of loss before delivery
succeed in selling, he returns it. By virtue of the is borne by the worker or contractor, not by the
contract between S and B, the latter, on employer (the person who ordered). (Arts.
receiving the beds was necessarily obliged to 1717, 1718.) A contract is for a piece of work if
pay their price within the terms fixed without services dominate that contract even though
there is a sale of goods involved. Where the
ART. 1467. A contract for the delivery at a
primary objective of a contract is a sale of a
certain price of an article which the vendor in
manufactured item, it is a sale of goods even
the ordinary course of his business
though the item is manufactured by labor
manufactures or procures for the general
furnished by the seller and upon previous order
market, whether the same is on hand at the
of the customer
time or not, is a contract of sale, but if the
goods are to be manufactured specially for the (3) The importance of marking the line that
customer and upon his special order, and not divides contracts for a piece of work from
for the general market, it is a contract for a contracts of sale arises from the fact that the
piece of work. (n) former is not within the Statute of Frauds.
 75 bottles of liquor. (3) Suppose, in the same
example, B had no whisky at the stipulated date
ART. 1468. If the consideration of the contract
of delivery and he paid S P20,000.00 instead of
consists partly in money, and partly in another
giving whisky. Did the contract become one of
thing, the transaction shall be characterized by
sale? No, because the payment is in
the manifest intention of the parties. If such
consideration of the value of the whisky, and
intention does not clearly appear, it shall be
not of the sugar. The manifest intention of the
considered a barter if the value of the thing
parties was to enter into a contract of barter.
given as a part of the consideration exceeds
But if B had whisky at the date of delivery and
the amount of the money or its equivalent;
he paid P20,000.00 with the consent of S, the
otherwise, it is a sale. (1446a)
contract would become one of sale. (4) Assume
now that the contract between S and B was for
S to deliver sugar to B who agreed to give 100
SALE DISTINGUISHED FROM BARTER bottles of whisky or to pay P20,000.00 cash. If B,
Contract of barter or exchange - one of the instead of whisky, paid P20,000.00 cash, it is
parties binds himself to give one thing in clear that the resulting contract is that of sale,
consideration of the other’s promise to give and not barter. (5) If the obligation of B is to
another thing deliver 50 bottles of whisky and pay P10,000.00
cash, or 75 bottles of whisky and P5,000.00
Contract of sale -vendor gives a thing in cash, or 25 bottles of whisky and P15,000.00
consideration for a price in money. cash, the transaction shall be considered a
THERE’S AN EXEMPTION! barter or sale depending on the manifest
intention of the parties. Under Article 1468, if
In such cases, the manifest intention of the such intention does not clearly appear, the
parties isparamount in determining whether it is contract shall be considered a barter, where the
one of barter or of sale cash involved is P5,000.00, or a sale, in case it is
P15,000.00, or either in case it is P10,000.00.
If this intention cannot be ascertained

-The only point of difference between the two

contracts is in the element which is present in SALE DISTINGUISHED FROM LEASE.
sale but not in barter, namely: “price certain in
money or its equivalent.” In the lease of things, one of the parties binds
himself to give to another the enjoyment or use
EXAMPLES: (1) S, a sugar miller, and B, a of a thing for a price certain and for a period
manufacturer and dealer of whisky, entered into which may be definite or indefinite. (Art. 1643.)
an agreement whereby S was to deliver sugar In other words, in a lease, the landlord or lessor
worth P20,000.00 to B who was to give 100 transfers merely the temporary possession and
bottles of whisky worth also P20,000.00. This is enjoyment of the thing leased. In a sale, the
a contract of barter. (2) Suppose at the date of seller transfers ownership of the thing sold.
delivery, B had only 25 bottles of whisky. With
the consent of S, S paid the difference of SALE DISTINGUISHED FROM DATION IN
P15,000 in cash. In this case, the contract is still PAYMENT.
barter. The consideration for the sugar is not Dation in payment (or dacion en pago) is the
cash but the whisky, and the amount of alienation of property to the creditor in
P15,000.00 paid by B is in consideration for the
satisfaction of a debt in money. (see Art. 1619.) (1) The parties have fixed or agreed upon a
It is governed by the law on sales. (Art. 1245.) definite amount

As such the essential elements of a contract of (2) It be certain with reference to another thing
sales, namely, consent: object certain, and certain
cause or considerations, must be present.
(3) The determination of the price is left to the
The distinctions are the following: judgment of a specified person or persons and
even before such determination.
(1) In sale, there is no preexisting credit, while in
dation in payment, there is; ILLUSTRATIVE CASES:

(2) In sale, obligations are created, while in 1. Price was fixed at 10% below the price in the
dation in payment, obligations are extinguished; inventory, at the invoice price, and in
accordance with the price list less 20% discount
(3) In sale, the cause is the price paid, from the
viewpoint of the seller, or the thing sold, from Facts: S sold to B a tobacco and cigarette factory
the viewpoint of the buyer, while in dation in together with the trademark “La Maria
payment, the extinguishment of the debt, from Cristina,” the stocks of tobacco, machinery,
the viewpoint of the debtor, or the object labels, wrappers, etc. for a sum subject to
acquired in lieu of the credit, from the modification, in accordance with the result
viewpoint of the creditor;14 shown by the inventory to be drawn up. In this
inventory the value of each individual price of
(4) In sale, there is more freedom in fixing the
furniture was fixed at 10% below the price in
price than in dation in payment; and
the partnership inventory. The value of the
(5) In sale, the buyer has still to pay the price, tobacco, both in leaf and in process of
while in dation in payment, the payment is manufacture, was fixed at the invoice price. The
received by the debtor before the contract is value of tobacco made up into cigars was fixed
perfected. (see 10 Manresa 16-17.) in accordance with the price list of the company
less 20% discount.
EXAMPLE: S owes B P10,000.00. To pay his debt,
S, with the consent of B, delivers a specific Issue: Under the terms of the agreement, may
television set. If the value of the television set, the price of the property sold be considered
however, is only P8,000.00, S is still liable for certain within the meaning of the law?
P2,000.00 unless the parties have considered
Held: The price may be considered certain. The
the conveyance as full payment.
articles which were the subject of the sale were
definitely and finally agreed upon. The price for
each article was fixed. It is true that the price of
WHEN PRICE CONSIDERED CERTAIN. the tobacco, for example, was not stated in
PRICE must be certain or capable of being pesos and centavos. But by its terms B agreed to
ascertained in money or its equivalent; and pay therefor the amount named in the invoices
money is to be understood as currency, and its then in existence. The price could be made
equivalent means promissory notes, checks and certain by a mere reference to these invoices.
other mercantile instruments generally
accepted as representing money.

Under the above article, the price is certain if

2. Price was fixed at a certain amount subject to ILLUSTRATIVE CASE: Price was fixed on the basis
modifications based on known factors. of a certain proportion of total net value of
business to be ascertained by appraisers.
Facts: S contracted to sell large quantity of coal
to B. The basic price fixed in the contract was Facts: S executed a document whereby he
P9.45 per long ton but it was stipulated that the agreed to transfer to B “the whole of the right,
price was subject to modifications “in title, and interest” in a business. This whole was
proportion to variations in calories and ash 4/173 of the entire net value of the business.
content and not otherwise.” The parties agreed that the price should be
4/173 of the total net value. The ascertainment
Issue: Is the price certain within the meaning of
of such net value was left unreservedly to the
the law?
judgment of the appraisers.
Held: By stipulation, the price could be made
Issue: Is the price certain?
certain by the application of known factors (Art.
1469.), and for the purposes of this case, it may Held: Yes, for the minds of the parties have met
be assumed that the price was fixed at P9.45 on the thing and the price. Nothing was left
per long ton unfinished and all questions relating thereto
were settled. This is an example of a perfected
sale.
EFFECT WHERE PRICE FIXED BY THIRD PERSON
DESIGNATED
EFFECT WHERE PRICE NOT FIXED BY THIRD
As a general rule, the price fixed by a third
PERSON DESIGNATED.
person designated by the parties is binding
upon them. There are, however, exceptions 1) If the third person designated by the parties
such as: to fix the price refuses or cannot fix it (without
fault of the seller and the buyer), the contract
(1) When the third person acts in bad faith or by
shall become ineffective, as if no price had been
mistake
agreed upon unless, of course, the parties
2) When the third person disregards specific subsequently agree upon the price.
instructions or the procedure marked out by the
(2) If such third person is prevented from fixing
parties or the data given him, thereby fixing an
the price by the fault of the seller or the buyer,
arbitrary price
the party not in fault may obtain redress against
EXAMPLE: S sold to B a diamond ring. The the party in fault (par. 2.) which consists of a
determination of the price was left to C whom choice between rescission or fulfillment, with
the parties thought was a jeweler. If C acted by damages in either case. (Art. 1191, par. 2; see
mistake, as when he is incompetent to know the Art. 1594.) If the innocent party chooses
price of the diamond ring, or in bad faith, as fulfillment, the court shall fix the price.
when he connived with S, the court may fix the
price.
EFFECT OF GROSS INADEQUACY OF PRICE IN
VOLUNTARY SALES.

General rule. — While a contract of sale is

commutative, mere inadequacy of the price or
alleged hardness of the bargain generally does ART. 1471. If the price is simulated, the sale is
not affect its validity when both parties are in a void, but the act may be shown to have been
position to form an independent judgment in reality a donation, or some other act or
concerning the transaction contract. (n)

Where low price indicates a defect in the

consent. — The inadequacy of price, however,
EFFECT WHERE PRICE IS SIMULATED.
may indicate a defect in the consent such as
when fraud, mistake, or undue influence is (1) If the price is simulated or false such as
present (Art. 1355.) in which case the contract when the vendor really intended to transfer the
may be annulled not because of the inadequacy thing gratuitously, then the sale is void but the
of the price but because the consent is vitiated. contract shall be valid as a donation.
Contracts of sale entered into by guardians or EXAMPLE: S sold to B a parcel of land worth
representatives of absentees are rescissible P50,000.00 for only P30,000.00. This contract of
whenever the wards or absentees whom they sale is valid although the price is grossly
represent suffer lesion by more than 1/4 of the inadequate. However, if it is shown that B
value of the things which are the object thereof. induced S to sell the land through fraud,
mistake, or undue influence, the contract may
be annulled on that ground. If the price is
EFFECT OF GROSS INADEQUACY OF PRICE IN simulated, B may prove another consideration
INVOLUNTARY SALES. like the liberality of S and if such liberality is
proved, then the contract is valid as a donation;
(1) General rule. — A judicial or execution sale is
or B may prove that the act is in reality some
one made by a court with respect to the
other contract, like barter and, therefore, the
property of a debtor for the satisfaction of his
transfer of ownership is unaffected.
indebtedness.
(2) If the contract is not shown to be a donation
(2) Where price so low as to be “shocking to the
or any other act or contract transferring
conscience.” — If the “price is so inadequate as
ownership because the parties do not intend to
to shock the conscience of the Court”, “such
be bound at all the ownership of the thing is not
that the mind revolts at it and such that a
transferred
reasonable mind would neither directly or
indirectly be likely to consent to it,’’ a judicial
sale, say, of real property, will be set aside.
PRICE ON A GIVEN DAY AT PARTICULAR
(3) Where seller is given the right to repurchase. MARKET.
— The validity of the sale is not necessarily
-a price is considered certain if it could be
affected where the law gives to the owner the
determined with reference to another thing
right to redeem, as when a sale is made at
certain.
public auction, upon the theory that the lesser
the price, the easier it is for the owner to effect
the redemption.
FIXING OF PRICE BY ONE OF THE
CONTRACTING PARTIES, NOT ALLOWED.
(1) If consent is essential to a contract of sale, delivered and appropriated by the buyer, the
the determination of the price cannot be left to latter must pay a reasonable price therefor.
the discretion of one of the contracting parties;
otherwise, it cannot be said that the other
consented to a price he did not and could not WHAT IS THE REASONABLE PRICE?
previously know.
The reasonable price or value of goods is
(2) Moreover, to be just, the price must be generally the market price at the time and place
determined impartially by both parties (Art.
1458.) or left to the judgment of a specified BECAUSE: The current price of the day may be
person or persons. highly unreasonable from accidental
circumstances, as on account of the commodity
NOTE: However, where the price fixed by one having been purposely kept back by the vendor
party is accepted by the other, the contract is himself.
deemed perfected because in this case, there
exists a true meeting of minds upon the price.
STAGES OF CONTRACT OF SALE

ART. 1474. Where the price cannot be 1. NEGOTIATION – the period from the time the
determined in accordance with the preceding parties gave interest to the time the contract is
articles, or in any other manner, the contract is perfected
inefficacious. However, if the thing or any part 2. PERFECTION – Takes place in the concurrence
thereof has been delivered to and of the essential elements ooof the sale which
appropriated by the buyer, he must pay a are the meeting of the minds of the parties as
reasonable price therefor. What is a reasonable to the object and to its price
price is a question of fact dependent on the
circumstances of each particular case. (n) 3. CONSUMMATION – Begins when the parties
perform their respective undertakings

PERFECTION OF CONTRACT OF SALE.

EFFECT OF FAILURE TO DETERMINE PRICE.
-The contract of sale being consensual, it is
(1) Where contract executory. — If the price perfected at the moment of consent without
cannot be determined in accordance with the necessity of any other circumstances
Articles 1469 and 1472, or in any other manner,
and the bargain is still executory, the contract is -From the moment there is a meeting of minds
without effect. upon the thing which is the object of the
contract and upon the price
Price certain is an essential element of the
contract of sale. (Art. 1458.) Consequently, (1) Conduct of the parties - Appropriate conduct
there is no obligation on the part of the vendor by the parties may be sufficient to establish an
to deliver the thing and on the part of the agreement.
vendee to pay. (2) Transfer of ownership - The ownership is not
(2) Where delivery has been made. — If the transferred until the delivery of the thing
thing or any part thereof has already been
(3) IN CASE OF INCOMPLIANCE – The injured (2) A sale by auction is perfected when the
party may sue for fulfillment or recission wit the auctioneer announces its perfection by the fall
payment of damages of the hammer, or in other customary manner.
Until such announcement is made, any bidder
may retract his bid; and the auctioneer may
RIGHT OF OWNER TO FIX HIS OWN PRICE withdraw the goods from the sale unless the
auction has been announced to be without
(1) The owner of a thing has the right to quote reserve.
his own price, reasonable or unreasonable.
(3) A right to bid may be reserved expressly by
-It is up to the prospective buyer to accept or or on behalf of the seller, unless otherwise
reject it provided by law or by stipulation.
-He may even impose a condition hard to fulfill (4) Where notice has not been given that a sale
and name a price quite out of proportion to the by auction is subject to a right to bid on behalf
real value of the thing offered for sale of the seller, it shall not be lawful for the seller
(2) He is also well within his right to quote a to bid himself or to employ or induce any
small or nominal consideration person to bid at such sale on his behalf or for
the auctioneer, to employ or induce any person
to bid at such sale on behalf of the seller or
EFFECT OF FAILURE TO PAY PRICE. knowingly to take any bid from the seller or
any person employed by him. Any sale
1. Price stipulated - The failure to pay the contravening this rule may be treated as
stipulated price after the execution of the fraudulent by the buyer. (n)
contract does not convert the contract into one
without cause or consideration

NOTE: Non-payment of the purchase price is RULES GOVERNING AUCTION SALES.

not among the instances where the law (1) Sales of separate lots by auction are
declares a contract of sale to be null and void separate sales.
-The VENDOR’S REMEDY in such case is -there is a separate contract in regard to each
generally to demand specific performance or lot. As soon as the hammer falls on the first lot,
rescission with damages in either case the purchaser of that lot has a complete and
2. No price stipulated – If there is no price, a separate bargain.
contract of sale is null and void. (2) Sale perfected by the fall of the hammer
REASON: the buyer never paid the seller -In putting up the goods for sale, the seller is
merely making an invitation to those present to
make offers which they do by making bids
ART. 1476. In the case of a sale by auction:
-Each bid is an offer and the contract is
(1) Where goods are put up for sale by auction perfected only by the fall of the hammer or in
in lots, each lot is the subject of a separate other customary manner.
contract of sale.
NOTE: It follows that the bidder may retract his
bid and the auctioneer may withdraw the goods
from sale any time before the hammer falls. OWNERSHIP OF THING TRANSFERRED BY
HOWEVER, if the sale has been announced to DELIVERY.
be without reserve, the auctioneer cannot
-The delivery of the thing sold is essential in a
withdraw the goods from sale once a bid has
contract of sale. Without it, the purchaser may
been made and the highest bidder has a right to
not enjoy the thing sold to him
enforce his bid
It is only after the delivery of the thing sold
(3) Right of seller to bid in the auction
that the purchaser acquires a real right or
-The seller or his agent may bid in an auction ownership over it
sale provided: (a) such right was reserved; (b)
- Delivery may be actual or constructive
notice was given that the sale is subject to a
right to bid on behalf of the seller; and (c) the
right to bid by the seller is not prohibited by law
or by stipulation. EXCEPTIONS TO THE RULE

(a) Where no notice given of right to bid -it (1) Contrary stipulation – The ownership of
shall be unlawful for the seller to bid either things is transferred by delivery. HOWEVER,
directly or indirectly or for the auctioneer to parties may STIPULATE that despite the delivery,
employ or induce any person to bid on behalf of the ownership of the thing shall remain with the
the seller seller UNTIL THA PRICE IS PAID IN FULL.

The purpose of the notice is to prevent puffing Ex: INSTALLMENTS

or secret bidding by or on behalf of the seller by TRIVIA: This is known as pactum reservati
people who are not themselves bound dominii or contractual reservation of title
Employment of a puffer or by bidder to enhance
or inflate the price of the goods sold is a fraud
ART. 1479. A promise to buy and sell a
(b) Where notice of right to bid given. determinate thing for a price certain is
Though bidding by the seller or his agent is reciprocally demandable.
fraudulent, a right to bid may be expressly An accepted unilateral promise to buy or to sell
reserved by or on behalf of the seller a determinate thing for a price certain is
NOTE: the SECRECY of puffing which renders it a binding upon the promissor if the promise is
fraud upon bidding supported by a consideration distinct from the
price. (1451a)

ART. 1477. The ownership of the thing sold

shall be transferred to the vendee upon the
actual or constructive delivery thereof. (n) KINDS OF PROMISE TREATED IN ARTICLE 1479.
ART. 1478. The parties may stipulate that 3 KINDS OF PROMISE
ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n) (1) An accepted unilateral promise to sell in
which the promisee (acceptor) elects to buy
(2) An accepted unilateral promise to buy in A unilateral promise to sell or to buy a
which the promisee (acceptor) elects to sell determinate thing for a price certain does not
bind the promissor even if accepted and may be
(3) A bilateral promise to buy and sell
withdrawn at any time
reciprocally accepted in which either of the
parties chooses to exact fulfillment -it is only if the promise is supported by a
consideration distinct and separate from the
price that its acceptance will give rise to a
EFFECT OF UNACCEPTED UNILATERAL perfected contract.
PROMISE.
-The promise has the burden of proving the
A unilateral promise or offer to sell or to buy a existence of such consideration
thing which is not accepted creates no juridical
EXAMPLE:
effect or legal bond - Such unaccepted
imperfect promise or offer IS CALLED In the preceding example, even if B accepts the
POLICITACION promise of S (this is a case of an accepted
unilateral promise to sell), S is not bound to sell
What is POLITACION?
his car to B because there is no promise, in turn,
-unaccepted imperfect promise on the part of B to buy.

EXAMPLE: S offers or promises to sell to B his However, if the promise is covered by a

car at a stated price and B just let the promise consideration distinct from the price of the car,
go by without accepting it. Neither S nor B is as when B paid or promised to pay a sum of
bound by any contract. Obviously, this is not the money to S for giving him the right to buy the
one contemplated in Article 1479. car if he chooses within an agreed period at a
fixed price, its acceptance produces consent or
meeting of the minds. A legally binding and
MEANING OF OPTION independent contract of option is deemed
perfected.
OPTION - a privilege existing in one person for
which he has paid a consideration which gives
him the right to buy/sell EFFECT OF BILATERAL PROMISE TO BUY AND
Ex: certain merchandise or certain specified SELL.
property, from/to another person, if he - When the promise is bilateral, , one party
chooses, at any time within the agreed period at accepts the other’s promise to buy and the
a fixed price, or under, or in compliance with latter, the former’s promise to sell a
certain terms and conditions. determinate thing for a price certain
An option is a contract, a preparatory contract EXAMPLE: S promised to sell his car to B and B
separate and distinct from the main contract promised to buy the said car for P100,000.00.
itself. It is only when the option is exercised then The parties are bound by their contract so that
the sale becomes perfected in case one of them should not comply with
what is incumbent upon him, the other has the
right to choose between the fulfillment and the
EFFECT OF ACCEPTED UNILATERAL PROMISE.
recission of the obligation, with the payment of RISK OF LOSS OR DETERIORATION.
damages in either case.
Four rules may be given regarding risk of loss
ILLUSTRATIVE CASE:
(1) If the thing is lost before perfection - seller
Promissor withdrew an option to sell which is and not the one who intends to purchase it
not supported by any consideration, after its bears the loss
acceptance by promisee.
res perit domino - the principle that the thing
Facts: S wrote B making a “firm offer for the perishes with the owner
sale” at a definite price of a determinate
(2) If the thing is lost at the time of perfection -
quantity of sardines. B accepted the offer
the contract is void or inexistent.
unconditionally.
(3) If the thing is lost after perfection but before
Issue: Is there a perfected contract of sale?
its delivery - even before the ownership is
Held: Yes, as the promise is bilateral, i.e., a transferred to the buyer, the risk of loss is
promise to buy and sell. Before accepting the shifted to the buyer as an exception to the rule
promise of S and before exercising his option, B of res perit domino
is not bound to buy. Upon accepting S’s offer, a
4) If the thing is lost after delivery - the buyer
bilateral promise to sell and to buy ensues; B
bears the risk of loss following the general rule
assumes ipso facto the obligations of a
of res perit domino.
purchaser, and not merely the right
subsequently to buy or not to buy. The
concurrence of both acts — the offer and the
acceptance — generates a binding contract of SCOPE OF ARTICLE 1480
sale Article 1480 contemplates two rules:

(1) The first rule - where the thing is lost after

ART. 1480. Any injury to or benefit from the perfection but before its delivery - — applies to
thing sold, after the contract has been non-fungible things (par. 1.) and fungible things
perfected, from the moment of the perfection sold independently and for a single price or for
of the contract to the time of delivery, shall be a price fixed without consideration of their
governed by articles 1163 to 1165, and 1262. weight, number, or measure.

This rule shall apply to the sale of fungible Under this rule, which follows the Roman Rule,
things, made independently and for a single the risk of the thing sold passes to the buyer,
price, or without consideration of their weight, even though the thing has not yet been
number, or measure. delivered to him.

Should fungible things be sold for a price fixed Ex: if a house (sold) be destroyed wholly or
according to weight, number, or measure, the partly by fire the loss falls upon the buyer who
risk shall not be imputed to the vendee until must pay the price, even though he has not
they have been weighed, counted, or received the thing
measured, and delivered, unless the latter has
incurred in delay. (1452a)
For the seller is not liable for anything which
happens without his fraud or negligence –
But if after the sale any alluvion has accrued to ART. 1481. In the contract of sale of goods by
the land, the benefit goes to the buyer for the description or by sample, the contract may be
benefit ought to belong to him who has the risk. rescinded if the bulk of the goods delivered do
In other words, the buyer assumes the risk of not correspond with the description or the
loss caused by fortuitous event sample, and if the contract be by sample as
well as by description, it is not sufficient that
(Art. 1174.) without the fault of the seller (Art.
the bulk of goods correspond with the sample
1262.), that is, in spite of the exercise of due
if they do not also correspond with the
diligence on his part (Art. 1163.) and before he
description.
has incurred in delay (Arts. 165, 1170, 1262.)
after the perfection of the contract to the time The buyer shall have a reasonable opportunity
of delivery. (Art. 1480, par. 1.) With respect to of comparing the bulk with the description or
the fruits, the buyer has a right to the same the sample. (n)
from the time the obligation to deliver the thing
arises. (Art. 1164.) If the risk ought to belong to
the buyer before delivery, the benefit ought to SALE OF GOODS BY DESCRIPTION AND/OR
belong to him who has the risk. SAMPLE.
Article 1480, paragraph 1 is applicable only The above article covers a sale of goods by
where the thing is determinate. (Art. 1460.) It description, by sample, and by sample as well as
also applies to fungible things sold for a price by description. It provides a cause for rescission
not fixed in relation to weight, number, or distinct from those stated in Article 1597
measure because in such case the fungible
things have been “particularly designated or (1) Sale by description. - Sale by description
physically segregated.” occurs where a seller sells things as being of a
particular kind, the buyer not know ing whether
the seller’s representations are true or false, but
relying on them as true; or, as otherwise stated,
Is Article 1480 above in conflict with Article
where the purchaser has not seen the article
1504 (infra.)?
sold and relies on the description given him by
(2) The second rule relates to fungible things the vendor, or has seen the goods but the want
sold for a price fixed in relation to weight, of identity is not apparent on inspection
number, or measure. Under the third paragraph,
The reason for the rule is that a dealer who sells
“the risk shall not be imputed to the vendee
an article describing it as the kind of an article
until they have been weighed, counted, or
of commerce the identity of which is not known
measured, and delivered.” (see U.S. vs. De Vera,
to the purchaser, must understand that such
43 Phil. 1001 [1922].) Paragraph 3 is an
purchaser relies upon the description as a
exception to the rule that the vendee bears the
representation by the seller that it is the thing
loss after the perfection of the contract and
described. If the bulk of the goods delivered do
before delivery. However, the vendee assumes
not correspond with the description, the
the risk if he has incurred in delay in receiving
contract may be rescinded. (Art. 1481.) But if
the goods sold.
the thing delivered is as described, the fact that
the buyer cannot use the thing sold for the
purpose for which it was intended without the
seller’s fault does not exempt the buyer from ART. 1482. Whenever earnest money is given
paying the purchase price agreed upon. in a contract of sale, it shall be considered as
part of the price and as proof of the perfection
of the contract. (1454a)
(2) Sale by sample. - To constitute a sale by
sample, it must appear that the parties
contracted solely with reference to the sample, MEANING OF EARNEST MONEY.
with the understanding that the bulk was like it.
- Money or something of value given by the
But a mere exhibition of a sample by the seller
buyer to the seller to bind the bargain
in the absence of any showing that it was an
inducement of the sale or formed the sole basis -It is actually a partial payment of the purchase
thereof, does not amount to a sale by sample as price and is considered as proof of the
where the quality of the articles to be furnished perfection of the contract.
is expressly described in the contract without
reference to the sample or the parties agree NOTE: Since earnest money constitutes an
that the goods ordered shall differ from the advance payment, it must be deducted from the
sample in some particular matter. Whether a total price.
sale is by sample is determined by the intent of
the parties as shown by the terms of the
contract and the circumstances surrounding the EARNEST MONEY AND OPTION MONEY
transaction. (77 C.J.S. 925.) In a sale by sample, DISTINGUISHED.
the vendor warrants that the thing sold and to (1) Earnest money is part of the purchase price,
be delivered by him shall conform with the while option money (see Art. 1479, par. 2.) is
sample in kind, character, and quality the money given as distinct consideration for an
(3) Sale by description and sample. - When a option contract;
sale is made both by sample and by description, (2) Earnest money is given only where there is
the goods must satisfy all the warranties (see already a sale, while option money applies to a
Art. 1565.) appropriate to either kind of sale, sale not yet perfected;
and it is not sufficient that the bulk of the goods
correspond with the sample if they do not also (3) When earnest money is given, the buyer is
correspond with the description, and vice versa. bound to pay the balance, while the would-be
buyer who gives option money is not required
to buy.
MEANING OF BULK OF GOODS.

-it is used to denote the goods as distinguished NOTE: But option money may become earnest
from the sample with which they must money if the parties so agree.
correspond

In other words “bulk of goods” mean the same

as “goods” which, as a whole body, must ART. 1483. Subject to the provisions of the
correspond substantially with the sample and Statute of Frauds and of any other applicable
description. statute, a contract of sale may be made in
writing, or by word of mouth, or partly in
writing and partly by word of mouth, or may the sale may be registered in the Registry of
be inferred from the conduct of the parties. (n) Deeds to make effective as against third persons
the right acquired under such sale. As between
the contracting parties, the form is not
FORM OF CONTRACT OF SALE. indispensable since they are allowed by law to
compel each other to observe that form
— The form of a contract refers to the manner
in which it is executed or manifested.

(1) General rule - , a contract may be entered SALE OF REAL PROPERTY OR AN INTEREST
into in any form provided all the essential THEREIN.
requisites for its validity are present
1) A sale of a piece of land or interest therein
- It may be in writing; it may be oral; it may be when made through an agent is void unless the
partly in writing and partly oral. It may even be agent’s authority is in writing
inferred from the conduct of the parties.
(2) For the sale of real property to be effective
NOTE: Sale is a consensual contract and is against third persons, the sale must be
perfected by mere consent. registered in the Registry of Deeds (or Property)

(2) Where contract covered by statute of fraud - The sale must be in a public document (e.g.,
In case the contract of sale should be covered acknowledged before a notary public or any
by the Statute of Frauds the law requires that public officer authorized by law to administer
the agreement (or some note or memorandum oath) for otherwise, the registration will be
thereof) be in writing subscribed by the party refused.
charged. Otherwise, the contract cannot be
(3) The real purpose of registration of a contract
enforced by action.
of sale being to give notice to third persons and
(a) Sale of personal property at a price not less to protect the buyer against claims of third
than P500.00; persons arising from subsequent alienations by
the vendor
(b) Sale of real property or an interest therein
regardlessof the price involved; a NOTE: ACTUAL NOTICE is equivalent to
registration. It is settled that registration is not a
(c) Sale of property not to be performed within mode of acquiring ownership.
a year from the date thereof regardless of the
nature of the property and the price involved (4) The sale of land in a private instrument is
valid and binding upon the parties, for the time-
(3) Where form is required in order that a honored rule is that even a verbal contract of
contract may be valid. — Where the “applicable sale of real estate produces legal effects
statute” requires that the contract of sale be in between the parties
a certain form for its validity, the required form
must be observed in order that the contract
may be both valid and enforceable.
STATUTE OF FRAUDS APPLICABLE ONLY TO
(4) Where form is required only for the EXECUTORY CONTRACTS.
convenience of the parties. — In certain cases, a
-The Statute of Frauds is applicable only to
certain form (e.g., public instrument) is required
executory contracts (where no performance,
for the convenience of the parties in order that
i.e., delivery and payment, has as yet been vendee’s failure to pay cover two or more
made by both parties) and not to contracts installments. In this case, he shall have no
which are totally (consummated) or partially further action against the purchaser to recover
performed any unpaid balance of the price. Any
agreement to the contrary shall be void. (1454-
- It does not forbid oral evidence to prove a
Aa)
consummated sale.

(1) Reason for the rule - The reason is that

partial performance like the writing, furnishes REMEDIES OF VENDOR IN SALE OF PERSONAL
reliable evidence of the intention of the parties PROPERTY PAYABLE IN INSTALLMENTS.
or the existence of the contract.
The vendor of personal property payable in
- A contrary rule would result in injustice or installments may exercise any of the following
unfairness to the party who has performed his remedies:
obligation
(1) elect fulfillment upon the vendee’s failure to
EXAMPLES: (1) S orally sold to B a parcel of land. pay; or
The sale is valid (Art. 1356; Lopez vs. Alvarez, 9
(2) cancel the sale, if the vendee shall have
Phil. 28 [1907]; Guerrero vs. Raquel, 10 Phil. 52
failed to pay two or more installments; or
[1908].) but it is unenforceable because the law
requires that it be in writing to be enforceable. (3) foreclose the chattel mortgage, if one has
(Art. 1403[e].) (2) If the contract of sale above is been constituted, if the vendee shall have failed
in private writing, then it is valid and binding to pay two or more installments.
but only as between the parties and their
privies (Soriano vs. Latoño, 87 Phil. 757 [1950];
Gallar vs. Husain, supra.) and not as against NATURE OF THE REMEDIES
third persons without notice until the sale is
registered in the Registry of Property. B has the -These remedies are alternative and are not to
right to compel S to put the contract in a public be exercised cumulatively or successively and
instrument so that it can be registered to affect the election of one is a waiver of the right to
third persons resort to the others.

- Thus, where from the prayer of the vendor in

its brief, it asks the appellate court to order the
ART. 1484. In a contract of sale of personal vendee to pay the remaining unpaid sum under
property the price of which is payable in the promissory note, it thereby waives the
installments, the vendor may exercise any of other remedies.
the following remedies:

1) Exact fulfillment of the obligation, should

the vendee fail to pay; RIGHT OF VENDOR TO RECOVER UNPAID
BALANCE OF PURCHASE PRICE.
(2) Cancel the sale, should the vendee’s failure
to pay cover two or more installments; (1) Remedy of specific performance - The
vendor who has chosen to exact the fulfillment
(3) Foreclose the chattel mortgage on the thing of the obligation is not limited to the proceeds
sold; if one has been constituted, should the of the sale of the mortgaged goods. He may still
recover from the purchaser the unpaid balance In other words, in all proceedings for the
of the price foreclosure of chattel mortgages, the mortgagee
is limited to the property included in the
(2) Remedy of cancellation - — If the vendor
mortgage
chooses rescission or cancellation of the
contract upon the vendee’s failure to pay two or
more installments, the latter can demand the
ART. 1485. The preceding article shall be
return of payments already made unless there
applied to contracts purporting to be leases of
is a stipulation about forfeiture
personal property with option to buy, when
Ex. In a case, for failure of the buyer to pay two the lessor has deprived the lessee of the
or more installments, the vendormortgagee (or possession or enjoyment of the thing.
his assignee) repossessed the car.

(3) Remedy of foreclosure - If the vendor has

LEASE OF PERSONAL PROPERTY WITH OPTION
chosen the third remedy of foreclosure of the
TO BUY.
chattel mortgage if one has been given on the
property, he is not obliged to return to the (1) Nature of transaction. - Leases of personal
vendee the amount of the installments already property with option to buy on the part of the
paid should there be an agreement to that lessee who takes possession or enjoyment of
effect. the property leased are really sales of
personalty payable in installments
- But he shall have no further action against the
vendee for the recovery of any unpaid balance (2) Purpose of provision - The evident purpose
of the price remaining after the foreclosure and of Article 1485 is to prevent vendors from
actual sale of the mortgaged chattel, and any resorting to this form of contract which usually
agreement to the contrary is void. is in reality contract of sale of personal property
payable in installments in contravention of the
provisions of Article 1484.
RECOVERY OF DEFICIENCY AFTER
- the vendor by retaining ownership over the
FORECLOSURE PROHIBITED.
property in the guise of being the lessor, retains
(1) Purpose of prohibition - — The principal likewise the right to repossess the same,
object of Article 1484 (3) is to remedy the without going through the process of
abuses committed in connection with foreclosure, in the event the vendee-lessee
foreclosure of chattel mortgages. It prevents defaults in the payment of the installments
mortgagees from seizing the mortgaged
EXAMPLE: B entered into a contract called
property, buying it at foreclosure sale for a low
“contract of lease” with S whereby B leased the
price and then bringing suit against the
car of S. It is stipulated that B, the alleged
mortgagor for a deficiency judgment.
lessee, shall pay P10,000.00, upon signing the
The almost invariable result of this procedure contract, and on or before the 5th day of every
was that the mortgagor found himself minus month, P2,000.00 by way of rental. The contract
the property and still owing practically the full fixed the value of the vehicle to be P100,000.00.
amount of his original indebtedness. It also provided that B has the option to pur
chase the car for the said amount and the
payment made by way of rentals shall be
deducted from the amount agreed in the option the parties may stipulate that the installments
and upon the full value fixed being paid, the or rents paid are not to be returned
lease would terminate and title to the leased
Such a stipulation is valid “insofar as the same
property would be transferred to B; and S would
may not be unconscionable under the
have the right to terminate the contract and
circumstances’’; otherwise, the court has the
repossess the vehicle should B fail to make
power to order the return of a portion of the
payments on the dates specified, and in such
total amount paid in installments or rents.
event, the payments theretofore made should
remain the property of S and not be recoverable
by B.
ART. 1487. The expenses for the execution and
There can hardly be any question that the registration of the sale shall be borne by the
contract in this case is one of sale on vendor, unless there is a stipulation to the
installments and not lease, with the socalled contrary. (1455a)
monthly rentals being in truth monthly
amortizations on the price of the car, and is,
therefore, subject to the provision that “when EXPENSES FOR EXECUTION AND
the lessor had deprived the lessee of the REGISTRATION.
enjoyment or possession” of the personal
property, he shall have no further action against Under this article, the vendor has the duty to
the lessee “to recover any unpaid balance” pay not only the expenses for the execution of
owing by the latter, “any agreement to the the sale but also for the registration of the same
contrary being void.” In choosing the alternative in the absence of any agreement between the
remedy of depriving the lessee of the parties to the contrary.
enjoyment of the leased property, the lessor, in Expenses incurred subsequent to the transfer of
such case, waives the right to bring an action for title are to be borne by the buyer, unless caused
unpaid rentals on the said vehicle. by the fault of the seller.

ART. 1486. In the cases referred to in the two ART. 1488. The expropriation of property for
preceding articles, a stipulation that the public use is governed by special laws. (1456)
installments or rents paid shall not be returned
to the vendee or lessee shall be valid insofar as
the same may not be unconscionable under
EXPROPRIATION OF PROPERTY FOR PUBLIC
the circumstances. (n)
USE.

The procedure for the exercise of the power of

eminent domain is provided for in Rule 67 of
the Rules of Court. Expropriation must be
STIPULATION AUTHORIZING THE FORFEITURE decreed by competent authority and for public
OF INSTALLMENTS OR RENTS PAID. use and always upon payment of just
In sales of personal property by installments or compensation
leases of personal property with option to buy,
Chapter 2 CAPACITY TO BUY OR attendance, education and transportation
according to the financial capacity of the family
SELL of the incapacitated person
ART. 1489. All persons who are authorized in NOTE: Generally, the contracts entered into by a
this Code to obligate themselves, may enter minor and other incapacitated persons (e.g.,
into a contract of sale, saving the modifications insane or demented persons, deafmutes who
contained in the following articles. do not know how to write), are VOIDABLE
Where necessaries are sold and delivered to a However, where necessaries are sold and
minor or other person without capacity to act, delivered to him (without the intervention of
he must pay a reasonable price therefor. the parent or guardian), he must pay a
Necessaries are those referred to in article 290. reasonable price
(1457)
The contract is, therefore, valid but the minor
has the right to recover any excess above a
reasonable value paid by him.
PERSON WHO MAY ENTER INTO A CONTRACT

OF SALE.
SALE BY MINORS.
- As a general rule, all persons, whether natural
or juridical, who can bind themselves have also The courts have laid down the rule that the sale
legal capacity to buy and sell. There are of real estate effected by minors who have
exceptions to this rule in those cases when the already passed the ages of puberty and
law determines that a party suffers from either adolescence and are now in the adult age,
absolute or relative incapacity. when they pretended to have already reached
their majority, while in fact they have not, is
valid, and they cannot be permitted afterwards
KINDS OF INCAPACITY. to excuse themselves from compliance with the
obligations assumed by them or to seek their
ABSOLUTE - the case of persons who cannot
annulment.
bind themselves

RELATIVE - exists only with reference to certain

persons or a certain class of property ART. 1490. The husband and the wife cannot
sell property to each other, except:
NOTE: There are no incapacities except those
provided by law and such incapacities cannot be (1) When a separation of property was agreed
extended to other cases by implication for the upon in the marriage settlements; or
reason that such construction would be in
(2) When there has been a judicial separation
conflict with the very nature
of property under article 191.* (1458a)

LIABILITY FOR NECESSARIES OF MINOR OR

RELATIVE INCAPACITY OF HUSBAND AND WIFE
OTHER PERSON WITHOUT CAPACITY TO ACT.
(1) The husband and the wife are prohibited by
Necessaries - those things which are needed for
the above article from selling property to each
sustenance, dwelling, clothing, medical
other. A sale between husband and wife in prohibition can be taken advantage of only by
violation of Article 1490 is inexistent and void persons who bear such relation to the parties
from the beginning because such contract is making the transfer or to the property itself that
expressly prohibited by law such transfer interferes with their rights or
interests. Unless such a relationship appears,
Revenue, 1 SCRA 302 [1961].) (2) They are also
the transfer cannot be attacked. Thus, the heirs
prohibited from making donations to each other
of either spouse, as well as creditors at the time
during the marriage except moderate gifts on
of the transfer, can attack the validity of the sale
the occasion of any family rejoicing. (Art. 87,
but not creditors who became such only after
Family Code.) However, if there has been a
the transaction.
separation of property agreed upon in the
marriage settlements, or when there has been a (2) The government can question the validity or
judicial separation of property decreed between legitimacy of sales subject to tax between
them by the court, the sales between husband husband and wife whenever necessary to
and wife are allowed. They have, therefore, in prevent tax evasion.
the two cases mentioned, capacity to buy from
or to sell to each other
ART. 1491. The following persons cannot
Incidentally, a marriage settlement (also called
acquire by purchase, even at a public or judicial
“ante-nuptial contract”) is an agreement
auction, either in person or through the
entered into by persons who are about to be
mediation of another:
united in marriage, and in consideration
thereof, for the purpose of fixing the property (1) The guardian, the property of the person or
relations that would be followed by them for persons who may be under his guardianship;
the duration of the marriage.
(2) Agents, the property whose administration
or sale may have been entrusted to them,
unless the consent of the principal has been
REASON FOR PROHIBITION UNDER ARTICLE
given;
1490.
(3) Executors and administrators, the property
The reason for the law is not based so much on
of the estate under administration;
the union of the personality of the husband and
wife nor on the weakness of the sex and on the the estate under administration; (4) Public
possibility that the husband will induce his wife officers and employees, the property of the
to engage in ruinous operations, but primarily, State or of any subdivision thereof, or of any
for the protection of third persons1 who, relying government owned or controlled corporation,
upon supposed property of either spouse, or institution, the administration of which has
enters into a contract with either of them only been entrusted to them; this provision shall
to find out that the property relied upon was apply to judges and government experts who,
transferred to the other spouse. in any manner whatsoever, take part in the
sale;

(5) Justices, judges, prosecuting attorneys,

PERSONS PERMITTED TO QUESTION SALE.
clerks of superior and inferior courts, and other
(1) Although certain transfers between husband officers and employees connected with the
and wife are prohibited under Article 1490, such administration of justice, the property and
rights in litigation or levied upon an execution
before the court within whose jurisdiction or
OTHER PERSONS ESPECIALLY DISQUALIFIED.
territory they exercise their respective
functions; this prohibition includes the act of Examples of persons especially disqualified by
acquiring by assignment and shall apply to law are:
lawyers, with respect to the property and
rights which may be the object of any litigation (1) aliens who are disqualified to purchase
in which they may take part by virtue of their private agricultural lands
profession;

(6) Any others specially disqualified by law. (2) an unpaid seller having a right of lien or
(1459a) having estopped the goods in transitu, who is
prohibited from buying the goods either directly
or indirectly in the resale of the same at a public
or private sale which he may make
INCAPACITY BY REASON OF RELATION TO
PROPERTY. (3) The officer conducting the execution sale or
his deputies cannot become a purchaser, or be
The above article enumerates the persons who,
interested directly or indirectly in any purchase
by reason of the relation of trust with the
at an execution sale.
persons under their charge or their peculiar
control over the property, are prohibited from In the case of aliens, the disqualification is
acquiring said property either directly or founded on express provision of the
indirectly and whether in private or public sale. Constitution and not by reason of any fiduciary
They are the: (1) guardians; (2) agents; (3) relationship. It has been held, however, that
executors and administrators; (4) public officers where a land is sold to an alien who later sold it
and employees; (5) judicial officers, employees to a Filipino, the sale to the latter cannot be
and lawyers; and (6) others especially impugned. In such case, there would be no
disqualified by law more public policy to be served in allowing the
Filipino seller or his heirs to recover the land as
The persons disqualified to buy referred to in
the same is already owned by a qualified
Articles 1490 and 1491 are also disqualified to
person.
become lessees of the things mentioned
thereon

REASON FOR PROHIBITIONS UNDER ARTICLE

1491.

The reason behind the article is to prevent

frauds on the part of the persons enumerated
therein and minimize temptations to the
exertion of undue and improper influence

The law does not trust human nature to resist

the temptations likely to arise out of the
interest of the buyer and the seller