You are on page 1of 3

Contract of Sale

Is a formal contract by which a seller agrees to sell and a buyer agrees to buy, under certain terms and
conditions spelled out in writing in a document signed by both parties. An invoice, for example, is a contract of
sale. Also called agreement of sale, contract for sale, sale agreement or sale contract.
It is an agreement between two parties whereby one, who is the seller or vendor, oblige himself to deliver
something to the other party who is the buyer or vendee, who is bound to pay a sum of money or its
equivalent.

Characteristics of a Contract of Sale


1. Consensual- perfected by mere consent of the parties without further acts.

2. Bilateral- both the contracting parties are bound to fulfill correlative obligations towards each other (the
seller to deliver and transfer ownership of the thing sold, and the buyer to pay the price).
3. Onerous- the thing sold is conveyed inconsideration of the price and vice versa.
Commutative- the thing sold is considered the equivalent of the price paid and vice versa.
4. Aleatory- in the case of sale of hope, one of the parties or both reciprocally bind themselves to give or to do
something inconsideration of what the other shall give or do upon the happening of an event which is
uncertain, or which is to occur at an indeterminate time.
5. Nominate- the contract is given a special name or designation in the Civil Code.
6. Principal- the contract does not depend for its existence and validity upon another contract
Essential elements of contract of sale
Consent or meeting of the minds -wherein the contract of sale is perfected at the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the price thereof.
Object or subject matter or the determinate thing -as what the law referred to which the seller is bound to
deliver and the buyer is bound to receive upon payment of its sum.
Cause or consideration or the price certain in money or its equivalent -which does not include goods or
merchandise although they have their own value in money.

Natural Elements
those which are deemed to exist in certaincontracts, in the absence of any contrary stipulations, likewarranty
against eviction;

Accidental Elements
those which may be present or absentdepending on the stipulations of the parties, like conditions,interest,
penalty, time or place of payment.

Stages of Contract of Sale

(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties;

(b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of
the contract; and

(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.

Distinguish Contract of Sale from Contract to Sell

A Contract to Sell is an agreement between a buyer and a seller whereby the seller promises to sell something
to the buyer and the buyer promises to buy it. But generally, in this kind of contract, the ownership of the
subject thing is not transferred to the buyer upon the signing of the contract. There are usually conditions to
be complied with by one or both of the parties. And the transfer of ownership will only happen when those
conditions are met.

A Contract of Sale is an agreement between a buyer and a seller whereby the seller agrees to give or deliver
something to the buyer for a certain price which the buyer agrees to pay. In contracts like this, when the buyer
pays and the seller delivers, the transfer of ownership is also done at the same time.

This is usually not applicable to situations where the seller is not yet ready to deliver the thing being sold. Nor
is it applicable where the buyer is not yet ready to pay the price in full.
However, even if the buyer cannot pay in full right away, both parties may still agree on the transfer of
ownership to the buyer. This is, provided that the seller can readily deliver what he is selling. And subject to
what we call a resolutory condition that when the buyer fails with his payment(s), the seller will take backs
the thing sold.

In real estate transactions, this type of contract is usually executed only when the property is ready to be
turned over and if the buyer is ready to pay the price in full.

Generally, in a Contract to Sell, the ownership is not transferred to the buyer upon the execution of the
contract. In a Contract of Sale, the ownership is transferred to the buyer right upon its execution.

Distinguish Absolute sale from Conditional sale

Absolute Sale- where the sale is not subject to any conditions whatsoever and where the title passes to
the buyer upon the delivery of the thing sold.
One wherein there is no condition whatever and imposes upon the vendor the obligation to deliver the real
estate, subject matter of the agreement to the vendee who upon the receipt of the property hands over and
pays the purchase price that has been previously agreed upon with the vendor.

The Deed of Absolute Sale, Sale in Exchange or Barter.

Conditional Sale- where the sale contemplate a contingency and where the contract is subject to certain
conditions, usually in the case of the vendee, for the full payment of the agreed purchase price.

This is an agreement to sell or buy real estate with certain conditions that must be accomplished by either or
both the parties so as to extinguish and or create ownership over the subject property. This is merely an
executory contract in contemplation of the law and the right of ownership is withheld for the meantime. In
other words, the certificate of title of the real property is not turned over to the vendee until and after certain
conditions have been accomplished by either or both the parties. Then it becomes an executed contract.

Sale on installments, Contract to Sell, Pacto de Retro, Sale with mortgage, Sale with assumption of
mortgage, Dacion en Pago.

Kinds of Sale
a. As to the nature of the subject matter
Sale of real property
Sale of personal property
b. As to value of the things exchange
Commutative sale
Aleatory sale
c. As to whether the object is tangible or intangible
d. As to validity or defect of the transaction
Valid sale
Remissible sale
Voidable sale
Unenforceable sale
Void sale
e. As the legality of the object
Sale of a licit object
Sale of an illicit object
f. As to presence or absence of conditions
Absolute sale
Conditional sale

Distinguish Option Contract from Earnest Money

Option contract
Is a contract granting a privilege in one person, for which he has paid a consideration, which gives him the
right to buy certain merchandise at any time within the agreed period, at a fixed price. It is separate and
distinct from the main contract itself which the parties may enter into upon the consummation of the option.
An option contract should have a consideration at all times or else it would be void.

Earnest money
Is something of value to show that the buyer was really in earnest, and given to the seller to bind the
bargain. It is a partial payment or a part of the purchase price and may prove to show the perfection of a
contract.