Article 1466. In construing a contract containing provisions Article 1471.

Article 1471. If the price is simulated, the sale is void, but the act may
characteristic of both the contract of sale and of the contract of agency be shown to have been in reality a donation, or some other act or
to sell, the essential clauses of the whole instrument shall be contract.
considered.
EFFECT OF GROSS INADEQUACY OF PRICE
Sale vs. Agency
SALE AGENCY NOTE: Mere inadequacy of the price does not affect the validity of the
The buyer pays for the price of The agent does not pay for the sale, except
the goods/property purchased price. He merely accounts for the (1) When there is fraud, mistake, or undue influence indicative of a
proceeds of the sale. defect in consent is present,
The buyer becomes the owner of The agent does not become the (2)When it shows that the parties really intended a donation or some
the goods/property purchased owner of the goods/property other act or contract.
delivered to him for sale.
Buyer cannot return the The agent returns the EFFECT WHERE PRICE IS SIMULATED
goods/property when the sale is goods/property if he was not able
defective to sell the same 1. The act may be shown to have been in reality a donation, or some
The seller warrants the The agent does not make any other act or contract
goods/property sold warranty as long as he acts within 2. If not and neither party had any intention whatsoever that the
his authority and in the name of amount will be paid (absolutely simulated): the sale is void
the principal 3. If there is a real price but what is stated in the contract is not the one
The seller has full freedom to The agent must follow the intended to be paid (only relatively simulated): the contract of sale is
enter into any terms or conditions instructions of the principal valid but subject to reformation
on the contract of sale
Effect of Gross Inadequacy of Price. No effect.
Article 1467. A contract for the delivery at a certain price of an article Exceptions: (meaning, sale is set aside)
which the vendor in the ordinary course of his business manufactures 1. If consent is vitiated, such as VIMFU (Violence, Intimidation, Mistake,
or procures for the general market, whether the same is on hand at the Fraud, Undue influence)
time or not, is a contract of sale, but if the goods are to be 2. If the parties intended a donation or some other act or contract
manufactured specially for the customer and upon his special order, 3. If the price is so low as to be shocking to the conscience
and not for the general market, it is a contract for a piece of work.
Effect of Simulated Price. Sale is void, unless it could be shown that the
Contract for a Piece of Work— The article sold is specially manufactured parties intended a donation or some other act of liberality.
and upon the special order of the customer. Article is not sold in the o Price Simulated- No price to support a contract of sale, such that
ordinary course of business. neither party had any intention that the amount will be paid—void
Contract for a piece of work Contract of Sale o Price is False- there is a real price not declared—contract is valid,
but the underlying deed is subject to reformation to indicate the real
The thing transferred is one not The thing transferred is one which
price upon which the minds of the parties have met.
in existence and w/c never would have existed and would have
would have existed but for the been the subject of sale to some
Article 1475. The contract of sale is perfected at the moment there is
order of the party desiring to other person, even if the order had
a meeting of minds upon the thing which is the object of the contract
acquire it not been given
and upon the price.
The services dominate the The primary objective of the
From that moment, the parties may reciprocally demand
contract even though there is a contract is a sale of the
performance, subject to the provisions of the law governing the
sale of goods involved manufactured item; it is a sale of
form of contracts.
goods even though the item is
manufactured by labor furnished by
PERFECTION OF CONTRACT OF SALE. Meeting of the minds upon the
the seller and upon previous order
thing and price.
of the customer
Effect: Parties may reciprocally demand performance
Not w/in the Statute of Frauds Governable by the Statute of Frauds
GENERAL RULE: A contract of sale is perfected at the moment there is a
Article 1468. If the consideration of the contract consists partly in
meeting of the minds upon the thing which is the object of the contract
money, and partly in another thing, the transaction shall be
and upon the price; consensual contract
characterized by the manifest intention of the parties. If such intention
Exception: When the sale is subject to a suspensive condition
does not clearly appear, it shall be considered a barter if the value of
the thing given as a part of the consideration exceeds the amount of
REQUIREMENTS:
the money or its equivalent; otherwise, it is a sale.
1. When parties are face to face – when there is absolute acceptance of
an offer that is certain
Sale Barter 2. When thru correspondence or telegram – when the offer or receives
Consideration: giving of money as Consideration: giving of a thing or had knowledge of the acceptance
payment 3. When the sale is subject to a suspensive condition – from the
Governed by law on sales: species of the genus sales moment the condition is fulfilled
If consideration consists party in money and partly by thing – look at NOTES: Qualified acceptance: mere counter-offer which needs to be
manifest intention; absolutely accepted to give rise to perfected contract of sale. Business
If intention is not clear: value of If intention is not clear: value of ads are mere invitations to make an offer except when it appears to be
thing is equal thing is more otherwise.
or less than amount of money – than amount of money – barter
sale Article 1477. The ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery thereof.
Rules if Consideration is partly Money and Partly Goods
1. Determine the intention of the parties. Article 1478. The parties may stipulate that ownership in the thing
2. If intention could not be determined, consider the value of the thing shall not pass to the purchaser until he has fully paid the price.
given:
a. If value of the thing more than value of the money, it is BARTER Article 1480. Any injury to or benefit from the thing sold, after the
b. If value of the thing less than value of the money, it is SALE contract has been perfected, from the moment of the perfection of the
c. If both values are the same, SALE contract to the time of delivery, shall be governed by articles 1163 to
1165, and 1262.
Article 1470. Gross inadequacy of price does not affect a contract of
sale, except as it may indicate a defect in the consent, or that the This rule shall apply to the sale of fungible things, made independently
parties really intended a donation or some other act or contract. and for a single price, or without consideration of their weight,
number, or measure.
Should fungible things be sold for a price fixed according to weight,
number, or measure, the risk shall not be imputed to the vendee until
they have been weighed, counted, or measured and delivered, unless
the latter has incurred in delay.
Legal consequences from point of perfection are the same in both legal
systems: upon perfection of an unconditional contract of sale involving
specific or determinate subject matter, the risk of loss deterioration and
the benefits of fruits and improvements, were fro the account of the
buyer.
WHO BEARS RISK OF LOSS/ DETERIORATION/
FRUITS:
1. BEFORE PERFECTION
a. Res perit domino
b. Owner is seller so seller bears risk ofloss
2. AT PERFECTION
o Res perit domino
o Contract is merely inefficacious because loss of the subject matter
does not affect the validity of the sale
o Seller cannot anymore comply with obligation so buyer cannot
anymore be compelled
3. AFTER PERFECTION BUT BEFORE DELIVERY
o Loss – confused state
o Paras: BUYER
o Tolentino: SELLER
o Deterioration and fruits – Buyer bears loss;
4. AFTER DELIVERY
o Res perit domino
o Delivery extinguishes ownership visa-vis the seller and creates a new
one in favor of the buyer
Article 1481. In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk of the goods
delivered do not correspond with the description or the sample, and if
the contract be by sample as well as description, it is not sufficient that
the bulk of goods correspond with the sample if they do not also
correspond with the description.
The buyer shall have a reasonable opportunity of comparing the bulk
with the description or the sample.
Sale of Goods By Description- where a seller sells a thing as being of a
certain kind verbally describing them and the buyer simply relies on the
seller’s descriptions of the things, not knowing whether the seller’s
representations are true or not.
Sale by Sample- Where the seller warrants that the bulk of goods being
sold correspond with the sample or samples exhibited not only in kind
but also in quality and character.
Sale by Description and Sample- Where the seller has to satisfy the
requirements in sale by description and sample. There are two-fold
warranty here:
(a) the goods purchased matched with the description and
(b) the goods also matched in kind, quality and character with that of
the sample or samples exhibited to the buyer or his representative
Article 1482. Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the perfection
of the contract.
EARNEST MONEY vs. OPTION MONEY
Earnest Money Option Money
It is part of the purchase price It is given as a distinct consideration
for an option contract which gives
the buyer a specific period within
which to purchase the thing
It is given only when there is It is given at a time when the sale
already a perfected sale had not yet been perfected. What
had been perfected only is the
option contract
When it is given, the buyer is Even if option money is paid by the
bound to pay the balance of the would-be-buyer he is not bound to
agreed purchase price buy the thing
If the sale does not materialize, If the buyer decides not to buy the
the earnest money paid must be thing, he cannot recover the option
returned, unless a contrary money he paid as consideration for
agreement had been stipulated the contract of option
Article 1483. Subject to the provisions of the Statute of Frauds and of
any other applicable 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 be inferred from the conduct of the parties.
FORM OF SALES
I. Form not important in validity of sale
a. Sale being consensual, may be oral or written, perfected by mere
consent as to price and subject matter
b. If particular form is required under the statute of frauds:
i. valid and binding between parties but not binding to 3rd persons
c. Reason: purposes of convenience only and not for validity and
enforceability; cause of action is granted to sue and compel other
party to execute the document
II. When form is important for validity; exception by specific provision
of law;
a. Power to sell a piece of land granted to an agent – otherwise VOID
b. Sale of large cattle; must also be registered with Municipal treasurer –
otherwise VOID
c. Sale of land by non-Christian if not approved by Governor– VOID
III. When form is important for enforceability (STATUTE OF FRAUDS
Article 1403 (2))
a. A sale agreement which by its terms is not to be performed within a
year from the making thereof;
b. An agreement for the sale of goods, chattels or things in action, at a
price not less than P500.00; and
c. A sale of real property or of an interest therein.
IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in writing and subscribed to by
party or his agent (contains essential terms of the contract)
2. When there has been partial performance/execution (seller delivers
with intent to transfer title/receives price)
3. When there has been failure to object to presentation of evidence
(oral)
4. When sales are effected through electronic commerce
Article 1484. In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the
following remedies:
(1)Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or
more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement
to the contrary shall be void.
Article 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or
enjoyment of the thing.
Article 1486. In the case referred to in the two preceding
articles, a stipulation that the 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 the circumstances.
Article 1487. The expenses for the execution and registration of the
sale shall be borne by the vendor, unless there is a stipulation to the
contrary.
Article 1488. The expropriation of property for public use is governed
by special laws.
Article 1489. All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
Where necessaries are those sold and delivered to a minor or other
person without capacity to act, he must pay a reasonable price
therefor. Necessaries are those referred to in article 290.
Two Kinds of Incapacity:
1. Absolute Incapacity- Party cannot bind himself in any case.
2. Relative Incapacity- Certain Persons under certain circumstances
cannot buy certain property.
** Minors in contract for necessaries must pay reasonable price.
Necessaries—those things which are needed for sustenance, dwelling,
clothing and medical attendance, in keeping with the financial capacity
of the family of the incapacitated person.
Article 1490. The husband and the wife cannot sell property to each
other, except:
(1) When a separation of property was agreed upon in the marriage
settlements; or
(2) When there has been a judicial separation of property under article
191.
Prohibition against Husband and Wife. Exceptions.
Rationale: PID
a. To avoid Prejudice to 3rd Persons
b. To prevent one spouse from unduly influencing the other.
c. To avoid by indirection the violation of the prohibition against
donations.
Who may assail illegality?
a. Creditors prior to the sale
b. Heirs of either spouse.
** Either spouse may not assail illegality because they are parties
thereto.
** A spouse designated as agent of the other spouse may sell the latter’s
exclusive property.
Article 1491. The following persons cannot acquire by purchase, even
at a public or judicial auction, either in person or through the
mediation of another:
(1) The guardian, the property of the person or persons who
may be under his guardianship;
(2) Agents, the property whose administration or sale may have
been intrusted to them, unless the consent of the principal has
been given;
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State or of any
subdivision thereof, or of any government-owned or controlled
corporation, or institution, the administration of which has been
intrusted to them; this provision shall apply to judges and government
experts who, in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in
which they may take part by virtue of their profession;
(6) Any others specially disqualified by law.
Persons Relatively Incapacitated to Buy. (PAGEJO)
1. Public Officers and employees—Property Of State.
2. Agents—Property of Principal unless with consent.
3. Guardian—Property of Ward.
4. Executors and administrators—Estate
5. Justices, Judges, Prosecuting Attorneys, Clerks and employees of
court—Property/Rights under litigation.
6. Others disqualified by law. (Ex. *aliens who are disqualified to
purchase private agricultural lands; *an unpaid seller having a right of
lien or having stopped 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 w/c he may make. Art. 1533, par.5)
Rationale: Fiduciary relationship
Status of Sale: Voidable (1-3); Void (4-6)
Article 1492. The prohibitions in the two preceding articles are
applicable to sales in legal redemption, compromises and
renunciations.
Article 1493. If at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the contract
shall be without any effect.
But if the thing should have been lost in part only, the vendee may
choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed
upon.
Partial Loss Rules:
1. Vendee may withdraw from the contract
2. Demand the remaining part, paying its price in proportion to the
total sum agreed upon
Article 1494. Where the parties purport a sale of specific goods, and
the goods without the knowledge of the seller have perished in part
or have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat
the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have
not deteriorated, and as binding the buyer to pay the agreed price for
the goods in which the ownership will pass, if the sale was divisible.
Loss/Substantial Deterioration of Specific Goods without seller’s
knowledge.
1. Buyer may avoid the sale or
2. May treat sale as valid w/ respect to the existing goods
Article 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale.
Obligations of Vendor. (TDWP)
1. Transfer Ownership (not waivable)
2. Deliver (not waivable)
3. Warrant Object (waivable and may be modified)
4. Preserve Thing from perfection to delivery (Art. 1163)
5. Pay for the execution and registration of the sale unless there is a
contrary agreement
**Execution sales do not require the delivery of thing since a one year
period of redemption is available to seller.
Article 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways
specified in articles 1497 to 1501, or in any other manner signifying
an agreement that the possession is transferred from the vendor to
the vendee.
Article 1497. The thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee.
Control and Possession necessary in Delivery.
Exception: Art. 1478. Stipulation as to full payment of price.
Delivery- a mode of acquiring ownership as a consequence of a contract
of sale by virtue of which actually or constructively the object is placed
in the control and possession of the vendee.
KINDS OF DELIVERY
1. Actual or Real. (1497)
2. Legal or Constructive
a. Legal Formalities (1498); execution of public instrument.
b. Symbolical Tradition (1498 par 2)- keys delivered.
c. Traditio Longa Manu- by mere consent /agreement. If the
movable sold cannot yet be transferred to the possession of the
buyer at the time of the sale. (1499)
d. Traditio Brevi Manu- if the buyer had already the possession the
object even before the purchase. (lessee becomes owner)
e. Traditio constitutum possessorium- possession as owner
changed. (Owner becomes lessee)
3. Quasi-Tradition- Delivery of Rights, credits or incorporeal property
made by:
a. Execution of public instrument
b. Placing titles of ownership in the hands of a lawyer.
c. Allowing the buyer to make use of the rights (1501)
Article 1498. When the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by
the delivery of the keys of the place or depository where it is stored
or kept.
Requirements:
1. Seller’s Control.
2. Seller’s Control transferred to buyer. delivery only upon approval or
3. Intention to deliver for ownership. satisfaction of the
buyer duly
Article 1499. The delivery of movable property may likewise be made manifested after trial
by the mere consent or agreement of the contracting parties, if the Revesting of Ownership is There is no revesting
thing sold cannot be transferred to the possession of the vendee at the ownership in the revested in the seller of ownership because
time of the sale, or if the latter already had it in his possession for any owner if the buyer so it is retained by the
other reason. decides seller until the sale
becomes absolute
Article 1500. There may also be tradition constitutum possessorium. Risk of loss or The risk rests on the The risk remains in
deterioration buyer before the the seller while the
Different forms of Constructive Delivery - Constructive delivery has revestment of goods are on trial
same legal effect as actual or physical delivery ownership

1. Traditio Longa Manu − Delivery of thing by mere agreement; when

SELLER points to the property without need of actually delivering
2. Traditio Brevi Manu − Before contract of sale, the would be buyer
was already in possession of the would be subject matter of sale (ex: as
lessee)
3. Symbolic delivery − As to movables – ex: delivery of the keys to a car
4. Constitutum possessarium − When at the time of the perfection of
the contract of sale, seller had possession of the subject matter in the
concept of owner and pursuant to the contract, seller continues to hold
physical possession no longer in the concept of an owner but as a lessee
or any other form of possession other than in the concept of owner.

Article 1501. With respect to incorporeal property, the provisions of

the first paragraph of article 1498 shall govern. In any other case
wherein said provisions are not applicable, the placing of the titles of
ownership in the possession of the vendee or the use by the vendee of
his rights, with the vendor's consent, shall be understood as a delivery.

Article 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer on delivery, but
he may revest the ownership in the seller by returning or tendering
the goods within the time fixed in the contract, or, if no time has
been fixed, within a reasonable time.

When goods are delivered to the buyer on approval or on trial or

on satisfaction, or other similar terms, the ownership therein
passes to the buyer:

(1) When he signifies his approval or acceptance to the seller or does

any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but
retains the goods without giving notice of rejection, then if a time has
been fixed for the return of the goods, on the expiration of such time,
and, if no time has been fixed, on the expiration of a reasonable time.
What is a reasonable time is a question of fact.

Transaction on Sale or Return. Subject to Resolutory Condition.

Difference with “Delivery with option to purchase”- Ownership is
transferred in Sale or Return

Transaction on Approval or Trial/Satisfaction. Subject to Suspensive

Condition.
Rules:
1. Risk of loss to seller until the sale becomes absolute. (Exceptions:
Buyer in default; Buyer agreed to bear the loss)
2. Buyer must give goods a trial except when it is evident that it cannot
perform the work intended.
3. Period of signifying acceptance commences to run only when all the
parts essential for operation has been delivered.
4. A provision that a 3rd person must satisfy approval is valid but he must
be in Good faith.
5. Generally the Sale and Delivery to an expert buyer is not a sale on
approval/trial.

Sale or Return vs. Sale on Approval

Basis Sale or Return Sale on Approval
Condition Subject to Resolutory Subject to suspensive
condition condition
Premise It depends upon the It depends upon the
will of the buyer suitability, quality or
character of the
goods
Transfer of ownership Ownership Ownership does not
immediately passes immediately pass to
to the buyer on the buyer. It passes