SALES

ARTICLE 1467
• Rules to determine if contract is one of sale or piece of
work
• If ordered in the ordinary course of business – SALE
• If manufactured specially and not for the market – PIECE OF WORK

• Schools of thought
• Massachusetts Rule – If specially done at the order of another,
PIECE OF WORK (followed in the Philippines)
• New York Rule – If thing already exists, SALE; if not, PIECE OF
WORK
• English Rule – If material is more valuable, SALE; if skill is more
valuable, WORK
ARTICLE 1468
• Rules to determine whether the contract is one of sale or
barter
• Look into INTENT – consider contemporaneous and
consequent acts
– name is presumptive of parties’ intention but
may be rebutted
• If intent is not apparent
• Thing > Money = BARTER
• 50-50 = SALE
• Money > Thing = Sale
ARTICLE 1469
• Price – the sum stipulated as the equivalent of the thing
sold, and every incident taken into consideration for the
fixing of the same, put to the debit of the vendee and
agreed by him

• Boston Bank vs. Manalo (GR NO. 158149, 09 February 2006)

• Certainty of price if not stipulated
• With reference to another thing certain
• Determination is left to the judgment of a specified
person or persons
• In the case of securities, grain, liquids, and other things,
when the price fixed is:
1. that which the thing sold would have on a definite day, or
in a particular exchange or market, or
2. when an amount is fixed above or below the price on such
day, or in such exchange or market
provided said amount be certain.
• Third person/persons tasked to fix the price
• Unable or unwilling – contract is inefficacious, unless
the parties subsequently agree upon the price;
• Acted in bad faith or by mistake – courts may fix the
price;
• Prevented from fixing the price or terms by fault of the
seller or the buyer – party not in fault may have such
remedies against the party in fault as are allowed the
seller or the buyer, as the case may be.

• Robles vs. Lizarraga Hermanos (50 Phil. 387)

ARTICLE 1470
• Inadequacy of price – a consideration so far short of the
real value of the property as to startle a correct mind

• Effect of gross inadequacy of price

• Ordinary sale – sale remains valid UNLESS there was vitiated
consent
• Execution of judicial sales – if the price is so inadequate as to
shock the conscience of the court, it will be set aside
• Contract is really a donation or some other act or contract
– must comply with the formalities of that contract
ARTICLE 1471
• Simulated sale – a contrived sale lacking consideration
and usually intended to put property beyond the reach of
creditors

• Simulated price
• Simulated price – sale is void but contract may be valid as a
donation or other agreement, provided requirements have
been complied with; otherwise, the contract is absolutely void
and not merely voidable (Cruzado vs. Bustos, 34 Phil. 17)
ARTICLE 1473
• Price cannot be fixed at the discretion of one party
• Sale as a consensual contract
• Acceptance by the other party of the price fixed by
the other party = perfection of the contract of sale
ARTICLE 1474
• If the price cannot be determined = sale is VOID
• Buyer cannot fulfil his duty to pay
• If the buyer has made use of the object, he must pay
a reasonable price.
• To prevent unjust enrichment.
ARTICLE 1475
• Nature of Contract
• Sale = consensual contract
• Delivery and payment not essential for perfection
but for consummation
• Pacific Oxygen and Acetylene Co. vs. Central Bank
(GR No. L-23391, 27 February 1971)
• Obana vs. CA (GR No. 36249. 29 March 1985)
• Requirements for perfection
• Face to face – when an offer is accepted without
conditions and without qualifications (a conditional
acceptance is a counter-offer)
- if negotiated through phone, as if face to face
• Through correspondence/telegram – when the offeror
receives or has knowledge of the acceptance by the
offeree
BUT if the buyer has already accepted, but the seller
does not know yet of the acceptance, the seller may still
withdraw
o Atkins, Kroll and Co., Inc. vs. B. Cua Hian Tek (GR
No. L-9871, 31 January 1958)
 • If made subject to a suspensive condition – from the
moment the condition is fulfilled
oRoque vs. Lapuz (GR No. L-32811, 31 March 1980)

• Moreno, Jr. vs. Private Management Office (G.R. No.

159373, 16 November 2006)
• Before perfection
• No mutual rights and obligations exist between the would-be
buyer and the would-be seller.
• Same thing is true when perfection is conditioned upon
something, and that thing is not performed. (Roman vs. Grimalt,
6 Phil. 96)

• Accepted bilateral promise to buy and sell

• Article 1479, first paragraph
• Similar to, but not exactly the same as, a perfected contract of
sale
• Formalities for Perfection
• Statute of Frauds (enforceability)
• Sale of real property, regardless of amount
• Sale of personal property, if P500 or more
• Sale which is to be performed only after more than
one year, regardless as to whether the property is
real or personal and regardless of the price involved
• If orally made, the contract cannot be enforced by a
judicial action, except if it has been completely or
partially executed or if the defense of the Statute of
Frauds is waived.

• The contract itself need not be in writing. A written

note or memorandum signed by the party charged is
enough to make the oral agreement enforceable. A
“sufficient memorandum” does not have to be a single
instrument; it may be found in two or more documents.
(Paredes vs. Espino, GR No. L-3351, 13 March 1968).
• Examples, Statute of Frauds
1. Oral sale of a parcel of land
2. Sale of a parcel of land through a private document
3. Oral donation inter vivos of a parcel of land
4. Oral donation propter nuptias of a parcel of land
5. Oral sale of a movable for P5,000
6. Oral sale of a movable for P300 each
7. Oral sale of a movable for P1, delivery and payment to
be made after 5 years
• After perfection
• Parties must comply with their mutual obligations:
• Buyer can compel the seller to deliver to him the object
purchased
• Seller can compel the buyer to pay the purchase price
• Remedy in case of breach – specific performance, damages

• Can the buyer sue a stranger in good faith to whom the seller
sold the object of the first sale for accion reivindicatoria?

• Bucton, et al. vs. Gabar, et al. (GR L-36359, 31 January 1974)

• Balatbat vs. CA (GR No. 109410, 28 August 1996)
• Dalion vs. CA (GR No. 78903, 28 February 1990)
ARTICLE 1476
• Auction – sale of property to the highest bidder
• Auctioneer – person legally authorized to sell goods or
lands of other persons at public auction for a fee
• Auction with reserve – the property will not be sold
unless the highest bid exceeds the minimum price
• Auction without reserve – the property will be sold even if
the highest bid does not exceed the minimum price
(auctioneer cannot withdraw the item)
• Perfection of sale by auction – when the auctioneer
announces its perfection by the fall of the hammer
or in other customary manner

• Before the fall of the hammer

• The bidder may retract his bid (bid is an offer that may
be withdrawn before it is accepted).
• The auctioneer can withdraw the goods from the sale,
unless the auction has been announced to be without
reserve (bid is merely an offer, not an acceptance of an
offer to sell)
• The seller, or anyone on his behalf, can bid, provided:
1. The right to bid was reserved; AND
2. Notice was given that the sale by auction is subject to a right to
bid by or on behalf of the seller.

OTHERWISE

1. Unlawful for the seller to bid for himself;

2. Unlawful for the seller to employ or induce any person to bid at
such sale on his behalf;
3. Unlawful for the auctioneer to employ or induce any person to bid
at such sale on behalf of the seller or knowingly to take any bid
from the seller or any person employed by him.
(Sale in contravention of 1, 2, 3 = may be treated as fraudulent by the buyer)
• Puffers or by-bidders – people who bid for the
seller but are not themselves bound
• Carreta vs. Castillo, 209 NYS 257

• Leoquinco vs. Postal Savings Bank (47 Phil. 772)

• CFI of Rizal and Escutin vs. CA and Ong (25 July
1981)
ARTICLE 1477
• Ownership is transferred upon delivery
• Kinds of delivery
• Actual – the act of giving real and immediate possession to the
buyer or the buyer’s agent (Article 1497)
• Constructive – an act that amounts to a transfer of title by
operation of law when actual transfer is impractical or
impossible, including any other manner signifying an
agreement that possession is transferred (Articles 1498-1501)
ARTICLE 1478
• Pactum reservati dominii
• Contract to sell
• Common in sales on instalment plan
• Must not prejudice innocent third parties

• Sun Brothers’ Appliances vs. Perez (GR No. L-17527, 30

April 1963)
• Adelfa Properties vs. CA (GR No. 111238, 25 January
1995)
ARTICLE 1478
• Pactum reservati dominii
• Contract to sell
• Common in sales on instalment plan
• Must not prejudice innocent third parties

• Sun Brothers’ Appliances vs. Perez (GR No. L-17527, 30

April 1963)
• Adelfa Properties vs. CA (GR No. 111238, 25 January
1995)
ARTICLE 1479
• Bilateral promise (1st paragraph) – gives to the
contracting parties personal rights in that each has the
right to demand from the other the fulfillment of the
obligation
- right may be transmitted to others, unless it was
granted for purely personal considerations
- Borromeo vs. Franco (5 Phil. 49)

• Unilateral promise (2nd paragraph) – must be plain, clear

and unconditional
• Option (2nd paragraph) – a contract granting a person the
privilege to buy or not to buy certain objects at any time
within the agreed period at a fixed price
- separate and distinct from the contract which the
parties may enter into upon the consummation of
the contract of option
- must have its own cause or consideration
- Mendoza, et al. vs. Comple (GR No. L-19311, 29
October 1965)
 PARAGRAPH 1 (MUTUAL PROMISE)
One party accepts the other’s promise to buy,
and the latter the former’s promise to sell a
determinate thing for a price certain.
Reciprocally demandable.
Requires no consideration distinct from the
selling price.
As good as a perfected sale, but no title of
dominion is transferred as yet, the parties
being given only the right to demand
fulfillment or damages
PARAGRAPH 2 (ACCEPTED UNILATERAL
PROMISE)
Only one makes the promise, which is
accepted by the other.
Does not bind the promissor even if accepted
and may be withdrawn any time EXCEPT if
the promise is supported by a consideration
separate and distinct from the price (option
money), in which case the acceptance will
give rise to a perfected contract.
There must be a consideration distinct from
the price (option money).
Acceptance must be of the offer to sell, not of
the option.
• Atkins, Kroll & Co., Inc. vs. B. Cua Hian Tek (GR No.
L-9871, 31 January 1958)
• Adelfa Properties vs. CA (GR No. 1112238, 25
January 1995)
• Policitacion – unilateral promise to buy or to sell
which is not accepted
- no juridical effect, no legal bond
ARTICLE 1480
• Who bears risk of loss?
• Before perfection
• TOTAL loss – seller bears loss, contract loses effect
• PARTIAL loss – seller bears loss BUT buyer has the option to (1)
withdraw or rescind the contract OR (2) compel performance as to the
remaining existing goods if the sale was divisible.
• After perfection but before delivery – buyer bears the loss
(exception to res perit domino)
• Article 1262; Articles 1583 and 1269
• After perfection and delivery – buyer bears the loss (Res perit
domino)
• Song Fo & Co. vs. Oria (33 Phil. 3)
• Exceptions to the rule that between perfection and
delivery, buyer bears the loss:
1. Sale of fungibles for a price fixed according to weight,
number, or measure;
2. Fraud, negligence, default, or violation of terms of the
contract by the seller;
3. Sale of a generic thing.
ARTICLE 1481
• Sale by Description – that where the seller sells
things as being of a certain kind, the buyer merely
relying on the seller’s representations or
descriptions
• Rights of the buyer:
1. Reasonable opportunity of comparing the bulk with the
description;
2. Rescind the contract if the bulk of the goods delivered does
not correspond with the description.
• Pacific Com. Co. vs. Ermita Market & Cold Stores
(56 Phil. 617)
• Co Cho Chit vs. Hanson, Orth & Stevenson, et al.
(GR No. L-8439, 30 May 1958)
• Sale by Sample – that where the seller warrants
that the bulk of the goods shall correspond with the
sample in kind, quality, and character.
• Rights of the buyer:
1. Reasonable opportunity of comparing the bulk with the
sample;
2. Rescind the contract if the bulk of the goods delivered does
not correspond with the sample.
• Mere exhibition of sample – does not
necessarily make the transaction a sale by
sample
– sale by sample = the exhibition must have
been the sole basis or inducement of the sale
• Sale by Description and Sample – that which must
satisfy the requirements in a sale by description
and a sale by sample, and not in only one
• Rights of the buyer:
1. Reasonable opportunity of comparing the bulk with the
description and the sample;
2. Rescind the contract if the bulk of the goods delivered does
not correspond with the description and the sample.
ARTICLE 1482
• Earnest money – something of value to show that
the buyer was really in earnest, and given to the
seller to bind the bargain.
• Part of the purchase price; and
• Proof of perfection of the contract.
 EARNEST MONEY OPTION MONEY
Perfected contract of sale Not yet perfected
Part of the purchase price Consideration distinct from
the purchase price
Buyer required to pay Would-be buyer not required
balance to buy

• Adelfa Properties vs. CA (GR No. 1112238, 25 January

1995)
ARTICLE 1483
• Contract of sale – generally, no particular form
• Statute of Frauds – enforceability
ARTICLES 1484 & 1485
• Contracts where Article 1484 applies:
1. Sale of personal property on an instalment plan;
2. Contract purporting to be a lease of personal property with option
to buy, when the lessor has deprived the lessee of the possession
or enjoyment of the thing.

• It does not apply:

1. If the sale is for cash on straight terms (i.e., after an initial
payment, the balance is paid in its totality at the time specified);
and
2. To a real estate mortgage.
• Requisites before Article 1484 may be applied:
1. Contract of absolute sale;
2. Object is personal property; and
3. Sale is on an instalment plan.
• Rationale behind the Recto Law
• To prevent abuse in the foreclosure of chattel mortgage
by selling at a low price and then suing for the
deficiency;
• A conditional sale based on the installment plan is not a
loan if the sale is made in good faith and not a mere
pretext to cover a usurious loan.
• Alternative Remedies
• If one is exercised, the others cannot be made use
of (the election of one is a waiver of the right to
resort to the others).
• For this doctrine to apply, the remedy must
already have been fully exercised.
• Remedies
1. Exact fulfillment of the obligation, if the vendee
fails to pay;
2. If the failure to pay covers two or more
instalments:
a. Cancel the sale; or
b. Foreclose the chattel mortgage on the thing sold
(no further action against the purchaser to recover
any unpaid balance of the price; stipulation to the
contrary void).
• Zayco vs. Luneta Motor Co. (GR No. L-30583, 23 October
1982)
• Pascual vs. Universal Motors Corporation (GR No. L-
27862, 20 November 1974)
• Spouses de la Cruz, et al. vs. ASIAN Consumer of Industrial
Finance Corp. & CA (GR No. 94828, 20 September 1992)