Balderosa, Jenaline D.

ACTCTY21S2

ASSIGNMENT 4.3

1. What is a Contract of Sale?

 A contract one of the contracting parties (known as the seller or vendor), obligates
himself to transfer the ownership of and to deliver a determinate thing, and the other
party, (known as the buyer or vendee), obligates himself to pay therefore a price certain
in money or its equivalent (Article 1458)

2. Who are the parties to the Contract of Sale?

 Vendor or seller - one who delivers the thing
 Vendee, buyer, or purchaser – one who pays for the thing
Example: May obliges herself to deliver her bvlgari watch to Lisa amounting to
P500,000. (In here, the vendor is May and the vendee is Lisa)

Take Note: The number of parties involved is limitless, meaning even though there’s 2 or
more sellers or buyers still, they are categorized into two.

3. What are the elements/requisites of a Contract of Sale?

 Essential Elements or Requisites
a.) Consent – (seller or vendor to transfer and deliver and on the part of the
buyer to pay)
b.) Subject matter or object - refers to the “determinate thing” (the thing must
be determinate of at least capable of being made determinate because if the
parties differ in regard to the thing sold, there is NO meeting of minds – NO
SALE)
Characteristics of Things/Object:
1. It must be licit/lawful – not contrary to laws, morals, good customs, public
policy and public order; within the commerce of men
Example: Sale of Marijuana: In the Philippines, it is Illegal but in other
countries like Canada and South Africa the sale and use of it is legal
though, there are still limitations such as for medicinal use only.
Take note: things may be illicit per se (of its nature) or per accidens
(because of some provisions of law declaring it illegal)
2. It must be determinate – specific and identifiable from the class or genus.
Example: Sale of a specific portion of land
3. The vendor must be able to transfer ownership at the time of delivery –
Take note: In contract of sale, what is important is that the seller has the
right to transfer the thing
Example: Esther sold a diamond ring to Elisse for P1,000,0000 which is
to be delivered 1 month after the contract has been perfected. The
diamond ring is currently owned by Leslie. Ten days before the due,
Esther bought the diamond ring from Leslie and successfully delivered it
to Elisse.

Take note:
a. Rights that are not transmissible or personal may also be the object of
sale, like the right of usufruct, and right of conventional redemption
Examples of intransmissible rights: right to vote, right to public
office, marital and parental rights
Examples of personal rights: rights of a partner in a partnership,
right to act asn an agent of another, right of the bailee to use the thing
loaned in a contract of commodatum
b. Services cannot be the object of a contract of sale
c. The transfer of ownership is at the time of delivery and not at the time
of perfection of contract. There can be a sale even if at the time of
perfection the seller is not the owner, what is required is at the time of
delivery the seller must be the owner.
Example: Lolit is engaged in buy and sell of land. She sold a land in
Pasig to Diana for P2,000,000 that is currently owned by Mary. Lolit
promised to transfer the land to Diana on August 30. On August 20,
Mary has transferred the ownership of land to Lolit and on August 30
she finally transferred it to Diana.

Objects of the Contract of Sale:

1. Existing goods – within the commerce of men
2. Future goods -
Examples:
 Goodwill of a trade or business
 Sale of wine that a vineyar is expected to produce
 Milk the cow may yield during the coming year
 Next catch of a fisherman’s set
a. Emptio rei seperatae – things having potential existence, the
quality and quantity of which are unknown but not the thing itself
which will definitely come. The validity of this titled sale depend on
the intention of the parties.
Example: Mike owns a banana plantation. For P50,000, Mike sold
his future harvest of banana on September to Joey. If Joey paid
for the price and on September there was no harvest, he shall
recover the P50,000 from Mike but if he did not pay yet, he is not
obliged to pay for the banana because no object, no sale.
b. Emptio spei – sale of hope and expectancy, its quality and
quantity are uncertain. The validity of this titled sale will depend
upon the agreement (aleatory contract)
Take note: Sale of vain hope or “hopeless case” is VOID
Example: Hector sold to Leon a lottery ticket no.005 amounting to
P5,000 for tomorrows draw. Unfortunately, the ticket did not win.
 Leon cannot recover the P5,000 from Hector because what he
bought is the “hope” of winning. But, he can recover if the lottery
ticket sold had its draw made yesterday, in this case, it is called
“vain hope”- the contract is VOID.

3. Goods the acquisition of which depends upon a contingency which

may or may not happen

Fungible Goods – refer to interchangeable goods or consummable goods that

allow one to be replaced by another without loss of value such as grain, oil, rice,
corn, etc.

- Sale of fungible goods has a suspensive condition and before fulfillment, no

obligation exists.

c.) Price – the sum stipulated as to the equivalent of the thing

Take note:
a. Need not to be in money (i.e. equivalent of the thing, service, etc.)
b. Inadequacy of price will not invalidate a contract of sale unless coupled
with a vitiated consent.

Requisites of the price:

o It must be certain
o It must real, not fictitious
o As a rule, not inferior the value of the thing

Considered certain when:

1. Fixed by the parties

2. It has reference to another thing which is certain
3. The determination of price is left to the judgment of the third person
4. Fixed by the court
5. The price fixed is that the thing would have on a definite day or in a
particular exchange or market above or below the price or when the
amount is fixed on such day

 Natural Elements – deemed to exist in the contract unless excluded

a.) Warranty against eviction
b.) Warranty against hidden defects
 Accidental Elements – or those present only if stipulated, such as time, place of
payment, conditions, interest, penalty, etc.

4. What are the characteristics of the Contract of Sale?

  Consensual – perfected by mere consent without any further act at the moment
there is meeting of minds upon the object.
 Bilateral and Reciprocal - both parties are bound by obligation dependent
upon each other (the buyer will pay for it if the seller delivered and transferred the
ownership of the thing)
 Commutative – the thing sold is considered the equivalent of the price paid and
vice versa. (“what you pay for is what you get”)
 Principal – can stand alone or does not depend upon the existence of other
contracts
 Onerous – valuable consideration is given
 Nominate – given a special name or designation in the Civil Code

5. Who are incapacitated to enter into Contract of Sale?

A. Absolute – persons who cannot bind themselves
 Minors, demented persons, imbeciles, prodigals, deaf and dumb, insane, and
those subject to Civil interdiction
However, when necessaries are sold and delivered to a minor or
incapacitated person, the latter is obliged to pay reasonable price.
B. Relative – exist only in reference to a certain persons or certain class or property.
1. Husband and wife except when:
- Separation of property was agreed upon in the marriage settlements or
(Complete Separation of Property – they just contribute to a common fund for the
expenses of their family)
- There has been judicial separation of property
Example: Kiko and Karen are married for almost 5 years now but due to some
trust issues when it comes to their properties, they decided to file for judicial
separation of property (“What is mine is now mine, and what is yours is now
yours”)
2. Guardian with respect to the property of the ward – this is prohibited by law
because there may abuse in the part of the ward
Example: Danilo is the legal guardian of Keith after his parents died. Keith is
sufferring from financial distress in supporting his needs that is why he agreed to
sell his inherited car to Danilo.
3. Agents, the property whose administration or sale may have entrusted to
them, unless with consent of the principal.
Example: Stacey assigned Sara to be the agent of her property in Tanay. As
much as Sara wants to buy the property, she cannot unless, Stacey allowed her.
4. Executors (assigned by the testator) and administrator (assigned by coury
in absence of a will), the property of the estate under administration
Example: Atty. Tuazon is the executor of Mr. Dimaano’s will. One of the
properties owned by Mr. Dimaano is the condominium unit in Quezon City. Atty.
Tuazon is very interested in buying the property but he is prohibited because he
has the control over the property and abuse of power may take place.
 5. Public officers and employees, the property of the State or any subdivision
thereof or GOCC, or institution, of which has been intrusted to them
6. Justices, judges, prosecuting attorneys, clerks or superior or inferior
courts, and other officers and employees connected with the
administration of justice (Article 1491)
7. Others specifically disqualified by law

6. What are the obligations of the vendor?

1. To transfer the ownership of the thing sold
 The ownership of the thing sold is acquired by the vendee from the moment the
thing is delivered to him (Article 1496)
2. To deliver the thing sold
 Seller has the duty to put the goods in deliverable condition (Art.1521)
 Delivery must be made in accordance to the stipulation of the parties as to place,
time, quality and quantity
 If what has been delivered is less than the quantity contracted (Article
1522):
a. Buyer may reject or pay in full at the contract rate, if the seller knows of the
diminution of the quantity.
b. Buyer is not liable for more than the FMV of the goods received, if the seller
does not know the diminution of the quantity
c. Buyer may accept or reject when the subject is composed of mixed goods
d. Buyer may reject if the subject matter is indivisible
 If what has been delivered is more than the quantity contracted or are
mixed with other, buyer may accept or reject the excess or the mixed goods,
but if he must accept, he must pay for the price of all of the goods delivered.
 Vendor is bound to deliver the thing sold and its accession and accessories in
the condition in which they were upon the perfection of the contract
 All fruits shall pertain to the vendee from the day on which the contract is
perfected
 The seller and buyer may however, stipulate that the fruits shall pertain to the
buyer at some future time such as when the obligation is one with a period.
3. To warrant the thing sold
 The vendor is liable for breach of warranty against eviction and warranty against
hidden defects and encumbrances
4. To take care of the thing sold with diligence of a good father of a family unless the
law or the stipulation of the parties requires another standard of care.

7. What are the obligations of the vendee?

Principal Obligations of Vendee:

1. To accept delivery
2. To pay the price of the thing sold and
 3. To bear the expenses for the execution and registration of the sale and putting the
goods in a deliverable state, if such is the stipulation

Pertinent Rules:

1. The vendor is not required to deliver the thing sold until the price is paid nor the vendee
to pay the price before the thing is delivered in absence of an agreement to the contrary
2. If stipulated, then the vendee is bound to accept the delivery and to pay the price at the
time and place designated
3. If there’s no stipulation as to the time and place of payment and delivery, the vendee is
bound to pay at the time and place of delivery
4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever
the thing might be at the moment the contract was perfected
5. If only the time for delivery of the sold has been fixed in the contract, the vendee is
required to pay even before the thing is delivered to him.

8. What are the warranties in a contract of sale?

Kinds of Warranties:
1. Express Warranties – refers to any affirmation of fact or any promise by the seller
relating to the thing whose natural tendency is to induce the buyer to purchase the
same, and if the buyer purchases the thing relying on such affirmation or promise
Take note: *expression of opinion:
a.) Made by an ordinary person does not import a warranty no matter how positive
the assertion
b.) Made by an expert constitutes warranty if the buyer relies on the expert opinion

2. Implied Warranties – inherent in the contracts of sale and accompany them unless
they are suppressed by the parties. They are of two kinds:
a. Warranty against eviction – refers to the implied warranty on the part of the
seller that he has the right to sell the thing at the time when ownership is to pass,
and that the buyer shall form that time have and enjoy the legal and peaceful
possession of the thing.
b. Warranty against hidden defects – refers to the implied warranty that the thing
shall be free from any hidden faults or defects, or any charge or encumbrance
not declared or known to the buyer.

Persons not liable for breach of warranty:

 Sheriff
 Autioneer
 Mortgagee
 Pledgee
 Other persons professing to sell by virtue of authority in fact or law
9. What is eviction?
 It is a juridical process whenever by a final judgment based on a right prior to the sale or
an act imputable to the vendor, the vendee is deprived of the whole or of a part of the
thing purchased
 “trespass in law”
Basis of Eviction:
a. On a right prior to the sale
b. An act imputable to the vendor

Requisites of Eviction:
a. Final judgment
b. The vendee is deprived of the whole or part of the thing sold
c. Deprivation is based on a right previous to the sale or an act imputalbe to the vendor
d. The vendor is notified of the suit at the instance of the vendee
e. There is no waiver on the part of the vendee

Instances when the vendor is liable for eviction:

1. Ownership by prescription or through the lapse of time has the following effects:
a.) Completed before sale – vendee may lose the thing purchases to 3rd persons
who has acquired title by prescription. Vendee can enforce the warranty against
eviction
b.) Completed after sale – vendor is NOT LIABLE for eviction because the vendee
can interrupt the running of the prescriptive period by bringing the necessary
action
c.) Deprivation for non-payment of taxes
d.) Liability of judgment debtor

Vendor’s liability in case of eviction:

a. If there is a stipulation exempting the vendor from the obligation to answer for
eviction
1. Vendor acted in bad faith – liable for the following:
 Value of the thing at the time of eviction
 Income or fruits
 Cost of suit
 Expenses of the contract
 Damages and interests and ornamental expenses
2. Vendor acted in good faith – liable for the following:
 Waiver consiente – if vendee made the waiver without knowledge of the
risks of eviction: the vendor shall pay only the value of the thing sold at
the time of eviction
 Waiver intencionada – if vendee made the waiver with knowledge of the
risks of evition: the vendor shall not be liable
  No warranty has been agreed/No stipulation exempting the vendor
from liability:
- Vendor acted in bad faith – vendor is liable
- Vendor acted in good faith – there is no liability for damages and
interest

10. What is redhibitory defect and what is redhibitory action?

Redhibitory Defect – it is a defect of such a nature that expert knowledge, even in case of
professional inspection, is not sufficient to discover.

 It is not sufficient that the defect was not discovered by an expert, what is required is that
the defect would not have been discovered even with the aid of an expert.
 If the expert through ignorance failed to discover it or through bad faith, failed to reveal
the same to the vendee, he shall be held LIABLE FOR DAMAGES

Redhibitory action – this is directed against the vendor to rescind the sale on account of
same vice or defect in the thing sold which renders it unfit for the use intended or which will
diminish its fitness for such use to such an extent that, has the vendee been aware
therefore, he would not have acquired it.

- Must be filed within forty (40) days from the date of delivery of the animals to the buyer

REFERENCES:

De Leon, H.S. and De Leon, H.M.J. (2016). The law on sales, agency and credit. Manila: Rex
Printing Company, Inc.
Suarez, C.B. and Suarez, A.Q.(2011). Pointers in business law. Manila: GIC Enterprises &
Co.,Inc.
Soriano, F. (2016). Notes in business law. Manila: GIC Enterprises & Co.,Inc.