SALES AND LEASE – 2H 2020-2021

CASE TITLE Ace Foods Inc. v. Micro Pacific Technologies Co.Ltd. G.R. NO. 200602

PONENTE Perlas-Bernabe, J. DATE December 11, 2013

DOCTRINE
Contract of Sale v. Contract of Sell

Corollary thereto, a contract of sale is classified as a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon perfection of the
contract, the parties may reciprocally demand performance, i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer,
binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, i.e., the full payment of the purchase price. A contract to sell may not even be considered
as a conditional contract of sale where the seller may likewise reserve title to the property subject of
the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the
first element of consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur.

FACTS Respondent MTCL sent a letter-proposal for the delivery and sale of computer hardware and products for
various offices of ACE Foods. ACE accepted and issued Purchase Orders for the subject products. The
products were delivered as reflected in the Invoice Receipt, which stated a title reservation. ACE failed to
pay the purchase price despite demands and instead sent a letter to MTCL stating the return of the subject
products thru its sales representative.

ACE filed a complaint before RTC praying that MTCL pull out from its premises the subject products for
breach of its “after delivery services” obligations. MTCL maintained that it had duly complied with its
obligations that the products were in good conditions, when they were delivered, installed and configured
in ACE’s premises. It prayed that ACE and MTCL was in the nature of a contract to sell ordered MTCL to
remove the subject products from ACE’s premises and pay actual damages and attorney’s fees.

ISSUE/S Whether the contract between ACE and MTCL is a contract of sale or a contract of sell.

RULING/S 1. The contract between ACE and MTCL is a Contract of Sale. A contract is what the law defines it to be,
taking into consideration its essential elements, and not what the contracting parties call it. The real nature
of a contract may be determined from the express terms of the written agreement and from the
contemporaneous and subsequent acts of the contracting parties. However, in the construction or
interpretation of an instrument, the intention of the parties is primordial and is to be pursued. The
denomination or title given by the parties in their contract is not conclusive of the nature of its contents.

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
promised. This may be gleaned from Article 1458 of the Civil Code which defines a contract of sale as
follows:
 SALES AND LEASE – 2H 2020-2021
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.

A contract of sale may be absolute or conditional. (Emphasis supplied)

Corollary thereto, a contract of sale is classified as a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon perfection of the contract,
the parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership of
the object of the sale, and the vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, i.e., the full payment of the purchase price. A contract to sell may not even be considered as
a conditional contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first
element of consent is present, although it is conditioned upon the happening of a contingent event which
may or may not occur.

In this case, the Court concurs with the CA that the parties have agreed to a contract of sale and not to a
contract to sell as adjudged by the RTC. Bearing in mind its consensual nature, a contract of sale had
been perfected at the precise moment ACE Foods, as evinced by its act of sending MTCL the Purchase
Order, accepted the latter’s proposal to sell the subject products in consideration of the purchase price of
₱646,464.00. From that point in time, the reciprocal obligations of the parties – i.e., on the one hand, of
MTCL to deliver the said products to ACE Foods, and, on the other hand, of ACE Foods to pay the
purchase price therefor within thirty (30) days from delivery – already arose and consequently may be
demanded. Article 1475 of the Civil Code makes this clear:

Art. 1475. 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.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.