From Atty. Deanabeth C.

Gonzales, Professor Rizal Technological University, CBET

Sept. 13, 2020

For everyone who will get hold of a copy or portions of this material:

This is posted online in the light of the pandemic covid-virus which adversely affect not just the
Philippines but the entire world. It is a privilege for me to teach part-time in a state university for more
than a decade now. I teach subjects in the College of Business and Entrepreneurial Technology
(CBET), subjects which are all part of the Board Exam for CPAs. Being a CPA-Lawyer, I know for a
fact that having a book is a must in studying any law subject. However, teaching in a school where
many students cannot afford to buy a book, my former students in the past years can attest to the fact
that I went out of my way to pay for books in advance and allow some students to pay me in
installments over the entire semester just for them to have a book. Nevertheless, some students still
cannot afford to buy a book, and attended classes by just walking to school. Being a product of the
Public School System in the Philippines, up to college in PUP Sta. Mesa for Accountancy, I fully
understand the money issue in buying books for many students.

With Social Distancing rules and hygienic issues during this pandemic, students are not encouraged to
make use of the university physical library and the online library is not yet that fully operational. Hence,
I decided to post portions of some books online to help those students who cannot afford to buy a
book, specially now that unemployment in the country has risen at all-time high.

Portions of the book were copied by former CBET students from the book Law on Sales, Agency and
Bailments by Hector De Leon (definitely not the latest edition) and from other books/sources (i.e., Law
on Sales, Agency, Pledges and Mortgages by Carlos Suarez, Alexander Suarez, 2008 ed., etc.) when
they were asked to report in class. I wasn’t too happy to see reports which were mostly copied from
the books but I got the softcopies of their reports sent to my email. In the end, I found myself having a
softcopy of many portions of the books on Law of Sales. There is no copyright infringement here
because it is for educational purposes and only portions of the book will be posted to help students who
cannot afford to buy a book in this pandemic times.

Note that the postings will not cover the entire assignment given for each session or particular day.
Rather, the postings will explain only some portions of the assignment for the day based on the books
previously used by the former CBET students. There is no new Civil Code to date so that the contents
of the books still apply. I will not prescribe any book on Sales for this semester in view of the financial
difficulty for most families. Students can buy (but NO available new stock of books in Rex Bookstore
per my online search as of September 10, 2020 nor in National Bookstores) or borrow any edition of
the book on sales by any author. Each student must download the proper civil code provisions from
the internet, make use of whatever postings available in the group/class messenger that can be helpful
for your classmates or do own research. The postings are for personal use of the student only and not
for mass production.

With no intent to have financial gain, but only to help students from the less privilege sector of our
society during this pandemic times, I hope many will benefit from this posting.

It may seem to be a cliché that “The Youth is the Hope of the Fatherland,” spoken by Dr. Jose Rizal.
Yet, in times like this, we need to give hope and to assist all students who will face more challenging
times ahead.

More power to all Filipinos and to all educators who in this pandemic times make extra efforts to
educate all learners.

May God who made heaven and earth continue to bless us all through Jesus Christ, by whose
blood shed on the cross save us all. Maraming salamat po.

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LAW ON SALES – Notes1

CHAPTER 1
NATURE AND FORM OF THE CONTRACT

Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.

Concept of contract of sale:

The contract of sale is an agreement whereby one of the parties (called seller or vendor)
obligates himself to deliver something to the other (called the buyer or purchaser or vendee) who, on
his part, binds himself to pay therefore a sum of money or its equivalent (known as the price).

Characteristics of a contract of sale. The contract of sale is:

(1) Consensual because it is perfected by mere consent without any further act;

(2) Bilateral because both 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 because the thing sold is conveyed in consideration of the price and vice versa (see Gaite
vs. Fonacier, L-11827, July 31, 1961);

(4) Commutative because the thing sold is considered the equivalent of the price paid and vice versa.
(see Ibid.) However, the contract may be aleatory as in the case of the sale of a hope, e.g.,
sweepstakes ticket;

(5) Nominate because it is given a special name or designation in the Civil Code namely “sale;” and

(6) Principal because it does not depend for its existence and validity upon another contract.

Transfer of title to property for a price essence of sale.

There can be no sale without a price. (see Art. 1474.) Technically, the cause in sale is, as to the
seller, the buyer’s promise to pay the price, and as to the buyer, the seller’s promise to deliver the thing
sold.

Two kinds of contract of sale.

As to the presence or absence of conditions, a sale may be:

(1) Absolute – where the sale is not subject to any condition whatsoever and where title passes to the
buyer upon delivery of the thing sold; or

(2) Conditional – where the sale contemplate a contingency (Arts. 1461, 1462, par. 2; Art. 1465.), and
in general, where the contract is subject to certain conditions (see Art. 1503, par. 1), usually the fully
payment of the purchase price. (Art. 1478.)

Distinction between a contract of sale and a contract to sell with reserved title.

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(1) Transfer of title – In a contract of sale, title passes to the buyer upon delivery of the thing sold;
while in a contract to sell (or of “exclusive right and privilege to purchase”), where it is manipulated that
ownership in the thing shall not pass to the purchaser until he has fully paid the price (Art. 1478.),
ownership is reserved in the seller and is not to pass until the full payment of the purchase price.

(2) Payment of price - In the first case, non-payment of the price is a negative resolutory condition
(see Art. 1179.), in the second case, full payment is a positive suspensive condition.

(3) Ownership of vendor – In the first case, the vendor has lost and cannot recover the ownership of
the thing sold until and unless the contract of sale itself is resolved and set aside. In the case, however,
the title remains in the vendor if the vendee does not comply with the condition precedent of making
payment at the time specified in the contract. There is no actual sale until and unless full payment is
made.

Other cases of contract to sell.

Where the subject-matter is not determinate (Arts. 1458, 1460.) or the price is not certain
(Art.1458.), the agreement is merely a contract to sell. For purposes of the perfection of a contract of
sale (see Art. 1475.), there is already a price certain where the determination of the price is left to the
judgment of a specified person or persons (see Art. 1469, par.1), and notwithstanding that such
determination has yet to be made.

A sale of future goods (see Art. 1462.) even though the contract is in the form of a present
sale operates as a contract to sell the goods.

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership
thereof at the time it is delivered.

Requisites concerning object.

(1) Aside from being (a) determinate (Arts. 1458, 1460.), the law requires that the subject matter must
be (b) licit or lawful, that is, it should not be contrary to law, morals, good customs, public order, or
public policy (Arts. 1347, 1409, [1, 4].), and should (c) not impossible. (Art. 1348.)

In other words, like any other object of a contract, the thing must be within the commerce of men. If the
subject matter of the sale is illicit, the contract is void and cannot, therefore, be ratified. (Art. 1409.) In
such case, the rights and obligations of the parties are determined by applying the following articles of
the Civil Code: 1411, 1412

(2) All rights which are not intransmissible or personal may also be the object of sale (Art. 1347.), like
the right to usufruct (Art. 572.), the right of conventional redemption (Art. 1601.), credit (Art. 1624.), etc..
Examples of intransmissible rights are the right to vote; right to public office; marital and parental rights;
etc. No contract may be entered upon future inheritance except in cases expressly authorized by law.
(Art. 1347, par. 2.)

Kinds of Illicit things.

The thing may be illicit per se (of its nature) or per accidens (because of some provisions of law
declaring it illegal). Article 1459 refers to both. Decayed food unfit for consumption is illicit per se, while
lottery tickets (Art. 195, Revised Penal Code.) are illicit per accidens.

Right to transfer ownership.

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 (1) One can sell only what he owns. – It is essential in order for a sale to be valid that the
vendor must be able to transfer ownership (Art. 1458.) and, therefore, he must be the owner or at least
must be authorized by the owner of the thing sold.

(2) Right must exist at time of delivery. – Article 1459, however, does not require that the vendor
must have the right to transfer ownership of the property sold at the time of the perfection of the
contract. It is sufficient if he has the “right to transfer the ownership thereof at the time it is delivered.”
Thus, the seller is deemed only to impliedly warrant that “he has a right to sell the thing at the time
when the ownership is to pass.” (Art 1547[1].) An agreement providing for the sale of property yet to be
adjudicated by a court is thus valid and binding.

Art. 1460. A thing is determinate when it is particularly designated or physically

segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered
into, the thing is capable of being made determinate without the necessity of a new or further
agreement between the parties.

Subject matter must be determinate.

A thing is determinate or specific (not generic) when it is particularly designated or physically
segregated from all others of the same class.

Art. 1461. Things having a potential existence may be the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that
the thing will come into existence. The sale of a vain hope or expectancy is void.

Sale of things having potential existence valid.

Even a future thing (Arts. 1461, par. 1.) not existing at the time the contract is entered into may
be the object of sale provided it has a potential or possible existence, that is, it is reasonably certain to
come into existence as the natural increment or usual incident of something in existence already
belonging to the seller, and the title will vest in the buyer the moment the thing comes into existence.

Sale of vain hope or expectancy void.

However, the efficacy of such sale is deemed subject to the condition that the thing
contemplated or expected will come into existence (par. 2.) for the sale of a vain hope or expectancy is
void. (par.3.)

Distinctions between sale of a thing expected (emptio rei speratae) and sale of the hope itself
(emptio spei).

Emptio rei speratae, is the sale of a thing not yet in existence subject to the condition that the
thing will exist and on failure of the condition, the contact becomes ineffective hence, the buyer has
no obligation to pay the price. On the other hand, Emptio spei is the sale of the hope itself that the
thing will come into existence, where it is agreed that the buyer will pay the price even if the thing does
not eventually exist.

(1) In emptio rei speratae, the future thing is certain as to itself but uncertain as to its quantity
and quality. Such sale is subject to the condition that the thing will come into existence (see Art. 1545,
par. 2.) whatever its quantity or quality. In emptio spei (like the sale of sweepstake ticket), it is not
certain that the thing itself (winning a price) will exist, much less its quantity and quality.

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 (2) In emptio rei speratae, the contract deals with a future thing, while in emptio spei, the
contract relates to a thing which exists or is present the hope or expectancy.

(3) In emptio rei speratae, the sale is subject to the condition that the thing should exist, so that
if it does not, there will be no contract by reason of the absence of an essential element. On the other
hand, emptio spei produces effect even though the thing does not come into existence because the
object of the contract is the hope itself, unless it is a vain hope or expectancy (like the sale of a falsified
sweepstake ticket which can never win).

Presumption in case of doubt.

In case of doubt, the presumption is in favor of emptio rei speratae which is more in keeping
with the commutative character of the contract. (see 10 Manresa 29-30.)

Art. 1462. The goods which form the subject of a contract of sale may be either existing
goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by
the seller after the perfection of the contract of sale, in this Title called “future goods.”

There may be a contract of sale of goods, whose acquisition by the seller depends upon
a contingency which may or may not happen. (n)

Goods which may be the object of sale.

Goods which form the subject of a contract of sale may be either:

(1) Existing goods or goods owned or possessed by the seller; or
(2) Future goods, that is, goods to be manufactured (like the sale of milk bottles to be
manufactured with the name of the buyer pressed in the glass), raised (like the sale of the future
harvest of palay from a ricefield), or acquired (like the sale of a definite parcel of land the seller expects
to buy). (Art. 1460.)

Art. 1463. The sole owner of a thing may sell an undivided interest therein.

Sale of undivided interest in a thing.

The sole owner of a thing may sell the entire thing; or only a specific portion thereof; or an
undivided interest therein and such interest may be designated as an aliquot part of the whole.
The legal effect of the sale of an undivided interest in a thing is to make the buyer a co-owner in
the thing sold. As co-owner, the buyer acquires full ownership of his part and he may, therefore, sell it.
Such sale is, of course, limited to the portion which may be allotted to him in the division of the thing
upon the termination of the co-ownership. Art. 493. This rule operates similarly with respect to
ownership of fungible goods. (Art. 1464.)
Article 1463 covers only the sale by a sole owner of a thing of an undivided share or interest
thereof.

Art. 1464. In case of fungible goods, there may be a sale of an undivided share of a
specific mass, though the seller purports to sell and the buyer to buy a definite number, weight
or measure of the goods in the mass, and though the number, weight or measure of the goods
in the mass is undetermined. By such a sale the buyer becomes owner in common of such a
share of the mass as the number, weight or measure bought bears to the number, weight or
measure of the mass. If the mass contains less than the number, weight or measure bought, the
buyer becomes the owner of the whole mass and the seller is bound to make good the
deficiency from goods of the same kind and quality, unless a contrary intent appears. (n)
Sale of an undivided share of a specific mass

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 (1) Meaning of fungible goods. – It means of which any unit is, from its nature or by mercantile
usage, treated as the equivalent of any unit (Uniform Sales Act, Sec. 76.) such as grain, oil, wine,
gasoline, etc..

(2) Effect of sale. – The owner of a mass of goods may sell only an undivided share thereof
provided the mass is specific or capable of being made determinate. (Art. 1460.) By such sale, the
buyer becomes a co-owner with the seller of the whole mass in the proportion in which the definite
share bought bears to the mass. It must follow that the aliquot share of each owner can be determined
only by the measurement of the entire mass. If later on it be discovered that the mass of fungible goods
contains less than what was sold, the buyer becomes the owner of the whole mass and furthermore,
the seller shall supply whatever is lacking from goods of the same kind and quality, subject to any
stipulation to the contrary.

(3) Risk of loss. – If the buyer becomes a co-owner, with the seller, or other owners of the
remainder of the mass, it follows that the whole mass is at the risk of all the parties interested in it, in
proportion to their various holdings.

(4) Subject matter. – Take note that in the sale of an undivided share, either of a thing (Art.
1463.) or of that of mass of goods (Art. 1464.), the subject matter is an incorporeal right. (Art. 1501.)
Here, ownership passes to the buyer by the intention of the parties.

ART. 1465. Things subject to a resolutory condition may be the object of the contract of sale.

Sale of thing subject to a resolutory condition.

A resolutory condition is an uncertain event upon the happening of which the obligation (or right)
subject to it is extinguished. Hence, the right acquired in virtue of the obligation is also extinguished.
One of the obligations of the vendor is to transfer the ownership of the thing object of the contract. If the
resolutory condition attaching to the object of the contract, which object may include things as well as
rights should happen, then the vendor cannot transfer the ownership of what he sold since there is no
object.
ART. 1466. In construing a contract containing provisions characteristic of both the
contract of sale and of the contract of agency to sell, the essential clauses of the whole
instrument shall be considered.

Sale distinguished from agency to sell.

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.

Sale may be distinguished from an agency to sell, as follows:

(1) In a sale, the buyer receives the goods as owner; in an agency to sell, the agent receives the
goods as the goods of the principal who retains his ownership over them and has the right to fix the
price and the terms of the sale and receive the proceeds less the agent’s commission upon the sales
made;
(2) In a sale, the buyer has to pay the price; in an agency to sell, the agent has simply to account
for the proceeds of the sale he may make on the principal’s behalf;
(3) In a sale, the buyer, as a general rule, cannot return the object sold; in an agency to sell, the
agent can return the object in case he is unable to sell the same to a third person;
(4) In a sale, the seller warrants the thing sold; in an agency to sell, the agent makes no warranty
for which he assumes personal liability as long as he acts within his authority and in the name of the
seller; and
(5) In a sale, the buyer can deal with the thing sold as he pleases being the owner; in an agency to
sell, the agent in dealing with the thing received, must act and is bound according to the instructions of
his principal.
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