Sale, defined: a contract whereby one of the
contracting parties obligates himself to
transfer the ownership and deliver the
possession, of a determinate thing, and the
other party, obligates himself to pay therefor
a price certain in money or its equivalent.
Subject matter of a sale: the Law on Sales
has an expanded coverage to include generic
objects which are at least “determinable”.
This states that the thing is capable of being
determinate without the need of a new or
further agreement by the parties, which
includes determinable albeit generic objects
as valid subject matters of sale.
Elements of Sale (CSP)
1. Consent
2. Subject Matter
3. Price
When all the elements are present, there
being a meeting of the minds, then a
perfected contract of sale arises, and its
validity is not affected by the fact that
previously a fictitious deed of sale was
executed by the parties.
Stages in the Life of a Sale
1. Negotiation
2. Perfection
3. Consummation
Negotiation covers the period from the time
the prospective contracting parties indicate
their interests in the contract to the time the
contract is perfected; perfection takes place
upon the concurrence of the essential
elements of the sale which are the meeting
of the minds of the parties as to the object
of the contract and upon its price;
Consummation, begins when the parties
perform their respective undertaking under
the sale, culminating in its extinguishment.
Essential Characteristics of a Sale
1. Nominate and Principal
Sale is a nominate contract since it has been
given a particular name by law.
It is a principal contract as contrasted from
an accessory contract because it can stand
on its own, and does not depend on another
contract for its validity or existence.
2. Consensual
Sale is a consensual contract as it is
perfected by mere consent, at the moment
there is a meeting of the minds upon the
things which is the object and its price.
Buenaventura v CA has held that once there
is a meeting of the minds as to the price, the
sale is valid, despite the manner of its actual
payment or even when there has been a
breach thereof.
Modalities that affect Consensuality:
May be affected by the stipulation which
can be added in the contractual relationship,
such as a suspensive term or condition.
Binan Steel Corp v CA: Not all contracts of
sale become automatically effective. In sales
with assumption of mortgage, the
assumption of mortgage is a condition
precedent to the seller’s consent and
therefore, without approval of the
mortgagee, the sale is not perfected.
If there is doubt as to the interpretation
3. Bilateral and Reciprocal whether the transaction is onerous or
gratuitous, the Court held, in Gaite v
Because it imposes obligations on both
Fornacier, that the rules of interpretation
parties. Remember that reciprocal
would incline the scales in favor of the
obligations are those which arise from the
“greater reciprocity of interests” since
same cause, and in which each party is a
sale is essentially an onerous contract.
debtor and creditor of the other, such that
the obligation of one is dependent upon the
obligation of the other.
5. Commutative
Legal effects on Reciprocality:
Sale is commutative as distinguished
1. The power to rescind is implied, and from being aleatory or deemed a
this need not be stipulated in the donation because a thing of value is
contract in order for the innocent exchanged for equal value. Nevertheless,
party to invoke such remedy. there is no requirement that the price be
2. Neither party incurs delay if the equal to the exact value of the object;
other does not comply or is not ready all that is required is for the seller to
to comply believe that was received was of the
3. From the moment one of the parties commutative value of what he gave.
fulfills his obligations, the default by
the other begins without need of
prior demand. In Gaite, it was held that the
consequences of negotiations such as
Polytechnic University of the PH v CA:
obtaining a discount, do not destroy the
it is therefore a general requisite for the
commutative nature of a sale, since in
existence of a valid and enforceable
the end, the test would be that the parties
contract of sale that it be mutually
to the sale believe they they have each
obligatory, that there should be a
received the proper and appropriate
concurrence of the promise of the
value for what they each in turn gave up.
vendor to sell a determinate thing and
the promise of the vendee to receive However, if the price given is extremely
and pay for the property so delivered disproportionate, in a strict legal
and transferred. standpoint, it is not a sale, but more of a
donation. Nevertheless, if no third party
complains, the nature of the contract
4. Onerous would never be an issue as the parties
will then be bound under estoppels.
Sale is an onerous contract because it
imposes a valuable consideration as
prestation, which ideally is a price
Inadequacy of price does not affect
certain in money or its equivalent.
sale. This may be a ground for setting
 aside an execution of sale, but is not a
sufficient ground for the cancellation of
a voluntary contract of sale otherwise
free from invalidating effects. It is
merely voidable, that is, valid until
annulled.
6. Sale is Title and NOT mode
It is the delivery or tradition that is the
mode to transfer ownership and
possession of the thing to the buyer.
The perfection of a sale is merely a title
that creates the obligation on the part of
the seller to transfer ownership and
deliver possession, but it is not sale on
its own that transfers the ownership.
Mode is the legal means by which
ownership is created, transferred or
destroyed.
Title only constitutes the legal basis by
which to affect ownership.
- The sale by itself does not affect
ownership, the most sale does is to
create the obligation to transfer
ownership; it is delivery that actually
transfers ownership.
SALE DISTINGUISHED FROM
OTHER SIMILAR CONTRACTS
1. Donation, defined: it is an act of
liberality whereby a person disposes
gratuitously of a thing or right in
favor of another person who accepts
it. Sale is onerous, while a donation
is gratuitous.
 A contract may be entered into in the
form of a sale and may end up being
governed by the Law on Donations,
even when there may be a formal
price agreed upon, if it is simulated,
and the real intention is that the
subject matter is being donated to the
supposed “buyer”.
 Under Art 726, even when the donor
imposes a burden on the donee, but
which is less than the value of the
thing give, it is still a donation.
o “ When the value of the
burden placed upon the donee
is more than the value of the
thing given, it becomes an
onerous obligation, governed
by Law on Sales.
2. Barter or Exchange: one of the
parties bind himself to give one thing
in consideration of the other’s
promise to give another thing,
whereas by sale, one of the parties
binds himself to deliver a thing in
consideration of the other’s
underaiking to pay the price in
money.
RULES TO DETERMINE WHETHER IT
IS SALE OR BARTER?
1. Manifest intention of the parties
2. Intention does not appear and
consideration consists party in
money and partly in another thing
o Barter: value of the thing
given exceeds the amount of
money given
o Sale: value of the thing given
equals or is less that the
amount of money given.
 o Note: barter is still goverened specially for the customer and upon
by the law on Sales. his special order, and not for the
o Note: The rules on Statute of general market, it is a contract for a
Frauds may apply to the sale piece of work.
of real property and personal o Two Tests of Distinction:
property bought at P500 or  Manufacturing in the
more, but this does not apply ordinary course of
to barter. business= SALE
o The right of legal redemption  Manufacturing upon
granted by law to an special order of
adjoining owner of an urban customers= piece of
land vovers only “resale” work
does not cover exchanges of o in Celestino Co the thrust of
properties. the taxpayer position in the
3. Froma contract for a piece of work implementation of the
One may buy a painting from an art “upon special order” test
gallery under a sale, or he may was more of timing, rather
request the artist himself to execute than by necessity: that if the
the painting for a price certain, manufacture of goods is
which is a contract for a piece-of- made always upon or after
work. In both cases, the resulting the orders of customers and
object and the price paid may be the on the basis of their
same. specifications, the underlying
 The distinction between a sale and a relationship would be that of
contract for work, labor, and a contract for a piece-of-work
materials is tested by the inquiry of or labor or materials.
whether the thing transferred is one (However, ‘timing
not in existence and which never application’ was later
would have existed but for the abandoned in CIR v EEI)
order of the party desiring to  Why relevant?
acquire it. The Court held here that Because if
the hemp was in existence in baled you’re
form before the agreements of sale classified as a
were made, and that it would’ve manufacturer
been baled, nevertheless, for sale to (as
someone else, since it was customary distinguished
to sell hemp in bales. from a
 Art 1467: … the vendor in the contractor
ordinary course of business with lower
manufactures for the general tax) you are
market whether the same is on hand subject to a
or not, is a contract of sale; but if the higher sales
goods are to be manufactured tax.
 o Celestino Co recognized that
the essence of a contract for a
piece-of-work is the “sale of
service” unlike in a sale
where the essence is the sale
of an object.
o Court ruled here that the
company was a manufacturer,
and there services were
subject to sale, not piece
work. The orders exhibited
were not shown to be special:
“They were merely orders for
work — nothing is shown to
call them special requiring
extraordinary service of the
factory “…it was not true
that it served special
customers only or confined
its services to them alone,
and that it was possible for
the company to “easily
duplicate or even mass-
produce the same doors – it
is mechanically equipped to
do so.”
 TEST: (CIR v EEI) the inquiry
whether the thing transferred is one
not in existence and which never
would have existed but for the order
of the party desiring to acquire it.
o “If the article ordered by the
purchaser is exactly such as
the plaintiff makes and keeps
on hand for sale to anyone,
and no change or
modification of it is made at
defendant’s request, it is a
contract of sale, even though
it may be entirely made after,
and in consequence of, the
defendants order for it.”
 Abandonment of the TIMING
APPLICATION/ UPON SPECIAL
ORDER TEST under ART 1467-
(CIR v Engineering Equipment)
Just because the thing came
into existence after, and was
motivated to be produced by
reason of a specific order,
does not necessarily qualify
the underlying transaction to
be a contract for a piece-of-
work.
Taken together, both Celestino Co and
Engineering Equipment established the
proper application of the “upon special
order” test under Article 1467, as not merely
one of timing of the flow of the transactions,
but one that goes into the nature of the
product involved when it was possible for
the manufacturer or producer to be able to
produce the product ahead of any special
order given by a customer or client.
Celestino Co. In that case it was held
that when the manufacturer engages in
the same activity in the ordinary course
of business, and does not need to employ
extraordinary skills and equipment, that
would classify the underlying transaction
as a sale.
In Engineering Equipment, the
fabrication of central air-conditioning
system, was as a matter-of-course, a
staple undertaking, one which could be
considered ordinary and usual in its
operations; and although each time it
serviced an order it had to take various
factors into consideration, EEI really did
not need to employ extraordinary skills
or equipment each time it had to execute
an order.

How about large quanitity products?
 Since it was specified and approved
by both the buyer and the seller, and
is manufactured not in the ordinary
course of its business, the contract
executed was clearly one of piece-of-
work
o the manufacture of 20,000
pieces of vinyl frogs and
20,000 copies of vinyl
mooseheads.
The main distinguishing factor between a
sale and a contract for a piece-of-work is
the essence of why the parties enter into
it:
 if the essence is the object,
irrespective of the party giving or
executing it, the contract is sale;
 if the essence is the service,
knowledge or even reputation of the
person who executes or
manufactures the object, the contract
is for piece of work, which is
essentially the sale of service or
labor.
Practical needs for being able to distinguish
- it is important to determine the
proper characterization of a contract
whether it be sale or piece work
since different sets of laws govern
each type.
- Sale is of real obligations and can be
subject to specific performance; on
the other hand, a piece-of-work
where the main subject matter is
service (obligation to do ) would not
allow specific performance as it
would be in effect involuntary
servitude which is prohibited.
- A contract of piece of work unlike
sale, is not governed by the Statute
of Frauds.
Agency to sell or to buy
By the contract of agency, a person binds
himself ro render some service to do
something in representation or on behalf of
the principal, with the consent or authority
of the latter.
Contracts of agency to sell or to buy is
different from sales.
Sale is not unilaterally revocable, while a
contract of agency to sell, is essentially
revocable, because it covers a fiduciary
relationship in the presence of an
irrevocability clause.
Obligation to deliver:
In sale, the buyer himself pays for the price;
in an agency to sell, the agent is not obliged
to pay the price but merely to deliver the
price which he may receive from the buyer.
In sale, after delivery, the buyer becomes the
owner; in an agency, the agent does not
become the owner of the subject.
Gonzalo Puyat & Sons, Inc. v. Arco
Amusement Company “…The agent is
exempted from all liability in the
discharge of his commission
provided he acts in accordance with
the instructions received from his
principal.”
 Ker & Co. Ltd v Lingtad: the Court
held that in spite of the disclaimer in
the agreement, it was still an agent of
the American company. The decisive
test for the Court was “the retention
of the ownership of the goods
delivered to the possession of the
dealer, like herein petitioner, for
resale to customers, the price and
terms remaining subject to the
control of the firm consigning such
goods.
Since insurable interest remained
with the American company, it
clearly showed that ownership over
the goods was never transferred to
Ker & Co.
The transfer of title or agreement to transfer
it for a price paid or promised is the essence
of sale. If such transfer puts the transferee in
the position of an owner and makes him
liable to the transferor as a debtor for the
agreed price, and not merely as an agent
who must account for the proceeds of a
resale, the transaction is a sale.
Victorias Milling Co. v. Court of Appeals,
the Court held that one of the factors that
most clearly distinguishes agency from other
legal concepts, including sale, “is control;
one person — the agent — agrees to act
under the control of direction of another —
the principal.”
On the importance of applying the
Statute of Frauds
Unlike those contracts covered by the SOF,
a contract of agency to sell is valid and
enforceable in whatever form it may be
entered to. There is one exception though,
under Art 1874, when the sale of a piece of
land is through an agent, it must be so
authorized in writing, otherwise, the sale is
void.
Distinguished from Dacion En Pago
Dation in payment is one whereby property
is alientated to the creditor in full
satisfaction of a debt in money; Dation is
governed by the Law on Sales, since it
involves the transfer of ownership of the
subject matter.
Dacion en pago is an objective novation of
the obligation where the thing offered as an
accepted equivalent of the performance of
an obligation is considered as the object of
the contract of sale while the debt is
considered as the purchase price; provided
further that there must also be a clear
agreement that the thing offered
extinguishes the debt.
Dacion en pago is by definition a special
mode of payment, whereby the debtor offers
another thing to the creditor who accepts it
as equivalent of payment of an outstanding
debt. The agreement does not necessarily
constitute a separate contract, but only an
arrangement by which an existing obligation
is extinguished.
How it partakes the nature of a sale?
 - The creditor is agrees to buy the
thing of the debtor, payment for
which is to be charged against the
debt.
- There is then the subsequent element
of delivery; after payment,
delivery and transfer of ownership of
the thing in favor of the creditor is
required. Conversely,if there is re-
possession of the object of a trust
receipt and is only by way of
security, there is no dacion.
- Lastly, there must be an agreement
that the delivery of the property is in
lieu of the payment. The transfer of
property between parties does not
automatically amount to dacion en
pago as it is essential that there be
meeting of the minds on whether the
loan would be extinguished by
dacion en pago.
From Lease:
In a contract of lease, the lessor binds
himself to give to the lessee (occupant) the
enjoyment or use of a thing for a price
certain and for a period which may be
definite or indefinite.
Refer to Recto Law (Chap 10)
Chapter 2: Parties of Sale
Who can enter into a sale?
The general rule is that any person who has
the “capacity to act” more specifically the
power to obligate himself may enter into a
contact of sale, whether as seller or buyer.
Minors, Insane, or demented persons
- Contracts entered by them are not
void, but merely voidable, subject to
annulment or raification. Such action
cannot be instituted by the
capacitated person since he is
disqualified from alleging the
incapacity of the person with whom
he contracts.
- When the defect of the contract
consists in the incapacity of one of
the parties, the incapacitated person
is not obliged to make any
restitution, except insofar as he has
been benefited by the thing or price
received by him.
Necessities contracted by a minor
- A minor is incapacitated to give
consent to a sale, and shall render
such contract to be voidable.
- But where a minor pays for
‘necessaries’, and he pays the price
therefor, the resulting sale is valid
and not voidable.
- Necessaries cover everything
indispensable for sustenance,
dwelling, clothing, medical
attendance, etc.
- In order for the sale of necessaries to
minors be valid, two elements need
to be present: perfection and
delivery.
Senility and Serious Illness
- This is coverd in Domingo v CA,
- The general rule is that aperson is
not incompetent to contract merely
because of advanced years or
sickness. However, when such
infirmities have impaited the mental
 faculties so as to prevent the person
from intelligently protecting her
rights, then she is incapacitated and
would render the contract entered to
be void. The Domingo ruling posits
that there was no meeting of the
minds since there was no real
consideration agreed upon, and the
deed was merely forged.
Sale by and between spouses
Article 1490 of the Civil Code, spouses
cannot sell property to each other, except:
Specific Prohibitions mandated by Law:
(a) when a separation of property was
agreed upon in the marriage settlements; or
(b) when there has been a judicial decree for
the separation of property.
Who can question the sale between spouses
 The heirs of the spouses who have
been prejudiced
 Prior creditors
 State for payment of taxes due
In violation of this Article, the contract
would be deemed void and non-existent;
Court leaves the party as they are.
What are the reasons for the prohibition?
1. To prevent a spouse from defrauding
his creditors by transferring his
properties to the other spouse
2. To avoid a situation where the
dominant spouse would take
advantage of the weaker spouse by
defrauding the latter.
 All-inclusive coverage: Prohibition
extends to those persons living
together as husband and wife without
a valid marriage.
 The only exception is where the
property has been conveyed to a
third party buyer in good faith and
for value, then reconveyance is no
longer available to common-law
spouse, since under the Torrens
system, every buyer has a right to
rely upon the title of the immediate
seller.
a. Agent: with respect to the property
whose administration or sale may
have been entrusted to him, unless
the consent of the principal is iven to
him.
b. Guardian: with respect to the
property of the person under his
guardianship.
c. Executor or administrator, with respect
to the property of the estate under his
administrations;
d. Public officers and employees, with
respect to property of the State or any
subdivision thereof, or of any
government-owned corp
e. Judges, justices, attornerys, clerk of
courts, etc. with respect to the property
and rights in litigation or levied upon an
execution before the court within
whose jurisdiction or territory
f. 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