Definition of sale:

“sale” as a contract whereby one of the contracting parties (Seller) obligates himself to transfer the
ownership, and to deliver the possession, of a determinate thing; and the other party (Buyer) obligates
himself to pay therefor a price certain in money or its equivalent.
2. Subject Matter of Sale
“determinate” to describe the subject matter of the sale, the present Law on Sales has expanded the
coverage to include generic objects which are at least “determinable.”

Art. 1460 - “requisite that the 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,” which includes “determinable” albeit generic objects as valid subject matters of
sale.

Subject matter MUST BE determinate at the point of performance.

3. Elements of Contract of Sale

(a) CONSENT, or meeting of the minds to transfer ownership in exchange for the price;
(b) SUBJECT MATTER; and
(c) PRICE, certain in money or its equivalent.

when an essential element is not present at meeting of the mind is to declare a “no contract” situation.

“the absence of any of these essential elements negates the existence of a perfected contract of sale.”
On the other hand, when all three elements are present, but there is defect or illegality constituting any of
such elements, the resulting contract is either voidable when the defect constitutes a vitiation of consent,
or void as mandated under Article 1409.

4. Stages in the Life of Sale

(a) POLICITACION, negotiation, or preparation stage;
(b) PERFECTION, conception or “birth”; and
(c) CONSUMMATION or “death.”

ESSENTIAL CHARACTERISTICS OF SALE

Nominate and Principal - Sale is a nominate contract since it has been given a particular name by law;
governed by a set of rules in the Civil Code, which we refer to as the “Law on Sales.”
Sale is a principal contract, as contrasted from accessory or preparatory contracts, because it can stand on
its own, and does not depend on another contract for its validity or existence.

DOCTRINAL SIGNIFICANCE OF THE “NOMINATE AND PRINCIPAL”

all other contracts which have for their objective the transfer of ownership and delivery
of possession of a determinate subject matter for a valuable consideration, are governed necessarily by the
Law on Sales.

2. Consensual
it is perfected by mere consent, at the moment there is a meeting of the minds upon the thing which is the
object of the contract and upon the price.

3. Bilateral and Reciprocal

Sale is a bilateral contract embodying reciprocal obligations, as distinguished from a unilateral contract,
because it imposes obligations on both parties to the relationship.
The obligation or promise of each party is the cause or consideration for the obligation or promise of the
other.
The obligation of one is dependent upon the obligation of the other. They are to be performed
simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the
other.

4. Onerous
it imposes a valuable consideration as a prestation, which ideally is a price certain in money or its
equivalent.

5. Commutative
a thing of value is exchanged for equal value, i.e., ideally the value of the subject matter is equivalent to
the price paid.

“commutativeness” is an essential characteristic of a sale, the test for compliance therewith is not
objective but rather subjective; i.e., so long as the party believes in all honesty that he
is receiving good value for what he transferred, then it complies with the commutative character of a sale,
and would not be deemed a donation nor an aleatory contract.

6. Sale Is Title and Not Mode

The perfection of a sale gives rise to the obligation on the part of the seller to transfer ownership and
deliver possession of the subject matter; but it would be delivery or tradition that is the mode to transfer
ownership and possession to the buyer.

sale is merely title that creates the obligation on the part of the seller to transfer ownership and deliver
possession, but on its own sale is not a mode that transfers ownership.

ownership and real rights are acquired only pursuant to a legal mode or process. While title
(such as sale) is the juridical justification, mode (like delivery) is the actual process of acquisition or
transfer of ownership over a thing.

SALE DISTINGUISHED FROM OTHER SIMILAR CONTRACTS

1. From Donation
Donation 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 essentially an onerous contract, whereas donation is a gratuitous contract. 79 A sale is perfected by
mere consent,
whereas donation, being a solemn contract, although consent is also required, must comply with the
formalities mandated by law for its validity.
2. From Barter
By barter or exchange, one of the parties binds 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 undertaking to pay the price in money or its equivalent.
3. From Contract for a Piece-of-Work
the distinction between a sale and a contract for work, labor, and materials is tested by the inquiry of
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, or a thing which would have existed and been the subject of sale to
some other person, even if the order had not been given.

two tests for distinction:

(a) Manufacturing in the ordinary course of business to cover sales contracts; and
(b) Manufacturing upon special order of customers, to cover contracts for piece-of-work.

CHAPTER 2
PARTIES OF SALE
general rule is that any person who has “capacity to act,” or “the power to do acts with legal effects,” or
more specifically with the power to obligate himself, may enter into a contract of sale, whether as seller or
as buyer.

MINORS, INSANE OR DEMENTED PERSONS, AND DEAF-MUTES

Nonetheless, contracts entered into by such legally incapacitated persons are not void, but merely
voidable, subject to annulment or ratification.

1. Necessaries
A minor is without legal capacity to give consent to a sale, and since consent is an essential requisite of
every contract, the absence thereof cannot give rise to a valid sale; nonetheless,
the defective consent gives rise to a voidable sale, meaning “valid until annulled.”

“[w]here necessaries are sold and delivered to a minor or other person without capacity to act, he must
pay a reasonable price therefore,” and the resulting sale is valid, and not merely
voidable.
For the sale of necessaries to minors to be valid, and not merely voidable, two elements need to be
present: (a) perfection of the sale; and (b) delivery of the subject necessaries.

2. Emancipation

3. Senility and Serious Illness

“[t]he general rule is that a person is not incompetent to contract merely because of
advanced years or by reason of physical infirmities. However, when such age or infirmities have impaired
the mental faculties so as to prevent the person from properly, intelligently, and
firmly protecting her property rights then she is undeniably incapacitated.

SALES BY AND BETWEEN SPOUSES

1. Sales with Third Parties
The disposition or encumbrance of community property or conjugal property, as the case may be, shall be
void without authority of the court or the written consent of the other spouse. In such a case, the
transaction shall be construed as a continuing offer on the part of the consenting spouse and the third
person and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors.

However, it conceded that as an exception, the husband may dispose of conjugal property without the
wife’s consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and
162 of the Civil Code.

2. Sales Between Spouses

Under Article 1490 of the Civil Code, spouses cannot sell property to each other, except: (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.

Rationale for Prohibition

(a) To prevent a spouse defrauding his creditors by transferring his properties to the other
spouse;
(b) To avoid a situation where the dominant spouse would unduly take advantage of
the weaker spouse, thereby effectively defrauding the latter; and
(c) To avoid an indirect violation of the prohibition against donations between spouses
under Article 133 of the Civil Code.

Article 133, and now Article 87 of the Family Code, do not make such exception in
case of donations.
One explanation for the difference in this aspect between Articles 133 and 1490 is that a donation
between spouses governed by the complete separation of property regime, being a gratuitous contract,
would necessarily reduce the estate of the donor and increase the estate of the donee;

while a sale between such spouses, being an onerous and commutative contract, would result in the
separate estates of the spouses being of the same value as before the sale and no fraud could result, either
to the spouses or to their creditors.

CHAPTER 3
SUBJECT MATTER
REQUISITES OF VALID SUBJECT MATTER
A valid contract of sale would result from the meeting of the minds of the parties on a subject matter that
has at the time of perfection the following requisites:
(a) It must be existing,1 having potential existence, a future thing,3 or even contingent4
or subject to a resolutory condition; in other words, it must be a
“POSSIBLE THING;”
(b) It must be LICIT; and
(c) It must be DETERMINATE or at least DETERMINABLE

1. Subject Matter Must Be “Possible Thing”

The proper consideration of the first requisite, if it is to have a legal significance, is to consider it not in
terms of physical existence or non-existence or whether the seller had or did not have ownership thereof
at the time of perfection,
but whether the subject matter is of a type and nature, taking into consideration the state of technology
and science at the time the sale is perfected, that it exists or could be made to exist to allow the seller
reasonable certainty of being able to comply with his obligations under the contract.

Requiring that the proper subject of a valid sale is a possible thing would ensure demandability and
enforceability of the underlying obligation of the seller to deliver. This rationale for
the first requisite is confirmed by the fact that it is not part of the requisites of a valid subject matter, at
the time of perfection, that the seller be the owner of the subject matter thereof. Under

Article 1459 of the Civil Code, it is only required that the seller “must have a right to transfer the
ownership thereof at the time [the subject matter] is delivered.”

a sale emptio rei speratae is strictly a contract covering future things, and subject to a suspensive
condition that the subject matter will come into existence. If the subject matter does not come into
existence, as in the case of conditional obligations, the contract is deemed extinguished “as soon as the
time expires or if it has become indubitable that the event will not take place.”

Subject Matter Is Nexus of Sale

the essence of a contract of sale is the meeting of minds that bring about the obligation to transfer the
ownership, and deliver the possession, of subject matter.

2. Subject Matter Must Be Licit

A thing is licit and may be the object of a contract when it is not outside the commerce of men, and all
rights which are not intransmissible.

3. Subject Matter Must Be Determinate or at Least Determinable

a. Determinate Subject Matter
A thing is determinate or specific when it is particularly designated or physically segregated from all
others of the same class.

In essence, the requisite of being “determinable” is met when at perfection, the agreement between the
parties included a formula which can be used by the courts to establish the subject matter upon which the
obligation to deliver can be enforced, without needing to get back to any one or both the parties of the
object of their intention.

CHAPTER 4
PRICE AND OTHER
CONSIDERATION
the usual or defi ned consideration for a sale is price, but that a contract of sale may still validly exist and
thereby be governed by the Law on Sales, when it is supported by other valuable considerations
the “obligation to transfer ownership and deliver possession” of the subject matter
is the more defining element of sale, thus: “Transfer of title or an agreement to transfer it for a price paid
or promised to be paid is the essence of sale.

MEANING OF “PRICE”
“Price” signifi es the sum stipulated as the equivalent of the thing sold and also every incident taken into
consideration for the fixing of the price put to the debit of the buyer and agreed to by
Him.
REQUISITES FOR VALID PRICE
The price or consideration of a contract of sale must have the following requisites at the time of the
perfection of the sale, thus:
(a) It must be REAL;
(b) It must be in MONEY OR ITS EQUIVALENT, (i.e., it must be VALUABLE CONSIDERATION); and
(c) It must be CERTAIN or ASCERTAINABLE
a. When Price Is Real
Price is “real” when at the perfection of the sale, there is legal intention on the part of the buyer to pay the
price, and legal expectation on the part of the seller to receive such price as the
value of the subject matter he obligates himself to deliver.

c. When Price Is False

Price is “false” when there is a real price upon which the minds of the parties had met, but not declared,
and what is stated in the covering deed is not the one intended to be paid.

If the price indicated in the covering instrument is false, the contract of sale is valid, but the underyling
deed is subject to reformation to indicate the real price upon which the minds of the
parties have met.

Effect of Non-Payment of Price

The failure to pay the price does not cancel a sale for lack of consideration, for there is still consideration.

2. Price Must Be in Money or Its Equivalent:

“Valuable Consideration”
Article 1468 of the Civil Code recognizes that if the consideration of the contract consists partly in
money, and partly in another thing, the transaction can still be considered
a contract of sale when this is the manifest intention of the parties.

This shows that the consideration for a valid contract of sale can be the price and other additional
consideration.

The significance of the use of the term “price to be in money or its equivalent” is for the law to
demonstrate the ideal example of the onerous nature of sales, that it must be supported by a
“valuable consideration.”

d. Effect of Unascertainability
Where the price cannot be determined in accordance with
any of the preceding rules, or in any other manner, the contract of sale is inefficacious.

Note that the law does not use the term “void,” because of the implied acknowledgment that the existence
of the formula allowed by law at the point of perfection has actually rendered a contract valid albeit
conditional, which cannot be rendered void by what happens after perfection.

CHAPTER 6
PERFORMANCE OR
 CONSUMMATION OF SALE
1. To Preserve the Subject Matter
When a sale covers a specific or determinate object, upon perfection and even prior to delivery, and
although the seller still owns the subject matter, he is already obliged to take care of the subject matter
with the diligence of a good father of a family.

2. To Deliver the Subject Matter

Article 1495 of the Civil Code, the seller is bound: (a) to transfer the ownership of, and (b) to deliver the
thing, which is the object of the sale to the buyer.

3. To Deliver the Fruits and Accessories

Every obligation to deliver a determinate thing is coupled with a specific provision under Article 1537,
that the seller is bound to deliver the thing sold and its accessions and accessories in the
condition in which they were upon the perfection of the contract, and all the fruits shall pertain to the
buyer from the day on which the contract was perfected.

2. Constructive Delivery
Under Article 1496 of the Civil Code, constructive delivery can take several forms, and may be any
“manner signifying an agreement that the possession is transferred from the vendor
to the vendee.” The essence of most forms of constructive delivery is the existence of an agreement
between the seller and the buyer, and that the latter is understood to have control
of the subject matter of sale.

(1) Constructive Delivery Has the Same Legal Effect

as Actual or Physical Delivery
the legal effects and consequences of actual or physical delivery, also apply equally to constructive
delivery.