LAW ON SALES
Requisites Concerning Object
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 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.
Concept of Contract of sale
The contract of sale is an agreement whereby one of
the parties (called the 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 therefor a sum of money or its equivalent (known
as the price).
Article 1459. The thing must be licit and the vendor
must have a right to transfer the ownership thereof at
the time it is delivered.
(1) Things
• Determinate
• Licit or lawful
• Not be impossible
(2) (Rights – all rights which are not intransmissible
or personal may also be the object of sale
Right of Vendor to Transfer Ownership
1. One can sell only what he owns
2. Sufficient if right exists at time of delivery
Article 1460. A thing is determinate when it is
particularly designated or physical 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. (n)
Subject Matter Must be Determinate
1) When a thing is determinate – particularly
designated or physically segregated from all
others of the same class
2) Sufficient if subject matter capable of being
determinate – It is sufficient that the thing is
determinable or capable of being made
determinate without the necessity of a new or
further agreement between the parties to
ascertain its identity, quantity, or quality.
Article 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. (n)
Sale of thing expected and sale of hope itself
distinguished.
Emptio rei speratae (sale of thing expected) 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 contract becomes ineffective and 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
LAW ON SALES
agreed that the buyer will pay the price even if the thing
does not eventually exist.
Article 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.
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 or 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
Article 1463. The sole owner of a thing may sell an
undivided interest therein.
Sale of Undivided Interest in a Thing
1) By sole owner – aliquot part, becomes co-owner
2) By co-owner – can dispose his undivided
share/interest without the consent of other co-
owners
Article 1464. In the 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, 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.
Sale of an undivided share of a specific mass.
(1) Meaning of fungible goods. — It means goods of
which any unit is, from its nature or by mercantile
usage, treated as the equivalent of any other unit (ex.
Grain, oil, wine, gasoline)
(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.
(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.
EXAMPLE:
S owns 1,000 cavans of palay stored in his warehouse. If
S sells to B 250 cavans of such palay which cavans are
not segregated from the whole mass, B becomes a co-
owner of the said mass to the extent of 1/4. If the
warehouse happens to contain only 200 cavans, S must
deliver the whole 200 cavans and supply the deficiency
of 50 cavans of palay of the same kind and quality.
In the same example, the number of cavans in the
warehouse may be unknown or undetermined and S
may sell only1/4 share of the contents. The legal effect
of such a sale is to make B a co-owner in that
proportion. It is obvious that in such case, the obligation
of the seller “to make good the deficiency” will not
arise.
Article 1465. Things subject to a resolutory condition
may be the object of the contract of sale.
EXAMPLES:
(1) S (vendor a retro) sold a parcel of land to B (vendee
a retro) subject to the condition that S can repurchase
the property within two years from the date of sale. If S
exercises the right to repurchase, then the sale made by
B to C before the lapse of the two (2)-year period falls.
The rule, however, that a vendor cannot transfer to his
vendee a better right than he had himself, suffers an
exception in case of property with Torrens title.
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(2) For failure to pay his debt, the land of S (mortgagor)
was sold to B, the highest bidder and purchaser in an
extrajudicial foreclosure of a real estate mortgage.
Under the law (Act No. 3135, as amended.), the
mortgagor may redeem the property at any time within
one year from and after the date of the registration of
the sale. If S redeems the property, then the sale made
to B is extinguished.
Article 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.
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. (Art. 1868.)
In order to classify a contract, due regard must be
given to its essential clauses. A contract is what the
law defines it to be, and not what it is called by the
contracting parties. 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 (see
Arts. 1547, 1548, 1561.); 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.
Article 1467. A contract for the delivery at a certain
price of an article which the vendor in the ordinary
course of his business manufactures or procures for the
general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to
be manufactured specially for the customer and upon
his special order, and not for the general market, it is a
contract for a piece of work.
Sale distinguished from contract for a piece of work.
By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The
contractor may either employ his labor or skill, or also
furnish the material.
The distinction between a contract of sale and one for
work, labor or materials or for a piece of work is tested
by 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, 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.
(1) In the first case, the contract is one for work,
labor and materials and in the second, one of
sale.
(2) In the first case, the risk of loss before delivery
is borne by the worker or contractor, not by the
employer (the person who ordered). A contract
is for a piece of work if services dominate that
contract even though there is a sale of goods
involved. Where the primary objective of a
contract is a sale of a manufactured item, it is a
sale of goods even though the item is
manufactured by labor furnished by the seller
and upon previous order of the customer.
(3) (The importance of marking the line that divides
contracts for a piece of work from contracts of
sale arises from the fact that the former is not
within the Statute of Frauds.
Article 1468. If the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characterized by the manifest
intention of the parties. If such intention does not
LAW ON SALES
clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration
exceeds the amount of the money or its equivalent;
otherwise, it is a sale.
Sale distinguished from barter.
By the contract of barter or exchange, one of the parties
binds himself to give one thing in consideration of the
other’s promise to give another thing. (Art. 1638.) On
the other hand, in a contract of sale, the vendor gives a
thing in consideration for a price in money. (Art. 1458.)
(1) The above distinction is not always adequate to
distinguish one from the other. Hence, the rule in
Article 1468 for those cases in which the thing given in
exchange consists partly in money and partly in another
thing.
(a) In such cases, the manifest intention of the parties is
paramount in determining whether it is one of barter or
of sale and such intention may be ascertained by taking
into account the contemporaneous and subsequent acts
of the parties. (Art. 1371.)
(b) If this intention cannot be ascertained, then the last
sentence of the article applies. But if the intention is
that the contract shall be one of sale, then such
intention must be followed even though the value of
the thing given as a part consideration is more than the
amount of the money given.
(2) The only point of difference between the two
contracts is in the element which is present in sale but
not in barter, namely: “price certain in money or its
equivalent.”
Article 1469. In order that the price may be considered
certain, it shall be sufficient that it be so with reference
to another thing certain, or that the determination
thereof be left to the judgment of a special person or
persons.
Should such person or persons be unable or unwilling to
fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
Where such third person or persons are prevented from
fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies
against the party in fault as are allowed the seller or the
buyer, as the case may be.
Article 1470. Gross inadequacy of price does not affect
a contract of sale, except as it may indicate a defect in
the consent, or that the parties really intended a
donation or some other act or contract.
Article 1471. If the price is simulated, the sale is void,
but the act may be shown to have been in reality a
donation, or some other act or contract.
Article 1472. The price of securities, grain, liquids, and
other things shall also be considered certain, when the
price fixed is that which the thing sold would have on a
definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on
such day, or in such exchange or market, provided said
amount be certain.
Article 1473. The fixing of the price can never be left to
the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected.
Article 1474. Where the price cannot be determined in
accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the
thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question
of fact dependent on the circumstances of each
particular case.
Article 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.
Article 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots,
each lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or
in other customary manner. Until such announcement is
made, any bidder may retract his bid; and the
auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without
reserve.
LAW ON SALES
(3) A right to bid may be reserved expressly by or on
behalf of the seller, unless otherwise provided by law or
by stipulation.
(4) Where notice has not been given that a sale by
auction is subject to a right to bid on behalf of the
seller, it shall not be lawful for the seller to bid himself
or to employ or induce any person to bid at such sale on
his behalf or for the auctioneer, to employ or induce
any person to bid at such sale on behalf of the seller or
knowingly to take any bid from the seller or any person
employed by him. Any sale contravening this rule may
be treated as fraudulent by the buyer.
Rules governing auction sales
(1) Sales of separate lots by auction are separate
sales
(2) Sale perfected by the fall of the hammer
 Concept of sale without reserve –
auctioneer cannot withdraw the goods
from sale once a bid has been made and
the highest bidder has a right to enforce
his bid
(3) Right of seller to bid in the auction – The seller
or his agent may bid in an auction sale
provided:
 such right was reserved;
 notice was given that the sale is subject
to a right to bid on behalf of the seller;
and
 the right to bid by the seller is not
prohibited by law or by stipulation.
Article 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof.
Article 1478. The parties may stipulate that ownership
in the thing shall not pass to the purchaser until he has
fully paid the price.
Article 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration
distinct from the price.
Kinds of promise treated in Article 1479.
The above article refers to three kinds of promises,
namely:
1) An accepted unilateral promise to sell in which
the promisee (acceptor) elects to buy;
2) An accepted unilateral promise to buy in which
the promisee (acceptor) elects to sell; and
3) A bilateral promise to buy and sell reciprocally
accepted in which either of the parties chooses
to exact fulfillment.
Effect of unaccepted unilateral promise.
A unilateral promise or offer to sell or to buy a thing
which is not accepted creates no juridical effect or legal
bond. Such unaccepted imperfect promise or offer is
called policitacion. A period may be given to the offeree
within which to accept the offer.
Meaning of option.
An option is a privilege existing in one person for which
he has paid a consideration which gives him the right to
buy/sell, for example, certain merchandise or certain
specified property, from/to another person, if he
chooses, at any time within the agreed period at a fixed
price, or under, or in compliance with certain terms and
conditions.
Effect of accepted unilateral promise.
The second paragraph of Article 1479 refers to what is
called as “option” in the commercial world. A unilateral
promise to sell or to buy a determinate thing for a price
certain does not bind the promissor even if accepted
and may be withdrawn at any time. It is only if the
promise is supported by a consideration distinct and
separate from the price that its acceptance will give rise
to a perfected contract.
Article 1480. Any injury to or benefit from the thing
sold, after the contract has been perfected, from the
moment of the perfection of the contract to the time of
delivery, shall be governed by articles 1163 to 1165, and
1262.
This rule shall apply to the sale of fungible things, made
independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according
to weight, number, or measure, the risk shall not be
imputed to the vendee until they have been weighed,
counted, or measured and delivered, unless the latter
has incurred in delay.
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Risk of loss or deterioration.
Four rules may be given regarding risk of loss:
1) If the thing is lost before perfection, the seller
and not the one who intends to purchase it
bears the loss in accordance with the principle
that the thing perishes with the owner (res perit
domino);
2) If the thing is lost at the time of perfection, the
contract is void or inexistent. (Art. 1409[3].) The
legal effect is the same as when the object is
lost before the perfection of the contract of sale
(see Art. 1493.);
3) If the thing is lost after perfection but before its
delivery, that is, even before the ownership is
transferred to the buyer, the risk of loss is
shifted to the buyer as an exception to the rule
of res perit domino (Arts. 1480, pars. 1 and 2,
1538, 1189, and 1269.); and
4) If the thing is lost after delivery, the buyer bears
the risk of loss following the general rule of res
perit domino.
Article 1481. In the contract of sale of goods by
description or by sample, the contract may be rescinded
if the bulk of the goods delivered do not correspond
with the description or the sample, and if the contract
be by sample as well as description, it is not sufficient
that the bulk of goods correspond with the sample if
they do not also correspond with the description.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the sample.
Sale of goods by description and/or sample.
(1) Sale by description. — Sale by description
occurs where a seller sells things as being of a
particular kind, the buyer not knowing whether
the seller’s representations are true or false,
but relying on them as true; or, as otherwise
stated, where the purchaser has not seen the
article sold and relies on the description given
him by the vendor, or has seen the goods but
the want of identity is not apparent on
inspection.
(2) Sale by sample. — To constitute a sale by
sample, it must appear that the parties
contracted solely with reference to the sample,
with the understanding that the bulk was like it.
It must appear that the exhibition of the sample
by the seller was an inducement of the sale or
formed the sole basis thereof. In a sale by
sample, the vendor warrants that the thing sold
and to be de livered by him shall conform with
the sample in kind, character, and quality.
(3) Sale by description and sample. — When a sale
is made both by sample and by description, the
goods must satisfy all the warranties (see Art.
1565.) appropriate to either kind of sale, and it
is not sufficient that the bulk of the goods
correspond with the sample if they do not also
correspond with the description, and vice versa.
Article 1482. Whenever earnest money is given in a
contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
Meaning of earnest money.
Earnest money is something of value given by the buyer
to the seller to show that the buyer is really in earnest,
and to bind the bargain. It is actually a partial payment
of the purchase price and is considered as proof of the
perfection of the contract. Since earnest money
constitutes an advance payment, it must be deducted
from the total price.
Earnest money and option money distinguished.
They may be distinguished as follows:
1) Earnest money is part of the purchase price,
while option money (see Art. 1479, par. 2.) is
the money given as distinct consideration for an
option contract;
2) Earnest money is given only where there is
already a sale, while option money applies to a
sale not yet perfected; and
3) When earnest money is given, the buyer is
bound to pay the balance, while the would-be
buyer who gives option money is not required
to buy.
Article 1483. Subject to the provisions of the Statute of
Frauds and of any other applicable statute, a contract of
sale may be made in writing, or by word of mouth, or
partly in writing and partly by word of mouth, or may be
inferred from the conduct of the parties.
Form of contract of sale.
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(1) General rule. — The form of a contract refers to
the manner in which it is executed or
manifested. As a general rule, a con tract may
be entered into in any form provided all the
essential requisites for its validity are present.
(2) Where form is required in order that a contract
may be enforceable. — In case the contract of
sale should be covered by the Statute of Frauds,
the law requires that the agreement (or some
note or memorandum thereof) be in writing
subscribed by the party charged, or by his
agent; otherwise, the contract cannot be
enforced by action.
Under the Statute of Frauds (Art. 1403[2, a, d, e].) of the
Civil Code, the following contracts must be in writing;
otherwise, they shall be unenforceable by action:
(a) Sale of personal property at a price not less than
P500.00;
(b) Sale of real property or an interest therein
regardless of the price involved; and
(c) Sale of property not to be performed within a year
from the date thereof regardless of the nature of the
property and the price involved
(3) Where form is required in order that a contract may
be valid. — Where the “applicable statute” requires that
the contract of sale be in a certain form for its validity,
the required form must be observed in order that the
contract may be both valid and enforceable.
(4) Where form is required only for the convenience of
the parties. — In certain cases, a certain form (e.g.,
public instrument) is required for the convenience of
the parties in order that the sale may be registered in
the Registry of Deeds to make effective as against third
persons the right acquired under such sale. As between
the contracting parties, the form is not indispensable
since they are allowed by law to compel each other to
observe that form.
Article 1484. In a contract of sale of personal property
the price of which is payable in installments, the vendor
may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee
fail to pay;
(2) Cancel the sale, should the vendee's failure to pay
cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendee's failure to
pay cover two or more installments. In this case, he
shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement
to the contrary shall be void.
Remedies alternative.
These remedies are alternative and are not to be
exercised cumulatively or successively and the election
of one is a waiver of the right to resort to the others.
Thus, where from the prayer of the vendor in its brief, it
asks the appellate court to order the vendee to pay the
remaining un paid sum under the promissory note, it
thereby waives the other remedies.
Right of vendor to recover unpaid balance of purchase
price
(1) Remedy of specific performance
(2) Remedy of cancellation
(3) Remedy of foreclosure
Article 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
Lease of personal property with option to buy.
Leases of personal property with option to buy on the
part of the lessee who takes possession or enjoyment of
the property leased are really sales of personalty
payable in installments. Accordingly, the rules provided
in Article 1484 are equally applicable to the so-called
leases of personal property.
The evident purpose of Article 1485 is to prevent
vendors from resorting to this form of contract which
usually is in reality contract of sale of personal property
payable in installments in contravention of the
provisions of Article 1484.
Article 1486. In the case referred to in the two
preceding articles, a stipulation that the installments or
rents paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
unconscionable under the circumstances.
Stipulation authorizing the forfeiture of installments or
rents paid.
In sales of personal property by installments or leases of
personal property with option to buy, the parties may
stipulate that the installments or rents paid are not to
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be returned. Such a stipulation is valid “insofar as the
same may not be unconscionable under the
circumstances’’; otherwise, the court has the power to
order the return of a portion of the total amount paid in
installments or rents.

Article 1487. The expenses for the execution and

registration of the sale shall be borne by the vendor,
unless there is a stipulation to the contrary
Article 1488. The expropriation of property for public
use is governed by special laws.

Expropriation of property for public use.

The procedure for the exercise of the power of eminent
domain is provided for in Rule 67 of the Rules of Court.
Expropriation must be decreed by competent authority
and for public use and always upon payment of just
compensation.