REVIEWER LAW OF SALES 2. Object or subject matter.
The
By: HECTOR DE LEON
CHAPTER 1
ART. 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
therefor a price certain in money or its
equivalent. A contract of sale may be
absolute or conditional. (1445a)
Contract of sale
A contract 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 binds himself to pay therefor a sum
of money or its equivalent (known as the
price)
Characteristics of a Contract of Sale
1. Consensual- perfected my mere
consent;
2. Bilateral- Both contracting parties are
bound to fulfill obligations reciprocally
towards each other- the seller to deliver
and transfer ownership of the thing sold
and the buyer, to pay the price.
3. Onerous- the thing sold is conveyed in
consideration of the price:
4. Commutative- thing sold is considered
the equivalent of the price.
5. Nominate-given a special name or
designation under the Civil Code of the
Philippines.
6. Principal- It does not depend for its
existence and validity upon another
contract.
Essential requisites of a contract of
sale
1. Consent or meeting of the minds-
consent on the part of the seller or
vendor to transfer and deliver and on the
part of the buyer to pay. There should be
an offer and acceptance of the offer:
determinate thing which is the object of
the contract. The thing must be
determinate or at least capable of being
made determinate because if the seller
and buyer differ in regard to the thing
sold, there is no meeting of the minds.
Subject matter may be real or personal
property.
3. Cause or consideration- The price
certain in money or its equivalent. As to
the seller, the cause is buyer's promise to
pay the price. As to the buyer, the cause
is the seller's promise to deliver the thing
sold. ;
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. (n)
Requisites concerning object
 Subject matter must be licit or lawful
 Must not be contrary to law, morals,
good customs, public order, or public
policy, and should not be impossible.
 Must be within the commerce of men.
i.e. Must not include those under
public ownership, such as public
bridges, parks, and those common to
everybody like air, sunshine, etc.
 Only rights which are not
intransmissible or personal may be
the object of sale i.e. right of usufruct,
etc.
 Examples of intransmissible rights
are the right to vote, marital and
parental rights.
 Examples of personal rights are the
right to be a partner in a partnership,
the right to act an agent of another,
and the right of the bailee to use the
thing loaned in a contract of
commodatum.
Kinds of illicit things
 Illicit per se (of its nature) or per
accidens (law makes it illegal)
 Examples of things which are illicit
per se- decayed food unfit for human
consumption
 Examples of things which are illicit
per accidens- Illegal drugs
Right of vendor to transfer ownership
• GENERAL RULE: You can only sell
what you own.
→ Exception: Valid if the right to
transfer ownership exists at time of
delivery.
 NOT REQUIRED that the vendor has
right to transfer ownership at the time
of perfection of the contract.
 The sale is valid as long as the seller
has the right to sell the thing at the
time the ownership needs to pass.
 Future goods may be the subject
matter of sale. i.e. Sale of crops yet
to be harvested, sale of chicks yet to
hatch, sale of property yet to be
adjudicated by a court.
Subject matter must be determinate
 A thing is determinate when it is
particularly designated or physically
segregated from all others of the
same class.
 A determinate thing is identified by its
individuality i.e. the watch I am
wearing, the car with plate number
AAA 555.
 Sufficient if the thing is determinable
or capable of being made
determinate without the necessity of
a new or further agreement between
the parties. If there are further
agreements needed as to ascertain
the identity, quantity, or quality of the
object, then the sale is void.
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. (n)
Sale of things having potential
existence
 A future thing not existing at the time
of perfection of the contract may be
the object of sale, provided it has a
potential or possible existence.
 It is reasonably certain to come into
existence. i.e. the wine a vine is
expected to produce, the grain a field
may grow, the milk a cow may yield.
Sale of hope or expectancy
 Subject to the condition that the thing
contemplated or expected will come
into existence.
- Sale refers to an "expected thing"
not yet in existence, not to the hope
or expectancy.
-Void if hope or expectancy is vain,
such ex sale of falsified lotto tickets.
Sale of sweepstakes ticket is valid.
The object of contract is the hope
itself. It is not subject to the condition
that the hope will be fulfilled.
Sale of future goods
 Goods to be manufactured, raised, or
acquired.
 Valid
 Executory contract that will be fulfilled
by delivery of the goods
 Different from contract for a piece of
work.
Article 1463. The sole owner of a thing
may sell an undivided interest therein. (n)
What the seller can sell
 Sole owner may sell the entire thing;
 Sole owner may sell only a specific
portion thereof;
 Sole owner may sell an undivided
interest therein, and such interest
may be designated as an aliquot part
of the whole, making the buyer and
 seller co-owners of the thing.

 Co-owner may sell his share DIFFERENCE BETWEEN SALE AND

without the consent of the other AGENCY TO SELL
co-owner
Contract of Sale Contract of
Meaning of fungible goods Agency
A contract where A person binds
 Goods of which any unit is treated as one of the parties himself to do
the equivalent of any other unit. e.g. delivers to another render some
grain, oil, wine, gasoline a determinate service or to do
 Buyer becomes co-owner with the thing in exchange something in
seller of the whole mass in the for a sum certain representation or
proportion in which the definite share in money. on behalf of
bought bears to the mass. i.e. 250 another, with the
cavans out of 1,000 cavans, % of the consent or
contents, etc. authority of the
latter.
Article 1465. Things subject to a Buyer receives the The agent
resolutory condition be the object of the goods as owner. receives the goods
contract of sale. (n) as the goods of
the principal who
Sale of thing subject to resolutory retains his
condition ownership over
them.
 A resolutory condition is an uncertain Buyer has to pay The agent has to
event, the happening of which the price. account for the
extinguishes the obligation. proceeds of the
sale he may make
 The happening of the resolutory on the principal's
condition will also extinguish the right behalf.
acquired in a sale. Buyer cannot Agent can return
return the object the object in case
 Example: Sale of land to a third party sold, as a general he is unable to sell
under pacto de retro sale. (S [vendor rule. the same to a third
a retro] sold a parcel of land to B person.
[vendee a retro] subject to the The seller Agent makes no
condition that S can repurchase the warrants the thing warranty as long
property within two years from the sold as he acts within
date of sale. If B sells the parcel of his authority and in
land before the lapse of two years to the name of the
a third person, C, S will have a better seller.
right to the title.). Buyer can deal Agent must act
with the thing as and is bound
 Example: Exercise by mortgagor of he pleases. according to the
right of redemption. (For failure of S instructions of his
to pay his debt, his land was principal.
foreclosed and was sold to B, the
highest bidder. The mortgagor may
redeem the property at any time
within one year from the date of sale.
 DIFFERENCE BETWEEN SALE AND How to determine if sale or barter, if
CONTRACT FOR A PIECE OF WORK the exchange consists partly in
Contract of Sale Contract for a another thing
piece of work
A contract where Contractor binds 1. Manifest intention of the parties is
one of the parties himself to execute a paramount, taking into consideration the
delivers to another a piece of work for the contemporaneous and subsequent acts
determinate thing in employer, in of the parties;
exchange for a sum consideration of a
certain in money. certain price or 2. If the intention cannot be ascertained,
compensation IT IS ONLY A BARTER IF the value of the
The thing transferred Not in existence, and thing given as a part of the consideration
is one which would never would have exceeds the amount of the money or its
have existed and existed if it were not equivalent.
been the subject of for the order of the
sale to some other party desiring to No sale if price is not certain or
person, even if the acquire it. ascertainable
order had not been
given.
Risk of loss is borne Risk of loss is borne  There can be no sale without a price.
by the buyer. by the worker or
contractor.  Price must be certain or capable of
Within the Statute of Not within the being ascertained.
Frauds- if price of Statute of Frauds
personal property is
not less than P500, it Cases when price is considered
must be in writing. certain:
Otherwise, thesaleis
UNENFORCEABLE.  If the parties have fixed or agreed
Example: Buying a Example: Placing an upon a definite amount.
pair of shoes of a order for a pair of
particular style and shoes of a particular  If it is with reference to another thing
size from a shape because the certain. This only applies when no
manufacturer who feet are deformed. specific amount has been stipulated
sells the same to the Manufactured by the parties.
general market even specially and not
if the manufacturer suitable for sale to  If the determination of the price is left
makes it for the others. to the judgment of a specified person
buyer. or persons. This also only applies
when no specific amount has been
stipulated by the parties.
DIFFERENCE BETWEEN SALE AND
BARTER Effect where price is fixed by third
person designated
Contract of Sale Contract of Barter
or Exchange
A contract where One of the parties  GENERAL RULE: The price fixed by
one of the parties binds himself to the third person specified by the
delivers to another give one thing in parties binds the parties.
a determinate thing consideration of the
in exchange for a other's promise to  EXCEPTIONS: 1) When the third
sum certain in give another thing person acts in bad faith, or by
money. mistake when the third person
fixed the price having in mind a
different thing. Court may fix the
 price thereof.
2) When the third person
disregards specific instructions or the
procedure laid down by the parties
fixed an arbitrary price.
Effect where price is not fixed by
third person design
1. If the third person designated by
the parties refuses or cannot fix it
WITHOUT THE FAULT OF EITHER
THE SELLER OR THE BUYER, the
contract shall become ineffective as if
no price had been agreed upon,
unless the parties agree upon the
price.
2. If the third person was prevented
from fixing the price by the FAULT OF
EITHER THE BUYER OR SELLER,
innocent party may obtain redress
against the party in fault. Innocent
party may choose between
RESCISSION OR FULFILLMENT,
with damages in either case. If
Innocent party chooses fulfillment,
the court shall fix the price.
Effect of gross inadequacy of price
GENERAL RULE: VALID
• EXCEPTION: Inadequacy of price
may indicate defect in the consent
such as when fraud, mistake or
undue influence is present. In this
case, the contract may be annulled
not because of inadequacy of price
but because consent is vitiated, or
when the price is so grossly
inadequate or low as to be "shocking
to the court's conscience" that no
man in his right mind would accept.
Effect where the price is simulated
. VOID
• If the parties really intended for a
donation, the sale is void but the
contract of donation is still valid.
If the parties really did not intend any
sale at all, the contract is void and
inexistent.
Fixing of price by one of the
contracting parties is not allowed.
• The validity or compliance of the
contract cannot be made to depend
upon the will of one party.
However, if the price fixed by one
party is accepted by the other, the
contract is deemed perfected.
Effect of failure to determine price
1. If the contract is executory (nothing
is paid or delivered yet) - The contract
is without effect if the price cannot be
determined. There is no obligation by
the vendor to deliver the thing and no
obligation by the vendee to pay.
2. Where delivery has been made -
lfthe thing or any part thereof has
been delivered, the buyer must pay a
reasonable price therefore. The
reasonable price or value of the
goods is generally the market price at
the time and place fixed by the
contract or by law for the delivery of
the goods.
Stages of a contract of sale
1. Negotiation - The time the
prospective contracting parties
indicate interest in the contract until
the time the contract is perfected.
2. Perfection- Takes place upon the
concurrence of the essential
elements of the sale; also known as
the meeting of the minds as to the
object and upon the price;
3. Consummation- When the parties
perform their respective undertakings,
culminating the extinguishment of the
contract.
Owner has the right to fix his own
price
 Owner has the right to quote his own
price, reasonable or unreasonable.
 It is up to the prospective buyer to
accept or reject it.
Rules governing auction sales:
1. Sales of separate lots by auction are
separate sales.
2. Sale is perfected by the fall of the
hammer or in other customary manner.
3. The seller or his agent may bid in an
auction sale provided such right was
reserved and that 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.
GENERAL RULE: Ownership of thing
is transferred by the delivery
• Purchaser acquires a real right or
ownership of the thing after delivery.
• Delivery may be actual or constructive.
EXCEPTION: When the parties
stipulate that despite delivery, the
ownership of the thing shall remain
with the seller until the purchaser has
fully paid the price
• Delivery is still needed to convey
ownership.
Kinds of promises which are
reciprocally demandable
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 or offer
• No juridical effect or legal bond
• Unaccepted offer is called policitation.
Example: If S offers or promises to sell to
B his cat for P1,00( , and B just lets the
promise go by without accepting it,
neither S nor B is bound by any contract.
Meaning of option
• An Option Contract is a privilege of a
person which gives him the right to buy or
sell certain merchandise or certain
property, if he so chooses.
There is a need for payment of option
money which is separate and distinct
from the purchase price, in order to have
an option contract.
It is only when the option is exercised
when a sale may be perfected.
Example: If S offers or promises to sell to
B his cat for P1,000, and B paid P100 to
S for giving him the right to buy the cat if
he or she chooses within an agreed
period at a fixed price, its acceptance
produces consent or meeting of the
minds.
Risk of loss or deterioration
1. If the thing is lost before perfection.
The seller bears the risk of 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. Same effect when the object is
lost before the perfection of the contract;
3. If the thing is lost after perfection but
before its delivery. The risk of loss is
borne by the buyer. This is an exception
of res perit domino. This is because the
buyer also enjoys the fruits of the thing
after perfection but before delivery.
-If sale of fungible things sold for a price
fixed in relation to weight, number, or
measure, they must first be weighed,
counted or measured and delivered, in
order to transfer the risk of loss to the
buyer. However, vendee will still assume
the risk if vendee incurred in delay in
receiving the goods.

4. If the thing is lost after delivery to the
buyer- The buyer bears the risk of loss
based on the principle of res perit
domino.
Sale of goods by description and/or
sample
The buyer is given a reasonable
opportunity of comparing the bulk with
the description or the sample.
Bulk of the goods means the goods
themselves as distinguished from the
sample and/or description with which
they must correspond.
Sale by description
• Where the seller sells things as being
of a particular kind, the buyer not
knowing whether the seller's
representation are true or false, but the
buyer relies on them as true.
Where the buyer has not seen the article
sold and relies on the description given
him by the seller
Where the buyer has seen the goods, but
the want of identity of the goods
delivered do not correspond with the
description.
conform with the sample in kind,
character, and quality.
Sale by description and sample
• When a sale is made both by sample
and by description.
The goods must satisfy all the warranties
appropriate to either kind of sale.
The bulk of the goods must correspond
with the sample and the description
BOTH.
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.
(1454a)
Meaning of earnest money
Money given by the buyer to the seller to
bind the bargain.
Actually a partial payment of the
purchase price and is considered a proof
of the perfection of the contract.
. Advanced payment
Must be deducted from the total price.

• The contract may be rescinded if the
bulk of the goods do not correspond
with the description.
Sale by sample
Option money may become earnest
money if the parties agree
DIFFERENCE BETWEEN EARNEST
MONEY AND OPTION MONEY

The parties contracted solely with EARNEST MONEY OPTION MONEY

reference to the sample, with the
Part of the purchase Money given as
understanding that the bulk was like it. price distinct consideration
for the option contracT
It must appear that the exhibition of the Given when there is No perfected sale yet
sample by the seller was an inducement already a perfected
of the sale or formed the sole basis sale
thereof. When earnest money The person who gave
is given, the buyer is the option money is
The vendor warrants that the thing sold bound to pay the not required to buy.
and to be delivered by him shall balance,

Form of contract of sale
GENERAL RULE: May be in any form
(written or oral)
• EXCEPTION: If it is covered by the
Statute of Frauds (must be in writing.
Otherwise, the contract of sale is
unenforceable.
Contracts of sale under Statute of
Frauds
a) Sale of personal property at a price
not less than 1500;
b) Sale of real property or an interest
therein regardless of the price;
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.
Sale of real property or an interest
therein
The sale of a parcel of land or interest
therein made through an agent is VOID,
unless the agent's authority is in writing;
The sale must be in a public instrument
(notarized) and registered before the
Registry of Deeds where the land is
located;
If it is in a private instrument only, it is
only valid between the parties and not as
against third persons.
Statute of frauds applicable only to
executory contracT
Executory contracts are those where
there is no performance such as delivery
or payment yet by either party.
Partial performance is a reliable
evidence of the intention of the parties
of the existence of the contract.
A contrary rule will result to injustice
and unfairness.
Remedies of the vendor in sale of
personal property payable in
installments
1. Elect fulfillment upon the vendee's
failure to pay:
2. Cancel the sale, if the vendee shall
have failed to pay two or more
installments; or
3. Foreclose the chattel mortgage, if one
has been constituted, if the vendee shall
have failed to pay two or more
installments.
These remedies are alternative and are
not to be exercised cumulatively or
successively.
The election of one is a waiver of the
right to resort to the others.
Right of the vendor to recover unpaid
balance of the purchase price
1. In remedy of specific performance- If
specific performance is chosen, the
buyer is STILL liable for the unpaid
balance if the proceeds of the execution
sale still falls below the unpaid balance.
2. In remedy of cancellation- The buyer
can demand only the return of payments
already made unless there is a stipulation
about forfeiture.
3. In remedy of foreclosure- There shall
be NO FURTHER ACTION for the
recovery of any unpaid balance of the
price. Any agreement to the contrary is
void.
Recovery of deficiency after
foreclosure is prohibited
• The mortgagee is limited to the
proceeds of the auction sale of the
property included in the mortgage.

To prevent the mortgagee from buying

the mortgaged property at foreclosure
sale for a low price and then bringing
suit against the mortgagor for a
deficiency judgment.

Stipulation authorizing forfeiture of

installments or re paid

• The parties may stipulate that the

installments or rents paid are not be
returned.

• Valid insofar as they are not

unconscionable under the circumstances.

Courts have the power to order the

return a portion of the total amount paid
in installments.

Expenses for execution and

registration

. The parties can stipulate who shall pay.

But the vendor has the duty to pay for

the expenses for the execution of the
sale and the registration of the sale.

In the absence of agreement as to who

shall pay, the vendor shall pay for the
above expenses.

• The buyer shall shoulder the payment

of all expenses subsequent to the transfer
of the title.