CONTRACT OF SALES

NATURE AND FORM OF THE CONTRACT

CONTRACT OF SALE

• 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. (1445a)
ELEMENTS OF A CONTRACT OF SALE

1. Essential
a. Consent or meeting of mind
b. Object or Subject
c. Cause or Consideration

2. Natural (e.g. Warranty against hidden defects and Warranty against eviction)
3. Accidental
STAGES OF CONTRACT OF SALE

• Preparation
• Perfection
• Consummation
CHARACTERISTICS OF CONTRACT OF SALE

• Consensual
• Bilateral
• Onerous
• Commutative
• Nominate
• Principal
SALE VS. DACION EN PAGO
Sale
No pre-existing credit
Creates obligation
Cause or Consideration:
Buyer: Delivery of the object
Seller: Price certain in money
Greater freedom in fixing the price
Dacion en pago
Pre-existing credit
Extinguish obligation
Cause or Consideration:
Buyers: Extinguishment of the obligation
Sellers: Delivery of the object in place of the
credit
Less freedom in fixing the price
SALE VS. CESSION EN PAYMENT
SALE
No pre-existing credit
Creates obligation
Cause or Consideration:
Buyer: Delivery of the object
Seller: Price certain in money
Greater freedom in fixing the price
Ownership is transferred to the buyer
CESSION EN PAYMENT
Pre-existing credit
Extinguishes obligation
Cause or Consideration:
Debtor: Extinguishment of the obligation
Creditor: Delivery of the object in place of the
credit
Less freedom in fixing the price
Creditors do not become the owner of the
properties
CONTRACT FOR A PIECE OF WORK

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.
CONTRACT FOR A PIECE OF WORK

Example:
Colegio de Dagupan which maintains a professional basketball team, entered into a
contract with Avon Footwear Company to provide rubber shoes to Lebron James and
Kobe Bryant. No pair was, however, immediately available for both the players. Lebron
James was given a pair the following day from the 200 pairs that Avon Footwear was in
the process of manufacturing for its customers at the time the orders were received.
Kobe Bryant was provided three days later with a pair that was specially made for him
since Avon Footwear does not make shoes of his size. What kind of contracts were
entered by Colegio de Dagupan?
SALE VS. BARTER AND RULE IF CONSIDERATION IS
PARTLY IN MONEY AND PARTLY IN ANOTHER THING

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 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 VS. BARTER AND RULE IF CONSIDERATION IS
PARTLY IN MONEY AND PARTLY IN ANOTHER THING

Example:
Sir Max and Sir Aldrin entered into a written contract which states that “Sir Max,
seller, hereby transfers his ring worth P20,000 to Sir Aldrin, buyer, for Sir Aldrin’s
cellphone worth P12,000 and cash of P8,000. What contract entered into between
Sir Max and Sir Aldrin?
SALE VS. BARTER AND RULE IF CONSIDERATION IS
PARTLY IN MONEY AND PARTLY IN ANOTHER THING

Example:
Sir Max and Sir Aldrin entered into a written contract which states that “Sir Max
hereby transfers his ring worth P20,000 to Sir Aldrin for Sir Aldrin’s cellphone worth
P12,000 and cash of P8,000. What contract entered into between Sir Max and Sir
Aldrin?
SALE VS. BARTER AND RULE IF CONSIDERATION IS
PARTLY IN MONEY AND PARTLY IN ANOTHER THING

Example:
Sir Max and Sir Aldrin entered into a written contract which states that “Sir Max
hereby transfers his ring worth P20,000 to Sir Aldrin for Sir Aldrin’s cellphone worth
P10,000 and cash of P10,000. What contract entered into between Sir Max and Sir
Aldrin?
CONTRACT TO SELL

• Not be considered as a Contract of Sale

• Prospective seller explicitly reserves the transfer of title to the prospective buyer
• Prospective seller does not yet agree or consent to the transfer of ownership
until the happening of an event, full payment of the purchase price.
• In case of non-fulfillment of the full payment of the purchase price, ownership is
retained by the prospective seller without further remedies by the prospective
buyer.
SALE VS CONTRACT TO SELL

SALE CONTRACT TO SELL

Title of the property passes to the buyer upon
the delivery of the thing sold.
Non-payment of the price is negative
resolutory condition
Ownership is reserved to the vendor and is
not to pass to the vendee until the full
payment of the price.
Non-payment of the price is positive
suspensive condition

Risk of loss: Buyer Risk of loss: Seller

SALE VS. AGENCY TO SELL
SALE
Ownership is transferred to the buyer upon
delivery
The buyer is required to pay the price
Buyer has the control of the property
AGENCY TO SELL
Title to the property is retained by the owner
despite the delivery
Agent is required to turn over to the principal
the price of the goods which he received from
the buyer
Principal retains control of the property
RULES ON THE OBJECT OF CONTRACT OF SALE

1. Requisites of object of a contract of sale

a. Within the commerce of man.
b. Licit
c. Determinate thing
2.  The vendor must have a right to transfer the ownership thereof at the time it is delivered.
3. Things having a potential existence may be the object of the contract of sale (emptio rei
speratae).
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the
thing will come into existence (emptio spei).
The sale of a vain hope or expectancy is void.
RULES ON THE OBJECT OF CONTRACT OF SALE

Emptio rei speratae Emptio spei

Sale of a future thing Sale of a mere hope or expectancy
The thing sold must come into existence The sale produces effects even if the thing
hoped for does not come into existence
RULES ON THE OBJECT OF CONTRACT OF SALE

4. 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, 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.

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

RULES ON THE OBJECT OF CONTRACT OF SALE

6. Sale 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.
• If the quantity (number, weight or measure) of the mass is more than the quantity sold, the
parties shall become co-owners 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
RULES ON THE OBJECT OF CONTRACT OF SALE

Example:
S sells to B 200 sacks of corn from a mass stored in the warehouse of S. The mass,
however, actually consists of 300 sacks of corn.
RULES ON THE OBJECT OF CONTRACT OF SALE

Example:
S sells to B 200 sacks of corn from a mass stored in the warehouse of S. The mass,
however, actually consists of 180 sacks of corn.
RULES ON THE OBJECT OF CONTRACT OF SALE

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

Example:
S and B entered into a Contract of Sale with a Right to Repurchase within 1 year
over the formers’ parcel of land.
RULES ON PRICE

1. Certainty of Price
• Parties have agreed upon a definite amount for the sale
• If it certain with reference to another thing certain
• If the determination of the price is left to the judgment of a specified person or persons
• If unable or unwilling to fix the price, the contract of sale shall be inefficious
• If acted in bad faith or mistake, the court 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
RULES ON PRICE

• 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

Example:
S sells to B 500 shares of stock of San Miguel at the price equivalent to the closing
price of the shares on December 15, 2021, at the Philippine Stock Exchange.
RULES ON PRICE

2. 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.
3. 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.
FORMS OF A CONTRACT OF SALE

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. 
FORMS OF A CONTRACT OF SALE

Under Statute of Frauds, the sale involving the following must be in

writing:
• Sale of real property or of any of interest therein (regardless of price)
• Sale of goods, chattels or things in action the price of which is P500 or
more
FORMS OF A CONTRACT OF SALE

Sale of a piece of land through an agent:

• The authority of the agent to sell the piece of land should be in writing.

Authority of the agent Contract of Sale Effect

Not in writing (Orally) Public Instrument/ Void
Private Instrument/
Orally
Private/Public Orally Unenforceable
Instrument
Private/Public Public/Private Valid
Note:Instrument
To record in the Register ofInstrument
Deeds, the authority of the agent and the contract of sale
must be in public instrument
SALE BY AUCTION

• Perfected:
• Fall of the hammer
• Any other manner

• Before Perfection
• Bidder may retract his bid
• Auctioneer may withdraw the goods unless auction is without reserve
SALE BY AUCTION

• Auction with reserve

• Auctioneer is the offeree and has the power of acceptance
• Offeree has the power to reject all bids including withdrawal of goods during bidding

• Auction without reserve

• Auctioneer is the offeror
• Bidders has the power of acceptance
• The article or lot cannot be withdrawn unless no bid is made within a reasonable time
SALE AT AUCTION

• Right of seller to bid:

• The right to bid must have been reserved expressly by or on behalf of the seller
• Right to bid must not be prohibited by law
• Notice must be given that the sale is subject to a right to bid by or on behalf of the
seller
PROMISE TO BUY OR SELL

• Bilateral promise to buy or sell

• Contract of sale is perfected

• Unilateral promise to buy or sell

• Promise is made only one of the parties
• If not accepted, no perfection of contract of sale
• If accepted:
• and is supported by a consideration distinct from the price, the promise is binding
• Not supported by any consideration distinct from the price, the promise is not binding
PROMISE TO BUY OR SELL

• S promised to sell his car to B for P100,000 giving B one week to decide whether
to buy or not.
• If B does not accept the promise, such acceptance does not create obligation
• If B accepts the promise, and give a consideration distinct from the price, S will be
bound by the promise
EARNEST MONEY VS OPTION MONEY

EARNEST MONEY OPTION MONEY

Part of purchase price Separate and distinct from the purchase price
Paid upon the perfection of contract of sale Paid for a sale that is yet to be perfected
PRESERVATION, INJURY, LOSS OF THE THING
BEFORE OR AFTER PERFECTION
• Duty of the seller after perfection but before delivery
• Diligence of a good father of a family, unless another standard of care required by law
or stipulated by the parties

• Right of the buyer of the fruits of the thing

• The buyer has the right to the fruit of the things from the time of perfection of contract
PRESERVATION, INJURY, LOSS OF THE THING
BEFORE OR AFTER PERFECTION
• Loss of or injury to the thing
• Before perfection
• Complete loss (contract of sale is void)
• Partial loss, the buyer may choose:
• Withdrawal from the contract (Rescission)
• Demanding the remaining part and paying its proportionate

• After perfection
• The goods remain at the seller’s risk until the ownership of the goods is transferred to the
buyer except:
PRESERVATION, INJURY, LOSS OF THE THING
BEFORE OR AFTER PERFECTION
• If there is agreement that the buyer bears the risk of loss
• If ownership of the goods retained by the seller merely to secure the performance by
the buyer of his obligation
• When actual delivery has been delayed through the fault of the buyer
SALE BY SAMPLE OR DESCRIPTION, BOTH

• 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
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES (RECTO LAW)
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 (regardless of the number
of installments defaulted)
(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.
Note: Availment of one of the remedy will not entitle to avail the others
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
Example:
S sold his only car to B for P100,000 payable in 10 monthly installments of P10,000
each. As security, B executed a chattel mortgage on the car. After paying the first
three installments, B defaulted in the payment of the fourth installment. What
remedies available to S?
- Exact the fulfillment of the obligation unless there is acceleration clause
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
Example:
S sold his only car to B for P100,000 payable in 10 monthly installments of P10,000
each. As security, B executed a chattel mortgage on the car. After paying the first
three installments, B defaulted in the payment of the fourth and fifth payment.
What remedies available to S?
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
Example:
S sold his only car to B for P100,000 payable in 10 monthly installments of P10,000
each. As security, B executed a chattel mortgage on the car. After paying the first
three installments, B defaulted in the payment of the fourth and fifth payment. S
foreclosed the chattel mortgage constituted on the car. At the foreclosure sale, the
car was sold for only P50,000. Can S recover the deficiency of P20,000 from B?
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
When deficiency may be recovered?
1. Sale on straight-term
2. If security foreclosed is other than the chattel mortgage constituted on the
thing sold
3. Sale on execution of judgment in favor of the seller
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
• Alternative (3) is also applicable:
• Lease of personal property with option to buy
• Lessor has deprived the lessee of the possession or enjoyment of the thing
CONTRACT OF SALE OF PERSONAL PROPERTY ON
INSTALLMENT SALES
Example
O the owner of a forklift, leased the same to T. The lease contract among other terms
and conditions the following:
1. Lease period – 2 years
2. Monthly rental of P2,000
3. T is given option to buy at the end of the term.
After 8 months, T defaulted on his payment of rental on the ninth, tenth and eleventh.
Accordingly, O terminated the lease contract and repossessed the forklift. May O
recover the rental in arrears from T?