RULES AND ALLIED LAWS APPLICABLE TO DIFFERENT TYPES OF SALES

Arts. 1475-1488
I. Rules in ordinary sales

A. Form
- manner in which a contract is executed or manifested

Article 1356. Contracts shall be obligatory, in whatever form they may have been
entered into, provided all the essential requisites for their validity are present.
However, when the law requires that a contract be in some form in order that it
may be valid or enforceable, or that a contract be proved in a certain way, that
requirement is absolute and indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised.

General rule (Art. 1483)

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.

General Rule: Contract of sale, as to from, may be:

> in writing, or
> word of mouth, or
> partly in writing and partly by word of mouth, or
> inferred from the conduct of the parties

Exception: when Statute of Frauds apply (Arts. 1403, par.2 and 1874)

Article 1403. The following contracts are unenforceable, unless they are ratified:
xxx
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party charged, or by his agent;
 evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a

year from the making thereof;

xxx

(d) An agreement for the sale of goods, chattels or things in action,

at a price not less than five hundred pesos, unless the buyer accept
and receive part of such goods and chattels, or the evidences, or
some of them, of such things in action or pay at the time some part
of the purchase money; but when a sale is made by auction and
entry is made by the auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold, terms of sale, price,
names of the purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one year,
or for the

Article 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.

In summary: contracts of sale that must be in writing, otherwise they cannot be

enforced in court litigation:

(a) 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.

(b) sale of personal property at a price not less than P 500.00

(c) sale of real property or an interest therein regardless of the price

involved

(if sale is done through an agent, the agent’s authority must be in

writing, otherwise void, not merely unenforceable)
EFFECT OF IMPROPER OR INVALID FORM:

- rights of the parties cannot be exercised in the contract (Art. 1356)

- the contract of sale can however remain valid and binding as between
the parties (i.e. oral sale of land or any real property) but not as against third
persons who have no notice until the sale is registered in the Register of Deeds.

B. Perfection
-meeting of the minds of the parties as to the object of the contract
and the price

a. General rule (Art. 1475)

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.

> General rule on perfection of contracts of sale follows the general rule on
perfection of contracts by mere consent under Art. 1315:

Article 1315. Contracts are perfected by mere consent, and from that moment
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.

1) Sale by description and/or sample (Art. 1481)

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. (n)

Application:

1. Sale of goods 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. If the bulk of the goods delivered do not
correspond with the description, the contract may be rescinded.

2. Sale of goods 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 delivered by him
shall conform with the sample in kind, character and quality.

3. Sale of goods by sample and by description: in this case, the goods must
satisfy all the warranties 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.

Right of buyer:

1. Reasonable opportunity of comparing the bulk with the description or the

sample

Bulk of goods does not designate the greater portion of the goods. It denotes the
goods themselves as distinguished from the sample and/or description with which
they must correspond.

b. Place of perfection

- Where the meeting of the minds happen

 - BUT when acceptance is sent by mail, perfection is deemed
where the offer is made

C. Expenses

a. Of execution and registration (1487)

Art. 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. (1455a)

b. Of putting the goods in a deliverable state (1521)

Art. 1521. Whether it is for the buyer to take possession of the goods
or of the seller to send them to the buyer is a question depending in
each case on the contract, express or implied, between the parties.
Apart from any such contract, express or implied, or usage of trade
to the contrary, the place of delivery is the seller's place of business if
he has one, and if not his residence; but in case of a contract of sale
of specific goods, which to the knowledge of the parties when the
contract or the sale was made were in some other place, then that
place is the place of delivery.

Where by a contract of sale the seller is bound to send the goods to

the buyer, but no time for sending them is fixed, the seller is bound to
send them within a reasonable time.

Where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to the buyer
unless and until such third person acknowledges to the buyer that he
holds the goods on the buyer's behalf.

Demand or tender of delivery may be treated as ineffectual unless

made at a reasonable hour. What is a reasonable hour is a question
of fact.
 Unless otherwise agreed, the expenses of and incidental to putting
the goods into a deliverable state must be borne by the seller. (n)

Place of delivery of goods sold:

1. Where there is an agreement, express or implied, the place of delivery is

that agreed upon;
2. Where there is no agreement, the place of delivery is that determined by
usage of trade;
3. Where there is no agreement and there is also no prevalent usage, the
place of delivery is the seller’s place of business;
4. In any other case, the place of delivery is the seller’s residence; and
5. In case of specific goods, which to the knowledge of the parties at the time
the contract was made were in some other place, that place is the place
of delivery, in the absence of any agreement or usage of trade to the
contrary.

Time of delivery of goods sold:

1. Agreement
2. Usage of trade/customs
3. Seller is bound to send the goods to the buyer within a reasonable time

Hour of delivery: reasonable hour of the day

Duty of seller to put goods in deliverable condition: unless otherwise agreed upon,
the seller bears the expenses to place the thing in a deliverable state that is, in
such a state that the buyer would, under the contract, be bound to take delivery
of them, consistent with the duty of the seller to deliver the goods bargained for.

c. Expenses:
a. Of execution and registration (1487)
b. Of putting the goods in a deliverable state (1521)

II. Rules in special sales

A. Sales at auction (1476)

 Art. 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.

(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. (n)

Note: In sale by auction, each bid is an offer and perfected only upon the fall of
the hammer.

Right of seller to bid in the auction, elements:

1. such right was reserved

2. notice was given that the sale is subject to a right to bid on behalf of the
seller
3. right to bid by the seller is not prohibited by law or stipulation

B. Sales by sample and/or description (Art. 1481)

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. (n)

C. Sales of personalty payable by instalments (Art. 1484) – RECTO LAW (ACT

NO. 4122)

Art. 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 fulfilment 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. (1454-A-a)

Remedies of the vendor in sale of personal property payable in instalments:

1. Elect fulfilment upon the buyer’s failure to pay;

2. Cancel the sale if the buyer shall have failed to pay 2 or more instalments
or rescission: in which case, the buyer can demand the return of payments
already made unless there is stipulation about forfeiture

3. Foreclose the chattel mortgage, if one has been constituted, if the vendee
shall have failed to pay 2 or more instalments: vendor has not further action
against the vendee for the recovery of any unpaid balance of the price
and any agreement to the contrary is void. The foreclosure is effected by
selling the mortgaged property at public auction and applying the
 proceeds of the sale to the satisfaction of the claim secured by the
mortgage.

a. Recover of deficiency after foreclosure is prohibited: to prevent

mortgagees from seizing the mortgaged property, buying it at
foreclosure sale for a low price and then bringing suit against the
mortgagor for a deficiency judgment.
b. In other words, in all proceedings for the foreclosure of chattel
mortgages, the mortgagee is limited to the property included in the
mortgage.

Nature of remedies: alternative and are not exercised cumulatively or

successively and the election of one is a waiver of the right to resort to the others.

a. Alternative remedies in case of non-payment

b. Forfeiture of instalments (Art. 1486)

Art. 1486. In the case referred to in 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. (n)

Nature of agreement: valid provided not unconscionable under the

circumstances

D. Leases of personalty with option to buy (Art. 1485)

Art. 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.

E. Expropriation (1488)

Art. 1488. The expropriation of property for public use is governed

by special laws. (1456)

F. Realty Instalment Buyers Act – MACEDA LAW (RA NO. 6552)

 Application:

1. all transactions or contracts involving the sale or financing of real

estate on installment payments, including residential condominium
apartments

EXCEPTION: industrial lots, commercial buildings and sales to tenants

under R.A. No. 3844, as amended

2. where the buyer has paid at least two years of installments

Rights of buyer:

(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one
month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every
five years of the life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to 50% of the
total payments made, and, after five years of installments, an additional 5%
every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place
after 30 days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.

Number of instalments: Down payments, deposits or options on the contract shall

be included in the computation of the total number of installment payments
made.

Installment made in less than 2 years: In case where less than two years of
installments were paid, the seller shall give the buyer a grace period of not less
than 60 days from the date the installment became due. (Section 4)
Rescission: If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after 30 days from receipt by
the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act. (Section 5)

G. The Subdivision and Condominium Buyers’ Protective Decree (PD 957)

COVERAGE: selling or mere offer to sell a condominium lot or subdivision unit

1. Registration and License to Sell

Developers are required to secure registration certificate, and license to

sell from the Housing and Land Use Regulatory Board (HLURB). Selling a
subdivision or condominium project is defined to include offering to sell,
advertising to sell and receiving reservation deposits.

➢ PD 957, Section 5. License to sell. Such owner or dealer to whom has

been issued a registration certificate shall not, however, be authorized
to sell any subdivision lot or condominium unit in the registered project
unless he shall have first obtained a license to sell the project within two
weeks from the registration of such project.
The Authority, upon proper application therefor, shall issue to such owner
or dealer of a registered project a license to sell the project if, after an
examination of the registration statement filed by said owner or dealer
and all the pertinent documents attached thereto, he is convinced that
the owner or dealer is of good repute, that his business is financially
stable, and that the proposed sale of the subdivision lots or
condominium units to the public would not be fraudulent.

➢ PD 957, Section 11. Registration of dealers, brokers and salesmen. No

real estate dealer, broker or salesman shall engage in the business of
selling subdivision lots or condominium units unless he has registered
himself with the Authority in accordance with the provisions of this
section.

➢ Subdivision project
-a tract or a parcel of land registered under Act No. 496 which is
partitioned primarily for residential purposes into individual lots with or
 without improvements thereon, and offered to the public for sale, in
cash or in installment terms. It shall include all residential, commercial,
industrial and recreational areas as well as open spaces and other
community and public areas in the project.

➢ Subdivision lot
- any of the lots, whether residential, commercial, industrial, or
recreational, in a subdivision project.

➢ Condominium project
- the entire parcel of real property divided or to be divided primarily for
residential purposes into condominium units, including all structures
thereon

➢ Condominium unit
-part of the condominium project intended for any type of independent
use or ownership, including one or more rooms or spaces located in one
or more floors (or part of parts of floors) in a building or buildings and
such accessories as may be appended thereto

➢ Sale or sell-
-shall include every disposition, or attempt to dispose, for a valuable
consideration, of a subdivision lot, including the building and other
improvements thereof, if any, in a subdivision project or a condominium
unit in a condominium project. "Sale" and "sell" shall also include a
contract to sell, a contract of purchase and sale, an exchange, an
attempt to sell, an option of sale or purchase, a solicitation of a sale, or
an offer to sell, directly or by an agent, or by a circular, letter,
advertisement or otherwise.

2. Non Forfeiture of Payments

PD 957, Section 23. Non-Forfeiture of Payments. No installment payment

made by a buyer in a subdivision or condominium project for the lot or unit
he contracted to buy shall be forfeited in favor of the owner or developer
when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop
the subdivision or condominium project according to the approved plans
 and within the time limit for complying with the same. Such buyer may, at
his option, be reimbursed the total amount paid including amortization
interests but excluding delinquency interests, with interest thereon at the
legal rate.

3. Representation in Ads

Representations by the developer on development facilities and

infrastructures appearing in advertisements, brochures, leaflets and other
announcements are deemed part of the main contract and enforceable
against the developer.

PD 957, Section 19. Advertisements. Advertisements that may be made by the

owner or developer through newspaper, radio, television, leaflets, circulars or any
other form about the subdivision or the condominium or its operations or activities
must reflect the real facts and must be presented in such manner that will not
tend to mislead or deceive the public.

The owner or developer shall answerable and liable for the facilities,
improvements, infrastructures or other forms of development represented or
promised in brochures, advertisements and other sales propaganda
disseminated by the owner or developer or his agents and the same shall form
part of the sales warranties enforceable against said owner or developer, jointly
and severally. Failure to comply with these warranties shall also be punishable in
accordance with the penalties provided for in this Decree.

➢ A DEVELOPER’S LACK OF CERTIFICATE OF REGISTRATION AND A LICENSE TO

SELL FROM THE HLURB DOES NOT INVALIDATE OR VOID THE CONTRACT OF
SALE BETWEEN THE PARTIES

MOLDEX REALTY, INC. vs. FLORA A. SABERON ( G.R. No.176289 April 8, 2013)
In Spouses Co Chien v. Sta. Lucia Realty and Development Corporation, Inc. this
Court has already ruled that the lack of a certificate of registration and a license
to sell on the part of a subdivision developer does not result to the nullification or
invalidation of the contract to sell it entered into with a buyer. The contract to sell
remains valid and subsisting. In said case, the Court upheld the validity of the
contract to sell notwithstanding violations by the developer of the provisions of
PD 957. We held that nothing in PD 957 provides for the nullity of a contract validly
entered into in cases of violation of any of its provisions such as the lack of a
license to sell. Thus:
A review of the relevant provisions of P.D. 957 reveals that while the law
penalizes the selling of subdivision lots and condominium units without prior
issuance of a Certificate of Registration and License to Sell by the HLURB, it
does not provide that the absence thereof will automatically render a
contract, otherwise validly entered, void. The penalty imposed by the
decree is the general penalty provided for the violation of any of its
provisions. It is well-settled in this jurisdiction that the clear language of the
law shall prevail. This principle particularly enjoins strict compliance with
provisions of law which are penal in nature, or when a penalty is provided
for the violation thereof. With regard to P.D. 957, nothing therein provides
for the nullification of a contract to sell in the event that the seller, at the
time the contract was entered into, did not possess a certificate of
registration and license to sell.