STAGES OF CONTRACT

Three (3) stages of contract: negotiation, perfection or birth, and consummation.

1. Negotiation begins from the time the prospective contracting parties manifest their interest
in the contract and ends at the moment of their agreement. 

2. Perfection or birth of the contract takes place when the parties agree upon the essential
elements of the contract, i.e., consent, object and price.

3. Consummation occurs when the parties fulfill or perform the terms agreed upon in the
contract, culminating in the extinguishment thereof. The birth or the perfection of the
contract, refers to that moment in the life of a contract when there is finally a concurrence of
the wills of the contracting parties with respect to the object and the cause of the contract.

FOR A MORE DETAILED APPLICATION OF THE ABOVE PRINCIPLES, PLEASE READ

THE CASE ANALYSIS IN THE NEXT ATTACHED MODULE.

OBLIGATIONS OF THE VENDOR OR SELLER

Under the law, the vendor (or seller) is bound to transfer the ownership of and deliver,
as well as warrant, the thing which is the object of the sale. A popular question always pops up:
can you really sell what is not yours at the moment? In general, only the owner of the object or
property can pass ownership over it. If the seller has no ownership, he cannot pass its
ownership to another despite the fact that the latter is a purchaser in good faith and for value.
This means that if the buyer has acquired ownership over a suspicious sale transaction, the risk
of legal trouble is always present. This is where the maxim “caveat emptor” or literally
means “buyer’s beware” comes into play. This means that the buyer must be cautious of what
s/he is buying. In the most unfortunate stance, s/he stands to pay damages for other’s prejudice,
lose possible ownership over the property if there is ownership issue at hand, and worse face
criminal trial for deceit/estafa or violation of anti-fencing law if the object is a stolen one.

The buyer (vendee) acquires no better title to the object than the seller had, unless its
owner is by his conduct estopped from denying the seller’s authority to sell it. Consistent with the
legal principle of “estoppel”, there are at least three (3) instances whereby the owner of the
goods cannot deny the validity of sale undertaken by the seller, thus:

 where the sale is made under the provisions of any recording laws;
 where the sale is made under a statutory power of sale or under the order of a court of
competent jurisdiction; or
 where the seller of the goods has a voidable title thereto, but his title has not been voided at
the time of sale.

Let us go back then to the popping popular question: can you really sell what is not
yours at the moment? The answer seems to be in the affirmative because the truth is: the
ownership of the thing sold is acquired by the vendee only from the moment it is delivered to him
by the vendor or his agent in any of the ways specified in Articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee. The seller therefore is not required to have ownership of the object at the time of
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the perfection of the sale. It is rather required that he has ownership over the thing sold at the
time it is delivered because it is delivery that transfers ownership to the buyer.

We shall discuss hence the stages of the contract of sale (negotiation; perfection and
consummation) as we go along in our topic.

Meantime, it bears stressing that there is legal or constructive (symbolic) delivery when the
delivery of the thing is not actual but is represented by other signs or acts indicative thereof,
such as when the sale is made through a public instrument. The execution of the public
instrument shall be equivalent to the delivery of the thing sold if, from the instrument, the
contrary does not appear or is not clearly inferred. This usually applies in the case of sale of land
and other real estate deals.

Nonetheless, in all instances of sale, for ownership to be transferred, it is essential that the seller
must be the owner of the property sold. This stems from the principle which states that “nobody
can dispose of that which does not belong to him.” However, it bears reiterating that while the
seller must be the owner of the prestation at the time of its delivery, s/he need not be the owner
thereof at the time of the perfection of the contract. The reason why it is mandatory that the
seller be the owner at the time the object is delivered; lies in the fact that if not; the erring seller
may be held liable for breach of warranty against eviction. So to conclude the issue that we
raised a while ago: yes, all future things or goods may be sold provided that you are the owner
thereof at the time of their delivery.

To sum up, the obligations of the Vendor (Seller) are as follows:

1. To deliver a determinate thing. Delivery may be actual or constructive (symbolic).

2. To transfer ownership ( seller/ vendor need not be the owner at the time of perfection of the
contract; however, he must be the owner at the time of delivery) of the determinate thing
sold. This includes the obligation to execute all necessary documents to transfer ownership
of the thing sold.
3. To warrant the object against eviction and hidden defects.
4. To take care of the thing pending the delivery with proper diligence (like a good father of a
family).
5. To pay for all expenses of the Deed of Sale (execution and registration expense) and all
taxes required, unless otherwise agreed upon.

OBLIGATIONS OF THE VENDEE OR BUYER

The primary responsibility of the vendee (buyer) under the contract of sale is to accept delivery
and to pay the price of the thing sold at the time and place stipulated in the contract. The vendee
cannot be compelled to accept the delivery if done at a time or place that is different from
agreement. Nonetheless, if the time and place should not have been stipulated, then the
payment must be made at the time and place of the delivery of the thing sold.

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Should the buyer simply accept the delivery of the thing purchased? The answer of course in the
negative. S/he must examine them first in order to ascertain if the same are exactly in conformity
to the requirements of their contract. What if the prestation are either voluminous or complicated
in character and originating from a distant shipment such that prior examination or examination
at hand is highly impractical? Well, In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not discharge the seller from liability in
damages or other legal remedy for breach of any promise or warranty in the contract of sale.
Where the goods are delivered to the buyer, which he has not previously examined, he is not
deemed to have accepted them, unless and until he has had a reasonable opportunity of
examining them for the purpose of ascertaining whether they are in conformity with the contract
if there is no stipulation to the contrary.

As earlier mentioned, in the absence of express or implied agreement of the parties, acceptance
of the goods by the buyer shall not discharge the seller from liability in damages or other legal
remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of
the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty
within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall
not be liable therefor and the obligation is deemed fully complied with.

MODES OF DELIVERY IN SALE

The following are the different modes of delivery in a contract of sale: 

1. Actual Delivery – physical handing over of a property.

Example: Ana bought 1 kilo of pork at the SM Supermarket. Upon payment of the agreed price,
the cashier gave her the commodity and took it with her home.

2. Symbolic Delivery – the ownership over the subject is transferred by delivery of another
thing that represents such subject.

Examples:  Sale of car is consummated by the delivery of its key.            

Sale of land is consummated by the execution of the documents of sale, even if the Certificate of
Title has not      yet been turned over. 

3. Traditio Brevi Manu – also known as “short-hand delivery”. The buyer is already holding
possession of the property and he offered to buy the same which was approved by the
seller.

 Example: Arthur is renting and using the car owned by Beth. Arthur offered to buy the same for
P1 million to which Beth approved. In this case, Beth need not actually deliver the car because
Arthur is already in its possession.

4. Traditio Longa Manu – also known as “long-hand delivery”. The possession of the object of
sale is with another person and the seller is to get it from another person.

Example: Arthur is renting and using the car owned by Beth. Maximo offered to buy the same
for P1 million to which Beth approved. In this case, Beth needs to get the car from Arthur so she
can deliver it to Maximo.

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5. Constitutum Possessorium – The possession of object of sale remains with the seller but
he shall be in possession of which under a different title, no longer as an owner.

Example: Arthur is using his own car to which Bob got interested. Bob offered to buy the same
for P1 million to which Arthur approved. In the meantime, they agreed that Arthur will continue to
use said car for 3 months and pay a monthly rent of P10,000.00.