NATURE OF CONTRACT OF SALES
delivery through physical segregation
Sale
- A contract whereby one of the contracting parties
(seller) obligates himself to transfer the ownership,
and to deliver the possession, of a determinate thing;
and the other party (buyer) obligates himself to pay
therefore a price certain in money or its equivalent
(art. 1458)
Nature and obligations created in a sale
- Two obligations of the seller:
o Transfer the ownership
o Deliver the possession of the subject matter
- An obligation for the buyer:
o Pay the price
Elements of contract of sale
- Consent – or the meeting of minds to transfer the
ownership in exchange for the price
- Subject matter
- Price – certain in money or its equivalent
Natural elements – those which are deemed to exist in
certain contracts in the absence of any stipulations, such as
warranty
Accidental elements – those which may be present or absent
depending on the stipulation of the parties, such as
conditions
Requisites concerning the object of contract of sale
- Things
o Determinate
o Licit or lawful
o Not impossible
 These three requisites means that
the object must be within the
commerce of men
- Rights – all rights which are not instransmissible or
personal may also be the object of sale
Right of Vendor to Transfer Ownership
- One can sell only what he owns
- Sufficient if right exists at time of delivery
Subject matter of a sale
- by the contract of sale one of the contracting parties
obligates himself to transfer and to deliver a
determinate thing (art. 1458)
o the thing as the object of contract of sale
must be determinate
- a thing is determinate when it is particularly
designated or physically segregated from all other of
the same class (art. 1460 par. 1)
o particularly designated
o physically segregated
- the requisite that a thing be determinate is satisfied if
at the time of 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 (art. 1460 par. 2)
o the thing will be determinate at the time of
o at the time of perfection of the contract, the
thing to be delivered is not yet determinate
- Things having a potential existence may be the object
of the contract of sale (art. 1461 par. 1)
The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing will
come into existence (art. 1461 part. 2)
The sale of a vain hope or expectancy is void (art.
1461 par. 3)
o Sale of a thing not yet in existence subject to
the condition that the thing will exist, and on
failure thereof, the contract becomes
ineffective and buyer has no obligation to pay
the price.
o Sale of hope or expectancy is valid
o If the hope is vain, it is void.
- Goods which may be the object of sale (art. 1462 par.
1)
o Existing goods or goods owned or possessed
by the seller
o Future goods or goods to be manufactured,
raised, or acquired
o Goods which acquisition depends upon a
contingency which may or may not happen
(art. 1462 par. 2)
- The sole owner of a thing may sell an undivided
interest therein (art. 1463)
o By sole owner – aliquot part (portion of a
thing), becomes co-owner
o By co-owner – can dispose his undivided
share/interest without the consent of other
co-owners
- Things subject to resolutory condition may be the
object of the contract of sale (art. 1465)
o The thing sold that is under the resolutory
period only transfers the usufructuary rights
Sale of an undivided share of a specific mass (art. 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 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 the goods of the
same kind and quality, unless a contrary intent
appears.
o Fungible goods – goods of which any unit is,
from its nature or by mercantile usage,
treated as equivalent of any other unit (can
be substituted)
 o Effect of sale – owner of a mass of goods may
sell only an undivided share thereof,
provided the mass is specific of capable of
being determinate
o Risk of loss – if the buyer becomes co-owner,
with the seller, or the owners of the
remainder of the mass, it follows that the
whole mass it at the risk of all parties
interested in it, in proportion to their various
holdings.
o Subject matter – in the sale of undivided
share, either of a thing or of that of mass of
goods, the subject matter is an incorporeal
right. Here, ownership passes to the buyer by
the intention of the parties.
o 1st sentence – referring to selling of undivided
share of specific mass, even if the amount is
undetermined. If amount is undetermined
and seller sold a percentage or fraction, seller
is not liable to the deficiency.
o 2nd sentence – referring to co-ownership.
o 3rd sentence – referring to situation when the
mass sold to buyer is more than what seller
owned. In this case, seller is liable to make up
for the deficiency.
Stages in the life of sale
- Negotiation
- Perfection
- Consummation
Essential Characteristics of contract of sale
- Nominate and principal
- Consensual
- Bilateral and reciprocal
- Onerous
- Commutative
- Sale is title and not mode
^Nominate and Principal
- Sale is a nominate contract since it has been given a
particular name by law
- It can stand on its own and does not depend on
another contract for its validity or existence
^Consensual
- A contract of sale is consensual because it is
perfected by mere consent, at the moment there is a
meeting of minds upon the thing which is the object
of the contract upon the price
- Modalities that affect the consensuality of sale:
o The consensual characteristic of sale can be
affected by modalities that by stipulation
may be added into the contractual
relationship, such as a suspensive term or
condition
^Bilateral and reciprocal
- The power to rescind the is implied, and such power
need not be stipulated in the contract in order for the
innocent party to invoke the remedy
- Neither party incurs delay if the other party does not
comply, or is not ready to comply in a proper
manner, with what is incumbent upon him
- From the moment of the parties fulfills his obligation,
the default by the other begins, without the need of
prior demands
- A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable (art. 1479
par. 1)
- An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price (art. 1479 par.
2)
^Onerous
- It imposes a valuable consideration as prestation,
which ideally is a price certain money or its
equivalent
^Commutative
- A thing of value is exchanged for equal value
^Sale is title and not mode
- The seller assumes the obligation to transfer
ownership and to deliver the thing sold, but the real
right of ownership is transferred only “by tradition”
or delivery thereof to the buyer
Sale Vs. Donation
- Donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of
another person, who accepts it.
- Sale is essentially an onerous contract, whereas
donation is gratuitous contract
- A sale is perfected by mere consent, whereas
donation, being a solemn contract, although consent
is also required, must comply with formalities
required by law for its validity
- Inadequacy of price (art. 1470)
o 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.
Sale Vs. Barter
- By barter or exchange, one of the parties binds
himself to give one thing in consideration of the
other’s promise to give another thing; whereas by
sale, one of the parties binds himself to deliver a
thing in consideration of the other’s undertaking to
pay the price in money or its equivalent
- Sale containing partly in money, partly in another
thing (art. 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 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.
- Rules to determine whether contract is sale or barter:
Sale Vs. Contract to sell
o Manifest intention of the parties, whether to
barter or sale
o When the intention does not appear and
consideration consists partly in money and
partly in another thing:
 Barter, if the value of the
thing given as part of the
consideration exceeds the
amount of money given or its
equivalent
 Sale, if the value of the thing
given as part of the
consideration equals or is
Certainty of price (art. 1469)
less than the amount of
money given
Sale for the general market VS. Contract for piece of work
(art. 1467)
- A contract of 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
- 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 Vs. Agency to sell/buy
- A contract of agency is one that essentially
establishes a representative capacity in the person of
the agent on behalf of the principal, and one
characterized as highly fiduciary
Inadequacy of price (art. 1470)
o In sale, title to the goods is transferred to the
buyer upon delivery of the thing sold, while
in agency, title to the goods is retained by the
owner despite the delivery of the goods to
the agent
o In sale, the buyer is required to pay the price
to seller, while in agency, agent is required to
turn over to the principal the price of the
goods which he received from the buyer
o In sale, the recipient (buyer) of the property
may do with the property as he pleases,
while in agency, the principal retains control
of the property.
Sale Vs. Dacion En Pago
Things subject to sensitive fluctiations
- In sale, there is no pre-existing credit, while in dacion
en pago, there is a pre-existing credit.
- A sale creates obligations, while dacion en pago
extinguishes obligations.
- In sale, the cause or consideration is the price, and
delivery of the object, while in dacion en pago, the
cause or consideration is the extinguishment of the
obligation and delivery of the object given.
- In sale, there is greater freedom in fixing the price,
while in dacion en pago, there is less freedom in
fixing the price because the amount of the pre-
existing credit which the parties seek to extinguish
- in contract of sale, the title to the property passes to
the vendee upon the delivery of the thing sold. In a
contract to sell, ownership is, by agreement, reserved
to the vendor and is not passed to the vendee until
the full payment of the purchase, generally.
- In contract of sale, non-payment of the price is a
negative resolutory condition. In a contract to sell,
full payment of the price is a positive suspensive
condition.
- In a contract of sale, the risk of loss is on the buyer. In
contract to sell, the risk of loss is on the seller.
- 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 judgement of a special person
or persons (art. 1469 part. 1)
- 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 (art. 1469
par. 2)
- If the third person or persons acted in bad faith or by
mistake, the courts may fix the price (art. 1469 par. 3)
- 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 (art. 1469 par.
4)
- 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 (art. 1470)
o Gross inadequacy is not indication of
invalidity of contract, it is just an indication of
the presence of vises of consent
- 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 (art. 1471)
o Price is simulated – the sale states that the
price has been paid but in fact never been
paid.
- The price of securities, grains, liquids, and other
things shall also be considered certain, when the
price is fixed that which the thing sold would have on
a definite day, or in a particular exchange 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 (art. 1472)
Fixing of price (art. 1473)
- 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
Kinds of promise treated in article 1479
Price cannot be determined (art. 1474)
- Where the price cannot be determined in accordance
with the preceding articles, the contract is
inefficacious.
- 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
Effect of unilateral accepted promise
of each particular case.
Reciprocity of contract of sale
- 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 (art. 1475
par. 1)
Effect of unilateral unaccepted promise
- From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts (art. 1475
par. 2)
Sale by auction (art. 1464)
- Sales of separate lots by auction are separate sales
- Sales are perfected by the fall of the hammer or any
customary manner.
Meaning of option
o However, the auctioneer can withdraw the
goods and the bidder can retract his bid, until
no sales are being perfected.
o Concept of sale without reserve – auctioneer
cannot withdraw the goods from sale once a
Injury or benefit from the thing sold
bid has been made and the highest bidder
has a right to enforce his bid.
- Right of seller to bid in the auction – the seller or his
agent may bid in an auction sale provided:
o Such right was reserved
o Notice was given that the sale is subject to a
right to bid on behalf of the seller
o The right to bid by the seller is not prohibited
by law or by stipulation
Delivery (art. 1477)
- The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive
delivery thereof.
- The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid
the price (art. 1478)
Risk of loss or deterioration
Unilateral promise
- A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable (art. 1479
par. 1)
- 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 (art. 1479 par.
2)
- Accepted unilateral promise to sell in which the
promisee (buyer) elects to buy
- Accepted unilateral promise to buy in which the
promisee (seller) elects to sell
- A bilateral promise to buy and sell reciprocally
accepted in which either of the parties chooses to
exact fulfillment
- An accepted unilateral promise is binding if it is
supported by a consideration or an option money,
which is distinct and separate from the price, and
acceptance thereof will give rise to a perfected
contract.
- 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.
o Unaccepted unilateral promise is not binding
and no contract was perfected.
- Option is a privilege existing in one person for which
he has paid a consideration which gives him the right
to buy/sell.
- Any injury 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
(art. 1480 par. 1)
- This rule shall apply to the sale if fungible things,
made independently for a single price, or without
consideration of their weight, number, or measure
(art. 1480 par. 2)
- 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 (art. 1480 par.
3)
1. if the thing is lost before perfection, the seller and
not the one who intends to buy 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 the perfection, the
contract is void or inexistent (art. 1409 par. 3). The
legal effect is the same as when the object is lost
before the perfection of the contract of sale (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 par. 1 and 2, 1538, 1189, and
1269)
4. The thing is lost after delivery, the buyer bears the
risk of loss following the general rule of res perit
domino.
Sale of goods by description or by sample
- 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 (art.
1481 par. 1)
- The buyer shall have a reasonable opportunity of
comparing the bulk with the description of the
sample (art. 1481 par. 2)
Sale of goods by description – it 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 by him by the vendor, or has been seen the
goods but the want of identity is not apparent on inspection
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.
Sale by description and sample – when a sale is made by
both sample and description, the goods must satisfy all the
warranties (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.
Earnest money
- 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 (art. 1482)
- 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 considered
proof of perfection of the contract.
- Earnest money VS. option money
o Earnest money is part of purchase price,
option money is a distinct consideration for
option contract
o Earnest money is given only where there is
already a sale, while option money applies to
a sale not yet perfected
o 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.
Forms of 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 (art.
1483)
- General rule: the form of a contract refers to the
manner in which it is executed or manifested. As a
general rule, a contract may be entered into in any
form provided all the essential requisites for its
validity are present.
- Where the form is required in order that a contract
may be enforceable. In case the contract of sale
should be covered by statute of frauds, the law
requires that the agreement be in writing subscribed
by the party charged, or by his agent; otherwise the
contract cannot be enforced in action
- The following contracts must be in writing to be
enforceable in action:
o Contracts not to be performed within a year
o A special promise to answer for the debt,
default, or miscarriage of another
o Agreement in consideration of marriage
o Sale of personal property for five hundred
pesos or more
o Lease of real property for more than one year
o A representation as to the credit of a third
person
o A sale of real property (art. 1358)
- Where form is required in order that a contract may
be valid.
- Where form is required only for the convenience of
the parties.
Sale of personal property (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:
o Exact fulfillment of the obligation, should the
vendee fail to pay
o Cancel the sale, should the vendee’s failure
to pay cover two or more installments
o 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 that the remedies mentioned here are
alternative and are not to be exercised cumulatively
or successively, and the election of one remedy is a
waiver of the right to resort to the others.
- Right of the vendor to recover unpaid balance of
purchase price:
o Remedy of specific performance
o Remedy of cancellation – vendee can only
demand the return of payment already
made, unless there’s stipulation about
forfeiture.
o Remedy of foreclosure of chattel mortgage

Lease of personal property with option to buy

- 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
(art. 1485)
- Lease 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 personal
property 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 in installments in contravention of the
provisions of article 1484.

Stipulations on forfeiture of installments/rents already paid

- 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 (art. 1486)
o If the amount resulted to be unconscionable,
the court may order the return of a portion
of the total amount paid in installments or
rents

Expenses incurred for execution and registration of sale

- The expenses for the execution and registration of

sale shall be borne by the vendor, unless there is a
stipulation to the contrary (art. 1488)

Expropriation of property for public use

- The expropriation of property for public use is

governed by special laws (art. 1488)
- Power of eminent domain – one of the inherent
power of the state