Sales Contract Essentials

KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City

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korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2022-2023
d. It is ordinary commutative and onerous

WEEK 3
SALES Ordinarily, the contract of sale is commutative and
onerous in that each one of the parties assume a
1.3.1 NATURE, FORMS AND REQUISITES correlative obligation the seller to deliver and
transfer ownership of the thing sold and the buyer to
pay the price.
Sales Defined
e. It is also nominate and a principal contract
By the contract of sale, one of the contracting parties
it can stand on its own, and does not depend on
obligates himself to transfer the ownership and to another contract for its validity AND it has been given
a particular name by law (Art. 1458, NCC)
deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent
Kinds of contract of Sale
(Art. 1458, NCC).
a. Absolute contract
Nature and Characteristics When the sale is devoid of any condition imposed on
the passing of the title of the thing to be conveyed or
a. It is a consensual contract on the obligation of a party thereto and hence title to
the property passes to the vendee upon delivery of
From the point of view of perfection, the contract of the thing sold.
sale is a consensual contract which means the sale
is perfected by mere consent. The delivery of the ting b. Conditional Sale
bought or payment of the price is not necessary for
the perfection of the contract. Instead, upon When the sale is subject to any condition imposed
perfection of the contract it creates an obligation to on the passing of the title of the thing to be conveyed
make the delivery of the thing bought Contract of Sale Contract to sell
Ownership is Ownership is only
b. It is not a mode, but only creates title transferred upon transferred upon full
delivery payment of price
The contract of sale is not a mode of transmitting Non-payment is a Full payment is a
ownership. Upon perfection, it does not transfer or resolutory condition positive suspensive
affect ownership. Instead, it only creates an condition, hence non-
obligation to transfer ownership or it only creates payment would not give
title. It is tradition or delivery, as a consequence of rise to the obligation to
sale that actually transfer ownership. transfer ownership
or on the obligation of a party thereto.
c. It creates Reciprocal Obligation
A contract of sale creates reciprocal obligations,

where the seller obligates himself to transfer the
ownership of and deliver a determinate thing, and
the buyer obligates himself to pay therefor a price
certain in money or equivalent.
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ESSENTIAL REQUISITES– ART. 1505, NCC

Capacities of Parties
1. Consent
General Rule:
Perfection
Same as ordinary Contract
a. Consensual contract
A contract of sale is a consensual contract which
Prohibited sales
means that the sale is perfected by mere consent or
1. Between husband and wife unless their property
is perfected by mere consent or is perfected at the
regime is complete separation but only the heirs and
moment there is a meeting of minds upon the thing
creditors can question its nullity.
which is the object of the contract and upon the price
2. The same prohibition also applies to common-law

b. Sale by Auction
relationships because of policy considerations and
A sale by auction is perfected when the auctioneer
the dictates of morality.
announces its perfection by fall of the hammer or in
other customary manner. Until such announcement
3. The guardian cannot acquire by purchase even at
is made, any bidder may retract his bid and the
public auction or juridical auction the property of the
auctioneer may withdraw the goods from the sale
ward under his guardianship, so long as the
unless the auction has been announced to be
guardianship still exist
without reserve.
4. The agent cannot acquire by purchase even at a

Effect of loss prior to perfection
public auction or juridical auction the property of the
principal
1. For things other than goods- The contract is
without effect
5. The executor or administrator cannot acquire by
2. In case of specific goods If they perished in part
purchase even at a public auction or juridical auction
or have wholly or in material part so deteriorated in
the property of the estate under his administration
quality as to be substantially changed in character
without the knowledge of the seller, the buyer at his
6. The public officer cannot acquire by purchase
option treat the sale as either void or valid as to all
even at a public auction or juridical auction the
of the existing goods or in so much thereof as have
property of the state or any subdivision thereof or
not deteriorated.
any government owned and controlled corporation
or institution trusted to them
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7. Justices, judges, prosecuting attorneys and clerk 2. Object

of superior and inferior courts and other officers and
employees connected to the administration of justice General Rule:
including attorneys or lawyers cannot acquire by Any thing that has a value can be assessed in
purchase even at a public auction or juridical auction money, whether immovable or movable,
the property under litigation or even those levied. consumable or non-consumable, corporeal or
incorporeal, present or future and even a mere hope
Formalities in a Contract of Sale or expectancy may be object of sale.
a. Requirement as to Validity Requisites

Whatever may be its subject matter, no particular a. The thing must be licit
form is required in a contract of sale for validity. The b. The thing may or may be existing at the time
only exception is the sale of large cattle which of the perfection of the contract so long as it has
requires that the same be recorded with the the potential or possibility of existence at some
city/municipal treasurer and that a certificate of future time
transfer to be issued. Thus an oral sale of a parcel
of land is a valid contract The goods which form the subject of a contract of
sale may be either existing goods, owned or
b. Requirement as to Enforceability possessed by the seller or goods to be
The sale of personal property at a price not less than manufactured, raised or acquired by the seller after
500 pesos and the sale of real property must be in the perfection of the contract of sale.
writing under the statute of frauds otherwise the
contract is unenforceable. The sale of future things in which the amount and
quality of the thing is uncertain and the sale is
Sale of Lands need not to be in public document and subject to the condition that the thing should come
be recorded to the registry of deeds to be valid. into existence such that if the condition is not fulfilled
or if the thing does not come into existence the
contract becomes ineffective.
The sale of hope or expectancy is allowed by the law

but a vain hope or expectancy is void.
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Sale of a Sale of a MERE Sale of a VAIN

thing HOPE Or HOPE Or 3. Consideration
expected or expectancy expectancy
future thing
As to the buyer the Consideration is the delivery of
Valid Valid Void
Example: Example: Example: the thing sold while as to the seller the payment of
Sale of the Sale of a Sale of a fake
the price in money or its equivalent. Both parties
grain a field valid lottery lottery ticket
may grow in a ticket must agree on the amount of price as well as to the
given time
manner of payment to a perfected contract of sale.
c. The thing must be determinate
Price
It is already particularly designated or physically
Price signifies the sum stipulated as the equivalent
segregated from all other of the same class or
of the thing sold and also every incident taken into
atleast determinable that is the thing is capable of
consideration for the fixing of the price put to the
being made determinate without necessary of a new
debit of the buyer and agreed to by him.
or further agreement between the parties.
Requisite of Price
d. Requirement of Ownership
Ownership by the seller of the thing sold at the time
1. The price must be real or true
of the perfection of the contract of sale is not an
If the price is simulated, the contract is void, but the
element for its perfection hence regardless of the
act may be shown to have been in reality a donation
true owner the sale is valid.
or some other act or contract. Thus, a deed of sale,
in which stated consideration had not in fact been
If the seller is not the owner but he was able to
paid is null and void. On the other hand, if the price
deliver the thing sold to the buyer, the latter does not
agreed upon is true, the failure to pay the price does
acquire ownership because no one can give what
not affect the validity of the contract but merely
one does not have. Except, when the title is void to
resultsin a right to demand the fulfilment or
a third person who purchased it for value in good
cancellation of the obligation under an existing valid
faith
contract.
2. The consideration must be in money or equivalent
(Letters of credit)
3. Price must be certain
a. In order that the price may be considered certain
it shall be sufficient that it be so with reference to
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another thing certain, or that the determination

thereof be left to the judgement of a specified Option Money Earnest Money
persons As to Money Given
b. If the person be unable or unwilling to fix the price, Separate and distinct Part of purchase price
the contract shall be inefficacious unless the parties consideration from the [Art. 1482, Civil Code]
subsequently agree upon the price purchase price
c. If the third person/s acted in bad faith or by As to Perfection
mistake, the court may fix the price Given when sale is not Given only when there
d. Where the third person/s are prevented from fixing yet perfected is already a sale
the price or terms by fault of the seller or buyer, the Obligation of the buyer
party not in fault may have such remedies against When given, the would- When given, the buyer
the party in fault as are allowed the seller or the be-buyer is not required is bound to pay the
buyer, as the case may be. to buy, but may even balance
e. The fixing of the price can never be left to the forfeit it depending on the
discretion of one of the contracting parties, however, terms of the option
if the price is fixed by one of the parties is accepted 1.3.3.4 RIGHTS/OBLIGATION OF VENDOR AND
by the other the sale is perfected. VENDEE
f. Where the price cannot be determined in any other OBLIGATIONS OF THE VENDOR
manner, the contract is inefficacious.
General
1.3.2 EARNEST MONWY AS DISTINGUESHED 1. To deliver the thing sold
FROM OPTION MONEY 2. To transfer ownership over the thing sold
Option Money 3. To warrant the following
Separate and distinct consideration from the a. That he has the right to sell the thing at the
purchase price. When given, the would-be-buyer is time when the ownership is to pass (warranty
not required to buy, but may even forfeit it depending of ownership)
on the terms of the option. b. That the buyer shall enjoy legal and
peaceful possession of the thing (warranty
Earnest Money against eviction)
Paid in advance of the purchase price agreed upon c. That the thing sold if free from any hidden
by the parties in a contract of sale, given by the buyer faults or defects (warranty against defect)
to the seller, to bind the latter to the bargain.
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Obligation to deliver and Transfer Ownership b. Constructive Delivery

1. Traditio simbolica (Symbolic Delivery)
a. Sale not a mode but merely title Such as the delivery of movable property may be
In sales the purpose of delivery is not only to transfer made by the delivery of the keys of the place or
possession but precisely to transfer ownership to the depository where it is stored or kept, or the delivery
buyer. The sale by itself does not transfer or affect of a negotiable document of title or the execution of
ownership the most that sale does is to create the a public instrument.
obligation to transfer ownership. 2. Traditio longa manu
Delivery is effected by the vendor by simply pointing
When to deliver to the vendee the thing to be transferred and which
In reciprocal, as in contract of sale, the general rule at that time must be within sight.
is that the fulfilment of the parties respective 3. Traditio brevimanu
obligations should be simultaneous thus, the vendor The vendee already had the thing in his possession
is not bound to deliver the thing sold if the vendee for any other reason or by reason of another distince
has not paid him the price or if no period for the title and the mere agreement of the parties that the
payment has been fixed in the contract. vendee shall now hold the thing as its owner
amounts to delivery
Exception: 4. Traditio constitutumpossesorium
Where a period for the payment of the price has The vendor continues to be in possession of the
been fixed in the contract, the vendor is already thing but in some other capacity and no long as an
bound to deliver the thing sold although the period owners, as when he.
has not elapsed or consequently although he has not Example : possess the thing as a lessee or a mere
collected the price. usufructuary.
Forms of Delivery Intention to deliver important

In all forms of delivery it is necessary that the act of
a. Actual Delivery delivery whether constructive or actual should be
In the case of a movable thing, it consist in actually coupled with the intention of delivering the thing,
handing it over to another or without that intention there is no tradition.
In case of immovable, it consist of material and
possessory acts done by the vendee in the presence
of and with the consent of the vendor
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Delivery on “sale or return” (3) In the absence thereof, to the person who
When goods are delivered to the buyer “on sale or presents the oldest title, provided there is good
return” to give the buyer an option to return the faith.
goods instead of paying the price, the ownership
passes to the buyer the delivery but he any re-vest Obligations of Buyer
the ownership to the seller by returning or tendering
the goods within the time fixed in the contract. The obligation of the buyer is to pay a price certain
in money or its equivalent.
Double sale
General Rule: Prior tempore, prior jure (“First in time, Rights granted to the buyer in relation to payment of
priority in right”) applies. price
Requisites: 1. Right to suspend payment

(1) 2 or more valid sales; Should the vendee be disturbed in the possession or
(2) Same subject matter; ownership of the thing acquired or should he have
(3) 2 or more buyers with conflicting interests over reasonable ground to fear such disturbance or
the rightful ownership of the thing sold; danger to cease.
(4) Same seller. [Cheng v Genato, 1998]
2. Right to Grace Period
Rules on double sale
If granted by contract
Sale of Movables When grace period is provided for in the contract of
Ownership shall be transferred to the person who sale, the same is a right, not an obligation of the
may have first taken possession in good faith debtor and when unconditionally conferred, the
grace period is effective without further need of
Sale of Immovables: demand either calling for the payment of the
Registered Land Ownership belongs to the person obligation or for honouring the right.
who:
(1) In good faith first recorded the sale in the In sale of Subdivision Lots or Condominium Units
Registry of Property; or In case of failure of the owner or developer to
(2) If there is no inscription of sale on the title, develop the approved plans and within the time limit
ownership passes to the person who in good faith for complying the same, the buyer may suspend the
was first in possession; or

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payment and wait for further development or he may accordance with this provision shall be equivalent to
demand reimbursement of the total amount paid. a warranty registration with the manufacturer,
1.3.4 WARRANTIES producer, or importer. Such registration is sufficient
to hold the manufacturer, producer, or importer
A. Express Warranties liable, in appropriate cases, under its warranty.
For there to be express warranty, the following
requisites must concur: (APIR) 2) Failure to make or send report. – Failure of the
(1) An affirmation of fact or any promise relating to distributor to make the report or send them the form
the thing sold required by the manufacturer, producer, or importer
(2) The natural tendency of such affirmation or shall relieve the latter of its liability under the
promise is to induce the buyer to buy; warranty: Provided, however, That the distributor
(3) The buyer buys the thing relying thereon. [Art. who failed to comply with its obligation to send the
1546] sales reports shall be personally liable under the
(4) Made before the sale not upon delivery or any warranty. For this purpose, the manufacturer shall
other point be obligated to make good the warranty at the
expense of the distributor.
B. Express Warranties in relation to consumers
Law 3) Retail. – The retailer shall be subsidiarily liable
under the warranty in case of failure of both the
Express warranty – operative from moment of sale. manufacturer and distributor to honor the warranty.
– All written warranties or guarantees issued by a In such case, the retailer shall shoulder the
manufacturer, producer, or importer shall be expenses and costs necessary to honor the
operative from the moment of sale. warranty. Nothing therein shall prevent the retailer
from proceeding against the distributor or
1) Sales Report. – All sales made by distributors of manufacturer.
products covered by this Article shall be reported to
the manufacturer, producer, or importer of the 4) Enforcement of warranty or guarantee. – The
product sold within thirty (30) days from date of warranty rights can be enforced by presentment of a
purchase, unless otherwise agreed upon. The report claim. To this end, the purchaser needs only to
shall contain, among others, the date of purchase, present to the immediate seller either the warranty
model of the product bought, its serial number, name card of the official receipt along with the product to
and address of the buyer. The report made in be serviced or returned to the immediate seller. No
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other documentary requirement shall be demanded an expert who by reason of his trade or profession
from the purchaser. If the immediate seller is the should have known them.
manufacturer's factory or showroom, the warranty
shall immediately be honored. If the product was 2. Such defects have rendered the thing unfit for the
purchased from a distributor, the distributor shall use for which it is intended or have diminished its
likewise immediately honor the warranty. In the case fitness for such use to such an extent that had the
of a retailer other than the distributor, the former vendee been aware thereof, he would not have
shall take responsibility without cost to the buyer of acquired it or would have given a lower price for it.
presenting the warranty claim to the distributor in the
consumer's behalf. Buyer can still pay even after expiration of grace
period as long as no demand for rescission has been
5) Record of purchases. – Distributors and retailers made, whether judicially or by notarial act.
covered by this Article shall keep a record of all
purchases covered by a warranty or guarantee for 1.3.5 SALES ON INSTALLMENT
such period of time corresponding to the lifetime of 1.3.5.1 PERSONAL PROPERTY- RECTO LAW
the product's respective warranties or guarantees. Recto Law: Sale of Movables on Installment – Arts.
1484-1486, Civil Code
6) Contrary stipulations – null and void. – All
covenants, stipulations or agreements contrary to WHEN APPLICABLE
the provisions of this Article shall be without legal Sale of movables in installment .
effect. The rule is intended to apply to sales of movables,
the price of which is payable in 2 or more
1.3.4.2 IMPLIED WARRANTIES installments, but not to straight-term sales where the
1. Warranty of ownership price is payable in full, after making a down payment
2. Warranty against eviction because the law aims to protect improvident buyers
3. Warranty against hidden defects who may be tempted to buy beyond their means
[Levy Hermanos v. Gervacio, G.R. No. L-46306
Warranty against Hidden Defects (1939)].
Nature of defects
1. It must be hidden, hence, the vendor shall not be
answerable for patent defects or those which may be
visible or those which are not visible if the vendee is
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ALTERNATIVE AND EXCLUSIVE REMEDIES whether the contract be one of contract to sell
Note: The exercise of one remedy bars the exercise (Villanueva, Sales, 2009 Ed., p. 432; Rillo vs. CA,
of the others. G.R. No. 125347, June 19, 1997).
a. Specific Performance
General Rule: When the seller has chosen specific Requisites:
performance, he can no longer seek for rescission or 1. Transactions or contracts involving the sale OR
foreclosure of the chattel mortgage financing of real estate on installment payments,
Exception: If specific performance has become including residential condominium apartments; and
impossible, the seller may still choose rescission 2. Buyer defaults in payment of succeeding
[Art. 1191, Civil Code] installments.
b. Cancellation of sale if vendee fails to pay 2 or Not Applicable:

more installments 1. Sale of industrial lots
When the seller cancels the sale by repossessing 2. Sale of commercial buildings
the property sold, he is barred from exacting 3. Sale of urban land covered by Urban Land Reform
payment for its price. and agricultural land under Agrarian Reform Law
Note: It can only be carried out when he who 4. Sale of lands payable in straight terms
demands rescission can return whatever he may be
obliged to restore [Art. 1385, Civil Code]. Rights of the Buyer
The law imposes additional requirements on the part
c. Foreclosure of Chattel Mortgage if vendee fails of the seller for a valid rescission.
to pay 2 or more installments
If seller chooses this remedy, he shall have no a. If buyer has paid at least 2 years of installments
further action to recover any unpaid balance, and then defaults:
any stipulation to the contrary shall be void. ● Buyer has right to a grace period of 1 month per
year of installment payment made BUT the buyer
1.3.5.2 SALE OF IMMOVABLE PROPERTY THRU may only avail of the grace period once every 5
INSTALLMENT (MACEDA LAW, R.A. 6552) years
Applies to sale or financing of real estate on ● Buyer has right to the refund of Cash Surrender
installment payments, including residential Value (CSV): 50% of total amount paid + 5% for
condominium apartments. The MACEDA law every year after the first 5 years of installments BUT
applies to sale of real estate on installments,
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total CSV should not be greater than 90% of total A decision in an ejectment case can operate as
amount paid notice of cancellation as required by RA 6552.
● After the lapse of the grace period, buyer is given However, mere filing of an unlawful detainer suit by
a notice of cancellation or demand for rescission by the seller does not operate as such notice [De Leon]
notarial act, effective 30 days from the buyer’s
receipt thereof AND only upon full payment of CSV
1.3.5.3 PD 957/ CONDOMINIUM ACT
b. If buyer has paid less than 2 years of installments: The National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and
● Grace period of at least 60 days business in accordance with the provisions of this
● After the lapse of the grace period, buyer is given Decree (Sec. 3)
a notice of cancellation or demand for rescission by The registered owner of a parcel of land who wishes
notarial act, effective 30 days upon receipt thereo to convert the same into a subdivision project shall
submit his subdivision plan to the Authority which
shall act upon and approve the same, upon a finding
c. During the grace period, the buyer shall also have that the plan complies with the Subdivision
Standards' and Regulations enforceable at the time
the right: the plan is submitted. The same procedure shall be
followed in the case of a plan for a condominium
● To sell or assign his rights, evidenced in a notarial
project except that, in addition, said Authority shall
instrument act upon and approve the plan with respect to the
building or buildings included in the condominium
● To update his account ● To pay in advance any project in accordance with the National Building
installment, or the full unpaid balance of the price, Code (R.A. No. 6541) (Sec. 4)
without any interest, and to have such full payment License to sell- Such owner or dealer to whom has
of the purchase price annotated in the certificate of been issued a registration certificate shall not,
however, be authorized to sell any subdivision lot or
title covering the property. 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
Down payments, deposits, or options on the contract project. (Sec. 5)
shall be included in the total number of installments Exempt transactions. A license to sell and
made. performance bond shall not be required in any of the
following transactions:
The seller may go to court for judicial rescission in
lieu of a notarial act of rescission. (a) Sale of a subdivision lot resulting from the
partition of land among co-owners and co-
heirs.
Cancellation pertains to extrajudicial cancellation.
(b) Sale or transfer of a subdivision lot by the
Absence of notice does not bar the filing of an action original purchaser thereof and any
to cancel the contract. subsequent sale of the same lot.
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(c) Sale of a subdivision lot or a condominium hereof, if shall appear there is satisfactory evidence
unit by or for the account of a mortgagee in that the said owner or dealer:
the ordinary course of business when
necessary to liquidate a bona fide debt. (Sec. (a) Is insolvent; or
7)
(b) has violated any of the provisions of this
Suspension of license to sell. Upon verified Decree or any applicable rule or regulation of
complaint by a buyer of a subdivision lot or a the Authority, or any undertaking of his/its
condominium unit in any interested party, the performance bond; or
Authority may, in its discretion, immediately suspend
the owner's or dealer's license to sell pending (c) Has been or is engaged or is about to
investigation and hearing of the case as provided in engage in fraudulent transactions; or
Section 13 hereof.
(d) Has made any misrepresentation in any
The Authority may motu proprio suspend the license prospectus, brochure, circular or other
to sell if, in its opinion, any information in the literature about the subdivision project or
registration statement filed by the owner or dealer is condominium project that has been
or has become misleading, incorrect, inadequate or distributed to prospective buyers; or
incomplete or the sale or offering for a sale of the
subdivision or condominium project may work or (e) Is of bad business repute; or
tend to work a fraud upon prospective buyers.
(f) Does not conduct his business in
The suspension order may be lifted if, after notice accordance with law or sound business
and hearing, the Authority is convinced that the principles.
registration statement is accurate or that any
deficiency therein has been corrected or Where the owner or dealer is a partnership or
supplemented or that the sale to the public of the corporation or an unincorporated association, it shall
subdivision or condominium project will neither be be sufficient cause for cancellation of its registration
fraudulent not result in fraud. It shall also be lifted certificate and its license to sell, if any member of
upon dismissal of the complaint for lack of legal such partnership or any officer or director of such
basis corporation or association has been guilty of any act
or omission which would be cause for refusing or
Until the final entry of an order of suspension, the revoking the registration of an individual dealer,
suspension of the right to sell the project, though broker or salesman as provided in Sec. 11. (Sec. 9)
binding upon all persons notified thereof, shall be
deemed confidential unless it shall appear that the Registration of dealers, brokers and salesmen. No
order of suspension has in the meantime been real estate dealer, broker or salesman shall engage
violated. (Sec.8) in the business of selling subdivision lots or
condominium units unless he has registered himself
Revocation of registration certificate and license to with the Authority in accordance with the provisions
sell. The Authority may, motu proprio or upon of this section.
verified complaint filed by a buyer of a subdivision lot
or condominium unit, revoke the registration of any If the Authority shall find that the applicant is of good
subdivision project or condominium project and the repute and has complied with the applicable rules of
license to sell any subdivision lot or condominium the Authority, including the payment of the
unit in said project by issuing an order to this effect, prescribed fee, he shall register such applicant as a
with his findings in respect thereto, if upon dealer, broker or salesman upon filing a bond, or
examination into the affairs of the owner or dealer other security in lieu thereof, in such sum as may be
during a hearing as provided for in Section 14 fixed by the Authority conditioned upon his faithful
compliance with the provisions of this Decree:
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Provided, that the registration of a salesman shall broker's, of salesman's registration; provided, that
cease upon the termination of his employment with such order shall state the cause for the suspension.
a dealer or broker.
The suspension or revocation of the registration of a
Every registration under this section shall expire on dealer or broker shall carry with it all the suspension
the thirty-first day of December of each year. or revocation of the registrations of all his salesmen.
Renewal of registration for the succeeding year shall (Sec. 12)
be granted upon written application therefor made
not less than thirty nor more than sixty days before Cease and Desist Order. Whenever it shall appear
the first day of the ensuing year and upon payment to the Authority that any person is engaged or about
of the prescribed fee, without the necessity of filing to engage in any act or practice which constitutes or
further statements or information, unless specifically will constitute a violation of the provisions of this
required by the Authority. All applications filed Decree, or of any rule or regulation thereunder, it
beyond said period shall be treated as original may, upon due notice and hearing as provided in
applications. Section 13 hereof, issue a cease and desist order to
enjoin such act or practices. (Sec. 16)
The names and addresses of all persons registered
as dealers, brokers, or salesmen shall be recorded Registration. All contracts to sell, deeds of sale and
in a Register of Brokers, Dealers and Salesmen kept other similar instruments relative to the sale or
in the Authority which shall be open to public conveyance of the subdivision lots and condominium
inspection (Sec 11) units, whether or not the purchase price is paid in
full, shall be registered by the seller in the Office of
Revocation of registration as dealers, brokers or the Register of Deeds of the province or city where
salesmen. Registration under the preceding section the property is situated.
may be refused or any registration granted
thereunder, revoked by the Authority if, after Whenever a subdivision plan duly approved in
reasonable notice and hearing, it shall determine accordance with Section 4 hereof, together with the
that such applicant or registrant: corresponding owner's duplicate certificate of title, is
presented to the Register of Deeds for registration,
1. Has violated any provision of this Decree the Register of Deeds shall register the same in
or any rule or regulation made hereunder; or accordance with the provisions of the Land
Registration Act, as amended: Provided, however,
2. Has made a material false statement in his that it there is a street, passageway or required open
application for registration; or space delineated on a complex subdivision plan
hereafter approved and as defined in this Decree,
3. Has been guilty of a fraudulent act in the Register of Deeds shall annotate on the new
connection with any sale of a subdivision lot certificate of title covering the street, passageway or
or condominium unit; or open space, a memorandum to the effect that except
by way of donation in favor of a city or municipality,
4. Has demonstrated his unworthiness to no portion of any street, passageway, or open space
transact the business of dealer, broker, or so delineated on the plan shall be closed or
salesman, as the case may be. otherwise disposed of by the registered owner
without the requisite approval as provided under
In case of charges against a salesman, notice Section 22 of this Decree. (Sec. 17)
thereof shall also be given the broker or dealer
employing such salesman. Mortgages. No mortgage on any unit or lot shall be
made by the owner or developer without prior written
Pending hearing of the case, the Authority shall have approval of the Authority. Such approval shall not be
the power to order the suspension of the dealer's, granted unless it is shown that the proceeds of the
mortgage loan shall be used for the development of
Contact No. 228-1996/887-2051
Business Department
the condominium or subdivision project and effective his or its obligations as provided in the preceding
measures have been provided to ensure such section within two years from the date of this Decree
utilization. The loan value of each lot or unit covered unless otherwise extended by the Authority or unless
by the mortgage shall be determined and the buyer an adequate performance bond is filed in
thereof, if any, shall be notified before the release of accordance with Section 6 hereof. (Sec 21)
the loan. The buyer may, at his option, pay his
installment for the lot or unit directly to the Alteration of Plans. No owner or developer shall
mortgagee who shall apply the payments to the change or alter the roads, open spaces,
corresponding mortgage indebtedness secured by infrastructures, facilities for public use and/or other
the particular lot or unit being paid for, with a view to form of subdivision development as contained in the
enabling said buyer to obtain title over the lot or unit approved subdivision plan and/or represented in its
promptly after full payment thereto (Sec. 18) advertisements, without the permission of the
Authority and the written conformity or consent of the
Advertisements. Advertisements that may be made duly organized homeowners association, or in the
by the owner or developer through newspaper, absence of the latter, by the majority of the lot buyers
radio, television, leaflets, circulars or any other form in the subdivision. (Sec. 22)
about the subdivision or the condominium or its
operations or activities must reflect the real facts and Non-Forfeiture of Payments. No installment
must be presented in such manner that will not tend payment made by a buyer in a subdivision or
to mislead or deceive the public. condominium project for the lot or unit he contracted
to buy shall be forfeited in favor of the owner or
The owner or developer shall answerable and liable developer when the buyer, after due notice to the
for the facilities, improvements, infrastructures or owner or developer, desists from further payment
other forms of development represented or promised due to the failure of the owner or developer to
in brochures, advertisements and other sales develop the subdivision or condominium project
propaganda disseminated by the owner or developer according to the approved plans and within the time
or his agents and the same shall form part of the limit for complying with the same. Such buyer may,
sales warranties enforceable against said owner or at his option, be reimbursed the total amount paid
developer, jointly and severally. Failure to comply including amortization interests but excluding
with these warranties shall also be punishable in delinquency interests, with interest thereon at the
accordance with the penalties provided for in this legal rate. (Sec. 23)
Decree. (Sec. 19)
Failure to pay installments. The rights of the buyer in
Time of Completion. Every owner or developer shall the event of this failure to pay the installments due
construct and provide the facilities, improvements, for reasons other than the failure of the owner or
infrastructures and other forms of development, developer to develop the project shall be governed
including water supply and lighting facilities, which by Republic Act No. 6552. (Sec. 24)
are offered and indicated in the approved
subdivision or condominium plans, brochures, Administrative Fines. The Authority may prescribe
prospectus, printed matters, letters or in any form of and impose fines not exceeding ten thousand pesos
advertisement, within one year from the date of the for violations of the provisions of this Decree or of
issuance of the license for the subdivision or any rule or regulation thereunder. Fines shall be
condominium project or such other period of time as payable to the Authority and enforceable through
may be fixed by the Authority. (Sec. 20) writs of execution in accordance with the provisions
of the Rules of Court. (Sec. 38)
Sales Prior to Decree. In cases of subdivision lots or
condominium units sold or disposed of prior to the Penalties. Any person who shall violate any of the
effectivity of this Decree, it shall be incumbent upon provisions of this Decree and/or any rule or
the owner or developer of the subdivision or regulation that may be issued pursuant to this
condominium project to complete compliance with Decree shall, upon conviction, be punished by a fine
Contact No. 228-1996/887-2051
Business Department
of not more than twenty thousand (P20,000.00) Period of Redemption (Repurchase)

pesos and/or imprisonment of not more than ten Period
years: Provided, That in the case of corporations,
partnership, cooperatives, or associations, the The period expressly agreed upon but such cannot
President, Manager or Administrator or the person exceed 10 years.
who has charge of the administration of the business
In the absence of an express agreement it shall be
shall be criminally responsible for any violation of
four years from the date of the contract.
this Decree and/or the rules and regulations
promulgated pursuant thereto. (Sec. 39) If the vendor questions the transaction as an
equitable mortgage but the court eventually rules
1.3.6 EXTINGUISHMENT OF A CONTRACT OF that it was indeed a pacto de retro sale, the vendor
SALE may still exercise the right to repurchase within 30
days from finality of judgment.
1.3.6.1 CONVENTIONAL REDEMPTION/ PACTO
DE RETRO SALE
By Whom Exercised
Pacto De Retro Sale and Equitable Mortgage
a. Vendor, after returning to vendee price of sale
1. Pacto De Retro Sale plus expenses of the contract, other legitimate
payments made by reason of sale, and necessary
Definition and useful expenses made on the thing sold [Art.
1616, Civil Code]
A sale with a right of repurchase, also known as b. His heirs, assigns or agents
conventional redemption, takes place when the c. Creditor, after he has exhausted the property of
vender reserves the right to repurchase the thing the vendor [Art. 1610, Civil Code]
sold, with the obligation of returning to the vendee d. Co-owners of an immovable, if they sold their
the price of the sale, the expenses of the contract interests to the same person, may only redeem their
and any other legitimate payments made by reason respective shares [Art. 1612, Civil Code]
of the sale, the necessary and useful expenses
made on the thing sold, and the obligation of From Whom to Redeem
complying with such other stipulation which may
have been agreed upon. a. Vendee a retro
b. His heirs, assigns or agents
Grant of Right of Repurchase must be Simultaneous c. Subsequent purchaser of property, even if the
right to redeem was not mentioned in the
The grant of right to repurchase must be made subsequent contract; except if registered land,
simultaneously with the sale although not where the right to redeem must be annotated on the
necessarily in the same instrument in fact, the sale title
is in writing and already complies with the d. If several heirs, then the right of redemption can
requirement of the statute of frauds. However, if the be exercised against each heir for his share of the
grant of right to repurchase was made long after the property [Art. 1615, Civil Code
sale was already perfected, the transaction is not a
pacto de retro sale but merely a grant of an option to How Exercised
buy back.
a. By returning the ff. to the buyer:
In a true pacto de retro sale, title to and ownership ● Price of the sale; except if the parties agreed on a
are immediately vested in a vendee a retro, subject redemption price
only to the resolutory condition that the vendor ● Expenses of the contract and other legitimate
repurchases it within the stipulated period. payments made by reason of the sale;
Contact No. 228-1996/887-2051
Business Department
● Necessary and useful expenses made on the thing payment, or by any other transaction whereby
sold ownership is transmitted by onerous title [Art. 1619,
Civil Code].
b. Complying with any other stipulation agreed upon,
if any. Instances of legal redemption under civil code:
1. Redemption by other co-owners or any one or
Effect of Redemption
some of them. If a co-owner sells his undivided
a. The sale is extinguished share to a third person. If two or more co-owners
b. The seller shall receive the thing free from all desire to exercise the right, they may only do so in
charges or mortgages constituted by the buyer BUT proportion to the share they may respectively have
he shall respect leases executed by the buyer in in the thing owned in common (Art. 1620, NCC).
good faith and in accordance with local custom
c. As to fruits: 2. Redemption by other co-heirs, or by any one of
1. If parties agreed on a distribution, the fruits them. If a co-heir sells his hereditary right to a
shall be distributed according to the agreement stranger (Art. 1088, NCC)
2. If parties did not agree on a distribution, 3. Redemption by owner of adjoining land:
a. If there are growing fruits at the
time of sale and at the time of redemption: a. In case of rural – If the owner alienates it to a third
1. Buyer receives person, the area of which does not exceed one
reimbursement if the buyer paid hectare. If two or more adjoining owners desire to
indemnity at the time of the sale exercise the right at the same time, the owner of the
2. Buyer receives no smaller area shall be preferred; and should both
reimbursement or prorating if the lands have the same area, the one who first
buyer did not pay indemnity at the
requested the redemption (Art. 1621, NCC).
time of sale
b. In case of urban land – If owner of urban land,
b. If there were no growing fruits at which is so small and so situated that a major portion
the time of sale, but some exist at the thereof cannot be used for any practical purpose
time of redemption: fruits prorated within a reasonable time and which said owner had
(buyer entitled to part corresponding
bought merely for speculation, resell it to a third
to time he possessed the land in the
person. If resale has not yet been perfected, an
last year, counted from the
anniversary of the date of sale). owner of adjoining land shall have a right of pre-
emption; in other words, his right to buy the property
Effect of non-redemption is preferred to that of third persons. If two or more
Ownership is consolidated in the buyer BUT the adjoining owners desire to exercise the right of pre-
consolidation shall not be recorded in the Registry of emption or redemption as the case may be, the
property without a judicial order, after the vendor has owner whose intended use of the land appears best
been duly heard [Art.1607, Civil Code]. justified shall be preferred (Art. 1622, NCC
4. Redemption by a debtor: if a credit or other
1.3.7 LEGAL REDEMPTION incorporated right in litigation be sold by the creditor
to a third person (Art. 1634, NCC)
Legal redemption
The right to be subrogated, upon the same terms
and conditions stipulated in the contract, in the place
of one who acquires a thing by purchase or dation in
Contact No. 228-1996/887-2051
Business Department
Period of Redemption
The right of legal redemption shall not be exercised
except within 30 days from the notice in writing by
the prospective seller, or seller, as the case may be.
The deed of sale shall not be recorded in the
Registry of Property unless accompanied by an
affidavit of the seller that he has given written notice
thereof to all possible redemptioners (Art. 1623,
NCC).
REFERENCES:
• Civil Law Reviewer by Atty. Elmer Rabuya (2020)
• Civil Reviewer by ARRELANO LAW BAR
Operation Commission (2022)
• Civil Reviewer by UP LAW BAR Operation
Commission (2022)

Sales Contract Essentials

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Sales Contract Essentials

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KORBEL FOUNDATION COLLEGE, INC.

Purok Spring 1, Brgy. Morales, Koronadal City

d. It is ordinary commutative and onerous

A contract of sale creates reciprocal obligations,

ESSENTIAL REQUISITES– ART. 1505, NCC

2. The same prohibition also applies to common-law

4. The agent cannot acquire by purchase even at a

7. Justices, judges, prosecuting attorneys and clerk 2. Object

a. Requirement as to Validity Requisites

The sale of hope or expectancy is allowed by the law

Sale of a Sale of a MERE Sale of a VAIN

another thing certain, or that the determination

Obligation to deliver and Transfer Ownership b. Constructive Delivery

Forms of Delivery Intention to deliver important

Requisites: 1. Right to suspend payment

Sale of Movables When grace period is provided for in the contract of

Sale of Immovables: demand either calling for the payment of the

Registry of Property; or In case of failure of the owner or developer to

was first in possession; or

b. Cancellation of sale if vendee fails to pay 2 or Not Applicable:

of not more than twenty thousand (P20,000.00) Period of Redemption (Repurchase)

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