HANDOUT NO.

3S
DISTINCTIONS

In determining the real character of the contract, the title given to it by the parties
is not as much significant as its substance (Romero v. Court of Appeals, 65
SCAD 621, November 23, 1995)

A. Contract to SELL

POINTS OF CONTRACT OF SALE CONTRACT TO SELL

DISTINCTION (Art. 1458, NCC) (Art. 1478, NCC)
When the title passes to Title over the property By agreement,
the vendee generally passes to the ownership is reserved in
vendee upon DELIVERY the vendor and will not
of the thing sold pass, regardless of
delivery, UNTIL FULL
PAYMENT OF THE
PRICE
Effect of Non-payment of Nonpayment is a Full payment is a positive
the price resolutory condition (i.e, suspensive condition
the contract of sale may
by such occurrence put
an end to a transaction
that once upon a time
existed)
Effect of delivery The vendor has lost and Title remains in the
cannot recover vendor, despite delivery,
ownership until and and when he seeks to
unless the contract is eject the vendee
resolved or rescinded because of non-
payment, he is enforcing
the contract and not
resolving the same
Transmission of Title passes to the Title remains
ownership vendee after compliance
with his obligation

 A Contract to Sell is NOT an Absolute Sale

B. Donation (See Art. 725, Civil Code)

C. Barter (Art. 1468, 1638-1641)

a) First rule – Intention of the parties

b) If intent does not clearly appear –
1) if thing is more valuable than money –BARTER
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2) If 50-50 – SALE
3) If thing is less valuable than the money – SALE

Case Study – Delpher Trades Corp. v. IAC, 157 SCRA 349, 1988

D. Contract for a Piece of Work (Arts. 1713-1715, and 1467)

 If the thing is specially done at the order of another – Contract for a PIECE
OF WORK
 If the thing is manufactured or procured for the general market in the
ordinary course of one’s business – SALE

POINTS OF CONTRACT OF SALE CONTRACT FOR

DISTINCTION
Nature of the object The thing transferred is
one which would have
existed and been the
object of sale to some
other, even if the order
had not been given.
Risk of loss Borne by the buyer
A PIECE OF WORK
The thing transferred is
one not in existence and
which would never have
existed but for the order
of the party desiring to
acquire it.
Borne by the worker or
contractor

Formalities Within the Statute of Under certain

Frauds circumstances

Case Study – Commissioner of Internal Revenue v. Arnoldus Carpentry shop,

159 SCRA 199, 1988

E. Agency to Sell (Art. 1466)

POINTS OF CONTRACT OF SALE CONTRACT OF

DISTINCTION AGENCY TO SELL
Nature of the person who The buyer receives the The agent receives the
receives the object goods as OWNER goods as the goods of the
principal who retains
ownership over them
Necessity of payment of The buyer has to pay the The agent does not pay,
the price price he delivers the price which
in turn he got from his
buyer
Effect of delivery with The buyer, after delivery, The agent does not
respect to the ownership acquires ownership over become the owner even if
of the thing the object of the contract the property has already
been delivered to him
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POINTS OF CONTRACT OF SALE CONTRACT OF

DISTINCTION AGENCY TO SELL
Warranties The seller warrants The agent does not as
long as he acts within his
authority and in the name
of the principal, unless he
agrees
Possibility of returning The buyer, as a general The agent can return the
the object rule, cannot return the object in case he is
object sold unable to sell the same to
third person

Case Study – Quiroga v. Parsons, 38 Phil. 501, 1918

F. Loan

In a loan, the amount is substantially smaller than the value of the security
given.

G. Dacion en Pago (Art. 1245)

POINTS OF SALE DATION IN PAYMENT

DISTINCTION
Existence of a There is NO pre-existing There is a pre-existing
Pre-existing credit credit credit
Effect of the perfection Give rise to obligations Extinguishes obligations
Bargaining power relative There is greater freedom There is less freedom in
to the price of the object in the determination of determining the price
the price
Effect of the performance The giving of the price The giving of the object in
by the buyer of his may generally end the lieu of the credit may
obligation obligation of the buyer extinguish completely or
partially the credit
(depending on the
agreement)

 Dation in Payment requires delivery and transmission of ownership of a

thing owned by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. When there is no such transfer of
ownership in favor of the creditor, as when the possession is only by way
of security, there is no dation in payment. (PNB v. Pineda, 197 SCRA,
1991)
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H. Lease (Arts. 1484 and 1485)

In a sale, the seller transfers ownership; in a lease, the lessor or landlord

transfers merely the temporary possession of the property.

I. Assignment of Property in Favor of Creditors/Cession (Art. 1255)

POINTS OF SALE CESSION

DISTINCTION
Effect of delivery of the Buyer acquires The assignee (creditor)
object/s ownership upon the does not acquire
delivery of the thing ownership over the things
assigned, but only the
right to sell the said
things
Effect of the performance Contract of sale is Unless there is a
of the obligations terminated or stipulation to the
consummated contrary, it shall release
the debtor from
responsibility of the NET
proceeds of the thing
assigned.

Sources: The Law on Sales, Agency and Credit Transactions, Hector S. De Leon
Civil Code of the Philippines, Book No. V, Edgardo Paras, 1995 Edition
Philippine Law on Sales, Cesar L. Villanueva, 1998 Edition
Civil Law Reviewer, Judge Ed Vincent S. Albano, 1998 Edition
Civil Law Reviewer, Desiderio P. Jurado, 1996 Edition
Obligations and Contracts Desiderio, P. Jurado, 1993 Edition
Santos v. Santos, CA , 47 Off. Gaz. 6372

A. Villegas