Supplemental Notes

Chapter 1, 2 and 3 (Sales)

1. Define contract of sale

By the contract of sale one of the contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.

2. Characteristics of a contract of sale

a. Bilateral The parties are bound by reciprocal obligations.
b. Consensual It is perfected by mere consent.
c. Commutative The parties exchange almost equivalent values.
d. Nominate It has special name given to it by law.
e. Onerous There is an exchange of valuable considerations
f. Principal It can exist by itself.

3. Essential requisites of contract of sale

a. Consent
b. Object
(1) Must be licit
(2) Seller must have the right to transfer ownership of object at the time ofe
delivery
(3) Must be determinate
(4) Emptio rei speratae is the sale of future thing
(5) Emptio spei is a sale of hope or expectancy.
(6) Vain hope or expectancy void
(7) Future inheritance void

c. Price must be certain

(1) Fixed by the parties
(2) If it be certain with reference to another thing certain.
(3) If the determination of the price is left to the judgment of a specified person
or persons.
(a) The third person is unable or unwilling to fix the price. - The contract is
inefficacious or null and void.
(b) The third person acted in bad faith or by mistake. - The injured party
may ask the court to fix the reasonable price.
(c) The third person is prevented from fixing the price or terms by fault of
the seller or the buyer. - The injured party may ask for fulfilment or
rescission plus damages.
(4) If the price is fixed by one of the contracting parties and accepted by the
other.
(5) Inadequacy of price in a contract of sale valid unless there is a defect in
consent or parties intended a donation or some other contract.
(6) Simulated price in a contract of sale void but the parties may prove that
the contract is a donation or some other contract.

4. Natural elements of the contract of sale Elements which are presumed to

exist in a contract of sale unless validly waived by the contracting parties.
a. Warranty against eviction
b. Warranty against hidden defects
c. Warranty against non-apparent and unregistered servitude or encumbrance
d. Warranty for merchantability

5. Accidental elements in the contract of sale Elements which do not exist in a

contract of sale unless provided by the contracting parties.

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 a. Place of delivery and payment
b. Time of delivery and payment
c. Terms or conditions of payment
d. Interest of the price

6. Contract of sale vs. Agency to sell

a. In sale, ownership passes to the buyer, while in agency to sell, ownership is
retained by the principal.
b. In sale, the buyer pays the seller, while in agency to sell, the buyer pays the
agent and the latter transmits the money to the principal.
c. In sale, the goods are delivered by the seller to the buyer while in agency to
sell, it is delivered by the agent to the final consumer.

7. Contract of sale vs. Contract for a piece of work

a. It is a contact of sale if it is for the delivery at a certain price of an article which
the vendor in the ordinary course of business, manufactures or procures for
the general market, whether the same is on hand or not while it is a contract
for a piece of work if the goods are to be manufactured especially for the
customer upon his special order and not for the general market.

8. Sale vs barter
a. In sale there is an exchange of thing and money, while in barter there is an
exchange of thing and thing.

b. If consideration is party in money and party in thing

(1) Determine the manifest or evident intention of the parties.

(2) The contract is one of barter if the value of the thing given as part of the
consideration exceeds the monetary consideration.
(3) The contract is one of sale if the monetary consideration is more than the
value of the thing given as part of the consideration.
(4) The contract is one of sale if the monetary consideration is equal to the
value of the thing given as part of the consideration.

9. Bilateral promise to buy and sell is as good as perfected contract of sale

10. Unilateral promise to buy or sell accepted by the promissee is binding only if
supported by option money.

11. Policitacion refers to unilateral promise not accepted by the promisee, therefore,
it does not produce any effect.

12. Who bears the risk of loss?

a. Before perfection seller
b. At the time of perfection seller
c. After perfection but before delivery buyer
d. After perfection but after delivery buyer

13. Earnest (arras) vs. option money

Earnest money is proof of perfection of contract of sale while option money is

proof of perfection of option contract of sale.

Earnest money is part of the purchase price while option money is not part of
the purchase price.

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 14. Recto Law ( Remedies of the Seller)

a. Exact fulfillment of the obligation, should the vendee fail to pay;

b. Cancel the sale, should the vendee's failure to pay cover two or more
installments;
c. 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.

15. Maceda Law (Rights of the Buyer)

Section 3. In all transactions or contracts involving the sale or financing of real

estate on installment payments, including residential condominium apartments
but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic
Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least
two years of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:

(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 fifty per cent of the
total payments made, and, after five years of installments, an additional five per
cent 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 thirty
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.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made.

Section 4. In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date the
installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period,
the seller may cancel the contract after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial
act.

16. Capacity to buy and sell

a. If one of the parties is incapable of giving consent the contract is voidable.

b. If both parties are incapable of giving consent the contract is unenforceable

c. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage
settlements; or
(2) When there has been a judicial separation of property under article 191

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 d. Persons who are prohibited from acquiring by purchase, even at public or
judicial auction, sales in legal redemption, compromises or renunciation:

(1) The guardian, the property of the person or persons under his
guardianship.
(2) Agents, the property whose administration or sale may have been entrusted
to them, unless the consent of the principal has been given.
(3) Executors and administrators, the property of the estate under
administration.
(4) Public officers and employees, the property of the State or GOCC under
their administration.
(5) Justices, judges, prosecuting attorneys, clerks of court and other officers
and employees connected with the administration of justice, the property
and rights in litigation.

17. Loss of specific at the time of perfection

a. If entirely loss the contract of sale is without any effect/void
b. If partially loss the buyer may:
(1) Withdraw
(2) Demand remaining part and pay its proportionate part

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