Part I

Sales
Two Kinds of Contract of Sale

Chapter 1
Nature and Form of the Contract
ARTICLE 1458. By the contract of sale one of the
contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
1. Absolute – the sale is not subject to any condition whatsoever and
where the title or ownership passes to the buyer upon delivery of
the thing sold
2. Conditional – the sale contemplates a contingency, and in general,
where the contract is subject to certain conditions; the delivery of
the thing sold does not transfer ownership until the condition is
fulfilled

A contract of sale may be absolute or conditional. ARTICLE 1459. The thing must be licit and the vendor
must have a right to transfer the ownership thereof at the time it is
delivered.
Concept of Contract of Sale

➢ Contract of Sale – a contract whereby one of the parties (called the Requisites Concerning Object
seller or vendor) obligates himself to deliver something to the other
(called the buyer or purchaser or vendee) who, on his part, binds 1. Things
himself to pay therefor a sum of money or its equivalent (known as ❖ The subject matter must be:
the price) a. determinate
b. licit or lawful
c. not be impossible
Characteristics of a Contract of Sale d. within the commerce of men
❖ If the subject matter of the sale is illicit, the contract is void and
➢ The contract of sale is: cannot, therefore, be ratified.
1. Consensual – it is perfected by mere consent without any ❖ Example of things outside the commerce of men are:
further act at the moment there is meeting of mind upon the a. those of public ownership such as streets, bridges,
thing and upon the price parks, etc.
2. Bilateral – both contracting parties are bound to fulfill b. those common to everybody such as air, sunshine, etc.
obligations reciprocally towards each other 2. Rights
3. Onerous – the thing sold is conveyed in consideration of the ❖ All rights which are not intransmissible or personal may also
price and vice versa be the object of sale (e.g. right of usufruct, right of
4. Commutative – the thing sold is considered the equivalent of conventional redemption).
the price paid and vice versa ❖ While services may be the object of a contract, they cannot be
❖ However, the contract may be aleatory as in the case of the object of a contract of sale.
the sale of a hope (e.g. sweepstakes ticket). ❖ Examples of rights intransmissible by law are:
5. Nominate – it is given a special name or designation in the a. right to vote
Civil Code, namely “Sale” b. right to public office
6. Principal – it does not depend for its existence and validity c. marital rights
upon another contract d. parental rights
❖ Examples of rights which are personal in character are:
a. right to be a partner in a partnership
b. right to act as an agent of another
Essential Requisites of a Contract of Sale
c. right of the bailee to use the thing loaned in a contract of
commodatum
➢ The rules of law governing contracts in general are applicable to
sales.
➢ Sales has the following requisites or elements:
1. Consent or Meeting of the Minds – the consent on the part of Kinds of Illicit Things
the seller or vendor to transfer and deliver and on the part of
the buyer or vendee to pay ➢ The thing may be:
❖ The parties must have legal capacity to give consent and 1. Illicit per se (of its nature)
to obligate themselves. ❖ Example:
❖ Where there is merely an offer by one party, without the a. decayed food unfit for consumption
acceptance of the other, there is no consent. 2. Illicit per accidens (because of some provisions of law
❖ The acceptance of payment by the seller is an indication declaring it illegal)
of his consent to a contract of sale. ❖ Examples:
❖ There may, however, be a sale against the will of the a. prohibited lottery tickets
owner (e.g. expropriation or forced sale of property, b. prohibited drugs
execution of sale to enforce a judgment of a court, c. land sold to an alien
foreclosure sale of mortgaged or pledged property). ➢ Article 1459 refers to both.
2. Object or Subject Matter – the determinate thing which is the
object of the contract
❖ The thing must be determinate or at least capable of Right of Vendor to Transfer Ownership
being determinate.
❖ The subject matter may be real/immovable or 1. One can sell only what he owns
personal/movable property, tangible or intangible, and it ❖ It is essential in order for a sale to be valid that the vendor
may be present or future property. must be able to transfer ownership and, therefore, he must be
❖ The subject matter must be licit and must be within the the owner or at least must be authorized by the owner of the
commerce of man. thing sold.
3. Cause or Consideration – the “price certain in money or its ❖ It is a well-known principle in law that nobody can dispose of
equivalent” that which he does not have.
❖ Price is the cost at which something is obtained in 2. Sufficient if right exists at time of delivery
exchange for something else. ❖ Article 1459, however, does not require that the vendor must
❖ There can be no sale without a price. have the right to transfer ownership of the property sold at the
❖ The absence of price is to be distinguished from failure time of the perfection of the contract.
to pay the price agreed upon. ❖ It is sufficient if he has the right to sell the thing at the time
❖ The cause in sale is, as to the seller, the buyer’s promise when the ownership is to pass.
to pay the price, and as to the buyer, the seller’s promise
to deliver the thing sold.
ARTICLE 1460. A thing is determinate when it is
particularly designated or physically segregated from all others of
Natural or Accidental Elements the same class.

➢ Natural Elements – those which are deemed to exist in certain
contracts, in the absence of any contrary stipulations (e.g. warranty
against eviction, hidden defects)
➢ Accidental Elements – those which may be present or absent
depending on the stipulations of the parties (e.g. conditions,
interest, penalty, time or place of payment)
The requisite that a thing be determinate is satisfied if at
the time 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.
Subject Matter Must Be Determinate
1. When thing determinate
❖ A thing is determinate or specific (not generic) when it is
particularly designated or physically segregated from all
others of the same class.
❖ This requisite, that the object of a contract of sale must be
determinate, is in accordance with the general rule that the
object of every contract must be determinate as to its kind.
❖ A determinate thing is identified by its individuality.
❖ It is not necessary, however, that the thing sold must be in
sight at the time the contract is entered into.
2. Sufficient if subject matter capable of being made determinate
❖ It is sufficient that the thing is determinable or capable of being
made determinate without the necessity of a new or further
agreement between the parties to ascertain its identity,
quantity, or quality.
ARTICLE 1461. Things having a potential existence may
be the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
existence.
The sale of a vain hope or expectancy is void.
Sale of Things Having Potential Existence
➢ Even a future thing not existing at the time the contract is entered
into, may be the object of sale provided it has a potential or possible
existence, that is, it is reasonably certain to come into existence as
the natural increment or usual incident of something in existence
already belonging to the seller, and the title will vest in the buyer
the moment the thing comes into existence.
Sale of a Mere Hope or Expectancy
➢ The efficacy of the sale of a mere hope or expectancy is deemed
subject to the condition that the thing contemplated or expected will
come into existence.
➢ The sale really refers to an “expected thing” which is not yet in
existence, and not to the hope or expectancy which already exists,
in view of the condition that the thing will come into existence.
➢ The sale of hope or expectancy itself is valid even if the thing hoped
or expected does not come into existence, unless the hope or
expectancy is vain, in which case, the sale is void.
ARTICLE 1462. The goods which form the subject of a
contract of sale may be either existing goods, owned or possessed
by the seller, or goods to be manufactured, raised, or acquired by
the seller after the perfection of the contract of sale, in this Title
called “future goods.”
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency which may
or may not happen.
Goods Which May Be the Object of Sale
1. Existing Goods – goods owned or possessed by the seller
2. Future Goods – good to be manufactured, raised, or acquired
Sale of Future Goods
➢ A sale of future goods even though the contract is in the form of a
present sale, is valid only as an executory contract to be fulfilled by
the acquisition and delivery of the goods specified.
➢ The first paragraph of Article 1462 does not apply if the goods are
to be manufactured especially for the buyer and not readily
saleable to others in the manufacturer’s regular course of business.
ARTICLE 1463. The sole owner of a thing may sell an
undivided interest therein.
Sale of Undivided Interest in a Thing
1. By sale owner
❖ Article 1463 covers only the sale by a sole owner of a thing of
an undivided share or interest thereof.
❖ The sole owner of a thing may sell the entire thing; or only a
specific portion thereof; or an undivided interest therein and
such interest may be designated as an aliquot part of the
whole.
❖ The legal effect of the sale of an undivided interest in a thing
is to make the buyer a co-owner in the thing sold.
2. By co-owner
❖ The co-owner of a thing, being the owner of his undivided
interest therein, can dispose of his share even without the
consent of the co-owner/s.
❖ The effect of the alienation shall be limited to the portion which
may be allotted to the vendor in the division of the property
upon termination of the co-ownership.
ARTICLE 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 goods of the same kind and quality, unless a
contrary intent appears.
Sale of an Undivided Share of a Specific Mass
1. Meaning of Fungible Goods
❖ Fungible Goods – goods of which any unit is, from its nature
or by mercantile usage, treated as the equivalent of any other
unit
2. Effect of Sale
❖ The owner of a mass of goods may sell only an undivided
share thereof, provided the mass is specific or capable of
being made determinable.
a. By such sale, the buyer becomes a co-owner with the
seller of the whole mass in the proportion in which the
definite share bought bears to the mass.
b. It must follow that the aliquot share of each owner can
be determined only by the measurement of the entire
mass.
c. If later on it be discovered that the mass of fungible
goods contains less than what was sold, the buyer
becomes the owner of the whole mass; furthermore, the
seller shall supply whatever is lacking from goods of the
same kind and quality, subject to any stipulation to the
contrary.
3. Risk of Loss
❖ If the buyer becomes a co-owner, with the seller, or other
owners of the remainder of the mass, it follows that the whole
mass is at the risk of all the parties interested in it, in
proportion to their various holdings.
4. Subject Matter
❖ In the sale of an undivided share, either of a thing or that of
goods, the subject matter is an incorporeal or intangible right.
Here, ownership passes to the buyer by the intention of the
parties.
ARTICLE 1465. Things subject to a resolutory condition
may be the object of the contract of sale.
Sale of Thing Subject to a Resolutory Condition
➢ Resolutory Condition – an uncertain event upon the happening of
which the obligation (or right) subject to it is extinguished; hence,
the right acquired in virtue of the obligation is also extinguished
➢ If the resolutory condition attaching to the object of the contract,
which object may include things as well as rights, should happen,
then the vendor cannot transfer the ownership of what he sold since
there is no object.
ARTICLE 1466. In construing a contract containing
provisions characteristic of both the contract of sale and of the
contract of agency to sell, the essential clauses of the whole
instrument shall be considered.
Sale Distinguished from Agency to Sell
➢ Contract of Agency – a person binds himself to render some
service or to do something in representation or on behalf of
another, with the consent or authority of the latter
➢ In order to classify a contract, due regard must be given to its
essential clauses. A contract is what the law defines it to be, and
not what it is called by the contracting parties.
 Sale Agency to Sell
The agent receives the goods as Should such person or persons be unable or unwilling to
The buyer receives the goods as
the goods of the principal who fix it, the contract shall be inefficacious, unless the parties
owner.
retains his ownership over them. subsequently agree upon the price.
The agent has simply to account
for the proceeds of the sale he If the third person or persons acted in bad faith or by
The buyer has to pay the price.
may make on the principal’s mistake, the courts may fix the price.
behalf.
The agent can return the object Where such third person or persons are prevented from
The buyer, as a general rule,
in case he is unable to sell the
cannot return the object sold. fixing the price or terms by fault of the seller or the buyer, the party
same to a third person.
not in fault may have such remedies against the party in fault as
The agent makes no warranty for
which he assumes personal are allowed the seller or the buyer, as the case may be.
The seller warrants the thing
liability as long as he acts within
sold.
his authority and in the name of
the seller. When Price Considered Certain
The agent in dealing with the
The buyer can deal with the thing
thing received must act and is 1. No sale if price not certain or ascertainable
sold as he pleases, being the
bound according to the ❖ The price must be certain or capable of being ascertained in
owner.
instructions of his principal. money or its equivalent.
❖ Money is to be understood as currency and its equivalent
means mercantile instruments generally accepted as
ARTICLE 1467. A contract for the delivery at a certain representing money (e.g. promissory notes, checks).
price of an article which the vendor in the ordinary course of his 2. Cases when price considered certain
business manufactures or procures for the general market, ❖ The price is certain if:
whether the same is on hand at the time or not, is a contract of sale, a. the parties have fixed or agreed upon a definite amount
but if the goods are to be manufactured specially for the customer b. it be certain with reference to another thing certain
and upon his special order, and not for the general market, it is a c. the determination of the price is left to the judgment of a
contract for a piece of work. specified person/s
❖ The last 2 cases are applicable only when no specific amount
has been stipulated by the parties.
Sale Distinguished from Contract for a Piece of Work

➢ Contract for a Piece of Work – the contractor binds himself to Effect Where Price Fixed by Third Person Designated
execute a piece of work for the employer, in consideration of a
certain price or compensation ➢ As a general rule, the price fixed by the third person specified by
➢ The contractor may either employ his labor or skill, or also furnish the parties is binding upon them.
the material. ➢ However, there are exceptions, such as:
1. When the third person acts in bad faith or by mistake as when
Contract for Work, Labor or the third person fixed the price having in mind not the thing
Contract of Sale Materials, or for a Piece of which is the object of the sale, but another analogous or
Work similar thing, in which case the court may fix the price
The thing transferred is one The thing transferred is one not ❖ Mere error in judgment cannot serve as basis for
which would have existed and in existence and which never disregarding the price fixed.
been the subject of sale to some would have existed but for the 2. When the third person disregarding specific instructions or the
other person, even if the order order of the party desiring to procedure laid down by the parties, or the data given him,
had not been given. acquire it. fixed an arbitrary price
The risk of loss before delivery is
The risk of loss is borne by the borne by the worker or
buyer. contractor, not by the employer
(the person who ordered). Effect Where Price Not Fixed by Third Person Designated
These are within the Statute of These are not within the Statute
Frauds. of Frauds. ➢ If the third person designated by the parties to fix the price refuses
or cannot fix it (without fault of the seller and the buyer), the contract
shall become ineffective, as if no price had been agreed upon
unless of course, the parties subsequently agree upon the price.
ARTICLE 1468. If the consideration of the contract
➢ If such third person is prevented from fixing the price by the fault of
consists partly in money, and partly in another thing, the
the seller or the buyer, the party not in fault may obtain redress
transaction shall be characterized by the manifest intention of the
against the party in fault which consists of a choice between
parties. If such intention does not clearly appear, it shall be
rescission or fulfillment, with damages in either case. If the innocent
considered a barter if the value of the thing given as a part of the
party chooses fulfillment, the court shall fix the price.
consideration exceeds the amount of the money or its equivalent;
otherwise, it is a sale.

ARTICLE 1470. Gross inadequacy of price does not affect

Sale Distinguished from Barter
Contract of Barter or
Contract of Sale
Exchange
One of the parties binds himself
The vendor gives a thing in
to give one thing in consideration
consideration for a price in
of the other’s promise to give
money.
another thing.
➢ The distinction is not always adequate to distinguish one from the
other. Hence, the rule in Article 1468 for those cases in which the
thing given in exchange consists partly in money and partly in
another thing.
❖ In such cases, the manifest intention of the parties is
paramount in determining whether it is one of barter or of sale
and such intention may be ascertained by taking into account
the contemporaneous and subsequent acts of the parties.
❖ If this intention cannot be ascertained, then the last sentence
of the article applies. But if the intention is that the contract
shall be one of sale, then such intention must be followed even
though the value of the thing given as a part of the
consideration is more than the amount of the money given.
➢ The only point of difference between the 2 contracts is in the
element which is present in sale but not in barter, namely: “price
certain in money or its equivalent”.
ARTICLE 1469. 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
judgment of a special person or persons.
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.
Effect of Gross Inadequacy of Price in Voluntary Sales
1. General Rule
❖ While a contract of sale is commutative, mere inadequacy of
the price or the fact that the bargain was a hard one generally
does not affect its validity when both parties are in a position
to form an independent judgment concerning the transaction.
2. Where low price indicates defect in the consent
❖ The inadequacy of price, however, may indicate a defect in
the consent such as fraud, mistake, or undue influence is
present in which case the contract may be annulled not
because of the inadequacy of the price but because the
consent is vitiated; or where the price is so grossly inadequate
or low as to be “shocking to court’s conscience” that no man
in his right mind would accept.
Effect of Gross Inadequacy of Price in Involuntary or Execution
Sales
1. General Rule
❖ Judicial or Execution Sale – one made by a court with respect
to the property of a debtor for the satisfaction of his unpaid
indebtedness
❖ Mere inadequacy of price is not a sufficient ground for the
cancellation of an execution sale.
2. Where price is so low as to be “shocking to the conscience”
❖ If the “price is so inadequate as to shock the conscience of
the Court,” a judicial sale will be set aside.
3. Where seller given the right to repurchase
❖ The validity of the sale is not necessarily affected where the
law gives to the owner the right to redeem.
ARTICLE 1471. 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.
Effect Where Price Simulated
➢ If the price is simulated or false, the sale is void but the contract
shall be valid as a donation.
➢ If the contract is not shown to be a donation or any other act or
contract transferring ownership because the parties do not intend
to be bound at all, the ownership of the thing is not transferred. The
contract is void and inexistent.
ARTICLE 1472. The price of securities, grain, liquids, and
other things shall also be considered certain, when the price fixed
is that which the thing sold would have on a definite day, or in a
particular exchange or 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.
Price on a Given Day at Particular Market
➢ The above provision follows the principle in Article 1469.
➢ When an amount is fixed above or below the price on a given day
or in a particular exchange or market, the said amount must be
certain, otherwise, the sale is inefficacious because the price
cannot be determined.
➢ This article is especially applicable to fungible things (e.g.
securities, grain, liquids), the prices of which are subject to
fluctuations of the market.
ARTICLE 1473. The 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.
Fixing of Price by One of the Contracting Parties Not Allowed
➢ If consent is essential to a contract of sale, the determination of the
price cannot be left to the discretion of one of the contracting
parties, otherwise, it cannot be said that the other consented to a
price he did not and could not previously know.
➢ To be just, the price must be determined impartially by both parties
or left to the judgment of a specified person/s.
➢ Where the price fixed by one party is accepted by the other, the
contract is deemed perfected because in this case, there exists a
true meeting of minds upon the price.
ARTICLE 1474. Where the price cannot be determined in
accordance with the preceding articles, or in any other manner, the
contract is inefficacious. However, 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 of each particular
case.
Effect of Failure to Determine Price
1. Where contract executory
❖ If the price cannot be determined in accordance with Articles
1469 and 1472, or in any other manner, the contract is without
effect.
❖ Consequently, there is no obligation on the part of the vendor
to deliver the thing and on the part of the vendee to pay.
2. Where delivery has been made
❖ If the thing or any part thereof has already been delivered and
appropriated by the buyer, the latter must pay a reasonable
price therefor.
❖ The reasonable price or value of goods is generally the market
price at the time and place fixed by the contract or by law for
the delivery of the goods.
ARTICLE 1475. 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.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
Stages of a Contract of Sale
1. Negotiation – the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is
perfected
2. Perfection – takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of the
parties as to the object of the contract and upon the price
3. Consummation – begins when the parties perform their respective
undertakings under the contract of sale, culminating in the
extinguishment thereof
Perfection of Contract of Sale
➢ The above provision follows the general rule that contracts are
perfected by mere consent.
➢ The contract of sale being consensual, it is perfected without the
necessity of any other circumstances.
➢ From the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price, the reciprocal
obligations of the parties arise.
➢ Ownership is not transferred until delivery of the thing.
➢ In case one of the contracting parties should not comply with what
is incumbent upon him, the injured party may sue for fulfillment or
rescission with the payment of damages in either case.
Right of Owner to Fix His Own Price
➢ The owner of a thing has the right to quote his own price,
reasonable or unreasonable. It is up to the prospective buyer to
accept or reject it.
➢ He is also well within his right to quote a small or nominal
consideration and such consideration is just as effectual and
valuable a consideration as a larger sum stipulated or paid.
Effect of Failure to Pay Price or Absence of Price
1. Price stipulated
❖ The failure to pay the stipulated price after the execution of
the contract does not convert the contract into one without
cause or consideration as to vitiate the validity of the contract.
❖ Such failure does not ipso facto resolve the contract in the
absence of any agreement to that effect.
❖ The vendor’s remedy in such case is generally to demand
specific performance or rescission or cancellation of the sale
with damages in either case.
2. No price stipulated
❖ The above situation is to be distinguished from a contract of
sale where the purchase price which appears thereon as paid,
has in fact, never been paid by the buyer.
❖ In such case, the sale is void and non-existent as without
cause or consideration.
ARTICLE 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots,
each lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in other
customary manner. Until such announcement is made, any bidder
may retract his bid; and the auctioneer may withdraw the goods
from the sale unless the auction has been announced to be without
reserve.
(3) A right to bid may be reserved expressly by or on
behalf of the seller, unless otherwise provided by law or by
stipulation.
(4) Where notice has not been given that a sale by auction
is subject to a right to bid on behalf of the seller, it shall not be
lawful for the seller to bid himself or to employ or induce any
person to bid at such sale on his behalf or for the auctioneer, to
employ or induce any person to bid at such sale on behalf of the
seller or knowingly to take any bid from the seller or any person
employed by him. Any sale contravening this rule may be treated
as fraudulent by the buyer.
Rules Governing Auction Sales
1. Sales of separate lots by auction are separate sales
 ❖ Where separate lots are the subject of separate biddings and
are separately knocked down, there is a separate contract in
regard to each lot.
2. Sale perfected by the fall of the hammer
❖ Each bid is an offer and the contract is perfected only by the
fall of the hammer or in other customary manner.
❖ The bidder may retract his bid and the auctioneer may
withdraw the goods from sale any time before the hammer
falls.
❖ If the sale has been announced to be without reserve, the
auctioneer cannot withdraw the goods from sale once a bid
has been made and the highest bidder has a right to enforce
his bid.
3. Right of seller to bid in the auction
❖ The seller or his agent may bid in an auction sale provided:
a. such right was reserved
b. notice was given that the sale is subject to a right to bid
on behalf of the seller
c. the right to bid by the seller is not prohibited by law or
stipulation
❖ Where no notice given of right to bid
• When there is no notice that the sale is subject to seller’s
right to bid, it shall be unlawful for the seller to bid either
directly or indirectly or for the auctioneer to employ or
induce any person to bid on behalf of the seller.
• The purpose of the notice is to prevent puffing or secret
bidding by or on behalf of the seller by people who are
not themselves bound.
• The employment of a puffer or by-bidder is a fraud upon
the purchaser and a sufficient ground for relieving him
from his bid and avoiding the sale.
❖ Where notice given of right to bid
• Though bidding by the seller or his agent is fraudulent, a
right to bid may be expressly reserved by or on behalf of
the seller.
• Where there is notice of the intention to bid by the seller,
the bidding in such case would not operate as a fraud.
ARTICLE 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery
thereof.
ARTICLE 1478. The parties may stipulate that ownership
in the thing shall not pass to the purchaser until he has fully paid
the price.
Ownership of Thing Transferred by Delivery
➢ It is only after the delivery of the thing sold that the purchaser
acquires a real right or ownership over it.
➢ The delivery may be actual or constructive.
Exception to the Rule
➢ The parties may stipulate that despite the delivery, the ownership
of the thing shall remain with the seller until the purchaser has fully
paid the price.
➢ Non-payment of the price, after the thing has been delivered,
prevents the transfer of ownership only if such is the stipulation of
the parties.
ARTICLE 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
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.
Kinds of Promise Treated in Article 1479
➢ The above article applies specifically to a promise “to buy or to sell.”
➢ It refers to 3 kinds of promise, namely:
1. An accepted unilateral promise to sell in which the promisee
(acceptor) elects to buy
2. An accepted unilateral promise to buy in which the promisee
(acceptor) elects to sell
3. A bilateral promise to buy and sell reciprocally accepted in
which either of the parties chooses to exact fulfillment
Effect of Unaccepted Unilateral Promise
➢ 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 offer is called policitation.
Meaning of Option
➢ Option – a privilege existing in one person for which he has paid a
consideration which gives him the right to buy or sell from or to
another person, if he chooses, at any time within the agreed period
at a fixed price, or under, or in compliance with certain terms and
conditions
➢ An option is a contract, a preparatory contract separate and distinct
from the main contract itself.
➢ It is only when the option is exercised when a sale may be
perfected.
Effect of Accepted Unilateral Promise
➢ A unilateral promise to sell or to buy a determinate thing for a price
certain does not bind the promisor even if accepted and may be
withdrawn at any time.
➢ It is only if the promise is supported by a consideration distinct and
separate from the price that its acceptance will give rise to a
perfected contract.
➢ The promisee has the burden of proving the existence of such
consideration.
Effect of Bilateral Promise to Buy and Sell
➢ When the promise is bilateral, it has practically the same effect as
a perfected contract of sale since it is reciprocally demandable.
➢ The concurrence of both acts — the offer and the acceptance —
generates a binding contract of sale.
ARTICLE 1480. Any injury to 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.
This rule shall apply to the sale of fungible things, made
independently and for a single price, or without consideration of
their weight, number, or measure.
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.
Risk of Loss or Deterioration
1. If the thing is lost before perfection, the seller bears the loss in
accordance with the principle that the thing perishes with the
owner.
2. If the thing is lost at the time of perfection, the contract is void or
inexistent. The legal effect is the same as when the object is lost
before the perfection of the contract of sale.
3. If the thing is lost after perfection but before its delivery, the risk of
loss is shifted to the buyer as an exception to the rule of res perit
domino.
4. If the thing is lost after delivery, the buyer bears the risk of loss
following the general rule of res perit domino.
Scope of Article 1480
1. The first rule applies to non-fungible things (par. 1) and fungible
things (see Art. 1464) sold independently and for a single price or
for a price fixed without consideration of their weight, number, or
measure.
❖ Under the first rule, which follows the Roman rule, “the risk of
the thing sold passes to the buyer, even though the thing has
not yet been delivered to him.”
❖ In other words, the buyer assumes the risk of loss caused by
fortuitous event, without the fault of the seller, that is, in spite
of the exercise of due diligence on his part and before he has
incurred in delay, after the perfection of the contract to the time
of delivery.
❖ With respect to the fruits, the buyer has a right to the same
from the time the obligation to deliver the thing arises.
❖ If the risk ought to belong to the buyer before delivery, “the
benefit ought to belong to him who has the risk.”
❖ Article 1480, paragraph 1 is applicable only where the thing is
determinate.
2. The second rule relates to fungible things sold for a price fixed in
relation to weight, number, or measure.
❖ Under the third paragraph, “the risk shall not be imputed to the
vendee until they have been weighed, counted, or measured
and delivered.”
❖ However, the vendee assumes the risk if he has incurred in
delay in receiving the goods sold.

ARTICLE 1481. 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.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the sample.
Sale of Goods by Description and/or Sample
➢ The buyer is given a reasonable opportunity of comparing the bulk
with the description or the sample.
➢ The term bulk of the goods, as used in law, does not designate the
greater portion of the goods. It denotes the good themselves as
distinguished from the sample and/or description with which they
must correspond.
1. Sale by description
❖ Sale by description 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 him by the vendor, or has seen the
goods but the want of identity is not apparent on
inspection.
❖ If the bulk of the goods delivered do not correspond with
the description, the contract may be rescinded.
2. Sale by sample
❖ To constitute a sale by sample, it must appear that the
parties contracted solely with reference to the sample,
with the understanding that the bulk was like it.
3. Sale by description and sample
❖ When a sale is made both by sample and by description,
the goods must satisfy all the warranties 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.
ARTICLE 1482. 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.
Meaning of Earnest Money
➢ Earnest Money – money given by the buyer to the seller to bind the
bargain; actually a partial payment of the purchase price and is
considered as proof of the perfection of the contract
➢ Since earnest money constitutes an advance payment, it must be
deducted from the total price.
Earnest Money and Option Money Distinguished
Earnest Money Option Money
It is the money given as distinct
It is part of the purchase price. consideration for the option
contract.
It is given only where there is This applies to a sale not yet
already a sale. perfected.
When earnest money is given, When the would-be buyer gives
the buyer is bound to pay the option money, he is not required
balance. to buy.
➢ Option money may become earnest money if the parties so agree.
ARTICLE 1483. 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.
Form of Contract of Sale
1. 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.
2. Where contract covered by Statute of Frauds
❖ In case the contract of sale should be covered by the Statute
of Frauds, the law requires that it be in writing subscribed by
the party charged, otherwise the contract cannot be enforced
by action; and where the “applicable statute” required that the
contract of sale be in a certain form for its validity, the required
form must be observed in order that the contract may be both
valid and enforceable.
❖ Under the Statute of Frauds, the following contracts must be
in writing:
a. Sale of personal property at a price not less than
P500.00
b. Sale of real property or an interest therein regardless of
the price involved
c. Sale of property not to be performed within a year from
the date thereof regardless of the nature of the property
and the price involved
3. Where form is required in order that a contract may be valid
❖ Where the “applicable statute” requires that the contract of
sale be in certain form for its validity, the required form must
be observed in order that the contract may be both valid and
enforceable.
4. Where form is required only for the convenience of the parties
❖ In certain cases, a certain form (e.g. public instrument) is
required for the convenience of the parties in order that the
sale may be registered in the Registry of Deeds to make
effective as against third persons the right acquired under
such sale.
Sale of Real Property or an Interest Therein
➢ A sale of a piece of land or interest therein when made through an
agent is void unless the agent’s authority is in writing.
➢ For the sale of real property to be effective against third persons,
the sale must be registered in the Registry of Deeds (or Property)
of the province or city where the property is located.
➢ The sale must be in a public instrument or document acknowledged
before a notary public or any official authorized by law to administer
oath for otherwise the registration will be refused.
➢ The sale of land in a private instrument is valid as between the
parties but it cannot be registered to bind or affect third persons.
Statute of Frauds Applicable Only to Executory Contracts
➢ It must be remembered that the Statute of Frauds is applicable only
to executory contracts (where no performance, i.e., delivery and
payment, has as yet been made by both parties) and not to
contracts which are totally (consummated) or partially performed.
➢ The reason for the rule is that partial performance, like the writing,
furnishes reliable evidence of the intention of the parties or the
existence of the contract.
➢ A contrary rule would result in injustice or unfairness to the party
who has performed his obligation.
ARTICLE 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:
(1) Exact fulfillment of the obligation, should the vendee
fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay
cover two or more installments;
(3) 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.
Remedies of Vendor in Sale of Personal Property Payable in
Installments
➢ The vendor of personal property payable in installments may
exercise any of the following remedies:
1. Elect fulfillment upon the vendee’s failure to pay
2. Cancel the sale, if the vendee shall have failed to pay two or
more installments
3. Foreclose the chattel mortgage, if one has been constituted,
if the vendee shall have failed to pay two or more installments
Nature of the Remedies
➢ These remedies are alternative and are not to be exercised
cumulatively or successively and the election of one is a waiver of
the right to resort to the others.
Right of Vendor to Recover Unpaid Balance of Purchase Price
1. Remedy of specific performance
❖ The vendor who has chosen to exact the fulfillment of the
obligation is not limited to the proceeds of the sale, on
execution, of the mortgaged goods.
 ❖ He may still recover from the purchaser the unpaid balance of
the price, if any on the real and personal properties of the
purchaser not exempt by law from attachment or execution.
2. Remedy of cancellation
❖ If the vendor chooses rescission or cancellation of the contract
upon the vendee’s failure to pay two or more installments, the
latter can demand only the return of payments already made
unless there is a stipulation about forfeiture.
3. Remedy of foreclosure
❖ If the vendor has chosen the third remedy of foreclosure of the
chattel mortgage, he shall have no further action against the
vendee for the recovery of any unpaid balance of the price
and any agreement to the contrary is void.

Recovery of Deficiency After Foreclosure Prohibited

➢ The principal object of Article 1484 (No. 3) is to remedy the abuses

committed in connection with foreclosure of chattel mortgages.
➢ In all proceedings for the foreclosure of chattel mortgages, the
mortgage is limited to the property included in the mortgage.

ARTICLE 1485. 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.

Lease of Personal Property with Option to Buy

➢ 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.
➢ The evident purpose of Article 1485 is to prevent vendors from
resorting to this form of contract which, usually, is in reality a
contract of sale of personal property payable in installments in
contravention of the provisions of Article 1484.

ARTICLE 1486. In the cases 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.

Stipulation Authorizing Forfeiture of Installments or Rents Paid

➢ In sales of personal property by installments or leases of personal

property with option to buy, the parties may stipulate that the
installments or rents paid are not to be returned.
➢ Such stipulation is valid “insofar as the same may not be
unconscionable under the circumstances” otherwise the court has
the power to order the return of a portion of the total amount paid
in installments or rents.

ARTICLE 1487. The expenses for the execution and

registration of the sale shall be borne by the vendor, unless there
is a stipulation to the contrary.

Expenses for Execution and Registration

➢ Under this article, the vendor has the duty to pay not only the
expenses for the execution of the sale but also for the registration
of the same in the absence of any agreement between the parties
to the contrary.
➢ Expenses incurred subsequent to the transfer of title are to be
borne by the buyer, unless caused by the fault of the seller.

ARTICLE 1488. The expropriation of property for public

use is governed by special laws.

Expropriation of Property for Public Use

➢ The procedure for the exercise of the power of eminent domain is

provided for in Rule 67 of the Rules of Court.
➢ Expropriation must be decreed by competent authority and for
public use and always upon payment of just compensation.