REGFRAME – LAW ON SALES Characteristics of Sale

Articles 1458-1637 of the Civil Code of the 1. CONSENSUAL – perfected by the mere
Philippines consent of the parties.
2. BILATERAL – reciprocal obligations of both
Art. 1458. By the contract of sale, one of the
parties to a sale
contracting parties obligates himself to transfer
3. ONEROUS – the thing sold is conveyed in
ownership of and to deliver a determinate thing, and
consideration of the price and vice versa.
the other to pay therefor a price in money or its
4. COMMUTATIVE – the thing sold is equivalent
equivalent.
to the price paid.
SELLER/VENDOR – the contracting party who has 5. NOMINATE – has a special name or
the obligation to: designation under the law.
6. PRINCIPAL – does not depend for its
a. Transfer ownership &
existence and validity on some other contract.
b. Deliver a determinate thing
Elements of a Contract of Sale
BUYER/VENDEE – the other contracting party who
1. CONSENT
has the obligation to:
▪ Meeting of the minds between the seller and
a. Pay a price certain in money or its equivalent
the buyer as to the offer and acceptance
Kinds of Sale upon the thing and the price
▪ Note: legal capacity to give consent
2. OBJECT OR SUBJECT MATTER
▪ Refers to the determinate thing or a thing
capable of being made determinate
▪ May be real or personal properties, rights
3. CAUSE OR CONSIDERATION
▪ Price certain in money or its equivalent (as to
Sales as Distinguished from other Contracts
the seller)
▪ Delivery of the thing (as to the buyer)

CONSENT
- Express or implied
- Legal capacity to give consent
- If consent is not given by one or both parties,
the contract is void
IN RELATION TO CAPACITY TO BUY OR SELL
“Art. 1489. All persons who are authorized in this
Code to obligate themselves, may enter into a
contract of sale, saving the modifications contained
in the following articles.
Where necessaries are those sold and delivered to
a minor or other person without capacity to act, he
must pay a reasonable price therefor. Necessaries
are those referred to in Article 290.”
1. JURIDICAL CAPACITY
- The fitness to be the subject of legal relations
2. CAPACITY TO ACT
- Power to do acts with legal effects
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 1. ABSOLUTE INCAPACITY – Those who cannot
validly give consent to any contract.
ex. Minors, insane or demented persons, deaf
mutes who do not know how to write.
2. RELATIVE INCAPACITY – Those prohibited to
enter into specific contracts under certain circs.
a. Sale between spouses, in general (Art. 1490)
b. Sale by persons mentioned under Art. 1491,
either in person or through an intermediary, namely:
- Guardians, agents, executors and administrators
- Public officers and employees
- Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other
officers and employees connected with the
administration of justice (includes the
act of acquiring by assignment and shall likewise
apply to lawyers)
- Any others specially disqualified by law.
OBJECT
THING must be:
1. LICIT and vendor must have the RIGHT TO
TRANSFER OWNERSHIP thereof at the time
it is delivered (Art. 1459)
- Lawful, not contrary to law, morals, good customs,
public policy
- Within the commerce of men
2. DETERMINATE (Art. 1460)
- Particularly designated;
- Physically segregated from all others of the same
class; or
- Capable of being made determinate without
necessity of a new or further agreement
3. HAVE POTENTIAL EXISTENCE (Art. 1461)
- Emptio Rae Speretae
- Future things may be the object of a sale (potential
existence and title vests in the buyer the moment the
thing comes into existence)
* SALE OF A MERE HOPE OR EXPECTANCY or
Emptio Spei is VALID
* SALE OF VAIN HOPE OR EXPECTANCY is VOID
4. POSSIBLE
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SALE OF:
➢ EXISTING GOODS or FUTURE GOODS (Art.
1462)
- Future goods – to be manufactured, raised or
acquired by the seller after the perfection of
the contract of sale
➢ UNDIVIDED INTEREST (Art. 1463)
- By sole owner – sells undivided share or interest or
specific portion
- By a co-owner – may dispose share without the
consent of the other co-owners
➢ UNDIVIDED SHARE OF A SPECIFIC MASS
(Art. 1464)
- Fungible goods – goods of which any unit is treated
as the equivalent of any other unit (e.g. grain, oil or
wine)
- Undivided share – buyer becomes co-owner in
proportion to the definite share bought (e.g. 250
unsegregated cavans)
➢ THING SUBJECT TO A RESOLUTORY
CONDITION (Art. 1465)
- Resolutory condition – uncertain event the
happening of which shall extinguish the obligation
(e.g. Pacto de Retro Sale)
➢ GOODS BY DESCRIPTION AND/OR SAMPLE
(Art. 1481)
- may be rescinded IF bulk of goods delivered do
not correspond with the description or sample
• Sale by description – sells things as being of a
particular kind; relies on description given
• Sale by sample – a small quantity is exhibited
as fair specimen of the bulk; implied warranty
that the goods shall be free from any defect not
apparent
CAUSE or CONSIDERATION
PRICE must be:
1. CERTAIN (Art. 1469)
• Capable of being ascertained in money or its
equivalent
• IF left to the judgment of a third person – valid
except if third person is in bad faith
2. ADEQUATE
• Gross inadequacy of price (Art. 1470) – shall
not invalidate sale; may indicate defect in
consent or that parties intended a donation
or other contract

3. NOT BE SIMULATED (Art. 1471)
• If simulated (i.e. fictitious price), the sale is void
• But the act may be a donation or some other
contract
4. BE FIXED BY BOTH PARTIES (Art. 1473)
- Cannot be left to the discretion of one of the
contracting parties
- However, if price fixed is accepted, the sale is
perfected
- If price cannot be determined, the sale is void.
But where delivery was made, the buyer must pay
a reasonable price therefor (Art. 1474)
PERFECTION OF SALE
“Art. 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.”
- Meeting of the minds upon the thing and the
price
- In case of failure to pay the price, the seller may
demand specific performance or rescission of
the contract, with payment of damages in both
cases (in relation to Art. 1592)
GENERAL RULE: DELIVERT TRANSFERS
OWNERSHIP
“Art. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof.”
- Title passes upon actual or constructive delivery
EXCEPT when there is a stipulation that
ownership shall not pass until full payment of the
price (in relation to Art. 1478)
OPTION CONTRACT
(Par. 2, Art. 1479)
• Property owner agrees with another person
that the latter shall have the right to buy the
former’s property at a fixed price within an
agreed period
• Right or privilege to buy the owner’s property
and pays a consideration therefor
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• OPTION MONEY – a consideration separate
and distinct from the purchase price for the
exercise of the above right or privilege
EARNEST MONEY
(Art. 1482)
- Considered as part of the purchase price
- Proof of the perfection of the contract of sale
- i.e. down payment, partial payment
deductible from the purchase price
FORM OF SALE
“Art. 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.”
GENERAL RULE: any form (i.e. in writing, word of
mouth, partly in writing and word of mouth, or may
be inferred from parties’ conduct
EXCEPTIONS: those under the Statute of Frauds (in
writing, otherwise unenforceable)
STATUTE OF FRAUDS
- in writing, otherwise unenforceable
a. Sale of personal property with a value of not less
than P500.00;
b. Sale of real property or interest therein (must
appear in a public instrument and registered
with the property registry of deeds to bind third
persons)
c. Sale of property not to be performed within a
year from the date thereof
OBLIGATIONS OF THE SELLER OR VENDOR
➢ As imposed by LAW
1. To transfer ownership of the thing sold;
2. To deliver the thing, including its fruits;
3. To warrant the object sold against eviction
and hidden defects;
 4. To take care of the thing sold with the
diligence of a good father of the family;
5. To pay for execution and registration,
unless there’s a contrary stip.
➢ As imposed by the parties through
STIPULATIONS
ST
1 TO TRANSFER OR TO DELIVER
(Art. 1495)
• Ownership of the thing is transferred by delivery
(Art. 1496)
• DELIVERY - Concurrent transfer of
ownership/control & possession
• Actual or constructive delivery (Arts. 1497-
1501)
* Payment is not essential to transfer ownership
when there has been delivery of the thing
KINDS OF DELIVERY
1. REAL OR ACTUAL
“Art. 1497. The thing sold shall be understood as
delivered, when it is placed in the control and
possession of the vendee.”
2. LEGAL OR CONSTRUCTIVE
- Delivery by operation of law
3. QUASI-TRADITIO
- Delivery of rights, credits or incorporeal property
KINDS OF LEGAL OR CONSTRUCTIVE
DELIVERY
1. EXECUTION OF A PUBLIC INSTRUMENT
(Art. 1498)
2. TRADITIO SIMBOLICA – use of symbol to
represent the thing delivered (Par. 2, Art. 1498)
3. TRADITION LONGA MANU – pointing out of
the object without actual delivery (Art. 1499)
4. TRADITIO BREVI MANU – possession of the
thing is with the would be buyer prior to the sale
(conversion to possession in the concept of an
owner) (Art. 1499)
5. TRADITIO CONSTITUTUM POSSESSORIUM
– opposite of brevi manu (Art. 1500)
QUASI-TRADITIO
- Delivery of rights, credits or incorporeal property
(Art. 1501)
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1. Execution of a public instrument (from
delivery of certificates, ownership passes)
2. Placing of titles of ownership in the possession
of the vendee
3. Use by the vendee of his rights with the
vendor’s consent
DELIVERY OF MOVABLES
1. Delivery of the thing plus accessories and
accessions, including fruits;
2. If goods delivered are less than under the
contract = Buyer has the option to accept or
reject it
3. If goods delivered are more than under the
contract = Buyer has the option to:
a. Accept as per contract and reject the rest
b. Accept the whole and pay the price
c. Reject the whole if the subject matter is
indivisible
DELIVERY OF IMMOVABLES
1. IF SOLD PER UNIT OR NUMBER
• statement of its area, rate at certain price =
deliver all that may have been stated under the
contract
a. If delivered is lesser = rescission or
proportional reduction of price (lack in the
area is not less than 1/10 of area agreed
upon)
b. If delivered is greater = accept as per
contract and reject the rest or accept the
whole area and pay at contract rate
2. IF SOLD FOR LUMP SUM
• price per unit is not indicated
• If area delivered is lesser or greater = price
will not be adjusted
ND
2 DELIVERY OF FRUITS and
ACCESSIONS and ACCESSORIES
• Accrue from the time the sale is perfected but
no real right over it until it is delivered
➢ DELIVERY THROUGH CARRIER
GENERAL RULE: delivery to the carrier is delivery
to the buyer
EXCEPTION: a contrary intention appears or there
is implied reservation of ownership under Pars. 1, 2
& 3 of Art. 1503
PLACE OF DELIVERY
WHERE should the thing or goods be delivered?
(Art. 1521)
Consider:
1. The stipulation of the parties;
2. The place fixed by usage or trade;
3. The place of business of the seller;
4. The seller’s place of residence;
5. If the thing is not in the place of business of the
seller, place of delivery shall be where the thing
is located at the time of perfection of the
contract.
➢ Also applicable to time of delivery
EFFECT OF DELIVERY
GENERAL RULE:
Ownership of thing shall be transferred to the buyer
upon actual or constructive delivery
EXCEPTIONS:
1. In a contract to sell
2. Sale on acceptance or approval
3. Sale or return
SALE ON RETURN or SALE ON APPROVAL
➢ SALE OR RETURN – Ownership passes to
buyer upon delivery; buyer has the option to
return the same to the seller instead of paying
the price (Art. 1502)
➢ SALE ON APPROVAL – Title shall continue in
the seller until:
a. Buyer approves the goods or accepts it
b. Buyer retains goods without giving notice of
rejection (fixed time, upon its expiration; no
time, upon expiration of reasonable time)
• Also called sale on acceptance, sale on trial
or sale on satisfaction (1502)
DOUBLE SALES (Art. 1544)
REQUISITES:
1. Two or more sales transactions constituting
valid sales;
2. Two or more sales transactions pertaining to
the same thing;
3. Two or more buyers at odds over the rightful
ownership; and
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4. Two or more buyers bought from the same
seller
If the thing sold is a MOVABLE:
• The first person who took possession in good
faith has a better right.
If the thing sold is an IMMOVABLE:
• The buyer who first registers in good faith has
a better right.
• If there was no registration, then the
person who first took possession.
• If neither is in possession, the buyer with the
oldest title in good faith.
(Good faith means having no knowledge of the
defect on the title of the seller)
3RD TO WARRANT AGAINST EVICTION
and HIDDEN DEFECTS
WARRANTY
• A statement or representation made by the
seller contemporaneously and as part of a
contract of sale
• Having reference to the character, quality or title
of the goods
• And by which seller promises or undertakes to
insure that certain facts are or shall be as he
then represents
EXPRESS WARRANTY (ART. 1546)
1. Any affirmation of fact or any promise by the
seller relating to the thing;
2. The natural tendency of such affirmation or
promise is to induce the buyer to purchase the
same
3. Buyer purchases the thing relying thereon.
• In case of breach = Seller is liable for damages
➢ Effect of expression of opinion – not a warranty
unless the seller is an expert and the opinion is
relied upon by the buyer
IMPLIED WARRANTY (ART. 1547)
• Deemed included in all contracts of sale
whether parties are actually aware or not or
whether they were intended or not
• Warranty by operation of law
KINDS: - In the condition in which they were upon the
A. Warranty against Eviction perfection of the contract
• INCLUSIONS: 5. OBLIGATION TO PAY FOR THE EXECUTION
1. That the seller has the right to sell at the time AND REGISTRATION
ownership is to pass; - General Rule: Seller bears obligation to pay
2. That the buyer shall enjoy the legal and - Except: Contrary stipulation
peaceful possession of the same
B. Warranty against Hidden Defects OBLIGATIONS OF THE BUYER OR VENDEE
1. Subject matter may be a movable or 1. To pay the price
immovable; 2. To accept delivery of the thing sold
2. Nature of hidden defect is such that it should
render the thing unfit for the use for which it 1ST TO PAY THE PRICE
was intended or should diminish its fitness; • According to the terms agreed upon regarding
3. Had the buyer been aware, he would not time, place and amount
have acquired it or would have given a lower • If payment of interest is stipulated – pay the
price same
• There is breach when: • In case of default in the payment of the price =
a. The defect is hidden and not patent breach of contract where specific performance
b. The defect must have already existed at the or rescission may be resorted to plus payment
time of the sale of damages and interests
C. Warranty against Redhibitory Defects
2ND TO ACCEPT THE DELIVERY
SPECIFIC IMPLIED WARRANTY IN SALE OF There is ACCEPTANCE when:
GOODS 1. Buyer intimates to seller that he has
WARRANTY AS TO THE FITNESS AND QUALITY accepted;
• REQUISITES: 2. Buyer does any act inconsistent with
1. Buyer makes known to seller the particular ownership of seller; or
purpose for which goods are acquired and it 3. Buyer retains thing without intimating to
appears that the buyer relied on the seller’s seller that he has rejected
skill or judgment;
2. Goods are bought by description from seller UNPAID SELLER (ART. 1525)
who deals in goods of that description 1. One who has not been paid or tendered the
whole price; or
1. SALE OF ANIMALS IN FAIRS 2. One who has received a bill of exchange or
- no warranty against hidden defects negotiable instrument as conditional
- with warranty against eviction or title payment and the same was dishonored
2. PUBLIC AUCTIONS REMEDIES OF UNPAID SELLER (ART.1526)
- no warranty against hidden defects Notwithstanding that the ownership in the goods
- with warranty against eviction or title may have passed to the buyer, the unpaid seller of
3. “AS IS WHERE IS” sales goods, as such, has:
- no warranty as to the fitness of the thing 1. Lien on the goods or the right to retain them
- with warranty against eviction (possessory lien)
4. SALE OF SECOND HAND ITEMS 2. Stoppage in transitu
3. Right of resale
4TH & 5TH TO PRESERVE AND PAY EXPENSES 4. Rescission
4. OBLIGATION TO PRESERVE THE THING
- With the diligence of a good father of a family

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1. POSESSORY LIEN
The unpaid seller of goods who is in possession
of them is entitled to retain possession until
payment or tender of the price in the following 4. RIGHT OF RESCISSION
cases, namely:
a. Goods have been sold without any
stipulation as to credit;
b. Goods have been sold on credit but the
term of credit has expired;
c. Where the buyer becomes insolvent
3. Buyer delays in the payment of the price for an
unreasonable time
REQUISITES:
1. Right to rescind is stipulated in case of
default
2. Buyer delays in the payment of the price for
an unreasonable time
> Notice must be given by the unpaid seller

When unpaid seller loses linen (Art.1529)

The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier for
transmission to the buyer without reserving the
ownership in the goods or the right to the possession
thereof;
(2) When the buyer or his agent lawfully obtains
possession of the goods;
(3) By waiver thereof.
2. STOPPAGE IN TRANSITU
• When the buyer of goods is or becomes
insolvent, the unpaid seller who has parted with
the possession of the goods has the right of
stopping them in transit
• Unpaid seller may resume possession of the
goods at any time while they are in transit, and
he will then become entitled to the same rights
in regard to the goods as he would have had if
he had never parted with the possession.
• either by obtaining actual possession or by
giving notice of his claim to the carrier
Goods in Transit (Art.1531)
The GOODS ARE IN TRANSIT when:
a. After delivery to a carrier and before the
buyer or his agent takes delivery of them;
b. If the goods are rejected by the buyer and the
carrier continues in possession of them
3. RIGHT OF RESALE
• Can be exercised when he has either a right of
lien or a right to stop the goods in transitu
• And under any of the 3 following cases:
1. Goods are perishable in nature
2. Right to resell is stipulated in case of default
EXTINGUISHMENT OF SALE
REDEMPTION
1. Conventional Redemption
When the seller reserves the right to repurchase
the thing sold in the same instrument of sale as
one of the stipulations of the contract
PERIOD OF REDEMPTION:
• No period stipulated = 4 years from date of
the contract
• Period stipulated = not to exceed 10 years
A. Seller a retro must return:
• Price of the sale
• Expenses of the contract and other
legitimate payments made by reason of
the sale;
• Necessary and useful expenses made on
the thing sold
B. Complying with any other stipulation agreed
upon, if any
AVAILABLE TO:
I. SELLER (or his agent/heirs/assigns)
II. CREDITORS of seller, AFTER they have
exhausted the seller’s property
• If co-owners, jointly and in the same contract,
sell an undivided immovable, each may
redeem only his respective share

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 • If a sole owner sells an immovable and
leaves several heirs, each heir may redeem
only his share
In these 2 cases, the buyer a retro may demand all
the sellers a retro or heirs to buy redeem the whole
thing and he cannot be compelled to agree to a
partial redemption.
EQUITABLE MORTGAGE
• One which, although lacking in some formality,
or form or words, or other requisites demanded
by a statute, nevertheless reveals the intention
of the parties to charge real property as security
for a debt, and contains nothing impossible or
contrary to law.
PRESUMPTION OF EQUITABLE MORTGAGE
1. Price unusually inadequate;
2. Possession retained by the seller as lessee
or otherwise;
3. Period of redemption extended (or granted
anew) upon or after the expiration of the right
to repurchase;
4. Part of the purchase price retained by the
seller;
5. Payment of taxes on the thing sold borne by
the seller;
6. Any other case where it may be fairly inferred
that the real intention of the parties is for the
transaction to secure a debt or other
obligation (1602)
REQUISITES OF RESUMPTION
a. that the parties entered into a contract
denominated as a contract of sale, and
b. that their intention was to secure an existing
debt by way of a mortgage.
➢ In case of doubt, a contract purporting to be
a sale with right to repurchase shall be
construed as an equitable mortgage
2. Legal Redemption (Arts. 1619-1623)
• 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 onerous title (such as sale or dation)
INSTALLMENNT SALES RECTO LAW
• Sale of movable in installments
• Seller may exercise any of the following:
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1. Exact fulfillment if there is failure to pay;
2. Cancel sale if there is failure to pay 2 or more
installments; or
3. Foreclose chattel mortgage on the thing sold
if there is failure to pay 2 or more
installments; cannot recover any unpaid
balance
• The above alternative remedies are likewise
applicable to contracts purporting to be leases
of personal property with option to buy (Art.
1485)
➢ Forfeiture of installments - Valid EXCEPT if
unconscionable under circumstances (Art.
1486)
INSTALLMENT SALES MACEDA LAW
• Sale of immovable in installments (Republic
Act No. 6552 or The Realty Installment Buyer
Act)
• Intended to protect ordinary buyers of
residential realty under contracts of sale,
contracts to sell and financing
• Provides for remedies of buyer who paid for
less than 2 years or more than 2 years
MACEDA LAW
FOR BUYERS WHO PAID AT LEAST 2 YEARS OF
INSTALLMENTS:
1. Pay balance without interest within 1 month
grace period for every year of installment
payment (grace period exercised once every 5
years)
2. No payment made during grace period = the
contract is cancelled and buyer is entitled to
50% of what he has paid + if more than 5 years,
5% for every year but not to exceed 90% of total
payments made (cancellation shall be effected
30 days from notice and upon payment of cash
surrender value)
FOR BUYERS WHO PAID LESS THAN 2 YEARS
OF INSTALLMENTS:
1. 1st grace period of 60 days from date the
installment became due
2. 2nd grace period of 30 days from notice of the
cancellation or demand for rescission
OTHER RIGHTS:
a. Sell interests under the contract
b. Assign rights under the contract