LAW ON SALES

NATURE AND FORM OF THE CONTRACT

CONTRACT OF SALE

Art. 1458. 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.

A contract of sale may be absolute or conditional. (1445a)

 NATURE AND FORM OF THE CONTRACT

CONTRACT TO SELL

Article 1478: The parties may stipulate that ownership

in the thing shall not pass to the purchaser until he has
fully paid the price.
 NATURE AND FORM OF THE CONTRACT

CONDITIONAL CONTRACT OF SALE

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.

 NATURE AND FORM OF THE CONTRACT

CONDITIONAL CONTRACT OF SALE

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.

 CONTRACT OF SALE
Ownership is transferred upon
Delivery
Non-payment is a resolutory
condition
CONDITIONAL CONTRACT
OF SALE
Sale is already perfected
CONTRACT TO SELL
Ownership is only transferred
upon full
payment of price
Full payment is a positive
suspensive condition;
CONTRACT TO SELL
No perfected sale yet
Essential requisite
1. Consent of contracting parties
Consent refers to seller’s consent to transfer ownership of,
and deliver, a determinate thing, and to buyer’s consent to pay
the price certain.

Being a consensual contract, the contract of sale is perfected

at the moment there is a “meeting of the minds” upon the
thing which is the object of the contract and upon theprice.
[Art. 1475, CC]
Can there be sales without consent?
1. Expropriation [Art. 1488, CC]
2. Ordinary Execution Sale [Rule 39, Sec. 15, Rules of Court]
3. Judicial Foreclosure Sale [Rule 68, Rules of Court], and
4. Extra-Judicial Foreclosure
2. Object certain which is the subject matter of
the contract

The things must be licit and the vendor must have a

right to transfer the ownership.

a. Must be licit
• Within the commerce of man
• When right is not intransmissible [Art. 1347, CC]
• It does not contemplate a future inheritance, unless expressly authorized by law
Example of illicit things per se (of its nature) and
per accidens (due t povisions of law)

• Sale of animals if the use or service for which they are

acquired has been stated in the contract, and they are found
to be unfit therefor [Art. 1575, CC]
• Sale of animals suffering from contagious diseases [Art.1575,
CC]
• Sale of future inheritance is void [Art. 1347, CC]
• Sale of land in violation of Constitutional prohibition against
the transfer of lands to aliens. [Art. XII of Constitution]
b. Existing, Future, Contingent
• Existing goods owned or possessed by the seller;
• Goods to be manufactured, raised, OR acquired by the seller –
“Future Goods”;
• Things having potential existence ;
• A sale may be made of a thing which, though not yet actually in
existence 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.
c. Determinate or Indeterminate
• Determinate
When it is particularly designated or physically segregated
from all others of the same class. [Art. 1460, CC]
c. Determinate or Indeterminate
• Indeterminate or generic thing is the opposite of
determinate or specific thing; that is, generic or
indeterminate thing is not particularly designated or
physically segregated from all others of the same
class.
It means that a thing cannot be specifically determined from
things of the same class. The thing can be replaced by another
thing that is of the same quality. Examples: a horse, a motorcycle,
a sack of rice, a car, and USD 100, 000.
3. Cause of the obligation which is established.

This refers to the “price certain in money or its equivalent”

[Art. 1458]. It does not include goods or merchandise
although they have their own value in money.

However, the words “its equivalent” have been interpreted to

mean that payment need not be in money, so that there can
be a sale where the thing given as token of payment has
“been assessed and evaluated and [its] price equivalent in
terms of money [has] been determined.” [De Leon]
a) Requisites of a valid price
1. Certain or ascertainable at the time of perfection

2. In money or its equivalent

• If the price is partly in money and partly in another thing: determine
the manifest intention of the parties to see whether it was barter or
sale. [Art. 1468, CC]

• If intention does not clearly appear, it shall be considered a barter if

the value of the thing exceeds the amount of money.
a) Requisites of a valid price
3. Real
• When buyer has an intention to pay and the seller expects
to receive the price
• If simulated: Sale is VOID; BUT act may be shown to have
been a donation or some other act or contract. [Art. 1471, CC]
• If Price is false – when the real consideration is not the price
stated in the contract:

Sale is void UNLESS proved to be founded on another

true and lawful price
b) How price is determined/when certain
1. Fixed by agreement of the parties and cannot be left to the
discretion of one of the parties – BUT if such is accepted by the
other, sale is perfected. [Art. 1473,CC]

2. Determination is left to the judgment of a specified person.

• General Rule: When the price is not certain, the contract is without
effect and no obligation arises from it.

• Exception: When the thing is already delivered, the buyer must pay a
reasonable price therefor. This exception only arises when he means
contemplated by the parties for fixing the price have become
ineffectual.
c. Inadequacy of price
• The stipulation in a contract of sale which states that the
consideration is “PhP1 and other valuable considerations”
does not make the contract void.

• Gross inadequacy of price does not affect the contract of sale

except that it may indicate a defect in consent. [Bagnas v.
CA, G.R. No. L-38498 (1989)]
General Rule: Does not affect a contract of sale’s
validity. [Art. 1470, CC]
Exceptions:

a. In Voluntary sales
• Where low price indicates a vice of consent, sale may be annulled.
• Where price is so low to be shocking to the conscience (fraud, mistake, undue influence), then
sale may be set aside
• Where price is simulated such as when the real intention was a donation or some other contract.
• Where the parties did not intend to be bound at all, sale is void.

b. In Involuntary sales
• A judicial or execution sale is one made by a court with respect to the property of a debtor for the
satisfaction of his indebtedness.
• Rescissible contracts of sale – Inadequacy of price is a ground for rescission of conventional sale
under Art. 1381 (a) and (b), CC.
d. When no price agreed
1. Sale is inefficacious [Art. 1474, CC]

2. But if the thing or part thereof has been delivered and appropriated
by the buyer, he must pay a reasonable price.
•What is a reasonable price is a question of fact dependent on the
circumstances of each particular case. [Art. 1474, CC]
• The reasonableness of a price may be determined on the basis of a
company’s balance sheet showing the book value or fair market value of its
shares. [Philippine Free Press v. CA, G.R. No. 132864 (2005)]

3. Generally, the reasonable price is the market price at the time and place
fixed by the contract or by law for delivery of goods.
f. Earnest money vs. option money
• Earnest Money – paid in advance of the purchase price agreed upon
by the parties in a contract of sale, given by the buyer to the seller, to
bind the latter to the bargain.