sales

Article 1458-1488 of NCC

DEFINITION OF contract of sale
Art. 1458. By the contract of sale:

1. one of the contracting parties (VENDOR) obligates himself to

transfer the ownership and to deliver a determinate thing, and
2. the other (VENDEE) to pay therefor a price certain in money or its
equivalent.

 A contract of sale may be absolute or conditional.

Characteristics of a contract of sale
1. Consensual- A sale is perfected by mere consent, manifested by the meeting of the
minds as to the offer and acceptance on the subject matter, price and terms of payment.

2. Bilateral and Reciprocal- The seller will deliver and transfer a determinate thing to
the buyer and the latter will pay an ascertained price. It imposes an obligation on both
parties to the relationship .

3. Principal- Its existence does not depend upon the existence and validity of another
contract.
Characteristics of a contract of sale
4. Onerous- It imposes a valuable consideration as a prestation . The thing sold is
conveyed in consideration of the purchase price, and vice versa.

5. Commutative- The thing sold is considered the equivalent of the price paid and the
price paid is the equivalent of the thing sold.

Note: It is not required that the price be deemed to be equal to the object, all that is required is that
the seller to accept that what is to be received is commercial equivalent of what he gave

Exception: Aleatory Contracts- The consideration is not equivalent of what has been received.

6. Nominate- It has been given a particular name by the law.

Contract of sale vs. other contracts
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 AGENCY
The buyer pays for the price of the goods/property purchased
The agent does not pay for the price. He merely accounts for the
proceeds of the sale.
The buyer becomes the owner of the goods/property The agent does not become the owner of the goods/property
purchased delivered to him for sale.
Buyer cannot return the goods/property when the sale is The agent returns the goods/property if he was not able to sell
defective the same
The seller warrants the goods/property sold The agent does not make any warranty as long as he acts within
his authority and in the name of the principal
The seller has full freedom to enter into any terms or The agent must follow the instructions of the principal
conditions on the contract of sale
Contract of sale vs. other contracts
Article 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his
business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of
sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work.

Contract for a Piece of Work— The article sold is specially manufactured and upon the special order of the customer.
Article is not sold in the ordinary course of business.
Contract for a piece of work Contract of Sale
The thing transferred is one not in existence and w/c never The thing transferred is one which would have existed and would
would have existed but for the order of the party desiring to have been the subject of sale to some other person, even if the
acquire it order had not been given

The services dominate the contract even though there is a sale of The primary objective of the contract is a sale of the manufactured
goods involved item; it is a sale of goods even though the item is manufactured by
labor furnished by the seller and upon previous order of the
customer
Not w/in the Statute of Frauds Governable by the Statute of Frauds
Contract of sale vs. other contracts
Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the
transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly
appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the
amount of the money or its equivalent; otherwise, it is a sale.

Sale Barter
Consideration: giving of money as payment Consideration: giving of a thing
Governed by law on sales: species of the genus sales
If consideration consists party in money and partly by thing – look at manifest intention;
If intention is not clear: value of thing is If intention is not clear: value of thing is more
equal than amount of money – barter
or less than amount of money – sale
Contract of sale vs. other contracts
Rules if Consideration is Partly Money and Partly Goods

1. Determine the intention of the parties.

2. If intention could not be determined, consider the value of the thing given:

a. If value of the thing more than value of the money, it is BARTER

b. If value of the thing less than value of the money, it is SALE

c. If both values are the same, SALE

PARTIES TO contract of sale
1. Seller – one who sells and transfers the thing and ownership to the
buyer; and

2. Buyer – one who buys the thing upon payment of the consideration
agreed upon.
Essential requisites of contract of
sale:
1. CONSENT of the contracting parties

2. OBJECT certain which is the subject matter of the

contract.

3. CAUSE of the obligation which is established

Requisites of a valid CONSENT
1. Art. 1319. Consent is manifested by the MEETING of the OFFER and the
ACCEPTANCE upon the thing and the cause which are to constitute the contract.

2. The offer must be CERTAIN and the acceptance ABSOLUTE.

3. A qualified acceptance constitutes a counter-offer. Acceptance made by letter or

telegram does not bind the offerer except from the time it came to his knowledge*.
The contract, in such a case, is presumed to have been entered into in the place
where the offer was made
*Cognition Theory is adopted by the Philippines in contrast to Expedition Theory which states that acceptance is complete and
effective when it is delivered to that same medium. Thus, an offer made through the mail is accepted when the acceptance is mailed
Requisites of a valid object
1. Must be licit (Art. 1459)

2. Vendor has right to transfer ownership at the time of delivery. (Art. 1459)

3. Must be determinate (particularly designated or physically segregated from all others of the same class). Determinate , if at
the time of perfection, the thing is capable of being made determinate without the necessity of a new or further agreement
between the parties. (Art. 1460.)

4. Things having a potential existence may be the object of the contract of sale. (Art. 1461. )

5. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into
existence. (Art. 1461. )

6. The sale of a vain hope or expectancy is void. (Art. 1461. )

7. May be “future goods” or goods to be manufactured, raised or acquired after perfection of sale. (Art. 1462.)

8. May be goods, acquisition of which by the seller depends upon a contingency which may or may not happen. (Art. 1462)
 Requisites of a valid price
1. It is sufficient that it is certain with reference to another thing certain. (Art. 1469)
2. Determination of price may be left to the judgment of a special person or persons. (Art. 1469)

a. If such person be unable or unwilling to fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.

b. If such person acted in bad faith or by mistake, the courts may fix the price.

c. If such person/s are prevented from fixing the price by fault of either seller or buyer, the party not in
fault may ask for remedies.

3. Gross inadequacy of price does not affect 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. (Art. 1470.)
 Requisites of a valid price
Effect of Gross Inadequacy of Price: No effect

Exceptions: Sale is set aside

1. If consent is vitiated, such as VIMFU (Violence, Intimidation, Mistake,

Fraud, Undue influence)

2. If the parties intended a donation or some other act or contract

3. If the price is so low as to be shocking to the conscience

 Requisites of a valid price
4. Must not be simulated. 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. (Art. 1471. )
 
5. Price may be that which the thing would be sold, or below or above that price, on a definite day
or in a particular exchange/market, provided the amount is certain. (Art. 1472.)
 
6. 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. (Art.
1473.)
 Requisites of a valid price
Effect of Simulated Price

Sale is void, unless it could be shown that the parties intended a donation or some other
act of liberality.

Price Simulated- No price to support a contract of sale, such that neither party had any
intention that the amount will be paid—Void

Price is False- there is a real price not declared—contract is valid, but the underlying
deed is subject to reformation to indicate the real price upon which the minds of the
parties have met (Relative Simulation)
 WHEN NO PRICE IS AGREED UPON
BY THE PARTIES
Art. 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. (n)

1. Where contract is executory – ineffective.

2. Where the thing has been delivered to and appropriated by the buyer – the buyer must pay a
reasonable price therefore.
 When is a contract of sale perfected?
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.*

NOTE: The acceptance of the offer must be absolute. It must be plain, unequivocal, unconditional and without variance of any sort
from the proposal.

Exception: When the sale is subject to a suspensive condition by virtue of law or stipulation.
 When is a contract of sale perfected?
REQUIREMENTS:
1. When parties are face to face – when there is absolute acceptance of an offer that is certain

2. When thru correspondence or telegram – when the offer or receives or had knowledge of the
acceptance

3. When the sale is subject to a suspensive condition – from the moment the condition is fulfilled

NOTES: Qualified acceptance: mere counter-offer which needs to be absolutely accepted to give rise
to perfected contract of sale. Business ads are mere invitations to make an offer except when it
appears to be otherwise.
SALE BY AUCTION
Art. 1476. 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. (every bidding is merely an offer and therefore, before it is accepted, it may be withdrawn).

(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.
When is ownership of the thing sold transferred to the
buyer?
General rule: The OWNERSHIP of the thing sold shall be TRANSFERRED to the
vendee upon the actual or constructive DELIVERY thereof. (Art. 1477.)

Exception: The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price (Art. 1478.)

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment
it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any
other manner signifying an agreement that the possession is transferred from the
vendor to the vendee.
KINDS OF DELIVERY
1. ACTUAL or REAL – Thing sold is placed under the control and possession of
buyer/agent

2. CONSTRUCTIVE or LEGAL – Does not confer physical possession of the thing,

but by construction of law, is equivalent to acts of real delivery.

Requisites:

a. The seller must have control over the thing;

b. The buyer must be put under control;
c. There must be intention to deliver the thing for purposes of ownership.
 KINDS Of constructive DELIVERY

01 02 03 04
TRADITIO TradiTio Traditio Longa TradiTio Brevi
SYMBOLICA Instrumental Manu Manu
delivery of certain delivery of the Delivery of thing by the buyer, being already in
symbols representing instrument of mere agreement; possession of the thing
the thing conveyance when seller points to sold due to some other
the property without cause, merely remains in
need of actually possession after the sale is
Ex. Delivery of key of delivering effected, but now in
a warehouse concept of owner.;
KINDS Of constructive DELIVERY

05
Constitutum Possessorium
the seller remains in possession of the
property in a different capacity.
OPTION MONEY VS EARNEST MONEY
Art. 1479. Option Money. 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
promissor if the promise is supported by a consideration distinct from the
price.

Art. 1482. Earnest Money. 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
OPTION MONEY VS EARNEST MONEY
BASIS OPTION MONEY EARNEST MONEY
As to Money Given Money given as distinct consideration for Forms part of the purchase price.
an option contract.

As to Perfection Applies to a sale not yet perfected. Given only when there is already a sale.

Obligation of the buyer upon payment Prospective buyer is not required to buy. When given, the buyer is bound to pay
of consideration the balance.

As to Recovery If buyer does not decide to buy, it cannot If sale did not materialize, it must be
be recovered. returned.

As to Transfer of Ownership Ownership is reserved to the seller and is Title passes to the buyer upon delivery of
not to pass until full payment. the thing sold.

Effect of Non-payment Specific performance. Specific performance and rescission

EFFECTS OF THE CONTRACT WHEN THE
THING SOLDRISK.
Art. 1480. BUYER’S HASAny BEEN LOST
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.
EFFECTS OF THE CONTRACT WHEN THE
THING SOLD
WHO BEARS RISK HAS BEEN LOST
OF LOSS/ DETERIORATION:

1. BEFORE PERFECTION
a. Res perit domino
b. Owner is seller so seller bears risk of loss

2. AT PERFECTION
a. Res perit domino
b. Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale
c. Seller cannot anymore comply with obligation so buyer cannot anymore be compelled

3. AFTER PERFECTION BUT BEFORE DELIVERY

a. Loss – Seller
b. Deterioration and fruits – Buyer bears loss;

4. AFTER DELIVERY
a. Res perit domino
b. Delivery extinguishes ownership visa-vis the seller and creates a new one in favor of the buyer
Sale by description/sample
Art. 1481. Sale by description/sample. 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 by description/sample
Sale of Goods By Description- where a seller sells a thing as being of a certain kind verbally describing them
and the buyer simply relies on the seller’s descriptions of the things, not knowing whether the seller’s
representations are true or not.

Sale by Sample- Where the seller warrants that the bulk of goods being sold correspond with the sample or
samples exhibited not only in kind but also in quality and character.

Sale by Description and Sample- Where the seller has to satisfy the requirements in sale by description and
sample. There are two-fold warranty here:

(a) the goods purchased matched with the description and

(b) the goods also matched in kind, quality and character with that of the sample or samples exhibited to the
buyer or his representative
FORMAL REQUIREMENT FOR validity of a
contract 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: 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. Contracts shall be obligatory, in whatever form they have been entered into,
provided all the essential requisites for their validity are present.

Exceptions:

a) If the law requires a document or other special form, the contracting parties may compel each other to observe that form (NCC,
Art. 1357).

b) Under Statute of Frauds, the following contracts must be in writing; otherwise, they shall be unenforceable:

1. Sale of personal property at a price not less than P500;

2. Sale of a real property or an interest therein;
3. Sale of property not to be performed within a year from the date thereof; or
4. When an applicable statute requires that the contract of sale be in a certain form
FORMAL REQUIREMENT FOR validity of a
contract
Exceptions: of sale
c) Sale of large cattle which requires that the same be recorded with the city/municipal treasurer and that a
certificate of transfer be issued. Otherwise, the sale is not valid (NCC, Art. 1581).

d) When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be
in writing; otherwise, the sale shall be VOID (not merely unenforceable).
RECTO LAW
Art. 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:
EXACT FULFILLMENT of the obligation, should the vendee fail to pay ;

Should the vendee’s failure to pay cover 2 or more installments

(2) CANCEL THE SALE or ;

(3) FORECLOSE the chattel mortgage on the thing sold, if one has been constituted. 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.
RECTO LAW
The Recto Law, which forms part of the Civil
Code, specifically Article 1484 to Article 1486,
covers sales of personal property on
installment basis. It is also applies to contracts
purporting to be leases of personal property
with option to buy. (Art. 1485)

*Note: Art. 1484 of the NCC incorporates the

provisions of Act No. 4122 passed by the Philippine
Legislature on Dec. 9, 1939, known as the "Installment
Sales Law" or the "Recto Law," which then amended
Art. 1454 of the Civil Code of 1889.
RECTO LAW
Requisites of Recto Law

1. Valid contract of sale;

2. Subject matter is personal property;

3. Payable in installments; and

4. In the case of the second and third remedies, that there has been a failure to pay two
or more installments (NCC, Art. 1484).
RECTO LAW- alternative remedies
1. Specific Performance: Exact fulfillment should the buyer fail to pay

General Rule: If availed of, the unpaid seller cannot anymore choose other remedies;

Exception: if after choosing, it has become impossible, rescission may be pursued

2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed chosen when:

a. Notice of rescission is sent

b. Takes possession of subject matter of sale

c. Files action for rescission

3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments

General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of barring effect: purchase price

Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc.
MACEDA LAW
Transactions/Sale covered by the Maceda Law

Coverage: Residential Real Estate

Excluded:

a. Industrial lots;

b. Commercial buildings (and commercial lots by implication);

c. Sale to tenants under agrarian laws; and

d. Sale of lands payable in straight terms (Sec. 3, RA 6552).

FEATURES OF MACEDA LAW
The Maceda Law is applicable to sales of immovable property on installments. The most important features are:

a. After having paid installments for at least two years, the buyer is entitled to a mandatory grace period
of one month for every year of installment payments made, to pay the unpaid installments without interest.

If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to fifty
percent (50%) of the total payments made, and after five years of installments, an additional five percent (5%)
every year but not to exceed ninety percent (90%) of the total payments made.

b. In case the installments paid were less than 2 years, the seller shall give the buyer a grace period of not
less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace period, the seller
may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand for
rescission by notarial act
FEATURES OF MACEDA LAW
What are the rights granted to buyers?

1. Buyer paid at least 2 years installment

a. Pay without interest the balance within grace period of 1 month for every year of installment payment. Grace period to be
exercised once every 5 years.

b. When no payment – cancelled; buyer entitled to 50% of what he has paid + 5% for every year but not exceeding 90% of
payments made

Note: Cancellation to be effected 30 days from notice & upon payment of cash surrender value.

2. Buyer paid less than 2 years installment

a. Grace period is not less than 60 days from due date

b. Cancellation if failure to pay w/in 60 days grace

c. 30 days notice before final cancellation

Note: buyer can still pay w/in the 30 days period with interest.
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. (1455a)

Article 1488. The expropriation of property for public use is governed by

special laws.