SALES

Art. 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.

Sale, by its very nature, is a consensual contract because it is

perfected by mere consent. The essential elements of a contract
of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate thing; and
c) Price certain in money or its equivalent.
 CONTRACT TO SELL

A contract to sell is defined as a bilateral contract whereby the

prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the
purchase price and/or compliance with the other obligations stated in
the contract to sell.
Given its contingent nature, the failure of the
prospective buyer to make full payment and/or abide
by his commitments stated in the contract to sell
prevents the obligation of the prospective seller to
execute the corresponding deed of sale to effect the
transfer of ownership to the buyer from arising.
 A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event, so that if
the suspensive condition does not take place, the parties would stand as
if the conditional obligation had never existed.

In a contract to sell, the fulfillment of the suspensive condition will not

automatically transfer ownership to the buyer although the property may
have been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.
Under the definition in 1458, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking.
In a contract to sell, the prospective seller explicity reserves the transfer of
title to the prospective buyer, meaning, the prospective seller does not as
yet agree or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, which for present
purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the
subject property when the entire amount of the purchase price is delivered
to him. In other words the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation
to sell from arising and thus, ownership is retained by the prospective
seller without further remedies by the prospective buyer.
Stated positively, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, the prospective seller's obligation to
sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code which states:

Art. 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
On the other hand, in a conditional contract of sale,
the fulfillment of the suspensive condition renders
the sale absolute and the previous delivery of the
property has the effect of automatically transferring
the seller's ownership or title to the property to the
buyer.

This transfer of title is “by operation of law” without

any further act having to be performed by the seller
Article 1187. The effects of a conditional obligation to give, once
the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless, when the
obligation imposes reciproacal prestations upon the parties, the
fruits and interests during the pendency of the condition shall be
deemed to have been mutually compensated. If the obligation is
unilateral, the debtor shall appropriate the fruits and interests
received, unless from the nature and circumstances of the
obligation it should be inferred that the intention of the person
constituting the same was different.
ART. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof. (n)

ART. 1478. The parties may stipulate that ownership in the

thing shall not pass to the purchaser until he has fully paid
the price. (n) (Contract to Sell or Conditional Sale)
 DELIVERY

ART. 1495. The vendor is bound to transfer the ownership of and

deliver, as well as warrant the thing which is the object of the sale.

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. (n)
 DELIVERY

Principal obligations of the vendor.

The principal obligations of a vendor are:
(1) to transfer the ownership of the determinate thing sold;
(2) to deliver the thing, with its accessions and accessories, if any, in the condition
in which they were upon the perfection of the contract (Art. 1537.) fruits (1164);
(3) to warrant against eviction and against hidden defects (Arts. 1495, 1547.);
(4) to take care of the thing, pending delivery, with proper diligence (see Art.
1163.); and
(5) to pay for the expenses of the deed of sale, unless there is a stipulation to the
contrary. (Art. 1487.)
 Ways of Effecting Delivery

(1) by actual or real delivery (Art. 1497.);

(2) by constructive or legal delivery (Arts.
1498-1501.); or
(3) by delivery in any other manner signifying
an agreement that the possession is
transferred to the vendee. (Arts. 1496-1499.)
In all the different modes of delivery, the critical
factor which gives legal effect to the act is the
actual intention of the vendor to deliver, and its
acceptanace by the vendee.

The act, without the intention, is insufficient.

There is no tradition.
 Equivalent to actual delivery.

Constructive delivery is a general term

comprehending all those acts which, although
not conferring physical possession of the
thing, have been held by construction of law
equivalent to acts of real delivery.
(2) Contrary may be stipulated. — The parties,
however, may stipulate that ownership in the
thing shall pass to the purchaser only after he
has fully paid the price (Art. 1478.) or fulfilled
cer- tain conditions. In a contract of absolute
sale, ownership is trans- ferred simultaneously
with the delivery of the thing sold.
 ACTUAL DELIVERY

ART. 1497. The thing sold shall be understood

as delivered, when it is placed in the control
and possession of the vendee.
 Concept of tradition or delivery.

Tradition is a derivative mode of acquiring

ownership by virtue of which one who has the
right and intention to alienate a corporeal thing,
transmits it by virtue of a just title to one who
accepts the same. (10 Manresa 122.)
CONSUMMATION OF THE CONTRACT

Delivery of the thing together with the payment of the

price, marks the consummation of the contract of sale.
Delivery is also necessary to enable the vendee to
enjoy and make use of the property purchased.
 CONSTRUCTIVE DELIVERY
ART. 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent
to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not
appear or cannot clearly be inferred.
With regard to movable property, its delivery may also
be made by the delivery of the keys of the place or
depository where it is stored or kept.
EXECUTION OF A PUBLIC INSTRUMENT

(The execution of a public instrument (i.e., an instrument or document

attested and certified by a public officer authorized to administer oath,
such as a notary public) as a manner of delivery applies to movable as
well as immovable property since the law does not make any distinction
and it can be clearly inferred by the use of the word “also” in paragraph 2 of
Article 1498.
This manner of delivery is symbolic. The buyer may use the document as
proof of his ownership of the property sold
 MERE PRESUMPTION

It confines itself to providing that “the execution

thereof shall be equivalent” to delivery, which
means that there is only a presumptive (not
conclusive) delivery which can be rebutted by
evidence to the contrary.
 SYMBOLIC TRADITION

Constructive delivery is symbolic when to effect the

delivery, the parties make use of a token symbol to
represent the thing delivered.
The delivery of the key where the thing sold is stored
or kept is equivalent to the delivery of the thing (par. 2.)
because the key represents the thing.
 DELIVERY OF MOVABLES

ART. 1499. The delivery of movable property may

likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time of
the sale, or if the latter already had it in his possession
for any other reason.
 TRADITIO LONGA MANU
The first part of Article 1499 refers to traditio longa manu.
This mode of delivery takes place by the mere consent or agreement
of the contracting parties as when the vendor merely points to the
thing sold which shall thereafter be at the control and disposal of the
vendee.
It should be noted that delivery “by the mere consent or agreement
of the contracting parties” is qualified by the phrase “if the thing
sold cannot be transferred to the possession of the vendee at the time
of the sale.”
 TRADITION BREVI MANO

This mode of legal delivery happens when the vendee has

already the possession of the thing sold by virtue of
another title as when the lessor sells the thing leased to the
lessee. Instead of turning over the thing to the vendor so
that the latter may, in turn, deliver it, all these are
considered done by action of law.
 ART. 1500. There may also be tradition constitutum
possessorium.

This mode of delivery is the opposite of traditio brevi manu.

It takes place when the vendor continues in possession of the property sold
not as owner but in some other capacity, as for ex- ample, when the vendor
stays as a tenant of the vendee. In this case, instead of the vendor delivering
the thing to the vendee so that the latter may, in turn, deliver it back to the
vendor, the law considers that all these have taken place by mere consent or
agreement of the parties.
 QUASI-TRADITIO

ART. 1501. With respect to incorporeal property, the provisions of the

first paragraph of article 1498 shall govern. In any other case wherein
said provi- sions are not applicable, the placing of the titles of
ownership in the possession of the vendee or the use by the vendee of
his rights, with the vendor’s consent, shall be understood as a delivery.
 QUASI-TRADITIO
ONLY MODE FOR INCORPOREAL RIGHTS

(1) by the execution of a public instrument; or

(2) when that mode of delivery is not applicable, by the
placing of the titles of ownership in the possession of the
vendee; or
(3) by allowing the vendee to use his rights as new
owner with the consent of the vendor.
 Intention to deliver and to accept a transfer of
possession.

In all the forms of delivery, it is necessary that the act be coupled with the
intention of delivering the thing. For instance, there is no constructive delivery,
where the keys to the place where the thing is deposited are delivered to the
vendee in order only that he may examine it or the titles of ownership of property
are placed in the possession of the vendee for his study or inspection but not with
the intention of making the delivery. The act, with- out the intention to deliver, is
insufficient.
 Contract of “SALE OR RETURN”

ART. 1502. When goods are delivered to the buyer “on sale or return”
to give the buyer an option to return the goods instead of paying the
price, the ownership passes to the buyer on delivery, but he may revest
the ownership in the seller by returning or tendering the goods within
the time fixed in the contract, or, if no time has been fixed, within a
reasonable time. (n)
 “SALE OR RETURN”

It is a contract by which property is sold but the buyer, who becomes the owner
of the property on delivery, has the option to return the same to the seller instead
of paying the price.
Parties agree that the buyer shall temporarily take the goods into his possession to
see whether they are satisfactory to him and that if they are not, he may refuse to
become owner.
It is clear also that the same object may be attained by an agreement that the
property shall pass to the buyer on delivery but that he may return the goods if
they are unsatisfactory.
 SALE OR RETURN

Since title passes to the buyer on delivery, the loss or destruction

of the property prior to the exercise of the buyer’s option to return
falls upon him and renders him responsible to the seller for the
purchase price or such part thereof as re- mains unpaid. (Art.
1504; 46 Am. Jur. 647.) The word “return” itself implies a
previous transfer of title.
 Sale on trial or approval or satisfaction

When goods are delivered to the buyer on approval or on trial or on satisfaction, or

other similar terms, the ownership therein passes to the buyer.
(1) When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but retains the
goods without giving notice of rejection, then if a time has been fixed for the return
of the goods, on the expiration of such time, and, if no time has been fixed, on the
expiration of a reasonable time. What is a reasonable time is a question of fact.
 Sale on trial or approval or satisfaction

It is a contract in the nature of an option to purchase if the goods

prove satisfactory, the approval of the buyer being a condition
precedent.

The buyer cannot accept part and reject the rest of the goods since
this falls outside the normal intent of the parties.
 Sale on trial or approval or satisfaction

In this kind of contract, the title shall continue in the seller until
the sale has become absolute either by the buyer’s approval of
the goods, or by his failing to comply with the express or
implied conditions of the contract as to giving notice of
dissatisfaction or as to returning the goods, or by his doing any
other act adopting the transaction such as mortgaging the
property or selling it to a third person.
 Sale on trial or approval or satisfaction

For the reason that the title to the goods does not pass and the
relationship between the seller and the purchaser is that of
bailor and bailee, the risk of loss or injury to the article pending
the exercise by the buyer of his option to purchase or return it,
is upon the seller except as the buyer may be at fault in respect
of the care and condition of the article, or may have agreed to
stand the loss.
 “Sale or return” distinguished from “sale on trial”

(1) “Sale or return” is a sale subject to a resolutory condition, while sale on trial is subject to a
suspensive condition;
(2) “Sale or return”depends entirely On the will of the buyer, while sale on trial depends on the
character or quality of the goods;
(3) In “sale or return,” the ownership of the goods passes to the buyer on delivery and subsequent
return of the goods reverts ownership in the seller, while in sale on trial, the ownership remains in
the seller until the buyer signifies his approval or acceptance to the seller; and
(4) In“sale or return,”the risk of loss or injury rests upon the buyer, while in sale on trial, the risk
still remains with the seller.
 RECTO LAW
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.

(1) elect fulfillment upon the vendee’s failure to pay; or

(2) cancel the sale, if the vendee shall have failed to pay
two or more installments; or
(3)foreclose the chattel mortgage if one has been
constituted, if the vendee shall have failed to pay two or
more installments
 APPLICABILITY

The law is aimed at those sales of personal property where the price is
payable in several installments;

ART. 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.
 1485

Nature of transaction. — Leases 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
personalty payable in installments. Accordingly, the rules provided in Article 1484 are
equally applicable to the so-called leases of personal property.
Sellers desirous of making conditional sales of their goods but do not wish openly to make
a bargain in that form, for one reason or another, have frequently resorted to the device of
making contracts in the form of leases either with option to the buyer to purchase for
small consideration at the end of the term provided the so-called rent has been duly paid,
or with the stipu- lation that if the rent throughout the term is paid, the title shall
thereupon vest on in the lessee.
 REMEDIES ARE ALTERNATIVE
NOT CUMULATIVE

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.
Resort to one means a waiver of the others
 EXACT FULFILLMENT

The vendor who has chosen to exact the fulfillment of the obligation
is not limited to the proceeds of the sale 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.
 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 the return of payments
already made unless there is a stipulation about forfeiture.
(see Art. 1486.) In a case, for failure of the buyer to pay two
or more installments, the vendor-mortgagee (or his assignee)
re- possessed the car.
 Remedy of foreclosure.

If the vendor has chosen the third remedy of foreclosure of the chattel mortgage
if one has been given on the property, he is not obliged to return to the vendee
the amount of the installments already paid should there be an agreement to that
effect.

But he shall have no further action against the vendee for the recovery of any
unpaid balance of the price remaining after the foreclosure and actual sale of the
mortgaged chattel, and any agreement to the contrary is void.
 Recovery of deficiency after foreclosure prohibited;
PURPOSE OF THE PROHIBITION

The principal object of Article1484 (3) is to remedy the abuses committed in

connection with foreclosure of chattel mortgages. This amendment prevents
mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a
low price and then bringing suit against the mortgagor for a deficiency judgment.
The almost invariable result of this procedure was that the mortgagor found himself
minus the property and still owing practically the full amount of his original
indebtedness. In other words, in all proceedings for the foreclosure of chattel mort-
gages, the mortgagee is limited to the property included in the mortgage.
( Bachrach Motor Co., Inc. v. Millan)
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.

Leases 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 personalty payable in installments.

Accordingly, the rules provided in Article 1484 are equally applicable

to the so-called leases of personal property.
 There can hardly be any question that the contract in this case is one
of sale on installments and not lease, with the so- called monthly
rentals being in truth monthly amortizations on the price of the car,
and is, therefore, subject to the provision that “when the lessor had
deprived the lessee of the enjoyment or possession” of the personal
property, he shall have no further action against the lessee “to
recover any unpaid balance” owing by the latter

any agreement to the contrary being void.

Repossession by lessor need not be through court action.

Even where the lessee voluntarily delivers the property to the lessor,
the case is not taken out of the purview of Article 1485 if he does so in
obedience to the lessor’s demands.

Specially where the contract specifically authorizes the lessor to

repossess the property whenever the lessee defaults in the payment of
rent, court action for such purpose is not essential.
Stipulation authorizing the forfeiture of installments or
rents paid.

ART. 1486. In the cases referred to in the two pre- ceding 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.
 CASES NOT APPLICABLE

Sale of personal property not payable in

installments;
Sale or mortgage of real estate;
Replevin
 MACEDA LAW; RA NO. 6552
REALTY INSTALLMENT BUYER ACT

It is embodied in R.A. 6552 which provides for certain protection to particular

buyers of real estate payable on installments. The law declares as "public policy to
protect buyers of real estate on installment payments against onerous and oppressive
conditions;
Purpose of the law. — The purpose is to protect buyers of real estate on installment
payments against onerous and oppressive conditions. (Sec. 2, R.A. No. 6552.)
 Coverage; CASES APPLICABLE

Residential Real Estate; residential condominium apartments

EXCEPT: a. Industrial lots;

b. Commercial buildings
c. Sale to tenants under agrarian laws; and

d. Sale of lands payable in straight terms

 Important features of Maceda Law:

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.
 RIGHTS OF THE BUYER

To pay without additional interest, the unpaid installments due within

the total grace period earned by him fixed at the rate of one (1)-month
grace period for every one (1) year of installment payments made. This
right however, shall be exercised by him only once in every five (5)
years of the life of the contract and its extension, if any;
 RIGHTS OF THE BUYER

If the contract is cancelled, the seller shall refund to

the buyer the cash surrender value of the payments
on the property equivalent to 50% of the total
payments made and, after five (5) years of
installments, an additional 5% every year but not to
exceed 90% of the total payments made
 RIGHTS OF THE BUYER

The buyer has the right to sell his right or assign

the same before actual cancellation of the contract
(see Sec. 5, R.A. No. 6552.) and to pay in advance
any unpaid installment anytime without interest
and to have such full payment of the purchase
price annotated in the certificate of title covering
the property.
 RIGHTS

In case the defaulting buyer has paid less than two (2) years
of installments, the seller shall give him a grace period of not
less than 60 days from the date the installment became due.
If he 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 the
demand for rescission of the contract by a notarial act.
CONDITIONS FOR THE CANCELLATION

The actual cancellation shall take place after 30 days from receipt by
the buyer of the notice of cancellation or the demand for rescission by
a notarial act and upon full payment of the cash surrender value to the
buyer. Down payments, deposits or options on the contract shall be
included in the computation of the total number of installment
payments made.
 IN CASES NOT APPLICABLE

The Act excludes from its operation sales on installments of

industrial lots, commercial buildings, and sales to tenants
under the Code of Agrarian Reforms.25 (Ibid.) In other
words, in the case of such kind of property, the Act
recognizes the vendor’s right unqualifiedly to cancel the
sale upon the buyer’s default.
 Unilateral promise to buy or sell

Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. (Contract of Sale)

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
 Option contract

Option Contract - It is a continuing offer or preparatory contract by

which the owner stipulates with another (potential buyer) that the
latter shall have the right to buy the property at a fixed price
within a certain time, or under, or in compliance with, certain terms
and conditions, or which gives to the owner of the property the right to
sell or demand a sale.

Option money - consideration

 PERFECTED SALE

Earnest Money - It is the payment made to a seller by the buyer to

show his good faith. It will constitute as part of the purchase price, if
the sale is finally consummated.

If the sale is not concluded, RIGHTS under 1191

 PRICE

The sum stipulated as the equivalent of the thing sold and also every incident taken into
consideration for the fixing of the price put to the debit of the buyer and agreed to by
him. IT MUST BE:
1. Real, not fictitious;
2. Paid in money or its equivalent;
3. For valuable consideration;
4. Certain or ascertainable at the time of the perfection of
the contract; and

5. n some cases, must not be grossly inferior to the valof the thing sold.
OBLIGATIONS OF THE BUYER

Payment of the price ;

Accept delivery of thing sold (Mora accipiendi);
Bear expenses for the execution and registration of
the sale and putting the goods in a deliverable state, if such is
the stipulation.
 RES PERIT DOMINO

Art. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is transferred
to the buyer the goods are at the buyer's risk whether actual delivery has been made or not,
except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery;

(2) Where actual delivery has been delayed through the fault of either the buyer or seller
the goods are at the risk of the party in fault. (n)
EXCEPTION TO RES PERIT DOMINO

If the thing is lost after perfection but before its

delivery, that is, even before the ownership is transferred to the
buyer, the risk of loss is shifted to the buyer as an exception to the rule
of res perit domino (Arts. 1480, pars. 1 and 2, 1538, 1189, and 1269.);
 RES PERIT DOMINO

after delivery
If the thing is lost , the buyer bears the risk
of loss following the general rule of res perit domino.
 RES PERIT DOMINO

If the thing is lost before perfection, the seller

and not the one who intends to purchase it
bears the loss (see Roman vs. Grimalt, 6 Phil.
96 [1906].) in accordance with the principle
that the thing perishes with the owner (res
perit domino);
OBJECT: Effect when the loss occurred at the time of
perfection of the contract of sale

If the thing is lost at the time of perfection, the

contract is void or inexistent. (Art. 1409[3].)
The legal effect is the same as when the object is
lost before the perfection of the contract of sale
(see Art. 1493.);
 Exception: In case of partial loss, the buyer may choose between
withdrawing from the contract and demanding the remaining part. If he
chooses the latter, he shall pay the remaining part’s corresponding
price in proportion to the total sum agreed upon (NCC, Art. 1493).