Part I. SALES (Arts.
1458-1637) Essential Requisites of a Contract of Sale(Elements):
Chapter 1 (Nature & Form of the Contract)
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 therefore a price
certain in money or its equivalent.
Contract of Sale
- a contract where one party (seller or vendor)obligates
himself to transfer the ownership of and to deliver a
determinate thing, while the other party (buyer or
vendee)obligates himself to pay for said thing a price certain
in money or its equivalent.
Characteristics Contract of Sale
(a) Consensual (as distinguished from real),
because the contract is perfected by mere consent.
(NOTE: A real contract is one perfected by delivery, e.g., the
contract of deposit or commodatum.)
(b) Bilateral reciprocal
because both parties are bound by obligations dependent
upon each other.
(c) Onerous,
because to acquire the rights, valuable consideration must
be given.
(d) Commutative
because the values exchanged are almost equivalent to each
other.
(NOTE: By way of exception, some contracts of sale are
aleatory, i.e., what one receives may in time be greater or
smaller than what he has given. Example: The sale of a
genuine sweepstakes ticket.)
(e) Nominate (as distinguished from an innominate contract)
because the Code refers to it by a special designation or
name, i.e. contract of sale)
(f) Principal (as distinguished from an accessory contract)
because for the contract of sale to validly exist, there is no
necessity for it to depend upon the existence of another valid
contract. (Examples of accessory contracts are those of pledge
and mortgage.)
NOTES: Delivery and payment in a contract of sale are so
interrelated and intertwined with each other that without
delivery of the goods there is no corresponding obligation to
pay. The two complement each other. It is clear that the two
elements cannot be dissociated, for the contract of purchase
and sale is essentially a bilateral contract, as it gives rise to
reciprocal obligations.
Neither is the delivery of the thing bought nor the payment of
the price necessary for the perfection of the contract of sale.
Being consensual, it is perfected by mere consent.
a. Essential elements those without which, there can be no
valid sale:
1. Consent or meeting of minds
2. Object subject matter(A Determinable subject matter)
3. Cause or consideration (Price certain in money or its
equivalent)
a. Natural elements inherent in the contract, and which in the
absence of any contrary provision, are deemed to exist in the
contract:
1. Warranty against eviction
2. Warranty against hidden defects
a. Accidental elements may be present or absent depending on
the stipulation of the parties (e.g.: conditions, interest, penalty,
time or place of payment, etc.)
Elements of the Contract of Sale
(a) Essential elements (those without which there can be no
valid sale):
1) Consent or meeting of the minds, i.e., consent to transfer
ownership in exchange for the price.
2) Determinate subject matter (generally, there is no sale of
generic thing; moreover, if the parties differ as to the object,
there can be no meeting of the minds).
3) Price certain in money or its equivalent (this is the cause or
consideration). (The price need not be in money.)
(b) Natural elements (those which are inherent in the contract,
and which in the absence of any contrary provision, are
deemed to exist in the contract).
1) warranty against eviction (deprivation of the property
bought)
2) warranty against hidden defects
(c) Accidental elements (those which may be present or absent
in the stipulation, such as the place or time of payment, or the
presence of conditions).
 Kinds of Sales o delivery
I. As to the presence or absence of conditions:
1) Absolute sale (no condition)
2) conditional sale (as when there is a sale with a pacto de
retro, a right to repurchase or redeem; or when there are
suspensive conditions, or when the things sold merely possess
a potential existence, such as the sale of the future harvest of a
designated parcel of land; or when, for example, all the
personal properties in an army depot would be sold except all
combat materials that may be found therein. Such a
stipulation is necessarily valid and, therefore, such combat
materials should be excluded from sale.
II. a.As to the nature of the subject matter:
1.*sale of real property
appropriated/ owned (immovable by virtue of NIDA-nature,
intent, determinations, analogy)
*sale of personal propertyshares of stock
2.*tangible/corporeal
*Intangible/incorporealrights & transmissible
ii.b.As to whether the object is tangible or intangible:
1) sale of property (tangible or corporeal)
2) sale of a right (assignment of a right or a credit, or some
other intangibles such as a copyright, a trademark, or
Bar Question
goodwill)
A has sold a baby grand piano to B, by private instrument for
(NOTE: If the object is tangible, it is called a chose in
P500,000. In that contract of sale, which is the object, and
possession; if the object is intangible, as the case of a right, it
which is the cause?
is a chose in action.)
ANS.: There are at least two viewpoints here, the latter of
[NOTE: The term goods as used in the Uniform Sales Act
which appears preferable:
does not ordinarily include choses in action (things in action).
First view The object (subject matter) of the sale is the
Neither does the term include money.]
piano, while the cause (consideration) is P500,000 (or, as one
III. As to the validity or defect of the transaction:
authority puts it, the giving of the P500,000, at least insofar as
1) valid sale
the seller A is concerned). Insofar as the buyer B is concerned,
2) rescissible sale
the object is the P500,000, while the cause (the consideration
3) voidable sale
for which he parted with his money) is the piano (or, as the
4) unenforceable sale
same authority puts it, the giving of the piano).
5) void sale
Second view Insofar as both the seller and the buyer are
IV. As to when the price is tendered (as to payment)
concerned, there is only one subject matter, namely, the piano.
1) cash sale
The cause or consideration for the seller is the price paid; for
2) sale on the installment plan
the buyer, it is the delivery to him of the piano.
V. As to the value of the things exchanged:
Contract of Sale Contract toSel
1) commutative sale
the non-payment of price is a resolutory the payment in full of the pr
2) aleatory sale
* Aleatory contract: one of the parties or both reciprocally condition, i.e., the contract of sale may positive suspensive conditio
bind themselves to give or to do something in consideration of by such occurrence put an end to a the price is not paid, it is as
what the other shall give or do upon the happening of an event transaction that once upon a time existed obligation of the seller to de
which is uncertain, or which is to occur at an indeterminate transfer ownership never bec
time. (Ex: Sale of sweepstakes ticket) effective and binding
VI. As to whether wholesale or retail (as to market): title over the property generally passes to ownership is retained by the
1) Wholesale, if to be resold for a profit the goods being the buyer upon delivery regardless of delivery and is
unaltered when resold, the quantity being large. until full payment of the pric
2) Retail, if otherwise (also if sold to tailors). after delivery has been made, the seller since the seller retains owne
VII. As to the proximate inducement for the sale: has lost ownership and cannot recover it despite delivery, he is enforc
1) sale by descriptiongadgets, real properties unless the contract is resolved or rescinding the contract if he
2) sale by sample consumable items rescinded the buyerfor failure to pay
3) sale by description and sample (Art. 1481, CivilCode).
VIII. As to the legality of the object:
1) sale of a licit object
2) sale of an illicit object
Sale Distinguished from Assignment of Property in
* Both: Art. 1459right of ownership Favor of Creditors (Cession or Cesion de Bienes)
o (x) perfection
 Sale differs from cession in much the same way as sale, differs
from dation in payment. Moreover, in cession the assignee
(creditor) does not acquire ownership over the things assigned,
but only the right to sell said things. From the proceeds of
such sale, the creditors are to be paid what isdue them.
(NOTE: The concept of cession is found in Art. 1255 of the
Civil Code, which provides that the debtor may cede or
assign his property to his creditors in payment of his debts.
This cession, unless there is a stipulation to the contrary, shall
only release the debtor from responsibility of the net proceeds
of the thing assigned. The agreements which, on the effect of
the cession, are made between the debtor and his creditors
shall be governed by special laws.)
[NOTE: Manresa defines cession as that which consists in
the abandonment of all the property of the debtor for the
benefi t of his creditors in order that the latter may apply the
proceeds thereof to the satisfaction of their credits]
Dation in Payment Cession
1 creditor is sufficient there must be 2 or more
Not all properties of the All the debtors properties are
debtors are conveyed conveyed
Debtor maybe solvent or Debtor must be insolvent
insolvent
Creditor becomes owner Creditors dont become
owner
Sale Distinguished from a Loan
In a loan, the amount is substantially smaller than thevalue of
the security given. If a person, however, borrows a sum of
money,and with it purchases in his own name a car, said
purchaserwould really be considered the buyer, and not the
personwho lent the money to him.
Sale Distinguished from Lease
In a sale, the seller transfers ownership; in a lease, the lessor
or landlord transfers merely the temporary possession and use
of the property.
Kinds of Extrajudicial Foreclosure Sale
1. an ordinary execution sale
governed by the pertinent provisions of Rule 39 of the
Rules of Court;
3. a judicial foreclosure sale
governed by Rule 68 of the Rules of Court;
4. an extrajudicial foreclosure sale
governed by Act 3135, as amended by Act 4118, otherwise
known as An Act to Regulate the Sale of Property Under
Special Powers Inserted In or Annexed to Real Estate
Mortgages.
Art. 1459
The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered.
1459. Lawfulness of the Object and Right to Transfer
Ownership
Two rules are given here:
(a) The object must be LICIT.
(b) The vendor must have the RIGHT to transfer OWNERSHIP at
the time the object is delivered.
Licit Object
(a) The word licit means lawful, i.e., within the commerce of
man.
(b) Things may be illicit:
1) per se (of its nature)
Example: Sale of human flesh for human pleasure.
2) per accidens (made illegal by provision of the law)
Examples: Sale of land to an alien after the effective date of the
Constitution; sale of illegal lottery tickets.
(c) If the object of the sale is illicit, the contract is null and void
(Art. 1409), and cannot, therefore, be ratified.
(d) The right of redemption may be sold. So also may literary,
artistic, and scientific works. A usufruct may also be sold.
Transfer of Ownership
(right of vendor to transfer ownership)
(a) It is essential for a seller to transfer ownership (Art.
1458) and, therefore, the seller must be the owner of the subject
sold. This stems from the principle that nobody can dispose of
that which does not belong to him nemodat quad non habet.
(b) But although the seller must be the owner, he need not
be the owner at the time of the perfection of the contract.It is
sufficient that he is the owner at the time the object is delivered;
otherwise, he may be held liable for breach of warranty against
eviction. Be it noted that the contract of sale by itself, is not a
mode of acquiring ownership.(See Art. 712, Civil Code). The
contract transfers no real rights; it merely causes certain
obligations to arise.
(c) Indeed, the seller need not be the owner at the time of
perfection because, after all, future things or goods, inter alia,
may be sold.
[NOTE: While there can be a sale of future property, there can
generally be no donation of future property. (Art. 751, Civil
Code).]
(d) A person who has a right over a thing (although he is not
the owner of the thing itself) may sell such right. Hence, a
usufructuary may generally sell his usufructuary right.
(e) Of course, if the buyer was already the owner of the
thing sold at the time of sale, there can be no valid contract for
then how can ownership be transferred to one who already has it?
@ according to book:
1. One can sell only what he owns
2. Sufficient if right exists at time of delivery
OBJECTS OF SALE
Requisites:
1. THINGS:
a) determinate or determinable (Arts. 1458, 1460)
b) lawful (Arts 1347, 1409 [1,4]
c) should not be impossible (Art. 1348) e.g. must be within
the commerce of man
2. RIGHTS must be transmissible
Exceptions:
-future inheritance
- service
Contract to sell
 exclusive right and privilege to purchase an object.
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
prospective buyer upon fulfilment of the condition agreed
upon, that is, full payment of the purchase price.
As to reservation of title to the subject
property
In both cases the seller may reserve the title
to the subject property until fulfillment of the
suspensive condition i.e. full payment of the
price

As to effect of fulfillment of suspensive

NOTE: Absent a proviso in the contract that the title to the
condition
property is reserved in the vendor until full payment of the
purchase price or a stipulation giving the vendor the right to 1. Upon fulfillment of 1. Upon
unilaterally rescind the contract the moment the vendee fails to the suspensive fulfillment of the
pay within the fixed period, the transaction is an absolute contract condition, the contract suspensive
of sale and not a contract to sell. (Dignos vs. CA [1988]) of sale is thereby condition, which
perfected, such that if is the full
* The contract of sale by itself is not a mode of acquiring there had been previous payment of the
ownership. The contact transfers no real rights; it merely causes delivery of the subject purchase price,
certain obligations to arise. property to the buyer, ownership will
ownership thereto not automatically
automatically transfer to the
Contract of Contract to transfers to the buyer buyer although
by operation of law the property may
Sale Sell without any further act have been
by the seller. previously
1. Title passes to the 1. Ownership is delivered to him.
buyer upon delivery of reserved in the The prospective
the thing sold seller and is not to seller still has to
pass until full convey title to the
payment of the prospective buyer
purchase price by entering into a
contract of
2. Non-payment of the 2. Full payment is a
absolute sale.
price is a negative positive suspensive
resolutory condition condition, the As to effect of sale of the subject property to
and the remedy of the failure of which is 3rd persons
seller is to exact not a breach
fulfilment or to rescind casual or serious 1. Constructive /actual 1. Third person
the contract but simply prevents knowledge on the part buying the
the obligation of of the 2nd buyer of the property despite
the vendor to defect in the sellers fulfilment of the
convey title from title renders him not a suspensive
having binding registrant in good faith. condition cannot
force Such second buyer be deemed a
cannot defeat the first buyer in bad faith
3. Vendor loses and 3. Title remains in buyers title. Ratio: and prospective
cannot recover the vendor if the Fulfilment of the buyer cannot seek
ownership of the thing vendee does not suspensive conditions the relief of
sold and delivered comply with the affects the sellers title reconveyance of
until the contract of condition precedent to the property and property.
sale is resolved and set of making payment previous delivery of the Exception: If
aside at the time property automatically There was no
specified in the transfers previous sale of
contract ownership/title to the the property.
buyer.

Conditional Sale Contract to Sell

Emptio rei speratae Emptio spei
 This is a future thing that may be sold.
Sale of an expected thing (emptioreisperati)
1. Sale of an expected 1. Sale of a mere If the thing does not materialize, VOID
thing hope or expectancy Deals with FUTURE things
that the thing will Sale of the hope itself (emptiospei)
come to existence; If the thing does not materialize, VALID as long as
HOPE existed
Sale of the hope
Deals with present things
itself
Sale of Vain Hope or Expectancy
2. Sale is subject to the 2. Sale produces
Sale is itself void. Be it noted that this is NOT an aleatory
condition that the contract for while in an aleatory contract there is an element of
effect even if the
thing will exist; if it chance, here, there is completely NO CHANCE.
thing does not Article 1461
does not, there is no
come into things having a potential existence may be the object of the
contract
existence, unless it contract of sale.
is a vain hope the efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
3. The uncertainty is 3. The uncertainty existence.
with regard to the is with regard to the sale of a vain hope or expectancy is void.
quantity and quality of the existence of the
the thing and not the thing 1462. Sale of Goods may be future or existing goods:
existence of the thing Manufactured
Raised
4. Object is a future 4. Object is a Acquired after perfection of the contract
thing present thing which Things whose acquisition depend upon a contingency which
is the hope or may or may not happen
expectancy 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
1460. Determinate thing a thing that can be particularly goods to be manufactured, raised, or acquired by the seller
designated or physically segregated from all others of the after the perfection of the contract of sale, in this Title called
same class. *future goods.
it is not essential really that at the time of perfection, the there may be a contract of sale of goods, whose acquisition
object be already specific. It is sufficient that it be capable of by the seller depends upon a contingency which may or may
being determinate without need of any new agreement. not happen.
However, from the viewpoint of risk or loss, not until the
object has really been made determinate can we say that the NOTE: In case of doubt the presumption is in favor of emptio
object has been lost, for as is well known, generic things rei speratae which is more in keeping with the commutative
cannot be lost.
character of the contract
If there is a necessity of making a new agreement to determine
the amount and the quality of the object sold, this necessarily Goods which may be Object of Sale
constitutes an obstacle to the perfection of the contract. (NO
a. Existing goods goods owned or possessed by the seller.
SALE)
a. Future goods goods to be manufactured, raised or acquired
@ according to book:
by the seller after the perfection of the contract.
Article 1460
NOTES:
A thing that can be particularly designated or physically
segregated from all others of the same class. A sale of future goods is valid only as an executory contract to
be fulfilled by the acquisition and delivery of goods specified.
The requisite that a thing be determinate is satisfied if at the While there can be sale of future property, there can generally be
time the contract is entered into, the thing is capable of being no donation of future property (Article 751 Civil Code)
made determinate without the necessity of a new or further Future inheritance cannot be sold.
agreement between the parties. A contract of sale or purchase of goods to be delivered at a
future time, if entered into without the intention of having any
goods pass from one party to another, but with an understanding
that at the appointed time, the purchaser is merely to receive or
pay the difference between the contract and the market prices, is
illegal. Such contract falls under the definition of futures in
which the parties merely gamble on the rise or fall in prices and
is declared null and void by law. (Art. 2018, NCC) (Onapal
Phil. Commodities, Inc. vs. CA [1993])
1461.
Sale of a thing having a potential existence: VALID
 Instances when the Civil Code recognizes sale of things
not actually or already owned by the seller at the time
of the sale:
1. Sale of a thing having potential existence (Article 1461)
2. Sale of future goods (Article 1462)
3. Contract for the delivery at a certain price of an article
which the vendor in the ordinary course of the business
manufactures or procures for the general market, whether
the same is on hand at the time or not (Article 1467)
Sale Agency to sell
1. Buyer receives 1. Agent receives
the goods as owner the goods as goods
of the principal who
retains his
ownership over
them
2. Buyer pays the 2. Agent delivers
price the price which in
turn he got from his
buyer
3. Buyer, as a 3. Agent can return
general rule, cannot the goods in case he
return the object is unable to sell the
sold same to a third
person
4. Seller warrants 4. Agent makes no
the thing sold warranty for which
he assumes personal
liability as long as
he acts within his
authority and in the
name of the seller
5. Buyer can deal 5. Agent in dealing
with the thing sold with the thing
as he pleases being received, must act
the owner and is bound
according to the
instructions of the
principal
Rules to determine if the contract is one of Sale or Piece of
work:
a. If ordered in the ordinary course of business sale
a. If manufactured specially for the customer and upon his
special order, and not for the market piece of work
SCHOOLS OF THOUGHT:
a) Massachusetts rule: If specifically done at the order
of another, this is a contract for a piece of work.
(Philippine application)
b) New York rule: If thing already exists-SALE; if not-
WORK
c) English rule: If material is more valuable-SALE; if
skill is more valuable-WORK
1463. The sole owner of a thing may sell an undivided interest
thereon and leads to co-ownership
Sale of undivided interest in a thing:
1. By sale owner
2. By co-owner
1464. Fungible Goods personal property which may be
replaced with equivalent things
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.
1465. Things subject to a resolutory (condition happening
extinguishes) condition may be the object of the contract of
the sale
1466.
in construing a contract containing provisions characteristics
of both the contract of sale and the contract of agency to sell,
the essential clauses of the whole instrument shall be
considered.
Contract of Sale Agency to Sell
the buyer pays the price the agent delivers the price w
he got from his buyer
the buyer after delivery becomes the the agent who is supposed to
owner not become the owner, even
property has already been de
him
the seller warrants the agent who sells assumes
no personal liability as long
within his authority and in th
the principal
1467. Sale vs Piece of Work
 a contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business
manufacturers 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 of piece of work.
a) If ordered in the ordinary course of business SALE
b) If manufactured specially and not for the market PIECE OF
WORK CONTRACT
Massachusetts Rule: If specially done at the order of another,
this is a contract of piece of work
New York Rule: if the thing is already existing SALE, if not
Piece of Work
(a) First Rule Intent.
(b) If intent does not clearly appear
1) if thing is more valuable than money BARTER
2) if 50-50 SALE
3) if thing is less valuable than the money SALE
BARTER
contract whereby one of the parties binds himself to give
one thing in consideration of the other's promise to give
another thing.
NOTE: The only point difference between contract of sale
and barter is in the element which is present in sale but not in
barter, namely: price certain in money or its equivalent
NOTE: If the consideration is partly in money and partly in
another thing, determine:

English Rule: if material is more valuable- SALE; if skill is a. The manifest intention of the parties
more valuable Piece of Work b. If the intent is not clear, apply the following rules:
1. If the thing is more valuable than money
barter
2. If the money and the thing are of equal value sale
.
3. If the thing is less valuable than money sale
Contract for Piece
Sale
of Work
Sale Dation in Payment
1. The thing 1. The thing
transferred is one transferred is one 3. No pre-existing 1. Pre-existing credit
not in existence and which would have credit
which never would existed and would 2. Obligations are 2. Obligations are
have existed but for have been the created extinguished
the order of the subject of sale to
party desiring to some other person, 3. Consideration on 3. Consideration of
acquire it even if the order had the part of the seller the debtor is the
not been given is the price; on the extinguishment of
part of the buyer is the debt; on the part
2. The services 2. The primary the acquisition of the of the creditor, it is
dominate the objective of the object the acquisition of the
contract even though contract is a sale of object offered in lieu
there is a sale of the manufactured of the original credit
goods involved item; it is a sale of
goods even though 4. Greater freedom 4. Less Freedom in
the item is in determining determining the
the price price
manufactured by
labor furnished by
the seller and upon 5. Buyer still has 5. The payment is
previous order of to pay the price received by the
the customer debtor before
the contract is
3. Not within the 3. Within the Statute perfected.
Statute of Frauds of Frauds

1468. Rules to Determine Whether Contract is One of Sale

or Barter 1469. Price
 - must be CERTAIN (otherwise, no consent = no contract); or
When no specific amount is stipulated, price is still CERTAIN
if:
a) With reference to another thing
b) The determination is left to the judgment of a specified person
a. If the SPECIFIED PERSON is unwilling, the contract in
inefficacious UNLESS the parties subsequently agree upon the
price
b. If the SPECIFIED PERSON acted in bad faith, court may fix
the price
c. If the SPECIFIED PERSON is prevented by fault of a party,
the aggrieved party may have remedies against the party at
fault
c) Cases Provided under 1472 of NCC:
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 fi xed
above or below the price on such day, or in such exchange or
market, provided said amount be certain.
FAILURE TO PAY the price does not cancel the validity or
perfection of the contract since there is still the consideration
the price agreed upon or the value
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 vendee and agreed to by him.
Requisites:
1. Certainty or ascertainable at the time of perfection
2. Real, not fictitious
3. In some cases, must not be grossly inferior to the value of
the thing sold.
4. Paid in money or its equivalent
Certainty
It is not necessary that the certainty of the price be actual
or determined at the time of the execution of the contract. The
price is certain in the following cases:
1. If the parties have fixed or agreed upon a definite amount;
NOTE: 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.
2. If it be certain with reference to another thing certain
3. If the determination of the price is left to the judgment of
a specified person or persons even before such determination
4. In the cases provided under Art. 1472 NCC
Effect when the price is fixed by the third person
designated:
GENERAL RULE: Price fixed by a third person designated
by the parties is binding upon them.
EXCEPTIONS:
1. When the third person acts in bad faith or by mistake
2. When the third person disregards the specific instructions
or the procedure marked out by the parties
Effect when the price is not fixed by the third person
designated:
1. If the third person refuses or cannot fix the price, the
contract shall become ineffective, unless the parties
subsequently agree upon the price
2. If the third person is prevented from fixing the price by
the fault of the seller or buyer, the party not in fault may
obtain redress against the party in fault
1470.
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.
Effect of Gross Inadequacy of Price
(a) In ordinary sale, the sale remains valid
even if the price is very low, UNLESS if
there was vitiated consent(such as when
fraud or undue influence is present).
(b) In execution of judicial sales While
mere inadequacy of price will not set
aside a judicial sale of real property, still if
the price is so inadequate as to shock the
conscience of the Court, it will be set
aside.
(c) It is possible that a donation, not a
sale, was really intended. In such a case,
the parties may prove that the low price
is sufficiently explained by the
consideration of liberality.
Effect of Gross Inadequacy of Price:
1. Voluntary sales
GENERAL RULE: Mere inadequacy of the price does not
affect validity of the sale.
A valuable consideration, however small or nominal, if
given or stipulated in good faith is, in the absence of fraud,
sufficient.(Rodriguez vs. CA, 207 SCRA 553)
Future inheritance cannot be sold.
EXCEPTIONS:
a. Where low price indicates vice of consent, sale may be
annulled; or contract is presumed to be an equitable mortgage
b. Where the price is so low as to be shocking to conscience,
sale may be set aside.
2. Involuntary or Forced sales
GENERAL RULE: Mere inadequacy of the price is not a
sufficient ground for the cancellation of the sale if property is
real.
EXCEPTIONS:
a. Where the price is so low as to be shocking to the moral
conscience, judicial sale of personal property will be set aside
b. In the event of a resale, a better price can be obtained
NOTE: The validity of the sale is not necessarily affected
where the law gives to the owner the right to redeem, upon the
theory that the lesser the price, the easier it is for the owner to
effect redemption.
 1471.Sale w/ Simulated/ Fictitious Price= VOID(NO
CAUSE/CONSIDERATION)
UNLESS a donation or some other agreement, provided the
requirements of donations or other agreements have been
complied with = VALID
-if the requirements dont exist = VOID
Effect where price is simulated
1. If it is shown to have been in reality a donation or some
other act or contract
The sale is void but the act or contract may be valid as a
donation
2. If not
The contract is void and inexistent
Article 1472 see 1469
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.
1473 Setting of the price cannot be left to one partys
discretion
UNLESS the price fixed is accepted by the other
party and therefore the sale is perfected
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.
1474Effect if the Price Cannot Be Determined
(a) The sale is void for the buyer cannot fulfill his duty to pay.
(b) If the buyer has made use of it, he should not be allowed to
enrich himself unjustly at anothers expense. So he must pay a
reasonable price. The sellers price, however, must be the
one paid if the buyer knew how much the seller was charging
and there was an acceptance of the goods delivered. Here,
there is an implied assent to the price fixed.
Effect of Failure to determine price:
1. Where contract executory
The contract is inefficacious
2. Where the thing has been delivered to and appropriated
by the buyer
The buyer must pay a reasonable price therefore
Reasonable price generally the market price at the time and
place fixed by the contract or by law for the delivery of the
goods
1475. Perfection of the contract of sale at the moment
there is a meeting of minds upon the thing which is the object
of the contract and upon the price (Not the delivery)
PERFECTION OF SALE
GENERAL RULE: It is perfected at the moment there is
meeting of the minds upon a determinate thing (object), and a
certain price (consideration), even if neither is delivered. A
choice between rescission and fulfilment, with damages in
either case)
NOTE: Sale is a consensual contract; Hence, delivery and
payment are not essential for its perfection
EXCEPTION: When the sale is subject to a suspensive
condition by virtue of law or stipulation.
* The terms and conditions of payment are merely accidental,
not essential elements of the contract of sale except where the
partied themselves stipulate that in addition to the subject-
matter and the price, they are essential or material to the
contract.
Requirements for perfection
a. When parties are face to face
When an offer is accepted without conditions or qualifications
NOTES:
A conditional acceptance is a counter-offer
when negotiated thru phone it is as if it is negotiated
face to face
b. When contract is thru correspondence or thru telegram
When the offeror receives or has knowledge of the acceptance
by the offeree
NOTE: If the buyer has already accepted but the seller does
not know yet of the acceptance, the seller may still withdraw
c. When a sale is subject to a suspensive condition
From the moment the condition is fulfilled
Requirements for Perfection
(a) When parties are face to face, when an offer is
accepted without conditions and without
qualifications. (A conditional acceptance is a counter-
offer.)
(NOTE: If negotiated thru a phone, it is as if the
parties are face to face.)
(b) When contract is thru correspondence or thru
telegram, there is perfection when the offeror
receives or has knowledge of the acceptance by the
offeree.
[NOTE: If the buyer has already accepted, but the
seller does not know yet of the acceptance, the seller
may still withdraw.]
(c) When a sale is made subject to a suspensive (give
rise) condition, perfection is had from the moment
the condition is fulfilled.
-Effect of Perfection: the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.

- Consummation of Contarct: upon delivery and payment
- Before perfection of the contract of sale, no mutual rights
and obligations exist between the would-be buyer and the
would-be seller.
-Accepted Bilateral Promise to Buy and Sell (1479(1)) is, in a
sense, similar but not exactly the same as a perfected contract
of sale
Formalities for Perfection
Under the Statute of Frauds, the sale of:
(a) real property (regardless of the amount)
(b) personal property if P500 or more must be in writing to
be enforceable. (Art. 1403, No. 2, Civil Code).
If orally made, it cannot be enforced by a judicial
action, except if it has been completely or partially executed,
or except if the defense of the Statute of Frauds is waived.
(Art. 1405, Civil Code). [NOTE: Also in writing should be
sales which are to be performed only after more than one year
(from the time the agreement was entered into) regardless
as to whether the property is real or personal, and regardless of
the price involved.]
Perfection in the Case of Advertisements
Advertisements are mere invitations to make an offer (Art.
1325, Civil Code) and, therefore, one cannot compel the
advertiser to sell.
The Sales Tax
- Even if the object sold has not yet been delivered, once there
has been a meeting of the minds, the sale is perfected and,
therefore, the sales tax (15% on the gross) is already due. It
accrues on perfection, not on the consummation of the sale.
- Retail sales are subject to tax (If the buyer buys the
commodity for his own consumption)
- Wholesale, they are not subject to tax (if for resale, regardless
of the quantity)
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) The sale is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary
manner.
3) Before the Fall of the Hammer:
a. the bidder may retract his bid (since Every bidding is merely
an offer and, therefore, before it is accepted, it may be
withdrawn)
b. the auctioneer may withdraw the goods from the sale unless
the auction has been announced to be without reserve (since
This bid is merely an offer, not an acceptance of an offer to
sell. Therefore it can be rejected. What the auctioneer does in
withdrawing is merely reject the offer)
4) May the seller bid? If so, under what conditions, if any?
ANS: Yes, provided:
(a) such a right to bid was reserved;
(b) and notice was given that the sale by auction is subject to a
right to bid on behalf of the seller. (Art. 1476, pars. 3 and 4).
5) May the seller employ others to bid for him?
ANS: Yes, provided he has notified the public that theauction
is subject to the right to bid on behalf of the seller.(Art. 1476,
par. 4)
People who bid for the seller, but are notthemselves bound, are
called by-bidders or puffers.
In view of the notice, there would not be anyfraud, and the
transaction with the rest should be consideredas valid. Without
thenotice, any sale contravening the rule may be treated by
thebuyer as fraudulent. (Art. 1476, No. 4). In other words,
thepurchaser could be relieved from his bid.
It may happen that the owner is not himself the auctioneer.
Now then if the auctioneer employs puffers and gives no
notice to the public, the sale would still be fraudulent, whether
or not the owner of the goods knew what the auctioneer had
done.
6) The owner has the right to FIX CONDITIONS for the sale of
auction
7) A private sale authorized by a probate court (and without
objection on the part of the heirs or creditors) cannot be
assailed by a person who is not an interested party (such as
an heir or creditor). One who merely offered a higher price
(without actually buying the property) is not an interested
party. It would have been different had there been a public
auction.
RULES GOVERNING AUCTION SALES
1. Sales of separate lots by auction are separate contracts of
sale.
2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid in the auction, provided:
a) such right was reserved
b) notice was given that the sale was subject to a right to
bid on behalf of the seller
c) right is not prohibited by law or by stipulation
4. Advertisements for bidders are simply invitations to make
proposals, and the advertiser is not bound to accept the highest
or lowest bidder, unless the contrary appears.
1477. The ownership of the thing sold shall be transferred to
the vendee upon ACTUAL or CONSTRUCTIVE delivery
Delivery may be:
(a) actual (Art. 1497, Civil Code).
(b) constructive (Arts. 1498-1601, Civil Code), including any
other manner signifying an agreement that the possession is
transferred. (Art. 1496, Civil Code).
1478. The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the price.
Transfer of Ownership
(a) Mere perfection of the contract does not transfer
ownership.
Ownership of the object sold is transferred only after delivery
(tradition), actual, legal or constructive.The rule is, therefore,
this: After delivery of the object, ownership is transferred.
 (b) How about a stipulation that even with delivery there will
be no change or transfer of ownership till the purchase price
has been fully paid, is this valid?
ANS.: Yes, but the stipulation is not binding on innocent third
persons such as customers at a store. The customers must not
be prejudiced.
TRANSFER OF OWNERSHIP
GENERAL RULE: While a contract of sale is consensual,
ownership of the thing sold is acquired only upon its delivery,
actual or constructive, to the buyer. (Daus vs. Sps. De Leon,
16 June 2003)
This is true even if the purchase has been made on
credit. Payment of the purchase price is not essential to the
transfer of ownership, as long as the property sold has been
delivered. (Sampaguita Pictures, Inc vs. Jalwindor
Manufacturers, Inc. 93 SCRA 420)
Nonpayment only creates a right to demand payment
or to rescind the contract, or to criminal prosecution in the
case of bouncing checks. (EDCA Publishing and Distributing
Corp. vs. Santos, 184 SCRA 614)
EXCEPTIONS:
1. Contrary stipulation or Pactum reservati dominii
(contractual reservation of title) a stipulation, usually in
sales by installment, whereby, despite delivery of the property
sold, ownership remains with the seller until full payment of
the price is made.
2. Contract to sell
3. Contract of insurance a perfected contract of sale, even
without delivery, vests in the vendee an equitable title, an
existing interest over the goods sufficient to be the subject of
insurance
1479.
Mutual Promise/ Bilateral Reciprocal Contract
- A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
Accepted Unilateral Promise
- A 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
OPTION MONEY.
- An acceptance of an offer to sell
- Only 1 makes the promise and the promise is accepted by the
other
- If the option is given without consideration, it is a mere offer
of contract of sale which is not binding until accepted
Policitacion a unilateral promise to buy or sell which is not
accepted
- No judicial effect and creates no legal bond
- A mere offer not converted to contract
Policitation
An unaccepted unilateral promise to buy or sell. Even if
accepted by the other party, it does not bind the promissor and
maybe withdrawn anytime. This is a mere offer, and has not
yet been converted into a contract.
Unilateral Promise
(a) The acceptance of a unilateral promise to sell must
be plain, clear, and unconditional. Therefore, if there is
aqualified acceptance with terms different from the offer, there
is no acceptance, that is, there is no promise to buy and there
is no perfected sale.
(b) If an option is granted, how long is the offer bound
by his promise?
ANS.: If no period has been stipulated, the court will
fix the term.
(c) Is the right to buy, a right that may be transmitted to
others?
ANS.: Yes, unless it was granted for purely personal
considerations.
Option
- It is a contract granting a person the privilege to buy or not to
buy certain objects at any time within the agreed period at a fi
xed price. The contract of option is a separate and distinct
contract from the contract which the parties may enter into
upon the consummation of the contract; therefore, an option
must have its own cause or consideration. After the period of
conventional redemption has expired, there is no more right to
repurchase. Should the period later on be extended, this would
really be an offer to sell, or any option, and, therefore, there
must be a consideration distinct from the repurchase price.
Contract to SELL is NOT an Absolute Sale
In contracts to sell where ownership is retained by the seller
and is not to pass until the full payment of the price, such
payment is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but simply an event
that prevented the obligation of the vendor to convey title
from acquiring binding force. To argue that there was only a
casual breach (and therefore rescission should not be allowed)
is to proceed from the wrong assumption that the contract is
one of absolute sale, where non-payment is a resolutory
condition, which is not the case. Therefore also, a clause in
such a contract allowing unilateral automatic rescission by
theseller in the event the buyer fails to pay any installment due
is VALID, Art. 1592 not being applicable.
EFFECT OF PROMISE TREATED UNDER ART. 1479
Civil Code:
1. Accepted unilateral promise to sell or buy
Only one makes the promise, this promise is accepted by
the other. Example: A promises to sell to B, B accepts the
promise, but does not in turn promise to buy.
does not bind the promissor even if accepted and may be
withdrawn anytime.
NOTE: Pending notice of its withdrawal, the accepted
promise partakes the nature of an offer to sell which if
accepted, results in a perfected contract of sale (Sanchez vs.
Rigos 45 SCRA3 68). In other words, if the acceptance is
 made before withdrawal, it constitutes a binding contract of
sale although the option is given without consideration.
if the promise is supported by a consideration distinct and
separate from the price (option money), its acceptance will
give rise to a perfected contract.
2. Bilateral promise to buy and sell
One party accepts the others promise to buy and the
latter, the formers promise to sell a determinate thing for a
price certain
it is reciprocally demandable
It requires no consideration distinct from the selling price
NOTE: this is as good as a perfected sale. No title of
dominion is transferred as yet, the parties being given only the
right to demand fulfillment or damages.
Option contract
A contract granting a privilege in one person, for which
he has paid a consideration, which gives him the right to buy
certain merchandise, at anytime within the agreed period, at a
fixed price.
An option without consideration is void and the effect is
the same as if there was no option
* However, in Sanchez vs. Rigos (1972), even though the
option was not supported by a consideration, the moment it
was accepted, a perfected contract of sale resulted, applying
Art. 1324 of the NCC. In view of the ruling of the Supreme
Court, the only importance of the consideration for an option
is that the option cannot be withdrawn by the grantor after
acceptance.
* In an option to buy, the party who has an option may validly
and effectively exercise his right by merely notifying the
owner of the formers decision to buy and expressing his
readiness to pay the stipulated price.
1480.Who bears the LOSS:
a) Loss before perfection =SELLER (No contract for NO
CAUSE)
b) After delivery to the buyer = BUYER (Res perit domino
the owner bears the loss.)
c) after perfection but before delivery= buyer bears the loss, as
exception to the rule of res perit domino
Reasons:
a. Had the sale been perfected, the buyer would have borne the
loss, that is, he would still have had to pay for the object even
if no delivery had been made.
b. Art. 1480 (pars. 1 and 2) clearly, states that injuries between
perfection and delivery shall be governed by Art. 1262, among
others. And Art. 1262 in turn says that an obligation which
consists in the delivery of a determinate thing shall be
extinguished if its hould be lost or destroyed without the fault
of the debtor, and before he has incurred in delay. (This
means that the obligation of the seller to deliver is
extinguished, but the obligation to pay is not extinguished.)
c. Art. 1583 says: In case of loss, deterioration, or improvement
of the thing before its delivery, the rule in Art. 1189 shall be
observed, the vendor being considered the debtor. Art. 1189,
in turn, says in part: If the thing is lost without the fault of the
debtor, the obligation shall be extinguished.
d. Art. 1269 (on LOSS) states: The obligation having been
extinguished by the loss of the thing, the creditor shall have all
the rights of action which the debtor may have against third
persons by reason of the loss. Thus, the buyer, who is the
creditor as to the object, has the right to proceed against the
wrongdoer for damages. He is given this right, instead of the
vendor, only because he is still being made liable for the price.
It would be absurd to grant him this right against wrongdoers
unless he has been prejudiced in some way. Clearly then, it is
he (the vendee or buyer) who bears the loss.
e. Historically, the buyer has always borne the loss. Under
Roman Law, the risk of the thing sold passes to the buyer,
even though he has not received the thing. For the seller is
not liable for any thing which happens without his fraud or
negligence. But if after the sale, any alluvium has accrued to
the land, this benefit ought to belong to him who has the risk.
f. Since the buyer gets the benefits during the intervening period,
it is clear that he must also shoulder the loss.
EXCEPT:
(a) If the object sold consists of fungibles sold for a price fixed
according to weight, number, or measure.
(b) If the seller is guilty of fraud, negligence, default, or
violation of contractual term.
(c) When the object sold is generic because genus does not
perish (genus nunquamperit).
1480
RULES ON RISK OF LOSS AND DETERIORATION:
a. The thing sold is lost before perfection: Seller bears the loss.
a. The thing sold is lost at the time of perfection: Contract is
void or inexistent.
a. The thing sold is lost after perfection, but before delivery:
GENERAL RULE: Who bears the risk of loss is governed
by the stipulations in the contract
In the absence of any stipulation:
First view:
Buyer bears the loss as an exception to the rule of res perit
domino.
EXCEPTIONS:
1. when object sold consists of fungible goods for a price
fixed according to weight, number or measure
2. seller is guilty of fraud, negligence, default or violation
of contractual terms
3. object sold is generic
(Civil Code of the Philippines, Paras)
NOTE: This view conforms with Manresas view. Buyer
would have been the one to profit from the thing had it not
been lost or destroyed.
Contrary view:
Where the ownership is transferred by delivery, as in our code,
the application of the axiom res perit domino, imposes the risk
of loss upon the vendor; hence, if the thing is lost by fortuitous
event before delivery, the vendor suffers the loss and cannot
recover the price from the vendee (Commentaries and
Jurisprudence on the Civil Code of the Philippines, Tolentino)
a. The thing is lost after delivery: Buyer bears the loss.

Question: If one does not comply, the other need not pay?
Answer: True. But this only applies when the seller is able to
deliver but does not.
themselves) of the goods shall correspond with the sample in
kind, quality, and character. Only the sample is exhibited. The
bulk is not present, and so there is no opportunity to examine
or inspect it.
Sale by description and sample must satisfy the
requirements in both, and not in only one.

EFFECT OF LOSS AT THE TIME OF SALE:
a. Thing entirely lost at the time of perfection: Contract is void
and inexistent
a. Thing only partially lost: Vendee may elect between
withdrawing from the contract or demanding the remaining
part, paying its proportionate price
When does it not correspond to the description/ sample?
- The bulk of goods delivered do not correspond to the
description/ sample
When does it not correspond to the description & sample?
- It is not sufficient that the bulk of goods correspond to the
sample alone if they do not correspond to the description

The buyer shall have reasonable opportunity comparing the

Fungibles are personal property which may be replacedwith bulk with the description or the sample
equivalent things.
Remedies:
Right of First Refusal a) Cancel or rescind the sale, return the goods and collect the
account paid
It is a right of first priority all things and conditions being
b) Retain the goods and sue for breach of warranty
equal; there should be identity of the terms and conditions to
1482. Earnest Money arras
be offered to the optionee and all other prospective buyers,
Something of value to show that the buyer was really earnest
with optionee to enjoy the right of first priority. A deed of sale
executed in favor of a third party who cannot be deemed a and given to the seller to bind the bargain
purchaser in good faith, and which is in violation of the of the Part of the Purchase price
right of first refusal granted to the optionee is NOT voidable Proof of perfection of the contract
under the Statute of Frauds, such contract is valid BUT When merchandise cannot be delivered, ARRAS must be
rescissible under Article 1380 to 1381(3) of the New Civil returned. Of course, this right may be renounced since neither
Code (Guzman Bocaling & Co. vs. Bonnavie; Riviera the law nor public policy is violated.
Filipina, Inc vs. CA et.al. GR No. 117355, April 5, 2002). earnest deposit money
The basis of the right of first refusal must be the current Earnest money or ARRAS is something of value to show
offer to sell of the seller or offer to purchase of any that the buyer was really in earnest, and given to the seller to
prospective buyer. Only after the optionee fails to exercise its bind the bargain. It is considered as:
right of first priority under the same terms and within the
a) part of the purchase price
period contemplated could the owner validly offer to sell the
b) proof of perfection of the contract
property to a third person, again, under the same terms as
*It shall be deducted from the total price.
offered to the optionee (Paranaque Kings Enterprises, Inc. vs.
CA GR No. 111538, February 26, 1997) Earnest money Option money
The lessees right of first option to buy the leased property 1. Title passes to 1. Ownership is
in case of its sale is but a part of the bigger right to lease the the buyer upon reserved to the seller
said property from the lessor. The option was given to the delivery of the and is not to pass
lessee because she was the lessee of the subject property. It thing sold until full payment
was a component of the consideration of the lease. The option 2. In case of 2. In case of
was by no means an independent right which can be exercised non-payment, an non-payment, there
by the lessee. If the lessee is barred by the contract from
action for specific can be action for
assigning her right to lease the subject property to any other
party, the lessee is similarly barred to assign her first option to performance or for specific
buy the leased property to another. (Bangayan et.al vs. CA and rescission can be performance
Lim GR No.123581, August 29, 1997) filed by the
injured party
1481. 3. Part of the 3. Money given as a
purchase price distinct
Sale by description where seller sells things as being of a
consideration for an
certain kind, the buyer merely relying on the sellers
representations or descriptions. Generally, the buyer has not option contract
previously seen the goods, or even if he has seen them, he 4. When given, the 4. The would-be
believes (sometimes erroneously) that the description tallies buyer is bound to buyer is not required
with the goods he has seen. pay the balance to buy
Sale by sample that where the seller warrants that the bulk 5. Given when 5. Applies to a sale
(not the major part or the majority of the goods but the goods there is already a not yet perfected
 sale
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.
For a complete discussion of the pertinent parts of the Statute
of Frauds, see comments under Art. 1475
Effect if Notary Public is Not Authorized
If the deed of sale of land is notarized by a notary public
whose authority had expired, the sale would still be valid,
since for validity of the sale, a public instrument is not even
essential.
If Sale Is Made Thru an Agent
The sale of a piece of land or interest therein when made thru
an agent is void (not merely unenforceable) unless the agents
authority is in writing. (Art. 1874, Civil Code). This is true
even if the sale itself is in a public instrument, or even
registered.
(NOTE: Interest therein refers to easement or usufruct for
example.)
RIGHTS OF BUYER:
1) Return the thing and recover the money paid, or
2) Retain the thing and sue for the breach of warranty.
PURCHASE BY MINORS: Contract is generally voidable
but in case of necessaries, where necessaries are sold and
delivered to a minor or other person without capacity to act, he
must pay a reasonable price therefore. Necessaries are those in
Art. 290.
FORMALITIES OF CONTRACT OF SALE
GENERAL RULE: Sale is a consensual contract and is
perfected by mere consent.
EXCEPTIONS: In order to be enforceable by action, the
following must be in writing:
1. Sale of personal property at a price not less than P500
2. Sale of real property or an interest therein
3. Sale of property not to be performed within a year from
the date thereof
4. Applicable statute requires that the contract of sale be
in a certain form
NOTE: Statute of Frauds is applicable only to executory
contracts and not to contracts which are totally or partially
performed.
1484. RECTO LAW
Contract of Sale Payable in INSTALLMENTS for Personal
Properties
The ALTERNATIVE Remedies of the vendor or seller in case
of failure to pay by the vendor or buyer:
1. Exact fulfillment of the obligation, should the vendee fail to
pay
2. Cancel the sale should the vendees failure to cover 2 or more
installments
3. Foreclosure the chattel mortgage on the thing sold, if one has
been constituted, should the vendees failure to cover 2 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 is void.
Requisites:
1. Valid contract
2. Contract of sale
3. Property sold is personal
4. Sale must be in installment plan
Reason: to prevent abuse in the foreclosure of the chattel
mortgage by selling at low price and the suing for the
deficiency (buyer loose the property but still indebted)
1485.The 1484 (Recto Law) shall be applied tocontracts
purporting to be leases of personal property withoption to buy,
when the lessor has deprived the lessee ofthe possession or
enjoyment of the thing.
- This may really be considered a sale of personal property in
installments.
- the purpose of Art. 1485 is to prevent an indirect violation of
Art. 1484
- Even if the word lease is employed, when a sale on
installment is evidently intended, it must be construed as a
sale.
1486. Maceda Law (RA 6552)
-effective date: Sept 14, 1972
Contract of Sale Payable in INSTALLMENTS for Real
Properties
Realty Installment Buyer Protection Act
Reason: to protect buyers of real estate against onerous and
oppressive conditions
Coverage: all contract of real estate on installments payments
INCLUDING residential condominium apartments
EXCLUDING industrial lot, commercial buildings and sales
to tenants
Section 3: Remedies for the buyer when he has paid at least 2
years of installments in case he defaults in payment of
succeeding installments:
a) To pay without interest within the total grace period 1 month
for every 1 year installment (can only be availed 1x every 5
years)
b) Cancel the contract, seller give 50% + 5% per year if after 5
years of installments but does not exceed 90% of the total
payments
(Provided, the actual cancellation of the contract shall take
place after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by
a notarial act and upon full payment of the cash surrender
value to the buyer)
 Total Installments = Options + Downpayment + Deposits +
Installments
Section 4: Rule if less than 2 years of installments were paid:
a) Grace period: not less than 60 days from installments became
due
b) If during a, the obligation is not complied, 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
Section 5: The buyer shall have:
a) Right to sell his rights; or
b) Assign the same to another person by a notarial act; or
c) To reinstate the contract by updating the account during the
grace period and before actual cancellation of the contract
Section 6: The buyer shall have the right to pay in advance
any installment or the full unpaid balance of the purchase
price anytime without interest and to have such full payment
of the purchase price annotated in the Certificate of Title
covering the property.
Article 1487
CHAPTER 2: CAPACITY TO SELL
1489All persons who are authorized in this Code toobligate
themselves may enter into a contract of sale, savingthe
modifications contained in the following articles.
Purchase By Minors= VOIDABLE
Except: where necessaries are 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
Art. 290
Absolute incapacity when party cannot bind himself in any
case.
Relative incapacity when certain persons, under certain
circumstances, cannot buy certain property.
(NOTE: Among people relatively incapacitated are those
mentioned in Arts. 1490 and 1491, Civil Code.)
CAPACITY TO BUY OR SELL
GENERAL RULE: All persons who can bind themselves
also have legal capacity to buy and sell.
EXCEPTIONS:
1. Absolute incapacity (minors, demented persons,
imbeciles, deaf and dumb, prodigals, civil interdictees) - party
cannot bind themselves in any case.
2. Relative incapacity incapacity exists only with reference
to certain persons or a certain class of property
Relative Incapacity
A. Husband and wife (Art. 1490): Generally, a sale by one
spouse to another is void.
The husband and wife cannot sell property to each other
except:
1. When a separation of property was agreed upon by the
spouses
2. When there has been a judicial separation of property
under Article 134 and 135 of the Family Code
B. Incapacity by reason of relation to property (Art. 1491)
The following persons cannot acquire property by purchase,
even at a public auction, either in person or through the
mediation of another: (GAEP-JO)
1. the guardian, with respect to the property of his ward;
2. agents, with respect to the property whose administration or
sale may have been entrusted to them, unless the consent of
the principal has been given;
3. executor or administrator, with respect to the property of the
estate under administration;
4. public officers and employees, with respect to the properties
of the government, its political subdivisions, or GOCCs, that
are entrusted to them;
5. judges, justices, prosecuting attorneys, clerks of courts, etc.,
with respect to the property in custogia legis; and
6. any other person specially disqualified by law.
Examples of persons especially disqualified by law:
a. Aliens who are disqualified to purchase agricultural lands
b. An unpaid seller having a right of lien or having stopped the
goods in transitu, who is prohibited from buying the goods
either directly or indirectly in the resale of the same, at public
or private sale which he may make
c. The officer holding the execution, or his deputy.
NOTE: While those disqualified under Arts. 1490 and 1491
may not become lessees (Art. 1646), still aliens may become
lessees even if they cannot buy lands.
Effect of violation:
a) With respect to nos. 1 to 3: the sale is VOIDABLE.
Reason: only private rights, which are subject to ratification
are violated
NOTE: In the case of Lao vs. Genato, 137 SCRA 77, the
Supreme Court found that the sale by the administrator of
certain properties of the estate in order to settle the existing
obligations of the estate was made to the administrators son
for a grossly low price. Furthermore, the said sale was not
submitted to the probate court for approval as mandated by
the order authorizing the administrator to sell. The sale was
indubitably illegal, irregular and fictitious, and the courts
approval of the assailed compromise agreement violated
Article 1491 and cannot work to ratify a fictitious contract
which is non-existent and void from the very beginning
b) With respect to nos. 4 to 6: the sale is NULL AND VOID.
Reason: violation of public policy cannot be subject to
ratification

1490Sale between Husband and Wife =VOID
Except:
a) When separation of property as agreed upon the
marriage settlements
b) When there has been a judicial separation of property
under Article 191.
Reason Why Generally a Husband and Wife Cannot Sellto
Each Other
To avoid prejudice to third persons
to prevent one spousefrom unduly influencing the other
to avoid by indirection the violation of the prohibition
against donations.
Generally, a sale by one spouse to another is void. However, not
everybody can assail the validity of the transaction. Thus,
creditors who became such after the transaction cannot assail its
validity for the reason that they cannot be said to have been
prejudiced. But prior creditors (creditors at the time of transfer)
as well as the heirs of either spouse may invoke the nullity of the
sale. When the proper party brings the sale should be declared
void by the courts. The spouses themselves since they are parties
to an illegal act, cannot avail themselves of the illegality of
the sale. The law will generally leave them as they are.
Under the two (2) exceptions under Art. 1490, the sale is
generally valid, but of course, should there be vitiated consent (as
in the case of undue influence) the sale is voidable
Just as a married couple cannot generally sell to eachother, they
also generally cannot donate to each other. (Art. 87,Family Code).
Incidentally, this prohibition about donating toeach other applies
also to COMMON-LAW husband and wifeon the theory that here
there can be an even greater degreeof undue influence;
furthermore, if they will be allowed whilethose lawfully married
will generally be prohibited, this wouldbe giving a reward to
illicit relationship.
1491 The following persons [Relatively Incapacitated to Buy]
cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another: (VOIDABLE
SALE)
(1) The guardian, the property of the person or persons who may
be under his guardianship;
(2) Agents, the property whose administration or sale may have
been entrusted to them, unless the consent of the principal has
been given;
(3) Executors and administrators, the property of theestate under
administration;
(4) Public officers and employees, the property of the State or of
any subdivision thereof, or of any government owned or
controlled corporation or institution, the administrationof which
has been entrusted to them; this provision shall apply to judges
and government experts who, in any manner whatsoever, take
part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation
or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take
part by virtue of their profession;
(6) Any others specially disqualified by law.
Reason: Public policy prohibits the transactions in view of the
fiduciary relationship involved
Thru the mediation of another this must be proved, that
is, that there was really an agreement between the intermediary
and the person disqualified; otherwise, the sale cannot be set
aside.
Purchase By Agent for Himself - Under Art. 1459 of the old
Civil Code, an agentor administrator was disqualified from
purchasing propertyin his hands for sale or management.
However, under Article 1491 of the new Civil Code, this
prohibition was modified inthat the agent may now buy the
property placed in his handsfor sale or administration, provided
the principal gives hisconsent thereto.
Purchase By Attorney - A lawyer is not allowed to purchase the
property of his client which is in litigation. To do otherwise would
be a breach of professional conduct and would constitute
malpractice.
- But assigning the amount of the judgment by the client to his
attorney, who did NOT take any part is the case where said
judgment was rendered, is valid. A thing is said to be in
litigation not only if there is some contest or litigation over it
in court, but also from the moment that it became subject to
the judicial action of the judge. Art. 1491 does not prohibit a
lawyer from acquiring a certain percentage of the value of the
properties in litigation that may be awarded to his client. A
contingent fee based on such valueis allowed.
- applies only if the sale or assignment of the property takes place
during the pendency of the litigation involving the clients
property. A contract between a lawyer and his client
stipulating a contingent fee is not covered by said prohibition
under Art. 1491(5) of the Civil Code because the payment of
said fee is not made during the pendency of the litigation but
only after judgment has been rendered in the case handled by
the lawyer.
1492(Still Relative Incapacity)
The prohibitions in the two preceding articles are applicable to
sales in legal redemption, compromise andrenunciations.
(a) legal redemption (Art. 1619, Civil Code) 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 purchase or
dation in payment, or by any other transaction whereby
ownership is transmitted by onerous title.
(b) compromises(Art. 2028, Civil Code) - a contract whereby the
parties, by making reciprocal concessions avoid litigation or put
an end to one already commenced.
(c) renunciation (Arts. 6, Civil Code) rights may be waived,
unless the waiver is contrary to law, morals, public order, public
policy, good customs, or prejudicial to 3rd persons with a right
recognized by law
 (Arts. 1270, Civil Code) condonation or remission is effected because of a legal impediment (Ten Forty Realty
usually gratuitous and requires acceptance by the obligor vs. Cruz, 10 Sept. 2003)
(expressly or impliedly)
b. traditio symbolica - to effect delivery, the parties
make use of a token or symbol to represent the thing
delivered
c. traditio longa manu seller pointing out to the buyer
the things which are transferred, which at the time
must be in sight.
CHAPTER 3: EFFECTS OF THE CONTRACT WHEN d. traditio brevi manu buyer simply continues in
THE THING SOLD HAS BEEN LOST possession of the thing but under title of ownership.
e. traditio constitutum possessorium seller continues
1493 Loss of the Object BEFORE SALE IS PERFECTED in possession but under a different title other than
Completely Lost ownership.
contract is void; no need to annul 3. Quasi-tradition delivery of rights, credits or incorporeal
property, made by:
No more cause of action a. placing titles of ownership in the hands of buyer
Partially Lost b. allowing buyer to make use of rights
Remedies: 4. Tradition by operation of law
Withdrawal or recision
Specific performance as to the remainder by the
payment of proportional price

1494Loss of Specific Goods

Where the goods without the knowledge of the sellerhave
perished in part or have wholly or in a material partso
deteriorated in quality as to be substantially changed
incharacter, the buyer may at his option treat the sale: Constructive delivery requires three things before
(1) As avoided; or ownership may be transferred:
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay the 1. The seller must have control over the thing
agreed price for the goods in which the ownership will pass, if 2. The buyer must be put under control
the sale was divisible. 3. There must be the intention to deliver the thing for
purposes of ownership
Article 1477
Kinds:
1. Actual or real placing the thing under the control and
possession of the buyer.
2. Legal or constructive delivery is represented by other
signs or acts indicative thereof
a. delivery by the execution of a public instrument.
NOTE: Gives rise only to a prima facie presumption of
delivery which is destroyed when actual delivery is not