Article 1466. In construing a contract containing Article 1471.

If the price is simulated, the sale is

provisions characteristic of both the contract of void, but the act may be shown to have been in
sale and of the contract of agency to sell, the reality a donation, or some other act or contract.
essential clauses of the whole instrument shall be
considered.

Sale vs. Agency EFFECT OF GROSS INADEQUACY OF PRICE

SALE AGENCY
The buyer pays for the price of the goods/property NOTE:does
The agent Merenot inadequacy of price.
pay for the the price
He does
merelynotaccounts
affect the
for
purchased validity ofofthe
the proceeds thesale,
sale.except
(1) When there is fraud, mistake, or undue influence
The buyer becomes the owner of the goods/property The agent does not become the owner of the goods/property
indicative of a defect in consent is present,
purchased delivered
(2)Whento him for sale.
it shows that the parties really intended a
Buyer cannot return the goods/property when the sale is The donation
agent returns
or some theother
goods/property if he was not able to
act or contract.
defective sell the same
The seller warrants the goods/property sold The EFFECT
agent does WHERE not make
PRICEany warranty as long as he acts
IS SIMULATED
within his authority and in the name of the principal
The seller has full freedom to enter into any terms or 1. Themust
The agent act may bethe
follow shown to have been
instructions of theinprincipal
reality a
conditions on the contract of sale donation, or some other act or contract
2. If not and neither party had any intention whatsoever
Article 1467. A contract for the delivery at a certain that the amount will be paid (absolutely simulated): the
price of an article which the vendor in the ordinary sale is void
course of his business manufactures or procures for 3. If there is a real price but what is stated in the contract
the general market, whether the same is on hand at is not the one intended to be paid (only relatively
the time or not, is a contract of sale, but if the simulated): the contract of sale is valid but subject to
goods are to be manufactured specially for the reformation
customer and upon his special order, and not for
the general market, it is a contract for a piece of Effect of Gross Inadequacy of Price. No effect.
work. Exceptions: (meaning, sale is set aside)
1. If consent is vitiated, such as VIMFU (Violence,
Contract for a Piece of Work The article sold is Intimidation, Mistake, Fraud, Undue influence)
specially manufactured and upon the special order of the 2. If the parties intended a donation or some other act or
customer. Article is not sold in the ordinary course of contract
business. 3. If the price is so low as to be shocking to the conscience
Contract for a piece of work
The thing transferred is one not in existence and w/c Effect
The thing of Simulated
transferred Price.would
is one which Sale have
is void, unless
existed andit could
be shown that the parties intended a donation or some
never would have existed but for the order of the party would have been the subject of sale to some other person,
other act of liberality.
desiring to acquire it even oif the orderSimulated-
Price had not beenNo given
price to support a contract of
The services dominate the contract even though there is a The primarysale, such that neither partyishad
objective of the contract a sale
anyofintention
the that the
sale of goods involved manufactured
amount item;
willitbe
is a sale of goods even though the item
paidvoid
is manufactured
o Price is by False-
labor furnished
there is by
a the
realseller
priceand
notupon
declared
previous order
contractof the
is valid,
customer
but the underlying deed is subject to
Not w/in the Statute of Frauds Governable reformation to indicate
by the Statute the real price upon which the
of Frauds
minds of the parties have met.
Article 1468. If the consideration of the contract
consists partly in money, and partly in another
thing, the transaction shall be characterized by the Article 1475. The contract of sale is perfected at
manifest intention of the parties. If such intention
the moment there is a meeting of minds upon the
does not clearly appear, it shall be considered a
barter if the value of the thing given as a part of thing which is the object of the contract and upon
the consideration exceeds the amount of the money the price.
or its equivalent; otherwise, it is a sale.
From that moment, the parties may reciprocally
Sale demand performance, subject to the provisions
Consideration: giving of money as payment
of the law governing the form of contracts.
Governed by law on sales: species of the genus sales
If consideration consists party in money and partly by thing look at manifest intention;
If intention is not clear: value of thing is equal
or less than amount of money sale PERFECTION OF CONTRACT OF SALE. Meeting of the
minds upon the thing and price.
Rules if Consideration is partly Money and Partly Effect: Parties may reciprocally demand
Goods performance
1. Determine the intention of the parties.
2. If intention could not be determined, consider the value GENERAL RULE: A contract of sale is perfected at the
of the thing given: moment there is a meeting of the minds upon the thing
a. If value of the thing more than value of the money, it is which is the object of the contract and upon the price;
BARTER consensual contract
b. If value of the thing less than value of the money, it is Exception: When the sale is subject to a suspensive
SALE condition
c. If both values are the same, SALE
REQUIREMENTS:
1. When parties are face to face when there is
absolute acceptance of an offer that is certain
Article 1470. Gross inadequacy of price does not 2. When thru correspondence or telegram when the
affect a contract of sale, except as it may indicate offer or receives or had knowledge of the acceptance
a defect in the consent, or that the parties really 3. When the sale is subject to a suspensive
intended a donation or some other act or contract. condition from the moment the condition is fulfilled
NOTES: Qualified acceptance: mere counter-offer which
needs to be absolutely accepted to give rise to perfected
contract of sale. Business ads are mere invitations to
make an offer except when it appears to be otherwise.
Article 1477. The ownership of the thing sold shall
be transferred to the vendee upon the actual or
constructive delivery thereof.
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
Article 1480. Any injury to or benefit from the thing
sold, after the contract has been perfected, from
the moment of the perfection of the contract to the
time of delivery, shall be governed by articles 1163
to 1165, and 1262.
This rule shall apply to the sale of fungible things,
made independently and for a single price, or
without consideration of their weight, number, or
measure.
Should fungible things be sold for a price fixed
according to weight, number, or measure, the risk
shall not be imputed to the vendee until they have
been weighed, counted, or measured and delivered,
unless the latter has incurred in delay.
Legal consequences from point of perfection are the same
in both legal systems: upon perfection of an unconditional
contract of sale involving specific or determinate subject
matter, the risk of loss deterioration and the benefits of
fruits and improvements, were fro the account of the
buyer.
WHO BEARS RISK OF LOSS/ DETERIORATION/
FRUITS:
1. BEFORE PERFECTION
a. Res perit domino
b. Owner is seller so seller bears risk ofloss
2. AT PERFECTION
o Res perit domino
o Contract is merely inefficacious because loss of the
subject matter does not affect the validity of the sale
o Seller cannot anymore comply with obligation so buyer
cannot anymore be compelled
3. AFTER PERFECTION BUT BEFORE DELIVERY
o Loss confused state
o Paras: BUYER
o Tolentino: SELLER
o Deterioration and fruits Buyer bears loss;
4. AFTER DELIVERY
o Res perit domino
o Delivery extinguishes ownership visa-vis the seller and
creates a new one in favor of the buyer
Article 1481. In the contract of sale of goods by
description or by sample, the contract may be
rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and
if the contract be by sample as well as description,
it is not sufficient that the bulk of goods correspond
with the sample if they do not also correspond with
the description.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the
sample.
Sale of Goods By Description- where a seller sells a
thing as being of a certain kind verbally describing them
and the buyer simply relies on the sellers descriptions of
the things, not knowing whether the sellers
representations are true or not.
Sale by Sample- Where the seller warrants that the bulk
of goods being sold correspond with the sample or
samples exhibited not only in kind but also in quality and
character.
Sale by Description and Sample- Where the seller has
to satisfy the requirements in sale by description and
sample. There are two-fold warranty here:
(a) the goods purchased matched with the description and
(b) the goods also matched in kind, quality and character
with that of the sample or samples exhibited to the buyer
or his representative
Article 1482. Whenever earnest money is given in a
contract of sale, it shall be considered as part of
the price and as proof of the perfection of the
contract.
EARNEST MONEY vs. OPTION MONEY
Earnest Money Optio
It is part of the purchase price It is g
which
purcha
It is given only when there is already a perfected sale It is gi
What
When it is given, the buyer is bound to pay the balance of Even
the agreed purchase price bound
If the sale does not materialize, the earnest money paid If the
must be returned, unless a contrary agreement had been the op
stipulated option
Article 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.
FORM OF SALES
I. Form not important in validity of sale
a. Sale being consensual, may be oral or written,
perfected by mere consent as to price and subject matter
b. If particular form is required under the statute of
frauds:
i. valid and binding between parties but not binding to
3rd persons
c. Reason: purposes of convenience only and not for
validity and enforceability; cause of action is granted to
sue and compel other party to execute the document
II. When form is important for validity; exception by
specific provision of law;
a. Power to sell a piece of land granted to an agent
otherwise VOID
b. Sale of large cattle; must also be registered with
Municipal treasurer otherwise VOID
c. Sale of land by non-Christian if not approved by
Governor VOID
III. When form is important for enforceability
(STATUTE OF FRAUDS Article 1403 (2))
a. A sale agreement which by its terms is not to be
performed within a year from the making thereof;
b. An agreement for the sale of goods, chattels or things
in action, at a price not less than P500.00; and
c. A sale of real property or of an interest therein.
IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES
CONTRACTS:
1. When there is a note or memorandum in writing and
subscribed to by party or his agent (contains essential
terms of the contract)
2. When there has been partial performance/execution
(seller delivers with intent to transfer title/receives price)
3. When there has been failure to object to presentation of
evidence (oral)
4. When sales are effected through electronic commerce
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.
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.
Article 1486. In the case referred to in the two
preceding 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.
Article 1487. The expenses for the execution and
registration of the sale shall be borne by the
vendor, unless there is a stipulation to the
contrary.
Article 1488. The expropriation of property for
public use is governed by special laws.
Article 1489. All persons who are authorized in
this Code to obligate themselves, may enter
into a contract of sale, saving the modifications
contained in the following articles.
Where necessaries are those sold and delivered to
a minor or other person without capacity to act, he
must pay a reasonable price therefor. Necessaries
are those referred to in article 290.
Two Kinds of Incapacity:
1. Absolute Incapacity- Party cannot bind himself in any
case.
2. Relative Incapacity- Certain Persons under certain
circumstances cannot buy certain property.
** Minors in contract for necessaries must pay
reasonable price.
Necessariesthose things which are needed for
sustenance, dwelling, clothing and medical attendance, in
keeping with the financial capacity of the family of the
incapacitated person.
Article 1490. The husband and the wife cannot sell
property to each other, except:
(1) When a separation of property was agreed upon
in the marriage settlements; or
(2) When there has been a judicial separation of
property under article 191.
Prohibition against Husband and Wife. Exceptions.
Rationale: PID
a. To avoid Prejudice to 3rd Persons
b. To prevent one spouse from unduly influencing the
other.
c. To avoid by indirection the violation of the prohibition
against donations.
Who may assail illegality?
a. Creditors prior to the sale
b. Heirs of either spouse.
** Either spouse may not assail illegality because they are
parties thereto.
** A spouse designated as agent of the other spouse may
sell the latters exclusive property.
Article 1491. The following persons cannot acquire
by purchase, even at a public or judicial auction,
either in person or through the mediation of
another:
(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 intrusted to them,
unless the consent of the principal has been
given;
(3) Executors and administrators, the property
of the estate 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 administration of which has been
intrusted 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.
Persons Relatively Incapacitated to Buy. (PAGEJO)
1. Public Officers and employeesProperty Of State.
2. AgentsProperty of Principal unless with consent.
3. GuardianProperty of Ward.
4. Executors and administratorsEstate
5. Justices, Judges, Prosecuting Attorneys, Clerks and
employees of courtProperty/Rights under litigation.
6. Others disqualified by law. (Ex. *aliens who are
disqualified to purchase private agricultural lands; *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 a
public or private sale w/c he may make. Art. 1533, par.5)
Rationale: Fiduciary relationship
Status of Sale: Voidable (1-3); Void (4-6)
Article 1492. The prohibitions in the two
preceding articles are applicable to sales in
legal redemption, compromises and
renunciations.
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract shall
be without any effect.
But if the thing should have been lost in part only,
the vendee may choose between withdrawing from
the contract and demanding the remaining part,
paying its price in proportion to the total sum
agreed upon.
Partial Loss Rules:
1. Vendee may withdraw from the contract
2. Demand the remaining part, paying its price in
proportion to the total sum agreed upon
Article 1494. Where the parties purport a sale of
specific goods, and the goods without the
knowledge of the seller have perished in part or
have wholly or in a material part so deteriorated
in quality as to be substantially changed in
character, the buyer may at his option treat the
sale:
(1) As avoided; or
(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 agreed price for the
goods in which the ownership will pass, if the sale
was divisible.
Loss/Substantial Deterioration of Specific Goods
without sellers knowledge.
1. Buyer may avoid the sale or
 2. May treat sale as valid w/ respect to the
existing goods
Article 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.
Obligations of Vendor. (TDWP)
1. Transfer Ownership (not waivable)
2. Deliver (not waivable)
3. Warrant Object (waivable and may be modified)
4. Preserve Thing from perfection to delivery (Art. 1163)
5. Pay for the execution and registration of the sale unless
there is a contrary agreement
**Execution sales do not require the delivery of thing since
a one year period of redemption is available to seller.
Article 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.
Article 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee.
Control and Possession necessary in Delivery.
Exception: Art. 1478. Stipulation as to full payment of
price.
Delivery- a mode of acquiring ownership as a
consequence of a contract of sale by virtue of which
actually or constructively the object is placed in the
control and possession of the vendee.
KINDS OF DELIVERY
1. Actual or Real. (1497)
2. Legal or Constructive
a. Legal Formalities (1498); execution of public
instrument.
b. Symbolical Tradition (1498 par 2)- keys delivered.
c. Traditio Longa Manu- by mere consent /agreement.
If the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale. (1499)
d. Traditio Brevi Manu- if the buyer had already the
possession the object even before the purchase.
(lessee becomes owner)
e. Traditio constitutum possessorium- possession as
owner changed. (Owner becomes lessee)
3. Quasi-Tradition- Delivery of Rights, credits or incorporeal
property made by:
a. Execution of public instrument
b. Placing titles of ownership in the hands of a
lawyer.
c. Allowing the buyer to make use of the rights
(1501)
Article 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.
Requirements:
1. Sellers Control.
2. Sellers Control transferred to buyer.
3. Intention to deliver for ownership.
Article 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.
Article 1500. There may also be tradition
constitutum possessorium.
Different forms of Constructive Delivery -
Constructive delivery has same legal effect as actual or
physical delivery
1. Traditio Longa Manu Delivery of thing by mere
agreement; when SELLER points to the property without
need of actually delivering
2. Traditio Brevi Manu Before contract of sale, the
would be buyer was already in possession of the would be
subject matter of sale (ex: as lessee)
3. Symbolic delivery As to movables ex: delivery of
the keys to a car
4. Constitutum possessarium When at the time of
the perfection of the contract of sale, seller had
possession of the subject matter in the concept of owner
and pursuant to the contract, seller continues to hold
physical possession no longer in the concept of an owner
but as a lessee or any other form of possession other than
in the concept of owner.
Article 1501. With respect to incorporeal property,
the provisions of the first paragraph of article 1498
shall govern. In any other case wherein said
provisions 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.
Article 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.
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.
Transaction on Sale or Return. Subject to Resolutory
Condition.
Difference with Delivery with option to purchase-
Ownership is transferred in Sale or Return
Transaction on Approval or Trial/Satisfaction. Subject
to Suspensive Condition.
Rules:
1. Risk of loss to seller until the sale becomes absolute.
(Exceptions: Buyer in default; Buyer agreed to bear the
loss)
2. Buyer must give goods a trial except when it is evident
that it cannot perform the work intended.
3. Period of signifying acceptance commences to run only
when all the parts essential for operation has been
delivered.
4. A provision that a 3rd person must satisfy approval is
valid but he must be in Good faith.
5. Generally the Sale and Delivery to an expert buyer is
not a sale on approval/trial.
Sale or Return vs. Sale on Approval
Basis Sale or Return
Condition Subject to Resolutory condition
Premise It depends upon the will of the
buyer
Transfer of ownership Ownership immediately passes
to the buyer on delivery

Revesting of ownership in the Ownership is revested in the

owner seller if the buyer so decides

Risk of loss or deterioration The risk rests on the buyer

before the revestment of
ownership