Professional Documents
Culture Documents
3. Opinions of Commentators
4. Jurisprudence
The transfer of title to property or the agreement to transfer title for a price paid or
promised, not mere physical transfer of the property, is the essence of sale.
- the sale of a thing not yet in - the sale of hope itself that the thing
existence, subject to the condition will come into existence, where it is
that the thing will exist and on failure agreed that the buyer will pay the price
of the condition, the contract even if the thing does not eventually
becomes ineffective and hence, the exist;
buyer has not obligation to pay the
price;
- the future thing is certain as to - like the sale of a sweepstake ticket, it
itself but uncertain as to its quantity is not certain that the thing itself
and quality; (winning a prize) will exist, much less it
quantity and quality;
- contract deals with a future thing; - contract relates to a thing which
exists or is present the hope or
expectancy;
- sale is subject to the condition that - produces effect even though the thing
the thing should exist, so that if it does not come into existence because
does not, there will be no contract by the object of the contract is the hope
reason of the absence of an essential itself, unless it is a vain hope or
element. expectancy (like the sale of a falsified
sweepstakes ticket which can never
win).
3. Cause or consideration refers to the price certain in money or its equivalent.
Natural Elements those which are deemed to exist in certain contracts, in the
absence of any contrary stipulations, like warranty against eviction;
Accidental Elements those which may be present or absent depending on the
stipulations of the parties, like conditions, interest, penalty, time or place of
payment.
Kinds of a Contract of Sale
1. As to presence or absence of conditions
Absolute where the sale is not subject to any condition whatsoever and where the
title passes to the buyer upon delivery of the thing sold.
Conditional where the sale contemplates a contingency and where the contract is
subject to certain conditions, usually in the case of the vendee, for the full payment
of the agreed purchase price.
2. Other kinds
However, in case the contract of sale should be covered by the Statute of Frauds, the
law requires that the agreement be in writing subscribed by the party charged, or by
his agent; otherwise, the contract cannot be enforced by action [see Art. 1403].
Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the
following contracts must be in writing to be enforceable:
(a) sale of personal property at a price not less than P500;
(b) sale of real property or an interest therein regardless of the price involved; and
(c) sale of property not to be performed within a year from the date thereof
regardless of the nature of the property and the price involved.
The Statute Frauds specifies three (3) ways in which contracts of sales of goods
within its terms may be made binding:
(a) the giving of a memorandum;
(b) acceptance and receipt of part of the goods (or things in action) sold and actual
receipt of the same (Art. 1585); and
(c) payment or acceptance at the time some part of the purchase price.
(b) cancel the sale, if the vendee shall have failed to pay two or more installments;
(c) foreclose the chattel mortgage, if one has been constituted, if the vendee shall
have failed to pay two or more installments.
These remedies are alternative and are not to be exercised cumulatively or
successively and the election of one is a waiver of the right to resort to the
others [Pacific Commerial Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140
SCRA 255].
In transactions involving the sale of financing of real estate on installment
payments, including residential condominium apartments, the following are the
rights given to the buyer who has paid at least two (2) years of installments in
case he defaults in the payment of succeeding payments
(a) to pay without additional interest the unpaid installments due within the total
grace period earned by him fixed at the rate of one-month grace period for every one
year of installment payments made this right shall be exercised by him only once in
every five (5) years of the life of the contract and its extension, if any; and
(b) if the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to 50% of the total
payments made and, after 5 years of installments, an additional 5% of every year but
not to exceed 90% of the total payments made. [Sec. 3, RA 6552 or the Realty
Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA 627].
(c) The buyer has the right to sell his right or assign the same before actual
cancellation of the contract and to pay in advance any unpaid installment anytime
without interest and to have such full payment of the purchase price annotated in the
certificate of title covering the property.
II. CAPACITY TO BUY OR SELL
Persons Who May Enter Into a Contract of Sale
As a general rule, all persons, whether natural or juridical, who can bind themselves,
have the legal capacity to buy and sell.
Persons Who Are Incapacitated to Enter Into a Contract of Sale
1. Absolute Incapacity pertains to persons who cannot bind themselves
(a) Minor
(c) Agents as to the property whose administration or sale has been entrusted to
them, unless consent of the principal is given
(e) Public officers and employees as to the property of the State or any subdivision
thereof, or of the government-owned or controlled corporations, the administration
of which is entrusted to them
(f) Judges and government experts who take part in the sale of the property and
rights under litigation
(h) Unpaid seller having a right of lien or having estopped the goods in transitu
(i) Officer holding the execution or his deputy
III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
Where the thing is entirely lost at the time of perfection, the contract is
inexistent and void because there is no object. There being no contract, there
is no necessity to bring an action for annulment.
Where the thing is only partially lost, the vendee may elect between
withdrawing from the contract and demanding the remaining part, paying its
proportionate price.
The thing is lost when it perishes or goes out of commerce or disappears in such
a way that its existence is unknown or it cannot be recovered.
IV. OBLIGATIONS OF THE VENDOR
Principal Obligations of the Vendor
to transfer the ownership of the determinate thing sold (Art. 1495);
The vendor need not be the owner of the thing at the time of perfection of the
contract; it is sufficient that he has a right to transfer the ownership thereof at
the time it is delivered (Art. 1459).
If the seller promised to deliver at a stipulated period and such period is of the
essence of the contract but did not comply with his obligation on time, he has
no right to demand payment of the price. The vendee-buyer is fact may ask for
the rescission or resolution of the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it
was the buyer who failed to supply the necessary credit for the transportation
of the goods, delay on the part of the seller may be said to be sufficiently
excused.
to deliver the thing, with its accessions and accessories, if any, in the condition in
which they were upon the perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to the
contrary (Art. 1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which
one has the right and intention to alienate a corporeal thing, transmits it by virtue of
a just title to one who accepts the same.
Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver
right away; he has one (1) year within which to redeem the property.
Kinds of Delivery or Tradition
1. Actual or Real (Art. 1497) the thing sold is placed in the control and
possession of the vendee or his agent. This involves the physical delivery of
the thing and is usually done by the passing of a movable thing from hand to
hand.
2. Legal or Constructive (Arts. 1498-1501) through the execution of a public
instrument
Legal formalities applies to real and personal properties, where the delivery is made
through the execution of a public document;
Traditio simbolica to effect delivery, the parties make use of a token symbol to
represent the thing delivered;
Traditio longa manu movable property is delivered by mere consent by the
contracting parties if the thing sold cannot be transferred to the possession of the
vendee at the time of the sale;
Traditio brevi manu the vendee already has the possession of the thing sold by virtue
of another title as when the lessor sells the thing leased to the lessee;
Constitotum possessorium the vendor continues in possession of the property sold
not as owner but in some other capacity (e.g., as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real
property, made by placing the titles of ownership in the hands of the vendee or
lawyer, by execution of a public instrument, or by allowing the vendee to use his
rights as new owner with the consent of the vendor.
(c) There must be the intention to deliver the thing for purposes of ownership.
An Unpaid Seller is one who has not been pair or rendered the whole price or who has
received a bill of exchange or other negotiable instrument as conditional payment and
the condition on which it was received has been broken by reason of the dishonor of
the instrument.
Rights of an unpaid seller:
1. A lien on the goods or right to retain them for the price while in his possession
(d) the seller must either actually take possession of the goods sold or give notice of
his claim to the carrier or other person in possession;
(e) the seller must surrender the negotiable document of title, if any, issued by the
carrier or bailee; and
(f) the seller must bear the expenses of delivery of the goods after the exercise of
the right.
3. A right of resale
(c) in the absence of both registration and possession, the vendee who presents the
oldest title (who first bought the property) in good faith.
Article 1544 has no application to lands not registered with the Torrens system.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency on the happening of which the
obligation (or right) of the contract depends.
Warranty is a statement or representation made by the seller of goods,
contemporaneously and as a part of the contract of sale, having reference to the
character, quality, or title of the goods, and by which he promises or undertakes to
insure that certain facts are or shall be as he then represents them.
If the obligation of either party is subject to any condition and such condition is not
fulfilled, such party may either (1) refuse to proceed with the contract, or (2)
proceed with the contract, waiving the performance of the condition.
If the condition is in the nature of a promise that it should happen, the non-
performance of such condition may be treated by the other party as a breach of
warranty.
Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he
has a right to sell the thing sold and to transfer ownership to the buyer who shall not
be disturbed in his legal and peaceful possession thereof.
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that
the seller guarantees that the thing sold is reasonably fit for the known particular
purpose for which it was acquired by the buyer or, where it was bought by
description, that it is of merchantable quality.
(b) should the vendor give security for the return of the price; or
(c) should the vendor have caused the disturbance or danger to cease; or
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 1597)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has been guilty of a breach of
promise or warranty (Art. 1599):
1 Recoupment - accept the goods and set up the sellers breach to reduce or
extinguish the price.The theory of recoupment is that the sellers damages
are cut down to an amount which will compensate him for the value of
what he has given.
2 Set-off or Counterclaim for damages - accept the goods and maintain an
action for damages for the breach of the warranty. Both sides of the
contract are enforced in the same litigation. The buyer (defendant) does
not seek to avoid his obligation under the contract but seeks to enforce the
sellers (plaintiffs) obligation and to deduct it from his liability for the
price for breach of warranty.
3 Action for damages refuse to accept the goods and maintain an action for
damages for the breach of the warranty.
4 Rescission - rescind the contract of sale by returning or offering the return
of the goods, and recover the price or any part thereof which has been
paid. This remedy is not available in the following cases:
(a) if the buyer accepted the goods knowing of the breach of warranty
without protest;
(b) if he fails to notify the seller within a reasonable time of his election
to rescind; and
(c) if he fails to return or offer to return the goods in substantially as good
condition as they were in at the time of the transfer of ownership to him.
But where the injury to the goods was caused by the very defect against
which the seller warranted, the buyer may still rescind the sale.
VIII. EXTINGUISHMENT OF SALE
Classification of modes or causes of extinguishing the contract of sale:
Common those causes which are also the means of extinguishing all other contracts
like payment, loss of the thing, condonation, etc. (Art. 1231).
Special those causes which are recognized by the law on sales (those covered by
Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567, and 1591).
Redemption Pre-emption
1 The sale to a third person has alreadyThe sale to a third person has not yet
been perfected been perfected
2 Has a much broader scope Narrower in scope may be exercised
only where there is a prospective
resale of a small piece of urban land
originally bought by the prospective
vendor merely for speculation
3 Directed against the third person whoDirected against the prospective
bought the property vendor who is about to resell the
property
4 Effect is to extinguish a contract thatEffect is to prevent the birth or
has already been perfected or evenperfection of a contract
consummated
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of credit a contract by which the owner of a credit transfers to another
his rights and actions against a third person in consideration of a price certain in
money or its equivalent (Art. 1458).
Assignment of credit and other incorporeal rights are consensual, bilateral, onerous,
and commutative or aleatory contracts. The assignment involves no transfer of
ownership but merely effects the transfer of rights which the assignor has at the time
to the assignee [Casabuena vs. CA, 286 SCRA 594].
It may be done gratuitously, but if done onerously, it is really a sale. Thus, the
subject matter is the credit or right assigned; the consideration is the price paid for
the credit or right; and the consent is the agreement of the parties to the assignment
of the credit or right at the agreed price.
Effect where the giver is not the lawful owner of the thing delivered: the aggrieved
party cannot be compelled to deliver the thing he has promised. He is entitled to
claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the
property he has given in exchange with damages or only claim an indemnity for
damages. The right to recover is, however, subject to the rights of innocent third
persons (Art. 1640).
The general scheme is to declare such bulk sales fraudulent and void as to creditors of
the vendor, or presumptively so, unless specified formalities are observed, such as
the demanding and the giving of a list of creditors, the giving of actual and
constructive notice to such creditors, by record or otherwise, and the making of an
inventory.
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or
assignment
(c) of all or substantially all, of the fixtures and equipment used in the business of
the vendor, mortgagor transferor, or assignor.