Chapter 1.

 
NATURE AND 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 therefor a price
certain in money or its equivalent.
A contract of sale may be absolute or conditional.

SALE, defined. It is 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. (See
Art. 1458, Civil Code).
 
ESSENTIAL CHARACTERISTICS OF THE CONTRACT OF SALE. 
  
a. Consensual - 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 - both parties are bound by obligations dependent upon each other
reciprocal 
c. Onerous - to acquire the rights, valuable consideration must be given.
 
d. Commutative -(as a rule) the values exchanged are almost equivalent to each other.
      (NOTE: By way of exception, some contracts of sale are aleatory,
that is, what one receives may in time be greater or smaller than what
he has given. Example: The sale of a genuine sweepstakes ticket.)
e. Principal - as distinguished from an accessory contract), 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.)
f. Nominate - as distinguished from an innominate contract, the Code refers to it by
a special designation or name, i.e., the contract of sale.
 

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.) (Republic v. Phil. Resources Dev. Corp., L-10414, Jan. 31, 1958).
 
 
In the case of Aguinaldo v. Esteban (GR No. 27289), the court said that
a contract of sale of property, without consideration, and executed by a person who is
of low intelligence, illiterate, and who could not sign his name or affix his thumbrmark,
is void."

       In Leabres v. CA (GR 41837), the Court ruled that "a receipt which merely
acknowledges the sum of P1,000, without any agreement as to the total purchase
price of the land supposedly purchased, nor to the monthly instalment to be paid by
the buyer lacks the requisites of a valid contract sale, namely: (a) consent or meeting
of the minds of the parties; (b) determinate subject matter; (c) price certain in
money or its equivalent, and, therefore, the "sale" is not valid or enforceable.
 
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 or conditions).
 
STAGES OF CONTRACT OF SALE
  
1.) POLICITACION, negotiation, or preparation stage
 
2.) PERFECTION, conception or “birth”
 
3.) CONSUMMATION or “death”
 
   (Ang Yu Asuncion v. CA 238 SCRA 602 [1994], Province of Cebu v. Hrs. of Rufina
Morales, 546 SCRA 315 (2008)
 
Politicitacion or negotiation covers the period from the from the time the
prospective contracting parties indicate their interests in the contract to the time the
contract is perfected; perfection takes place upon the occurrence of the essential
element of the sales which are the meeting of the minds of the parties as to the object
of the contract and upon the price; and consummation begins when the parties
perform their respective undertaking under the contract of sale, culminating in the
extinguishment thereof. (XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598
[2009]).
 
KINDS OF SALES
a. As to the nature of the subject matter: f. As to the presence or absence of
 
conditions
   
1.) sale of real property 1.) absolute sale
 
2.) sale of personal property 2.) conditional sale
         (as when there is a sale with a pacto
b. As to the value of the things exchanged:
de retro, a right to repurchase or redeem; or
 
when there are suspensive condition, or
1.) commutative sale – equal
when the things sold merely possess a
2.) aleatory sale - lower or greater 
c. As to whether the object is tangible or potential existence, such as the sale of future
 
intangible: harvest of a designated parcel of land; or
  when, for example, all the personal
1.) sale of property (tangible or corporeal) properties in an army depot would be sold
2.) sale of a right (assignment of a right or “except all combat materials” that may be
a credit, or some other intangibles such found therein. Such stipulation is necessarily
as a copyright, a trademark, or valid and therefore, such combat material
goodwill. should be excluded from sale. (Celestino v.
    Aud. Gen. GR No. L-12183 [1959])
NOTE: If the object is tangible, it is called
a chose in possession; if the object is g. As to whether wholesale or retail
 
intangible, as the case of a right, it is a
1.) Wholesale, if to be resold for a profit
chose in action.
the goods being unaltered when resold, the
quantity being large.
2.) Retail, if otherwise (also sold to
tailors. (Sy Kiong v. Sarmiento, GR. No. L-
 2934 [1951]).
d. As to the validity or defect of the h. As to the proximate inducement of the
 
transaction sale
   
1.) valid sale 1.) sale by description
2.) rescissible sale 2.) sale by sample
 
3.) voidable sale 3.) sale by description and sample
4.) unenforceable sale
 
e. As to the legality of the object i. As to when the price is tendered
 

   
1.) sale of a licit object 1.)  cash sale
2.) sale of an illicit object
 

SALE IS A FORM OF “TITLE” AND NOT A “MODE”

The perfection of a sale gives rise to the obligation on the part of the seller to transfer
ownership and deliver possession of the subject matter; nevertheless, it would be delivery or
tradition that is the mode to transfer ownership and possession to the buyer. Although in one
case the Court defined a "sale" as a "contract transferring dominion and other real rights in the
thing sold,1 sale is merely title that creates the obligation on the part of the seller to transfer
ownership and deliver possession, but on its own sale is not a mode that transfers
ownership.2 (1Titong v. CA, 287 SCRA 102 [1998]; 2Equatorial Realty Dev. Inc. v. Mayfair Theater,
Inc. 370 SCRA 56 [2001])..
  
The perfection of the sale, the seller assumes the obligation to transfer ownership and to
deliver the thing sold, but the real right of ownership is transferred "by tradition" or delivery
thereof to the buyer. (Alcantara-Daus v. de Leon, 404 SCRA 74[2003])
  
An asserted right or claim to ownership, or a real right over a thing arising from a juridical
act, is not per se sufficient to give rise to ownership over the thing; that right or title must be
completed by fulfilling certain conditions imposed by law: "Hence, ownership and real rights are
acquired only pursuant to a legal mode or process. While title (such as sale) is the juridical
justification, mode (like delivery) is the actual process of acquisition or transfer of ownership
over a thing." The Court ruled in Acap that the "Declaration of Heirship and Waiver of Rights"
executed by the heirs waiving their inheritance rights in favor of a non-heir cannot be deemed a
proper mode to affect title to the land involved because waiver of inheritance right can only be
done in favor of another heir whereas, it could not also be considered a sale contract because
the document did not provide for, nor imply the existence of, the essential element of
price.  (Acap v. CA, 251 SCRA 30, 38 [1995])
  
Once a sale has been duly perfected, its validity "cannot be challenged on the ground of
the non-transfer of ownership of the property sold at that time of the perfection of the
contract, since it is consummated upon delivery of the property to the vendee. It is through
tradition or delivery that the buyer acquires ownership of the property sold." Consequently, the
proper remedy of the buyer would be rescission, and not annulment of the sale. (Manongsong
v. Estimo, 404 SCRA 683, [2003]).

To summarize, "mode" is the legal means or process by which dominion or ownership is

created, transferred or destroyed (e.g, succession, donation, discovery, intellectual creation,
etc.): whereas, "title" only constitutes the legal basis by which to affect dominion or ownership.
Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to
create the obligation to transfer ownership; it is tradition or delivery, as a consequence of sale,
that actually transfers ownership. (Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc. 370 SCRA
56 [2001])
 
Since tradition is the mode by which ownership over the subject matter is transferred to
the buyer, the Roman Law concept of sale encompassing only the obligation of the seller to
deliver the property was consistent with the treatment of sale as merely a title, and by its
perfection does not affect the ownership nor effect the transfer thereof to the buyer. This is in
stark contrast to the common law concept that the perfection of a sale over a determinate
subject matter which is ready for delivery would legally transfer ownership to the buyer, even
when there has been no actual or constructive delivery thereof by the seller. (Law on Sales.
Villanueva and Tiansay, ed. 2016, p. 14)

SALE DISTINGUISHED FROM OTHER SIMILAR CONTRACTS

SALE DACION EN PAGO

(DATION IN PAYMENT)
1. There is no pre-existing credit There is pre-existing credit
2. Gives rise to obligation Extinguishes obligation
3. The cause or consideration here is the The cause or consideration here, from the
price from the viewpoint of seller; or viewpoint of the person offering the dation in
obtaining of the object, from the payment, is the extinguishing of his debt; form
viewpoint of the buyer. the viewpoint of the creditor, it is the
acquisition of the object offered in lieu of the
 original credit
4. There is greater freedom in the There is less freedom in the determining of the
determination of price price
5. The giving of the price may generally The giving of the object in lieu of the credit
end the obligation of the buyer may extinguish completely or partially the
credit (depending on the agreement)

Note: DACION EN PAGO is one whereby property is alienated to the creditor in full satisfaction
of a debt; it constitute “the delivery and transmission of a thing by the debtor to the
creditor as an accepted equivalent of the performance of the obligation. (Tan Shuy v.
Maulawin, 665 SCRA 604 [2012]

         DACION EN PAGO considerations are not in the realm of perfection of contract, for indeed
dacion en pago is by definition a special mode of payment, whereby the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding debt. (Ocampo
v. Land Bank of the Philippines, 591 SCRA 562 [2009])

  CESSION
SALE
ASSIGNMENT OF PROPERTY IN FAVOR OF CREDITORS
1. Sale differs from cession in much the same way as the sale differs from dation in
payment.
2. Buyer becomes the The assignee (creditor) does not acquire ownership over the things
owner of the thing assigned, but only the right to sell said things. From the proceeds of
sold. such sale, the creditors are to be paid what is due them.
 
NOTA BENE:

  DACION EN PAGO
CESSION
(DATION IN PAYMENT)
1. One creditor is sufficient There must be 2 or more creditors
2. Not all properties of the debtor are All the debtor’s properties are conveyed
conveyed
3. Debtor may be solvent or insolvent Cession takes place only if the debtor is insolvent
4. The creditor becomes the owner of The creditors do no become owners of the thing
the thing conveyed conveyed

  SALE DONATION
1. An onerous contract A gratuitous contract
2. Perfected by mere consent Being a solemn contract, although consent is required,
must comply with the formalities mandated by law for its
validity. i.e.:
DONATION OF MOVABLE – Art. 748 allows oral
 donation, provided there is simultaneous delivery of
the thing or of the document representing the right
donated but if the value of the movable exceeds
P5,000, the acceptance must be in writing;
DONATION OF IMMOVABLE – donation must be in a
public document and the acceptance must be in the
same instrument or a separate public document,
otherwise the donation is void.
3. Mode to acquire title Mode to acquire ownership

Note: DONATION is an act of liberality whereby one person disposes gratuitously of a thing or

right in favor of another person who accepts it.

  SALE BARTER
Definition One of the parties bind himself to One of the parties binds himself to give
deliver a thing in consideration of the one thing in consideration of the other’s
other’s undertaking to pay the price in promise to give another thing.
money or its equivalent
Intention It is a sale and not a barter when such It is a barter when such was the
was the intention of the parties (even if intention of the parties
the acquisition of a thing is paid for  
another object of greater value than
the money component)
Intention When the consideration is partly in When the consideration is partly in
does not money and partly in another thing, it is money and partly in another thing, it is
appear sale where of the value of the thing barter where of the value of the thing
  given as part of the consideration given as part of the consideration
EQUALS or LESS THAN the amount of EXCEEDS the amount of money given or
money given its equivalent

  CONTRACT OF SALE CONTRACT TO SELL

1. The non-payment of the price is a The payment in full of the price is a positive
resolutory condition suspensive condition. Hence if not paid, it is as if
  i.e. the contract of sale may by the obligation of the seller to deliver and to
such occurrence put an end to a transfer ownership never became effective and
transaction that once upon a time binding.
existed
2. Title over the property generally Ownership is retained by the seller, regardless of
passes to the buyer upon delivery delivery and is not to pass until full payment of the
 price
3. After delivery has been made, the Since the seller retains ownership, despite delivery,
seller has lost ownership and he is enforcing and not rescinding the contract if
cannot recover it unless the he seeks to oust the buyer for the failure to
contract is resolved or rescinded pay (Manuel v. Rodriguez, L-13435 [1960])

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. (n)
 
LICIT OBJECT 
1. The word licit means lawful, i.e. within the commerce of man.
 2. Things may be illicit:
a. per se (of its nature) – example, sale of human flesh for human pleasure
b. per accidens (made illegal by provision of the law) – example, sale of land to an alien
after the effective date of the Constitution; sale of illegal lottery ticket
c. If the object of sale is illicit, the contract is null and void.
 
TRANSFER OF OWNERSHIP
 
a. It is essential for a seller to transfer ownership (Art. 1458) and, therefore, the 8eller must be
the owner ot the subject sold. This stems from the principle that nobody can dispose of that
which does not belong to him –NEMO DAT QUAD NON HABET. (Azcona u. keyes and
Larracas, 69 Phil. 446; see also Coronel u. Ona, 33 Phil. 456).
 
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 1s 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. (Art. 712, Civil
Code). The contract transfers no real rights; it merely causes certain obligations to
arise. Hence, it would seem that A can sell to B property belonging to C at the time of the
meeting of the minds. (7S, Jan. 31, 1921) Of course, if at the time A is supposed to deliver, he
cannot do so, he has to answer for damages. Having assumed the risk of acquiring ownership
from C, it is clear he must be liable in case of failure. (See Martin v. Reyes, et al., 91 Phil.
666).
 
c. Indeed, the seller need not be the owner at the time perfection because, after all, "future
things or goods" among others 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 18 not the owner of the thing itself may
sell such right. (10 Manresa, p. 25). Hence, a usufructuary may generally so 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?
 
Art. 1460. A thing is determinate when it is particularly designated or physical
segregated from all other of the same class.
       The requisite that a thing be determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate without the necessity of a
new or further agreement between the parties. (n)
 
DETERMINATE THING – The object of the sale must be determinate, i.e. specific but it is
not essential really at the time of perfection, the object be already specific. It is sufficient that it
be capable of being determinate without need of any new agreement. Thus, there can be sale
of 20 kilos of sugar of a named quality. However, from the viewpoint of risk of loss, not until the
object has been lost, for as is well known, “generic things cannot be lost”.
 
Art. 1461. Things having a potential existence may be the object of the contract of
sale.
The efficacy of the sale of a mere hope or expectancy is deemed subject to the
condition that the thing will come into existence.
The sale of a vain hope or expectancy is void. (n)

Art. 1462. The goods which form the subject of a contract of sale may be either
existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or
acquired by the seller after the perfection of the contract of sale, in this Title called "future
goods."
 There may be a contract of sale of goods, whose acquisition by the seller depends
upon a contingency which may or may not happen. (n)
 
Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n)
 
SALE OF A THING HAVING POTENTIAL EXISTENCE – This is a future thing that can be sold.
(Note: Future inheritance cannot be sold. [Art. 1347, par. 2, Civil Code)
 
Examples of thing possessed of a potential existence:
 a. rice harvest next year
b. young animals not yet in existence or still ungrown fruits
 c. the wool that shall, thereafter, grow upon sheep
d. the expected goodwill of a business enterprise
 
EMPTIO REI SPERATI EMPTIO SPEI
sale of an expected thing sale of hope itself
If the expected thing does not materialize, It does not matter whether the expected
the sale is not effective. thing materialized of not; what is important is
that the hope itself validly existed.
deals with future thing – that which is deals with a present thing – for certainly the
expected hope or expectancy already exist
Ex. Ex. Sale of valid sweepstakes ticket (whether
the ticket wins or not, the sale itself is valid)
 
VAIN HOPE OR EXPECTANCY – sale is void. (Note: This is NOT an aleatory contract for while an
aleatory contract there is an element of chance, here, there is completely no chance. Ex. Sale of
a losing ticket for a sweepstakes already run)
 
SALE OF GOODS may be for future or existing goods.
 
FUTURE GOODS – they are those still to be:
a. manufactured (like airplane) or printed (like a subscription to a newspaper)
b. raised (like young animals)
c. acquired by seller after perfection of the contract (like the land which the seller
expects to buy [also referred to as after-acquired property])
d. acquired but depending upon a contingency which may or may not happen
 
SALE OF UNDIVIDED INTEREST, example: If I own a house, I may sell an aliquot part thereof
(say ½ or 1/3) to somebody, in which case he ma and I will become co-owners.

Art. 1464. 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. (n)
 
 Note: Fungible (adj.)- being something (such as money or a commodity) of such a nature
that one part or quantity may be replaced by another equal part or quantity in paying a debt or
settling an account;
Fungibles (n) - are personal property which may be replaced with equivalent things
 
Sale of Share in a specific mass; example. In a stock of rice, the exact number of cavans
of which is still unknown, Jose buys 100 cavans. If there are really 150, Jose becomes the co-
owner of the whole lot, his own share being 2/3 hereof.
 
Art. 1465. Things subject to a resolutory condition may be the object of the contract
of sale. (n)
 
Note: Resolutory condition : a condition that upon fulfillment terminates an already
enforceable obligation and entitles the parties to be restored to their original positions
(extinguishes obligation)

Art. 1466. In construing a contract containing provisions characteristic of both the

contract of sale and of the contract of agency to sell, the essential clauses of the whole
instrument shall be considered. (n)
 
Difference between contract of sale and contract of agency to sell (like a consignment for sale)
 
  SALE CONTRACT OF AGENCY TO SELL
__MCE_ITEM__ The Buyer pays the price. The agent delivers the price which
1. in turn he got from his buyer.
2. After delivery, the buyer becomes the The agent who is supposed to sell
owner does not become the owner, even if
the property has already been
delivered to him.
3. The seller warrants The agent assumes no personal
liability as long as he acts within his
authority and in the name of the
principal.
 
The Supreme Court has identified what constitute the “essential clauses” to warrant a
conclusion as to the proper nature of the contract in issue. In Quiroga v. Parsons (38 Phil. 501),
the court said:
 
These features exclude the legal conception of an agency or order to sell whereby
the mandatory or agent received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtain from the sale of the thing to a third person,
 and if he does not succeed in selling it, he returns it. By virtue of the contract between
the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged
to pay their price within the term fixed, without any other consideration and regardless as
to whether he had or had not sold the beds.

The court also noted although the parties designated the arrangement as an agency did
not mean the characterization to be conclusive “[b]ut it must be understood that a contract is
what the law defines it to be, and not what it is called by the contracting parties.
 
Also, in Ker & Co., Ltd. V. Lingad (38 SCRA 524, 526 [1971]), the Court said:
 
The transfer of title or agreement to transfer it for a price paid or promised is the
essence of sale. If such transfer puts the transferee in the attitude or position of an owner
and makes him liable to the transferor as a debtor for the agreed price, and not merely as
an agent who must account for the proceeds of a resale, the transaction is a sale; while
the essence of an agency to sell is the delivery to an agent not as his property, but as the
property of the principal, who remains the owner and has the right to control the sale, fix
the price, and terms, demand and receive the proceeds less the agent’s commission upon
sales made.
 
Art. 1467. A contract for the delivery at a certain price of an article which the vendor
in the ordinary course of his business manufactures or procures for the general market,
whether the same is on hand at the time or not, is a contract of sale, but if the goods are to
be manufactured specially for the customer and upon his special order, and not for the
general market, it is a contract for a piece of work. (n)
 
Art. 1468. If the consideration of the contract consists partly in money, and partly in
another thing, the transaction shall be characterized by the manifest intention of the
parties. If such intention does not clearly appear, it shall be considered a barter if the value
of the thing given as a part of the consideration exceeds the amount of the money or its
equivalent; otherwise, it is a sale. (1446a)
 
Rule to determine whether contract is one of sale or barter:

a. FIRST RULE – Intent

b. If intent does not clearly appear:
1. If the thing is more valuable than money – BARTER
2. If 50-50 – SALE
3. If the thing is less valuable than the money – SALE
 
 Art. 1469. In order that the price may be considered certain, it shall be sufficient that
it be so with reference to another thing certain, or that the determination thereof be left to
the judgment of a special person or persons.
 
Should such person or persons be unable or unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently agree upon the price.
 
If the third person or persons acted in bad faith or by mistake, the courts may fix the
price.
 
Where such third person or persons are prevented from fixing the price or terms by
fault of the seller or the buyer, the party not in fault may have such remedies against the
party in fault as are allowed the seller or the buyer, as the case may be. (1447a)
 
The price must be CERTAIN; otherwise, there is no true consent between the parties (10
Manresa 45-46). If NO SPECIFIC AMOUNT has been agreed upon, the price is still considered
CERTAIN:
 
1. If it be certain with reference to another thing certain;
2. If the determination of the price is left to the judgment of a specified person or
persons;
3. In the cases provided for under Art. 1472 of the Civil Code.

Art. 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. (n)
 
In ordinary sale, the sale remains valid even if the price is very low. Of course, there was
vitiated consent (such as when fraud or undue influence is present), the contract may be
annulled but only to such vitiated consent.
 
However, in 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. (National Bank v. Gonzales, 45 Phil 693)
 
Note: As a matter of fact, it may be that the extremely low price was the result not of sale
but of a contract of loan, with the price paid as the principal and the object, given merely as
security. In a case like this, the contract will be interpreted to be one of loan with an equitable
mortgage. (Aguilar v. Rubiato, 40 Phil 570).
 
 Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have
been in reality a donation, or some other act or contract. (n)
 
Art. 1472. 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. (1448)
 
Art. 1473. 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. (1449a)

Reason for the rule. The other could not have consented to the price for he did not know
what it was. (10 Manresa 58)
 
Art. 1474. Where the price cannot be determined in accordance with the preceding
articles, or in any other manner, the contract is inefficacious. However, if the thing or any
part thereof has been delivered to and appropriated by the buyer he must pay a
reasonable price therefor. What is a reasonable price is a question of fact dependent on the
circumstances of each particular case. (n)
 
If the price cannot really be determined, the sale is void for the buyer cannot fulfil his
duty to pay. However, if the buyer has made use of it, he should not be allowed to enrich
himself unjustly at another’s expense. So he must pay a “reasonable price.” The seller’s 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 thereof.
 
         Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price. 
          From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts. (1450a)
 
Sale is a consensual contract (perfected by mere consent). Therefore, delivery or payment
is not essential for perfection.
[Note: The contract of sale is consummated upon delivery and payment. (Naval v.
Enriquez, 3 Phil 669)]
 
Requirements for perfection:
 1. When the parties are face-to-face, when an offer is accepted without conditions and
without qualification. (A conditional acceptance is a counter-offer.)
(Note: If negotiated thru phone, it is as if the parties are face-to-face.)

2. When the 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 the
acceptance, the seller may still withdraw. [Laudico v. Arias, 43 Phil 270])

3. When a sale is made subject to a suspensive condition, perfection is had from the
moment the condition is fulfilled.
 
Before perfection of the contract of sale, no mutual rights and obligations exist between
the would-be buyer and the would-be seller.
 
Formalities for Perfection. Under the Statute of Frauds , sale (must be in a public writing):
1. Real Property (regardless of the amount)
2. Personal Property – if ₱ 500 or more
 
Effect of Perfection. After perfection the parties must now comply with their mutual
obligations. Thus, for example, the buyer can now compel the seller to deliver to him the object
purchased. In the meantime, the buyer has only the personal, not a real right.
 
ILLUSTRATIVE PROBLEMS here.
 
        Art. 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) A sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer, or in other customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without reserve. 
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation. 
(4) Where notice has not been given that a sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce
any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any
person to bid at such sale on behalf of the seller or knowingly to take any bid from the
 seller or any person employed by him. Any sale contravening this rule may be treated as
fraudulent by the buyer. (n)
 
  Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof. (n)
 
            Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n)
 
Ownership is not transferred by perfection but by delivery. [This iars true even if the sale
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. A contrary stipulation is, however,
VALID.]

Kinds of Delivery:
 
1. Actual (Art. 1497)
2. Constructive (Art. 1498-1501) including “any other manner signifying an agreement
that the possession transferred (Art. 1496)
 
Even if delivered, the ownership may still be with the seller till full payment of the price is
made, if there is a stipulation to this effect. But of course innocent third parties cannot be
prejudiced. The stipulation is usually known as pactum reservati domini and is common in sales
on the instalment plan.
 
         Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. 
         An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct from
the price. (1451a)
 
Distinction between Mutual Promise and Accepted Unilateral Promise

  ACCEPTED UNILATERAL
MUTUAL PROMISE (1st paragraph)
PROMISE (2nd paragraph)
1. Example: A promises to buy to buy Example: A promises to sell to B. B accepts
something and B promises to sell it at an the promise, but does not in turn promise
agreed price to buy.
2. This is clearly a bilateral reciprocal Only one makes the promise
contract.
3. This is as good as perfected sale. Yet, no This is a unilateral promise to sell and is
 title of dominion is transferred as yet, the binding on the promissor only if the
parties being given the right only to promise is supported by a consideration
demand fulfillment or damages distinct from the price.
 
Contract to Sell is not an Absolute Sale. A contract or promise to sell, a parcel of land for
example, is not a contract of sale. Such a contract to sell would exist when for instance, land is
promised to be sold, and title given only after the downpayment and the monthly instalment
therefor shall have all been paid. Failure to make the needed payment is failure to comply with
the needed suspensive condition. Hence, promissor was never realy obliged to convey title.
Hence also, there would be nothing wrong if he sells the property to another, after an
unsuccessful demand for the said price. (Manuel v. Rodriguez, Sr., L-13435). Therefore also, a
clause in such a contract allowing unilateral automatic recission by the seller in the event the
buyer fails to pay any instalment due is VALID, Article 1592 not being applicable.
 
Policitacion – this is the unilateral promise to buy or to sell which is not accepted. This
produces no juridical effect, and creates no legal bond. This is not a mere offer, and has not yet
been converted into a contract.

  Art. 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. (1452a)
 
Who bears the Risk of Loss?

a. Lost before perfection The SELLER bears the loss.

Reason: There was no contract, for there was no cause or
consideration. Being the owner, the seller bears the loss. This
means that he cannot demand payment of the price.
b. Lost after delivery to the The BUYER bears the loss. (Res perit domino – the owner
buyer bears the loss)
c. Lost after perfection but The BUYER bears the loss, as exception to the rule of res
before delivery perit domino.
 
 
Art. 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. (n)
 
Sale by description – where the seller sell things as being a certain kind, the buyer merely
relying on the seller’s representations or descriptions. Generally, the buyer has not previously
seen the goods, or even if he has seen them, he believes (sometimes erroneously) that the
description tallies with the goods he has seen. 

Sale by sample – that where the seller warrant that the bulk (not the major part or the
majority of the goods but the goods 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 or sample – must satisfy the requirements in both, and not in only
one. 

The mere exhibition of sample does not necessarily make it a sale by sample. This

exhibition must have been the sole basis or inducement of the sale. A sale by sample may still
be had even if the sample was shown only in connection with a sale to the first purchaser.
There can be a sale by sample even if the sale is “as is.”
 
Art. 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. (1454a)
     
Earnest money called “arras,” is something of value to show that the buyer was really in
earnest, and given to the seller to bind the bargain. It is considered as:
a. part of the purchase price (the balance is all that has to be paid)
b. as proof of the perfection of the contract
 
Earnest Money Option Money
Applies to a perfected sale Applies to a sale not yet perfected
Money is part of the purchase price money is not part of the purchase price, the
would-be buyer is not required to buy.
Not to be returned to the would-be buyer Not to be returned to the would-be buyer
should the sale be not consummated should the sale be not consummated
 
 However, if the merchandise cannot be delivered, the earnest money must be returned.
However, this right may be renounced since neither the law nor public policy is violated.
 
Art. 1483. Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word of mouth, or
partly in writing and partly by word of mouth, or may be inferred from the conduct of the
parties. (n)
For statute of frauds, refer to the discussion on Art. 1475.
 
If sale is made thru and agent. The sale of a piece of land or interest therein when made
thru an agent is void (not merely unenforceable) unless the agent’s authority is in writing. This
is true even if the sale itself is in a public instrument, or even registered.

Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies: 
(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. (1454-A-a)
 
Purpose of the rules for sale of Personal Property on Installment Plan. To prevent abuse
in the foreclosure of chattel mortgages by selling at a low price and then suing for the
deficiency is the precise purpose of the article. Otherwise, the buyer would find himself without
the property, and still indebted. (Bachrach Motor v. Millan, 61 Phil 405) 

Parenthetically, the proviso on non-recovery of deficiency (also referred to as the RECTO

LAW) is constitutional in view of the public policy involved. Moreover, it does not unduly impair
the obligation of contracts (Manila Trading and Supply Co. v. Reyes, 62 Phil 461) inasmuch as it
is not retroactive (Int. Harvester v. Mahinay, 39 O.G. 1874) 

The remedies in enumerated are not cumulative. They are alternative, and if one is
exercised, the others cannot be made use of.
 
Art. 1485. The preceding article shall be applied to contracts purporting to be leases
of personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-A-a)
 
 Art. 1486. In the case referred to in 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. (n)
 
When “Lease” construed as “Sale”. Even if the word “lease” is employed, when a sale on
instalment is evidently intended, it must be construed as a sale.

Non-Return of installment Paid

1.     As a general rule, it is required that a case of rescission or cancellation of the sale
requires mutual restriction, that is, partial payments of price or “rents” must be
returned;

2.     However, by way of exception, it is valid to stipulate that there should be NO

returning of the price that has been partially paid or of the “rents” given, provided the
stipulation is not unconscionable.
 
See: RA 6552 (Sale of Real Property in Installment or the Maceda Law)
 
Art. 1487. The expenses for the execution and registration of the sale shall be borne
by the vendor, unless there is a stipulation to the contrary. (1455a)
 
Art. 1488. The expropriation of property for public use is governed by special laws.
(1456)

REPUBLIC ACT No. 6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS

Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine,
where the buyer has paid at least two years of installments, the buyer is entitled to the
following rights in case he defaults in the payment of succeeding installments:
 (a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace period
for every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total payments
made, and, after five years of installments, an additional five per cent every year but not
to exceed ninety per cent of the total payments made: Provided, That 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.

Down payments, deposits or options on the contract shall be included in the computation of
the total number of installment payments made.

Section 4. In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller
may cancel the contract 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.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the
same to another person or to reinstate the contract by updating the account during the grace
period and before actual cancellation of the contract. The deed of sale or assignment shall be
done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid
balance of the purchase price any time without interest and to have such full payment of the
purchase price annotated in the certificate of title covering the property.

Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of
Sections 3, 4, 5 and 6, shall be null and void.

Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall
be affected thereby.
Section 9. This Act shall take effect upon its approval.