SALES

Subject Matter of Sale

● Must be determinate or determinable
NATURE AND FORM OF CONTRACT
● Article 1460 states that the “requisite that
the thing be determinate is satisfied if at
the time the contract is entered into, the
Art. 1458. By the contract of sale one of the
thing is capable of being made
contracting parties obligates himself to transfer
determinate without the necessity of a
the ownership and to deliver a determinate
new or further agreement between the
thing, and the other to pay therefor a price
parties,” which includes “determinable”
certain in money or its equivalent.
albeit generic objects as valid subject
matters of sale.
A contract of sale may be absolute or
● This would require that even if the subject
conditional. (1445a)
matter of the sale was generic
(determinable), the performance of the
Sale seller’s obligation would necessarily
● Contract whereby one of the contracting require its physical segregation or
parties (Seller) obligates himself to transfer particular designation, making the subject
the ownership, and to deliver the matter determinate at the point of
possession, of a determinate thing; and the performance.
other party (Buyer) obligates himself to ● The use of the word “determinate” to
pay therefore a price certain in money or describe the subject matter emphasizes
its equivalent. more specifically the fact that the
● applies the common law concept of obligation to deliver and transfer
requiring the obligation to transfer the ownership can be performed only with the
ownership of the subject matter of the sale subject matter becoming specific or
as a principal obligation of the seller. determinate.

Sources of law of Sales Elements of Contract of Sale

● Spanish civil code ● Consent or meeting of the minds to
● Uniform sales law adopted from USA transfer ownership in exchange for the
● Code of commerce price
● SC decisions ● Subject matter
● Opinions and comments of commentators ● Price in money or its equivalent
● Special laws
Notes on Elements of Contract of Sale
Nature and Obligations created in Sale ● When all three elements are present, there
● Obligations of seller being a meeting of the minds, then a
○ Transfer ownership perfected contract of sale arises, and its
○ Delivery the possession of the validity is not affected by the fact that
subject matter previously a fictitious deed of sale was
● Obligation of buyer executed by the parties,11 or by the fact of
○ Pay the price non- performance of the obligations
● Both sets of obligations are real obligations thereafter.
or obligations “to give,” as contrasted from ● Villanueva: the more appropriate term to
personal obligations “to do” and “not to use when an essential element is not
do,” and can be the proper subject of present at a meeting of the mind is to
actions for specific performance. declare a “no contract” situation.
● In contrast, obligations to do or not to do, ● On the other hand, when all three
cannot elements are present, but there is defect or
● be enforced through actions for specific illegality constituting any of such
performance because of the public policy elements, the resulting contract is either
against involuntary servitude. voidable when the defect constitutes a
vitiation of consent, or void as mandated
under Article 1409 of the Civil Code.

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SALES

given to it by the contracting

Stages in Life of Sale parties.
● Policitacion/Negotiation ● Consensual
○ period from the time the ○ Sale is a consensual contract since
prospective contracting parties it is perfected by mere consent, at
indicate their interests in the the moment there is a meeting of
contract to the time the contract is the minds upon the thing which is
perfected; the object of the contract and upon
● Perfection the price.
○ upon the concurrence of the ○ Buenaventura v. CA: Once there is a
essential elements of the sale meeting of the minds as to the
which are the meeting of the price, the sale is valid, despite the
minds of the parties as to the manner of its actual payment, or
object of the contract and upon the even when there has been breach
price; thereof.
● Consummation ○ Under Article 1475 of the Civil Code,
○ when the parties perform their from the moment of perfection of
respective undertaking under the the sale, the parties may
contract of sale, culminating in the reciprocally demand performance,
extinguishment even when the parties have not
affixed their signatures to the
Essential Characteristics of Sale written form subject to the
● Nominate and principal provisions of the law governing the
○ Sale is a nominate contract since it form of contracts.
has been given a particular name ○ Actual delivery of the subject
by law matter or payment of the price
○ Sale is a principal contract, as agreed upon are not necessary
contrasted from accessory or components to establish the
preparatory contracts, because it existence of a valid sale
can stand on its own, and does not ○ Fule v. CA: A contract of sale is
depend on another contract for its perfected at the moment there is a
validity or existence; more meeting of the minds. Being
importantly, that parties enter into consensual, a contract of sale has
sale to achieve within its essence the force of law between the
the objectives of the transaction, contracting parties and they are
and simply not in preparation for expected to abide in good faith.
another contract. Formal requirements are, therefore,
○ In one case, the Court held that in for the benefit of third parties.
determining the nature of a Non-compliance therewith does
contract, the courts look at the not adversely affect the validity of
intent of the parties and not at the the contract nor the contractual
nomenclature used to describe it, rights and obligations of the parties
and that pivotal to deciding such thereunder.
issue is the true aim and purpose of ○ Under Article 1332 of the Civil Code,
the contracting parties as shown by when one of the parties is unable to
the terminology used in the read, or if the contract is in a
covenant. language not understood by him,
○ In another case, the Court held that and mistake or fraud is alleged, the
contracts are not defined by the person enforcing the contract must
parties thereto but by the principles show that the terms thereof have
of law; and that in determining the been fully explained to the former.
nature of a contract, the courts are ○ Existence of suspensive term or
not bound by the name or title condition affects the consensuality
of the contract of sale

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● Bilateral and Reciprocal ○ Inadequacy of price may be a

○ Sales is a bilateral contract since it ground for setting aside an
has reciprocal obligations, as execution sale but is not a sufficient
distinguished from a unilateral ground for the cancellation of a
contract because it imposes voluntary contract of sale otherwise
obligations on both parties free from invalidating effects.
○ Legal effects of sale being a ● Sale is a title and not a mode
bilateral and reciprocal contract ○ The perfection of a sale gives rise to
■ Power to rescind is implied, the obligation on the part of the
no need to stipulate seller to transfer ownership and
■ Neither party incurs delay if deliver possession of the subject
no one complies matter; nevertheless, it would be
■ When one party fulfills delivery or tradition that is the
obligation, default begins on mode to transfer ownership and
the other party possession to the buyer.
○ PUP v. CA: It is therefore a general ○ Alcantara-Daus v. De Leon: While a
requisite for the existence of a valid sale is perfected by mere consent,
and enforceable contract of sale ownership of the thing sold is
that it be mutually obligatory. acquired only upon its delivery to
● Onerous the buyer.
○ Sale is an onerous contract, as ○ Manongsong v. Estimo: once a sale
distinguished from a gratuitous has been duly perfected, its validity
contract, because it imposes a “cannot be challenged on the
valuable consideration as a ground of the non-transfer of
prestation, which ideally is a price ownership of the property sold at
certain in money or its equivalent. that time of the perfection of the
● Commutative contract, since it is consummated
○ Sale is a commutative contract, as upon delivery of the property to the
distinguished from an aleatory vendee.
contract, because a thing of value is ○ Mode
exchanged for equal value, i.e., ■ legal means by which
ideally the value of the subject dominion or ownership is
matter is equivalent to the price created, transferred or
paid. destroyed (e.g., succession,
○ Nevertheless, there is no donation)
requirement that the price be ○ Title
equal to the exact value of the ■ legal basis by which to affect
subject matter; all that is required is dominion or ownership.
for the seller to believe that what ○ Therefore, sale by itself does not
was received was of the transfer or affect ownership; it is
commutative value of what he tradition or delivery, as a
gave. consequence of sale, that actually
○ The test for compliance therewith is ○ transfers ownership.
not objective but rather subjective;
i.e., so long as the party believes in Absolute and Conditional Sale
all honesty that he is receiving ● Absolute
good value for what he transferred, ○ No condition imposed and
then it complies. ownership passes to the vendee
○ The subjective test of the upon delivery of the thing of
commutative nature of sale is subject of sale
further bolstered by the principle ○ Absolute although denominate as
that inadequacy of price does not conditional sale absent such
affect ordinary sale. stipulation that title to property is

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reserved in the vendor until full ● It is not the function of notary public to
payment validate, and make binding legal effect
● Conditional upon parties
○ Subject to certain contingency
○ Ownership is not vested in the Effect of absence of notarization
buyer until the happening of the ● Absence will not necessarily invalidate the
condition, usually full payment transaction, it remains only as a private
○ Contract to sell, where the transfer document
of ownership is subjected to
condition Failure to pay consideration distinguished from
○ Perfected contract of sale pertains lack of consideration
to the compliance by one party of ● Results in a right to demand the
an undertaking the fulfillment fulfillment or cancellation of obligation
under an existing valid contract
When conditional sale is considered as
absolute sale Contract of sale v. Contract to sell
● Deed of sale in nature although
Contract of sale Contract to sell
denominated as conditional sale absent
such stipulation reserving title to vendor
Title over the property Ownership is retained
until full payment, nor any stipulation
passes to the buyer by the seller whether
giving them the right to unilaterally
upon delivery unless or not there is delivery.
rescind the contract in case of non
there is a contrary Ownership passes to
payment
agreement buyer upon full
● In such cases, ownership passes to the
payment
vendee upon constructive or actual
delivery Non payment of Payment in full is a
purchase price is a positive suspensive
Manner of payment of the purchase Price is an negative resolutory condition. If price is
essential element of contract of sale condition, the sale not paid, no obligation
● Montecillo v. Reynes: an agreement on the becomes ineffective on the part of seller to
price but a disagreement on the manner transfer ownership
of payment will prevent a valid existence of
a contract for lack of consent
Significance of promise to execute a deed of
Effect of no price paid sale
● Contract of sale is void where the price ● Where the seller has promised to execute
appears in the documents is in fact, never deed of sale after full payment – contract
been paid to sell

Natural elements Contract to sell

● Inherent in the contract and are deemed ● Bilateral contract whereby the prospective
to exist in the contract depending on the seller, while expressly reserving ownership,
stipulations of the parties (conditions, binds himself to sell the said property to
warranty against eviction) the prospective buyer, with an agreement
that it is conditioned upon the full
Accidental elements payment
● Not essential/natural, may or may not exist
depending on the stipulation of the parties Contract of sale
● Ownership is vested on the buyer whether
Significance of notarization of deed of sale or not full payment is made
● The fact the the deed of sale is notarized ● Title passes to buyer upon delivery
does not justify the conclusion that the
said sale is a true conveyance

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SALES

Failure of buyer to pay the price in contract of Object of a contract of sale

sale ● Object of a contract of sale is its subject
● Will cause the ownership to revert back to matter
the seller unless the bilateral contract of
sale is rescinded Object must be licit or lawful
● May either be things or rights which must
Can there be a valid sale against the will of the be licit or lawful and within the commerce
owner of the property? Yes of man
● Expropriation
● Execution of sale conducted under Rule 39 Classification of illicit things
Sec. 15 of ROC ● Illicit per se - immoral or wrongful
● Judicial foreclosure of sale ● Illicit per accidens - illegal only because
● Extrajudicial foreclosure there is a law prohibiting it

Effect of reluctant consent Rights as objects of sale

● No difference in law where a person gives ● If they are transmissible, they can be the
his consent; there is no difference in law subject of contracts of sale
where a person gives his consent ● Transmissible rights are those which can
reluctantly and even against his good be transmissible such as right to usufruct,
sense and judgment right redemption, assignment or sale, right
to inheritance
Forged deed of sale may be the root of a good ● Intransmissible rights are those that are
title right of suffrage, right to hold a public
● Forged deed may be defined as an position, right to support, and marital
instrument which purports to have been rights
executed by the person or persons whose
signatures appear thereon Can services be the object of sale? Yes
● While a forged deed is null and void and of ● Like contract for a piece for work but
no effect as between parties, it may be services cannot be the object of sale since
nevertheless it is not a determinate thing and no
transfer of ownership is available in
Distinctions between condition upon the services
perfection of a contract and condition imposed
on the performance of an obligation Effect if object is illicit
● Failure to comply with first condition ● Contract is void, not subject to ratification
results in the failure of a contract, while the
failure to comply with the second In pari delicto
condition only gives the other party the ● Rights of the parties embroiled in a void
option either to refuse to proceed with the contract due to illegality of the object shall
sale or to waive the condition be determined by Art. 1411-1412
● No action or suit arises in equity or at law
from an illegal contract, no suit can be
Article 1459. The thing must be licit and the
maintained for specific performance or to
vendor must have a right to transfer the
recover property agreed
ownership thereof at the time it is delivered. (n)
Transfer of ownership is essential in sale
Objects of contracts in general ● Seller must have the right to transfer the
● All things which are not outside the ownership of the thing to the buyer at the
commerce of man including future things, time of delivery, which may be actual or
may be the object of a contract
constructive
● All rights which are not intransmissible
may also be the object of contracts ● By implication–at the time of perfection of
the contract

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● The seller need not be the owner of the

Perfected by mere Must comply with
thing or right sold. What is important is consent formalities mandated
that at the time of delivery, he is already by law for its validity
the owner of the thing or right
● Sale will not be valid if the seller is not the Valid sale cannot Even when the donor
owner of the property at the time of deprive the imposes upon the
compulsory heirs of donee a burden, but
delivery–nobody can dispose a thing which
their legitimes; it does which is less than the
does not belong to him not diminish the value
estate of the seller of the thing given,
Foreclosure is a sale covered by Art. 1458 there is still a donation.
● Forced sale, under which the mortgagor is
in default, the forced seller becomes Purported sale: when Purported donation:
the price of a sale is but it is not mere
obliged to transfer the ownership to the
simulated, the sale liberality that
highest bidder who is obliged to pay the itself may be void, “but permeates the
bid price or money equivalent the act may be shown contract as the only
● Seller must be the owner of the thing sold to have been in reality consideration, because
a donation or some other considerations
Seller can only sell what he owns/authorized to other act or contract.” or burdens are placed
sell upon the donee.
In other words, a
● One can only sell what one owns or is
contract may be In such a case, the
authorized to sell, and the buyers can entered into in the issue of what is the
acquire no more than what the seller can form of a “sale” and applicable rule (i.e.,
transfer legally may end up being Law or Sales or Law on
Reason why seller in good faith need not be the governed by the Law Donation) becomes
owner of the object of sale on Donations, even critical in determining
when there may be a the validity
● If the seller is required to be the owner of
formal price agreed and enforceability of
the object of the sale at the perfection of
upon, the contract.
contract, future goods could no longer be if it is simulated, and
the subject of sale the real intention is
that the subject
Sales v. Donation matter is being
donated to the
Sales Donation supposed “buyer.”
Contract whereby one Act of liberality
of the contracting whereby a person
parties obligates disposes
himself to transfer the gratuitously of a thing Article 1460. A thing is determinate when it is
ownership, and to or right in favor of particularly designated or physical segregated
deliver the possession, another person, who from all others of the same class.
of a determinate thing; accepts it.78
and the other party The requisite that a thing be determinate is
obligates himself to satisfied if at the time the contract is entered
pay therefore a price into, the thing is capable of being made
certain in money or its determinate without the necessity of a new or
equivalent. further agreement between the parties. (n)
Onerous Gratuitous Thing must be determinate
● Object must be determinate, however the
fact that the quantity is not determinate

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shall not be an obstacle to the existence of

Such sale is subject to quantity and quality.
a contract
the condition that the
● Segregated from all others of same class
thing will come into
existence whatever its
Relaxation of the rule of determinate thing
quantity or quality
● If at the time of the contract was entered
into, the thing is capable of being made
The contract deals The contract relates to
determinate without the need for entering
with a future thing a thing which exists or
into a new or supplemental contract
is present — the hope
between the parties, the requirement is
or expectancy.
satisfied
The sale is subject to The second produces
Article 1461. Things having a potential existence the condition that the effect even though the
may be the object of the contract of sale. thing should exist, so thing does not come
that if it does not, into existence because
The efficacy of the sale of a mere hope or there will be no the object of the
expectancy is deemed subject to the condition contract by reason of contract is the hope
that the thing will come into existence. The sale the absence of an itself, unless it is a vain
of a vain hope or expectancy is void. essential element. hope or expectancy
(like the sale of a
falsified sweepstake
Things with potential existence ticket which can never
● A thing although not yet in existence win).
which may reasonably come into existence
for being natural increment of something
already in existence is said to have potency Article 1462. The goods which form the subject
to exist and which can be a subject matter of a contract of sale may be either existing
of a contract of sale goods, owned or possessed by the seller, or
● Example goods to be manufactured, raised, or acquired
○ Fruits expected from harvest by the seller after the perfection of the contract
○ Sugar to be harvested of sale, in this Title called “future goods.”

Status of things with potential existence There may be a contract of sale of goods, whose
Emptio rei speratae Emptio spei acquisition by the seller depends upon a
contingency which may or may not happen. (n)
Emptio rei Emptio spei is the sale
speratae(sale of thing of the hope itself that
Goods
expected) is the sale of the thing will come
● Includes all chattels personal but not
a thing not yet in into existence, where it
things in action or money of legal tender in
existence subject to is agreed that the
philippines
the condition that the buyer will pay the
● Real property is not “goods”
thing will exist and on price even if the thing
failure of the condition, does not eventually
Kinds of goods
the contract becomes exist.
● Existing goods
ineffective and hence,
● Future goods
the buyer has no
○ Goods to be manufactured yet
obligation to pay the
○ If goods are to be manufactures
price.
specifically for a customer –
contract is for a piece of work
The future thing is It is not certain that
certain as to itself but the thing itself
Delivery is understood
uncertain as to its (winning a prize) will
● Without delivery of the future goods at the
quantity and quality. exist, much less its
appointed time, sale is not valid

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● Mere speculation on delivery, transaction is been weighed then the buyer

void becomes the owner

Contract of piece of work

Article 1465. Things subject to a resolutory
● Not one with existence, and which would
condition may be the object of the contract of
never have existed but for the order of the
sale. (n)
person desiring it

Resilutory condition
Article 1463. The sole owner of a thing may sell
● Extinguishes subsisting obligation
an undivided interest therein. (n)
Effect of fulfillment of resolutory condition
Can a co-owner of a thing alienate his share or ● What is really the subject to a resolutory
a portion of his share in the co-ownership? condition is not the thing, but the sale
● Yes, like a sole owner, co-owner has the ● The thing subject of such sale may be the
right to alienate object of the contract subject only to the
happening of condition
Selling property to a dead person
● Seller cannot transfer title over a lot
Article 1466. In construing a contract containing
through a deed of absolute sale, to a
provisions characteristic of both the contract of
person who has already died, as the
sale and of the contract of agency to sell, the
deceased has no more civil personality
essential clauses of the whole instrument shall
be considered. (n)
Article 1464. In the case of fungible goods, there
may be a sale of an undivided share of a specific
Contract is what the law defines it to be
mass, though the seller purports to sell and the
● Determine the entire document as to
buyer to buy a definite number, weight or
determine what the law defines it and not
measure of the goods in the mass, and though
simply by the parties
the number, weight or measure of the goods in
the mass, and though the number, weight or
Sale distinguished from agency to sell
measure of the goods in the mass is
By the contract of agency, a person binds himself
undetermined. By such a sale the buyer
to render some service or to do something in
becomes owner in common of such a share of
representation or on behalf of another, with the
the mass as the number, weight or measure
consent or authority of the latter. (Art. 1868.) In
bought bears to the number, weight or
order to classify a contract, due regard must be
measure of the mass. If the mass contains less
given to its essential clauses. A contract is what
than the number, weight or measure bought,
the law defines it to be, and not what it is called
the buyer becomes the owner of the whole
by the contracting parties.
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) Sale Agency to sell

The buyer receives the The agent receives the

Purchase of an undivided share in specific mass
goods as owner goods as the goods of
of fungible goods
the principal who
● Fungible are those which cannot be used
retains his ownership
without being consumed
over them and has the
● When the purchase purports to be in
right to fix the price
definite number, weight, or measure of
and the terms of the
goods in an undetermined mass ot stock,
sale and receive the
the rules are
proceeds less the
○ If the aliquot part purchased from
agent’s commission
the seller is more than the whole
upon the sales made
undetermined mass after it had

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SALES

The buyer has to pay The agent has simply ordinary course of his business manufactures or
the price to account for the procures for the general market, whether the
proceeds of the sale he same is on hand at the time or not, is a contract
may make on the of sale, but if the goods are to be manufactured
principal’s behalf specially for the customer and upon his special
order, and not for the general market, it is a
The buyer, as a general The agent can return contract for a piece of work.
rule, cannot return the the object in case he is
object sold unable to sell the
Distinction between Contract of Sale and
same to a third person
Contract for a Piece of Work
The seller warrants the The agent makes no Contract of Sale Contract for a Piece
thing sold warranty for which he of Work
assumes personal
liability as long as he Item is being item that is specially
acts within his manufactured and manufactured and
authority and in the sold by the vendor in upon the special order
name of the seller ordinary course of of the customer
business
The buyer can deal The agent in dealing
with the thing sold as with the thing
he pleases being the received, must act and Art. 1468. If the consideration of the contract
owner is bound according to consists partly in money, and partly in another
the instructions of his thing, the transaction shall be characterized by
principal. the manifest intention of the parties. If such
intention does not clearly appear, it shall be
Primordial test considered a barter if the value of the thing
● Determine the intent of the parties given as a part of the consideration exceeds the
perceived from the whole scope or effect amount of the money or its equivalent;
of the language otherwise, it is a sale.

Sale on consignment Applicability

● Sale through sale of goods, dealer, agency; ● Applies only if the consideration paid for
title to the goods does not pass to the the sale consists partly in money (or its
consignee equivalent) and partly in kind

Contract of Agency to Sell; Form Rules to Follow

● Contracts may be entered into any form ● First rule: Determine the intention of
provided that all requirements for the parties. Intention must prevail.
validity are present, unless otherwise ● Second rule: If intention can’t be
provided by law determined, then consider the value of the
● Contract of Agency to Sell on commission thing given as part of the consideration
basis doesn’t belong to any of three ○ Value of thing > value of money,
categories mentioned in Art. 1357, 1358, and BARTER
1403 so it is valid and enforceable in ○ Value of thing < value of money,
whatever form SALE
○ Value of thing = value of money,
Intent prevails over form SALE
● form cant prevail over true intent of parties
Money Exchange; Rule
Art. 1467. A contract for the delivery at a certain ● Local currency exchange to foreign
price of an article which the vendor in the currency, PURCHASE AND SELL

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SALES

● Local currency exchange to other ■ A sold 10 sacks of Dinorado

denominations of local currency, BARTER rice at the same price to the
● Foreign currency exchange to other price of the same brand last
denominations of foreign currency, month.
BARTER
Price Based on Mere Estimates; Effect
● Transaction lacks the requisites essential
Art. 1469. In order that the price may be
for the perfection of contract
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 Art. 1470. Gross inadequacy of price does not
judgment of a special person or persons. affect a contract of sale, except as it may
indicate a defect in the consent, or that the
Should such person or persons be unable or parties really intended a donation or some
unwilling to fix it, the contract shall be other act or contract.
inefficacious, unless the parties subsequently
agree upon the price.
Inadequacy of Price
● A price insufficient to satisfy the real or
If the third person or persons acted in bad faith
actual price of the object of sale
or by mistake, the courts may fix the price.
● Mere inadequacy doesn’t affect the validity
of a contract of sale, if the parties can form
Where such third person or persons are
an independent judgment concerning the
prevented from fixing the price or terms by fault
transaction
of the seller or the buyer, the party not in fault
● A valuable consideration if stipulated in
may have such remedies against the party in
good faith is sufficient in absence of fraud
fault as are allowed the seller or the buyer, as
● Price fixed in a sale with right of
the case may be.
repurchase is not necessarily the true value
of the land sold, hence inadequacy of price
Certainty of Purchase Price is not sufficient to set aside a sale unless it
● This is an essential element of a binding is grossly inadequate or purely shocking to
agreement to sell a personal property the conscience
● Contract of sale cannot exist if price is not
certain General Rule and Exceptions
● GR: Gross inadequacy of price does not
Effect if no Specific Amount as Purchase Price affect a contract of sale
● GR: Purchase price must be specified in ● XPN:
the contract ○ If consent is vitiated (VIMFU),
● If not, it can be sufficient if: voidable
○ if it is determinable by making a ○ If parties intended a donation or
reference to another thing which is some act or contract
itself certain ○ If the price is so low as to be
■ ex. I sold my phone for the shocking to the conscience,” sale
same price my mother sold should be set aside
her phone last week.
○ if determination is entrusted to the Time to Determine Adequacy/Inadequacy of
judgment of a specified person/s Price
■ ex. If both parties ● the price obtaining at the time of the
designated a 3rd person as execution of the contract should be
an arbitrator to determine considered, not the price obtaining
the price of goods thereafter
purchased.
○ by reference to a certain fact/s such
as the one referred to in art. 1472

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Inadequacy of Price must be Proved ● lesion may be used as a standard in

● mere speculation is not allowed, determining gross inadequacy of price
inadequacy of price must be proven by
sufficient evidence Hard Bargain, Effect
● absent of any evidence of fair market value ● the fact that bargain is a hard one, couple
of land as of the time of its sale, can’t be with mere inadequacy of price when both
concluded that such price was inadequate parties are in position to form an
● mere inadequacy is not enough to rule out independent judgment concerning the
the transaction as one of sale, it must be transaction is not sufficient ground for the
grossly inadequate or shocking to the cancellation of contract
conscience
● Gross inadequacy of price does not affect a
Art. 1471. If the price is simulated, the sale is void,
contract of sale
but the act may be shown to have been in
reality a donation, or some other act or contract.
When price paid is much higher; Effect
● price paid is much higher than the
assessed value, price is not to be construed Simulated Price Effects
as inadequate as to shock the conscience
of the court
Absolute Relative
● the same also applies to such
considerations, like when there’s liberality takes place when the when the parties
or filial love (father sold his property to son) parties do not intend conceal their true
to be bound at all agreement
Gross Inadequacy of Price in Judicial Sale
● Gross inadequacy of price does not affect a Art. 1471 refers to an parties or any of them
contract of sale absolute simulated may establish proof
● Mere inadequacy of price will not cause price which is void; no that the act is a
the cancellation of sale effective sale donation or etc.
● XPN: price is so inadequate as to shock the
conscience of the court, judicial sale will be will be binding if not
set aside prejudicial to a 3rd
person, and must not
Rule when the Seller is Given the Right to be contrary to law,
Redeem morals, good customs,
● the sale isn’t necessarily affected if the public order or policy
price is low
● the lesser the price, the easier it is for the
owner to redeem property sold ● Art. 1471 has the same tenor as Art. 1353
which provides that
When Contract is really intended as a Donation
● Gross inadequacy of price will affect the Sale in Fraud of Creditors; Accion Pauliana
validity of the contract (sale), if the real ● executed with intention to prejudice the
contract is donation which is onerous rights of creditors
● However, the donee may explain that the ● To determine if contract is fraudulent,
inadequate price is supported by donor’s question whether the conveyance was a
liberality to maintain the validity of bona fide transaction or a trick and
donation contrivance to defeat creditors
● Accion Pauliana: rescissory action or
Lesion subsidiary remedy accorded (Art. 1383 CC)
● Art. 1381, contracts entered into by legal to the party suffering the damage, only if
representatives of incapacitated persons there are no other legal means to obtain
and absentees, where there is a lesion of reparation
more than ¼ of value of the thing — such
are rescissible unless approved by court

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SALES

Criminal Counterpart of Sale in Fraud or

Creditors Owner can fix his own price
● Culpable Insolvency punishable under Art. ● owner can set his own price, whether
314 RPC reasonable or unreasonable; it is up to the
buyer if he will accept or reject such
● owner can also impose such condition that
Art. 1472. The price of securities, grain, liquids,
is hard to fulfill
and other things shall also be considered
certain, when the price fixed is that which the
Observation
thing sold would have on a definite day, or in a
● Prohibition in Art. 1473 is should only apply
particular exchange or market, or when an
to the buyer, because a seller, who is also
amount is fixed above or below the price on
the owner, has the right to fix his own price
such day, or in such exchange or market,
○ buyer can accept or reject such
provided said amount be certain.

Art. 1474. Where the price cannot be

Price of Securities, Grains, Liquids, and Things
determined in accordance with the preceding
when Considered Certain
articles, or in any other manner, the contract is
● When the price fixed is that chich the
inefficacious. However, if the thing or any part
thing would have on a definite day or in a
thereof has been delivered to and appropriated
particular exchange/ market
by the buyer he must pay a reasonable price
● When an amount is fixed above or below
therefor. What is a reasonable price is a
the price of such day, or in such exchange/
question of fact dependent on the
market, provided the amount be certain
circumstances of each particular case.
Principle followed in the Ascertainment of Price
● follows the principle in Art. 1469 which When price could not be determined; Effect
considers a price as certain by making ● the contract is ineffective; certainty of price
reference to another thing having a is an essential requisite of contract of sale
fixed/certain value
When prices are mere estimates
● the transaction lacks the requisites
Art. 1473. The fixing of the price can never be left
essential for the perfection of contract
to the discretion of one of the contracting
parties. However, if the price fixed by one of the
Appropriation of the Thing Delivered in an
parties is accepted by the other, the sale is
Inefficacious Contract
perfected.
● In the event that sale is ineffective, but the
the delivery of the thing or part thereof has
General Rule been made to buyer who appropriated the
● price of the thing subject of sale can’t be same, he is required to pay a reasonable
fixed unilaterally by one of the parties price
● consent of the other party is necessary, ○ if there is appropriation of the
otherwise no meeting of the minds on the things and the thing is still intact,
price; sale is inefficacious he must return the thing in
● if the price was fixed by either seller or condition that he received it
buyer and the other agreed, the sale is (Principle of Quasi-Contract)
perfected if other requisites of the contract ● in the meantime, buyer is holding as
are present trustee for the seller-owner
● Art. 1473 complements Art. 1308 that
contract must bind both contracting Reasonable Price
parties; its validity or compliance can’t be ● Reasonableness of the price is a question
left to the will of one of them of fact
● however, fixing of the price may be left to ● determination is dependent upon the
the sound judgment of the specified circumstance of each case
person/s

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SALES

● Market Value is a good standard in ● Upon perfection, buyer can compel seller
determining the reasonable price to deliver thing
○ Market value is that reasonable ● seller acquires no real right over the thing
sum which a property would until there is delivery
command in a fair sale by a man ○ should the seller transfer the
willing but not obliged to sell to property in favor of 3rd person who
another who is willing but not is in good faith, that 3rd person may
obliged to buy acquire the property against first
● Offers to sell or buy are mot competent buyer
evidence of the fair market value of ● perfected contract of sale imposes
property reciprocal obligation
○ seller to transfer ownership and
deliver determinate thing
Art. 1475. The contract of sale is perfected at the
○ buyer to pay price in certain money
moment there is a meeting of minds upon the
or equivalent
thing which is the object of the contract and
upon the price.
Form of Contract Required in Sale
● Contracts shall be obligatory, in whatever
From that moment, the parties may reciprocally
form, provided all the essential requisites
demand performance, subject to the provisions
for their validity are present.
of the law governing the form of contracts
● However, if the law requires that a contract
be in some form in order that it may be
Requirements of Perfection of Sale valid or enforceable, that requirement is
● Sale is perfected when there is meeting of absolute and indispensable.
the mids upon
○ object of the contract Absence of Formal Deed of Sale; Effect
○ price ● does not render the agreement null and
● Delivery/payment is not essential for void, the provision of Article 1358 of the
perfection Civil Code on the necessity of a public
document is only for convenience
Consummated Sale
● after the delivery of the thing and payment Other Formalities
of the price ● Art. 1403 requires that the following
● ownership of thing is acquired by the contracts of sale must be in writing or
buyer from the owner, the moment of evidenced by writing, note or
delivery to him in any ways specified by memorandum, otherwise. they cannot be
law or upon agreement of the parties proved in court:
● Voluntary Offer to Sell is not deemed a ○ A contract or agreement for the
consummated sale sale of real property or or an
interest therein:
Failure to pay Purchase Price ○ Sale of personal property if the
● Failure to pay purchase price after the price is P500 or more
perfection of the contract doesn’t make
the sale void for lack of consideration Contract of Sale Subject to a Suspensive
● At most, it will result in default on the part Condition
of the buyer; seller may seek available ● the contract is not perfected until the
legal remedies fulfillment of the condition
○ demand specific performance or
○ rescission with damages Contract through Letter or Telegram
● perfected only when the offeror has
Effect of Perfection of the Sale Contract; When received or has knowledge of the
Real Right Acquired acceptance made by the offeree
● Seller is bound to deliver the thing sold ○ Even if the buyer has accepted. the
and the buyer is bound to pay the price seller may still withdraw if he does

13
SALES

not know yet of the buyer's ● perfected when the auctioneer announces
acceptance its perfection by the fall of the hammer or
○ If there was acceptance by the in any other customary manner
buyer made known to the seller, ○ doesn’t matter if another was
seller can’t withdraw anymore as allowed to match the bid of the
the contract is already perfected highest bidder

Manner of Payment of Price when sale is on Rights of Participants Before the fall of the
installment basis; Essential Hammer
● definite agreement on the manner of ● the bidder who made the winning bid may
payment of the price is an essential retract his bid
element in the formation of a binding and ○ withdrawal is allowed because
enforceable contract of sale before the bid has been accepted, it
is merely an offer to buy
● auctioneer may withdraw the goods from
Art. 1476. In the case of a sale by auction:
the sale
(1) Where goods are put up for sale by auction in
○ auctioneer cannot reject the
lots, each lot is the subject of a separate
winning bid if the auction has been
contract of sale.
announced to be without reserve,
which means there is no
(2) A sale by auction is perfected when the
reservation to withdraw the goods
auctioneer announces its perfection by the fall
from the sale
of the hammer, or in other customary manner.
Until such announcement is made, any bidder
May the Seller himself Bid?
may retract his bid; and the auctioneer may
● Yes, if the ff. conditions are present:
withdraw the goods from the sale unless the
○ Right to bid has been expressly
auction has been announced to be without
reserved unless prohibited by law
reserve.
or by stipulation
○ Notice is given that tah auction is
(3) A right to bid may be reserved expressly by
subject to a right of seller to bid or
or on behalf of the seller, unless otherwise
another to bid on behalf of seller
provided by law or by stipulation.
Effect of Absence of Notice
(4) Where notice has not been given that a sale
● the seller or the auctioneer may secretly
by auction is subject to a right to bid on behalf
employ "by-bidders” or "puffers” who will
of the seller, it shall not be lawful for the seller to
bid without being bound but whose bids
bid himself or to employ or induce any person
will have a tendency to induce or provoke
to bid at such sale on his behalf or for the
higher bid from interested buyers
auctioneer, to employ or induce any person to
○ misleading the latter because of
bid at such sale on behalf of the seller or
the inflated bid price
knowingly to take any bid from the seller or any
● If such happens, the buyer who has been
person employed by him. Any sale contravening
duped may treat the sale as fraudulent to
this rule may be treated as fraudulent by the
relieve himself from the bid
buyer.
○ the same applies (fraudulent sale0
even if the puffers were employed
Perfection of Sale by Auction by the auctioneer without the
● Sale by auction is generally exercised by knowledge and consent of the
the sheriff in case of judicial sales arising seller
from execution or foreclosure of ○ it is the secrecy of the puffing and
mortgages not the authorized bidding by the
○ Notaries public are also authorized seller which makes it fraudulent
to sell mortgaged properties ● owner has the right fix terms and
foreclosed extrajudicially (Art. 3135) conditions of the auction sale

14
SALES

“As is” in auction sale ○ Tradicion Symbolica - the delivery

● in public auctions of imported goods, this of certain symbols or things
refers to physical condition of the representing the thing being
merchandise for sale and not to the legal delivered such as keys or titles
situation which the merchandise has at ○ Tradicion Instrumental - the
the time of the sale delivery of instrument of
conveyance to the grantee by the
Disappearance of Property Purchased in Public grantor
Judicial Sale; Effect ○ Tradicion Longa Manu - the
● lf the property purchased in a judicial sale pointing of the thing (movable)
has or is brought out of the territorial within sight, by the grantor to the
jurisdiction of the Philippines, the grantee but which at the time of
purchase price should be returned the transaction, the thing could not
be placed yet in the hands of the
grantee, or on order be delivered to
Art. 1477. The ownership of the thing sold shall
his house or designated place
be transferred to the vendee upon the actual or
○ Tradicion Brevi Manu - the grantee’s
constructive delivery thereof.
continuation of his possession over
the thing delivered but now under
Time when Ownership is Transferred in Sale a title of ownership. Deliver and
● transferred to the vendee upon delivery redeliver is not necessary
not upon the perfection of the contract. ○ Tradicion Constitutum
○ Payment of purchase of price is not Possessorium - the owner’s
essential to the transfer of continuous possession of the
ownership, as long as the property property he had sold to another
sold had been delivered person, and his present possession
○ XPN: If parties stipulated that thereof is no longer that of an
ownership shall not pass until price owner but that of a lessee, pledgee
had been fully paid etc. (opposite of Tradicion Brevi
● Ownership by the seller of the thing sold at Manu)
the time of the perfection of the contract ○ Traclicion by Operation of Law -
of sale is not an essential element for its delivery of the things by operation
perfection ( of law
○ Quasi-Tradicion - delivery of
Vendor Need Not Possess Title To The Thing At incorporeal property like rights and
Perfection Of Contract credits done through the
● It is essential that the vendors be the ■ placing of titles of
owners of the property sold otherwise they ownership in the hands of
cannot dispose that which does not the grantee or
belong to them representative or
○ vendor need not possess title to the ■ by allowing the grantee to
thing sold at the perfection of the make use of the rights wit
contract; only at the time of delivery the consent of the grantor

Kinds of Delivery Transfer of Possession does not necessarily

● Actual or Real Delivery - when the thing is mean Transfer of Ownership
placed in control and possession of the ● In contract to sell, even if the supposed
vendee buyer took possession of the property and
● Constructive or Legal Delivery - when leased it, there is no transfer of ownership
delivery is effected not by actually
transferring the possession of the thing to
Art. 1478. The parties may stipulate that
the vendee but by legal formalities.
ownership in the thing shall not pass to the
Classifications:
purchaser until he has fully paid the price.

15
SALES

is separate and distinct from a contract of

Stipulation on Transfer of Ownership; Pactum sale
Reservatii in Domini
● GR: delivery of a thing transfers ownership Option Contract
to the buyer ● privilege existing in one person, for which
● XPN: If parties stipulate that ownership he had paid a consideration which gives
shall not pass until full payment of the him the right to buy
purchase price; this is known as Pactum ● The contract of option is a separate and
Reservatii in Domini distinct contract from the contract where
● when there’s stipulation like this, it is not the parties may enter into upon the
referred to as contract to sell and not consummation of the option
contract of sale ● An option is a contract by which the owner
of the property agrees with another person
that he shall have the right to buy his
Art. 1479. A promise to buy and sell a
property at a fixed price within a certain
determinate thing for a price certain is
time
reciprocally demandable.
● Option to buy is not a contract of purchase
An accepted unilateral promise to buy or to sell
or sale
a determinate thing for a price certain is
● An option is not of itself a purchase, but
binding upon the promisor if the promise is
merely secures the privilege to buy. Until
supported by a consideration distinct from the
acceptance, it is not properly speaking, a
price.
contract, and does not vest transfer or
agree to transfer any title to or any interest
Coverage of Article or right in the subject matter
● First paragraph refers to a bilateral ● It must be noted that the option even if
reciprocal contract there being a promise accepted, can still be withdrawn, if not
to buy on the part of the buyer, and a supported by a consideration
promise to sell on the part of the seller ● Without any consideration (option money),
○ object is a determinate thing and there will arise no option contract because
the price is certain; no need for a contract cannot exist without any
consideration for this bilateral consideration.
promise to buy and sell ● Consideration for the option to repurchase
● Second paragraph refers to an accepted is different from consideration for the
unilateral promise of the contract of repurchase
○ Buyer to buy a determinate
property for a price certain; or Test to Determine whether a Contract is a
○ Seller to sell a determinate property Contract of Sale or an Option
for a price certain ● The test is whether or not the agreement
● The buyer may noy be compelled to buy could be specifically enforced
because he has the right, freedom or
option to buy or not Effect of Breach of Promise to Buy and Sell
● on the part of the seller, he is allowed to ● the injured party can only seek damages
withdraw from the promise he had ● obligations in this contract is an obligation
accepted to do; indemnity for damages
○ XPN: when the promise to buy is
supported by a consideration Acceptance of an Offer
{option money), distinct and ● It must be unqualified and absolute in
separate from the purchase price. order to be binding
● The reason why the seller cannot withdraw ● The acceptance must be absolute and
within the period agreed upon for the must not qualify the terms of the offer; it
exercise of the option to buy is because the must be plain, unequivocal, unconditional
accepted promise has become a binding and without variance of any sort from the
contract called contract of option— which proposal.

16
SALES

● Absent proof of the concurrence of all the

essential elements of a contract of sale, the
giving of earnest money can’t establish the
existence of a perfected contract of sale
● holder of the oplion, after accepting the
promise and before he exercises his option
is not bound to buy

Policitacion, Concept
● a unilateral promise to buy or sell which is
not accepted by the other party It
produces no legal effect.

Contract of First Refusal

● a contractual grant, not of the sale or a
property, but of the first priority to buy the
property in the event the owner sells the
same
● lessor has the legal duty to the lessee not
to sell the leased property to anyone at any
price until after the lessor has made an
offer to lessee and the lessee fails to accept
it
● formal offer to redeem must be
accompanied by a valid tender of the
redemption price and the filling of judicial
action, plus the consignation of the
redemption

17