SALES 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. Characteristics of the Contracts of Sale 1. Consensual perfected by mere consent
Buenaventura vs CA A contract of Sale is not real, but a consensual contract. As a consensual contract, a contract of sale becomes binding and valid contract upon the meeting of the minds of the parties as to price. If there is a meeting of the minds of the parties as the price, the contract of sale is valid, despite the manner of payment or even the breach of that manner of payment. If the real price is not stated in the contract, the contract should be reformed. If there is no meeting of the minds of the parties as to price, because the price stipulated in the contract is simulated, then the contract is void.

6. Nominate the Code refers to it by a special designation, that is, the contract of sale. Requisites of Contract of Sale (ELEMENTS) (a) Essential elements without which there can be no valid sale:
1. CONSENT or MEETING OF THE MINDS consent to transfer ownership in exchange for the price. 2. DETERMINATE SUBJECT MATTER generally, there is no sale of generic things; 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 the consideration

(b) Natural Elements those which are inherent in the contract, and which in the absence of any contrary provision, are deemed to exists in the contract
1. Warranty against eviction 2. Warranty against hidden defects

2. Bilateral reciprocal both parties are bound by obligations dependent upon each other 3. Onerous to acquire the rights, valuable consideration must be given 4. Commutative as a rule, because the values exchanged are almost equivalent to each other [by way of exception, some
contracts of sale are aleatory, what one receives may in time be grater or smaller than what he has given] Gaite vs Fonacier A contract of sale is normally commutative and onerous; not does each one of the parties assume a correlative obligation (the seller to deliver and transfer the ownership of the thing sold and the buyer to pay the price), but each party participates performance by the other is doubt whether it is subject to a suspensive condition or a suspensive period, the scales favor of the greatest reciprocity of interests, since sale is essentially onerous. That greater reciprocity obtains if the buyers obligation is deemed to be actually existing, with only its maturity or demandability suspended.

(c) Accidental elements may be present or absent in the stipulation, such as the place or time of payment, or the presence of conditions Kinds of Sale (a) As to the nature of the subject matter: 1. Sale of real property 2. Sale of personal property (b) As to the value of exchanged: 1. Commutative Sale 2. Aleatory Sale the thing

5. Principal the contract of validly exists, there is no necessity for it to depend upon the existence of another valid contract.

(c) As to whether the object is tangible or intangible 1. Sale of property (tangible or

corporeal)

2. Sale of a right (assignment of a

right or a credit, or some other intangibles such as a copyright, a trademark, or goodwill)

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

If the object is tangible, it is called chose in possession; if the object is intangible, as the case of a right, it is chose is action

Contract of Sale vs Contract to Sell Of Sale To Sell

1. Title passes to the buyer upon delivery 1. Ownership shall not pass until the full payment of the purchase price 2. Full payment is a positive suspensive condition, the failure of which is not a breach, casual or serious, of the contract but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. [where the seller promises to execute a deed of absolute sale upon full payment of the purchase price CONTRACT TO SELL] 3. Title remains in the vendor if the vendee does not comply with the condition precedent of making payment at time specified in the contract.

(d) As to the validity or defect of the transaction: 1. Valid sale 2. Rescissible sale 3. Voidable sale 4. Unenforceable sale 5. Void sale (e) As to the legality of the object: 1. Sale of a licit object 2. Sale of an illicit object (f) as to the presence or absence of conditions: 1. absolute sale [no condition] 2. conditional sale [ex; pacto de
retro a right to repurchase or redeem; when there is a suspensive condition]

2. Non-payment is a negative resolutory condition REMEDY: Art 1191 (either rescission with damages or specific performance with damages)

3. Vendor has lost and cannot recover ownership of the thing sold and delivered, actually or constructively unless it is Rescinded

(g) as to whether wholesale or retail 1. wholesale, if to be resold for a

profit the goods being unaltered when resold, the quantity being large. 2. Retail

Conditional Contract of Sale vs Contract to Sell Conditional Contract Contract to Sell of Sale
1. The seller may likewise reserve title to the property subject of the sale until the fulfillment of the suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of contingent event which may or may not occur. If the suspensive condition is not fulfilled the perfection of the contract of sale is completely abated. However if the suspensive condition is fulfilled, the contract is perfected. 2. Upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. If there had been previous delivery of the subject property, the title is automatically transferred to the buyer. Subsequent buyer cannot defeat the first buyers title even the former took in possession of the property first 1. Upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.

(h) As to the proximate inducement for the sale: 1. Sale by description 2. Sale by sample 3. Sale by description and sample
(art 1481)

(i) As to when the price is tendered: 1. Cash sale 2. Sale on the installment plan

2. There being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as full payment of the purchase price, cannot be deemed a buyer in bad faith.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Coronel vs CA In a conditional contract of sale, when the condition happened, its effects retroacted to the date of the constitution of the obligation. The sale is deemed to have been absolute on the date the contract was entered into. Seller cannot claim that even if the condition happened, there was still need for him to make good on his promise to transfer ownership because the contract was one of sale and not to sell. The difference between a contract to sell and contract of sale is that in the former ownership is expressly reserved by the seller until the happening of the condition upon which, he must make good on his promise to go on with the sale. In a contract of sale, upon the happening of the condition, the sale becomes absolute and the seller can be compelled to execute the relevant documents. In this case, the seller has no more title to sell the thing to another buyer. In fact, if there has been previously delivery ownership is deemed automatically vested in the buyer.

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. Requisites concerning object
1. Thingsaside from being (a) determinate [Art 1458, 1460], the law requires that the subject matter be (b) licit or lawful, subject to the following articles:
Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. Art. 1348. Impossible things or services cannot be the object of contracts. Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

2. Rights All rights are not intransimissible or personal may also be the subject of sale ex, usufruct, right of conventional redemption, credit

Kinds of Illicit Things

(a) Illicit per se (of its nature) ex. Decayed food unfit for consumption (b) Illicit per accidens ex. Lottery tickets (art 195 RPC), sale of land to an alien (Constitution) [there is a law which makes the object illicit]

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Frenzel vs Carito
A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all. The petitioner, being a party to an illegal contract, cannot come into a court of law and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in a contract or transaction which involves his own moral turpitude may not maintain an action for his losses. To him who moves in deliberation and premeditation, the law is unyielding. The law will not aid either party to an illegal contract or agreement; it leaves the parties where it finds them. Under Article 1412 of the New Civil Code, the petitioner cannot have the subject properties deeded to him or allow him to recover the money he had spent for the purchase thereof. Equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly. Where the wrong of one party equals that of the other, the defendant is in the stronger position ... it signifies that in such a situation, neither a court of equity nor a court of law will administer a remedy. The rule is expressed in the maxims: EX DOLO MALO NON ORITUR ACTIO and IN PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS.

same terms within the period contemplated can the owner validly offer to sell the property to a third person, again under the same terms as offered to the grantee.
Equitorial Realty Development Inc vs Mayfair Inc It was a Right of first refusal. An option clause or an option contract to be valid needs a determined or certain price. An accepted unilateral promise which specifies the thing to be sold and the price to be paid when coupled with a valuable consideration distinct and separate from the price is what may properly be termed as a perfected contract of option. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. A separate consideration is not needed in a right of first refusal. In this case, the right of first refusal is an integral part of the lease contractthe consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfairs consent to the lease and to pay the price agreed upon, is consideration of the lessors promise that it will give Mayfair the right to match the offered price and to buy the property at that price, in case it desires to sell the same.

Right to Transfer ownership

1. Seller must be owner or authorized by owner of thing sold. it is essential in order for a sale to be valid that the vendor must be able to transfer ownership or atleast be authorized to do so. This rule is accord with the principle that one can not transmit or dispose of that which he does not have - NEMO DAT QUOD NON-HABET. [ex sale of paraphernal (separate) property of the deceased wife by the husband who was neither an owner nor administrator of the property at the time of sale is void ab initio] 2. Right must exists at time of delivery it is not required that the vendor must have the right to transfer ownership of the property sold at the time of the perfection of the contract. 3. Where property sold in violation of right of first refusal of another person Rescissible. A right of first refusal is neither amorphous nor merely preparatory and can be executed according to its terms. In contracts of sale, the basis of the right of first refusal must be the current offer of the seller to sell or the offer to purchase of the prospective buyer. Only after the grantee fails to exercise his right under the

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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. Meaning of Determinate
-The object of the sale must be determinate, that is specific, but it is not essential really that 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.
Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. YU TEK & CO. V GONZALES Facts: A) Gonzales obliged himself, via a contract, to sell 600 piculs of 1st and 2nd class sugar to Yu Tek. Gonzales received payment, in the amount of P3T. Gonzales did not fulfill his obligation to deliver sugar. Yu Tek then sues. Gonzales claims force majeure, since he was not able to produce any sugar at this plantation. Issue: W/N Gonzales is liable on his obligation. Held: Gonzales is liable. No specific lot of sugar segregated or designated to make subject matter specific, therefore generic. There was no stipulation that the sugar was to be obtained exclusively from the crop. Since it was generic, there is no risk of it being lost. Contract was NOT A PERFECTED SALE, but a PROMISE TO SELL. A contract of sale is not perfected until the parties have agreed upon the price and the thing sold. A contract whereby a party obligates himself to sell for a price certain specified quantity of sugar of a given quality, without designating any particular lot of sugar, is not perfected until the quantity agreed upon has been selected and is capable of being physically designated and distinguished from all other sugar. NATIONAL GRAINS AUTHORITY VS. IAC Facts: National Grains Authority (later National Food Authority) is a government agency which buys palay grains from qualified farmer. Leon Soriano offered to sell palay grains to the agency. After undergoing the regular application process, he was given a quota

(maximum) of 2,640 cavans of palay. On August 23 and 24, 1979, Soriano delivered 630 cavans which were not bagged, classified and weighed. When Soriano demanded payment for the delivered palay, he was informed by the Provincial Manager William Cabal that his payment was held in abeyance because there was an investigation concerning him because of allegations that he is not a bona fide farmer and gets the palay from another person. Soriano filed case for specific performance. RTC favored him and was affirmed by the IAC. Hence, this petition with National Grains Authority arguing that there was no sale but only an offer by Soriano because it was not accepted by the agency as evidenced of not rebagging, classifying and weighing it. Issue: W/N there was a sale? Held: Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay therefore a price certain in money or its equivalent. A contract, on the other hand, is a meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The essential requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established (Art. 1318, Civil Code of the Philippines. In the case at bar, Soriano initially offered to sell palay grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of thecontract, provided it is possible to determine the same, without the need of a new contract between the parties." Inthis case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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.
Even a future thins not existing at the time the contract is entered into may be the object of sale provided it has potential or possible existence, that is, it is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller, and the title will vest in the buyer the moment the thing comes into existence.

Emptio Rei Sperati

Sale of a thing not yet in existence subject of the condition that the thing will exist and one failure of the condition, the contract becomes ineffective and hence, the buyer has no obligation to pay the price. The future thing is certain as to itself but uncertain as to its quantity and quality.

Held: The document in question expresses a valid contract of sale as it has the essential elements of a contract of sale as defined under Article 1458 of the New Civil Code. Article1458 provides that by the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent, and that a contract of sale maybe absolute or conditional. The subject matter of the contract of sale are the fruits of the coconut trees on the land during the years from 15 September 1968 up to 1 January1976, which subject matter is a determinate thing. Things having potential existence may be the object of the contract of sale Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. A man may sell property of which he is potentially and not actually possessed.

Emptio Spei
The sale of the hope itself that the thing will come into existence, where it is agreed that the buyer will pay the price even if the thing does not eventually exist. It is not certain that the thing itself will exist, much less its quantity and quality. Pichel vs Alonzo
On August 14, 1968, plaintiff and his wife sold to defendant Luis Pichel all the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment plaintiff refused to allow the defendant to make any harvest. In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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.
Paragraph 1 of Art 1462 does not apply if the goods are to be manufactured especially for the buyer and not readily saleable to others in the manufacturers regular course of business. It contemplates a contract of sale of specific goods where one of the contracting parties binds himself to transfer the ownership of and deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. The said article requires that there be delivery of goods, actual or constructive, to be applicable. Example of contingency: I can sell you now a specific car which my father promised to give me, would I pass the bar next year.

Art. 1463. The sole owner of a thing may sell an undivided interest therein.
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be alloted to him in the division upon the termination of the coownership.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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. Sale of an Undivided share of a specific mass
1. Effect of sale- the owner of a mass of goods may sell only his undivided share thereof, provided the mass is specific or capable of being determinate. a. By such sale, the buyer becomes a coowner with the seller of the whole mass in the proportion in which the definite share brought bears to the mass. b. It must follow that the aliquot share of each owner can be determined only by the measurement of the entire mass. If later on it be discovered that the mass of fungible goods contains less than what was sold, the buyer becomes the owner. c. The whole mass and furthermore, the seller shall supply whatever is lacking from goods of the same kind and quality subject to any stipulation to the contrary. 2. Risk of loss if the buyer becomes a co-owner, with the seller, or other owners of the remainder of the mass, it follows that the whole mass is at risk of all the parties interested in it, in proportion to their various holdings. 3. Subject matter Incorporeal right 4. Article 1464 applicable to non-fungible although Art 1464 speaks of fungible goods, it may also apply to goods not strictly fungible in nature.

Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale.
Resolutory condition- an uncertain event upon the happening of which the obligation subject to it is extinguished
Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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.
In constructing the words used in the contract, it must be construed in its obligatory form, unless other technical terms are used.

Sale vs Agency to sell Sale

1. The buyer receives the goods as owner

to pay the alleged overpayments in the sum of $1335.52 plus legal interest. Even if it was one of purchase and sale, Puyat is guilty of fraud in concealing the true price Issue: W/N the contract between the parties was one of purchase and sale and not one of agency Held: Yes, it is one of purchase and sale because: o The contract is the law between the parties. Arco has accepted the price for the equipment. o The 10% commission that Puyat was to receive does not necessarily make the petitioner an agent as this provision is only an additional price which the respondent bound itself to pay. o Puyat could not be an agent of Arco because it is known that Puyat is the agent of Starr Piano in the Philippines. KER & CO V LINGAD FACTS: Petitioner Ker would have us revers a decision of the CTA, holding it liable as a commercial broker uhder sec 194(t) of the NIRC. It was shown that pettioner was assessed by then Commissioner of Internal Revenue tax as the commercial broker's percentage tax, surhcarge and compromise penalty. There was request on the part of petitioner for the cancellation of such assessment, which request was tunred down. Such liability arose from a contract of petitioner with the United States Rubber Intl. US Rubber shall from time to time consign to the petitioner products under the terms of this agreement in suh quantities as in the judgement of US Rubber. All goods on consignment shall remain the property of US Rubber utntil sold Ker. In the contract it was stipulated that the agreement does not constitute Ker the agent or legal representative of US Rubber for any purpose whatsoever. ISSUE: Whether the relatioship thus created is one of vendor and vendee or of broker and principal... HELD: Though there was a denial in the agreement that the petitioner is in no way an agent nor legal representative of US Rubber, the SC holds that the relationship is one of agency. That the petititoner is by contractual stipulation an agent of US Rubber is borne out by the facts that petititoner can dispose of the products of US Rubber only to certain persons or entities and within stipulated limits, unless excepted by the contract or by US Rubber and that upon termination of the Agreement, all the goods held on consignment shall be held by petititoner for the account of the rubber company. If the transfer of title puts the transferee in the altitude or position of an owner and makes him liable to the trnasferor as a debtor for the agreed price, and not merely as an agent who must account for the prodeeds of the 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.

Agency To Sell

1. The agent receives the goods of the principal who retains his ownership over them and has the right to fix the price and the terms of the sale and receive the proceeds less the agents commission upon the sales made. 2. The agent has simply to account for the proceeds of the sale he may make on the principals behalf 3. in an agency to sell, the agent can return the object in case he is unable to sell the same to a third person 4. the agent makes no warranty for which he assumes personal liability as long as he acts within his authority and in the name of the seller 5. the agent dealing with the thing received, must act and is bound according to the instructions of his principal.

2. Buyer has to pay the price

3. The buyer as a general rule, cannot return the object sold

4. The seller warrants the thing sold

5. The buyer can deal with the thing sold as he pleases being the owner

10 PUYAT V ARCO AMUSEMENT Facts: Teatro Arco was engaged in the business of operating cinematographs. It later changed its name to Arco Amusement Co. Puyat is the exclusive agents in the Philippines for the Starr Piano Co. of Richmond, Indiana, USA. Arco wanted to equip its cinematograph with sound reproducing devices, so it approached Puyat. They agreed that Arco will pay Puyat the amount of the equipment, plus 10% commission and all other expenses. The price was $1700 and this was duly paid by Arco plus the commission. Later on another sale was made between the two for another set of equipment for the price of $1600. 3 years later, in connection with a civil case that the Puyats were facing, Arco learned that the equipment they purchased from Puyat were overpriced. They sought for reimbursement but failed, and so the case of Arco vs. Puyat TC: contract between Arco and Puyat was one of outright purchase and sale. Appelate Court: the relation between them was that of agent and principal, Puyat was sentenced

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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. Sale Distinguished from Contract for a piece of work
Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. Art. 1717. If the contractor bound himself to furnish the material, he shall suffer the loss if the work should be destroyed before its delivery, save when there has been delay in receiving it. Art. 1718. The contractor who has undertaken to put only his work or skill, cannot claim any compensation if the work should be destroyed before its delivery, unless there has been delay in receiving it, or if the destruction was caused by the poor quality of the material, provided this fact was communicated in due time to the owner. If the material is lost through a fortuitous event, the contract is extinguished.
CELESTINO CO. & CO. VS. COLLECTOR OF INTERNAL REVENUE Facts From 1946 to 1951 Celestino Co. (Oriential Sash Factory) paid 7% tax on gross receipts of its sash, door and window factory in accordance with the sec. 186 of the National Revenue Code imposing taxes on sales of manufactured articles. In 1952, it began to claim liability only to the contractors 3% tax under section 191. To support its contention, it presented duplicate copies of letters sketches of doors and windows and price quotations supposedly sent by the manager of the factory to customers who allegedly made special orders. Celestino & Co. habitually makes sash, windows and doors as it has represented in its stationery and advertisements to the public. It also manufactures its products on a made to order basis. The Court of Tax Appeals held that Celestino & Co. is a manufacturer, as such art. 186 should be applies Celestino & Co. invokes Art. 1467 of NCC: in filling orders for windows and doors according to specifications, it did

not sell but merely contracted for particular pieces of work Issue w/n Celestino & Co. is a contractor (sells it services) or a manufacturer (sells its products) Ruling Celestino & Co. does nothing more than sell the goods that it mass produces or habitually makes. It is not true that Celestino & Co. serves special customers only or confines its services to them alone. It did not merely sell its services but also the materials ordinarily manufactured by it. A factory which habitually makes sash, windows and doors and sells the goods to the public is a manufacturer. The fact that the windows and doors are made by it only when customers place their orders and according to such form or combination as suit to the fancy of the purchasers does not alther the nature of the establishment. The orders by the customers were not shown to be special that would require extraordinary service from Celestino & Co. They were merely orders for work done in the ordinary course of the manufacturers business. It then cannot be said that Celestino & Co. contracts for a piece of work. CIR VS. ENGINEERING EQUIPMENT AND SUPPLY COMPANY Facts: Engineering Equipment and Supply Company (Engineering) is engaged in the design and installation of central type air conditioning systems. - On the complaint of a Juan de la Cruz, CIR investigated Engineering for tax evasion. - Engineering is assessed Php 740,587 as deficiency tax liabilities. They appealed to the Court of Tax Appeals. - CTA ruled that Engineering is exempt from deficiency manufacturers sales tax because they are contractors. They were assessed with Php 174,141 as compensating tax and 25% surcharge. - Both Engineering and CIR appealed to the SC. Issue: - W/n Engineering is a contractor and thus, exempt from paying the deficiency manufacturers sales tax. Held: - Engineering is a contractor. The company did not manufacture air conditioning units; instead, they imported them and used them in the systems they were installing. The supply of air conditioning units to the companys various customers was specially made for each customer and installed in his building upon his special order. Without the contract with a particular customer, Engineering wont be delivering air conditioning units. This is in accord with the test for a contract for a piece of work, which asks whether the thing transferred (in this case, aircons) is one not in existence and which never would have existed but for the order of the party desiring to acquire it. Engineering is a contractor since it renders service representing the will of his employer only as to the result of his work and not as to the means by which it is accomplished. - Being a contractor, Engineering is only subject to the contractors tax and not to the advance sales tax. They should only be taxed for the use of imported goods and not the importation of goods because it has been proven that the air conditioning units were used for its construction business and were never resold.

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Law on Sales

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.
Art. 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. (1538a)

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. Price is certain if:

To determine whether it is a sale or barter: (a) manifest intention of the parties

Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

(b) if intention cannot be ascertained, last sentence of article applies. Thing vs money > = barter < = sale

Sales Distinguished payment

from

dation

in

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

(1) In sale, there is no pre-existing credit, while in dation in payment, there is; (2) In sale, pbligations are created, while in dation in payment obligations are extinguished; (3) in Sale, the cause is the price paid, from the viewpoint of the seller, or the thing sold, from the viewpoint of the buyer, while in dation in payment, the extinguishment of the debt, from the viewpoint of the debtor, or the object acquired in lieu of the credit, from the viewpoint of the creditor, (4) in Sale, there is more freedom in fixing the price than in dation in payment, and (5) in sale, the buyer has still to pay the price, while in dation in payment, the payment is received by the debtor before the contract is perfected.

(1) the parties have fixed or agreed upon a definite amount; or (2) it be certain with reference to another thing certain [Art 1472] (3) the determination of the price is left to the judgment of a specified person or persons and even before such determination
It is binding upon the parties of the contract, howver, exceptions are: (a) 3rd person acts in bad faith or by mistake (b) 3rd person disregards specific instructions or the procedure marked out by the parties or the data given him

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Law on Sales

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. Effect of gross inadequacy of price in voluntary sales
General rule mere inadequacy of the price or alleged hardness of the bargain generally does not affect its validity Exception (a) there is defect in the consent
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.

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.
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

The contract may be annulled not because of the inadequacy of price but because consent is vitiated (b) Price is so low as to be shocking to conscience

If the price is simulated as when the vendor really intended to transfer the thing gratuitously, then the sale is void but the contract shall be valid as a donation.

Effect of gross inadequacy of price in involuntary sales

General rule a judicial or execution sale is one made by a court with respect to the property of a debtor for the satisfaction of his indebtedness. Does not invalidate contract Except: shocking to conscience and seller has given right to repurchase

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Law on Sales

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.
The above provision follows the principle in Article 1469 that a price is considered certain if it could be determined with reference to another thing certain. This article is especially applicable to fungible things like securities, grain, liquids, etc. the price of which are subject to fluctuations of the market.

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. Effect of failure to determine price
1. Where contract executory if the price cannot be determined in accordance with Articles 1469 and 1472, or in any other manner, and the bargain is till executory, the contract is without effect. Price certain is an essential element of the contract of sale [1458]. Consequently, there is no obligation on the part of the vendor to deliver the thing and on the part of the vendee to pay. 2. Where delivery has been made if the thing or any part thereof has already been delivered and appropriated by the buyer, the latter must pay a reasonable price thereof. This obligation of the buyer is sometimes contractual (if the agreement omits any reference to price), and sometimes, quasi-contractual (solution indebiti)
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

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. REASON:
The determination of the price cannot be left to the discretion of one of the contracting parties; otherwise it cannot be said that the other consented to a price he did not and could not previously know
Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

To be just, the price must be determined impartially by both parties or left to the judgment of a specified person or persons (1458, 1469) However, if the other party accepted the price fixed by the other, the contract is deemed perfected.(1475)

Ex. If a buyer orders a cavan of rice from a srore, nothing being said as to the price, the parties intend and understand that a reasonable price shall be paid. The obligation here is contractual. The law merely enforces the intention of the parties. Article 1474 applies only where the means contemplated by the parties for fixing the price have, for any reason, proved ineffectual. In this case, the obligation of the buyer to pay reasonable price is an obligation imposed by law as distinguished from a contractual obligation. It is based on the fundamental principle that no one should enrich himself at the expense of another. In case, however, the parties do not intend to be bound until after the price is settled, the buyer must return any goods already received or if unable to do so, must pay their reasonable value at the time of delivery, and the

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Law on Sales

seller must return any portion of the amount received.

Concept of reasonable price

The reasonable price or value goods is generally the market price at the time and lace fixed by the contract or by law for the delivery of the goods.

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. Perfection of Contract of Sale
GENERAL RULE: contracts are perfected by mere consent
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.

Determination of fair market value

Offers to sell are not competent evidence of the fair market value of a property, because they are no better than offers to buy, which have been held to be inadmissible as proof of said values. Market value reasonable sum which property would bring on a fair sale by a man willing but not obliged to sell to a man willing but not oblige to buy.

1. Conduct of the parties appropriate conduct by the parties may be sufficient to establish an agreement. There is no perfected sale where it is conditional and the condition is not fulfilled. 2. Transfer of ownership the ownership is not transferred until the delivery of the thing [1496]. However, the parties may stipulate that ownership in the thing not pass to the purchaser until full payment [1478] 3. Form of Contract Art 1483 st General Rule : 1 sentence of Art 1356
Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.

EXCEPTION: Statute of frauds

Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

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Law on Sales

Art. 1358. The following must appear in a public document: (1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; (4) The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405. Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract.

Campillo vs PNB A sale of real estate, whether made as a result of a private transaction or of a foreclosure or execution sale, becomes legally effective against third persons only from the date of its registration

4. Consent Reluctantly Given

Acasio vs Corp. de los PP Dominicos de Filipinas There must, them, be a distinction to be made between a case where a person gives his consent reluctantlyand even against his good sense and judgment, and where he, in reality, gives no consent at all, as where he executes a contract or performs an act against his will under a pressure which he cannot resist. It is clear that one acts as voluntarily and independently in the eye of the law when he acts reluctantly and with hesitation as when he acts spontaneously and joyously. Legally speaking he acts as voluntarily and freely when he acts wholly against his better sense and judgment as when he acts in conformity with them. Between the two acts there is no difference in law.

5. Notarized deed of sale states receipt of price To overcome a public document solemnly executed before a notary public, the evidence to the contrary must be clear, strong, and convincing. Parol evidence will not suffice to negate clear and positive recitals of a public document not otherwise tainted with fraud or falsification. 6. Non-fulfillment by one party of his obligation In case one of the contracting parties should not comply with what is incumbent upon him, the injured party may demand specific performance with damages or rescission with damages

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Law on Sales

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.

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.
GENERAL RULE: The delivery of the thing sold is essential in a contract of sale. Without it, the purchaser may not enjoy the thing sold to him. [1164,1496-1497]
Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.

EXCEPTION: 1478, stipulation by the parties Conditional contract of sale - Non-payment of the price, after the thing has been delivered, prevents the transfer of ownership only if such is the stipulation of the parties [pactum reservati dominii or contractual reservation of title} Contract to Sell payment is a positive suspensive condition, failure of which is not a breach, casual or serious, but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. Contract of Insurance a perfect contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

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.
Accepted unilateral promise to sell Only one of the parties makes the promise , wherein the promissor (seller) promised to sell a determinate thing. Acceptance of the promisee (buyer) is binding only when such promise is supported by a consideration distinct and separate from the price of the determinate thing offered to sell One of the parties, promised to buy a determinate thing. Effect It is binding to the promissory on only if the promise is supported by a consideration distinct from the price. If there is no consideration, acceptance of the promise may be withdrawn at any time. (1324)

Carceller vs CA
Option: a preparatory contract in w/c one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. - It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract w/ the one to whom the option was granted, if the latter should decide to use the option. - It is a separate agreement distinct from the contract w/c the parties may enter into upon the consummation of the option

Consideration in an option contract may be anything of value unlike in sale where it must be the price certain in money or its equivalent Sanchez vs Rigos
if an option is given without a consideration, it is a mere offer of a contract of sale which is not binding until accepted. if however, acceptance is made before a withdrawal, it constitutes a binding contract of sale even though the option was not supported by a sufficient consideration. the concurrence of the offer and the acceptance generates a contract os sale Provision of the same law must be reconciles. Article 1324 - general principles on contract - is modified by Article 1479 - on sales - which makes the latter the exception to the former. according to statutory construction, exceptions are not favored unless the intention to the contrary is clear.

Accepted unilateral promise to buy

Bilateral promise to buy and sell

One party accepts the others promise to buy and the latter, the formers promise to sell a determinate thing for a price certain. Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

Such promise, when accepted is binding only if the buyer gives a consideration distinct from the price of the determinate thing. If there is none, acceptance by the seller may be withdrawn at any time (1324) Perfected contract of sale since it is reciprocally demandable

Option privilege existing in one person for which he has paid a consideration which gives him right to buy/sell a determinate thing, if he chooses, at any time within the agreed period at a fixed price, or in compliance with certain terms and conditions.

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Law on Sales

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. Risk of loss or deterioration
Four rules may be given regarding risk of loss: (1) If the thing is lost before perfection, the seller and not the one who intends to purchase it bears the loss in accordance with the principle that the thing perishes with the owner (res perit domino) (2) If the thing is lost at the time of perfection, the contract is void or inexistent [1409(3)]. The contract is ineffective [1493]
Art. 1409. The following contracts are inexistent and void from the beginning: (3) Those whose cause or object did not exist at the time of the transaction;

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.
Sale by description- occurs where a seller sells things as being of a particular kind, the buyer not knowing whether the sellers representations are true or false, but relying on them as true; or as otherwise stated, where the purchaser has not seen the article sold and relies on the description given him by the vendor, or has seen the goods but the want of identity is not apparent on inspection. [if the bulk of the goods delivered do
not correspond with the description, the contract may be rescinded] Sale by sample the parties contracted solely with reference to the sample, with the understanding that the bulk was like it. But a mere exhibition of a sample by the seller in the absence of any showing that it was an inducement of the sale or formed the sole basis thereof, does not amount to a sale by sample as where the quality of the articles to be furnished is expressly described in the contract without reference to the sample in some particular manner. - a species of sale by description. The sample is employed instead of words to communicate to the buyer the characteristics of the goods being sold. It is itself a tacit assertion of the qualities of the bulk it represents. Sale by description and sample when a sale is made both by sample and by description, the goods must satisfy all the warranties appropriate to either kind of sale, and it is not sufficient that the bulk of the goods correspond with the sample if they do not also correspond with the description, and vise versa.

(3) If the thing is lost after perfection but before its delivery, even before the ownership is transferred to the buyer, the risk of loss is shifted to the buyer as an exception to the rule of res perit domino [applies to non-fungible things sold
independently and for a single price or for a price fixed without consideration of their weight, number, measure]

(4) If the thing is lost after delivery, the buyer bears the risk of loss following the general rule of res perit domino.

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Law on Sales

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. Earnest money something of value given by the buyer to the seller to show that the buyer is really in earnest, and to bind the bargain. -partial payment of the purchase price and is considered as proof of perfection of the contract. Since earnest money constitutes an advance payment, it must be deducted from the total price.
1. 2. Earnest Money Part of purchase price Given only where there is already a sale When earnest money is given, the buyer is bound to pay the balance 1. Option Money money given as distinct consideration for an option contract applies to a sale not yet perfected the would-be buyer who gives option money is not required to buy

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.
General rule: a contract may be entered into in any form provided all the essential requisites for its validity are present [1356] Exception: Statute of Frauds Sale of personal property at a price not less than P500.00 Sale of real property or an interest therein regardless of the price involved; and Sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the price involved. Purpose of Statute of Frauds: to give notice to third persons and to protect the buyer against claims of third persons arising from subsequent alienations by the vendor, it is certainly not necessary to give efficacy to the deed of sale, as between the parties to the contract. -to prevent fraud and perjury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced in writing. Statute of Frauds refers to specific kinds of transactions and cannot apply to any other transaction that is not enumerated therein. It is Applicable only to executory contracts. Making a public document for the transaction, furnishes reliable evidence of the intention of the parties or the existence of the contract. The application of the Statute of Frauds presupposes the existence of a perfected contract and requires only that a note or memorandum subscribed by the party charged or by his agent be executed in order to compel judicial enforcement. Where there is no perfected contract, there is no bases for the application of the statute

2. 3.

3.

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Law on Sales

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. Remedies of vendor in sale of personal property payable in installments
The vendor of personal property payable in installments may exercise any of the following remedies: (1) elect fulfillment upon the vendees failure to pay; (SPECIFIC PERFORMANCE) [the vendor may exact the fulfillment of the
obligation not limited to the proceeds of the mortgaged goods. He may still recover from the purchaser the unpaid balance of the price, if any on the real and personal properties of the purchaser not exempt from attachment or execution]

sale of the mortgaged chattel, and any agreement to the contrary is void]

Applicability of Art 1484

The law is aimed at those sales of personal property where price is payable in several installments Not applicable: 1. sale of personal property not payable in installments 2. sale or mortgage of real estate 3. Action of replevin for it is a preliminary step to foreclosure An election of one remedy is an exclusion of the others.

(2) cancel the sale, if the vendee shall failed to pay two or more installments; [vendee can demand the return of payments
already made unless there is stipulation about forfeiture (1486)

(3) foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more installments.
[vendor is not obliged to return the amount of the installment already paid, but shall have no further action against the vendee for the recovery of any unpaid balance of the price remaining after the foreclosure and actual

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Law on Sales

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. Lease of personal property with option to buy
1. Nature of transaction leases of personal property with option to buy on the part of the lessee who takes possession or enjoyment of the property leased are really sales of personalty payable in installments. Art 1484 is applicable -Sellers desirous of making conditional sales of their goods but do not wish openly to make bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases wither with option to the buyer to purchase for small consideration at the end of the term provided the so-called rent has been duly paid, or with the stipulation that is the rent throughout the term is paid, the tile shall thereupon vest on in the lessee. 2. Purpose of the Provision to prevent vendors from resorting to this form of contract which usually is in reality contract of sale of personal property payable in installments in contravention of the provisions of art 1484.

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.
In sales of personal property by installments or leases of personal property with option to buy, the parties may stipulate that the installments or rents paid are not to be returned. Such a stipulation is valid insofar as the same may not be unconscionable under the circumstances; otherwise, the court has the power to order the return of a portion of the total amount paid in installments or rents.

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.

Art. 1488. The expropriation of property for public use is governed by special laws.

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Law on Sales

Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 290.
GENERAL RULE: all persons, whether natural or juridical, who can bind themselves have also legal capacity to buy and sell. Exception: incapacitated [absolute/relative (1490-1491)] Necessaries definition (Art 194 FC)
Art. 194. Support comprises everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family.

Art. 1490. The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 191.
General Rule: A sale and donation between husband and wife in violation of Article 1490 is inexistent and void from the beginning because such contract is expressly prohibited by law. As to donations, there is an exception to moderate gifts on the occasion of any family rejoicing. Exception: marriage settlement, judicial decree of separation of property

persons

Generally, contracts entered into by minor and other incapacitated persons are voildable (1327,1390). However, where necessaries are sold and delivered to him without intervention of the parent or guardian, he must pay a reasonable price therefor. The contract is, therefore, valid but the minor has the right to recover any excess above a reasonable value paid by him.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law.
This article enumerates the persons who, by reason of the relation of trust with the persons under their charge or their peculiar control over the property, are prohibited from acquiring said property either directly or indirectly and whether in private or public sale.

The persons disqualified to buy referred to in articles 1490 and 1491 are also disqualified to become lessees of the things mentioned thereon.

Reason for Prohibition under Article 1491

Public policy considerations which disallow the transactions entered into by them, whether directly or directly, in view of the fiduciary relationship involved or the peculiar control exercised by these individuals over the properties or rights covered. It seeks to prevent frauds on the part of such persons and minimize temptations to the exertion of undue and improper influence. Prohibition with respect to Guardians the relation between guardian and ward is so intimate, the dependence so complete and the influence so great that any transaction between the two parties entered while the relationship exists are, in the highest sense, suspicious and presumptively fraudulent. This influence is presumed to last while the guardians functions are to any extent still unperformed, while the property is still under his control and until the accounts have been finally settled. Prohibition with respect to Agents fiduciary relation however, the consent of the principal removes the transaction out of the prohibition contained in Art 1491 (2). An agent can buy for himself properties after the termination of the agency or other properties different from those he has been commissioned to sell Prohibition with respect to executors prohibition refers only to properties under the administration of the executor or administrator at the time of the acquisition and does not extend, therefore, to property nor falling within this class. Prohibition with respect to public officials and employees prohibition refers only to: (a) Properties belonging to the State, or of any subdivision thereof, or of any government-owned or controlled corporation or institutions (b) Administration of which has been entrusted to the public officials or employees. This prohibition includes judges and government experts who, in any manner, take part in the sale.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Prohibition with respect to judges, etc., and lawyers (JUDGES) prohibition applies only to the sale or assignment of property which is the subject of litigation to the persons disqualified therein. For prohibition to operate, the sale or assignment must take place during the pendency of the litigation involving the property. A property is considered in litigation from the moment it became subject to the judicial action of the judge. There is no violation of the prohibition although improper under the Canons of Judicial Ethics, where a judge purchased the property in question after the decision involving the property had already become final because none of the parties filed an appeal, hence the same is no longer in litigation. (LAWYERS and LAW FIRMS) prohibited to purchase, directly or indirectly, the property or rights which are the subject of litigation in which he takes part by virtue of his profession. A violation of such constitutes a breach of professional ethics and malpractice for which the lawyer may be reprimanded, suspended or disbarred from the practice of the legal profession. Good faith is not a defense.

Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations.
Art. 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly.

Effect of sale in violation or prohibition

Nos. 1 to 3 sale shall only be voidable because such cases only private interests are affected. The defect can be cured by ratification of the seller. Nos. 4 to 6 sale is null and void, cannot be cured with ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. It is grounded on public policy.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Art. 1493. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect. But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. Art. 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale: (1) As avoided; or (2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible.

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.
Principal obligations of a vendor are: (1) Transfer ownership of the determinate thing sold;
(2) Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract. All the fruits shall pertain to the vendee from the day on which the contract was perfected.

(3) To warrant against eviction and against hidden defects

(4) Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.

(5) To pay for expenses of the deed of sale, unless there is a stipulation to the contrary

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.
Tradition derivative mode of acquiring ownership by virtue of which one who has the right and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same. In all different modes of affecting delivery, it is the real intention of the parties, to deliver on the part of the vendor, and to accept on the part of the vendee, which gives legal effect to the act. Without such intention, there is no tradition. There is no delivery as to transfer ownership where the vendee takes possession of the personal property subject matter of the contract of sale by stealing the same while in custody of the vendor or his agent.
Alcantara-Daus vs De Leon Sellers ownership of the land is not an element in the perfection of the contract. However, this contract creates an obligation on the part of the seller to transfer ownership and to deliver the subject matter of the contract. It is during delivery that the law requires the seller to have the right to transfer ownership of the thing sold. It is through delivery or tradition that the buyer acquires the real rights of ownership over the thing sold

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.
General rule: The execution of a public instrument as a manner of delivery applies to movable as well as immovable property. This manner of delivery is symbolic. The buyer may use the document as proof of his ownership of the property sold. Exception: if from the deed the contrary does not appear or cannot clearly inferred Constructive delivery is symbolic when to effect the delivery, the parties make use of a token symbol to represent the thing. House/car= keys

Delivery of the thing together with the payment of the price, marks the consummation of the contract of sale. Actual delivery involves physical delivery of the thing and is usually done by passing of a movable thing from hand to hand.

Art. 1499. The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason.
Traditio longa manu takes place by the mere consent or agreement of the contracting parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee Traditio brevi manu the vendee has already the possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the leassee. Delivery is considered done by action of law

Art. 1500. There may also be tradition constitutum possessorium.

Tradition constitutum possessorium opposite brevi manu. Vendor continues in possession of the property sold not as owner but in some other capacity (tenant). Instead of the vendor delivering the thing to the vendee so that the latter may, in turn deliver it back to the vendor, the law considers that all these have taken place by mere consent or agreement of the parties.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

Art. 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor's consent, shall be understood as a delivery.
Quasi-Traditio in case of incorporeal things, delivery is effected: (1) By the execution of a public document; or (2) When that mode of delivery is not applicable, by the placing of the titles of ownership in the possession of the vendee; or (3) By allowing the vendee to use his rights as new owner, with the consent of the vendor.

Art. 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer of delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time. When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer: (1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. Contract of sale or return, and of sale on trial or approval or satisfaction
The property shall pass to the buyer on delivery but he may return the same if they are unsatisfactory. The duty of the buyer with regard to the return of the goods requires, ordinarily, that they be returned in the same or substantially the same condition in which they were when the contract was made. Undoubtedly, if they are injured or damaged substantially through negligence or misuse of the buyer, his right to return is lost and the sale becomes absolute. Sale or return a contract which property is sold but the buyer, who becomes the owner of the property on delivery has the option to return the same to the seller instead of paying the price. -under this contract, the option to purchase or return the goods rests entirely on the buyer without reference to the quality of the goods.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales

The buyer may revest ownership in the seller by returning the goods within the time fixed in the contract or within reasonable time,otherwise the sale becomes absolute and be liable for the price. Seller cannot prevent revesting by refusing to accept the return of the property -ownership passes to the buyer on delivery, risk of loss or destruction of the property will be bear by the buyer. Sale on trial or approval contract in the nature of option to purchase of the goods prove satisfactory, the approval of the buyer being a condition precedent. -title shall continue in the seller until the sale has become absolute either by the buyers approval of the goods, or by his failing to comply with the express or implied conditions of the contract as to giving notice of dissatisfaction or as to returning the goods or by his doing any other act adopting the transaction such as mortgaging the property, or selling it to a third person. 1. 2. Sale or return Sale is subject to a resolutory condition Depends entirely on the will of the buyer Ownership of the goods passes to the buyer on delivery and subsequent return of the goods reverts ownership in the seller Risk of loss or injury rests upon the buyer. 1. 2. Sale on trial Sale is subject to a suspensive condition Depends on the character or quality of the goods Ownership remains in the seller until the buyer signifies his approval or acceptance to the seller

3.

3.

4.

4.

Risk remains with the seller.

If the contract uses instead the phrase for sale or return not on sale or return as article 1502 was worded, the intention may be to enter into a contract of agency.

Justine Dawn G. Santos/Juris Doctor/College of Law/Bulacan State University

Law on Sales