LAW ON SALES
NATURE AND FORM OF THE CONTRACT
Code of Commerce relating to sales have been
repealed by the Civil Code (Book IV, Title VI, Arts
1458-1637).
Oblicon- contract of sale
1458-1637- special rules peculiar to sales
alone
Sources of law on sales
1. Admixture of civil law and common law
principles. Code Commission:
-Uniform Sales Law have been adopted in the Civil
Code with modifications to suit the principles of PH
law
This incorporation of a goodly number of American
rules on sale of goods has been prompted by these
reasons:
a.) The old Code does not solve questions
arising from certain present-day business practices.
-the sale of future goods (Art. 1482.);
-sale of goods by description or by sample (Art.
1501.);
-when goods are delivered on sale or return (Art.
1522.);
-sale of goods by negotiation or transfer of a
document of title (Arts. 1527 to 1540.);
-and the rights of the unpaid seller of goods. (Arts.
1545 to 1555.)
b.) fails to regulate many incidents and aspects
of delivery and acceptance of goods, of warranty of
title and against hidden defects, and of payment of
the price
c.) Foreign trade of the PH will continue with the
United States.
-To lessen misunderstanding between the merchants
on both sides of the Pacific, their transactions should,
be governed by the same rules.
-This desirable condition will not only facilitate trade
but will also perpetuate sentiments of esteem and
goodwill between the two peoples.
-Fair and mutually beneficial trade incalculably
enhances international friendship.
2. The Title on Sales has been enriched by
the addition of new provisions and on judicial
decisions and of new rules adopted with modifications
to suit the framework of the PH Law of the Uniform
Sales Act of the US
CHAPTER 1
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.
Concept of contract of sale
-is an agreement whereby one of the parties (seller of
vendor) obligates himself to deliver something to the
other (buyer, purchaser, vendee) who, on his part
binds himself to pay therefor a sum of money or its
equivalent (price)
Spanish Code
Contract- a contract of purchase of sale. As every
sale necessarily presupposes a purchase (redundant)
Title IV- Sales; Contract has been changed to
Contract of sale
-Proposed Code: Seller transfers ownership of the
thing sold (Art. 1458, 1459, 1495, 1547)
-Present Code: (Art 1445) obligation is merely to
deliver the thing, so that even if the seller is not the
owner, he may validly sell, subject to the warranty
(Art. 1474) to maintain the buyer in the legal and
peaceful possession of the thing sold.
Nature of Obligations Created in Sale.
1. Obligations of Seller to:
a. Transfer the ownership
b. Deliver the possession
2. An obligation of the buyer to:
a. Pay the price
Characteristics of a contract of sale
1. Consensual- it is perfected by mere consent
without further act, at the moment there is
meeting of the minds upon the thing which is
the object of the contract and upon the price.
-It becomes valid and binding upon the meeting of the
minds as to the price, despite the manner of its actual
payment or even where there has been breach.
Real price not stated, sale is valid but subject to
reformation
No meeting of the minds as to price (simulated)-
contract void
SALES AND LEASE | 1
The binding effect of a deed of sale on the parties is
based on the principle that the obligations arising
therefrom have the force of law between them.
-The parties who alleges it must show its existence by
competent proof and its essential elements.
-Art 1332, despite consensuality, when one of the
parties is unable to read, or in a language not
understood by him, mistake or fraud is alleged, the
person enforcing the contract must show that the
terms have been fully explained to the former
-Ex: A real contract is one perfected by delivery;
contract of deposit or commodatum
Modalities that affect Consensuality
-By the stipulation may be added into the contractual
relationship, such as suspensive term or condition.
-Even if consensual, not all contracts of sale become
automatically and immediately effective
Ex: Sales with Assumption of mortgage- a
condition precedent to sellers consent, without the
approval of the mortgagee, the sale is not perfected
-Even if delivered and taken possession with the
knowledge and consent, contract not perfected and
meeting of the minds is incomplete when there is no
agreement as to the final price
2. Bilateral and Reciprocal- both the
contracting parties are bound to fulfill
correlative obligations toward each other,
whereby the obligation is the cause or
consideration for the obligation or promise of
the other
-the seller, to deliver and transfer ownership of the
thing sold
-buyer, to pay the price
-They are to be performed simultaneously such that
the performance of one is conditioned upon the
simultaneous fulfillment of the other.
The legal effects and consequences of sale being a
bilateral contract composed of reciprocal obligations:
a. The power to rescind is implied, and such
power need not be stipulated in the contract
in order for the innocent party to invoke the
remedy (Art 1191)
b. Neither party incurs in delay if the other party
does not comply, or is not ready to comply
with what is incumbent upon him (Art 1168)
c. From the moment one of the parties fulfills
his obligation, the default by the other begins
(ibid), without the need of prior demand (Art
1191)
-Each party has the remedy of specific performance
-Rescission or reformation cannot be enforced by
defaulting party upon the other party who is ready and
willing to proceed with the fulfillment of his obligation.
-The right of rescission of a party to an obligation
under Art 1191 is predicated on a breach of faith by
the other party who violates reciprocity between them.
3. Onerous- the thing sold is conveyed in
consideration of the price and vice versa.
-It imposes a valuable consideration as a prestation
-The Court held that the rules of interpretation would
incline the scales in favor of the greater reciprocity of
interests, since sale is onerous.
4. Commutative, the thing sold is considered
the equivalent of the price paid and vice
versa
-Exception: the contract may be aleatory as
in the case of the sale of a hope
(sweepstake ticket)
Onerous and Commutative: In a contract of sale, not
only does each one of the parties assume a
correlative obligation, but each party anticipates
performance by the other from the very start.
-There is no requirement that the price be equal to the
exact value of the subject matter; all that is required
for the seller to believe that what was received was of
the commutative value of what he gave.
-The obligation of one party can be lawfully
subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving
nothing for what he gives (hope or expectancy)
-The test for compliance is not objective but rather
subjective, so long as the party believes in all honesty
that he is receiving good value for what he
transferred, commutative character, not donation or
an aleatory contract
-Inadequacy of price does not affect ordinary sale;
may be a ground for setting aside, but not sufficient
for cancellation. May show vice in consent (annul),
but not for inadequacy but for vitiation of consent.
5. Nominate, it is given a special name or
designation in the Civil Code, sale, its
nature and consequences are governed by a
set of rules in CC --- Law on Sales
6. Principal, it does not depend for its
existence and validity upon another contract
(opposite of accessory: pledge & mortgage)
-Parties enter into sale to achieve within its essence
the objectives of the transaction, and simply not in
preparation for another contract
SALES AND LEASE | 2
-Nominate and principal, in determining the real
character of the contract, the title given to it by parties
is not as significant as its substance.
-The court looks at the intent of the parties and not at
the nomenclature used to describe it. True aim and
purpose of the parties is shown by the terminology
used in the covenant, as well as by their conducts,
words, actions and deeds prior to, during and
immediately after executing their agreement
-Not defined by the parties but the principles of law
-All other contracts which have for their objective the
transfer of ownership and delivery of possession of a
determinate subject matter for a valuable
consideration, are governed necessarily by the Law
on Sales
7. Sale is title and not mode.
Sale is merely title that creates the obligation on
the part of the seller to transfer ownership and
deliver possession, but on its own sale is not a
mode that transfers ownership
-Ownership is acquired only upon its delivery to the
buyer
-Ownership and real rights are acquired only pursuant
to a legal mode or process. While title (sale) is the
juridical justification, mode (delivery) is actual process
of acquisition or transfer of ownership over a thing
Mode- dominion or ownership is created, transferred,
destroyed (succession, donation, discovery,
intellectual creation), title only constitutes the legal
basis by which to affect dominion over ownership.
-Sale does not by itself transfer or affect ownership,
the most that sale does is create the obligation to
transfer ownership, it is tradition or delivery, as a
consequence of sale, that transfers ownership.
Essential Requisites of a Contract of Sale
The rules of law governing contracts in general are
applicable to sales. Like every contract, sale has the
following requisites or elements:
1. Consent of meeting of the minds
-Consent on the part of the seller to transfer and
deliver and on the part of the buyer to pay (Art. 1475)
-Parties must have the legal capacity to give consent
and obligate themselves (Art. 1489-1491).
-Essence: conformity of the parties on the terms of
the contract, the acceptance by one of the offer made
by the other. (Bilateral)
-A sale against the will of the owner:
expropriation (Art 1488)
Three kinds of sale under the law:
o Ordinary execution sale
o Judicial Foreclosure
o Extra-judicial foreclosure sale
-Sale of conjugal property, consent of both husband
and wife. Absence of which renders the sale null and
void (At 124 of the FC), vitiation thereof (Art 1390)
makes it voidable.
2. Object or subject matter (Determinate
subject matter)
-Determinate thing which is the object of the contract
(Art. 1460)
-must be determinate or at least capable of being
made determinate because if the seller and buyer
differ in regard to the thing sold, there is no meeting of
minds - there is no sale.
There is no sale of generic thing, if the parties differ
as to the object, there can be no meeting of the minds
-May be personal or real property
-Even if the subject matter of the sale was generic
(determinable), the performance of the sellers
obligation would require its physical segregation or
particular designation, making the subject matter
determinate at the point of performance.
-Not meant to exclude certain generic things from
validly becoming the proper subject matter of sale, at
the point of perfection.
3. Cause or consideration
-The price certain in money or its equivalent (Art.
1458), check or a promissory note, which is the
consideration of the thing sold
-Does not include goods or merchandise although
they have their own value in money (Arts. 1468, 1638)
When all three elements are present, a perfected
contract arises and its validity is not affected if
previously a fictitious deed of sale was executed by
the parties, or by the fact on non-performance of the
obligations thereafter.
Void, when some of the essential element is not
present
Villanueva: when essential element not present at
meeting of the mind, is to declare a no contract
situation
-Absence of any elements negates the existence of a
perfected contract of sale, rather than using the
technical term void.
Natural and accidental elements.
SALES AND LEASE | 3
The above essential elements of a contract of sale
(without which no sale can validly exist) are to be
distinguished from:
1. Natural elements- deemed to exist in certain
contracts, in the absence of any contrary stipulations,
like warranty against eviction (Art 1548) or hidden
defects (Art 1561)
2. Accidental elements- those which may be
present or absent depending on the stipulations of the
parties, like conditions, interest, penalty, time or place
of payment, etc
Stages in the Contract of Sale.
1. Policitation- Generation or negotiation or
preparation stage
-Covers the period from the time the prospective
contracting parties indicate their interests in the
contract to the time the contract is perfected.
2. Perfection- meeting of the minds,
conception or birth
-Concurrence of the essential elements of the sale:
meeting of the minds as to the object of the contract
and upon the price
-Contract begins to exist in the legal world. Until sale
is perfected, it cannot serve as an independent
source of obligation, nor as a binding juridical relation
between the parties.
3. Consummation- when the object is
delivered and the price is paid, death
-Parties perform their respective undertaking under
the contract of sale, culminating in the extinguishment
thereof
Effect of absence of price/non-payment of price.
1. There can be no sale without price (Art
1474)
-The cause in sale is, as to the seller, the buyers
promise to pay the price
-As to the buyer, The sellers promise to deliver the
thing sold
-A contract is void and produces no effect where the
same is without cause or consideration (Art.
1409(3)
The purchase price, which appears thereon as
paid, has in fact, never been paid by the buyer to the
seller. Such sale is nonexistent and cannot be
considered consummated
-When figures as prices are mere estimates, the
transaction lacks an essential requisite for the
perfection of the contract of sale
2. Non-payment of the purchase price is a
resolutory condition for which the remedy is
either rescission or specific performance (Art.
1191)
-Failure to pay the price in full within a fixed period
does not dissolve a contract in the absence of any
agreement that payment on time is essential (Art
1592), or make it null and void for lack of
consideration, but results at most in default on the
part of the vendee for which the vender may
exercise his legal remedies
Title of title to property for a price, essence of
sale.
1. Obligations to deliver and pay- The transfer
of title to property or agreement for a price
actually paid or promised, not a mere physical
transfer is the essence of sale
-Neither is the delivery nor payment necessary for the
perfection of the contract. It is perfected by mere
consent (consensual Art 1475)
-When seller cannot deliver the object of the sale,
because the buyer has already acquired title and
delivery thereof from the rightful owner, such contract
may be deemed inoperative and may fall under Art
1409 (5), impossible service since delivery of
ownership is no longer possible
-It is only upon the existence of the contract of sale
that the seller is obligated to transfer ownership to the
buyer and the buyer, to pay the purchase price to the
seller.
Kinds if sale (Paras)
(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 the things exchanged:
1. Commutative sale
2. Aleatory sale
(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
credit, or some other intangibles such as
a copyright, a trademark or goodwill)
-Tangible- chose in possession
-Intangible- case of a right, chose in action
SALES AND LEASE | 4
NB: Goods- does not ordinarily include choses in
action nor money.
(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
(g) As to whether wholesale or retail:
1. Wholesale- to be resold for a profit the
goods being unaltered when resold, the
quantity being large
2. Retail- if otherwise, also if sold to tailors
(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. Case sale
2. Sale on the installment plan
Kinds of contract of sale (De Leon)
1. As to presence or absence of conditions.
A sale may be either:
a. Absolute- where the sale is not subject to
any condition and where title passes to the buyer
upon the delivery of the thing sold
-Ownership of the property sold may pass to the
vendee upon the actual or constructive delivery
thereof (Art 1497)
-Payment is not essential to the transfer of ownership
as long as the property sold has been delivered. Such
delivery (see Art. 1497.) operates to divest the vendor
of title to the property which may not be regained or
recovered until and unless the contract is resolved or
rescinded in accordance with law
b. Conditional- the sale contemplates a
contingency (Arts 1461, 1462, par 2, Art 1465), -and
in general, where the contract is subject to certain
conditions (Art 1503, 1)
-in the case of the vendee, the full payment of the
agreed price (Art 1478)
-in the case of the vendor, the fulfillment of certain
warranties (e.g., eviction of squatters)
-In sales with assumption of mortgage, the
assumption of mortgage is a condition to the seller-
mortgagors consent to the sale; without approval by
the mortgagee no sale is perfected and the seller
remains the owner and mortgagor of the subject
property with the right to redeem in the case of
foreclosure.
-A sale denominated as a Deed of Conditional Sale
is still absolute where the contract is devoid of any
proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is
paid
-The delivery of the thing sold does not transfer title
until the condition is fulfilled
-If the condition is imposed on an obligation of a party
(e.g., ejection by the vendor of squatters within a
certain period before delivery of property) not upon
the perfection of the contract itself, which is not
complied with, the other party may either refuse to
proceed or waive said condition
2. Other Kinds- depending on ones point of
view:
a. As to the nature of the subject matter- real
or personal, tangible or intangible
b. As to manner of payment of the price-
case or installment
c. As to its validity- valid, rescissible,
unenforceable, void
Sale Distinguished form other similar contracts.
A contract is what the law defines it to be, taking into
consideration its essential elements, and not what the
contracting parties call it. The transfer of ownership in
exchange for a price paid or promised is the very
essence of the contract of sale.
From Donation
- Act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another
person who accepts it
SALE DONATION
Onerous Gratuitous
Perfected by mere Solemn contract,
consent although consent is
required, must comply
with the formalities
mandated by law for its
validity
Valid sale cannot have Disposition inter vivos by
SALES AND LEASE | 5
the same legal effect of gratuitous title, a valid in another thing
depriving the compulsory sale for valuable
Where the value of the Where the value of the
heir of their legitimates consideration does not
thing given as part of the thing given as part of the
diminish the estate of the
consideration equals or is consideration exceeds
seller--- but merely
less than the amount of the amount of money
substitution of values,
money given given or its equivalent
that is, the property sold
is replaced by the Consideration amount Consideration amount
equivalent monetary given given
consideration
Distinction is academic only since aside from these
Art 1471, when the price of a sale is simulated, the
rules, Art 1461 provides that barter shall be governed
sale itself may be void, but the act may be shown to
by the Law on Sales. The two rules specifically
have been in reality a donation.
provided for barter contracts, but which are similar to
A contract may be entered into in a form of a sale and the rules on warranty against eviction applicable to
may end up being governed by the Law on Donations sale are as follows:
even when there may be a formal price agreed upon,
a. If one of the contracting parties having received the
it is simulated, and the real intention is that the
thing promised in barter, should prove that it did not
subject matter is being donated to the supposed
belong to the person who gave it, he cannot be
buyer
compelled to deliver that which he offered in
A purported donation may have been executed by exchange, but he shall be entitled to damages
parties, but it is not mere liberality that permeates the b. One who loses by eviction the thing received in
contract as the only consideration, because other barter may recover that which he gave in exchange
consideration or burdens are placed upon the done. with a right to damages, or he can only make use of
Art 726, even when donor imposes upon the donee a the right to recover the thing which he has delivered
burden, but which is less than the value of the thing while the same remains in the possession of the other
given, there is still a donation. party, but without prejudice to the rights acquired in
good faith by a third person
-When the value imposed is more than he value of the
thing given, it becomes an onerous donation, as
either a barter or sale, which are governed by Law on Instances when difference between is critical:
Sales.
a. The rules on the Statue of Frauds, (sale of real or
personal property <P500 do not apply to barter
From Barter b. The right of legal redemption granted by law to an
SALE BARTER adjoining owner of an urban land covers only resale
and does not cover exchanges of properties
One of the parties binds One of the parties binds
himself to deliver a thing himself to give one thing
in consideration of the in consideration of the From Contract for a piece-of-work
others undertaking to others promise to give
pay the price in money or another thing - The contractor binds himself to execute a piece of
its equivalent work for the employer, in consideration of a certain
An assignment of a property to the corporation by price or compensation, the contractor may either
controlling shareholders in exchange for shares is not employ only his labor or skill, or also furnish the
a sale nor barter because the corporation cannot be material.
considered a third party when it would be controlled
Transfer of title or an agreement to transfer it for a
by the transferor as part of the estate planning
price paid or promised to be paid is the essence of
Rules to Determine (Art 1468), especially when the sale. Whether the contract be one of sale or one for a
consideration agreed upon is partly in money and piece of work, a transfer of ownership is involved and
partly in another thing
a party necessarily walks away with an object
a. Manifest Intention of the Parties
Ex: buy a painting from art gallery; sale- execute
Even if the acquisition of a thing is paid for by another painting for a price certain which is a contract for
object of greater value than the money component, it
piece of work. In both cases, the resulting object and
may be a sale not a barter, when such was the
intention of the parties price may be the same

b. When intention does not appear and

consideration consists partly in money and partly

SALES AND LEASE | 6

 SALE PIECE OF WORK a. Statutory basis:
a. Statutory Rule on Distinguishing Basis of Art 1467: upon special order test, ability of
Tested whether the thing transferred is one not in the producer to manufacture the goods in the
existence and which never would have existed but for condition that they customarily are without having to
the order of the party desiring it, or a thing which wait for specific orders from customers.
would have existed and been the subject of sale to
some other person, even if the order had not been -The essence of a contract for a piece of work is the
given. Art 1467: sale of service, unlike in a sale where the essence is
the sale of an object.
Whether the same is But if the goods are to be
on hand at the time manufactured for the Special orders is not one of timing, or habit, but
or not customer and upon his actually must be drawn from the nature of the work to
special order, and not for the be performed and the products to be made, products
general market
are not ordinary and would require the use of
Two tests for distinction extraordinary skills or equipment
Manufacturing in the Manufacturing upon Not merely one of timing of the flow of the
ordinary course of special order of transactions, but one that goes into the nature of the
business to cover sales customers, to cover piece
product involved when it was possible for the
contracts of work
manufacturer or producer to be able to produce the
If the article ordered is -If the company accepts a product ahead of any special order given by a client
exactly such as the job that requires the use of
company makes and extraordinary or additional -Habituality test and large quantity of the products to
keeps on hand for sale equipment, or involves be delivered do not also indicate that the underlying
to anyone, and no services not generally contract is one of sale; what was approved was not in
change or modification performed by it the ordinary course of its business
of it is made at request
Core test: By its nature, to be unique and always
If the essence is the If the essence is the
object, irrespective of service, knowledge or different from other orders it had to service in the past
the party giving or even reputation of the Contract to sell and conditional sale
executing it person who executes or distinguished.
manufactures the object---
essentially the sale of Contract to sell- Bilateral contract whereby the
service or labor prospective seller, while expressly reserving the
If parties intended that If one accepts the ownership of the subject property despite delivery
at some future date an undertaking on the basis thereof to the prospective buyer binds himself to sell
object has to be of some plan, taking into the said property exclusively to the prospective buyer
delivered, without account the work he will upon fulfillment of the condition agreed upon (full
considering the work or employ personally or payment)
labor of the party bound through another
to deliver From agency to sell or to buy--- a person binds
b. Practical Needs for being Able to Distinguish himself to render some service or to do something in
representation or on behalf of the principal, with the
Constituted of real Main subject matter is the consent or authority of the latter.
obligations and would service to be rendered,
be the proper subject of would not allow an action -It essentially establishes a representative capacity in
an action of for specific performance in the person of the agent on behalf of the principal, and
performance case the contractor one characterized as highly fiduciary. 3
refuses to comply with his
obligation--- Art 1715 SALE AGENCY TO SELL OR
BUY
Only when the subject Not governed by the
matter is indeterminate Statute of Frauds Not unilaterally revocable Because it covers an
or generic, is the buyer underlying fiduciary
granted the remedy relationship, is essentially
under Art 1165 to have revocable even in the
the subject matter done presence of an
by a third party with cost irrevocability clause
chargeable to the seller
From its nature, the The agent is not obliged
buyer himself pays for to pay the price, and is

SALES AND LEASE | 7

the price of the object merely obliged to deliver
which constitutes his the price which he may
main obligation receive from the buyer
The buyer, after delivery, The agent does not
becomes the owner of become the owner of the
the subject matter thing subject of the
agency, even if the object
is delivered to him
Seller warrants The agent who effects
the sale assumes no
personal liability as long
as he acts within his
authority in the name of
the principal. ---It is
legally possible for an
agent or broker to
voluntarily bind himself to
the warranties of the
seller
Because of the fiduciary
nature, the agent is
disqualified from
receiving any personal
profit from the transaction
covered by the agency,
and any profit received
should pertain to the
principal
b. Statutory RuleArt. 1466, in constituting a
contract containing provisions characteristic of both
the sale and of the contract of agency to sell, the
essential clauses of the whole instrument shall be
considered.
Essence is transfer of Delivery to the agent of
title or agreement to the goods not as the
transfer it for the price agents property but of
paid or promised the principal who remains
the owner and has the
right to control the sales
by the agent, fix the price
and terms, demand and
receive the proceeds of
the sales less the agents have been in reality a donation.
commission
From Dacion en Pago property is alienated to the it is simulated, and the real intention is that the
creditor in full satisfaction of a debt in money. It
constitutes the delivery and transmission of a thing by
the debtor to the creditor as an accepted equivalent of
the performance of the obligation.
-Elements of sale must be present including a clear
agreement that the things offered is accepted for the
extinguishment of the debt.
-Not in the realm of perfection of contract, but rather
in the stage of consummation, for it is a special mode
of payment. Prior to delivery, to constitute dacion, the
agreement does not constitute a separate contract,
but only an agreement by which an existing obligation
may be extinguished.
In order that there be a valid dation in payment:
a. Performance of the prestation in lieu of
payment which may consist in the delivery of
the a corporeal thing or a credit against the
third person
b. Some difference between the prestation due
and that which is given in substitution
c. An agreement between creditor and debtor
that the obligation is immediately
extinguished by reason of the performance
of a presentation different from that due\
Dacion requires delivery and transmission of
ownership of a thing to the creditor as an accepted
equivalent of the performance of the obligation.
SALE DACION
Onerous Gratuitous
Perfected by mere Solemn contract,
consent although consent is
required, must comply
with the formalities
mandated by law for its
validity
Valid sale cannot have Disposition inter vivos by
the same legal effect of gratuitous title, a valid
depriving the compulsory sale for valuable
heir of their legitimates consideration does not
diminish the estate of the
seller--- but merely
substitution of values,
that is, the property sold
is replaced by the
equivalent monetary
consideration
Art 1471, when the price of a sale is simulated, the
sale itself may be void, but the act may be shown to
A contract may be entered into in a form of a sale and
may end up being governed by the Law on Donations
even when there may be a formal price agreed upon,
subject matter is being donated to the supposed
buyer
A purported donation may have been executed by
parties, but it is not mere liberality that permeates the
contract as the only consideration, because other
consideration or burdens are placed upon the done.
Art 726, even when donor imposes upon the donee a
burden, but which is less than the value of the thing
given, there is still a donation.
-When the value imposed is more than he value of the
SALES AND LEASE | 8
thing given, it becomes an onerous donation, as 1. Transfer of title to the buyer
either a barter or sale, which are governed by Law on
Sales. Contract to sell
Transfer of title to the buyer
-May not be defined as a
conditional contract of sal
where the seller may
reserve title to the
property until fulfillment of
suspensive condition
Fulfillment of suspensive
condition (full payment),
ownership will not
automatically transfer
although property may
have been previously
delivered
-Prospective seller still
has to convey title to the
buyer by entering into a
contract of absolute sale
to consummate
transaction
Sale of subject property to a third person
There being no previous
sale of the property, a
third person despite the
fulfillment of suspensive
condition, cannot be
deemed a buyer in bad
faith and the prospective
buyer cannot seek the
relief or conveyance of
the property
-No double sale
-Title will transfer to
buyer after registration;
there is no defect in the
owner-sellers title; may
be sued for damages
Conditional sale
Consent is present,
although it is conditioned
upon the happening of a
contingent event which
may or may not occur
If suspensive condition is
not fulfilled, perfection of
contract is completely
abated
If suspensive condition is
fulfilled, contract is
perfected
Upon the fulfillment of
suspensive, the sale
becomes absolute and
this will affect the sellers
title.
-If there was previous
delivery, title is
automatically transferred
to the buyer, seller will no
longer have any title to
transfer to any third
person
-Art 1544, second buyer
who had knowledge of
such defect in the title, or
charged with the obli to
discover such defect,
cannot be a registrant in
good faith. He cannot
defeat the first buyers
title.
-If a title is issued to the
2nd, the 1st may seek
reconveyance of the
property

Other cases of contract to sell.

1. Where the subject matter is not determinate
(Arts 1458, 1460), or the price is not certain (Art 1458)
-For the perfection of a contract of sale (Art 1475),
there is already a price certain where the

SALES AND LEASE | 9

determination of the price is left to the judgment of a
specified person (Art 1469) and not withstanding that
such determinations has yet to be made
2. A sale of future goods (Art 1462) even
though the contract is in the form of a present sale
operates as a contract to sell the goods
3. Where the stipulation is that the deed of sale
and certificate of sale would be issued only after full
payment
-The act of the vender of delivering the possession of
the property to the vendee contemporaneous with the
contract was an indication that an absolute contract of
sale was intended and not a contract to sell.
Sale distinguished from Assignment of Property
in Favor of Creditors (Cession)
-The creditor does not acquire ownership over the
things assigned, but only the right to sell said things.
From the proceeds of the sale, the creditors are to be
paid what is due them.
Art. 1255-- the debtor may cede or assign his
property to his creditors in payment of his debts. This
cession, unless there is a stipulation to the contrary,
shall only release the debtor from responsibility of the
net proceeds of the thing assigned. The agreements
which, on the effect of the cession, are made between
the debtor and his creditors shall be governed by
special laws.
-abandonment of all the property of the debtor for the
benefit of his creditors in order that the latter may
apply the proceeds thereof to the satisfaction of their
credits.
DATION CESSION
One creditor is sufficient Two or more creditors
Not all properties of the All the debtors properties
debtor are conveyed are conveyed
Debtor may become Takes place only if the
solvent or insolvent debtor is insolvent
Kinds of Extrajudicial Foreclosure Sale.
1. Ordinary execution sale- governed by the
pertinent provisions of Rule 39 of RofC
2. Judicial foreclosure- Rule 68
3. Extrajudicial forclosure- governed by Act
3135, amended by Act 4118
ART. 1459The 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. Things- it must be within the commerce of
men
a. Determinate (Art 1458, 1460)
b. Licit or lawful- Not contrary to law,
morals, good customs, public order, or
public policy (Art 1347, 1409)
-If illicit, the contract is void and cannot be ratified (Art
1409. The rights and obligations of the parties are
determined by applying:
Art 1411--- When the nullity proceeds from the
illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being
in pari delicto, they shall have no action against each
other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal
of effects or instruments of a crime shall be applicable
to the things or the price of contract.
This rule is applicable only when one of the parties is
guilty; but the innocent one may claim what he has
given, and shall not be bound to comply with his
promise.
Art. 1412. --- If the act in which the unlawful or
forbidden
cause consists does not constitute a criminal offense,
the following rules shall be observed:

Creditor becomes the Creditors do not become (1) When the fault is on the part of both contracting
owner of the thing owners parties, neither may recover what he has given by
conveyed virtue of the contract, or demand the performance of
the others undertaking;

Sale Distinguished from Lease.
Sale Lease
Seller transfers Lessor or landlord
ownership transfers merely the
temporary possession
and use of the property
(2) When only one of the contracting parties is at fault,
he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may
demand the return of what he has given without any
obligation to comply with his promise.
c. Not be impossible (Art 1348)

SALES AND LEASE | 10

 2. Rights- all rights which are not
intransmissable or personal may also be the
object of sale (Art 1347):
The vendor must have the RIGHT to transfer
OWNERSHIP at the time thye object is delivered.
-Right to usufruct (Art 572)
-Right of conventional redemption (Art 1601)
-credit (Art 1624)
-Right to vote, public office, marital and parental rights
No contract may be entered upon future inheritance
except in cases expressly authorized by law. (Art.
1347, par. 2.)
-While services may be the object of a contract (Art.
1347, par. 3.), they cannot be the object of a contract
of sale. (Art. 1458; see Art. 1467.)
Kinds of illicit things.
Illicit per se (of its nature)- decayed food
Illicit per accidens- because of some
provisions of law declaring it illegal; lottery
tickets (Art 195, RPC), land sold to an alien
mortgagor (or pledgor) continues to be the owner of
the property mortgaged, and, therefore, has the
power to alienate the same; however, he is obliged,
under pain of penal liability, to secure the consent of
the mortgagee.
Art 1459 refers to both.
Right to transfer ownership.
1. Seller must be owner or authorized by owner
of thing sold
In order for a sale to be valid that the vendor must be
able to transfer ownership (Art 1458), and therefore
he must be the owner or at least authorized
In accord with the principle that one cannot
transmit or dispose of that which he does not
have (nemo dat quod non-habet)
One can only sell what one owns or is authorized to
sell, and the buyer can acquire no more than what the
seller can transfer legally
2. Right must exist at time of delivery
Art 1459 does not require that the vendor must have
the right to transfer ownership of the property sold at
the time of the perfection of the contract (sufficient
that he is the owner at the time of the delivery)
-Perfection per se does not transfer ownership which
occurs upon the actual or constructive delivery. -Sale
(consensual), perfected by mere consent, ownership
by the seller is not an element for its perfection
- The seller is deemed only to impliedly warrant that
he has a right to sell the thing at the time when the
ownership is to pass. (Art 1547)
-The seller need not be the owner at the time of
perfection, future things or goods may be sold.
-REASON: Since future goods or goods whose
acquisition by the seller depends upon a contingency
may be the subject matter of sale, it would be
inconsistent for the article to require that the thing
sold must be owned by then seller at the time of the
sale inasmuch as it is not possible for a person to own
a thing or right not in existence. An agreement
providing for the sale of property yet to be adjudicated
by a court is thus valid and binding.
3. Where property sold registered in name of
seller who employed fraud in securing his
title
A forged or fraudulent deed is a nullity and conveys
no title, there are instances when such may become
the root of a valid title:
Where the certificate of title was already
transferred from the name of the owner to
the forger, and while it remained that way,
the land was subsequently sold to an
innocent purchaser for value.
Where there is nothing in the certificate to
indicate any cloud or vice in the ownership of
the property, or any encumbrance thereon,
or in the absence of any fact or circumstance
to excite suspicion, the purchaser is not
required to explore further than what the
Torrens title upon its face indicates in quest
for any hidden defect or inchoate right that
may subsequently defeat his right thereto.
Otherwise, the efficacy and conclusiveness
of the certificate of title which the Torrens
System seeks to insure would entirely be
futile and nugatory.
o Established rule: the rigts of an
innocent purchaser for value must
be respected and protected,
notwithstanding the fraud employed
by the seller in securing his title.
o The proper recourse of the true
owner of the property who was
prejudiced and fraudulently
dispossessed of the same is to
bring an action for damages against
SALES AND LEASE | 11
 those who caused or employed
fraud.
o If the latter are insolvent, an action
against the Treasurer of the
Philippines may be filed for
recovery of damages against the
Assurance Fund.
4. Where property sold in violation of a right of
first refusal of another person
DOCTRINE: A contract of sale entered into in
violation of a right of first refusal of another person,
while valid, is rescissible.
A right of 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 the
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 same terms and within the period
contemplated can the owner validly offer to sell
the property to a third person, again, under the
same terms as offered by the grantee
Where there is no showing of bad faith on the
part of the vendee, the contract of sale may not
be rescinded, and the remedy is an action for
damages against the vendor.
5. Where real property, subject of unrecorded
sale, subsequently mortgaged by seller
which mortgage was registered
The mortgagees registered right over the
property is inferior to that of the buyers
unregistered right
-The unrecorded sale between the buyer and the
seller is preferred for the reason that if the seller had
parted with his ownership, he no longer had
ownership and free disposal of the thing so as to be
able to mortgage it again.
-Registration of the mortgage is of no moment since it
is understood to be without prejudice to the better
right of third parties.
ART 1460-- A thing is determinate when it is
particularly designated or physically segregated
from all others 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.
Subject matter must be determinate.
1. When thing determinate.
A thing is determinate or specific when it is
particularly designated or physically segregated from
all others of the same class.
- In accordance with the general rule that the object of
every contract must be determinate as to its kind (Art
1349)
- Identified by its individuality (my car, the watch I am
wearing, etc)
2. Sufficient if subject matter capable of being
made determinate
- It is not necessary that the thing sold must be in
sight at the time the contract is entered into. It is
sufficient that the thing is determinable or capable
of being made determinate without the necessity of
a new or further agreement.
-A person may validly sell all the cavans of rice in a
particular bodega or a parcel of land in a particular
street
-A thing is generic when it is indicated only by its kind
and cannot be pointed out with particularity.
If there is a necessity of making a new agreement to
determine the amount and the quality of the object
sold, this necessarily constitutes an obstacle to the
perfection of the contract.
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
Sale of things having potential existence.
-Even a future thing not existing at the time the
contract is entered into may be the object of sale
provided it has a 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
SALES AND LEASE | 12
Ex: the wine a vine is expected to produce, grain a sweepstake ticket)
filed may grow in a given time, the milk a cow may The contract deals with a The contract relates to a
yield future thing That which present thing which
NB: The thing sold must be specific and identified. is expected exists -- the hope or
expectancy
They must be also owned by the vendor at the time.
The sale is subject to the Produces effect even
Subject to the condition that the thing will come condition that the thing though the thing does not
into existence: The hope or expectancy already should exist, if not, there come into existence
exists, what does not yet exist is the expected thing. will be no contract by because the object of the
2nd par refers to sale of an expected thing and not to reason of the absence of contract is the hope itself,
the hope or expectancy itself. an essential element unless it is a vain hope or
expectancy (falsified
Sale of a mere (vain) hope or expectancy. sweepstake ticket which
can never win)
The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing
contemplated or expected will come into Presumption in case of doubt.
existence
-The presumption is in favor of sale of thing expected,
-The sale refers to an expected thing which is not yet which is more in keeping with the commutative
in existence, and not to the hope or expectancy which character of the contract.
already exists, in view of the condition that the thing
will come into existence. (Commutative- the thing sold is considered the equivalent of
the price paid and vice versa
-Sale of mere hope is valid even if the thing hoped ---Not only does each one of the parties assume a
does not come into existence, unless it is vain correlative obligation but such party anticipates performance
by the other from the very start.
-If the hope or expectancy itself is vain, the sale is
itself void. -However the contract may be aleatory as in the case of the
sale of a hope (sweepstake ticket)
Ex: S binds himself to sell a parcel of land if he wins a
case for the recovery of said land pending in the Contingent character of obligation to pay must clearly
Supreme Court. appear. Where in a sale, the obligation of one
party can be lawfully subordinated to an uncertain
NB: this is NOT an aleatory contract for while in an event, so that the other understands that he
aleatory contract there is an element of chance, here, assumes that risk of receiving nothing for what he
there is completely NO CHANCE gives as in the case of a sale of hopes or
Sale of thing expected and sale of hope itself expectations (emptio spei), it is not in the usual
distinguished. course of business to do so, hence, the contingent
character of the obligation must clearly appear.
Sale of thing expected Sale of hope (emptio
(Emptio rei speratae) spei)
Thing is not yet in It is the sale of hope itself ART. 1462 The goods which form the subject of a
existence subject to the that the thing will come contract of sale may be either existing goods,
condition that the thing into existence, where it is owned or possessed by the seller, or goods to be
will exist, and on failure agreed that the buyer will
of the condition, the pay the price even if the manufactured, raised, or acquired by the seller
contract becomes thing does not eventually after the perfection of the contract of sale, in this
ineffective: The buyer exist. Title called future goods.
has no obligation to pay
PARAS: It does not There may be a contract of sale of goods, whose
the price
matter whether it acquisition by the seller depends upon a
PARAS: If the expected materialized or not, but contingency which may or may not happen
thing does not the hope itself must have
materialize, the sale is validly existed.
not effective
Goods which may be the object of sale.
The future thing is certain It is not certain that the
as to itself, but uncertain thing itself will exist, 1. Existing goods or goods owned or
as to its quality and much less its quantity possessed by the seller;
quantity. (Art 1545, par2) and quality (sale of a

SALES AND LEASE | 13

 2. Future goods or goods to be manufactured
(sale of milk bottles with the name of the
buyer pressed in the glass), raised (future
harvest of palay), or acquired by seller after
the perfection of the contract (definite parcel
of land the seller expects to buy). Art. 1460
Future goods as object of sale.
-Sale of which, even though the contract is in the form
of a present sale, is valid only as an executor
contract to be fulfilled by the acquisition and
delivery of the goods specified.
-Property or goods which at the time of the sale are
not owned by the seller but which thereafter are to be
acquired by him, cannot be the subject of an executed
sale but may be the subject of a contract for the future
sale and delivery, even if the acquisition depends
upon a contingency which may or may not happen.
-Par 1 does not apply if the goods are to be
manufactured especially for the buyer and not
readily saleable to other manufacturers regular
course of business. The contract must be considered
as one for a piece of work (Art 1467)
-Article contemplates a contract of sale of specific
goods where one of the 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.
-It does not apply to a transaction where there was no
such delivery; neither was there any intention to
deliver a determinate thing
ART. 1463. The sole owner of a thing may sell an
undivided interest therein.
Sale of an undivided interest.
The owner of a thing may sell the entire thing, or a
specific portion thereof, or an undivided interest
therein and such interest may be designated as an
aliquot part of the whole.
-LEGAL EFFECT: To make the buyer the co-owner
The buyer acquires full ownership of his part and
he may sell it, convey or transfer only the title
pertaining to the undivided half of the land, for vital to
the validity of a contract of sale is that the vendor be
the owner of the thing sold. (Art. 1459.). (Operates
similarly with fungible goods)
-Article covers only the sale by a sole owner of a thing
of an undivided share or interest thereof.
ART. 1464--- In 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 of a share of
the mass as the number, weight or measure
bought bears to the number, weight, 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.
Civil Code classifies movable goods into consumable
or non-consumable (Art 418). This article speaks of
fungible goods.
1. Meaning of fungible goods
Goods of which any unit is, from its nature or by
mercantile usage, treated as the equivalent of any
other unit: grain, oil, wine, gasoline etc.
2. Effect of sale
The owner of a mass of goods may sell only an
undivided share thereof, provided the mass is specific
and capable of being made determinate (Art 1460)
a. By such sale, the buyer becomes a co-owner
of the whole mass in the proportion in which
the definite share bought 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 it was discovered that the mass contains less than
what was sold, the buyer becomes the owner of the
whole mass and furthermore, the seller shall supply
whatever is lacking from goods of the same kind and
quality,, subject to any stipuilation to the contrary.
3. Risk of loss
If the buyer becomes a co-owner, it follows that the
whole mass is at the risk of all the parties interested
therein in it, in proportion to their various holdings
4. Subject matter
Sale of an undivided share, either of a thing or that of
a mass of goods, the subject matter is an incorporeal
SALES AND LEASE | 14
right. Ownership passes to the buyer by the
intention of the parties.
5. Applicability of Article 1464 to non-fungible
goods.
-Barrels of flour, bales of cotton, herds of cattle or
sheep
Ex: In a stock of rice, the exact number of cavans of
which is still unknown, Jose buys 100 cavans. If there
are really 150, Jose becomes the co-owner of the
whole lot, his own share being 2/3 thereof
Page 22 paras

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