GENERAL PRINCIPLES SALE

A sale is absolute A sale is conditional

I. Definition (Art. 1458) when no condition is when it is made to a
Parties Obligations imposed. certain contingency
to transfer or condition.
ownership Ownership passers to Ownership is not to
the vendee or buyer vest in the but the
upon delivery of the happening of the
SELLER Real Subject
thing subject of the condition, usually in
Obligations matter sale. the payment of the
price.
SALE Consent to deliver There is neither a Ownership or title
possession stipulation in that title over the price
to the property sold is retained by the
meeting of Real reserved in the seller vendor, and it is not
minds obligations until the full payment to the vendee
of the price nor giving unless and the
BUYER to pay the vendor or seller happening of the
the right to condition.
unilaterally resolbe
II. Definition of Sales
the contract the
By the contract of sale, one of the contracting moment the buyer
parties (SELLER or VENDOR) obligates himself: fails to pay within a
fixed period.
a. To transfer the ownership
b. To deliver a determinate thing ESSENTIAL REQUISITES OF A CONTRACT
OF SALE
And the other (BUYER OR VENDEE)
Consent or meeting of the minds – refers to the
a. To pay therefore a price certain: in money
consent on the part of the seller to transfer title
or its equivalent.
and to deliver and on the part of the buyer to
pay and acquire.
III. General Principles
 A contract of sale is perfected even if However, there can be a valid sale even if
there is no delivery of the thing bought or it be against the will of the owner of the
the payment of the price yet since delivery property in the following cases:
and payment are not necessary for the
perfection of the contract of sale. Being Expropriation;
consensual, it is perfected by mere  Ordinary execution sale under Section 15 Rule 39
consent. of the 1997 Revised Rules of Civil Procedure;
 Gross inadequacy of price does not affect Judicial foreclosure sale under Rule 68 of the
a contract of sale, except as it may 1997 Revised Rules of Civil Procedure;
indicate a defeat in the consent, or that Extra-judicial foreclosure sale under Act 3135
the parties really intended a donation or
some other act or contract.
RELATED PROVISIONS IN CONSENT

ABSOLUTE SALE CONDITIONAL

 The sole owner of a thing may sell an undividedb. When the offer is accepted with a qualification or
interest therein. condition.
c. When before acceptance is communicated, the
The contract of sale is perfeted at the moment
subject matter has become illegal or impossible.
there is a meeting of minds upon the thing
d. When the period of time given to the offeree
which is the object of the contract and upon the
within which must signify his acceptance has
price. From that moment, the parties may
already lapsed.
reciprocally demand performance, subject to the
When the offer is revoked in due time (that is,
provisions of the law governing the form of
before the offeror has learned of its acceptance
contracts. (1475)
by the offeree)

VII. GENERAL RULE ON OPTIONS

VI. CONSENT AS AN ESSENTIAL REQUISITE

Art. 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing
and the case which are to constitute the
contract. The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
Art. 1324. When the offerer has allowed the
offeree 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.

Acceptance made by letter or telegramVIII. PROBLEM

does not bind the offerer except from the1. B, interested in a particular car at a car exchange
time it came to his knowledge. The company, asked S for the price. S said:
contract, in such a case, is presumed to “P3,500,000.” B, however could not make up his
have been entered into in the place where mind whether to buy or not. So S told B, “B, I’ll
the offer was made. give you a week to make up your mind. In the
a. Parties are face to face – offer must be certain meantime, I will reserve this car for you.” Before
and the acceptance be absolute. A qualified the week is over, can S withdraw the offer to
acceptance constitutes a counter-offer. sell the car for P3,500,000?
b. Negotiated thru phone – as if the parties are
face to face
c. Correspondence or thru telegram – offerer Answer: Yes. Provided B has not yet signified
receives or has knowledge of the acceptance by his acceptance or the offer to sell, that is, B has
the offeree. not yet bought the car, and provided that S
d. Subject to suspensive condition – condition is communicates such withdrawal to B. Thus, S
fulfilled. may, without liability to B, sell to another.

When Offer Becomes Ineffective
Other instances
There are other instances when the offer
becomes ineffective, namely:
a. When the offeree expressly or impliedly rejects
the offer.
2. A offered to sell his house and lot for P10M to B,
who was interested in buying the same. In his
letter to B, A stated that he was giving B a
period of one month within which to raise the
amount, and that as soon as B is ready, they
will sign the deed of sale. One week before
expiration of the one-month period, A went to
B, and told him that he is no longer willing to
 sell the property unless the price is increased to Art. 1459. The thing must be licit and the
P15M. May B compel A to accept the P10M first vendor must have a right to transfer the
offered, and execute the sale? ownership thereof at the time it is delivered.

Reasons: No, because here the promise to sell

(or the option granted B to buy) had no cause
OBJECTS OF CONTRACTS
or consideration distinct from the selling price.
Art. 1347. All things which are not outside the
commerce of men, including future things, may
When ownership is not transferred despite be the object of a contract.
delivery?
All rights which are not intransmissible may also
Art. 1477 be the object of contracts.

Art. 1478 No contract may be entered into upon

future inheritance except in cases expressly
authorized by law.
IX. OBJECT OR SUBJECT MATTER
All services which are not contrary to law,
Object or subject matter – refers to the morals, good customs, public order or public
determinate thing or at least capable of being policy may likewise be the object of a contract.
determinate

PROBLEM:
The object or subject matter of the sale should
Seller and Buyer orally entered into a contract
be determinate or at least determinable without
whereby Seller sold his one year production of
a need for executing another contract.
eggs in his poultry farm to Buyer for P150,000
Moreover, the thing or goods sold should also
which amount immediately gave in cash to
be under the power or authority of the seller or
Seller. The contract between Seller and Buyer
vendor to convey/alienate it.
is:

a. Void because the object was not existing at the

Meaning of Determinate
Art. 1460. A thing is determinate when it is
particularly designated or physically segregatedc. Rescissible because buyer will likely suffer
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.
Lawfulness of the Object and Right to
Transfer Ownership
time of execution of the contract.
b. Valid because future things may be the object of
contracts.
damage if the eggs do not come into existence.
d. Unenforceable because the contract was not in
writing.
OBJECT OF CONTRACTS
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.
LICIT – must be within the commerce of men
 VOID SUBJECT MATTER: contract to pay for the bags, at a discount of
10% as commission on the sale. The payment
a. Contrary to law
had to be made whether or not Y was able to
b. Simulated/fictitious
sell the bags. The contract is one of:
c. Did not exist at a time of transaction
d. Outside commerce of men a. Sale c. Agency to buy
e. Impossible service
b. Agency to sell d. Trust agreement
f. Intention can not be ascertained
g. By provision of law ACCIDENTAL ELEMENTS IN A CONTRACT
OF SALE
But a sale by a person not the owner of the
thing sold at the time of delivery is still valid if: Those which are not essential or natural but
may or may not exist depending on the
 Sale of a thing having potential existence
stipulations of the parties like conditions and
 Sale of future goods
payment of interest.
 Contract for the delivery at a certain price of an
article which the vendor in the ordinary course Essential Characteristics of Sale:
of the business manufactures or procures for
the general market, whether the same is on 1. Nominate vs. Innominate
hand at the or not. 2. Principal vs. Accessory vs. Preparatory
3. Consensual vs. Solemn vs. Real
CAUSE OR CONSIDERATION 4. Bilateral/Reciprocal vs. Unilateral
5. Onerous vs. Gratuitous
Cause or consideration – refers to the price
6. Commutative vs. Aleatory
certain in money or its equivalent.
7. Title vs. Mode
NOTE: Failure to pay the consideration is
different from lack of consideration. Failure to
pay the consideration results in a right to 1. Nominate – law gave it a name
demand the fulfillment or cancellation of the 2. Principal – can stand on its own; unlike accessory
obligation while lack of consideration prevents contract
the existence of valid contract of sale. Bilateral – imposes obligation on both parties
a. Obligation of seller – transfer ownership & deliver
Gross inadequacy of price does not affect a
b. Obligation of buyer – pay for price
contract in the consent of that the parties really
intended a donation or some other act or Consequence: power to rescind is implied in
contract. bilateral contracts
NOTE: The parties must also agree on the 4. Onerous – with valuable consideration
manner of payment of the purchase price since
it is an essential element before a contract of Consequence: all doubts in construing contract
sale can exist such that disagreement on the to be received in greater reciprocity of interest
manner of payment is tantamount to a failure to Sale is title and not mode
agree on the price.
 Sale by itself is not a mode of acquiring
PROBLEM: ownership. It merely causes certain obligations
X granted Y the right to sell as an “agent” X’s to arise such as to transfer ownership.
bags in Mindanao. Y was obliged under the
 Ownership is transferred not by contract of sale 2. Sales versus Payment by cession
but by tradition or delivery.
SALE DATION IN PAYMENT
SALES DISTINGUISHED FROM OTHER No pre- Pre-existing credit
CONTRACTS existing
credit
 Dacion – is process or extinguishment of pre- Obligations Obligations are extinguished
existing obligation are created
a. There must be delivery of subject matter in lieu Consideration Consideration of the debtor
of a pre-existing obligation; on the part is the extinguishment of the
b. There must be difference between prestation due of the seller debt; on the part of the
and what is given in substitute; is the price; creditor, it is the
c. There must be a clear “meeting of minds” that on the part assignment of the things
the pre-existing obligation is extinguished by of the buyer sold
reason of the prestation substituted. is the deivery
 Dacion – novates the original contractual relations of the object
Greater Less freedom in
into a fully executed sale.
freedom in determining the price
determining because of the amount of
the price the pre-existing credit which
the parties seek to
extinguish
1. Sales versus dacion en pago The The creditors do not
ownership of become the owners of the
SALE DATION IN PAYMENT
the thing is property assigned to them
No pre-existing Pre-existing credit
transferred to but remerely given the right
credit
the buyer to sell such property and
Obligations are Obligations are apply the proceeds to their
created extinguished claims.
Consideration on Consideration of the
the part of the debtor is the
seller is the price; extinguishment of the SALES vs. CONTRACT FOR PIECE OF WORK
on the part of the debt; on the part of
buyer is the the creditor, it is the A contract for the delivery at a certain price of
acquisition of the acquisition of the an article which the vendor in the ordinary
object object offered in lieu of course of his business manufactures or procures
the original credit for the general market, whether the same is on
Greater freedom Less freedom in hand at the time or not, is a contract of sale.
in determining the determining the price
price because of the amount But if the goods are to be manufactured
of the pre-existing specially for the customer and upon his special
credit which the parties order, and not for the general market, it is a
seek to extinguish contract for piece of work.
Buyer still has to The payment is
pay the price received by the debtor Contract of sale Piece of work
before the contract is Ordinary course of Not ordinary course
perfected. business of business
Produce for the Manufactured
general market specially
 Covered by statute Not coverd by at the time the orders were received. Michael
of fraud if the sale stature of fraud Barkley, who is 7’ tall and wears size 18 shoes,
of personal property provided it will be was provided three days later, with a pair that
is P500 or more or performed within was specially made for him since Armstrong
sale of real property one year does not make shoes of his size. What kind of
regardless of contracts were entered into for the shoes
amount
provided to the two basketball players?

a. The contract for the pair of shoes provided to

School of Thoughts
Charles Jordan is a contract for a piece of work,
1. Massachussets Rule – if specially done at the while that for Michael Barkley is a contract of
order of another is a contract for a piece of sale.
work; otherwise it is a contract of sale
b. The contract for the pair of shoes provided to
2. New York rule – if the thing already exists, it is a
Charles Jordan is a contract of sale, while that
sale; if not it is a contract for a piece of work.
for Michael Barkley is a contract for a piece of
3. English rule – if materials is more valuable, it is a
work.
contract of sale; if skill is more valuable, it is a
contract for a piece work. c. Both contracts are contracts of sale

Problem: d. Both contracts are contracts for a piece of

work.
If the material used in the manufacture of the
article is more valuable, it is contract of sale, SALES vs. BARTER
and if the labor or skill is more valuable than the
BARTER IS SALE but with the PRICE being
material used in the manufacture of the article,
replaced with an obligation to transfer
it is a contract for a piece of work. This school
ownership/possession of another subject
of thought followed:
matter.
a. English rule c. New York rule
Therefore: BARTER GOVERNED BY LAW ON
b. Massachusetts rule d. Italian rule
SALES
Problem:
But: NOT COVERED BY STATUTE OF FRAUDS
San Miguel Corporation, which maintains a
professional basketball team entered into a
contract with Armstrong Rubber Company for RULES TO DETERMINE WHETER
the latter to provide a pair of rubber shoes to CONTRACT IS ONE OF SALE OR BARTER
the formers two imported basketball players,
Charles Jordan and Michael Barkley. Armstrong Art. 1468. If the consideration of the contract
Rubber Company was instructed to make a pair consists partly in money, and partly in another
for either or both players in case the company thing, the transaction shall be characterized by
did not manufacture shoes of their size. No pair the manifest intention of the parties.
was, however, immediately available for both If such intention does not clearly appear, it
the players. Charles Jordan, who is 6’5 tall and shall be considered a barter if the value of the
wears size 12 rubber shoes, was given a pair thing given as a part of the consideration
day from the 300 pairs that Armstrong was in exceeds the amount of the money or its
the process of manufacturing for its customers equivalent; otherwise, it is a sale.
 a. First rule – intent SALES VERSUS AGENCY TO
b. If intent does not clearly appear – SELL/BUY
1. If thing is more valuable than money –
BARTER
SALE AGENCY TO SELL
2. If 50/50 – SALE
Buyer receives Agency receives the
3. If money is more valuable than the
the goods as goods as goods of
thing – SALE
owner principal who retains his
BARTER ownership over them
Buyer pays the Agent delivers the price
- In barter, the consideration is the giving price which in turn he got
of a thing in sale, it is giving of money as from his buyer
payment Buyer, as a Agent can return the
- Both are governed by law on sales; both general rule, goods in case he is
are species of the genus sales cannot return unable to sell the same
- If consideration consists partly in money & the object sold to a third person
partly by thing – look at manifest Seller warrants Agent makes no
intention; if intention is not clear: the thing sold warranty for which he
assumes personal
a. Value of the thing is equal or less than
liability as long as he
amount of money – SALE
acts within his authority
b. Value of thing is more than the and in the name of the
amount of money – BARTER seller
AGENCY TO SELL/BUY Buyer can deal Agent in dealing with
with the thing the thing received must
REPRESENTATIVE sold as he act and is bound
pleases being according to the
AGENCY the owner instruction of the
FIDUCIARY – essentially principal
revocable
- fruits and of principal SALES VERSUS DONATION

CONSENSUAL SOLEMN
*requisite of
Not personally liable for the
form for validity
obligation created by the sale
contract
ONEROUS GRATUITOUS
AGENT Not obliged to pay the price /COMMUTATIVE *pure liberality

Does not assume the risks or

ESSENCE: Both involve the transfer
ownership to the object of sale of ownership/possession of subject
matter
 SALES VERSUS LEASE ownership of the thing does not comply with
sold and delivered the condition
Lease – essentially involves the temporary until the contract of precedent of making
enjoyment of possession of the subject sale is resolved and payment at the time
matter set aside. specified in the
contract.
Few Instances: Treated as sale on
installments when lease structured in such a CONDITIONAL SALE VS. CONTRACT TO SELL
way as to avoid application of the Recto Law
As to reservation of title to the subject property.

In both cases, the seller may reserve the title to

CONTRACT OF SALE VS. CONTRACT TO
SELL
Contract to sell – exclusive right privilege to
purchase an object
the subject property until fulfillment of the
suspensive condition i.e. full payment of the
price.
As to effect of fulfillment of suspensive condition

1. Upon fulfillment of the suspensive

Absent a proviso in the contract that the title
condition, which is the full payment of the
to the property is reserved in the vendor until
purchase price, the contract of sale is
full payment of the purchase price or a
thereby perfected, such that if there had
stipulation giving the vendor the right to
been previous delivery of the subject
unilaterally rescind the contract the moment
property to the buyer, ownership thereto
the vendee fails to pay within the fixed
automatically transfers to the buyer by
period, the moment the transaction is an
operation of law without any further act
absolute contract of sale not a contract to
by the seller.
sell.
2. Upon fulfillment of the suspensive
CONTRACT OF SALE CONTRACT TO SELL condition, which is the full payment of the
Title passes to the Ownership is reserved purchase price, ownership will not
buyer upon the in the seller is not to automatically transfer to the buyer
delivery of the thing pass until the full although the property may have been
sold payment of purchase previously delivered to him. The
price prospective seller still has to convery title
Non-payment of the Full payment is a to the prospective buyer by entering into a
price is a negative positive suspensive contract of absolute sale.
resolutory condition condition, the failure
and the remedy of the of which is not a
seller is to exact breach – casual or
fulfillment or to serious but simply As to effect of sale of the subject property to
rescind the contract prevents the third persons
obligation of the 1. Constructive/actual knowledge on the part
vendor to convey title
of the third buyer of the defect in the
from having binding
seller’s title renders him not a registrant in
force
Vendor losses and Title remains in the good faith. Such second buyer cannot
cannot recover vendor if the vendee defeat the first buyer’s title.
Ratio: Fulfillment of the suspensive conditions
affects the seller’s title to the property and
previous delivery of the property automatically
transfers ownership/title to the buyer.

2. Third person buying the property despite

fulfillment of the suspensive condition
cannot be deemed suspensive in bad faith
and prospect a buyer cannot seek the
relied of the conveyance of property.

Exception: If there was no ------- sale of the

property.