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SALES NOTES ON PROVISIONS

ARTICLES BASED ON VILLANUEVA BASED ON DE LEON


1458 Two obligations of the seller: The contract of sale is an agreement whereby one of the
1.Transfer ownership parties (called the seller or vendor) obligates himself to
2.Deliver the possession of the subject matter deliver something to the other (called the buyer or
purchaser or vendee) who, on his part, binds himself to
An obligation for the Buyer: pay therefor a sum of money or its equivalent (known as
1.Pay the price the price).

-Both of these obligations are real obligations or Characteristics of a contract of sale:


obligations “to give”. In contrast, obligations to do
or not to do, cannot be enforced through actions 1.Consensual, because it is perfected by mere consent
for specific performance because of the public with- out any further act;
policy against involuntary servitude 2.Bilateral,1 because both the contracting parties are
bound to fulfill correlative obligations towards each other
Essential requisites of a contract of sale: — the seller, to deliver and transfer ownership of the thing
1. Consent or meeting of the minds: The essence sold and the buyer, to pay the price;
of consent is the conformity of the parties on the 3.Onerous, because the thing sold is conveyed in
terms of the contract, the acceptance by one of considera- tion of the price and vice versa (see Gaite vs.
the offer made by the other. The contract to sell is Fonacier, 2 SCRA 820 [1961].);
a bilateral contract. Where there is merely an offer 4.Commutative, because the thing sold is considered the
by one party without the acceptance of the other, equivalent of the price paid and vice versa. (see Ibid.)
there is no consent. However, the contract may be aleatory 2 as in the case of
the sale of a hope (e.g., sweepstakes ticket);
This refers to the con- sent on the part of the 5.Nominate, because it is given a special name or
seller to transfer and deliver and on the part of the designa- tion in the Civil Code, namely, “sale”; and
buyer to pay. 6.Principal, because it does not depend for its existence
and validity upon another contract.
XX: sale against the will of the owner in case of
expropriation (see Art. 1488.) and the three Essential requisites distinguished from Natural and
different kinds of sale under the law, namely: an accidental elements:
ordinary execution sale (see Rules of Court, Rule
39, Sec. 15.), judicial foreclosure sale (Ibid., Rule 1.Natural elements or those which are deemed to exist in
68.), and extra-judicial foreclosure sale. (Act No. cer- tain contracts, in the absence of any contrary
3135, as amended.) A different set of law applies stipulations, like warranty against eviction (Art. 1548.) or
to each class of sale mentioned. hidden defects (Art. 1561.); and

2. Subject Matter: object of the contract. It may be 2.Accidental elements or those which may be present or
personal or real property. ab- sent depending on the stipulations of the parties, like
conditions, interest, penalty, time or place of payment, etc.
It’s not just determinate thing, also include
determinable (Article 1460, 2nd par.). Even if the 2 kinds of sale:
subject matter is generic (determinable), it must
necessarily be determinate at the point of 1.Absolute: where the sale is not subject to any condi- tion
performance. It does not mean to exclude certain whatsoever and where title passes to the buyer upon
generic things from validly becoming the proper delivery of the thing sold. Thus, it has been held that a
subject matter of sale, at the point of perfection. deed of sale is absolute in nature although denominated
as a “Deed of Conditional Sale” in the absence of any
3.Cause or consideration: “price certain or stipulation that the title to the property sold is reserved in
equivalent” the vendor until full payment of the purchase price nor a
stipulation giving the vendor the right to unilaterally
The price must be real, not fictitious; otherwise, rescind the contract the mo- ment the vendee fails to pay
the sale is void although the transaction may be within a fixed period.
shown to have been in reality a donation or some
other contract. (Art. 1471.) A seller cannot render 2. Conditional: where a contract is subject to certain
invalid a perfected contract of sale by merely conditions, usually, in the case of the vendee, the full
contradicting the buyer’s allegation regarding the payment of the agreed purchase price
price and subsequently raising the lack of
agreement as to the price. (David vs. Tiongson). Contract to sell vs. Contract of sale:

Stages in the life of sale: Contract to sell: is a preparatory contract to sale;

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SALES NOTES ON PROVISIONS

1.Negotiation/preparation/Policitacion: the period “exclusive right and privilege to purchase”, where it is


from the time the prospective contracting parties stipulated that ownership in the thing shall not pass to the
indicate their interests in the contract purchaser until he has fully paid the price (Art. 1478.)

2.Perfection/concepcion/birth: takes place upon Contract of sale: Principal contract; title passes to the
the concurrence of the essential elements of the buyer upon delivery of the thing sold
sale which are the meeting of the minds of the
parties as to the object of the contract and upon CONTRACT TO SELL AND CONDITIONAL SALE:
the price
Contract to sell: seller reserve the ownership; binds
3. Consummation or death: begins when the himself to sell the said property exclu-sively to the
parties perform their respective undertaking under prospective buyer upon fulfillment of the purchase price.
the contract of sale, culminating in the
extinguishment thereof. Conditional Sale: the seller reserve reserve title to the
property subject of the sale until the fulfillment of the
suspensive condition, be- cause in a conditional contract
of sale, the first element of con- sent is present, although
it is conditioned upon the happening of a 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.

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SALES NOTES ON PROVISIONS

1475 Under Article 1475 of the Civil Code, from the This article follows the general rule that contracts are
moment of perfection of the sale, the parties may perfected by mere consent. (Art. 1315.) The contract of
reciprocally demand performance, even when the sale being consen- sual, it is perfected at the moment of
parties have not affixed their signatures to the consent without the neces- sity of any other
written form of such sale,28 but subject to the circumstances. From the moment there is a meet- ing of
provisions of the law governing the form of minds upon the thing which is the object of the contract
contracts.29 Consequently, the actual delivery of and upon the price (see Art. 1624.), the reciprocal
the subject matter or payment of the price agreed obligations of the parties arise even when neither has
upon are not necessary components to establish been delivered. The essence of consent is the conform-
the existence of a valid sale;30 and their ity of the parties on the term of the contract, the
non- performance do not also invalidate or render acceptance by one of the offer made by the other.
“void” a sale that has began to exist as a valid
contract at perfection; non-performance, merely Form of contract. — Generally, a contract of sale is
becomes the legal basis for the remedies of either binding regardless of its form. (Art. 1356.) However, in
specific performance or rescission, with damages case the contract of sale should fall within the provisions
in either case. of the Statute of Frauds (Art. 1403[2].) or of any other
applicable statute which requires a certain form for its
enforceability or validity (Art. 1356.), then that form must
be complied with. (Art. 1483.) A contract of sale may be in
a private instrument; the contract is valid and binding be-
tween the parties upon its perfection and a party may
compel the other to execute a public instrument
embodying the contract. (see Arts. 1357, 1358.)

Failure to pay the consideration of contract is different


from lack of consideration; the former results in a right to
demand fulfillment or cancellation of the obligation under
an existing valid contract, while the latter prevents the
existence of a valid contract.

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SALES NOTES ON PROVISIONS

725
(Donation)
1467 Two tests for distinction:

A.Manufacturing in the ordinary course of


business to cover sales contracts; and

B.Manufacturing upon special order of customers,


to cover contracts for piece-of-work.

- The jurisprudential doctrine that became the


basis of Article 1467 therefore indicated that the
term “upon special order” is really based on the
ability of the producer to manufacture the goods in
the condition that they customarily are without
having to wait for specific orders from customers.

SALE VS PIECE-OF-WORK

Sale is constituted of real obligations and would


be the proper subject of an action for specific
performance. On the other hand, a contract for a
piece-of-work, where the main subject matter is
the service to be rendered (obligation to do),
would not allow an action for specific performance
in case the contractor refuses to comply with his
obligation. Instead, Article 1715 provides that
“[S]hould the work be not of such quality, the
employer may require that the contractor remove
the defect or execute another work. If the
contractor fails or refuses to comply with this
obligation, the employer may have the defect
removed or another work executed at the
contractor’s cost.”

In a sale, only when the subject matter is


indeterminate or generic (i.e., determinable) is
the buyer granted the remedy under Article 1165
to have the subject matter done by a third party
with cost chargeable to the seller. Finally a
contract for a piece-of-work, unlike a sale, is not
governed by the Statute of Frauds.
1468 Article 1468 of the Civil Code provides for the In such cases, the manifest intention of the parties is
following rules in cases of dispute whether the paramount in determining whether it is one of barter or of
contract is a sale or a barter, especially when the sale and such intention may be ascertained by taking into
consideration agreed upon is partly in money and account the contemporaneous and subsequent acts of the
partly in another thing: parties. (Art. 1371.)

1.Manifest Intention of the Parties – Even if the If this intention cannot be ascertained, then the last
acquisition of a thing is paid for by another object sentence of the article applies. But if the intention is that
of greater value than the money com- ponent, it the con- tract shall be one of sale, then such intention
may still be a sale and not a barter, when such must be followed even though the value of the thing given
was the intention of the parties; as a part consideration is more than the amount of the
money given.
2.When Intention Does Not Appear and
Consideration Consists Partly in Money and
Partly in Another Thing:

(a)It is a barter, where the value of the thing given


as part of the consideration exceeds the amount

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SALES NOTES ON PROVISIONS

of money given or its equivalent;


(b)It is a sale, where the value of the thing given
as part of the consideration equals or is less than
the amount of money given.
1638 The do ut des contract (“I give that you may A contract whereby one person transfers the ownership of
give”), apart from sales contracts where the non-fungible things to another with the obligation on the
consideration is price, is essentially a barter or part of the latter to give things of the same kind, quantity,
exchange agreement defined under Article 1638 and quality is considered a barter. (Art. 1954.)
of the Civil Code: “By the contract of barter or
exchange one of the parties binds himself to give The use of the term “barter” in describing a contract is not
one thing in consideration of the other’s promise controlling.
to give another thing.” Under Article 1641 of the
Civil Code, contracts of barters are essentially Perfection and consummation:
governed by the provisions pertaining to the The contract of barter is perfected from the moment there
nominate contract of sale. Like sale which is a meeting of minds upon the things promised by each
consists of bilateral real obligations (to deliver and party in consideration of the other. (see Art. 1475.)
transfer ownership of the subject matter on the
part of the seller, to pay the price on the part of It is consummated from the time of mutual delivery by the
the buyer), a do ut des contract, which is a barter contracting parties of things they promised.
contract, also consist of reciprocal obligations to
give.
CONTRACT OF SALE VS CONTRACT OF BARTER OR EXCHANGE

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. (Art. 1638.) On the other hand, in a con- tract of sale, the vendor gives a thing in consideration for a
price in money. (Art. 1458.)

The only point of difference between the two contracts is in the element which is present in sale but not in barter, namely:
“price certain in money or its equivalent.”

SALE VS AGENCY TO SELL

Agency to sell: By the contract of agency, a person binds himself to render some service or to do something in representation
or on behalf of the principal, with the consent or authority of the latter.

By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of
an- other, with the consent or authority of the latter. (Art. 1868.)

Sale may be distinguished from an agency to sell, as follows:


1.In a sale, the buyer receives the goods as owner; in an agency to sell, the agent receives the goods as 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 agent’s commission upon the sales made;

2.In a sale, the buyer has to pay the price; in an agency to sell, the agent has simply to account for the proceeds of the sale
he may make on the principal’s behalf;

3.In a sale, the buyer, as a general rule, cannot return the object sold; 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.In a sale, the seller warrants the thing sold (see Arts. 1547, 1548, 1561.); in an agency to sell, 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; and

5.In a sale, the buyer can deal with the thing sold as he pleases being the owner; in an agency to sell, the agent in dealing
with the thing received, must act and is bound according to the instructions of his principal. 10

From its very nature, sale is not unilaterally revocable; whereas, a contract of agency to sell, because it covers an underlying
fiduciary relationship, is essentially revocable, even in the presence of an irrevocability clause.
In sale, the buyer himself pays for the price of the object, which constitutes his main obligation; in an agency to sell, the agent
is not obliged to pay the price, and is merely obliged to deliver the price which he may receive from the buyer.

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SALES NOTES ON PROVISIONS

In sale, the buyer, after delivery, becomes the owner of the subject matter; in an agency to buy, the agent does not become
the owner of the thing subject of the agency, even if the object is delivered to him.
In sale, the seller warrants; in an agency, the agent who effects the sale assumes no personal liability as long as he acts
within his authority and in the name of the principal. However, it is legally possible for an agent or a broker to voluntarily bind
himself to the warranties of the seller.
Finally, because of the fiduciary nature of the relationship, in an agency to sell, 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.

SALE VS LEASE

In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and
for a period which may be definite or indefinite. (Art. 1643.) In other words, in a lease, the landlord or lessor transfers merely
the temporary possession and enjoyment of the thing leased. In a sale, the seller transfers ownership of the thing sold.

SALE VS DATION IN PAYMENT

Dation in payment (or dacion en pago) is the alienation of prop- erty to the creditor in satisfaction of a debt in money. (see Art.
1619.) It is governed by the law on sales. (Art. 1245.) As such the essential elements of a contract of sales, namely, consent:
object certain, and cause or considerations, must be present.
The distinctions are the following:
1.In sale, there is no preexisting credit, while in dation in payment, there is;
2.In sale, obligations 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;11
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 con-
tract is perfected

SALE VS PAYMENT BY CESSION (ART. 1255)

PAYMENT BY CESSION: Payment of cession is a special form of payment whereby the debtor abandons all of his properties
in favor of his creditors in order that from the proceeds thereof the creditors can obtain their credits from the debtor.

There is a debt, mode of extinguishing an obligation.

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SALES NOTES ON PROVISIONS

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