Law on Sales

Art. 1458:
By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or its equivalent.
A contract of sale maybe absolute or conditional

CHARACTERISITICS OF A CONTRACT OF SALE

1. Consensual - perfected by mere consent
2. Bilateral - both contracting parties are bound to fulfill correlative obligations to each
other - seller, to deliver and transfer ownership of the thing sold and the buyer, to pay the
price
3. Onerous - the thing sold is conveyed in consideration of the price
4. Commutative - the thing sold is considered the equivalent of the price paid and vice
versa. However, the contract may be aleatory as in the case of the sale of a hope
(sweepstakes ticket)
Aleatory contract - one of the parties or both reciprocally bind themselves to
give or to do something in consideration of what the other shall give or do upon the
happening of an event which is uncertain, or which is to occur at an indeterminate
time. The consideration is not equivalent of what has been received in the case of
purchase of a lotto ticket. If the ticket wins, the prize is much more than the price of
the ticket.
5. Nominate - it is given a special name or designation namely Sale
6. Principal - It does not depend for its existence and validity upon another contract

ESSENTIAL REQUISITES OF A CONTRACT OF SALE

1. Consent or meeting of the minds

a. Seller consents to deliver and transfer ownership while buyer consents to pay;

b. Parties must be legally capacitated

2. Object or subject matter – determinate thing or capable of being determinate;

things and rights

3. Cause or consideration – the price certain in money or its equivalent (check or

promissory note)

The above are the essential elements of a contract of sale or those without which no
sale can validly exist. They are to be distinguished from:
 (1) Natural elements or those which are deemed to exist in certain contracts, in the
absence of any contrary stipulations, like warranty against eviction (Art. 1548.) or hidden
defects (Art. 1561.); and
(2) Accidental elements or those which may be present or absent depending on the
stipulations of the parties, like conditions, interest, penalty, time or place of payment, etc.

ILLUSTRATIVE CASES:

1. Supposed sale was evidenced by a receipt acknowledging receipt of P1,000.00.

Facts: B bought on a partial payment of P1,000.00, evidenced by a receipt, a
portion of a subdivision from S, administrator of the testate estate of his deceased
spouse. Subsequently, S was authorized by the court to sell the subdivision. In the
meantime, PT Co. became the new administrator. It sold the lot to another which
sale was judicially approved. B files a complaint which seeks, among other things,
for the quieting of title over the lot in question.
Issue: Was there a valid and enforceable sale to B?
Held: No. An examination of the receipt reveals that the same can neither be
regarded as a contract of sale nor a promise to sell. There was merely an
acknowledgment of the sum P1,000.00. There was no agreement as to the total
purchase price of the land nor to the monthly installments to be paid by B. The
requisites for a valid contract of sale are lacking. (Leabres vs. Court of Appeals,
146 SCRA 158 [1986].)

2. Buyer did not sign draft of Contract to Sell because it covered seven (7) lots
instead of six (6), but sent to seller five (5) checks as down payment which the seller did
not encash.
Facts: B Company and S, subdivision developer, agreed to enter into a new
Contract to Sell whereby S will sell seven (7) lots at P423,250.00 with a down
payment of P42,325.00 and the balance payable in 48 monthly installments of
P7,395.94. The draft of the Contract to Sell prepared by S was sent to B Company
but B’s president did not sign it although he sent five (5) checks covering the down
payment totalling P27,542.72. S received the checks but did not encash it because
B’s president did not sign the draft contract, the reason given by the latter was that
the draft covered seven (7) lots instead of six (6). Since no written contract was
signed, S sued B to recover possession of the lots still occupied by the latter.
Issues: (1) May the unsigned draft be deemed to embody the agreement between
the parties? (2) May the receipt of the five (5) checks by S serve to produce the effect
of tender of down payment by B?
Held: (1) Based on the facts, the parties had not arrived at a definite agreement.
The only agreement they arrived at was the price indicated in the draft contract. The
number of lots to be sold was a material component of the Contract to Sell. Without
an agreement on the matter, the parties may not in any way be considered as having
arrived at a contract under the law.
(2) Moreover, since the five (5) checks were not encashed, B should have
deposited the corresponding amount of the said checks as well as the installments
agreed upon. A contract to sell, as in this case, involves the performance of an
 obligation, not merely the exercise of a privilege or a right. Consequently,
performance or payment may be effected not by tender of payment alone but by both
tender and consignation. It is consignation which is essential to extinguish B’s
obligation to pay the balance of the purchase price. (see Arts. 1256-1258.) B did not
even bother to tender and make consignation of the installments or to amend the
contract to reflect the true intention of the parties as regards the number of lots to be
sold. (People’s Industrial Commercial Corp. vs. Court of Appeals, 88 SCAD 559,
G.R. No. 112733, Oct. 24, 1997.)

KINDS OF SALE
ABSOLUTE – sale is not subject to any condition and where title or ownership
immediately passes to the buyer upon delivery of the thing (CONTRACT OF SALE). A
contract of sale is absolute when the title to the property passes to the vendee upon
delivery of the thing sold (Rabuya, 2017).
CONDITIONAL – sale subject to a contingency, usually the full payment of price
and where delivery does not transfer ownership until the condition is fulfilled.
(CONTRACT TO SELL)

Where the obligation of either party to a contract of sale is subject to any condition which
is not performed, such party may:
1. Refuse to proceed with the contract; or
2. Waive performance of the condition.

Unlike in a non-fulfillment of a warranty which would constitute a breach of contract, the

non-happening of the condition, although it may extinguish the obligation upon which it
is based, generally does not amount to a breach of contract of sale.

REQUISITES OF OBJECTS OF SALE

1. Determinate or capable of being determinate - when it is particularly designated or
physically segregated from all others of the same class. A determinate thing is identified
by its individuality, e.g., my car (if I have only one); the watch I am wearing; the house
located at the corner of Rizal and Del Pilar Streets, etc.;

2. Licit or within the commerce of man; rights must be transmissible

KINDS OF THINGS AS TO LEGALITY

A. LICIT – the thing must be within the commerce of men

B. ILLICIT

B.1. Illicit per se (of its nature)

B.2. Illicit per accidens (declared illegal by law)

Article 1459 refers to both. Decayed food unfit for consumption is illicit per se, while
lottery tickets (Art. 195, Revised Penal Code.) are illicit per accidens. Land sold to an
alien is also per accidens because the sale is prohibited by the Constitution.The rule is
well-settled that the 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. (Service Specialist,
Inc. vs. Intermediate Appellate Court, 174 SCRA 80 [1989].)

RIGHT OF VENDOR TO TRANSFER ONWERSHIP

GENERAL RULE: One can only sell what he owns

Exception: if authorized to do so (otherwise, unenforceable)

***the right to sell the thing may not exist yet at the time of perfection but must exist at
the time that the ownership is to pass

WHAT MAY BE SOLD?

1. things or rights that are in existence
2. emptio rei speratae or sale of future things as long as it has the potential or
possible existence
***hedging
***future inheritance may not be sold but successional rights may be the
object of sale
3. emptio spei or the sale of hope or expectance; sale of vain hope is void
EXAMPLES:
(1) S binds himself to sell for a specified price to B a parcel of land if he wins a
case for the recovery of said land pending in the Supreme Court. Here, the
obligation of S to sell will arise, if the “expected thing,’’ the land, will come into
existence, i.e., if he wins the case. Before a decision is rendered, there is only
“the mere hope or expectancy’’ that the thing will come into existence.
(2) B buys a sweepstakes ticket in the hope of winning a prize. Here, the object
of the contract is the hope itself. The sale is valid even if B does not win a prize
because it is not subject to the condition that the hope will be fulfilled.
4. goods the acquisition of which depends on a condition which may or may not
happen
5. sale of a sole owner of an undivided or aliquot part of his property consisting of a
specific mass or incorporeal rights - EFFECT: co-ownership
Fungible goods. — It means goods of which any unit is, from its nature or by
mercantile usage, treated as the equivalent of any other unit (Uniform Sales Act, Sec. 76.),
such as grain, oil, wine, gasoline, etc
6. sale of properties or rights subject to resolutory conditions

A resolutory condition is an uncertain event upon the happening of which the

obligation (or right) subject to it is extinguished. Hence, the right acquired in virtue
of the obligation is also extinguished.
 Example: For failure to pay his debt, the land of S (mortgagor) was sold to B,
the highest bidder and purchaser in an extrajudicial foreclosure of a real estate
mortgage. Under the law (Act No. 3135, as amended.), the mortgagor may redeem
the property at any time within one year from and after the date of the registration of
the sale. If S redeems the property, then the sale made to B is extinguished.
Note: One of the obligations of the vendor is to transfer the ownership of the
thing object of the contract. (Art. 1458.) If the resolutory condition attaching to
the object of the contract, which object may include things as well as rights
(Arts. 1427, 1347, par. 1.), should happen, then the vendor cannot transfer the
ownership of what he sold since there is no object.

SALE vs. DONATION

SALE DONATION
Onerous Gratuitous/Onerous
Consensual Formal contract
Law on Sales Law on Donation

SALE vs AGENCY TO SELL (Art 1466)

SALE AGENCY TO SELL

Buyer receive the goods as owner Agent receives the goods owned by the
principal
Buyer has to pay the price Agent has to account for proceeds of sale he
makes in behalf of the principal
Buyer cannot return the object sold Agent can return the object if he is unable
to sell
Buyer can perform acts of ownership over Agent must act within the bounds of the
the thing agency and according to the instructions of
the principal

ILLUSTRATIVE CASE: 1. One given exclusive right to sell beds furnished by

manufacturer, agreed to pay discounted invoice price at a certain period.
Facts: S granted B the exclusive right to sell the former’s beds in Visayas. S was to
furnish B with the beds which the latter might order. The price agreed upon was the
invoice price of the beds in Manila with a discount of from 20% to 25%. Payment was to
be made at the end of sixty days.
Issue: S claimed that the contract was an agency to sell while B maintained that it was a
sale.
Held: The stipulations are precisely the essential features of a contract of purchase and
sale. There was the obligation on the part of S to supply the beds and on the part of B, to
pay their price. These features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent receives the thing to sell it and does not pay its price but
delivers to the principal the price he obtains from the sale of the thing to a third person,
and if he does not succeed in selling, he returns it. By virtue of the contract between S
and B, the latter, on receiving the beds was necessarily obliged to pay their price within
the terms fixed without any other consideration and regardless as to whether he had sold
the beds. (Quiroga vs. Parson Hardware Co., 38 Phil. 501 [1918].)

SALE vs CONTRACT FOR A PIECE OF WORK (Art. 1467)

SALE CONTRACT FOR A PIECE OF WORK

Thing would have existed and subject to sale Thing transferred in not in existence and
to another person even if order has not been would not have existed but for the order of
given the person acquiring it

Risk of loss before delivery is borne by the Risk of loss is borne by worker
buyer
Covered by the Statue of Frauds (Art 1403 Not within the ambit of the Statute of Frauds
par 2)

EXAMPLE:
If B is buying a pair of shoes of a particular style and size from S which the latter
ordinarily manufactures or procures for the general market but the same is not available,
an order for one would be a contract of sale, since the article would have existed and been
the subject of sale to some other person even if the order had not been given.
On the other hand, if B places an order for a pair of shoes of a particular shape
because his feet are deformed, the fact that such kind of shoes is not suitable for sale to
others in the ordinary course of the seller’s business and is to be manufactured especially
for B and upon his special order, makes the contract one for a piece of work.

SALE vs. DACION EN PAGO

BASIS SALE DACION EN PAGO

Existence of Credit No pre-existing credit Contract where property is
alienated to extinguish pre-
existing credit/debt
Relationship Buyer-seller relationship Novates creditor-debtor
relationship into seller-
buyer
Obligation Obligations are created Obligations are
extinguished
Consideration Price - seller Extinguishment of the debt
Acquisition of the object - - debtor
buyer Acquisition of the object
offered in lieu of the
original credit - creditor
Determination of the Price Greater freedom Limited Freedom
Payment of price Buyer still has to pay the The debtor receives the
 price payment before the contract
is perfected

EXAMPLE: S owes B P10,000.00. To pay his debt, S, with the consent of B, delivers a
specific television set. If the value of the television set, however, is only P8,000.00, S is
still liable for P2,000.00 unless the parties have considered the conveyance as full
payment.

SALE vs BARTER (Art 1468)

SALE BARTER/EXCHANGE
Consideration is money or its equivalent Consideration is another thing

Rules in determining whether contract is sale or barter/exchange if consideration is

partly cash and in kind
Intention of parties By contemporaneous and subsequent acts of
the parties
Value of thing given > amount of Contract is BARTER
money/equivalent
Value of thing given < amount of Contract is SALE
money/equivalent

EXAMPLES:
(1) S, a sugar miller, and B, a manufacturer and dealer of whisky, entered into an
agreement whereby S was to deliver sugar worth P20,000.00 to B who was to give 100
bottles of whisky worth also P20,000.00. This is a contract of barter.
(2) Suppose at the date of delivery, B had only 25 bottles of whisky. With the consent of S,
S paid the difference of P15,000 in cash. In this case, the contract is still barter. The
consideration for the sugar is not cash but the whisky, and the amount of P15,000.00 paid
by B is in consideration for the 75 bottles of liquor.
(3) Suppose, in the same example, B had no whisky at the stipulated date of delivery and
he paid S P20,000.00 instead of giving whisky. Did the contract become one of sale? No,
because the payment is in consideration of the value of the whisky, and not of the sugar.
The manifest intention of the parties was to enter into a contract of barter. But if B had
whisky at the date of delivery and he paid P20,000.00 with the consent of S, the contract
would become one of sale.

WHEN PRICE IS CONSIDERED CERTAIN (Art 1469)

Price must be certain and capable of being ascertained in money (currency) or its
equivalent (mercantile documents)

PRICE IS CERTAIN IF:

1. parties have agreed/fixed a definite amount
 2. it is in reference to another certain thing
3. the determination of the price is left to the judgment of a specified person/s
EFFECT IF 3RD PERSON ACTED IN BAD FAITH OR BY MISTAKE –
courts may fix the price
REMEDY IF 3rd person IS PREVENTED FROM FIXING THE PRICE THE
PRICE/TERMS BY FAULT OF THE SELLER /BUYER – party aggrieved may
choose between fulfillment or rescission with damages if there is bad faith

EXAMPLE: S sold to B a diamond ring. The determination of the price was left to C
whom the parties thought was a jeweler.
If C acted by mistake, as when he is incompetent to know the price of the
diamond ring, or in bad faith, as when he connived with S, the court may fix the price.

4. The price of securities, grain, liquids and other things shall also be considered
certain when :

a. The price is that which the thing sold would have been on a definite day

b. The price is that which the thing sold would have been in a particular
exchange or market

c. The a certain amount is fixed above or below the price on such day or such
exchange/market
Art. 1470-1472 See De Leon discussion. Page 54-60

WHO CAN FIX THE PRICE? (Art 1472)

1. The fixing of the price can never be left to the discretion of one of the contracting
parties unless the other one accepts. (Art. 1473)

2. Third persons

3. Courts

** If the price cannot be fixed, the contract is inefficacious. However, if the thing or part
thereof has already been delivered to and appropriated by the buyer, he must pay a
reasonable price therefor. (QUANTUM MERUIT/MERIT) (Art. 1474)

PERFECTION OF THE CONTRACT OF SALE (ART. 1475)

As a Consensual contract, it is perfected at the moment of consent without

the necessity of any other circumstances. From the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price (see Art. 1624.), the
reciprocal obligations of the parties arise even when neither has been delivered.
ART. 1477

HOWEVER, The ownership is not transferred until the delivery of the thing. Delivery
may be actual or constructive. (Arts. 1496, 1164.14)
In all forms of delivery, it is necessary that the act of delivery, whether actual or
constructive, should be coupled with the intention of delivering the thing sold. The act
without the intention is insufficient; there is no tradition.

Art. 1478
The parties, however, may stipulate that the ownership in the thing, notwithstanding its
delivery, shall not pass to the purchaser until after he has fully paid the purchase price
thereof.

Effect of failure to pay price. 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.

Kinds of promise treated in Article 1479.

The above article refers to three kinds of promises, namely:
(1) An accepted unilateral promise to sell in which the promisee (acceptor) elects to
buy;
(2) An accepted unilateral promise to buy in which the promisee (acceptor) elects to
sell; and
(3) A bilateral promise to buy and sell reciprocally accepted in which either of the
parties chooses to exact fulfillment.

A unilateral promise or offer to sell or to buy a thing which is not accepted creates no
juridical effect or legal bond. Such unaccepted imperfect promise or offer is called
policitacion. A period may be given to the offeree within which to accept the offer.

EXAMPLE: S offers or promises to sell to B his car at a stated price and B just let the
promise go by without accepting it. Neither S nor B is bound by any contract. Obviously,
this is not the one contemplated in Article 1479.

An option is a privilege existing in one person for which he has paid a consideration
which gives him the right to buy/sell, for example, certain merchandise or certain
specified property, from/to another person, if he chooses, at any time within the agreed
period at a fixed price, or under, or in compliance with certain terms and conditions.

Option contract is a preparatory contract in which one party grants to another, for a
fixed period and at a determined price, the privilege to buy or sell, or to decide whether or
not to enter into a principal contract. NOTE: If the option is perfected, it does not result
in the perfection or consummation of the sale.

Period within which to exercise the option

 1. Within the term stipulated;
2. If there is no stipulation, the court may fix the term.

Exercise of an option
In an option to buy, the party who has an option may validly and effectively exercise
his right by merely notifying the owner of the former’s decision to buy and expressing his
readiness to pay the stipulated price (De Leon, 2011).
A notice of acceptance must be communicated to offeror even without actual
payment as long as payment is delivered in the consummation stage provided it still
within the period provided.

EXAMPLE: In the preceding example, even if B accepts the promise of S (this is a case
of an accepted unilateral promise to sell), S is not bound to sell his car to B because
there is no promise, in turn, on the part of B to buy. However, if the promise is covered
by a consideration distinct from the price of the car, as when B paid or promised to pay
a sum of money to S for giving him the right to buy the car if he chooses within an
agreed period at a fixed price, its acceptance produces consent or meeting of the minds.
A legally binding and independent contract of option is deemed perfected.

Effect of the presence and absence of a separate consideration in an option contract

1. With separate consideration:
a. Contract is valid;
b. Offeror cannot withdraw offer until after expiration of the option;
c. Is subject to rescission and damages but not specific performance.
2. Without separate consideration:
a. The option contract is not deemed perfected;
b. Offer may be withdrawn at any time prior to acceptance.

NOTE: Even though the option was not supported by a consideration, the moment it was
accepted, contract of sale is perfected (NCC, Art. 1324).

Right of first refusal must be contained in a written contract but maybe waived when a
party entered into a compromise agreement.
The right of first refusal be embodied in a written contract and the grant of such
right must be clear and express. NOTE: It is applicable only to executory contracts
and not to contracts which are totally or partially performed.

Option Money vs. Earnest Money

Option money- is the distinct consideration in case of an option contract. It does not
form part of the purchase price hence, it cannot be recovered if the buyer did not continue
with the sale.
Earnest money or “arras” - is the money given to the seller by the prospective buyer to
show that the latter is truly interested in buying the property, and its aim is to bind the
bargain. It is actually a partial payment of the purchase price and is considered as proof of
the perfection of the contract.
Basis Option Money Earnest Money
As to Money Given Money given is distinct Forms part of the purchase
consideration for an option price
contract
As to perfection Applies to a sale not yet Given only when there is
perfected already a sale
Obligation of the buyer Prospective buyer is not When given, the buyer is
upon payment of required to buy bound to pay the balance
consideration
As to Recovery If buyer does not decide to If sale did not materialize, it
buy, it cannot be recovered must be returned
As to Transfer of Ownership is reserved to Title passes to the buyer
Ownership the seller and is not to pass upon delivery of the thing
until full payment sold
Effect of Non-payment Specific performance Specific performance and
rescission

Effect of bilateral promise to buy and sell.

When the promise is bilateral, that is, one party accepts the other’s promise to buy and the
latter, the former’s promise to sell a determinate thing for a price certain, it has practically
the same effect as a perfected contract of sale since it is reciprocally demandable.

EXAMPLE: S promised to sell his car to B and B promised to buy the said car for
P100,000.00. The parties are bound by their contract so that in case one of them should
not comply with what is incumbent upon him, the other has the right to choose between
the fulfillment and the recission of the obligation, with the payment of damages in either
case.

Art. 1480 Risk of loss or deterioration.

A thing is considered as lost

GR: It is understood that the thing is lost when it:
1. Perishes;
2. Goes out of commerce; or
3. Disappears in such a way that its existence is unknown or cannot be recovered
[NCC, Art. 1189(2)].
XPN: In an obligation to deliver a generic thing, the loss or destruction of anything of the
same kind does not extinguish the obligation

Four rules may be given regarding risk of loss:

(1) If the thing is lost before perfection, the seller and not the one who intends to
purchase it bears the loss in accordance with the principle that the thing perishes with the
owner (res perit domino);
(2) If the thing is lost at the time of perfection, the contract is void or inexistent. The
legal effect is the same as when the object is lost before the perfection of the contract of
sale;
XPN: In case of partial loss, the buyer may choose between withdrawing from the
contract and demanding the remaining part. If he chooses the latter, he shall pay the
remaining part’s corresponding price in proportion to the total sum agreed upon (NCC,
Art. 1493)
(3) If the thing is lost after perfection but before its delivery, that is, even before the
ownership is transferred to the buyer, the risk of loss is shifted to the buyer as an
exception to the rule of res perit domino (Arts. 1480, pars. 1 and 2, 1538, 1189, and
1269.); and
GR: Who bears the risk of loss is governed by the stipulations in the contract.
In the absence of stipulation: there are two conflicting views:
First view: Res perit creditori or buyer bears the risk of loss (Paras, Vitug, Padilla
and De Leon). Article 1504 of the Civil Code, which embodies res perit domino, only
covers goods. The obligation to pay on the part of the buyer is not extinguished
(Villanueva, 2004).
NOTE: Pursuant to Article 1537 of the Civil Code, the vendee must also bear the
resulting disadvantages before the delivery but after the contract has been perfected.
This theory is an exception to the rule of resperit domino. On the other hand,
pursuant to Article 1262 of the Civil Code, if the thing is lost or destroyed without
the fault of the seller, the obligation to deliver is extinguished but the obligation to
pay subsist (Pineda, 2010).

Second view: Res perit domino or seller bears the risk of loss (Tolentino, Jurado,
Baviera, and Villanueva).
In reciprocal obligations, the extinguishment of the obligation due to loss of the
thing affects both debtor and creditor; the entire juridical relation is extinguished.
Under this view, the rule on loss under Article 1189 of the Civil Code would be
different from the rule on deterioration – the loss would be for the account of the
seller, while deterioration would be for the account of the buyer (Tolentino, 2002).
This view would make Articles 1480 and 1538 of the Civil Code consistent
with the provisions of Article 1504 of the Civil Code (Villanueva, 2009).
Ownership is transferred only after delivery, further, the contract is reciprocal. If the
vendee cannot have the thing, it is illogical and unjust to make him pay the price
(Pineda, 2010).

(4) If the thing is lost after delivery, the buyer bears the risk of loss following the
general rule of res perit domino.
XPNs: 1. Where the delivery has been made either to the buyer or to the bailee for
the buyer, but ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract; and 2. Where actual
delivery has been delayed through the fault of either the buyer or seller, the goods are at
the risk of the party at fault [NCC, Art. 1504 (1) (2)].

Options of the buyer with regard to the sale in the total or partial loss or
deterioration of a mass of specific goods without the knowledge of the seller:
 1. He may treat the sale as avoided or cancelled; or
2. He may continue with the sale with respect to the available or remaining goods
(NCC, Art. 1494) – Effect: The remaining goods shall pass in ownership to the buyer but
subject to proportionate reduction of the price. But this is applicable only if the goods are
divisible or capable of being divided. If indivisible, the only option available is the
avoidance of the sale.

Art. 1481 – Sale by description, by sample, and description and sample

(1) Sale by description. — Sale by description occurs where a seller sells things as
being of a particular kind, the buyer not knowing whether the seller’s
representations are true or false, but relying on them as true; or, as otherwise
stated, where the purchaser has not seen the article sold and relies on the
description given him by the vendor, or has seen the goods but the want of
identity is not apparent on inspection.
(2) Sale by sample. — To constitute a sale by sample, it must appear that the parties
contracted solely with reference to the sample, with the understanding that the
bulk was like it. But a mere exhibition of a sample by the seller in the absence of
any showing that it was an inducement of the sale or formed the sole basis thereof,
does not amount to a sale by sample as where the quality of the articles to be
furnished is expressly described in the contract without reference to the sample or
the parties agree that the goods ordered shall differ from the sample in some
particular matter. Whether a sale is by sample is determined by the intent of the
parties as shown by the terms of the contract and the circumstances surrounding
the transaction.
(3) Sale by description and sample. — When a sale is made both by sample and by
description, the goods must satisfy all the warranties (see Art. 1565.) appropriate
to either kind of sale, and it is not sufficient that the bulk of the goods correspond
with the sample if they do not also correspond with the description, and vice versa.

Formal requirement for the validity of a contract of sale

General Rule: A contract of sale may be made in writing, or by word of mouth, or partly
in writing and partly by word of mouth, or may be inferred from the conduct of the
parties (NCC, Art. 1483). Contracts shall be obligatory, in whatever form they have been
entered into, provided all the essential requisites for their validity are present.

XPNs:
a) If the law requires a document or other special form, the contracting parties may
compel each other to observe that form (NCC, Art. 1357).
b) Under Statute of Frauds, the following contracts must be in writing; otherwise, they
shall be unenforceable:
Sale of personal property at a price not less than P500;
Sale of a real property or an interest therein;
Sale of property not to be performed within a year from the date thereof;
4. When an applicable statute requires that the contract of sale be in a certain form
[NCC, Art. 1403(2)].
c) Sale of large cattle which requires that the same be recorded with the city/municipal
treasurer and that a certificate of transfer be issued. Otherwise, the sale is not valid (NCC,
Art. 1581).

SKIP Article 1484 – 1486 – Incorporated in Recto Law and Maceda Law

Capacity to Buy and Sell

Persons who may enter into a contract of sale

GR: All persons, whether natural or juridical, who can bind themselves, have legal
capacity to buy and sell [NCC, Art. 1489(1)].
XPNs:
1. Minors, insane and demented persons and deaf-mutes who do not know how to write;
2. Persons under a state of drunkenness or during hypnotic spell;
3. Husband and wife - sale by and between spouses. Rationale for the prohibition:
a. To prevent a spouse from defrauding his creditors by transferring his properties
to the other spouse;
b. To avoid a situation where the dominant spouse would unduly take advantage of
the weaker spouse;
c. To avoid an indirect violation of the prohibition against donations between spouses
under Article 133 of the Civil Code (Medina v. Collector of Internal Revenue, G.R. No.
L-15113, January 28, 1961).
4. Sale between guardians and wards – the contract is void and not merely voidable. The
prohibition exists only when the guardianship exists.
5. Sale between agents and principals GR: Art. 1491 (2) of NCC XPN: The prohibition
does not apply if the principal consents to the sale of the property in the hands of the
agent or administrator. Also, after the termination of the affairs of the agency, the
prohibition no longer applies. The transaction may be ratified by way of a new contract
which will become valid only from its execution and will not retroact to the date of the
first contract.
6. Sale between executors and administrators of estate of the deceased [NCC, Art. 1491
(3)]. But hereditary rights are not included in the prohibition.
7. Sale involving property of the government [NCC, Art. 1491(4)]. The nullity of such
prohibited contracts is definite and permanent and cannot be cured by ratification. The
public interest and public policy remain paramount and do not permit of compromise or
ratification.
8. Sale of property in litigation [NCC, Art. 1491(5)] Nullity is permanent. Prohibition
applies only to a sale or assignment to the lawyer by a client of the property which is the
object of litigation (Rabuya, 2017).

Persons who are absolutely incapacitated to enter into a contract of sale

1. Unemancipated minors (NCC, Art. 1327);
2. Insane or demented persons, and deaf-mutes who do not know how to write (NCC, Art.
1327).

Persons who are relatively incapacitated to enter into a contract of sale

1. Spouses (NCC, Art. 1490);
2. Agents, Guardians, Executors and Administrators;
3. Public Officers and Employees;
4. Court Officers and Employees, and
5. Others specially disqualified by law (NCC, Art. 1491)

Status of the following contracts of sale

1. Sale entered into by minors
GR: It is voidable, subject to annulment or ratification.
XCP: Where necessaries are sold and delivered to a minor or other person without
capacity to act, he must pay a reasonable price [NCC, Art. 1489(2)].
2. Sale by & between spouses (NCC, Art. 1490)
a. Status of prohibited sales between spouses:
GR: Null and void
XPN: In case of sale between spouses:
1. When a separation of property was agreed upon in the marriage
settlements; or
2. When there has been a judicial separation of property agreed upon
between them
b. Contract of sale with 3rd parties:
GR: Under the law on sales, it would seem that a spouse may, without the
consent of the other spouse, enter into sales transactions in the regular or
normal pursuit of their profession, vocation or trade (in relation to Art. 73,
Family Code).
XPN: Even when the property regime prevailing was the conjugal
partnership of gains, the Supreme Court held the sale by the husband of a
conjugal property without the consent of the wife is void, not merely
voidable under Art. 124 of the Family Code since the resulting contract lacks
one of the essential elements of full consent (Guiang v. CA, G.R. No.
125172, June 26, 1998).
c. Between common law spouses - also null and void.
Sale between common law spouses is null and void to prevent the exercise of
undue influence by one spouse over the other. The prohibition also applies to a
couple living as husband and wife without the benefit of marriage (Calimlim-
Canullas v. Fortun, et. al., G.R. No. L-57499, June 22, 1984). REASON: The
condition of those who incurred guilt would turn out to be better than those
in legal union.

Persons who has the right to assail the validity of the transaction between
spouses
1. The heirs of either of the spouses who have been prejudiced;
2. Prior creditors; and
3. The State when it comes to the p payment of the proper taxes due on the
transaction.

Persons specially disqualified by law to enter into contracts of sale (ALIEN-UnOS)

1. ALIENs who are disqualified to purchase private agricultural lands (Art. XII Secs. 3&7,
1987 Constitution).
2. Unpaid seller having a right of lien or having stopped the goods in transit is prohibited
from buying the goods either directly or indirectly in the resale of the same at
public/private sale which he may make [NCC, Art. 1533(5); Art. 1476(4)]
3. The Officer holding the execution or deputy cannot become a purchaser or be
interested directly or indirectly on any purchase at an execution (Sec. 21 Rule 39, Rules
of Court).
4. In Sale by auction, seller cannot bid unless notice has been given that such sale is
subject to a right to bid in behalf of the seller (NCC, Art. 1476).

Effect of a sale made by the seller with voidable title over the object
1. Perfection stage: valid – buyer acquires title of goods.
2. Consummation stage: valid – If the title has not yet been avoided at the time of sale
and the buyer must buy the goods under the following conditions:
a. In good faith;
b. For Value;
c. Without notice of seller’s defect of title (NCC, Art. 1506).
NOTE: Art. 1506 is predicated on the principle that where loss has happened which must
fall on one of two innocent persons, it should be borne by him, who is the occasion of the
loss (De Leon, 2005).

OBLIGATIONS OF THE VENDOR

1. Deliver the thing sold (NCC, Arts. 1458&1459); - Actual or Constructive

2. Deliver fruits & accessions/accessories accruing from perfection of sale;
3. Transfer the ownership;
4. Warranties;
5. Take care of the thing, pending delivery, with proper diligence;
6. Pay for the expenses of the deed of sale unless there is a stipulation to the contrary.

Obligation of the seller in terms of the nature of the subject matter of the sale
When the subject matter of the sale is a DETERMINATE or SPECIFIC THING, the
seller must deliver the thing to the buyer when compelled by the latter.

When the subject matter is an INDETERMINATE OR GENERIC THING, the seller

may be asked that the obligation be complied with at his expense (NCC, Art. 1165).

Seller’s obligation in case of delay or promise to deliver the thing to two or more
persons who do not have the same interest.

The seller shall be responsible for any fortuitous event that may occur until he has
delivered the thing (Art. 1165 in relation to Art. 1174 of the NCC).

Ways of effecting constructive delivery.

(a) by the execution of a public instrument (Art. 1498, par. 1.);
 (b) by symbolical tradition or traditio symbolica (ibid., par. 2.);
(c) by traditio longa manu (Art. 1499.); - delivery by consent or mere pointing.
(d) by traditio brevi manu (Ibid.); -delivery with the short hand” refers to the act of a
person, to whom an item is transferred, who is already in possession of the item
but not as the owner of the item.
(e) by traditio constitutum possessorium (Art. 1500.); - when the possessor who is the
owner of the property continues his possession no longer under a title of
ownership but under a title less than ownership, i.e. lessee, depositary, etc
(f) by quasi-delivery or quasi-traditio with respect to incorporeal things. (Art. 1501.)
– execution of public instrument, placing of titles of ownership in the possession
of the vendee, allowing the vendee to use his rights as new owner with the consent
of the vendor. Incorporeal Property – intangible property like usufruct

Art. 1497 – Traditio - Delivery

Liability in case of loss. — When the thing subject of the sale is placed in the control and
possession of the vendee or his agent, the delivery is complete and the vendee cannot
avoid liability in case the thing is subsequently lost without the fault of the vendor. Hence,
the vendor may claim payment of the price.

Actual delivery – things sold is placed in the control and possession of the vendee.

Art. 1498 Sale made in a public instrument – presumptive delivery

Execution shall be equivalent to the delivery of a thing

Symbolic Tradition - when to effect the delivery, the parties make use of a token symbol
to represent the thing delivered. The delivery of the key where the thing sold is stored or
kept is equivalent to the delivery of the thing (par. 2.) because the key represents the thing.

Art. 1502 Sale or return, or sale on trial or approval or satisfaction

Sale or return. — It is a contract by which property is sold but the buyer, who
becomes the owner of the property on delivery, has the option to return the same to the
seller instead of paying the price.
(a) Under this contract, the option to purchase or return the goods rests entirely on the
buyer without reference to the quality of the goods. The buyer may revest the ownership
in the seller by returning or tendering the goods within the time fixed in the contract, or, if
no time has been fixed, within a reasonable time (Art. 1502, par. 1.); otherwise, the sale
becomes absolute and the buyer is liable for the price. The seller cannot, in this type of
sale, prevent the revesting of title by refusing to accept the return of the property.
(b) Since title passes to the buyer on delivery, the loss or destruction of the property prior
to the exercise of the buyer’s option to return falls upon him and renders him responsible
to the seller for the purchase price or such part thereof as remains unpaid. (Art. 1504; 46
Am. Jur. 647.) The word “return” itself implies a previous transfer of title.

Sale on trial or approval. — It is a contract in the nature of an option to purchase if

the goods prove satisfactory, the approval of the buyer being a condition precedent. (77
C.J.S. 938.)
In this kind of contract, the title shall continue in the seller until the sale has
become absolute either by the buyer’s approval of the goods, or by his failing to
comply with the express or implied conditions of the contract as to giving notice of
dissatisfaction or as to returning the goods (Ibid., 655; Art. 1502, Nos. 1 and 2.), or
by his doing any other act adopting the transaction such as mortgaging the property
or selling it to a third person.

“Sale or return” distinguished from sale on trial.

(1) “Sale or return” is a sale subject to a resolutory condition, while sale on trial is subject
to a suspensive condition;
(2) “Sale or return” depends entirely on the will of the buyer, while sale on trial depends
on the character or quality of the goods;
(3) In “sale or return,” the ownership of the goods passes to the buyer on delivery and
subsequent return of the goods reverts ownership in the seller, while in sale on trial, the
ownership remains in the seller until the buyer signifies his approval or acceptance to the
seller; and
(4) In “sale or return,” the risk of loss or injury rests upon the buyer, while in sale on trial,
the risk still remains with the seller.

Art. 1503
Transfer of ownership where goods sold delivered to carrier.
(1) General rule. — As stated above, the general rule is that delivery, be it only
constructive, passes title in the thing sold (see Art. 1496.); and delivery to the carrier
is deemed to be a delivery to the buyer. (Art. 1523, par. 1.) The risk of loss, therefore,
as between the buyer and the seller, falls upon the buyer. The theory upon which the law
is based is perfectly simple. If a seller consigns goods to another specified person it
indicates an intention to deliver to the carrier as bailee for the person named, and, if such
shipment was authorized by that person as a buyer, the ownership vests in him. The same
result follows it, after the goods have been shipped without a named consignee, the
carrier at the consignor’s request, agrees to deliver to a specified person.
(2) Where right of possession or ownership of specific goods sold reserved. — On the
other hand, if the seller directs the carrier to redeliver the goods at their destination to the
seller himself, or to his order, it indicates an intention that the carrier shall be the bailee
for the seller and the ownership will remain in the latter. (see 2 Williston, op. cit., p. 147.)
The seller may, by the terms of the contract, reserve the right of possession or ownership
in the goods until certain conditions are fulfilled. (Art. 1505, par. 1.)

Where seller or his agent is consignee.

(1) Carrier becomes bailee for seller. — Where goods are shipped and by the bill of
lading4 (see Art. 1507.), the goods are deliverable to the seller or his agent or to the order
of the seller or his agent, the seller thereby reserves the ownership in the goods (par. 2.)
and the carrier is a bailee for him and not the buyer. This principle is applicable even
though the goods are shipped on the buyer’s vessel. .
(2) Rights of seller. — The seller may not only retain the goods until the buyer performs
his obligation under the contract, but he may, even in violation of the contract, dispose of
them to third persons. If the seller does this, of course, he is liable for damages to the
buyer but the second purchaser from the seller acquires a better right.

Art. 1504
As a general rule, if the thing is lost by fortuitous event, the risk is borne by the owner of
the thing at the time of the loss under the principle of res perit domino). Article 1504
above states the exceptions.
(1) Where the seller reserves the ownership of the goods merely to secure the
performance by the buyer of his obligations under the contract, the ownership is
considered transferred to the buyer who, therefore, assumes the risk from the time of
delivery.
(2) Where actual delivery had been delayed through the fault of either the buyer or seller,
the goods are at the risk of the party at fault with respect to any loss which might not have
occurred but for such fault. In this case, the law punishes the party at fault.

Art. 1505
No one can give what he has not or transfer a greater right to another than he himself has.
Sale is a derivative mode of acquiring ownership and the buyer gets only such rights as
the seller had.

Art. 1506
Voidable Title
EXAMPLES:
(1) S, a minor, sold his television set to B, a person of majority age. Under the law
(see Art. 1390, Civil Code.), the contract is voidable or annullable because a
minor is incapable of giving consent to a contract. B, in turn, sold the television
set to C who acted in good faith.
In this case, C acquires a valid title to the television set after its delivery if the
contract had not yet been annulled by a proper action in court.
(2) B bought in good faith for value a car which was stolen from C, the lawful owner.
As against B, C has a better right to the car. Article 1506 is clearly inapplicable
where the seller had no title at all.
C may recover the car without paying any indemnity, except when B acquired it in
a public sale.

Art. 1507 – Document of Title

Includes any bill of lading, dock warrant, “quedan,” or warehouse receipt or order
for the delivery of goods, or any other document used in the ordinary course of business
in the sale or transfer of goods, as proof of the possession or control of the goods, or
authorizing or purporting to authorize the possessor of the document to transfer or receive,
either by indorsement or by delivery, goods represented by such document.
Documents of title may be either:
(1) Negotiable documents of title or those by the terms of which the bailee undertakes to
deliver the goods to the bearer and those by the terms of which the bailee undertakes to
deliver the goods to the order of a specified person (Art. 1508.); or
(2) Non-negotiable documents of title or those by the terms of which the goods covered
are deliverable to a specified person.

Art. 1508 -1509

A negotiable document of title is negotiable by delivery if the goods are deliverable
to the bearer, or when it is indorsed in blank or to the bearer by the person to whose order
the goods are deliverable or by a subsequent indorsee. An indorsement is in blank when
the holder merely signs his name at the back of the receipt without specifying to whom
the goods are to be delivered. If the document is specially indorsed, it becomes an order
document of title and negotiation can only be effected by the indorsement of the indorsee.
A special indorsement specifies the person to whom or to whose order the goods are to be
delivered.

ART. 1511
Transfer of non-negotiable documents.
A non-negotiable document of title cannot be negotiated. Nevertheless, it can be
transferred or assigned by delivery. In such a case, the transferee or assignee acquires
only the rights stated in Article 1514. Even if the document is indorsed, the transferee
acquires no additional right.