Chapter 1 Nature and Form of the Contract Explanation sito Note

Art.1458 By the contract of sale, one of the Essential elements of a contract of sale
contracting parties obligates himself to transfer
a. Consent or meeting of the minds, that
ownership and to deliver a determinate thing,
is, consent to transfer ownership in
and the other to pay therefor a price certain in
exchange for the price.
money or its equivalent. A contract of sale may
b. Determinate subject matter
be absolute or conditional.
c. Price certain in money or its equivalent
Stages of Contract of Sale
Contract of sale not a contract to sell
1. Negotiation. It covers the period from
A contract of sale is an agreement where
the time the prospective contracting
ownership of a property is immediately
parties indicate interest in the contract
transferred from the seller to the buyer upon
to the time the contract is perfected.
the signing of the contract and the payment of
2. Perfection. It takes place upon the
the purchase price. The essential element is the
concurrence of the essential elements
immediate transfer of ownership.
of the sale, which is the meeting of the
minds of the parties as to the object of A contract to sell, on the other hand, is an
the contract and upon the price. agreement where the ownership of the
3. Consummation. It begins when the property is transferred to the buyer only upon
parties perform their respective the fulfillment of a specific condition, usually
undertakings under the contract of sale, the full payment of the purchase price. The
culminating in the extinguishment seller retains ownership until the condition is
thereof. met. The transfer of ownership is contingent
upon a future event. If the condition is not met,
Sale is a Title
the contract is not completed, and ownership
In relation to the acquisition and transfer of remains with the seller.
ownership, it should be noted that sale is not a
Consent is manifested by the meeting of the
mode but merely a title.
offer and the acceptance upon the thing and
A mode is the legal means by which dominion the cause which are to constitute the
or ownership is created, transferred or agreement.
destroyed but title is only the legal basis by
Acceptance, as it relates to the offer, can be
which to affect dominion or ownership.
demonstrated through formal or informal acts
Sale by itself does not transfer or affect or conduct that clearly communicate the
ownership; the most that sale does is to create intention to accept the offer. This shows the
the obligation to transfer ownership. agreement of the offeree (the person receiving
the offer) to the terms proposed by the offeror.
2 Kinds of a contract of sale
Acceptance can be manifested through various
1. Absolute. There are no conditions actions, such as payment or declaration of the
attached to the contract. property for taxation purposes.
2. Condtional. There are certain
conditions attached to the contract.

Examples
Object: The object of every contract must be Option Vs Contract of Sale
determinate as to its kind. Even if the quantity
An option is an unaccepted offer. It's a
is not precisely determined, the contract is valid
continuing offer where the owner gives another
as long as it's possible to determine the
person the right to buy the property at a fixed
quantity without needing a new contract. The
price within a certain time, under certain terms
object refers to the subject matter of the
and conditions. The option holder isn't
contract—the thing or service being exchanged.
obligated to buy; they merely have the privilege
It must be clearly defined or definable.
to do so. If the option holder accepts the offer
Price is an essential element of a binding within the specified time, it becomes a binding
agreement to sell personal or real property contract. If not, the option expires.
because it seriously affects the right and
A contract of sale, conversely, fixes the rights
obligations of the parties. A disagreement on
and obligations of both parties at the time of
the manner of payment is considered
execution. The offer and acceptance are
equivalent to a disagreement on the price itself.
concurrent; both parties' minds meet on the
Gross inadequacy of price doesn't terms of the agreement. It's a binding
automatically nullify an execution sale. agreement immediately upon acceptance.
However, a transaction might be invalidated if
What is the test in determining whether it is a
the inadequacy is so significant that it shocks
contract of sale or purchase or a mere option?
one's conscience or if it's viewed as unjust. The
courts may intervene in such cases. The Is whether or not the agreement could be
example given is an execution sale where the specifically enforced. Explain pa
judgment debtor retains the right to redeem
the property. Even if the price is low, the right Earnest money is part of the purchase price,
to redeem prevents significant harm. given when a sale has already been perfected. It
serves as proof of the contract's existence and
Characteristics of a contract of sale binds the buyer to pay the remaining balance.
Option money, on the other hand, is given as
1. Consensual. The contract is perfected
distinct consideration for an option contract. It
by mere consent.
applies to a sale that hasn't been perfected yet.
2. Bilateral or Reciprocal. The seller and
Giving option money doesn't obligate the buyer
the buyer are bound by obligations
to purchase; it only secures the right to buy
dependent upon each other.
within a specified timeframe.
3. Onerous. It imposes a valuable
consideration, which is a price certain in A Contract for a piece of work vs contract of
money or its equivalent. sale
4. Commutative. The thing of value is
exchanged for equal value. A contract for a piece of work involves creating
5. Nominate. The Civil Code refers to it by something new specifically for the buyer. The
a special name, contract of sale. item didn't exist before the contract and would
6. Principal. It can stand on its own and not have existed but for the buyer's order.
does not depend on another contract A contract of sale involves transferring
for its validity. ownership of something that already exists. The
item existed independently of the contract and
could have been sold to someone else.
Example The requisite that a thing be determinate is
satisfied if at the time the contract is entered
Dacion en pago vs Contract of sale
into, thing is capable of being made
Dacion en pago as a special mode of payment determinate without the necessity of a new or
where a debtor offers another thing to the further agreement between the parties.
creditor as equivalent payment for an
Art. 1461 Things having a potential existence
outstanding debt. Several conditions must be
may be the object of the contract of sale. The
met: There must be a valid performance of
efficacy of the sale of a mere hope or
payment; the thing offered must be corporeal
expectancy is deemed subject to the condition
(tangible) or a real right; there must be a
that the thing will come into existence. The sale
difference between the prestation due and that
of a vain hope or expectancy is void.
which is given in substitution; and the obligation
must be immediately extinguished. The key is Things having a potential existence. This is a
that the creditor is essentially buying the thing future thing that can be the object of sale.
offered to settle the debt.
Example: “still ungrown fruits”, “wine that a
A contract of sale, on the other hand, is a particular vineyard is expected to produce”,
typical exchange of goods or services for a price. “young animals not yet in existence”
The focus is on the transfer of ownership for a
Sale of a mere hope or expectancy. This is the
price.
subject to the condition that the thing will come
Art.1459 The thing must be licit and the vendor into existence.
must have a right to transfer the ownership
Example: Sale of sweepstakes ticket or lotto
thereof at the time it is delivered.
ticket
Licit means lawful. The thing object of sale
Emptio Rei Speratae. Sale of a thing with
should not be contrary to law, morals, good
potential existence. Sale is subject to the
customs, public order and safety.
condition that the thing will exist; If it does not,
Examples of Void sale there is no contract. The object is a future thing.

1. Sale of animals suffering from Emptio Spei. Sale of a mere hope or expectancy
contagious diseases. that the thing will come to existence. Sale of the
2. Sale of animals if the use or service for hope itself. Sale is effective even if the thing
which they are acquired has been does not come into existence unless it is a vain
stated in the contract, and they are hope. The object is a present thing which is the
found to be unfit therefor. hope or expectancy.
3. Sale of future inheritance
General Rule: A person cannot sell or convey
4. Sale of land in violation of the
what he does not have or own.
constitutional prohibition against the
transfer of lands to aliens. Exceptions:
Art. 1460 A thing is determinate when it is 1. Sale of a thing having potential
particularly designed or physically segregated existence
from all others of the same class. 2. Sale of future goods
3. Contract for delivery at a certain price
of an article which the the vendor in the
 ordinary course of business Example:
manufacture or process for the general
Art. 1466. In construing a contract
market, whether the same is on hand at
containing provisions characteristics of both
the time or not.
the contract of sale and of the contract of
Art. 1462 The goods which form the subject agency to sell, the essential clauses of the
of a contract of sale may be either existing whole instrument shall be considered.
goods, owned or possessed by the seller
Contract of Sale vs Agency to sell
(existing goods), or goods to be
manufactured, raised, or acquired by the Contract of sale. The buyer receives the
seller after the perfection of the contract of goods as owner. The buyer pays the price.
sale, in this Title called “future goods”.
Agency to sell. The agent receives the
There may be a contract of sale of goods, goods as goods of the principal who retains
whose acquisition by the seller depends his ownership over them. The agent delivers
upon a contingency which may or may not the price, which he got from his buyer, to
happen. his principal.
Example: Art. 1467. A contract for the delivery at a
certain price of an article which the vendor
in the ordinary course of his business
Art. 1463 The sole owner of a thing may sell manufactures or procures for the general
an undivided interest therein market, whether the same is on hand at the
time or not, is a contract of sale, but if the
Example:
goods are to be manufactured specially for
the customer and upon his special order,
and not for the general market, it is a
Art. 1464. Even if the exact number, weight, contract for a piece of work.
or measure isn’t specified in the contract,
the sale is still valid. The buyer becomes the -What determines whether the contract is
owner of a proportionate share of the total one of work or of sale is whether the thing
mass, and the seller is responsible for any has been manufactured specially for the
deficiency from the agreed-upon activity. customer and upon his special order.
The seller is obligated to make up any
Contractor. A person who, in the pursuit of
shortfall from goods of the same kind and
the independent business, undertakes to do
quantity.
a specific job or piece of work for other
Example persons, using his own name means and
methods without submitting himself to
control as to the petty details.
Art 1465. Things subject to a resolutory Test of a contractor. The true test of a
condition may be the object of the contract contractor would seem to be that he
of sale. renders service in the course of an
Resolutory condition. A condition the independent occupation, representing the
happening of which will extinguished the will of his employer only as to the result of
obligation his work, and not as to the means by which i
Simple Terms

Contractor is defined as a person who, S and B agree that S will give B their only
independently, undertakes a specific job or parcel of land, and B will give S their only
piece of work for others, using their own car (worth ₱500,000) plus ₱500,000 cash.
methods and means without being The agreement's nature depends on their
controlled in the details of the work. intention. If they intended a sale, it's a sale.
If they intended a barter, it's a barter. If
The test to determine if someone is a
there's no manifest intention, and the car's
contractor focuses on whether they render
value equals the cash, it's a sale because the
service as part of an independent
value of the non-monetary consideration
occupation. A true contractor represents
doesn't surpass the money. However, if the
their employer's will only concerning the
car's value is more than the cash, it
result of their work, not the methods used
becomes a barter.
to achieve it.
Art.1469 says that for a price to be
Example:.
considered certain, it must be fixed or
Scenario 1: Employee: If the company hires determinable by reference to another
an employee to design the website, that certain thing, or left to the judgment of a
employee works under the company's specific person or persons. If those people
direct supervision, following specific can't or won't determine the price, the
instructions and using the company's contract is void unless the parties later
resources. This person is not a contractor. agree on a price. If those people acted in
bad faith or made a mistake, the court can
Scenario 2: Contractor: If the company set the price. If the mistake was by the
hires a freelance web designer, they provide seller or buyer, the innocent party can seek
the designer with the desired outcome (a remedies.
website with specific features), but the
designer determines how to achieve it using Example:
their own tools, techniques, and schedule.
A agrees to sell B a painting, with the price
The company is only concerned with the
to be determined by an art expert, C.
final product, not the designer's process.
This freelance web designer is a contractor. - Scenario 1 (Certain Price): C assesses the
is accomplished. painting and sets the price at $10,000. The
price is certain, and the contract is valid.
Art. 1468 Article 1468 states that if a
contract's consideration involves both - Scenario 2 (Uncertain Price): C refuses to
money and another thing, the transaction's assess the painting, and A and B cannot
nature depends on the parties' clear agree on a price. The contract is void unless
intention. If their intention isn't clear, it's they subsequently agree on a price.
considered a barter if the non-monetary
- Scenario 3 (Bad Faith): C is bribed by B to
part's value exceeds the money; otherwise,
undervalue the painting, setting the price
it's a sale.
artificially low. A can challenge the price in
Example: court, and the court may set a fair price.
 - Scenario 4 (Mistake): C makes a genuine Scenario 3 (Mere Inadequacy): S was aware of
mistake in assessing the painting's value the house's value but needed money urgently
due to a lack of expertise. The court may and accepted the low offer. The contract is
correct the price to reflect the painting's likely valid because there's no defect in consent
actual valu or indication of a different intended transaction.
The inadequacy alone is insufficient to
Requisites for a valid price
invalidate the sale unless the price is so low as
1. Real. The price is not simulated or not to be "shocking to the conscience." This is a
fictitious. subjective determination.
2. Certain or Ascertainable. It is certain if
Article 1471 states that if the price in a sales
it is expressed and agreed in terms of
contract is simulated (fake), the sale is void.
specific amount of money or its
However, the underlying act might be
equivalent, It is ascertainable if it is
something else, like a donation or another type
sufficient that it be so with reference to
of contract. The key is that the stated price isn't
another thing certain, or that the
genuine; it masks a different reality.
determination thereof be left to the
judgment of a special person or Example:
persons.
S "sells" a car to B for ₱100,000. However, this
3. In money or its equivalent
is a sham; S actually intended to gift the car to
4. Manner of payment must be agreed
B, and the ₱100,000 is a fictitious amount. The
upon.
sale is void because the price is simulated. The
Article 1470 states that a grossly inadequate actual transaction is a donation, which would
price doesn't automatically invalidate a sales have different legal implications. The court
contract unless it suggests a defect in consent would likely recognize the donation as the true
(like fraud, mistake, or undue influence) or intent.
indicates the parties intended a donation or
Article 1472 addresses the certainty of price for
another type of transaction. Mere inadequacy,
certain goods. The price of securities, grains,
without these factors, doesn't void the sale
liquids, and similar items is considered certain if
unless the price is shockingly low.
it's the market price on a specific day or if a
Example: fixed amount above or below that market price
is specified.
S sells a house worth ₱10,000,000 to B for
₱1,000,000. Example:

- Scenario 1 (Gross Inadequacy + Defect in A agrees to sell B 100 bushels of wheat at the
Consent): S was tricked into selling the house at market price on July 1st. The price is
such a low price. The contract is voidable considered certain because it's tied to a readily
because of the defect in consent (fraud). ascertainable market value on a specific date.
Even if A and B disagree on the manner of
- Scenario 2 (Gross Inadequacy + Donation): S
payment (e.g., cash vs. credit), this doesn't
intended to gift the house to B, and the low
invalidate the contract as long as the price itself
price reflects this intention. The contract is valid
is certain.
as a donation.
Article 1473 states that setting the price can't Article 1476 outlines the rules for sales by
be left solely to one party's discretion. However, auction. It establishes that:
if one party sets the price, and the other
Each lot is a separate contract: When goods are
accepts it, the sale is valid.
sold in lots at an auction, each lot represents a
Example: separate contract of sale.

A offers to sell B a unique antique for a price to Perfection of sale: A sale by auction is
be determined by A alone. B accepts this offer. complete when the auctioneer announces its
This is valid because, even though A unilaterally perfection (usually by the fall of the hammer or
sets the price, B's acceptance makes the price a similar customary action). Before this
binding. However, if B had rejected A's price, announcement, bidders can withdraw their
then the contract would be void because the bids.
price was not mutually agreed upon. If A sets a
Right to bid: The seller (or someone acting for
price, and B says, "I'll think about it," there is no
them) may have the right to bid, but this must
contract until B accepts or rejects the price
be clearly stated.

Seller's bidding restrictions: It's illegal for the

Article 1474 deals with situations where the
seller to bid themselves or use others to
price can't be determined by the methods in
artificially inflate the price. Any sale violating
the preceding articles. In such cases, if the
this rule is considered fraudulent.
buyer has received the goods, they must pay a
reasonable price. Determining what constitutes Example:
a "reasonable price" is a factual matter
depending on the circumstances. An auction is held for 10 paintings. Each
painting is a separate lot, meaning the sale of
Example: one painting doesn't affect the sale of others.
The auctioneer uses a hammer. When the
A and B agree that A will sell B a custom-made
hammer falls on a painting, that sale is
piece of furniture. They don't specify a price,
complete. If the auctioneer announces that the
and there's no clear market value for this
seller reserves the right to bid, this is allowed,
unique item. B receives the furniture. Because
but the seller cannot use this right to
the price isn't determined by any of the
manipulate the price by bidding against
methods in the prior articles, and the goods
themselves or using a proxy bidder. If the seller
have been delivered, B must pay a reasonable
secretly bids through a friend to drive up the
price. A court would determine a reasonable
price, the sale is considered fraudulent.
price based on factors like the materials used,
the labor involved, the furniture's quality, and Article 1477 discusses the transfer of ownership
similar comparable items. in a contract of sale. It states that ownership of
the thing sold passes to the buyer upon actual
Article 1475. The contract of sale is perfected at
or constructive delivery. The seller loses
the moment there is a meeting of minds upon
ownership until the contract is rescinded. The
the thing which is the object of the contract and
contract is absolute, meaning the seller can't
upon the price. From that moment, the parties
unilaterally cancel it unless there's a specific
may reciprocally demand performance, subject
clause allowing it. Non-payment of the price is a
to the provisions of the law governing the form
resolutory condition (meaning it terminates the
of contracts.
contract), but it doesn't automatically void the price is paid. If B defaults on the payment, A
sale; the seller has options to pursue legal can legally reclaim the house. This is because
recourse. the parties explicitly or implicitly agreed that
the transfer of ownership was conditional upon
Example:
full payment.
A sells a car to B. A hands over the car keys to
Article 1479 states that a promise to buy and
B (actual delivery). Ownership immediately
sell a specific thing for a certain price creates a
transfers to B. If B doesn't pay, A can't just take
reciprocally demandable contract. This means
the car back without going through legal
both parties have obligations to each other: the
channels. Non-payment is a resolutory
buyer must buy, and the seller must sell.
condition; A can sue B for the price or seek
other legal remedies. If the contract had a Example:
clause allowing A to reclaim the car if B didn't
A and B enter into a written agreement where
pay within a certain timeframe, then A might
A promises to sell B a specific plot of land for
have that right under the contract terms. But
₱1,000,000, and B promises to buy it for that
without such a clause, the non-payment itself
price. This is a binding contract. A is obligated
doesn't automatically void the sale and return
to sell the land to B, and B is obligated to buy it
ownership to A.
from A. If either party breaches the contract (A
2 Aspects of Delivery refuses to sell, or B refuses to buy), the other
party can seek legal remedies. The contract is
1. The de jure delivery or the execution of
"reciprocally demandable" because the
deeds of conveyance
obligations are mutual and enforceable.
2. The delivery of material possession
A contract to sell is a bilateral contract where
Article 1478 allows the parties to a sales
the prospective seller, while retaining
contract to agree that ownership of the item
ownership of the property, agrees to sell it to a
won't transfer to the buyer until full payment.
prospective buyer upon fulfillment of a specific
This is a stipulation. The Civil Code doesn't
condition, typically full payment of the purchase
require this stipulation to be explicit; an implied
price. The key difference from a conditional
agreement is sufficient. Critically, delivery
contract of sale is that ownership doesn't
(either actual or constructive) is distinct from
automatically transfer to the buyer upon
the transfer of ownership. Delivery can occur
fulfillment of the condition; the seller must still
before full payment, but ownership transfer is
formally convey title.
contingent upon the stipulated condition (full
payment). Example:

Example: Imagine Ana wants to buy Ben's house for

$500,000. They enter into a contract to sell.
A sells a house to B for ₱5,000,000. They agree
The contract states that Ana will pay Ben
that ownership of the house will only transfer to
$500,000 in installments over two years. Ana
B once B has made the full payment. A gives B
takes possession of the house immediately, but
the keys to the house (constructive delivery)
the title remains in Ben's name until Ana makes
before B has completed the payment. B begins
the final payment. Once Ana completes the
living in the house. Despite the constructive
payments, Ben then formally transfers the title
delivery, B does not own the house until the full
to Ana. If Ana fails to complete the payments,
Ben retains ownership and can sell the house to Not an Obligation to Sell/Lease: The owner is
someone else. This is a contract to sell because not obligated to sell or lease the asset, even if
the transfer of ownership is dependent on a the ROFR holder wants to buy or lease it.
future event (full payment) and requires a
Matching Offer: The ROFR holder usually must
separate act (transfer of title) by the seller.
offer the same terms as any other potential
An option contract gives one party (the option buyer or lessee (e.g., same price, lease
holder) the right, but not the obligation, to buy conditions).
or sell an asset at a predetermined price within
Specific Timeframe: A ROFR typically applies
a specified time frame. The other party (the
only for a specific period or until a certain event
option writer) is obligated to fulfill the contract
occurs.
if the option holder exercises their right. The
option holder typically pays a premium to the Example:
option writer for this right.
Maria owns a piece of land. She enters into a
Example: ROFR agreement with David, giving him the
right of first refusal to purchase the land if she
Carlos wants to buy a piece of land owned by
decides to sell it within the next five years. If,
David. They agree on an option contract where
during those five years, Maria wants to sell the
Carlos pays David $10,000 for the right to buy
land, she must first offer it to David at the
the land for $200,000 within the next six
market price. If David declines the offer, Maria
months. If Carlos decides to buy the land within
can then sell it to another buyer. If David
those six months, David is obligated to sell it to
accepts, he is obligated to buy the land at the
him for $200,000. However, if Carlos does not
offered price.
exercise his right within the six-month period,
he forfeits the $10,000 premium, and David is Article 1480 of the Civil Code addresses the
free to sell the land to someone else. This is an responsibility for injury to or benefit from the
option contract because it grants Carlos the thing sold after the contract of sale has been
right, but not the obligation, to purchase the perfected but before delivery. It states that this
land at a set price within a set timeframe. is governed by Articles 1163 to 1165.
Essentially, it determines who bears the risk of
A right of first refusal (ROFR) is a contractual
loss or damage to the goods during this period.
agreement that gives a person the first
opportunity to buy or lease a property or asset Article 1480: Any injury to or benefit from the
if the owner decides to sell or lease it. It thing sold, after the contract has been
doesn't obligate the owner to sell or lease, but perfected, from the moment of the perfection
it requires them to offer it to the person with of the contract to the time of delivery, shall be
the ROFR first before offering it to anyone else. governed by Articles 1163 to 1165; and
If the person with the ROFR decides not to
exercise their right, the owner is then free to Key Points:
sell or lease to another party. Perfection of Contract: The crucial point is the
Key characteristics of a ROFR: perfection of the contract of sale. This means
the moment all the essential elements of a valid
Preemptive Right: It's a preemptive right, contract are present (offer, acceptance, object,
meaning it gives the holder priority over other price, consent).
potential buyers or lessees.
 Period of Risk: The risk of loss or damage shifts on a description (written or verbal) or a sample
from the seller to the buyer after the contract is provided to the buyer before the sale.
perfected but before delivery.
Non-Conformity: The buyer has the right to
Articles 1163-1165: These articles deal with the rescind the contract if the goods delivered
general rules on obligations and contracts, significantly differ from the description or
including the responsibility for fortuitous events sample. The difference must be substantial, not
(events outside of human control). minor discrepancies.

Example: Reasonable Opportunity for Comparison: The

buyer must have a reasonable chance to
Maria and Juan agree to a sale of a specific
compare the delivered goods with the
painting. The contract is perfected on March
description or sample before accepting them.
1st. The painting is to be delivered on March
15th. On March 8th, a fire destroys the Combined Description and Sample: If the sale is
painting. Because the contract was already based on both description and sample, the
perfected, and the loss occurred before goods must conform to both to be considered
delivery, Juan (the buyer) bears the loss under compliant. Matching only the sample isn't
Article 1480, unless the loss was due to the fault sufficient; they must also match the description.
or negligence of Maria (the seller). If, however,
Rescission: Rescission means the contract is
the painting was destroyed before the contract
canceled, and the buyer is entitled to a refund
was perfected (e.g., on February 28th), then
or return of the goods.
Maria (the seller) would bear the loss.
Example:
Article 1481 of the Civil Code deals with the
rescission (cancellation) of a contract for the A furniture store sells a sofa to a customer
sale of goods by description or by sample. It based on a catalog description and a showroom
essentially states that if the goods delivered sample. The description states the sofa is made
don't match the description or sample provided, of genuine leather, and the sample is a small
the buyer can rescind the contract. piece of genuine leather. The sofa delivered is
made of imitation leather. According to Article
Article 1481: In the contract of sale of goods by
1481, the customer can rescind the contract
description or by sample, the contract may be
because the delivered sofa doesn't match the
rescinded if the bulk of the goods delivered do
description or sample. The customer would be
not correspond with the description or the
entitled to return the sofa and get a full refund.
sample, and if the contract be by sample as well
as description, it is not sufficient that the bulk of Sale by sample occurs when a buyer agrees to
goods correspond with the sample if they do purchase goods based on the quality and
not also correspond with the description. The characteristics of a specific sample provided by
buyer shall have a reasonable opportunity of the seller. The sample acts as a representation
comparing the bulk with the description or the of the entire batch of goods. The buyer is
sample. 👎 expected to receive goods that match the
sample in terms of quality, appearance, and
Key aspects of Article 1481:
other relevant features.
Sale by Description or Sample: This article
applies to contracts where goods are sold based
Sale by description happens when a buyer sells the car to someone else), he must return
purchases goods based on the seller's written or the ₱10,000 to Maria and may also be liable for
verbal description of the goods. The description damages. The earnest money signifies a serious
should be sufficiently detailed to enable the commitment to the sale and provides legal
buyer to understand the nature, quality, and protection for both parties.
other relevant attributes of the goods. The
Article 1483 of the Civil Code states that,
buyer is expected to receive goods that
subject to the Statute of Frauds and other
conform to the description provided by the
applicable laws, a contract of sale can be made
seller.
in writing, orally, or a combination of both. The
Sale by Sample: contract's existence can also be inferred from
the parties' behavior.
Scenario: A furniture store sells a sofa. The
customer chooses a specific sofa from the General Rule: A contract of sale can be formed
showroom floor as their sample. They agree to through a written agreement, an oral
purchase the same sofa model, expecting the agreement, or a combination of both. It can
purchased sofa to match the sample in color, also be implied from the actions of the parties
fabric, and overall quality. involved.

Sale by Description: Exception: There's an exception for the sale of

land or any interest in land. In such cases, the
Scenario: An online retailer sells a "vintage-
authority of the agent representing the seller
style" rug. The product description details the
must be in writing; otherwise, the sale is void.
rug's size, material, color palette, and mentions
its "distressed" appearance. The customer Example:
purchases the rug based on this description.
Scenario 1 (Oral Contract): Ana orally agrees to
They expect the rug to arrive as described, with
sell her bicycle to Ben for ₱5,000. They agree
the expected size, material, and overall style.
on the price and delivery terms. This is a valid
Article 1482 states that when earnest money is contract, provided it meets other legal
given in a contract of sale, it's considered part requirements.
of the purchase price and serves as proof that
Scenario 2 (Written Contract): Carlos and David
the contract is perfected. This means the
sign a written contract for the sale of Carlos's
contract is legally binding, and both buyer and
car. The contract details the price, payment
seller have obligations.
terms, and delivery date. This is a valid contract.
Example:
Scenario 3 (Implied Contract): Eva regularly
Maria agrees to buy a car from John for supplies fruit to a store. The store owner
₱100,000. As a show of good faith, Maria gives consistently accepts and pays for the fruit. This
John ₱10,000 as earnest money. This ₱10,000 is consistent pattern of behavior could imply a
now considered part of the ₱100,000 purchase contract of sale, even without an explicit
price. The contract is now legally binding. If written or oral agreement.
Maria fails to pay the remaining ₱90,000, John
Scenario 4 (Exception): Flora, through an oral
can keep the ₱10,000 earnest money as
agreement with her agent, attempts to sell a
compensation for her breach of contract.
plot of land to Greg. This sale is void because
Conversely, if John breaches the contract (e.g.,
the agent's authority to sell the land wasn't motorcycle and selling it. She cannot then
documented in writing. demand any additional money from Ben, even if
the sale of the motorcycle doesn't cover the full
Article 1484 of the Civil Code discusses the
₱60,000.
remedies available to a seller in a contract of
sale for personal property where the price is Article 1485 states that Article 1484 (regarding
payable in installments. If the buyer defaults on remedies for installment sales of personal
their payments, the seller has three options property) also applies to contracts that appear
(these are alternative, meaning the seller can to be leases of personal property with an option
only choose one, not cumulative): to buy, if the lessor has deprived the lessee of
possession or enjoyment of the property. This
Exact fulfillment of the obligation: The seller
essentially means that if a lease agreement is
can demand full payment from the buyer. This
structured in a way that's functionally
is possible if the buyer has only missed one
equivalent to an installment sale, the same
installment.
remedies are available to the lessor (seller).
Cancel the sale: The seller can cancel the
contract if the buyer's failure to pay covers two
or more installments. Article 1486 says that in cases covered by
Articles 1484 and 1485, any installments or
Foreclose the chattel mortgage: If a chattel
rents already paid will not be returned to the
mortgage was established as security for the
vendee (buyer) or lessee unless doing so would
installments, the seller can foreclose on the
be unconscionable under the circumstances.
property (take possession and sell it) if the
This implies that payments made are generally
buyer defaults on two or more installments.
non-refundable, except in very unusual or unfair
After foreclosure, the seller cannot pursue
situations.
further action to recover any remaining unpaid
balance. ExampLE

Example: Imagine a company leasing a machine to a

customer with an option to buy at the end of
Sarah sells her motorcycle to Ben for ₱60,000,
the lease term. The lease payments are
payable in six equal monthly installments of
structured to almost exactly equal the purchase
₱10,000. A chattel mortgage is created to
price, and the customer has very limited use of
secure the debt.
the machine during the lease period (due to the
Scenario 1 (One Missed Payment): Ben misses lessor's restrictions). This lease with an option
his second payment. Sarah can demand the full to buy is essentially functioning as an
₱60,000 from Ben. installment sale.

Scenario 2 (Two Missed Payments): Ben misses Applying Article 1485: If the customer defaults
his second and third payments. Sarah can on multiple lease payments, the lessor can use
cancel the sale, repossess the motorcycle, and the remedies from Article 1484 (demand full
sell it to recover her losses. payment, cancel the lease/sale, or foreclose on
the machine if a chattel mortgage exists).
Scenario 3 (Foreclosure): Ben misses his second
and third payments. Sarah can foreclose on the Applying Article 1486: Even if the lease is
chattel mortgage, taking possession of the canceled due to the customer's default, the
customer likely will not get their lease payments private land for public projects like building
back, unless there are exceptional roads, schools, or other infrastructure. Because
circumstances that make it unfair for the lessor this process involves significant legal and
to retain the payments. For example, if the procedural steps to ensure fairness and
lessor had made a significant misrepresentation compensation to the property owner, it's not
about the machine's capabilities. covered under the general rules of contract law
but rather under specific statutes and
Article 1487 of the Civil Code deals with who
regulations.
bears the expenses for the execution and
registration of a sale. The general rule is that Example:
the seller (vendor) pays these expenses.
The government needs to build a new highway
However, this can be altered by a specific
to alleviate traffic congestion. A portion of the
agreement between the buyer and seller.
planned highway route passes through Mr.
General Rule: The seller is responsible for the Smith's farmland. The government cannot
costs associated with finalizing the sale, such as simply seize Mr. Smith's land. Instead, they
those for the preparation and registration of the must follow the procedures outlined in the
deed of sale with the appropriate government relevant expropriation laws. These laws
agency. typically dictate:

Exception: If there's a written agreement Due process: Mr. Smith must be notified of the
stating otherwise, the buyer (vendee) may be government's intent to take his land.
responsible for these expenses.
Fair market value: The government must offer
Example: Mr. Smith just compensation for the land's fair
market value. This is usually determined
Maria sells her house to Juan for ₱2,000,000.
through an appraisal process.
Scenario 1 (General Rule): In the absence of
Legal proceedings: If Mr. Smith disagrees with
any other agreement, Maria is responsible for
the offered compensation, he can challenge the
paying all the fees related to transferring the
government's valuation in court.
title of the house to Juan's name. This includes
things like notary fees, registration fees, and The entire process of taking Mr. Smith's land,
any other government-mandated charges. from initial notice to final compensation, is
governed by special laws related to
Scenario 2 (Exception): Maria and Juan agree
expropriation, not the general rules of contract
in their contract that Juan will cover all the
law found in Article 1488.
expenses associated with the execution and
registration of the sale. In this case, Juan is
responsible for paying all the fees. This would
need to be explicitly stated in their written
contract.

Article 1488 of the Civil Code states that the

taking of private property for public use is
governed by special laws. This refers to the
process of expropriation, where the
government or an authorized entity takes