BUSLAWREG

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TRANSACTIONS
• OMNIBUS INVESTMENTS,
FOREIGN INVESTMENTS,
RETAIL TRADE AND OTHER
RELATED SPECIAL LAWS
 THE
ANGELITE
PRAYER
CONTRACT
OF SALE

Arts. 1458-1637, New Civil Code

ATTY. MARCELINO A. PINEDA,

JR. 
 What is a contract of Sale?
• By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership of and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent
CONCEPT OF CONTRACT OF SALE
Art. 1458, NCC
“By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.

A contract of sale may be absolute or conditional.”

CHARACTERISTICS OF CONTRACT OF
SALE

1. CONSENSUAL
2. BILATERAL
3. RECIPROCAL
4. ONEROUS
5. COMMUTATIVE
6. NOMINATE
7. PRINCIPAL
1.  CONSENSUAL  - it is perfected by mere consent

2. BILATERAL – both contracting parties are bound to fulfill

obligations toward each other (the seller to deliver, and
transfer ownership of the thing sold; the buyer to pay the
price)

3. RECIPROCAL - Reciprocal obligations are “those which

arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of
one is dependent upon the obligation of the other. They are
to be performed simultaneously such that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.

Q: What is the difference between bilateral and

reciprocal?
 (Cont.) CHARACTERISTICS OF A
CONTRACT OF SALE

4. ONEROUS – because the thing sold is in consideration of a price

(price certain in money)

Onerous vs. Gratuitous

Sale vs. Donation 

“Sale is an onerous contract, as distinguished from a gratuitous

contract, because it imposes a valuable consideration as a prestation,
which ideally is a price certain in money or its equivalent.”

5. COMMUTATIVE – the thing sold is considered the equivalent of

the price paid 
 (Cont.) CHARACTERISTICS OF A
CONTRACT OF SALE

6. NOMINATE – is has a designated name (contract of sale)

“Sale is a nominate contract since it has been given a particular name

by law.”

7. PRINCIPAL – it does not depend upon another contract for its

existence and validity
Principal vs. Accessory contract
Sale vs. Agency

“Sale is a principal contract, as contrasted from accessory or

preparatory contracts, because it can stand on its own, and does
not depend on another contract for its validity or existence; more
importantly, that parties enter into sale to achieve within its essence
the objectives of the transaction, and simply not in preparation for
another contract.”
Since sale is a form
of a contract, the
essential elements
of a contract of
sale is the same as
the essential
elements of a
contract.
 What then are
the essential
elements or
requirements of
a contract of
sale?

This Photo by Unknown author is licensed under CC BY-SA.

 ESSENTIAL ELEMENTS OF A CONTRACT
OF SALE
Consent – it is the meeting of the minds to
deliver and transfer ownership of a
determinate thing and to pay a price certain in
money
Object or subject matter – the determinate
thing 
Cause or consideration – price certain in
money 
The above enumerated elements are indispensible and without
which no valid contract of sale may exist.

Note: However there are certain contract of sale that have to be in a

certain form to be effective, enforceable, and/or valid.
 Can a contract of sale be subject to a condition?

Yes, the second paragraph of Art. 1458 states

that a contract of sale may be absolute or
conditional.

Two Kinds of Contract of Sale

•Absolute – sale is not subject to any condition

whatsoever
•Conditional – where the contract of sale is subject to
a certain condition or contingency ( i.e. the transfer of
ownership is transferred upon full payment of the purchase
price)
 What are the stages of a contract of sale?
The stages of a contract of sale are:

•Negotiation or preparation or Policitacion – this is the stage

where the parties (buyer and seller) negotiate as to the
determinate thing and the price

•Perfection (birth) – it is the stage where there is already a

meeting of the minds between the parties (buyer and seller)
with regard to the determinate thing, price certain in money,
and other conditions agreed upon by the parties

•Consummation (death) – this is the stage when the

parties (buyer and seller) have performed their respective
obligations
 What are the requisites for a valid object or subject
matter?

Arts. 1458, 1459, and 1348 identifies the requisites for

a valid object or subject matter

Art. 1458 states:

“By the contact of sale one of sale one of the

contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.
 Art. 1459 states:

“The thing must be licit and the vendor must have a

right to transfer the ownership thereof at the time it is
delivered.”

Article 1348 states:

“Impossible things or services cannot be the object of

contracts”
 What are the requisites for a valid object or
subject matter?

Thus the following are the requisites for a

valid object or subject matter:

•Determinate
•Licit
•Not impossible
•The vendor must have a right to transfer
ownership at the time it is delivered
 What is the meaning of licit?
Licit (legal) things should be lawful, not contrary to
law, morals, public policy, public order, good customs

Example of licit things: Chicken, cars, land

Example of illicit (illegal) things:

Shabu, marijuana, kidney of a human being

subject of sale
 What does determinate thing mean?

Art. 1460 defines a determinate thing as when it is

particularly designated or physically segregated from all
others of the same class.

The requisite that a thing be determinate is satisfied if at

the time the contract is entered into, the thing is capable
of being made determinate without the necessity of a new
or further agreement between the parties.
 Art. 1460 states:

“A thing is determinate when it is particularly

designated or physically segregated from all others
of the same class.

The requisites that a thing be determinate is

satisfied if at the time the contract is entered into,
the thing is capable of being made determinate
without the necessity of a new or further agreement
between the parties.”
 Suppose A agreed to sell to B a car for Php
200,000, and B agreed to buy a car from A for
Php 200,000.

What is the object or subject matter of the

contract?
CAR

Is this a valid contract of sale?

This is not a valid contract of sale,

because the object or subject
matter is not determinate.
 Re-state the example to make the
contract of sale valid.

A agreed to sell to B a Toyota Corolla car

with plate number ABC123 for Php
200,000, and B agreed to buy said Toyota
Corolla car with plate number ABC123
from A for Php 200,000.
Suppose A who bought a Toyota Corolla car with
plate number ABC123 for Php 200,000 from C, on
installment, and A will fully pay the car and have
ownership of it on May 20, 2019. On April 20, 2019, A
agreed to sell and deliver to B on May 30, 2019, the
Toyota Corolla car with plate number ABC123 for
Php 220,000, and B agreed to buy the same.

Is there a perfected contract of sale between A and

B on April 20, 2019?

Yes, there is a perfected contract of sale, even

though A is not yet the owner of the Toyota Corolla
car with plate number ABC123 on April 20, 2019.
Art. 1459 does not require that the seller has the right
to transfer ownership at the time of the perfection of
the contract of sale, as long as the seller has the
right to transfer ownership at the time it is to be
delivered.
Supposing A accidentally found a Acer Laptop owned
by B. A then sells the Acer Laptop owned by B to C
for PhP 5,000. Is there a valid contract of sale?

NO. Because, A does not have a right to transfer

ownership of the Acer Laptop
Suppose A intends to build a two (2) storey house
on the lot he owns located at Lot 123 in Subd. X.
May this house, which does not exist yet, be the
object or subject matter of a contract of sale?

Yes. Art. 1461 states that:

“Things having a potential existence may be the

object of the contract of sale.

The efficacy of the sale of a mere hope or

expectancy is deemed subject to the condition that the
thing will come into existence.

The sale of a vain hope or expectancy is void.”

 •1st par. of Art. 1461 provides that future things may
be subject of a contract of sale.
Ex. A binds himself to sell to B, 100 kilos of mango
fruits that A will harvest in his farm (thing having a
potential existence)
“a valid sale may be made of a thing, which though not yet actually in existence,
is reasonably certain to come into existence as the natural increment or usual
incident of something already in existence, and then belonging to the vendor,
and the title will vest in the buyer the moment the thing comes into existence.
(Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers
Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential
existence. A man may sell property of which he is potentially and not actually
possess. He may make a valid sale of the wine that a vineyard is expected to
produce; or the grain a field may grow in a given time; or the milk a cow may
yield during the coming year; or the wool that shall thereafter grow upon sheep;
or what may be taken at the next case of a fisherman's net; or fruits to grow; or
young animals not yet in existence; or the goodwill of a trade and the like. The
thing sold, however, must be specific and Identified. They must be also owned at
the time by the vendor.” (Luis Pichel, petitioner vs. Prudencio Alonzo,
respondent G.R. No. L-36902 January 30, 1982)
 The 3rd paragraph of Art. 1461 mentioned that if the
subject of a contract of sale is a vain hope and
expectancy, the same is void

What is a vain hope or vain expectancy?

A vain hope or a vain expectancy is something that is
impossible to happen.

When the object or subject matter of a contract of

sale is impossible to happen, the contract of sale is
void.
 Give an example of sale of hope or expectancy

B buys a lottery ticket from A, for P100, in the

hope of winning the prize

the object is the hope or expectancy of

winning the prize

Give an example of sale of a vain hope or

expectancy

B buys a fake lottery ticket from A, for P100, in the

hope of winning the prize

the object is a vain hope or expectancy, because B

has no chance of winning, it is impossible to
happen
 May future goods be the object of a contract of
sale?

What are future goods?

Future goods - are goods to be manufactured,

raised, or acquired by the seller after the
perfection of the contract of sale
Art. 1462 provides:

“The goods which form the subject of a contract of sale

may be either existing goods owned or possessed by the
seller, or goods to be manufactured, raised, or
acquired by the seller after the perfection of the
contract of sale, in this Title called “future goods.

There may be a contract of sale of goods whose

acquisition by the seller depends upon a contingency
which may or may not happen.”

Examples of future goods:

Shoes to be produced by a factory
Crops to be grown / harvested
Airplanes to be manufactured
May O, owner of a 1,000 sqm. Land, sell an undivided
portion of the land, equivalent to 200 sqm to B? YES

Art. 1463 states:

“The sole owner of a thing may sell an undivided

interest therein.”

The owner of the thing may sell the whole or an

undivided interest in the thing. In such a case a co-
ownership will be created between the buyer and
seller of the thing.
 Art. 1464 provides:

“In the case of fungible goods, there may be a sale of

an undivided share of a specific mass, though the seller
purports to sell and the buyer to buy a definite number,
weight or measure of the goods in the mass, and though
the number, weight or measure of the goods in the mass
is undetermined. By such a sale the buyer becomes
owner in common of such a share of the mass as the
number, weight or measure bought bears to the number,
weight or measure of the mass. If the mass contains
less than the number, weight or measure bought, the
buyer becomes the owner of the whole mass and the
seller is bound to make good the deficiency from goods
of the same kind and quality, unless a contrary intent
appears.”
What are fungible goods?

Fungible goods means goods of which

any unit is, from its nature or by
mercantile usage, treated as the
equivalent of any other unit, such as
grain, oil, wine, gasoline etc.
Art. 1464 pertains to sale of fungible goods that are in
mass, and their weight, number or measure is
undetermined, and the seller and buyer agreed to sell
and buy a definite weight, number or measure. In such
a case the buyer and the seller become co-owners of the
fungible things in mass.

In case the mass contains less that the agreed

weight, number or measure sold, the buyer becomes
the sole owner of the mass. The seller is also obliged
to supply the deficiency.
Give an example where the mass contains less that
the agreed weight, number or measure sold, thus the
buyer becomes the sole owner of the mass, and the
seller is also obliged to supply the deficiency.

A sold to B 250 cavans of rice stored in the

warehouse of A, which purportedly contained 1000
cavans. In such a case, A and B will be co-owners of
the rice stored in the warehouse, wherein A owns ¾,
and B owns ¼ of the rice stored in the warehouse.

However, if it was discovered that only 200 cavans of

rice were stored in the warehouse. B will now be the
sole owner of the 200 cavans of rice, and A is
obligated to deliver to B the deficient 50 cavans of
rice.
 Art. 1465 states:

“Things subject to a resolutory condition may be the

object of the contract of sale.”

What is a Resolutory condition?

A resolutory condition is an uncertain event upon

the happening of which, the obligation (or right)
subject of it is extinguished.

Give an example of a sale of a thing subject of a

resolutory condition.
S sells his land to B, but S was given a right to buy-back
(repurchase) the land within 2 years. Just 6 months after
buying the land, B sells the land to C.

Before expiration of 2 years, S buys-back (repurchased) the

land.
What is the thing subject of a resolutory condition in this
example?
In this case, the land, is subject to a resolutory
condition, which is the right to repurchase the land
within two (2) years. The sale of the land from B to C
is valid, even though S still has the right to
repurchase the land.

In such a case, C will be bound to sell the land to S,

within the two (2) year repurchase period, should S
desire to exercise his right to repurchase the land.
Art. 1466 states:

“In construing a contract containing provisions

characteristic of both the contract of sale and of the
contract of agency to sell, the essential clauses of the
whole instrument shall be considered.”

What is a contract of agency?

A contract of agency is defined as a contract wherein

a person binds himself to render some service or to do
something in representation or on behalf of another,
with the consent and authority of the latter
 Distinction between Contract of Sale and Contract of Agency

• In sale, the buyer receives the goods as owner; in agency, the agent
receives the goods in behalf of the principal (the seller retains ownership)

• In sale, the buyer pays the price; in agency, the agent merely
accounts for the proceeds of the sale, to the principal

• In sale, the buyer as rule cannot return the object bought; in agency,
the agent can return the thing he received and failed to sell

• In sale, the seller warrants the thing sold; an agency, the agent is not
liable for any warranty

•In sale, the seller can deal with the thing sold as he pleases; in agency,
the agent, in dealing with the thing, is bound by the authority given to him
by the principal

• A contract of sale cannot be revoked unilaterally; while a contract of

agency can be revoked unilaterally by the Principal
 DISTINCTION BETWEEN CONTRACT OF SALE AND CONTRACT OF AGENCY

AREAS / MATTERS FOR CONTRACT OF SALE CONTRACT OF AGENCY TO

DISTINCTION SELL/BUY

As how one receives the goods The Buyer receives the goods as The Agent receives the
the owner goods in behalf of the
principal
The agent merely accounts
As to who pays the price certain The Buyer pays the price for the price paid by the
in money Principal and/or for the
Principal
The Agent can return the
Whether or not the object or Once the Buyer receives the object or object or subject matter he
subject matter may be returned subject matter from the Seller, as a received from the seller if the
rule the Buyer cannot return the Agent fails to sell the object or
object or subject matter subject matter
The Seller warrants the thing sold and The Agent is not liable for
As to Warranty liable for the warranties any warranty
The Agent is bound by the
How to deal with the thing The Seller can deal with the thing authority given to him/her by
subject matter of sale subject of the sale as he/she the Seller in dealing with the
pleases subject matter of sale
In a contract of Agency to
Whether revocable unilaterally Contract of Sale cannot be revoked Sell/Buy the Principal can
unilaterally. Both the Seller and unilaterally revoke the
Buyer must agree authority of the Agent
Ex. A is an agent of P. A was authorized by P to sell
refrigerators owned by P for PhP 10,000.

• If A receives a refrigerator, P retains ownership of the

refrigerator; while the buyer receives the refrigerator as
an owner

• If A receives a refrigerator, A is not bound to pay the

price of the refrigerator, A is merely obligated to
account for the sale of the refrigerator when it is sold;
if the buyer receives the refrigerator he is obligated to
pay the price of the refrigerator
• A can return to P the unsold refrigerator received by the
former; the buyer cannot return what he has already
bought

• P is liable for warranties for the refrigerator sold; A is

not liable for warranty

• P may sell the refrigerator for PhP 9,000 or for PhP

10,000 or for PhP 11,000; while A can only sell the
refrigerator for PhP 10,000.
Article 1467 provides:

“A contract for the delivery at a certain price of an article

which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether
the same is on hand at the time or not, is a contract of
sale, but if the goods are to be manufactured specially for
the customer and upon his special order, and not for the
general market, it is a contract for a piece of work.”

Art. 1467 distinguishes a contract of sale from that of

a contract for a piece of work.
 What is a contract of piece of work?

A contract for a piece of work is where a

contractor bind himself to execute a piece of work
for the employer, in consideration of a certain
price or compensation. The contractor may either
employ his labor or skill, or also furnish the
material
 Distinction between a Contract of Sale and
Contract for a Piece of Work
• In a Contract for a Piece of Work, the thing is not in
existence, and would never have existed if not for the
order of the party desiring to acquire it; while in a
contract of sale, the thing would have existed even if the
order has not been made (thing that already exist cannot
be the subject of a contract of piece of work)
•In a Contract for a Piece of Work, the risk of loss
before delivery is borne by the worker or contractor, not
by the employer (the person who ordered); in a
contract of sale, the risk is borne by the buyer
•In a Contract for a Piece of Work, the Statute of Fraud
is not applicable; in a contract of sale, the Statute of
Fraud is applicable
 DISTINCTION BETWEEN CONTRACT OF SALE AND CONTRACT OF
PIECE OF WORK

AREAS/MATTERS FOR CONTRACT OF SALE CONTRACT OF PIECE

DISTINCTION OF WORK

As to the existence of the The object or subject matter The object or subject
object or subject matter would exist even without the matter would not exist
Buyer or order of the Buyer without the order of the
party acquiring it

Risk of loss of the object or Buyer bears the risk of loss The worker or
subject matter before contractor bears the
delivery risk of loss not the
person who ordered

Whether or not the Statute of Statute of Fraud is applicable Statute of Fraud is not
Fraud is applicable applicble
 Give an example of a Contract for a Piece of Work

An order for a bridal dress, which is unique and

specific to a particular customer

What is a Statute of Fraud?

Refers that certain contracts be in writing with

sufficient content to evidence the contract in order for
it to be enforceable and/or effective
Art. 1468 states that:

“If the consideration of the contract consist partly in

money, and partly in another thing, the transaction shall
be characterized by the manifest intention of the parties. If
such intention does not clearly appear, it shall be
considered a barter if the value of the thing given as a part
of the consideration exceeds the amount of the money or
its equivalent; otherwise, it is a sale.”

Art. 1468 lays down the rule on how to characterize /

interpret / treat a contract, whether it is a contract of sale
or a contract of barter, where the consideration is part
money and part thing
 What is a contract of Barter?
Barter is defined as a contract an exchange of goods or
service for another goods or services. One of the parties
binds himself to give one thing in consideration of the
other’s promise to give another thing

DISTINCTION BETWEEN CONTRACT OF SALE AND

CONTRACT OF BARTER

AREAS / MATTERS CONTRACT OF SALE CONTRACT OF

OF DISTINCTION BARTER

Cause or Price certain in Goods, Objects,

consideration money Thing, or Service
In contract of sale the consideration is money;
while in the a contract of barter the consideration
is a thing

If the consideration is partly money and partly goods

or thing, is the contract a sale or a barter?

It can be a contract of sale or it can be a contract of

barter

To determine whether it is a contract of sale or a

contract of barter, refer to Art. 1468 of the CC
 Rule in Determining whether Sale or Barter, when the
Consideration is part Money and Part Thing

• First determine the manifest intention of the

parties, whether it is contract of sale or a contract of
barter

• If the manifest intention of the parties is not

clear, determine the value of the thing
(consideration). If the value of the thing is greater that
the money then it is a barter, otherwise it is a sale
Suppose A is engage in the trading of rice. On the other-
hand B, is engage in the business of selling sugar.

A and B entered into an agreement that every month A

would deliver to B 25 kilos of rice, valued at PhP 1,000;
in exchange B would deliver 10 kilos of sugar to A, also
worth PhP 20,000.

Is this a contract of sale or a contract of barter?

Contract of Barter, A and B are engaged in the

contract of barter, since A and B agreed to give
each other entirely goods or thing. Hence, Art. 1468
is not applicable, Art. 1638 is applicable
 Suppose on their 3rd month of trading A could only
deliver 10 kilos of rice (worth PhP 400.00). Hence, in
addition to 10 kilos of rice, A also paid B PhP 600.00
cash, in exchange for the 10 kilos of sugar (worth
PhP 1,000.00).
Is this a contract of sale or a contract of barter?

It is still a contract of Barter. Notwithstanding that the

value of the sugar is less than the cash given to B, the
transaction is still barter, because the manifest
intention of the parties is to engage in barter, which is
the exchange of sugar and rice.

However, if the intention of the parties could not ne

determined, the contract would be that of sale, since
the money paid is greater than the value of the thing,
which are considerations for the rice.
Suppose A and B agreed that A will to buy from B 100
kilos of sugar, worth PhP 10,000. However, when it
was time for A to pay B, A does not have money to
pay for the 100 kilos of sugar. A then asked B if A
could just give B 250 kilos of rice, in exchange for the
100 kilos of sugar. B agreed.

Is this a contract of sale or a contract of barter?

Contract of Sale. Art. 1468 is applicable. The

intention of A was to buy from B 100 kilos of sugar
worth PhP 10,000, and the intention of B is to sell
100 kilos of sugar to A for PhP 10,000.
 Art. 1469 states:

“In order that the price may be considered certain, it shall be

sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of a specified person or
persons.

Should such person or persons be unable or unwilling to fix it, the

contract shall be inefficacious, unless the parties subsequently agree
upon the price.

If the third person or persons acted in bad faith or by mistake, the

courts may fix the price.

Where such third person or persons are prevented from fixing the
price or terms by fault of the seller or the buyer, the party not in fault
may have such remedies against the party in fault as are allowed the
seller or the buyer, as the case may be.”
•Art. 1469 lays down the criteria in determining if the
consideration or cause may be considered as price
certain in money.

Why is it important to ascertain if the consideration

or cause is price certain in money?

It is important to determined if the cuase or

consideration is price certain in money, because,
if the cause or consideration is not a price certain
in money, then there is no valid contract of sale
 When is it considered that the consideration is a Price
is Certain in Money?
The consideration is considered a price i certain in money

1. When the parties have fixed or agreed upon a definite

amount
2. The price/amount is certain with reference to another
thing
3. The determination of the price is left to the judgment of a
specified person or persons

As a rule the determination of the price by a third person is

binding; except

•When the 3rd person acted with bad faith or by mistake

•When the 3rd person disregarded the instructions of the parties
 What is the effect if the 3rd person designated to
Fix the Price failed or refuses to do so?

• If the 3rd Person Designated refuses to fix the

price, the contract shall be ineffective, unless
parties subsequently agree to the price

• If the 3rd Person Designated failed to fix the

price, because he was prevented by the seller
or buyer, the innocent party may choose
between rescission or fulfillment with
damages
Art. 1470 provides that:

“Gross inadequacy of the price does not affect a contract

of sale, except as it may indicate defect in the consent, or
that the parties really intended a donation or some other
act or contract.”

Gross inadequacy in the price does not affect the

contract of sale, hence, even if the price for the thing
bought is much lower than its actual value, the contract is
valid as long as the parties knowingly, in good faith, and
voluntarily agreed upon the price.

However, if the gross inadequacy of the price,

indicates a defect in consent, the contract of sale is
void or voidable
Example:

A owns a Ford Mustang with plate number XYZ789

worth PhP 2,000,000. A aware of the value of the Ford
Mustang to be PhP 2,000,000, he nonetheless sold the
Ford Mustang with plate number XYZ789 to his good
friend B for PhP 1,000,000, which B agreed to buy.

In this case, the contract of sale is valid, notwithstanding

that the agreed price for the Ford Mustang is much lower
than its value.
Suppose in the above given example, A was not aware
that the value of the Mustang is PhP 2,000,000. That
upon inquiry to C (a common friend of A and B), C
maliciously informed A that the value of the Ford
Mustang is only PhP 1,000,000, in order to benefit B and
B knew of the false information given by C to B. Thus A
sold the Ford Mustang to B for PhP 1,000,000.

Is the contract of sale valid?

NO. It is voidable, because consent of A is vitiated

or there is a defect in the consent of A
Art. 1471 provides that:

“If the price is simulated, the sale is void, but the act may
be shown to have been in reality a donation, or some other
act or contract.”

The price is simulated, or false, is when there is in fact

no price (cause or consideration) in the contract of sale.
In such a case, one (1) of the essential element of a
contract of sale is absent, thus the contract of sale is void.

An example of this is when the parties entered into a

purported contract of sale, but in reality the vendor
intended to transfer the thing gratuitously, the contract of
sale is void, but the contract shall be valid as to a
donation.
Art. 1472 states:

“The price of securities, grain, liquids, and other things

shall also be considered certain, when the price fixed is
that which the thing sold would have on a definite day, or in
a particular exchange or market, or when an amount is
fixed above or below the price on such day, or in such
exchange or market, provided said amount be certain.”
Suppose A agreed to sell to B, 50 cavans of denorado
rice, and it was agreed that the price per cavans of
denorado rice is Php 2.00 lower than the price at
Puregold, San Nicolas, Angeles City, on June 2, 2019.

Is the price for the cavans of denorado rice

certain?

YES, the price is certain

Art. 1472 states:

“The price of securities, grain, liquids, and other things shall also be
considered certain, when the price fixed is that which the thing sold
would have on a definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on such day, or
in such exchange or market, provided said amount be certain.”
Art. 1473 states:

“The fixing of the price can never be left to the discretion

of one of the contracting parties. However, if the price
fixed by one of the parties is accepted by the other, the
sale is perfected.”

May the Seller solely determine the price in a

contract of sale?

NO. A characteristic of a contract of sale is mutuality,

thus both parties must mutually agree to all the terms
in the contract, including the price. Further, Art. 1473
specifically states that the fixing of the price cannot be
left to the discretion solely to one of the contracting
party
Art. 1474 provides that:

“Where the price cannot be determined in accordance

with the preceding articles, or in any other manner, the
contract is inefficacious. However, if the thing or any part
thereof has been delivered to and appropriated by the
buyer he must pay a reasonable price thereto. What is a
reasonable price is a question of fact dependent on the
circumstances of each.”

Art. 1474 again emphasizes and reiterates that if a

price cannot be determined with certainty, then the
contract of sale is ineffective.
Suppose A sold to B a sack of rice, but the price for
the sack of rice is uncertain (A and B have not agreed
on the price). Despite not agreeing on the price, A
delivered to B the sack of rice. When A and B could
not agree on the price for the sack of rice, and the
price could not be determined with certainty, B has
already consumed half of the sack of rice.

Is the contract of sale valid? NO, the contract of sale is

ineffective

What are the obligations of the parties, if any?

B must pay a reasonable price from the rice consumed.
Art. 1475 provides:

“The contract of sale is perfected at the moment there is

a meeting of the minds upon the thing which is the object
of the contract and upon the price.

From that moment, the parties may reciprocally demand

performance, subject to the provisions of the law
governing the form of contracts.”

When is the contract of sale perfected?

The contract of sale is perfected the moment there is

a meeting of the mind as to the object that is
determinate and the price that is certain
• Considering that the contract of sale is consensual,
the same is perfected the moment there is a meeting of
mind upon the thing, which the object of the contract
and the price. Distinction must be made between
perfection and consummation. The contract of sale is
perfected when there is a meeting of the mind as to the
determinate thing and the price certain. It is consummated
when all the obligations of the parties, including
transfer of ownership, have been performed.

• The moment the contract is perfected, the parties are

duty bound to comply what is incumbent upon them, and
for the parties to demand performance
• Failure of the party to comply what is incumbent upon
him, the party who is ready to comply may seek for
rescission or fulfillment, with damages
 Art. 1476 provide for the rules in case of sale by auction.
Rules in Case of Sale by Auction

•Auction in lots – each lot is the subject of a separate contract of

sale
•Auction is perfected by the fall of the hammer or in other
customary manner, the bidder may retract his bid or the auctioneer
may withdraw the thing anytime the hammer falls, unless the
auction is announced to be without reserve
•The seller has a right to bid, provided (a) the right to bid was
reserved; (b) notice was given that the sale is subject to a right to
bid on behalf of the seller; and (c) the right to bid by the seller is not
prohibited by law or by stipulation
•Where no notice of right to bid is given, it is unlawful for the
seller to bid, either directly or directly, or for the auctioneer to
employ or induce any person to bid in behalf of the seller.
Art. 1477 states:

“The ownership of the thing sold shall be transferred to the

vendee upon the actual or constructive delivery thereof.”

Art. 1478 states:

“The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the
price.”

Arts. 1477 and 1478 provides for the rules on when

ownership is transferred to the buyer
When does ownership transferred from the seller to the
buyer?
• It is only after delivery of the thing sold that the
purchaser acquires a real right or ownership over
it. Delivery may be actual or constructive. However,
the parties may stipulate, despite delivery, that the
ownership shall remain with the seller until the
purchaser has fully paid the price.

• Thus, even if payment has not been made,

ownership is transferred upon delivery, unless a
stipulation to the contrary is agreed upon
 Art. 1479 states:

“A promise to buy and sell a determinate thing for a price certain

is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate

thing for a price certain is binding upon the promisor if the promise
is supported by a consideration distinct from the price.”

The 1st par of Art. 1479 contemplates a mutual promise to

buy and sell a determinate thing. This means the seller has
promised to sell a determinate thing at a price certain and the
buyer has promised to buy a determinate thing at a price
certain. This is where two (2) parties agree to enter into a
contract of sale. There is no contract of sale yet, but merely an
agreement to enter into one.
• This type or phase of an agreement is executory in
nature
• The parties may demand compliance from each of the
other party.

Suppose S promised to sell a Toyota car with plate No.

NME 234 to B for PhP 300,000, and B accepts and
promised to buy the car.

Are the parties bound by the contract?

Yes. The parties are bound by the contract, and each

may demand compliance
The 2nd par. of Art. 1479, contemplates a unilateral
promise to buy or sell a determinate thing, wherein the
promise is accepted, and such promise was subject a
consideration other than the price

• In this case only one of the party makes a promise to

buy or sell a determinate thing, and the other party
accepts the promise

• The promissor is bound by the promise if, the promise

is supported by a consideration other than the price
(similar to option money)
 Suppose S promised to sell a Toyota a car with plate No.
NME 234 to B for PhP 300,000, and B accepts but made
no promise to buy.

Is S bound or obligated to sell his car to B?

NO. A is not bound or has no obligation to sell to B the car.

Because, B did not make a promise to buy
Suppose S promised to sell a Toyota car with plate No.
NME 234 to B for PhP 300,000, and B accepts but made
no promise to buy. In consideration of the promise to sell, B
gave S PhP 500.

Is S bound or obligated to sell his car to B?

YES. S is bound or has the obligation to sell to B the car,

because, B paid or gave a consideration distinct from the
purchase price and in consideration of the promise made
by S (called an option money).
Article 1489 provides:

All persons who are authorized in this Code to obligate

themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.

Where necessaries are those sold and delivered to a

minor or other person without capacity to act, he must
pay a reasonable price therefor. Necessaries are those
referred to in article 290
Who may enter into a contract of sale?

All person natural or juridical, who have legal capacity

to enter into a contract

Person who are legally capacitated may enter into a

contract of sales, hence, incapacitated persons cannot
enter into a contract of sale.

However, there are different kinds of incapacity.

 What are the different kinds of Incapacity?
Absolute incapacity - Those persons who cannot
bind themselves
Relative incapacity - Those persons who are
capacitated, however, they
are incapacitated to deal
with regard to certain
person, certain property or
certain things
Who are this person who have absolute incapacity?
• 18 years old and above
• Those who are not insane
• Those who are not deaf mute and do not know
how to read and write
May a minor (below 18 years old) enter into a contract of sale?

NO, because a minor has no legal capacity to enter into a

contract
Suppose M, minor, 10 years old, who was left alone in the house,
went to a store to buy food, because he/she was hungry. M
bought and paid P 4.00, the usual price, for a biscuit at the store,
and M ate the biscuit. When F, father of M learns of the incident,
F confronted the owner of the store and demanded for the return
of the P 4.00, claiming that M, has no capacity to enter into a
contract of sale, and thus the sale was void.

Is the store owner obligated to return the P 4.00?

NO, because M though has no capacity to act, must still

pay for the reasonable price for the biscuit. (2nd par. of
Art. 1489)
Article 1489 provides:

All persons who are authorized in this Code to obligate themselves,

may enter into a contract of sale, saving the modifications contained
in the following articles.

Where necessaries are those sold and delivered to a minor or

other person without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to in article 290

What are necessaries as contemplated in Art. 1489?

Necessaries are those things which are needed for

sustenance, dwelling, clothing, and medical attendance,
in keeping with the financial capacity of the family of the
incapacitated person
Suppose M, minor, 12 years old, went to SM Clark
alone, and bought a computer at ABC Store. M was
given a discount and bought and paid P 20,000, for a
computer that usually sells for P 25,000. When F, father
of M learns of the incident, F confronted the owner of
ABC store and demanded for the store to accept back
the computer that M bought and for the store to return
the P 20,000, claiming that M, has no capacity to enter
into a contract of sale, and thus the sale was void.

Is the store owner obligated to return the P 4.00?

YES, because M has no capacity to act, thus the contract

of sale for the computer is voidable.
Who are those person who have relative incapacity,
with regard to the person they cannot enter into a
contract of sale?

• Husband and wife cannot enter into a contract of sale

with each other, except when there is an agreement or
judgment as to the separation of property (Art. 1490)

The prohibition stated above prohibiting husband and wife

to enter into a contract of sale with each other is a form of
relative incapacity
Who are those person who have relative incapacity,
with regard to the things which is the object or
subject matter of the sale?
• Guardian cannot acquire the property of persons under
his/her guardianship (Art. 1491 (1))

• Agents cannot acquire property that he administers or

those he was authorized to sell, unless the consent of the
principal has been given (Art. 1491 (2))

• Executors and/or Administrators cannot acquire the

property of the estate under his/her administration (Art. 1491
(3))
• Public Officers and Employees cannot acquire the
property of the State or of any subdivision, thereof, or any
government-owned or controlled corporation, or institution,
the administration of which has been inthrusted to them. This
applies to judges and government experts who, in any
manner take part in the sale (Art. 1491 (4))

• Justices, judges, prosecuting attorneys’ clerks of

superior and inferior courts, and other officers, and
employees functions cannot acquire the property/ies
connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their
respective (Art. 1491 (5))

The above enumeration is also a form of relative

incapacity
The prohibition in Art. 1490 and 1491, with regard to
sale, is also applicable in legal redemption,
compromises, and renunciation
Art. 1480 states:

“Any injury to or benefit from the thing sold, after the

contract has been perfected, from the moment of the
perfection of the contract to the time of delivery, shall be
governed by articles 1163 to 1165, and 1262.

This rule shall apply to the sale of fungible things, made

independently and for a single price, or without
consideration of their weight, number or measure.

Should fungible things be sold for a price fixed according to

weight, number, or measure, the risk shall not be imputed
to the vendee until they have been weighed, counted, or
measured, and delivered, unless the latter has incurred in
delay.”
• Art. 1163 pertains to taking good care of the thing with
the diligence of a good father of a family

• Art. 1164 pertains to the right of the creditor to the fruits

from the time the obligation to deliver arises

• Art. 1165 pertains to right of the creditor to compel

delivery, and in case of delay, the debtor shall be
responsible for fortuitous event

• Art. 1262 pertains to loss or destruction of a determinate

thing before delivery, and the thing is lost or destroyed due
to fortuitous event, without the fault of the debtor, the
obligation is extinguished (unless there is stipulation that
the debtor will be liable even for fortuitous event)
Rule in Case of Loss or Deterioration (applicable to a Determinate
Thing or Fungible

• If the thing is lost before perfection of the contract of sale, the

seller bears the loss

• If the thing is lost at the time of the perfection of the contract of

sale, the seller bears the loss

• If the thing is lost after perfection of the contract of sale but

before delivery, the buyer bears the loss

• If the thing is lost after perfection of the contract of sale and

after delivery, the buyer bears the loss

If the fungible thing is lost for a fixed price according to weight,

number or measure, and the fungible thing has not been weighed,
counted, or measured, the seller bears the loss (exception to the
above-cited rule)
 Art. 1481 states:

In the contract of sale of goods by description or by sample, the

contract may be rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and if the contract be by
sample as well as by description, it is not sufficient that the bulk of the
goods correspond with the sample if they do not also correspond with
the description.

The buyer shall have a reasonable opportunity of comparing the

bulk with the description or the sample.

Art. 1481 gives the rule for sale of goods by description or by sample.
Rule In Cases of Contract of Sale of Goods by Description or by
Sample

•Sale by description or by sample - If the bulk of goods does not

correspond to the description or sample, the contract may be rescinded

•Sale by description and by sample - The bulk of goods must

correspond both to description and sample, otherwise, the contract may be
rescinded
Art. 1482 states

“Whenever earnest money is given in a contract of sale, it

shall be considered as part of the price and as proof of the
perfection of the contract.”

What is an earnest money?

Earnest money is money given by the buyer to the
seller as evidence of the perfection of a contract

What is an option money?

Option money is money or consideration paid,

distinct from the purchase price, in order to secure
for the buyer the opportunity to make up his/her
mind to buy
 Distinction between Earnest Money and Option
Money

• Earnest money is part of the purchase price; option

money is not part of the purchase price but in
consideration of an option

• Earnest money is given as proof of perfection of sale;

option money there is no perfected sale yet

• Earnest money once paid, the buyer is bound to pay

balance of the purchase price; option money even if
given, does not bind the prospective buyer to pay the
purchase price, should the prospective buyer opt not to
buy
DISTINCTION BETWEEN OPTION MONEY AND EARNEST
MONEY
Item of OPTION MONEY EARNEST MONEY
Distinction

Whether it is part Not part of the price Part of the price

of the Price or not

As to perfection of Not proof of Proof od perfetction of

the Contract of perfection of a a contract of sale
Sale contract of sale

Obligation to pay The prospective The buyer has the

the balance of the buyer has no obligation to pay the
purchase price obligation to pay the balance of the
balance of the purchase price
purchase price
Art. 1483 provides that a contract of sale may be made orally
or in writing or partly orally or partly in writing, or may be
inferred from the conduct of the parties, subject to
compliance with the Statute of Fraud in certain cases.

As a general rule, a contract of sale is perfected by

mere consent, however certain contract of sale must
comply with the Statute of Fraud

Statute of Fraud requires that a contract must be

in some form of writing in order that a contract
could be enforced
 What are the contract of sale that must conform
with the Statute of Fraud

The following are the Contract of Sale that

Must Comply with the Statute of Fraud

• Sale of personal property of PhP 500 and above

unless the buyer accept and receive part of such
goods (Art. 1403 (2)d CC)

• Sale of real property or an interest therein (Art. 1403

(2)a CC)

• Sale of property not to be performed within a year

from the date thereof, regardless of the nature or the
property or the price (Art. 1403 (2)e CC)
 ASSIGNMENT

Reading Assignment for next meeting : 

Articles 1458 to 1488 and related

discussions on the Articles
 END OF CLASS

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