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

thereof a price certain in money or its equivalent.

The contract of sale is an agreement whereby one of the parties (seller/vendor)

obligates himself to pay therefor a sum of money or its equivalent (price).

Characteristics of a Contract of Sale

(1) Consensual- it is perfected by mere consent without any further act;

(2) Bilateral- both of the Contracting parties are bound to fulfill correlative

obligations towards each other- the seller, to deliver and transfer owrnership of the

thing sold and the buyer, to pay the price.

(3) Onerous- the thing sold is conveyed in consideration of the price and vice

versa.

(4) Commulative- 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.

(5) Nominate- it is given a special name or designation in the Civil Code.

(6) Principal- it does not depend for its existence and validity upon another

contract.
Without delivery of the goods, there is no corresponding obligation to pay. The two

component each other, for the contract of purchase and sale is, essentially, a

bilateral contract, as it gives rise to reciprocal obligations.

Essential Requisites of a Contract of Sale

(1) Consent or meeting of the minds. This refers to the consent on the part of the
seller to transfer and deliver and on the part of the buyer to pay. The parties must
have legal capacity to give consent and to obligate themselves. The essence of
consent is the conformity of the parties on the terms of the contract, the
acceptance by one of the offer made by the other. The contract to sell is a bilateral
contract. Where there is merely an offer by one party without the acceptance of the
other, there is no consent. The acceptance of payment by a party is an indication of
his consent to a contract of sale, thereby precluding him from rejecting its binding
effect.

Consent against the Will of the Owner

case of expropriation (see Art. 1488.)

an ordinary execution sale (see
Rules of Court, Rule 39, Sec. 15.),
judicial foreclosure sale (Ibid.,
Rule 68.), and
extra-judicial foreclosure sale. (Act No. 3135,
as amended

The sale of conjugal property requires the consent of both the

husband and the wife. The absence of the consent of one renders
the sale null and void (see Art. 124, Family Code.)

(2) Object or subject matter. This refers to the determinate thing

which is the object of the contract. (Art. 1460.) The thing must be

determinate or at least capable of being made determinate because

if the seller and the buyer differ in regard to the thing sold, there
is no meeting of the minds; therefore, there is no sale. The subject
matter may be personal or real property

(3) Cause or consideration. This refers to the price certain

in money or its equivalent (Art. 1458.) such as a check or a promissory
note, which is the consideration for the thing sold. It does
not include goods or merchandise although they have their own
value in money. (see Arts. 1468, 1638.) However, the words its
equivalent have been interpreted to mean that payment need not
be in money, so that there can be a sale where the thing given as
token of payment has been assessed and evaluated and [its] price
equivalent in terms of money [has] been determined.

The absence of any of the above essential elements negates

the existence of a perfected contract of sale

Natural and accidental elements

(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

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

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

Effect of absence of price/nonpayment

of price.

(1) There can be no sale without a price. (see Art. 1474.) Technically,
the cause in sale is, as to the seller, the buyers promise to
pay the price, and as to the buyer, the sellers promise to deliver
the thing sold. A contract of sale is void and produces no effect
whatsoever where the same is without cause or consideration (Art.
1409[3].)

But the failure to pay the price in full within a fixed period
does not, by itself, dissolve a contract of sale in the absence of any
agreement that payment on time is essential (Ocampo vs. Court
of Appeals
Transfer of title to property for a price,
essence of sale.
(1) Obligations to deliver and to pay. The transfer of title to
property or agreement to transfer title for a price actually paid or
promised, not a mere physical transfer of the property, is the essence
of sale.

It is only upon the existence of the contract of sale that the

seller is obligated to transfer ownership to the buyer and the buyer,
to pay the purchase price to the seller. (Chua vs. Court of Appeals,

(2) Where transfer of ownership not intended by the parties.

A contract for the sale or purchase of goods/commodity to be
delivered at a future time, if entered into without the intention
of having any goods/commodity pass from one party to another,
but with an understanding that at the appointed time,
the purchaser is merely to receive or pay the difference between
the contract and the market prices, is illegal. Such contract falls
under the definition of what is called futures in which the
parties merely gamble on the rise or fall in prices and is declared
null and void by law.

Kinds of contract of sale.

(1) As to presence or absence of conditions. A sale may be
either:

(a) Absolute. where the sale is not subject to any condition

whatsoever and where title passes to the buyer upon
delivery of the thing sold. Thus, it has been held that a deed
of sale is absolute in nature although denominated as a Deed
of Conditional Sale in the absence of any stipulation that the
title to the property sold is reserved in the vendor until full
payment of the purchase price nor a stipulation giving the
vendor the right to unilaterally rescind the contract the moment
the vendee fails to pay within a fixed period. (Dignos vs.
Court of Appeals) ownership of
the property sold passes to the vendee upon the actual or constructive
delivery thereof. (see Art. 1497.)

(b) Conditional. where the sale contemplates a contingency

(Arts. 1461, 1462, par. 2; Art. 1465.), and in general,
where the contract is subject to certain conditions (see Art.
1503, par. 1.), usually, in the case of the vendee, the full payment
of the agreed purchase price (Art. 1478; see Peoples
Homesite & Housing Corp. vs. Court of Appeals

However, a sale denominated as a Deed of Conditional

Sale is still absolute where the contract is devoid of any proviso
that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. (Heirs of Juan
San Andres vs. Rodriguez,

The delivery of the thing sold does not transfer title until
the condition is fulfilled. Where the condition is imposed, instead,
upon the perfection of the contract the failure of such
condition would prevent such perfection (Galang vs. Court of
Appeals

The stipulation that the payment of the full consideration

[of a parcel of land] shall be due and payable in five
(5) years from the execution of a formal deed of sale is not a
condition which affects the efficacy of the contract of sale. It
merely provides the manner by which the full consideration
is to be computed and the time within which the same is to be
paid. (Heirs of Juan San Andres vs. Rodriguez

(2) Other kinds. There are, of course, other kinds of sale

depending on ones point of view, e.g., as to the nature of the subject
matter (real or personal, tangible or intangible), as to manner
of payment of the price (cash or installment), as to its validity
(valid, rescissible, unenforceable, void), etc

Contract of sale and contract to sell

with reserved title distinguished

(1) Transfer of title contract of sale contract to sell

(exclusive right and privilege to
purchase)
title passes to the purchase), where it is
buyer upon delivery of stipulated that ownership
the thing sold in the thing shall not pass
to the purchaser
until he has fully paid the
price
In the absence of such
stipulation, especially
where the buyer took
possession of the
property upon execution
of the contract, indicates
that what the parties
contemplated is a
contract of absolute sale.
(2) Payment of price non-payment of the full payment
price is a negative is a positive suspensive
resolutory condition condition,

and the remedy of the the failure of which is not

seller is to exact
fulfillment or to rescind
the contract
(3) Ownership of the vendor has lost and
vendor. cannot
recover the ownership of
the thing sold and
delivered, actually
or constructively (see Art.
1497.), until and unless
the contract
of sale itself is resolved
and set aside
a
breach, casual or serious,
of the contract but simply
an event that
prevents the obligation of
the vendor to convey title
from acquiring
binding force
Where the seller promises
to execute a deed
of absolute sale upon full
payment of the purchase
price
the title remains in the
vendor if the vendee does
not
comply with the condition
precedent of making
payment at the
time specified in the
contract
There is no actual sale
until and unless full
payment of
the price is made

Otherwise stated, in a contract of sale, after delivery of the

object of the contract has been made, the seller loses ownership
and cannot recover the same, unless the contract is rescinded.
But in the contract to sell, the seller retains ownership and the
buyers failure to pay cannot even be considered a breach,
whether casual or substantial, but an event that prevented the
sellers duty to transfer title to the object of the contract.

Since the refusal of petitioner to deliver the scrap iron was

founded on the non-fulfillment by the private respondent of a
suspensive condition, it cannot be held liable for damages.
(Visayan Sawmill Company, Inc. vs. Court of Appeals)

the contract reached the stage of perfection, there being a

meeting of the minds upon the object which is the subject matter
of the contract and the price which is the consideration.
Applying Article 1475 from that moment, the parties may reciprocally
demand performance of the obligations incumbent upon
them, i.e., delivery by the vendor and payment by the vendee

The thing sold shall be understood as delivered when it is placed in the control
and possession of the vendee.

When the transaction is an absolute contract of sale

absent a proviso in the contractthat the title to the property is reserved in the vendor until
full payment of the purchase price or a stipulation giving
the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within the fixed period

Contract to sell conditional sale

a bilateral contract
whereby the prospective
seller, while expressly
reserving the
ownership of the subject
property despite delivery
thereof to the
prospective buyer, binds
himself to sell the said
property exclusively
to the prospective buyer
upon fulfillment of the
condition
agreed upon, that is, full

payment of the purchase

price
(1) Transfer of title upon the fulfillment of the
to the buyer suspensive
condition which is the full
payment of the purchase
price, ownership
will not automatically
transfer to the buyer
although the
property may have been
previously delivered to
him. The prospective
seller still has to convey
title to the prospective
buyer by
entering into a contract of
the first element of consent
is present, although it is
conditioned upon the
happening of
a contingent event which
may or may not occur. If
the suspensive
condition is not fulfilled, the
perfection of the contract
of sale is
completely abated.
 absolute sale to
consummate the
transaction
(2) Sale of subject there being no previous
property to a third sale of the
person property, a third person
buying such property
despite the
fulfillment of the
suspensive condition such
as the full payment
of the purchase price, for
instance, cannot be
deemed a buyer in
bad faith and the
prospective buyer cannot
seek the relief of
reconveyance
of the property. There is no
double sale in such case.
Title to the property will
transfer to the buyer after
registration
because there is no defect
in the owner-sellers title
per se, but the
latter, of course, may be
sued for damages by the
intending buyer
Other cases of CONTRACT TO SELL
*Where the subject matter is not determinate (Arts. 1458,
1460.) or the price is not certain (Art. 1458.), the agreement is
merely a contract to sell.
* A sale of future goods (see Art. 1462.) even though the
upon the fulfillment
of the suspensive
condition, the sale
becomes absolute and this
will
definitely affect the sellers
title thereto. In fact, if there
had been
previous delivery of the
subject property, the
sellers ownership
or title to the property is
automatically transferred
to the buyer,
such that the seller will no
longer have any title to
transfer to any
third person. Applying
Article 1544 of the Civil
Code, such second
buyer of the property who
may have had actual or
constructive
knowledge of such defect
in the sellers title, or at
least was
charged with the obligation
to discover such defect,
cannot be a
registrant in good faith.
Such second buyer cannot
defeat the first
buyers title. In case a title
is issued to the second
buyer, the first buyer may
seek reconveyance of the
property subject of the
sale.
(Coronel vs. CA)
contract is in the form of a present sale operates as a contract to
sell the goods.

* Where the stipulation of the parties is that the deed of sale

and corresponding certificate of sale would be issued only after
full payment of the purchase price, the contract entered into is a
Contract to sell.

Requisites concerning object

(1) Things. Aside from being (a) determinate (Arts. 1458,

1460.), the law requires that the subject matter must be (b) licit or
lawful, that is, it should not be contrary to law, morals, good customs,
public order, or public policy (Arts. 1347, 1409[1, 4].), and
should (c) not be impossible. (Art. 1348.)- the thing must be within the commerce of
men.

(2) Rights. All rights which are not intransmissible or personal

may also be the object of sale (Art. 1347.), like the right of
usufruct (Art. 572.), the right of conventional redemption (Art.
1601.), credit (Art. 1624.), etc.
Examples of intransmissible rights are the right to vote, right
to public office, marital and parental rights, etc.
No contract may be entered upon future inheritance except
in cases expressly authorized by law. (Art. 1347, par. 2.) While
services may be the object of a contract (Art. 1347, par. 3.), they
cannot be the object of a contract of sale. (Art. 1458; see Art. 1467

kinds of illicit thing

The thing may be illicit per se (of its nature) or per accidens (because
of some provisions of law declaring it illegal

xxx 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. Xxx

Right to transfer ownership

(1) Seller must be owner or authorized by owner of thing sold.

one can not transmit or dispose of that which he does
not have (It is essential in order for a sale to be valid)

Example:
a sale of paraphernal (separate) property of the deceased
wife by the husband who was neither an owner nor administrator
of the property at the time of sale is void ab initio. Such being
the case, the sale cannot be the subject of ratification by the administrator
or the probate court. (Manotok Realty, Inc. vs. Court of Appeals,

(2) Right must exist at time of delivery

Article 1459, however,

does not require that the vendor must have the right to transfer
ownership of the property sold at the time of the perfection of the
contract. (Martin vs. Reyes, 91 Phil. 666 [1952].) Perfection per se
does not transfer ownership which occurs upon the actual or constructive
delivery of the thing sold. Sale, being a consensual con tract, it is perfected by mere
consent (see Art. 1475.), and ownershipby the seller of the thing sold is not an
element for its perfection.
It is sufficient if the seller has the right to transfer the ownership
thereof at the time it is delivered. Thus, the seller is
deemed only to impliedly warrant that he has a right to sell the
thing at the time when the ownership is to pass. (Art. 1547[1].)

Legal effect: rights of an innocent purchaser for value must be respected

and protected, notwithstanding the fraud employed by the seller
in securing his title

xxx The proper recourse of the true owner of the

property who was prejudiced and fraudulently dispossessed of
the same is to bring an action for damages against those who
caused or employed the fraud, and if the latter are insolvent, an action against the
Treasurer of the Philippines may be filed for recovery of damages against the
Assurance Fund. (Fule vs. Legare)

(4) Where properly sold in violation of a right of first refusal of

another person.
while valid is rescissible; Where, however, there is no showing
of bad faith on the part of the vendee, the contract of sale may not
be rescinded (see Arts. 1380-1381[3].), and the remedy of the person
with the right of first refusal is an action for damages against
the vendor. (Rosencor Development Corporation vs. Inquing)

(5) Where real property, subject of unrecorded sale, subsequently

mortgaged by seller which mortgage was registered

The mortgagees
registered mortgage right over the property is inferior to that
of the buyers unregistered right. The unrecorded sale between
the buyer and the seller is preferred for the reason that if the seller
the original owner, had parted with his ownership of the thing
sold then, he no longer had ownership and free disposal of that
thing so as to be able to mortgage it again. Registration of the
mortgage is of no moment since it is understood to be without
prejudice to the better right of third parties. (State Investment House, Inc. vs. CA)

(1) When thing determinate

when it is particularly designated or physically

segregated from all others of the same class. (see Art. 1636[1].) This
requisite that the object of a contract of sale must be determinate
is in accordance with the general rule that the object of every contract
must be determinate as to its kind.

(2) Sufficient if subject matter capable of being made determinate

It is not necessary that the thing sold must be in sight at the

time the contract is entered into. It is sufficient that the thing is
determinable or capable of being made determinate without the
necessity of a new or further agreement between the parties (Art.
460, par. 2; see Melliza vs. City of Iloilo)

Sale of things having potential existence.

Even a future thing (Arts. 1461, par. 1; 1347, par. 1.) not existing
at the time the contract is entered into may be the object of
sale provided it has a potential or possible existence

sale of thing expected Sale of Hope itself

(emptio reisperatae) (emptio spei)

the sale is subject to the condition that produces effect even though the thing
the thing does not come
should exist, so that if it does not, thereinto existence because the object of the
will be no contract by contract is the hope itself,
reason of the absence of an essential unless it is a vain hope or expectancy
(like the sale of a falsified
element sweepstake ticket which can never win
Xxx In case of doubt, the presumption is in favor of emptio rei
speratae which is more in keeping with the commutative character
of the contract. Xxx
xxx (1) Contingent character of obligation to pay must clearly appear. (2) Surety bond

negates such contingent character xxx

Goods which may be the object of sale

(1) Existing goods or goods owned or possessed by the seller;

(2) Future goods or goods to be manufactured

(like the sale of milk bottles to be manufactured with the name of the buyer
pressed in the glass), raised (like the sale of the future harvest of palay from a
ricefield), or acquired (like the sale of a definite parcel of land the seller expects to
buy).8 (Art. 1460.)

Future goods as object of sale

property or goods which at the time of the

sale are not owned by the seller but which thereafter are to be
acquired by him, cannot be the subject of an executed sale but may
be the subject of a contract for the future sale and delivery thereof,
even though the acquisition of the goods depends upon a contingency
which may or may not happen. In such case, the vendor
assumes the risk of acquiring the title and making the conveyance,
or responding in damages for the vendees loss of his bargain.
(Martin vs. Reyes, 91 Phil. 666 [1952]; 77 C.J.S. 604.)

Sale of undivided interest in a thing.

The sole owner of a thing may sell the entire thing; or only a
specific portion thereof; or an undivided interest therein and such
interest may be designated as an aliquot part of the whole.
The legal effect of the sale of an undivided interest in a thing
is to make the buyer a co-owner in the thing sold. As co-owner,
the buyer acquires full ownership of his part and he may, therefore,
sell it

Such sale is, of course, limited to the portion which

may be allotted to him in the division of the thing upon the termination
of the co-ownership. (Article 493.)9 This rule operates
similarly with respect to ownership of fungible goods. (Art. 1464.)
Article 1463 covers only the sale by a sole owner of a thing of
an undivided share or interest thereof.

(1) Meaning of 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 (such asgrain, oil, wine, gasoline, etc.)

(2) Effect of sale.

The owner of a mass of goods may sell only
an undivided share thereof, provided the mass is specific or capable
of being made determinate:
(a) By such sale, the buyer becomes a co-owner with the
seller of the whole mass in the proportion in which the definite
share bought bears to the mass

(b) It must follow that the aliquot share of each owner can
be determined only by the measurement of the entire mass. If
later on it be discovered that the mass of fungible goods contains
less than what was sold, the buyer becomes the owner
of the whole mass and furthermore, the seller shall supply whatever is lacking from
goods of the same kind and quality, subject to any stipulation to the contrary.

(3) Risk of loss. If the buyer becomes a co-owner, with the

seller, or other owners of the remainder of the mass, it follows that
the whole mass is at the risk of all the parties interested in it, in
proportion to their various holdings.

(4) Subject matter. Take note that in the sale of an undivided

share, either of a thing (Art. 1463.) or of that of mass of goods (Art.
1464.), the subject matter is an incorporeal right. (Art. 1501.) Here,
ownership passes to the buyer by the intention of the parties.

Sale of thing subject to a resolutory condition.

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.
(see Arts. 1179, 1181.)

Ex. Right of the seller to repurchase the parcel of land within the stipulated period,

upon the happening of such resolutory condition, shall extinguished such right (to

repurchase)

The contract of agency

A person binds himself to render some

service or to do something in representation or on behalf of another,
with the consent or authority of the latter. (Art. 1868.)
Agency to sell
the agent receives the goods as the
goods of the
principal who retains his ownership over
them and has the right
to fix the price and the terms of the
sale and receive the proceeds
less the agents commission upon the
sales made
the agent has simply to account for the
proceeds of the sale
he may make on the principals behalf
the agent can return the object in
case he is unable to sell the same to a
third person
the agent makes no warranty
for which he assumes personal liability
as long as he acts within
his authority and in the name of the
seller;
the agent in dealing
with the thing received, must act and is
bound according to the
instructions of his principal
Xxx A contract is what the law defines it to be, and
not what it is called by the contracting parties. (Quiroga vs. Parson
Hardware Co., xxx
Contract of Sale
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
Contract of Sale
the buyer receives the goods as owner
the buyer has to pay the price
the buyer, as a general rule, cannot
return the
object sold
the seller warrants the thing sold (see
Arts. 1547,
1548, 1561.)
the buyer can deal with the thing sold
as he
pleases being the owner
contract for a piece of work
the contractor binds 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.
(Art. 1713
is not within the Statute of Frauds. (see
Art. 1483.)
the goods
are to be manufactured specially for the
customer and
upon his special order, and not for the general
market
the time or not

contract of barter or exchange contract of Sale

one of the parties binds the vendor gives a thing in
himself to give one thing in consideration for a price in money. (Art.
consideration of the others promise 1458.)
to give another thing. (Art. 1638.)

Xxx The above distinction is not always adequate to distinguish

one from the other. Hence, the rule in Article 1468 for those
cases in which the thing given in exchange consists partly in
money and partly in another thing.

(a) In such cases, the manifest intention of the parties is

paramount in determining whether it is one of barter or of sale
and such intention may be ascertained by taking into account
the contemporaneous and subsequent acts of the parties. (Art.
1371.)

(b) If this intention cannot be ascertained, then the last sentence

of the article applies. But if the intention is that the contract
shall be one of sale, then such intention must be followed
even though the value of the thing given as a part consideration
is more than the amount of the money given.

Contract of lease Contract of Sale

one of the parties binds himself to give the seller transfers ownership of the
to thing sold.
another the enjoyment or use of a thing
for a price certain and for a period
which may be definite or indefinite.
(Art. 1643.)
-the landlord or lessor transfers merely
the temporary possession and
enjoyment of the thing leased
Dation in payment (or dacion en pago)
is the alienation of property to the creditor in satisfaction of a debt in money. (see
Art.
1619.) It is governed by the law on sales. (Art. 1245.)

Dation in Payment Sale

there is preexisting credit
obligations are extinguished
the extinguishment of the debt, from
the
viewpoint of the debtor, or the object
there is no preexisting credit
obligations are created
the cause is the price paid, from the
viewpoint of
the seller, or the thing sold, from the
acquired in lieu of the credit, from the viewpoint of the buyer
viewpoint of the creditor
is more freedom in fixing the price
the payment is received by the debtor the buyer has still to pay the price
before the contract is perfected
ART. 1469. 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.

Effect of gross inadequacy of price

in voluntary sales.
(1) General rule. While a contract of sale is commutative,
mere inadequacy of the price or alleged hardness of the bargain
generally does not affect its validity when both parties are in a
position to form an independent judgment concerning the transaction.
(Askav vs. Cosalan,

(2) Where low price indicates a defect in the consent. The inadequacy
of price, however, may indicate a defect in the consent such
as when fraud, mistake, or undue influence is present (Art. 1355.)
in which case the contract may be annulled not because of the
inadequacy of the price but because the consent is vitiated. Contracts
of sale entered into by guardians or representatives of absentees
are rescissible whenever the wards or absentees whom
they represent suffer lesion by more than 1/4 of the value of the
things which are the object thereof

(3) Where price so low as to be shocking to conscience. While

it is true that mere inadequacy of price is not a sufficient ground
for the cancellation of a voluntary contract of sale, it has been held
that where the price is so low that a man in his senses and not
under a delusion would not accept it, the sale may be set aside
and declared an equitable mortgage to secure a loan. (Aguilar vs.
Rubiato)

As the price is so grossly inadequate, the contract will

be interpreted to be one of loan with equitable mortgage with
the price paid as principal of said loan and the land given merely
as security. (Aguilar vs. Rubiato)

xxx Where seller is given the right to repurchase. The validity

of the sale is not necessarily affected where the law gives to the
owner the right to redeem, as when a sale is made at public auction,
upon the theory that the lesser the price, the easier it is for
the owner to effect the redemption. (De Leon vs. Salvador) xxx

Effect where price is simulated.

(1) If the price is simulated or false such as when the vendor
really intended to transfer the thing gratuitously, then the sale is
void but the contract shall be valid as a donation. (Arts. 1471, 1345,
1353.)

(2) If the contract is not shown to be a donation or any other

act or contract transferring ownership because the parties do not
intend to be bound at all (Art. 1345, ibid.), the ownership of the
thing is not transferred. The contract is void and inexistent. (Art.
1409[2].)

(3) Simulation occurs when an apparent contract is a declaration

of a fictitious will deliberately made by agreement of the
parties, in order to produce, for the purpose of deception, the
appearance of a juridical act which does not exist or is different
from that which was really executed. Its requisites are (a) an outward
declaration of will different from the will of the parties; (b)
the false appearance must have been intended by mutual agreement;
and (c) the purpose is to deceive third persons. (Tongoy vs. CA)

Price on a given day at particular market.

principle in Article 1469 that a price is considered certain if it could be determined
with reference
to another thing certain; amount must be certain; otherwise, the sale is inefficacious
(Art. 1474.) because the price cannot be determined; especially applicable to
fungible things like securities,
grain, liquids, etc. the price of which are subject to fluctuations
of the market.

ART. 1473. 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

to be just, the price must be determined impartially

by both parties (Art. 1458.) or left to the judgment of a specified
person or persons. (Art. 1469.)
However, where the price fixed by one party is accepted by
the other, the contract is deemed perfected because in this case,
there exists a true meeting of minds upon the price. (Art. 1475.)

Effect of failure to determine price.

(1) Where contract executory. If the price cannot be determined
in accordance with Articles 1469 and 1472, or in any other
manner, and the bargain is still executory, the contract is without
effect. Price certain is an essential element of the contract of sale.
(Art. 1458.)
(2) Where delivery has been made. If the thing or any part
thereof has already been delivered and appropriated by the buyer,
the latter must pay a reasonable price therefor. This obligation of
the buyer is sometimes contractual (if the agreement omits any
reference to price), and sometimes, quasi-contractual (if the agreement
provides that the parties are thereafter to agree on the price).
(see Art. 2142.)

In case, however, the parties do not

intend to be bound until after the price is settled, the buyer
must return any goods already received or if unable to do so,
must pay their reasonable value at the time of delivery, and
the seller must return any portion of the amount received

ART. 1475. The contract of sale is perfected at the

moment there is a meeting of 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.

The essence of consent is the conformity

of the parties on the term of the contract, the acceptance by
one of the offer made by the other

xxx The ownership is not transferred

until the delivery of the thing. (Arts. 1496, 1164. 14) 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. (Arts. 1478, 1306.) xxx

xxx Form of contract. Generally, a contract of sale is binding

regardless of its form. (Art. 1356.) However, in case the contract
of sale should fall within the provisions of the Statute of Frauds
(Art. 1403[2].) or of any other applicable statute which requires a
certain form for its enforceability or validity (Art. 1356.), then that
form must be complied with. (Art. 1483.) A contract of sale may
be in a private instrument; the contract is valid and binding between
the parties upon its perfection and a party may compel the
other to execute a public instrument embodying the contract. (see
Arts. 1357, 1358.) xxx

A sale of real estate, whether made as a result of a private transaction

or of a foreclosure or execution sale, becomes legally effective
against third persons only from the date of its registration.
(Campillo vs. Phil. National Bank

Xxx The receipt can neither be regarded as a contract

of sale nor a promise to sell. xxx

xxx To overcome a public document solemnly executed before a

notary public, the evidence to the contrary must be clear, strong,
and convincing. Parol evidence will not suffice to negate the clear
and positive recitals of a public document not otherwise tainted
with fraud or falsification. (Regalario vs. Northwest Finance Corporation, xxx

xxx Applicants qualification to buy still subject for investigation.

In a case, the agreement denominated as contract of sale was
considered by the court as a mere application to buy the land in
question, and not a perfected contract of sale. Although it embodied
all the essential elements of a contract of sale by installment,
it appearing that after the approval of such application it was
still necessary to have the [applicants] qualifications investigated
as well as whether or not he has complied with the provisions of
the law regarding the disposition of lands by the Board of Liquidators,
the application was subject to revocation in case the applicant
was found not to possess the qualifications necessary.
(Alvarez vs. Board of Liquidators, 4 SCRA 95 [1962]; Galvez vs.
Tagle Vda. de Kangleon xxx

Xxx Registration of motor vehicles is required not because it is the

operative act that transfers ownership in vehicles (as in land registration
cases), but because it is the means to identify the owner
thereof in case of accident so that responsibility for the same can
be fixed. (De Peralta vs. Mangusang xxx

xxx Where the parties, however, still have to meet and agree on
how and when the downpayment and installment payments are
to be made, it cannot be said that a contract of sale has been perfected. Xxx

xxx Agreement on the manner of payment

goes into the price such that a disagreement on the manner
of payment is tantamount to failure to agree on the price. (Toyota
Shaw, Inc. vs. CA) xxx

Xxx 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. (Montecillo vs.
Reyes) xxx
xxx sale is null and void where the purchase
price, which appears thereon as paid, has, in fact, never been paid
by the buyer to the seller. In such case, the sale is without cause or
consideration. (Art. 1409[3].) Such sale is non-existent or cannot be considered
consummated xxx

xxx The owner of a thing has the right to quote his own price,
reasonable or unreasonable. It is up to the prospective buyer to
accept or reject it. He may even impose a condition hard to fulfill
and name a price quite out of proportion to the real value of the
thing offered for sale. (Cornejo vs. Calupitan) xxx

Rules governing auction sales.

(1) Sales of separate lots by auction are separate sales. Where
separate lots are the subject of separate biddings and are separately
knocked down, there is a separate contract in regard to each
lot. As soon as the hammer falls on the first lot, the purchaser of
that lot has a complete and separate bargain. He need not make
another. When a second lot is put up and knocked down to the
highest bidder, there is a separate complete contract as to the said
lot whether the bidder who secured the first lot or whether another
person happens to be the highest bidder. Such is the rule in
No. (1) though no doubt the parties may subsequently consolidate
all the purchases into one transaction as by giving a single
note for the aggregate price.

Sale perfected by the fall of the hammer. In putting up the

goods for sale, the seller is merely making an invitation to those
present to make offers which they do by making bids (Art. 1326.),
one of which is ultimately accepted. Each bid is an offer and the contract is
perfected only by the fall of the hammer or in othercustomary manner. It follows
that the bidder may retract his bid
and the auctioneer may withdraw the goods from sale any time
before the hammer falls. However, if the sale has been announced
to be without reserve, the auctioneer cannot withdraw the goods
from sale once a bid has been made and the highest bidder has a
right to enforce his bid.

Contract not to bid. A sale may be fraudulent not only

because of conduct of the seller, but because of conduct of the
buyer. It is not permissible for intending buyers at auction or other
competitive sales to make an agreement for a consideration that
only one of them shall bid, in order that the property may be
knocked down at a low price. The bargain is fraudulent as regards
the seller though the agreement is without consideration, if it is
actually carried out, for the fraud against the seller is the same as
if there were considerations

Advertisements for bidders. They are simply invitations

to make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears. (Art. 1326.)

xxx only after the delivery of the thing sold that the purchaser acquires
a real right or ownership over it. (Arts. 1164, 1496-1497.) xxx

In the absence of stipulation to the contrary, the ownership of

the thing sold passes on to the vendee upon delivery thereof

The delivery may be actual (Art. 1497.)- considered as delivered when it is

Placed in the control and possession of the vendee

or constructive. (Arts.
1498-1501.)-Example; when the sale is made through a public instrument,
The execution thereof shall be equivalent to the delivery of the thing

Exceptions to the rule.

(1) Contrary stipulation. The ownership of things is transferred
by delivery, and not by mere payment. However, the parties
may stipulate that despite the delivery, the ownership of the
thing shall remain with the seller until the purchaser has fully paid
the price.

Xxx In contracts to sell, where ownership is

retained by the seller and is not to pass until the full payment of
the price, such payment is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but simply an event
that prevents the obligation of the vendor to convey title from
acquiring binding force.xxx

Three (3) Kinds of promise treated in Article 1479

(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

xxx A unilateral promise or offer to sell or to buy a thing which is

not accepted creates no juridical effect or legal bond- imperfect promised
(policitacion)xxx

A pe riod may be given to the offeree within which to accept the offer.
An option
is a privilege existing in one person for which he
has paid a consideration which gives him the right to buy/sell

Nature of option contract.

(1) An option is a contract. It is a preparatory contract, separate
and distinct from the main contract itself (subject matter of
the option) which the parties may enter into upon the consummation
of the option.
(2) It gives the party granted the option the right to decide,
whether or not to enter into a principal contract, while it binds
the party who has given the option, not to enter into the principal
contract with any other person during the agreed time and
within that period, to enter into such contract with the one to
whom the option was granted if the latter should decide to use
the option.17 (see Carceller vs. CA)
(3) An option must be supported by a consideration distinct
from the price. (Co. vs. CA)

The optionee (holder of the option), after accepting the option

and before he exercises it, has the right, but not the obligation, to
buy or sell, as the case may be. Once the option is exercised, i.e.,
offer is accepted before a breach of the option,

bilateral promiseto sell and to buy

ensues and both parties are then reciprocally
bound to comply with their respective undertakings. It would be
a breach of the option for the optioner-offeror to withdraw the offer
during the agreed period. If in fact, he withdraws the offer before
its acceptance (exercise of the option) by the optionee-offeree, the
latter may not sue for specific performance on the proposed contract
since it has failed to reach its own stage of perfection. The
offeror, however, renders himself liable for damages for breach of
the option.18 (Asuncion vs. CA)

A contract of option to buy is separate from the contract to sell, and both contracts
need separate and distinct considerations for validity. (Dijamco
vs. CA)

xxx Full payment of price not necessary

for exercise of option to buy. Xxx

xxx Article 1324 of the Civil Code provides as follows:

When the offerer has allowed the offeree a certain period
to accept, the offer may be withdrawn at any time before acceptance
by communicating such withdrawal, except when
the option is founded upon a consideration, as something paid
or promised. Xxx

right of first refusal cannot be deemed a perfected contract

of sale under Article 1458 of the new Civil Code and, as such, a
breach thereof decreed under a final judgment does not entitle
the aggrieved party to a writ of execution of the judgment but
to an action for damages in a proper forum for the purpose
When the promise is bilateral, that is, one party accepts the
others promise to buy and the latter, the formers 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.

Risk of loss or deterioration.

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

(2) If the thing is lost at the time of perfection, the contract is

void or inexistent. (Art. 1409[3].) The legal effect is the same as
when the object is lost before the perfection of the contract of sale

(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

(4) If the thing is lost after delivery, the buyer bears the risk of
loss following the general rule of res perit domino.

Scope of Article 1480.

Article 1480 contemplates two rules:
(1) The first rule where the thing is lost after perfection but
before its delivery (see Rule No. 3, supra.) applies to non-fungible
things (par. 1.) and fungible things sold independently and
for a single price or for a price fixed without consideration of their
weight, number, or measure. (par. 2.)
Under this rule, which follows the Roman Rule, the risk of the
thing sold passes to the buyer, even though the thing has not yet
been delivered to him. Therefore, if a house (sold) be destroyed
Art. 1480
105
wholly or partly by fire the loss falls upon the buyer who must
pay the price, even though he has not received the thing.

Article 1480, paragraph 1 is applicable only where the thing

is determinate. (Art. 1460.) It also applies to fungible things sold
for a price not fixed in relation to weight, number, or measure
because in such case the fungible things have been particularly
designated or physically segregated

ART. 1481. 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 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.
(n)

Sale of goods by description

and/or sample

The above article covers a sale of goods by description, by sample, and by sample
as well as by description. It provides a cause for rescission distinct from those
stated in Article 1597.
(1) Sale by description. Sale by description occurs where a
seller sells things as being of a particular kind, the buyer not know- ing whether the
sellers 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. (77
C.J.S. 1170.)

The reason for the rule is that a dealer who sells an article describing it as the kind
of an article of commerce the identity of which is not known to the purchaser, must
understand that such
purchaser relies upon the description as a representation by the
seller that it is the thing described. (55 C.J. 739.) If the bulk of the
goods delivered do not correspond with the description, the contract
may be rescinded. (Art. 1481.) But if the thing delivered is as
described, the fact that the buyer cannot use the thing sold for the
purpose for which it was intended without the sellers fault does
not exempt the buyer from paying the purchase price agreed
upon. (see Pacific Commercial Co. vs. Ermita Market & Cold
Stores, 55 Phil. 617 [1931].)
(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. (77 C.J.S. 925.) In a sale
by sample, the vendor warrants that the thing sold and to be delivered
by him shall conform with the sample in kind, character,
and quality. (77 C.J.S. 1169; see Art. 1565.)
A sale by sample is really a species of sale by description. The
sample is employed instead of words to communicate to the buyer
the characteristics of the goods being sold. It is itself a tacit assertion
of the qualities of the bulk it represents.
(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. (77 C.J.S. 1172.)
Meaning of bulk of goods.
In this article, the term bulk of goods is not used to designate
the greater portion of the goods. Rather, it is used to denote
the goods as distinguished from the sample with which they must
correspond. The word goods in the phrase is an oppositional
genitive defining bulk. In other words bulk of goods mean
the same as goods which, as a whole body, must correspond
substantially with the sample and description.