Law 502

Part I Sales
Chapter 1: Nature and Form of Contract

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership 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. (1445a)

- Contract of Sale
o Is a contract where one of the parties (seller or vendor) obligates himself to deliver something to the other
(buyer or purchaser or vendee) who, on his part, binds himself to pay a sum of money or its equivalent
(price)
o Characteristics:
1. Consensual perfected by mere consent without any further act
2. Bilateral both contracting parties are bound to fulfill obligations reciprocally towards each other
Seller to deliver and transfer ownership of the thing
Buyer to pay the price
3. Onerous the thing sold is conveyed in consideration of the price and vice versa
4. Commutative the things sold is considered the equivalent of the price paid and vice versa
May also be aleatory meaning as in the case of the sale of a hope (e.g. sweepstakes ticket)
5. Nominate it is given a special name or designation in the civil code, Sale
6. Principal it does not depend for its existence and validity upon another contract
o Essential Requisites/ Elements
1. Consent or Meeting of the Minds
Refers to the consent on the part of the seller or vendor to transfer and deliver, and on the party
of the buyer or vendee to pay
Parties must have legal capacity
An offer by one party without acceptance of the other does not have consent
Exception: Sale against the will of the owner in the case of -
Expropriation of property
Execution sale to enforce a judgement of a court
Foreclosure sale of mortgaged or pledged property
2. Object or Subject Matter
Refers to the determinate thing which is the object of the contract
Thing must be determinate or at least capable of being made determinate
o If the seller and the buyer differ in regards to the thing sold, there is no meeting
of the minds and no sale
Subject matter may be real or personal property
3. Cause or Consideration
Price certain in money or its equivalent
May be check, promissory note, assumption by the buyer of mortgage debt of the seller
Price is the cost at which something is obtained in exchange for something else
Does not generally include goods or merchandise and other things although they have
their own value in money
Note: Absence of price is NOT the same as failure to pay the price agreed upon
Cause is
Sellers POV buyers promise to pay the price
Buyers POV sellers promise to deliver the thing sold
 o Natural elements
Those deemed to exist in certain contracts in the absence of any contrary stipulations
E.g. warranty against eviction or hidden defects
o Accidental elements
Those which may be present or absent depending on the stipulation of the parties
E.g. conditions, interest, penalty, time or place of payment
o Kinds of Contract of Sale:
1. Absolute where the sale is not subject to any condition whatsoever and where title or ownership
passes to the buyer upon delivery of the thing sold
2. Conditional where the sale contemplates a contingency
The contract is subject to certain conditions, usually full payment of the purchase price
The delivery of the thing sold does not transfer ownership until the condition is fulfilled

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is
delivered. (n)

- Requisites of Objects
1. Things
a. Determinate
b. Licit or lawful not contrary to law, morals, good customs, public order, or public policy
c. Not be impossible within the commerce of men
2. Rights
o All rights which are not intransmissible or personal may be the object of sale
E.g. right of usufruct, right of conventional redemption
Intransmissible rights right to vote, right to public office, marital and parental rights, etc.
Personal rights right to be a partner in partnership, right to act as agent of another, right of
bailee to use the thing loaned in a contract of commodatum, etc.
o Services may be the object of a contract but not of sale
- Kinds of Illicit Things
a. Illicit per se (of its nature) e.g. decayed food unfit for consumption
b. Illicit per accidens (because of provisions of law declaring it illegal) e.g. prohibited lottery tickets, land sold
to an alien
- Right of Vendor to transfer Ownership
1. One can sell only what he owns
o One must own or at least be authorized by the owner of the thing sold
o Nobody can dispose of that which he does not have
2. Sufficient if right exists at time of delivery
o Does not require the vendor to have the right to transfer ownership at the time of perfection of contract
o Is sufficient if right exists at the time when the ownership is to pass
Reason: Future goods or goods whose acquisition by the seller depends upon a contingency may
be a subject matter of sale
Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other 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. (n)

- Subject matter must be determinate

1. When thing determinate
o A thing is determinate or specific (not generic) when it is particularly designated or physically segregated
from all others of the same class
o A determinate thing is identified by its individuality
o It is not necessary that the thing sold must be in sight at the time the contract is entered into
2. Sufficient if subject matter capable of being made determinate
o 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 to ascertain its identity, quantity, or quality

Art. 1461. 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. (n)
- Sale of things having potential existence
o A future thing not existing at the time the contract is entered into may be the object of sale provided it
has a potential or possible existence
It is reasonably certain to come into existence as the natural increment or usual incident of
something in existence already belonging to the seller, and the title will vest in the buyer the
moment the thing comes into existence
o E.g. the wine a vine is expected to produce, the grain a field may grow in a given time, the mil a cow may
yield during the coming year, the wool that shall grow upon a sheep, next catch of a fisherman, goodwill
of a trade
o Thing sold however must be specified and identified and must be owned by the vendor at the time
- Sale of hope or expectancy
o The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing
contemplated or expected will come into existence
o Sale refers to an expected thing
o Sale of hope or expectancy itself is valid even if the thing hoped or expected does not come into existence,
unless the hope or expectancy is vain, in which case the sale is void

Art. 1462. 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. (n)

- Goods which may be the object of sale

1. Existing goods goods owned or possessed by the seller
2. Future goods goods to be manufactured, raised, or acquired
 - Sale of Future Goods
o Form: present sale and is valid only as an executory contract to be fulfilled by the acquisition and delivery
of the goods specified
o Property or goods which at the time of the sale, are not owned by the seller but which thereafter are
acquired by him, cannot be subject of an executed sale but may be the subject of a contract for the future
sale and delivery thereof
o Upon acquisition of goods, either party acquires the right to demand the execution of the contract of sale
o Exception: first paragraph does not apply if goods are to be manufactured especially for the buyer and
not readily saleable to others in the manufacturers course of business
Contract is regarded as one for a piece of work

Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n)

- Sale of undivided interest in a thing

a. By sole owner
o Sole owner 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
o Effect of sale of an undivided interest: make the buyer a co-owner of thing sold
Acquires full ownership of his part and may sell it limited to the portion allotted to him in the
division of the thing upon termination of co-ownership
b. By co-owner
o Co-owner of a thing, being the owner of his undivided interest, can dispose of his share without the
consent of the other co-owner/s
o Effect: alienation shall be limited to the portion which may be allotted to the vendor in the division of the
property upon termination of co-ownership

Art. 1464. 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. (n)

- Fungible Goods 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.
- Sale of undivided share of a specific mass
o Effect: The buyer becomes a co-owner with the seller of the whole mass in the proportion in which the
definite share bough bears to the mass
The aliquot share of each owner can be determined only by the measurement of the entire mass
If later discovered that the mass of fungible goods contains less than what was sold, the buyer
becomes the owner of the whole mass and the seller shall supply whatever is lacking from goods
of the same kind and quality, subject to stipulation of contrary
o Risk of loss: whole mass is at the risk of all the parties interested in it, in proportion of their holdings
o Subject Matter: is an incorporeal or intangible right, ownership passes to the buyer by the intention of
the parties
 Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)

- Resolutory condition is an uncertain event upon the happening of which the obligation (or right) subject to it is
extinguished
o The right acquired is extinguished
o If the resolutory condition attaching to the object of the contract should happen then the vendor cannot
transfer the ownership of what he sold since there is no object

Art. 1466. 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. (n)

- Agency to Sell By 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
- Sale vs Agency to Sell

Sale Agency to Sell

Buyer receives the goods as owner
Buyer has to pay the price
Buyer, as a general rule, cannot return the object sold
Seller warrants the thing sold
Buyer can deal with the thing sold as he pleases, being the Agent must act and is bound according to the instructions
owner
Agent receives the goods as the goods of the principal who
retains his ownership over them
Agent simply accounts for the proceeds of the sale he
makes on the principals behalf
Agent can return the object in case he is unable to sell the
same to a third person
Agent makes no warranty for which he assumes personal
liability as long as he acts within the authority and in the
name of the seller
of his principal when dealing with the item

Art. 1467. 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. (n)

- Contract for a piece of work

o The contractor binds himself to execute a piece of work for the employer, in consideration of a certain
price or compensation
Contractor may employ his labor or skill, or furnish the material

Contract for work, labor, materials or piece of work Sale

Thing transferred is one not in existence and which never
would have existed but for the order of the party desiring
to acquire it
Risk of loss before delivery borne by the worker or
contractor
Not within the Statute of Frauds
The thing transferred is on which would have existed and
been the subject of sale to some other person, even if the
order had not been given
Risk of loss borne by the buyer
Within the Statute of Frauds
 Art. 1468. If the consideration of the contract consists 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. (1446a)

- Contract of barter or exchange One of the parties binds himself to give one thing in consideration of the others
promise to give another thing
- Sale the vendor gives a thing in consideration for a price in money
- Rule in case thing given is in exchange of partly money and partly thing:
a. Follows the intention of the parties intention may be ascertained by taking into account the
contemporaneous and subsequent act of the parties
b. If intention cannot be ascertained
o Value of thing > Money Barter
o Money > Value of thing Sale

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 special 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. (1447a)

- When price considered certain

1. No sale if price not certain or ascertainable
o There can be no sale without a price
Price must be certain or capable of being ascertained in money or its equivalent
Money currency
Equivalent promissory notes, checks and other mercantile instruments generally
accepted as representing money
2. Cases when price considered certain
a. The parties have fixed or agreed upon a definite amount
b. It be certain with reference to another thing certain
c. The determination of the price is left to the judgement of a specified person or persons
- Effect where price fixed by third person designated
o General Rule: Price fixed by the third person specified by the parties is binding upon them
o Exception:
1. When the third person acts in bad faith or by mistake, the court may fix the price
E.g. the third person fixed the price having in mind the wrong thing
Mere error in judgement cannot serve as basis for disregarding the price fixed
2. When the third person disregarding specific instructions or procedures laid down by the parties, or
the data given him, fixed an arbitrary price
- Effect where price not fixed by third person designated
1. If third person designated refuses or cannot fix the price, contract shall be ineffective as if no price had been
agreed upon unless the parties subsequently agree on a price
2. If third person is prevented from fixing the price by fault of seller or buyer, the party in fault may obtain
redress against the party in fault, either rescission or fulfilment, with damages in both case
o If innocent party chooses fulfillment court shall fix the price
 Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or some other act or contract. (n)

- Effect of gross inadequacy of price in voluntary sales

o General Rule: Does not affect validity when both parties are in a position to form an independent
judgement concerning the transaction
o Exception: Where low price indicates a defect in consent
When fraud, mistake, or undue influence is present
Effect: Contract may be annulled not because of the inadequacy of price but because consent is
vitiated or where the price is so grossly inadequate or low as to be shocking to courts
conscience that no man in his right mind would accept
- Effect of gross inadequacy of price in involuntary or execution of sales
o Judicial or execution sale one made by a court with respect to the property of a debtor for the
satisfaction of his unpaid indebtedness
o General Rule: not a sufficient ground for cancellation of an execution sale
o Exception: If the price is so inadequate as to shock the conscience of the Court
Effect: It will be set aside
o When seller given the right to repurchase
Effect: Validity of sale is not necessarily affected
E.g. when sale is made at public auction, upon the theory that the lesser the price, the easier it is
for the owner to buy back the property

Art. 1471. 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. (n)

- If simulated or false, such when the vendor really intended to transfer the thing gratuitously
o Effect: Contract is valid as donation, void as sale
- If contract is not shown to be donation or any other act or contract transferring ownership because they do not
intend to be bound at all
o Effect: Contract is void and inexistent

Art. 1472. 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. (1448)

- Price on a given day at a particular market

o Price is considered certain if it could be determined with reference to another thing certain
- provided said amount be certain
o When an amount is fixed above or below the price on a given day or in a particular exchange or market,
the said amount must be certain otherwise the sale is inefficacious because price cannot be determined
- Applicable to fungible things
o E.g. securities, grain, liquid, etc., the prices of which are subject to fluctuations in 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. (1449a)

- Fixing of price by one of the contracting parties not allowed because:

1. Consent is essential to a contract of sale
The determination of the price cannot be left to the discretion of one of the contracting parties
otherwise it cannot be said that the other consented to a price he did not and could not have
previously known
2. To be just, the price must be determined impartially by both parties or left to the judgement of a
specified person or persons
But if price is fixed by one party and accepted by the other, contract is deemed perfected

Art. 1474. 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 therefor. What is a reasonable price is a question of fact dependent on the
circumstances of each particular case. (n)

- Effect of failure to determine price

a. Where contract executory if the price cannot be determined, the contract is without effect
o There is no obligation on the party of the vendor to deliver the thing and no obligation on the part of the
vendee to pay
b. Where delivery has been made the buyer must pay a reasonable price
o A reasonable price or value of goods is generally the market price at the time and place fixed by the
contract or by law for the delivery of the goods

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. (1450a)

- Perfection of contract of sale

o General rule: Contract of sale is consensual perfected without the necessity of any other circumstance
Effect: Reciprocal obligations of the parties arise
Conduct of parties may indicate the consent of the owner to the sale of his property and of the
other party to acquire the same by purchase
Ownership however is not transferred until the delivery of the thing
- In case one of the contracting parties should not comply, the injured party may sue for fulfillment or rescission
with the payment of damages
- Right of owner to fix his own price
o Owner has right to quote his own price, reasonable or unreasonable
Up to the buyer to accept or reject it
o Owner has right to quote a small or nominal consideration and such consideration is just as effectual and
valuable a consideration as a larger sum stipulated or paid
- Effect of Failure to pay/ absence of price
o Price stipulated
Does not convert the contract into one without cause or consideration does not ipso facto
resolve the contract in the absence of any agreement to that effect
Remedy of vendor is to demand specific performance or rescission with damages in either case
o No price stipulated
If no stipulation or meeting of the minds regarding the purchase price, there is no contract of sale
 Art. 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.

(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other
customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may
withdraw the goods from the sale unless the auction has been announced to be without reserve.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by
stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not
be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the
auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid
from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the
buyer. (n)

- Rules governing auction of sales

1. Sales of separate lots by auction are separate sales
o However parties may subsequently consolidate all the purchases in one transaction
2. Sale perfected by the fall of the hammer
o Putting the goods up for sale is only making an invitation to make offers
Making a bid is making an offer and the contract is perfected only by the fall of the hammer or in
other customary manner
Bidder may retract his bid and auctioneer may withdraw the goods from sale any time
before the hammer falls
After sale has been announced without reserve, auctioneer cannot withdraw and highest
bidder has the right to enforce the bid
3. Right of seller to bid in the auction
o Seller may bid in an auction sale provided:
a. Such right was reserved
b. Notice was given that the sale is subject to a right to bid on behalf of the seller
c. Right to bid by the seller is not prohibited by law or stipulation
Where no notice given of right to bid
It is unlawful for the seller to bid either directly or indirectly or for the auctioneer to
employ or induce any person to bid on behalf of the seller where no notice of the owners
right to bid is given
Why? To prevent puffing
o Puffing secret bidding in the behalf of the seller by people who are not
themselves bound
It is fraudulent to enhance or inflate the price of good sold
Is a sufficient ground for relieving the highest bidder from his bid and
avoiding the sale
Where notice given of right to bid
A right to bid may be expressly reserved by or on behalf of the seller
It is the secrecy of puffing which renders it a fraud upon bidding
o When there is notice, the bidding would not operate as fraud
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof. (n)

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid
the price. (n)

- Ownership of thing transferred by delivery

o Without delivery, purchaser may not enjoy the thing sold to him
o It is only after the delivery of the thing sold that the purchaser acquires a real right or ownership over it
o Delivery may be actual or constructive
o May be true even if purchase price has not been paid or purchase was made on credit
- Exception: Parties may stipulate that despite delivery, ownership of the thing shall remain with the seller until the
purchaser has fully paid the price

Art. 1479. 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 promissor if
the promise is supported by a consideration distinct from the price. (1451a)

- Kinds of promise in Art 1479: (promise to buy or to sell)

a. An accepted unilateral promise to sell in which the promisee (acceptor) elects to buy
b. An accepted unilateral promise to buy in which the promisee (acceptor) elects to sell
c. A bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to exact
fulfilment
- Effect of unaccepted unilateral promise
o Called policitation
o Creates no juridical effect or legal bond
- Effect of accepted unilateral promise
o Does not bind the promisor even if accepted and may be withdrawn at any time
o Is binding only if the promise is supported by a consideration distinct and separate from the price that its
acceptance will give rise to a perfected contract
Option
Is a privilege existing in one person for which he has paid a consideration which gives him
the right to buy/sell something from/to another person, if he chooses, at any time within
the agreed period at a fixed price, or under, or in compliance with certain terms and
conditions
o Promisee has the burden of proving the existence of such consideration
o However, if acceptance is made before a withdrawal, it constitutes a binding contract of sale although the
option is given without consideration
- Effect of bilateral promise to buy and sell
o One party accepts the others promise to buy and the latter, the formers promise to sell, a determinate
thing for a price certain
o Generates a binding contract of sale
Art. 1480. 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. (1452a)

- For non-fungible things or fungible things particularly designated/ specifically segregated

1. If the thing is lost before perfection the seller bears the loss
o In accordance with the principle of Res perit domino (thing perishes with the owner)
2. If the thing is lost at the time of perfection 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 the perfection but before its delivery risk of loss is shifted to the buyer, even if the
buyer does not hold ownership yet
o Exception to the rule of Res perit domino (thing perishes with the owner)
4. If thing is lost after delivery buyer bears the risk of loss
o Follows rule of Res perit domino (thing perishes with the owner)
- For fungible things sold for a price fixed in relation to weight, number, or measure
o Risk shall not be imputed to the vendee until they have been weighed, counted, or measured, and
delivered
o However vendee assumes the risk if he has incurred delay in receiving the goods sold

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
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

o Buyer is given a reasonable opportunity of comparing the bulk with the description or the sample
Bulk of the goods denotes the goods themselves as distinguished from the sample and/or
description with which they must correspond
Does not mean only the greater portion of the goods
a. Sale by description
o Occurs when a seller sells things as being of a particular kind, the buyer not knowing whether the sellers
representations are true or false, but relying on them as true
o Where the purchaser has not seen the article sold and relies on the description given by the vendor, or
has seen the goods but the want of identity is not apparent on inspection
o If the bulk of goods delivered does not correspond with the description Contract may be rescinded
b. Sale by sample
o Requisites:
1. The parties contracted solely with reference to the sample, with the understanding that the bulk was
like it
2. Exhibition of the sample by the seller was an inducement of the sale or formed the sole basis thereof
o Effect: The vendor warrants that the thing sold and to be delivered by him shall conform with the sample
in kind, character and quality
 c. Sale by description and sample
o When a sale is made by both sample and description, the goods must satisfy all the warranties appropriate
to either kind of sale
o It is not sufficient that the bulk of goods correspond to the sample but not the description, and vice versa

Art. 1482. 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. (1454a)

- Earnest money
o Money given by the buyer to the seller to bind the bargain
o Is actually a partial payment of the purchase price and is considered proof of the perfection of the contract
o Is deducted from the total price
- Earnest money vs Option money

EARNEST MONEY OPTION MONEY

Part of the purchase price Money given as distinct consideration for the option
contract
Given only when there is already a sale Applies to a sale not yet perfected
Buyer is bound to pay the balance when earnest money is The would-be buyer is not required to buy
paid

- Note: Option money may become earnest money if both parties agrees on it

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may
be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from
the conduct of the parties. (n)

- Form of contract of Sale

1. General Rule: Contract may be entered into in any form provided all the essential requisites for its validity are
present
2. Where contract covered by Statute of Frauds
o If case is covered by the Statue of frauds, contract is required to be in writing, subscribed by the party
charged, otherwise it cannot be enforced by action
o The following contracts must be in writing:
a. Sale of personal property at a price not less than P500
b. Sale of real property or an interest therein regardless of price involved
c. Sale of property not to be performed within a year from the date regardless of the nature of the
property and price involved
3. Where form is required in order that a contract may be valid
o Where the applicable statue requires that the contract of sale be in certain form for its validity, the
required form must be observed in order that the contract be both valid and enforceable
4. Where the form is required only for the convenience of both the parties
o A certain form (e.g. public instrument) may be required for the convenience of the parties in order that
the sale may be registered in the Registry of Deeds to make effective as against third persons the right
acquired under such sale
o Allowed to compel each other to execute the contract of sale observing that form
 - Sale of real property or an interest therein
o Sale of a piece of land or an interest therein through an agent
Void unless agents authority is in writing
o Sale must be registered in the Registry of Deeds (or Property) of the province or city it is located in order
to be effective against third persons
Sale must be in a public instrument or document otherwise the registration will be refused
o Sale of land in a private instrument
Valid between parties but cannot be registered to bind or affect third persons
- Statute of Frauds applicable only to executory contracts
o No performance (e.g. delivery or payment) should be made to enforce the Statue of Frauds
o Does not apply to totally (consummated) or partially performed contracts of sale
Reason: partial performance furnishes reliable evidence of the intention of the parties or the
existence of the contract

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no further action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)

- Remedies of vendor in sale of personal property payable in installments

1. Elect fulfillment upon the vendees failure to pay
o Remedy of specific performance
Not limited to the proceeds of the sale of the mortgaged goods to recover the unpaid balance,
but also includes real and personal properties of the purchaser not exempt by law from
attachment or execution
2. Cancel the sale, if the vendee shall have failed to pay two or more installments
o Remedy of Cancellation
Vendee can demand only the return of payments already made
Exception: There is stipulation on forfeiture
3. Foreclose the chattel mortgage, of one has been constituted, if the vendee shall have failed to pay two or
more installments
o Remedy of Foreclosure
If vendor has chosen this remedy, he cannot take any other action against the vendee to recover
the unpaid balance of the price
Any agreement to the contrary is void
Foreclosure is effected by selling the mortgaged personal property at public auction and applying
the proceeds of the sale to the satisfaction of the claim secured by the mortgaged
Recovery of deficiency after foreclosure prohibited
Prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale
for a low price and then bringing suit against the mortgagor for a deficiency judgment
- Nature of remedies: are alternative and not to be exercised cumulatively or successively
o The waiver of one is a waiver of the right to resort to the others
Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option
to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a)

- Lease of personal property with option to buy

o Are really sales of personalty (personal property) payable in installments
- Rules in Art 1484 are applicable

Art. 1486. In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be
returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the
circumstances.

- Stipulation authorizing forfeiture of installments or rents paid

o In sales of personal property by installments or leases of personal property with option to buy, the parties
may stipulate that the installments or rents paid are not to be returned
o Valid insofar as the same may not be unconscionable under the circumstances otherwise the court has
the power to order the return of a portion of the total amount paid in installments or rents

Art. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a
stipulation to the contrary. (1455a)

- Vendor has the duty to pay not only the expenses for the execution of the sale, but also for the registration of it
- Exception: When there is stipulation to the contrary
- Note: Expenses incurred subsequent to the transfer of the title are borne by the buyer, unless caused by the fault
of the seller

Art. 1488. The expropriation of property for public use is governed by special laws. (1456)

- Expropriation must be decreed by competent authority and for public use and always upon payment of just
compensation