I.

The Nature of Sales

A. Definition of Sale
Article 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
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.”
1. Elements of Sale (E-N-A)
a. Essential elements – for validity:
i. Consent - refers to seller’s consent to transfer ownership of, and deliver, a determinate
thing, and to buyer’s consent to pay the price certain.
Requisites:
a. Legal Capacity;
b. Offer(definite) and acceptance(absolute); and
c. No vitiation of consent
ii. Determinate subject matter - Must be determinate or capable of being determinate,
licit and within the commerce of man, and possible.
iii. Consideration - Refers to “price certain in money or its equivalent.” It must be real,
certain, and pecuniary.
b. Natural elements - those deemed to exist in certain contracts in the absence of any contrary
stipulations. (Ex. Warranty against eviction, hidden defects)
c. Accidental elements - those which may be present or absent depending on the stipulations of
the parties. (Ex. Conditions, interest, penalty)
2. Stages of Contract of Sale
a. Generation or Negotiation - covers the period from the time the prospective contracting parties
indicate their interests in the contract to the time the contract is perfected.
b. Perfection - takes place upon the concurrence of the essential elements of the sale which are
the meeting of the minds of the parties as to the object of the contract and upon the price
c. Consummation - begins when the parties perform their respective undertaking under the
contract of sale, culminating in the extinguishment thereof.
3. Sale Creates Real Obligations “To Give”
Art. 1165. “When what is to be delivered is a determinate thing, the creditor, in
addition to the right granted him by Article 1170, may compel the debtor to
make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation
be complied with at the expense of the debtor.
 If the obligor delays, or has promised to deliver the same thing to two or
more persons who do not have the same interest, he shall be responsible for
any fortuitous event until he has effected the delivery. “
i. Specific or Determinate Thing – capable of particular designation
ii. Generic or Indeterminate Thing – refers only to a class, to a genus, and cannot be
pointed out with particularity. (genus nunquam perit)

NATURE OF OBLIGATIONS CREATED PER DEFINITION IN ART. 1458

1. For the SELLER – To transfer ownership and to deliver possession of the subject
matter
2. For the BUYER – to pay the price.
4. Essential Characteristics of Sale:
a. Nominate and Principal
i. Nominate - it has a specific name given by law. Its nature and consequences are
governed by a set of rules in the Civil Code, which euphemistically we refer to as the
“Law on Sales.”
ii. Principal - 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.
b. Consensual - it is perfected by mere consent, at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price. (Art. 1475)
c. Bilateral and Reciprocal - because both parties are bound by obligations dependent upon each
other.
d. Onerous - it imposes a valuable consideration as a prestation, which ideally is a price certain in
money or its equivalent. (Art. 1458)
e. Commutative - the thing sold is considered the equivalent of the price paid and the price paid is
the equivalent of the thing sold.

XPN: Aleatory – the consideration is not equivalent of what has been received in the
case of purchase of a lotto ticket. If the ticket wins, the prize is much more than the
price of the ticket.

f. Sale is Title and Not Mode - Mode is the legal means by which dominion or ownership is
created, transferred or destroyed (e.g., succession, donation, discovery, intellectual creation,
etc.); title only constitutes the legal basis by which to affect dominion or ownership. Therefore,
 sale by itself does not transfer or affect ownership; the most that sale does is to create the
obligation to transfer ownership; it is tradition or delivery, as a consequence of sale, that
actually transfers ownership.
B. Sale DISTINGUISHED from similar Contracts
1. Donation
When the price of the contract of sale is simulated, the sale may be void but the act may be shown to
have been in reality a donation or some other contract. [Art.1471, CC]

When the price of the contract of sale is simulated, the sale may be void but the act may be shown to
have been in reality a donation or some other contract. [Art.1471, CC]
2. Barter

Barter is a contract where one of the parties binds himself to give one thing in consideration of
the other’s promise to give another thin

By barter or exchange, one of the parties binds himself to give one thing in consideration of the
other’s promise to give another thing[Art. 1638]; whereas, by sale, one of the parties binds
himself to deliver a thing in consideration of the other’s undertaking to pay the price in money
or its equivalent.
3. Contract for Piece-of-Work
The fact that the object were made by the seller only when customers placed their orders, does
not alter the nature of the contract of sale, for it only accepted such orders as called for the
employment of such materials as it ordinarily manufactured or was in a position habitually to
manufacture such. [Celestino Co & Co vs. Collector, 1956:]

When each product or system executed is always UNIQUE and could not mass-produce the
product because of its very nature, such is a contract for a piece of work.[Commissioner vs.
Engineering Equipment and Supply Co., 1975]
 SALE CONTRACT FOR A PIECE OF WORK
When the price of the contract of sale is Goods are manufactured for customer upon
simulated, the sale may be void but the act his special order
may be shown to have been in reality a
donation or some other contract. [Art.1471,
CC]
For the general market, whether on hand or For a specific customer
not
Governed by Statute of Frauds Not within Statute of Frauds

4. Agency to Sell
By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of the principal, with the consent or authority of the latter.

5. Dacion En Pago
Dation in payment is one whereby property is alienated to the creditor in full satisfaction of a
debt in money; it constitutes “the delivery and transmission of a thing by the debtor to the
creditor as an accepted equivalent of the performance of the obligation.”

Art. 1245. “Dation in payment whereby property is alienated to the creditor in full satisfaction
of a debt in money, shall be governed by the law of sales.”

There is a novation of the contract of loan into a contract of sale when the creditor agrees to
accept a thing in payment of the debt. Hence, if the thing given in payment turns out to belong
to another, the creditor’s remedy should be governed by the law on sales, not loan.
6. Lease
In a contract of lease, the lessor binds himself to give to another (the lessee) the enjoyment or
use of a thing for a price certain, and for a period which may be definite or indefinite.

A conditional sale may be made in the form of a “lease with option to buy” as a device to
circumvent the provisions of the Recto Law governing the sale of personal property on
installments