Article 1458
The parties will have these obligations
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 buyer’s
promise to pay the price, and as to the buyer, the seller’s
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].) in that the purchase price, which appears thereon as
paid, has, in fact, never been paid by the buyer to the seller.
Such sale is nonexistent and cannot be considered
consummated Where the figures referred to by the buyer as
prices are mere estimates given them by the seller of the
condominium units in question, the transaction lacks an
essential requisite for the perfection of the contract of sale.
(2) Non-payment of the purchase price is a resolutory
condition for which the remedy is either rescission or specific
performance under Article 1191 of the Civil Code. It
constitutes a very good reason to rescind a sale, for it violates
the very essence of the contract of sale.
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. or
make it null and void for lack of consideration, but results at
most in default on the part of the vendee for which the vendor
may exercise his legal remedies. It is incumbent upon the
partychallenging the recital of a notarized deed of sale that the
vendorhas received the purchase price to prove his claim with
clear andconvincing evidence. A notarized document is
evidence of high character. (Diaz vs. Court of Appeals, 145
SCRA 346 [1986].) An action to declare a contract void or
inexistent does not
prescribe. (Art. 1410.)
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. But neither is the delivery of the thing
bought nor the payment of the price necessary for the
perfection of the contract of sale. Being consensual, it is
perfected by mere consent. (See Art. 1475.) However, where
the seller can no longer deliver the object of the sale to the
buyer because the latter has already acquired title and delivery
thereof from the rightful owner, such contract may be deemed
to be inoperative and may thus fall, by analogy, under Article
1409(5) of the Civil Code: “those which contemplate an
impossible service,’’ since delivery of ownership is no longer
possible. 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. In
defining the contract of sale, Article 1458 merely specifies the
obligations of the parties to transferownership and to pay
under the contract.
even without Article 1458.
ILLUSTRATIVE CASE:
Spouses exchanged their properties for no par shares of a
corporation as a result of which they gained control of the
corporation.
Facts: Spouses H & W, stockholders of DT Corporation,
conveyed to said DT a parcel of land leased to E, in exchange
for 2,500 shares of stock equivalent to 55% majority in the
corporation. E questioned the transaction on the ground that it
was not given the first option to buy the leased property
pursuant to
the proviso in the lease agreement.
Issue: Is the “deed of exchange” a contract of sale which, in
effect, prejudiced E’s right of first refusal over the leased
property?
Held: No. In effect, DT Corporation is a business conduit of
H and W. What they really did was to invest their properties
and change the nature of their ownership from unincorporated
to incorporated form by organizing DT to take control of their
properties and at the same time save on inheritance taxes. The
deed of exchange cannot be considered a contract of sale.
There was no transfer of actual ownership interests by H and
W to a third party. They merely changed their ownership from
one form to another. The ownership remained in the same
hands.
Hence, E has no basis for its claim of a right of first refusal
under the lease contract. (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.4
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. In such
case, ownership ofthe property sold passes to the vendee upon
the actual or constructive delivery thereof. (see Art. 1497.)
Payment of the purchase price is not essential to the transfer
of ownership as long as the property sold has been delivered.
Such delivery (see Art. 1497.) operates to divest the vendor of
title to the property which may not be regained or recovered
until and unless the contract is resolved or rescinded in
accordance with law or
(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. 1478and in the
case of the vendor, the fulfillment of certain warranties, e.g.,
the timely eviction of squatters on the property sold. In sales
with assumption of mortgage, the assumption of mortgage is a
condition to the seller-mortgagor’s consent to the sale so that
without approval by the mortgagee no sale is perfected and
the seller remains the owner and mortgagor of the subject
property with the right to redeem in the case of foreclosure.
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. 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 or the juridical
relation itself from coming into existence.
If the condition is imposed on an obligation of a party (e.g.,
ejection by the vendor of squatters within a certain period
before delivery of property) not upon the perfection of the
contract itself, which is not complied with, the other party
may either refuse to proceed or waive said condition. (see Art.
1545; 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. Similarly, the mere fact that the obligation
of the buyer to pay the balance of the purchase price was
made subject to the condition that the seller first deliver the
reconstituted title of the house and lot sold does not make the
contract a contract to sell for such condition is not
inconsistent with a contract of sale [2000].)
(2) Other kinds. — There are, of course, other kinds of sale
depending on one’s 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),
Contract of sale and contract to sell
with reserved title distinguished.
At this stage, it would be desirable to point out that there are
distinctions between the two contracts.
(1) Transfer of title. — In a contract of sale, title passes to
the buyer upon delivery of the thing sold, while in a contract
to sell (or of “exclusive right and privilege to purchase”),
where it is stipulated that ownership in the thing shall not pass
to the purchaser until he has fully paid the price (Art. 1478.),
ownership is reserved in the seller and is not to pass until the
full payment of
the purchase 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. — In the first case, non-payment of the
price is a negative resolutory condition (see Art. 1179.), and
the remedy of the seller is to exact fulfillment or to rescind the
contract (see Arts. 1191, 1592.), while in the second case, full
payment is a positive suspensive condition, the failure of
which is not 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 agreement is a contract to sell.
(3) Ownership of vendor. — Being contraries, their effect in
law cannot be identical. In the first case, the vendor has lost
and 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. In
the second case, however, 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 and
a contract of sale is entered into to consummate the sale. If the
vendor should eject the vendee for failure to meet the
condition precedent he is enforcing the contract and not
rescinding it. Article 1191 5 is not applicable. A contract to
sell is commonly entered into so as to protect the seller
against a buyer who intends
to buy a property in installments by withholding ownership
over the property until the buyer effects full payment
therefore. A stipulation in a contract providing for automatic
rescissionupon non-payment of the purchase price within the
stipulated period is valid. (see Art. 1191.) It is in the nature of
an agreement granting a party the right to rescind a contract
unilaterally in case of breach without need of going to court.
ILLUSTRATIVE CASES:
1. Vendor “sells, transfers, and conveys” a land to the vendee
who may sell or assign the land prior to full payment of all
installments.
Facts: The dispositive part of a deed entitled “Deed of Sale
of Real Property” states: “for and in consideration of the sum
of P140,000, payable under the terms and conditions stated in
the foregoing premises, the VENDOR sells, transfers and con-
5Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case
one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the
fulfillment and the rescission of the
obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.
(1124)conveys unto the VENDEE x x x” the property in
question as of December 22, 1971, the date of said
document.” In paragraph 5 thereof, it is provided that “should
the VENDEE prior to the full payment of all the amounts
aforementioned, decide to sell or to assign part or all of the
aforementioned parcel of land, the VENDOR shall be
informed inwriting and shall have the option to repurchase the
property x x x. Should the VENDOR herein decide to
repurchase and the property is sold or transferred to a third
person, the balance of the consideration herein still due to the
VENDOR shall constitute automatically a prior lien on the
consideration to be paid by the third person to herein
VENDEE.”
Issue: Is the above instrument a contract to sell?
Held:
No. (1) Title to land transferred to vendee. — “It is a
deedof sale in which title to the subject land was transferred
to the vendee as of the date of the transaction,
notwithstanding that the purchase price had not yet been fully
paid at that time.
Under the first-cited stipulation, what is deferred is not the
transfer of ownership but the full payment of the purchase
price, which is to be made in installments, on the dates
indicated.
Under the second stipulation, it is recognized that the vendee
may sell the property even ‘prior to full payment of all the
amounts aforementioned,’ which simply means that although
the purchase price had not yet been completely paid, the
vendee had already become the owner of the land. As such, he
could sell the same subject to the right of repurchase reserved
to the vendor.”
(2) Right of vendor where land sold by vendee. — “In fact,
the contract also provides for the possibility of the vendee
selling the property to a third person, in which case the
vendor, if she wishes to repurchase the land, shall have a lien
on any balance of the consideration to be paid by the third
person to the vendee.”
2. The sale of scrap iron is subject to the condition that the
buyer will open a letter of credit in favor of the seller for
P250,000.00 on or before May 15, 1983.
Facts: In May 1, 1983, B (buyer) and S (seller) entered into a
contract entitled “Purchase and Sale of Scrap Iron” whereby S
bound itself to sell the scrap iron upon the fulfillment by B of
his obligation to make or indorse an irrevocable and
unconditional letter of credit not later than May 15, 1983.On
May 17, 1983, B, through his men, started to dig and gather
scrap iron at S’s premises. S cancelled the contract because of
B’s alleged non-compliance with the essential preconditions
among which is the opening of the letter of credit. It appeared
that the opening of the letter of credit was made on May 26,
1983 by a corporation which was not a party to the
contract, with a bank not agreed upon, and was not
irrevocable and unconditional, for it was without recourse and
stipulated certain conditions.
In his complaint, B, private respondent, prayed for judgment
ordering S, petitioner corporation, to comply with the contract
and to pay damages.
Issue: Is the transaction between S and B a mere contract to
sell or promise to sell, and not a contract of sale?
Held: (1) The contract is not one of sale. — “The petitioner
corporation’s obligation to sell is unequivocally subject to a
positive suspensive condition, i.e., the private respondent’s
opening, making or indorsing of an irrevocable and
unconditional letter of credit. The former agreed to deliver the
scrap iron only upon payment of the purchase price by means
of an irrevocable and unconditional letter of credit. Otherwise
stated, the contract is not one of sale where the buyer acquired
ownership over the property subject to the resolutory
condition that the purchase price would be paid after delivery.
Thus, there was to be no actual sale until the opening, making
or indorsing of the irrevocable and unconditional letter of
credit. Since what
obtains in the case at bar is a mere promise to sell, the failure
of the private respondent to comply with the positive
suspensive condition cannot even be considered a breach —
casual or serious — but simply an event that prevented the
obligation of petitioner corporation to convey title from
acquiring binding force.”
(2) The obligation of the petitioner corporation to sell did
not arise. — “Consequently, the obligation of the petitioner
corporation to sell did not arise; it, therefore, cannot be
compelled by specific performance to comply with its
prestation. In short, Article 1191 of the Civil Code does not
apply; on the contrary, pursuant to Article 1597 of the Civil
Code, the petitioner corporation may totally rescind, as it did
in this case, 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.
Romero, J., dissenting:
(1) The contract reached the stage of perfection. —
“Evidently, the distinction between a contract to sell and a
contract of sale is crucial in this case. Article 1458 has this
definition: x x x. Article 1475 gives the significance of this
mutual undertaking of the parties, thus: x x x. Thus, when the
parties entered into thecontract entitled “Purchase and Sale of
Scrap Iron” on May 1, 1983, 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.
(2) The seller has placed the goods in the control and
possession of the vendee. — From the time the seller gave
access to the buyer to enter his premises, manifesting no
objection thereto but even sending 18 or 20 people to start the
operation, he has placed the goods in the control and
possession of the vendee and delivery is effected. For,
according to Article 1497, “The thing sold
shall be understood as delivered when it is placed in the
control and possession of the vendee.”
(3) That payment of the price in any form was not yet
effected is immaterial to the transfer of ownership. —
“That payment of the price in any form was not yet effected is
immaterial to the transfer of the right of ownership. In a
contract of sale, the nonpayment of the price is a resolutory
condition which extinguishes the transaction that, for a time,
existed and discharges the obligations created thereunder. x x
x. “Consequently, 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 buyer’s failure to pay cannot even be
considered a breach, whether casual or substantial, but an
event that prevented the seller’s duty to transfer title to the
object of the contract.”
(4) The transaction is an absolute contract of sale and not
a contract to sell. — “The phrase in the contract ‘on the
following terms and conditions’ is standard form which is not
to be construed as imposing a condition, whether suspensive
or resolutory, in the sense of the happening of a future and
uncertain event upon which an obligation is made to depend.
There must be a manifest understanding that the agreement is
in what may be referred to as “suspended animation” pending
compliance
with provisions regarding payment. The reservation of title to
the object of the contract in the seller is one such
manifestation.
Hence, it has been decided in the case of Dignos vs. Court of
Appeals (158 SCRA 375 [1988].) that, absent a proviso in the
contract that 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
themoment the vendee fails to pay within the fixed period, the
transaction is an absolute contract of sale and not a contract to
sell.”
Contract to sell and conditional sale
distinguished.
A contract to sell may be defined as 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 to the buyer. — A contract to sell as
defined above may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to
the property subject of the sale until the fulfillment of the
suspensive condition, because in a conditional contract of
sale, 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 abatedHowever, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the 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 absolute sale
to consummate the transaction.
(2) Sale of subject property to a third person. — It is
essential to distinguish between a contract to sell and a
conditional contractof sale specially in cases where the
subject property is sold by theowner not to the party the seller
contracted with, but to a thirdperson. In a contract to sell,
there being no previous sale of the 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-seller’s
title per se, but the latter, of course, may be sued for damages
by the intending buyer.In a conditional contract of sale,
however, upon the fulfilment of the suspensive condition, the
sale becomes absolute and this will definitely affect the
seller’s title thereto. In fact, if there had been previous
delivery of the subject property, the seller’s 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 seller’s 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 buyer’s title. In case a title is issued to
the second buyer, the first 6A prior contract to sell made by a
decedent during his lifetime prevails over a subsequent sale
made by an administrator without probate court approval. The
estate is
bound to convey the property upon full payment of the
consideration buyer may seek reconveyance of the property
subject of the sale.
Other cases of contract to sell.
(1) 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. For purposes of the perfection of a
contract of sale (see Art. 1475.), there
is already a price certain where the determination of the price
is left to the judgment of a specified person or persons (see
Art. 1469, par. 1.), and notwithstanding that such
determination has yet to be made.
(2) A sale of future goods (see Art. 1462.) even though the
contract is in the form of a present sale operates as a contract
to sell the goods.
(3) 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 and not a contract of sale It has been
held that the act of the vendor of delivering the
possession of the property (land) to the vendee
contemporaneous with the contract (deed of sale in a private
instrument) was an indication that an absolute contract of sale
was intended bythe parties and not a contract to sell
ILLUSTRATIVE CASE:
Seller ofinterest in a business claims the profits derived by
business before the price thereof was fixed by appraisers
designated by the parties in the contract.
Facts: S sold to B his interest in a company, the price to be
ascertained by three (3) appraisers. After six (6) months, the
appraisers rendered their report at which time S signed a
document whereby he acknowledged receipt of the price
arrived at and relinquished any claim that he had in the
business. Thereport of the appraisers did not contain any
segregation of the assets of the business from the accumulated
profits. S is now claiming the profits from B from the time of
the execution of the sale to the time he acknowledged receipt
of the price on the ground that before the price was fixed by
the appraisers, the contract was not a sale but merely a
contract to sell.
Issue: Is this contention of S tenable?
Held: No. The contract of sale is perfected when the parties
agree upon the thing sold and upon the price (see Art. 1475.),
it being sufficient for the price to be certain that its
determination be left to the judgment of a specified person.
Sale of thing expected and sale of hope
itself distinguished.
Emptio rei speratae (sale of thing expected) is the sale of a
thing not yet in existence subject to the condition that the
thing will exist and on failure of the condition, the contract
becomes ineffective and hence, the buyer has no obligation to
pay the price. On the
other hand, emptio spei is the sale of the hope itself that the
thing will come into existence, where it is agreed that the
buyer will pay the price even if the thing does not eventually
exist.
(1) In emptio rei speratae, the future thing is certain as to
itself but uncertain as to its quantity and quality. Such sale is
subject tothe condition that the thing will come into existence
(see Art. 1545,par. 2.), whatever its quantity or quality. In
emptio spei (like the sale of a sweepstake ticket), it is not
certain that the thing itself (winning a prize) will exist, much
less its quantity and quality.
(2) In the first, the contract deals with a future thing,
while in the second, the contract relates to a thing which
exists or is present — the hope or expectancy.
(3) In the first, the sale is subject to the condition that the
thing should exist, so that if it does not, there will be no
contract by reason of the absence of an essential element.
On the other hand, the second produces effect even though the
thing does not come into existence because the object of the
contract is the hope itself, unless it is a vain hope or
expectancy (like the sale of a falsified sweepstake ticket
which can never win).
Presumption in case of doubt.
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. (see 10 Manresa 29-30.)
ILLUSTRATIVE CASE:
Buyer executed a surety bond in favor of seller to secure
payment of the balance of purchase price of iron ore, which
balance shall be paid out of amount derived from sale by
buyer of the iron ore.
Facts: S embarked upon the exploration and development
of mining claims belonging to B. Later, they executed a
document wherein S transferred to B all of S’s rights and
interest over the 24,000 tons of iron ore, “more or less” that S
had already extracted from the mineral claims in
consideration of a down payment of P10,000.00, and the
balance of P65,000.00 which will be paid out of the “first
shipment of iron ore and of the first amount derived from the
local sale of iron ore made” from said claims, which amount
was secured by a surety bond executed by B in favor of S.
No sale of the approximately 24,000 tons of iron ore had been
made nor had the P65,000.00 been paid.
Issue: Is the obligation of B to pay the remaining
P65,000.00subordinated to the sale or shipment of the oreas a
condition precedent?
Held: No. A contract of sale is normally commutative and
onerous (see Art. 1458.): not only does each one of the parties
assume a correlative obligation (the seller to deliver and
transfer ownership of the thing sold and the buyer to pay the
price), but such party anticipates performance by the other
from the very start.
(1) Contingent character of obligation to pay must clearly
appear. — Where in a sale, the obligation of one party can be
lawfully subordinated to an uncertain event, so that the other
understands that he assumes that risk of receiving nothing for
what he gives as in the case of a sale of hopes or expectations
(emptio spei), it is not in the usual course of business to do so,
hence, the contingent character of the obligation must clearly
appear.
(2) Surety bond negates such contingent character. — In the
case at bar, nothing is found in the record to evidence that S
desired or assumed to run the risk of losing his rights over the
ore without getting paid for it, or that B understood that S
assumed any such risk. This is proven by the fact that S
insisted on a bond by a surety company to guarantee payment from that which was really executed. Its requisites are (a) an
of the P65,000.00; and the fact that B did put up such bond outward declaration of will different from the will of the
indicates that he admitted the definite existence of his parties;
obligation to pay the balance of P65,000.00. (b) the false appearance must have been intended by
mutual agreement; and
(c) the purpose is to deceive third persons.
Article 1468 (The fact that the seller continues to pay realty taxes on the
land sold even after the execution of the contract to sell does
Sale distinguished from lease. not necessarily prove ownership, much less simulation of said
In the lease of things, one of the parties binds himself to give contract.
to another the enjoyment or use of a thing for a price certain The non-payment of the price does not prove simulation; at
and for a period which may be definite or indefinite. (Art. most, it gives the seller the right to sue for collection.
1643.) In otherwords, in a lease, the landlord or lessor Generally, in a contract of sale, payment of the price is a
transfers merely the temporary possession and enjoyment of resolutory condition and the remedy of the seller is to exact
the thing leased. In a sale, the seller transfers ownership of the fulfillment or, in case of a substantial breach, to rescind the
thing sold. contract. The non-payment of the price by the supposed
buyer, a minor, when taken into account together with the
Sale distinguished from dation in payment. many intrinsic defects of the deed of sale, may, however,
Dation in payment (or dacion en pago) is the alienation of show that the price is simulated, making the sale void.
property to the creditor in satisfaction of a debt in money. (see
Art. 1619.) It is governed by the law on sales. (Art. 1245.) As
such the essential elements of a contract of sales, namely,
consent: object certain, and cause or
considerations, must be present.
The distinctions are the following:
(1) In sale, there is no preexisting credit, while in dation in
payment, there is;
(2) In sale, obligations are created, while in dation in
payment,obligations are extinguished;
(3) In sale, the cause is the price paid, from the viewpoint of
the seller, or the thing sold, from the viewpoint of the buyer,
while in dation in payment, the extinguishment of the debt,
from the viewpoint of the debtor, or the object acquired in lieu
of the credit, from the viewpoint of the creditor;11
(4) In sale, there is more freedom in fixing the price than in
dation in payment; and
(5) In sale, the buyer has still to pay the price, while in dation
in payment, the payment is received by the debtor before the
contract is perfected. (see 10 Manresa 16-17.)
11What actually takes place in dation in payment is an
objective novation of the obligation where the thing offered as
an accepted equivalent of the performance of an obligation is
considered as the purchase price. (see Art. 1291[1], Civil
Code.)

EXAMPLE:
S owes B P10,000.00. To pay his debt, S, with the consent of
B, delivers a specific television set. If the value of the
television set, however, is only P8,000.00, S is still liable for
P2,000.00 unless the parties have considered the conveyance
as full payment.

Article. 1471
(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