THE LAW ON SALES

IMPORTANT TIPS ON THE LAW ON SALES

(Arts. 1458-1637, CIVIL CODE)

Contract of Sale Defined: Sale is a contract

where one party (seller or vendor) obligates
himself to transfer the ownership of and to
deliver a determinate thing, while the other
party (buyer or vendee) obligates himself to
pay for said thing a price certain in money or
its equivalent. (Art. 1458, Civil Code)
Essential Characteristics of the Contract of Sale:
• Consensual (as distinguished as real), because
the contract is perfected by mere consent;
• Bilateral or reciprocal - because both parties
are bound by obligations dependent upon
each other. (as opposed to unilateral)
• Onerous, because to acquire the rights,
valuable considerations must be given. (as
differentiated to gratuitous)
• Commutative, as a rule, because the values
exchanged are almost equivalent to each other.
• (NOTE: By way of exception, some contracts of
sale are aleatory, that is, what one receives may
in time greater or smaller than what he has
given. Example: The sale of genuine sweepstakes
ticket, contract of insurance)
• Principal (as distinguished from an accessory
contract), because for the contract of sale to be
validly exist, there is no necessity for it to depend
upon the existence of another valid contract.
• Nominate because the Code refers to it by a
special designation or name, that is the contract
of sale. (this is opposite to innominate contracts)
Elements of the Contract of Sale:

Essential elements (those without which there can be no

valid sale)
• Consent or meeting of the minds, that is consent transfer
ownership in exchange for the price
• Determinate subject matter or object(generally, there is
no sale of generic thing, moreover, if the parties differ as
to the object, there be no meeting of the minds).
• Price certain in money or its equivalent (this is the cause
or consideration) (The price need not be in money)
Natural elements (those which are inherent in the
contract, and which in the absence of any
contrary provision, are deemed to exist in the
contract)
• Warranty against eviction (deprivation of the
property bought)
• Warranty against Hidden Defects

Accidental elements (those which may be present

or absent in the stipulation, such as the place or
time of payment, or the presence of conditions)
Stages in the Contract of Sale:

• Generation or Negotiation
• Perfection - Meeting of the Minds
• Consummation - when the object is
delivered and the price is paid.
 SALE
There is no pre-existing credit.
Give rise to an obligation.
The cause or consideration here is
the price, from the viewpoint of
the seller; or of the obtaining of
the object from the viewpoint of
the buyer.
There is greater freedom in the
determination of the price.
The giving of the price may
generally end the obligation of the completely or partially the credit
DATION IN PAYMENT
There is a pre-existing credit.
Extinguishes obligations.
The cause or consideration here,
from the viewpoint of the person
offering the dation, is the
extinguishing of his debt; from the
viewpoint of the creditor is the
acquisition of the object offered in
lieu of the original credit.
There is less freedom in the
determination of the price
The giving of the object in lieu of
the credit may extinguish
Difference between a Contract of Sale and a Contract to Sell

• In a Contract of Sale, the non-payment of the price is a resolutory

condition, that is the contract of sale may by such occurrence put
an end to a transaction that once upon a time existed.; In a
Contract to Sell, the payment in full of the price is a positive
suspensive condition. Hence if the price is not paid, it is as if the
obligation of the seller to deliver and to transfer ownership never
became effective.
• In the Contract of Sale, title over the property generally transfer to
the buyer upon delivery; in the Contract of Sell, ownership is
retained by the seller, regardless of the delivery and it will not pass
until full payment of the price.
• In a contract of Sale, after delivery has been made, the seller has
lost ownership and cannot recover it unless the contract is
resolved or rescinded. In a Contract to Sell, since the seller retains
ownership, despite delivery, he is enforcing the contract if he seeks
to oust the buyer for failure to pay.
• The object of Sale must be LICIT and the Vendor must have
the right to transfer ownership at the time the object is
delivered. (Art. 1459)
• The object of the sale must be determinate, that is specific,
but it is not essential really that at the time of perfection, the
object be already specific. It is sufficient that it be capable of
being determinate without need of any new agreement.
• Things of potential Existence may be an object of sale. This is
a future thing that may be sold. Example: "All my rice
harvest next year." Note however that future inheritance
cannot be sold, however. (Art. 1347, par. 2, Civil Code)
• Other examples of things possessed of a potential existence:
• Young animals not yet in existence or still ungrown fruits;
• The wine that a particular vineyard is expected to produce;
• Expected goodwill of a business
Sale of expected thing and sale of mere hope or expectancy). Art.
1461
• Sale of expected thing (Emptio Rei Sperati)
• Sale of hope itself (Emptio Spei)
NOTE: If the expected thing in (a) does not materialize, the sale is
not effective. In the second, it does not matter whether the
expected thing materialized or not; what IS IMPORTANT IS THAT
THE HOPE ITSELF VALIDLY EXISTED. The first deals with future
thing - that which is expected; the second deals with the present
thing - certainty the hope or expectancy already exist.
Example of Emptio Spei: Sale of a valid sweepstakes ticket.
Whether the sweepstake ticket wins or not, the sale is valid.
NOTE: If the hope or expectancy itself is in vain, the sale is itself
VOID. Be it noted that this is not an aleatory contract for while
in aleatory contract there is an element of chance, here there is
completely no chance.
Example : Sale of a losing ticket for a sweepstake already drawn.
• Goods may be future or existing goods. Future
goods are those still to be manufactured, raised
or those acquired by the seller after the
perfection of the contract. Art. 1462

• An undivided Interest may also be sold. Art.

1463
• Also things subject to a resolutory condition
may be sold. Art. 1465
Requisites in order that a thing may be the object of
sale:

• The thing must be existing, or at least, have a future

or contingent existence (Arts. 1461, 1462, 1465);
• It must be determinate or determinable by
description or segregation (Art. 1460);
• It must be licit or legal (Art. 1459)
• The vendor must have real right to transfer ownership
of the thing at the time it is delivered (Art. 1459)
Objects of Contract of Sale:

• The following may be the objects of sale:

• Things having potential existence (Art. 1461, NCC);
• Things that are existing or to be manufactured,
raised or acquired in the future or future goods (Art.
1462, NCC)
• Those whose acquisition by the seller depends upon
contingency which may or may not happen (Art.
1462, NCC);
• Things subject to a resolutory condition (Art. 1465)
Requisites of price in a contract of sale:

• The price must be in money or its equivalent (Art. 1458)

• It must be certain or ascertainable (Art. 1469)
• It must be real, i.e., not simulated, (Art. 1471)

Meaning of a price certain:

• The parties have fixed or agreed upon a definite amount;

or
• It be certain with reference to another thing certain (See
Art. 1472), as where the buyer agrees to pay the price as
indicated in the invoices;
• The determination of the price is left to the judgment of a
specified person or persons (Art. 1469)

• The last two cases are applicable only when no specific

amount has been stipulated by the parties.
Rules if price is to be determined by a third person:
The price fixed by the third person is binding except when he
acts in bad faith or by mistake;
• In such case, the courts may fix the price;
• If the third person is unable or unwilling to fix the price, the
contract shall be inefficacious (without effect), unless the
parties subsequently come to an agreement ; and
• If the third person is prevented from fixing the price by the
fault of the seller or buyer, the party not in fault may choose
between rescission or fulfillment with damages in either
case. (Art. 1469)

• The fixing of the price may not be left to the discretion of one
of the contracting parties, as it cannot be said that there is
meeting of minds upon the fixed price. (Art. 1308 on
Mutuality if Contracts) But if the other accepts price fixed,
the sale is deemed perfected.
• If the price cannot be determined, the contract is
inefficacious. However, if the thing or any part
thereof has been delivered to and appropriated by
the buyer, he is under obligation to pay reasonable
price thereof. (Art. 1474)

• Effect of Gross Inadequacy of Price:

• It does not affect the contract of sale except when

the inadequacy may indicate that there is a defect in
the consent, or that the parties really intended a
donation or some other act or contract.
 CONTRACT OF SALE AGENCY TO SELL
In contract of sale, the buyer In an agency to sell, the agent
pays the price. delivers the price which in
turn he got from his buyer;

In sale, the buyer after The agent who is supposed to

delivery becomes the owner; sell does not become the
owner, even if the property
has been delivered to him;

In sale, the seller warrants The agent who sells assumes

no personal liability as long as
he acts within his authority
and in the name of the
principal
Rules to determine whether contract is sale or barter.
In a contract where the consideration is partly
money and partly goods, the following rules shall
apply:

• the intention of the parties must be determined;

• If the intent is not clear, then apply the following
rules:
• If the sold thing is more valuable than money, the
contract is barter;
• If the money and the thing are equal value, the
contract is sale;
• If the thing is less valuable than money, the contract
is a contract of sale (Art. 1468, NCC)