CONTRACT OF SALE

J. Tamayao
 CONTRACT OF SALE
A contract where one party obliges himself to transfer ownership and to deliver a determinate thing and the
another party to pay a price certain in money or its equivalent.

Contract of sale DOES NOT transfer the ownership of the subject matter. It is merely a title that creates the
obligation to transfer ownership and a mode thereof.

Elements:
Essential those elements without which there can be no valid contract. These elements are consent, object/
subject matter and cause or consideration

Natural those elements which are found in a contract by its nature and presumed by law to exist, such as
Warranty of hidden defects or eviction in contract of sale.

those which exist by virtue f an agreement for the purpose of expanding, limiting, or modifying a
Accidental contract.
Such accidental elements are conditions, clauses, terms, modes of payment, or penalties.
 STAGES & CHARACTERISTICS OF CONTRACT OF SALE
STAGES CHARACTERISTICS
Preparatory or
Consensual
conception
process of formation such as bargaining, and negotiation to
Commutative
arrive at a defined contract.
Perfection or Birth Nominate
there is now a meeting of minds to arrive at a definite
agreement as to the subject matter, cause or consideration, Bilateral
terms, and conditions of the contract.
Onerous
Consummation or
Death
Principal
which is the fulfillment or performance of the terms and
conditions agreed upon in the contract may be said to have
been fully accomplished or executed.
 SALE v.
Donation Barter Piece of Work
Sale Donation Sale Barter Sale Piece of Work

Onerous Gratuitous Cause is Cause is Ordinary Special

Money another course Order
Consensual Acceptance
thing
Already Unique
If partly money & thing: existed
Follow Intention
Intention
Not clear intent

Thing > Money = BARTER

Money >= Thing = SALE
 SALE v.
Dacion en Pago Contract to Sell Agency to Sell
Sale Dacion en Pago Sale Contract to Sell Sale Agency

No pre- Pre-existing Delivery Full Ownership Agent,

existing obli obli Payment ownership
retained by
Creates obli Ext. obli Non- Full
Principal
payment is Payment is
resolutory positive Buyer pays Agent
condition suspensive price delivers
price
Perfected Not yet
perfected
 SALE v.
Lease Conditional
Sale Lease Sale Conditional Contract to Sell

Ownership No Sale Sale No Sale

ownership –
Delivery Upon No
USE only
fulfillment automatic
of Condition transfer of
ownership.
 OBJECT (Art. 1347 – 1349)
What may be? What cannot be?
Thing or service Ø Future inheritance, except when authorized by
must be law e.g. inter vivos partitions by decedent (Art.
Ø Determinate or Determinable (Art. 1349) 1080) and marriage settlements (Art. 84 FC)
Ø Within the commerce of man or transmissible (Art. Ø Impossible things or services (Art. 1348)
1347)
Ø Actual or possible of existence , includes future
things (Art. 1347)
Ø Lawful or not contrary to law, morals, good
customs, public order and public policy (Art. 1347
par. 2)
 OBJECT (Art. 1347 – 1349)
Existing
THINGS
Future Ø Should come into existence
Ø Emptio Rei Speratae – sale of hope or expectancy but CERTAIN

With Ø Emptio Spei – sale of a future thing (HOPE), but not CERTAIN.
HOPE Hope itself.
Without Ø VAIN HOPE. Voidable.

Present Ø Valid
INHERITANCE
Future Ø Void.

Transmissible Ø Valid
RIGHT
Intransmissible Ø Void.
 OBJECT
Things in Litigation Rescissible

Entered into by defendant, without knowledge and approval of the litigants or the court is rescissible [Art. 1381 (4)]

Undivided Interest Valid – Co -Owner

Makes the buyer a co-owner of the thing. The co-owner can dispose his share even without the consent of the other co-
owner/s.
The sale of an undivided share in a specific mass of fungible goods makes the buyer a co-owner of the entire mass in
proportion to the amount he bought.

Subj. of Resolutory Extinguished.

If the resolutory condition happens, the vendor cannot transfer ownership of what he sold since there is no object.
 OBJECT: Loss or Deterioration
Before Perfection After Perfection
Seller bears risk of loss.
Before Delivery After Delivery

Buyer has risk of loss. Buyer has risk of loss.

At Perfection XPN: Stipulation.
Void / Inexistent Object.
 CAUSE OR CONSIDERATION
Ø It is the sum stipulated as equivalent of the thing sold and also every incident
PRICE taken into consideration for the fixing of the price put to the debit of the buyer and
agreed to by him
Certain When certain? When NOT certain?
Ø Parties agree on price. Ø Unable or Unwilling = Sale is Ineffective
Ø In reference to another thing. Ø In Bad Faith / Mistake = Courts fix the price
rd
Ø Left to the judgment of 3 person. Ø 3rd person prevented = innocent party has
right of DAMAGES + (Rescission / Fulfillment)
Executory Ø No obligation.
If Not Determined?
Executed Ø Delivery made. Must pay reasonable price.

Ø a.)When low price indicates vice of consent, sale may be annulled

Voluntary Ø b.) Where the price is so low as to be “shocking to conscience”,
Inadequacy of Price sale may be set aside
GR: Mere inadequacy of the Ø c.) Where the parties did not intend to be bound at all, sale is
price does not affect validity of VOID
the sale. Ø a.) Where the price is so low as to be “shocking to conscience”,
Involuntary
sale may be set aside
Ø b.) Resale
 CAUSE OR CONSIDERATION
In Money

Real Ø If the price is simulated, the contract is VOID for the lack of cause or consideration.

Relative Ø False price. Valid

Simulation
Absolute Ø Price is not intended to be paid. VOID.
 CONSENT
ART. 1319
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came
to his knowledge. The contract, in such a case, is presumed to have been entered into in the
place where the offer was made.

Offer Acceptance
OFFER must be CERTAIN ACCEPTANCE must be ABSOLUTE and
UNQUALIFIED (Art. 1319); it is NOT
DEFINITE, INTENTIONAL, and PRESUMED

COMPLETE – as to cause and object If qualified, counter-offer.

Kinds: 1320 – Express, Implied
1319 - Qualified
 CONSENT – CAPACITES OF PARTIES
ART. 1329 Prohibitions by Law

The incapacity declared in article 1327 is subject to the modifications determined by law, and
is understood to be without prejudice to special disqualifications established in the laws.
Prohibitions under A. DONATIONS between SPOUSES: VOID
the law: B. PURCHASE of STATE PROPERTY by PUBLIC OFFICERS: VOID
C. PURCHASE of PROPERTY in LITIGATION by JUDGES, LAWYERS: VOID
D. AGENT- the property of the PRINCIPAL
E. EXECUTOR - the property under ADMINISTRATION (Art. 1491)

WHO?
1. Public Officers and employees—Property Of State.
2. Agents—Property of Principal unless with consent.
PAGE JO 3. Guardian—Property of Ward.
4. Executors and administrators—Estate
5. Justices, Judges, Prosecuting Attorneys, Clerks and employees of
court—Property/Rights under litigation.
6. Others
 SALE OR RETURN
EFFECT: Sale with Resolutory Condition

Property is sold, but the buyer has the option to return it to the seller instead of paying the
price. It depends on the discretion of the buyer; it is a sale with a resolutory condition.

SALE ON APPROVAL OR TRIAL

EFFECT: Sale with Suspensive Condition

It is in nature of an option to purchase. Sale is dependent on the quality of the goods; it is a

sale with suspensive condition.
When Valid? 1. Buyer signifies his approval or acceptance to seller
2. Does any other act adopting the transaction
3. Retains the goods without giving notice of rejection after the time fixed has expired; it no
time has been fixed, after the expiration of a reasonable time
OBLIGATIONS OF THE VENDOR
J. Tamayao
 OBLIGATIONS OF VENDOR
1) Transfer ownership
2) Deliver the thing, with its accessions and accessories, if any
3) Warrant against eviction and against hidden defects
4) To take care of the thing, pending delivery, with proper diligence
5) To pay the expenses of the deed of sale, unless there is stipulation to the contrary

Ownership, as a consequence of certain contracts such as

sale, shall be transferred to the vendee upon actual or
constructive delivery, quasi-tradition, or by operation of law

1. Vendee has not paid the price

2. No period for payment has been fixed
WHEN NOT TO DELIVER? 3. Even if a period for payment has been fixed, if the
vendee has lost the right to make use of the same
 HOW TO DELIVER? (Tradition)
Actual
Actual or real- placing the thing under the control and possession of the buyer

Constructive
Legal or constructive- delivery is represented by other signs or acts indicative thereof
By Legal Form Ø Through a public instrument.
Symbolic Ø Delivery of keys or depository where the movable is kept or stored. Simbolica.
Longa Manu Ø Movable, Pointing at the thing.
Brevi Manu Ø Buyer simply continues in possession of the thing but under ownership.
Consitutum
Posessorium Ø Seller continues to be in possession of the property sold but not as a owner but in
some other capacity.
 HOW TO DELIVER? (Tradition)
Actual or real- placing the thing under the control and possession of the
Actual buyer
Constructive
Legal or constructive- delivery is represented by other signs or acts indicative thereof
By Legal Form Ø Through a public instrument.
Symbolic Ø Delivery of keys or depository where the movable is kept or stored. Simbolica.
Longa Manu Ø Movable, Pointing at the thing.
Brevi Manu Ø Buyer simply continues in possession of the thing but under ownership.
Consitutum
Posessorium Ø Seller continues to be in possession of the property sold but not as a owner but in
some other capacity.
Quasi-Tradition Delivery of rights, credits or incorporeal property, made by (i) placing titles of
ownership in the hands of the buyer or (ii) allowing the buyer to make use of rights
 DELIVERY THROUGH CARRIER
RULE:
Delivery to carrier is deemed to be delivery to the buyer.
EXCEPTION: Where the right of possession or ownership of specific goods sold is reserved.

Duty After Delivery:

1. To enter on behalf of buyer into such contract reasonable under the circumstances
2. To give notice to buyer regarding necessity of insuring the goods
 WHERE TO DELIVER?
RULE:
Yes
Agreement? Follow.
No Usage of trade.
No usage, seller’s place of
business. In other case, Seller’s
residence.
 ISSUES ON DELIVERY
Delivered less than
1. Buyer may reject; or
2. Buyer may accept and pay at the contract rate

Delivered more than

1. Buyer may reject all; or
2. Buyer may accept the goods agreed upon and reject the rest; or
3. Buyer may accept all and must pay for them at the contract rate

Delivered mixed goods

Rule: Buyer may accept the goods which are in accordance with the contract and reject the rest.

If indivisible: If the subject is indivisible, in case of delivery of a large quantity of goods or a mixed goods,
the buyer may reject the whole of the goods
UNPAID SELLER
J. Tamayao
 UNPAID SELLER
Concept
Unpaid seller is one who has not been paid the whole amount of the price or one who received a
negotiable instrument and it has been dishonored, buyer is insolvent, or otherwise.

1) Right to lien of goods or the rights to retain them for the price while he is in possession of them
2) Right of stoppage in transit
3) Right of resale
4) Right to rescind the sale

Before Delivery In Transit After Delivery

Right to Lien Stoppage in Transitu Rescission

Right of Resale / Rescind

 UNPAID SELLER – RIGHT TO LIEN
When?
Right to retain possession of goods until payment or tender of the whole price, or unless he agrees to
sell on credit. Credit term expired and buyer is insolvent.

EFFECT: Partial Delivery

When unpaid seller made partial delivery of the goods, he may exercise his lien on the
remainder, unless such part delivery shows an intent to waive the lien or right of retention.

When Lost? When Delivered

1) Delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer
without reserving the ownership in the goods or the right of possession thereof;
2) Buyer or his agent lawfully obtains possession of the goods;
3) By waiver thereof
 UNPAID SELLER – STOPPAGE IN TRANSITU
When?
An extension of the lien for the price; entitles unpaid seller to resume possession of the goods while
they are in transit before the goods come in possession of the vendee. Buyer is insolvent AND seller is
unpaid while goods are in transit.

How? Exercising right:

1. By obtaining actual possession of the goods.

2. By giving notice of his claim to the carrier or bailee.

Effect: Effect When Exercised

1) Goods are no longer in transit

2) Carrier shall be liable as depositary or other bailee.
3) Carrier must redeliver the goods to, or according to the instructions of the seller
 UNPAID SELLER – RESALE
When? Right to Lien Stoppage in Transitu

Right of Resale

Instances:
1. Goods are perishable by nature
2. Right to resell is expressly reserved
3. Buyer delays in payment for an unreasonable time
Profit To seller only.
Effect of Resale: Resale at:
Loss Sue balance to
buyer
 UNPAID SELLER – RESCIND
When? Right to Lien Stoppage in Transitu

Right to Rescind

Instances:
1. Right to rescind is expressly reserved
2. Buyer delays in payment for an unreasonable time
SALE OF REAL ESTATE & CHATTELS
J. Tamayao
 SALE OF REAL ESTATE
By the Unit By Lump Sum Sale
Ø The vendor must deliver the entire property Ø Sates the full purchase price based on the
agreed upon. The immovable property must be estimate or where both area and boundaries
of the quality specified in the contract. are stated.
Ø Effect: RESCISSION

WHEN TO RESCIND?
Ø If the lack of area is at least 1/10th than that
stated or stipulated.
Ø If the deficiency in the quality specified in the
contract exceeds 1/10th of the price agreed
upon
Ø If the vendee would not have bought the
immovable had he known of its smaller area or
inferior quality

If GREATER AREA:
Ø Accept the area included, reject the rest.
 DOUBLE SALE
Movable Immovable
Rule: Rule:
Who first takes possession in good faith i. First registrant in good faith
ii. First possessor in good faith
iii. Person with oldest title in good faith
 RECTO LAW – Personal Property in Installment
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.
 MACEDA LAW
Paid >=2
a) To pay, without additional interest, the unpaid installments due within the total grace period
for every one year of installment payments made; provided, That this right shall be exercised by the
Buyer only once in every five years of the life of the contract and its extensions, if any.
b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty percent of the total payments made and, after five years of
installments, an additional five per cent every year but not to exceed ninety per cent of the total
payments made; provided, that the actual cancellation or the demand for rescission of the contract by
a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total
number of installment payments made.

Cash Surrender Value ( Refund ) = Total Payments x Percentage ( %age) Refund

 MACEDA LAW
Paid >=2
The seller shall give the buyers a grace period of not less than sixty days from the date the installment
become due. If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act.
WARRANTY
J. Tamayao
 WARRANTY
Against Eviction Hidden Defects
When? When?
Vendee is deprived of the whole or part of the Defect Renders the thing sold unfit for its
thing purchased. intended use; and Diminishes its fitness for such
use
Effect:
In case eviction occurs, the vendee shall have the Implied:
right to demand of the vendor the following: 1. Warranty of Fitness – not implied for
1. Return of value of thing particular purpose.
2. Income or fruits of thing 2. Warranty of Merchantability – implied. For
3. Cost of the suit general purpose.
4. Expenses of the contract
5. Damages and interest, and ornamental
expenses, if sale is made in bad faith.
 Remedies of Buyer in Hidden Defects
Redhibitoria Withdraw to the contract

Quanti Minoris Reduction in Price

Hidden Defect on Animals

Veterinarian is liable if he fails to discover or disclose the hidden defect through ignorance or bad
faith. (art. 1576)

Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of
sale.

Limitation of the action: Rehibitory action must be brought 40 days from the date of their delivery to
the vendee. (art. 1577)
REDEMPTION, PRE-EMPTION, MORTGAGE
J. Tamayao
 CONVENTIONAL REDEMPTION
Concept
Also called the right to redeem or repurchase, takes place when the vendor reserved the right to
reacquire the thing sold
No Agreement Ø 4 years from date of contract
Agreement Ø Must not exceed 10 years

Who?
1. Vendor a retro
2. Creditors of Vendor
 LEGAL REDEMPTION
Concept
The right to be subrogated, upon the same terms and conditions stipulated in the contract.

Co-Owners

Urban Lands

Rule if 2 or more:
1. Owner of the smaller area shall be preferred.
2. If both lands have same area, the one who first requested the redemption
shall be preferred.
 EQUITABLE MORTGAGE
WHEN?
A contract may be presumed to be an equitable mortgage under the following cases:
(applies only to absolute sale)
1. Unusually inadequate purchase price;
2. Vendor remains in possession as lessee or otherwise;
3. Extension for period of right to repurchase;
4. Purchases retains for himself a part of the purchase price;
5. Vendor binds himself to pay the taxes of the thing sold;
6. When the real intention of the parties is to secure the payment of an obligation.