The Law on Sales, Agency and Credit Transactions Sales Summary Report

SALES d.) Onerous – valuable considerations are given by both

(Arts. 1458 – 1637) parties to acquire rights
e.) Commutative – the parties exchange almost equivalent
Article 1458. By the contract of sale one of the contracting values
parties obligates himself to transfer the ownership of and f.) Nominate – it has a special name given to it by law
deliver a determinate thing, and the other to pay therefore
a price certain in money or its equivalent. A contract of sale Form of a contract of sale
may be absolute or conditional. o Subject to the provisions of the Statute of Frauds and of
any other applicable statute, a contract of sale may be in
Elements of a Contract of Sale any of the following forms:
I. Essential elements/requisites – Those without which a a. In writing, or
contract of sale would not exist. b. By word of mouth, or
a. Consent of the contracting parties c. Partly in writing and partly by word of mouth, or
b. Subject matter which should be a determinate d. May be inferred from the conduct of the parties
thing (Art. 1483)
c. Price certain in money or its equivalent o Under the Statute of Frauds, the sale involving the
II. Natural elements – Those inherent in a contract of sale, following must be in writing to be enforceable:
which in the absence of stipulation excluding them, are a. Sale of real property or of any interest therein
deemed to exist (regardless of the price)
a. Warranty against eviction b. Sale of goods, chattels or things in action the price
b. Warranty against hidden defects and of which is P500.00 or more. (Art. 1403) Things in
encumbrances action include credit, shares of stock and other
III. Accidental elements – They refer to particular incorporeal properties.
stipulations of the parties such as terms, place and time of o Sale of a piece of land through an agent
payment, and other conditions agreed upon. The authority of the agent to sell a piece of land must
be in writing; otherwise, the sale is void. (Art. 1874)
Characteristics of a Sale a. The authority of the agent to sell a piece of land
a.) Consensual – it is perfected by mere consent of the should be in writing, otherwise void.
parties b. If the authority of the agent is in a private
b.) Principal – it can exist by itself without being instrument or in a public instrument and the sale
dependent upon another contract was:
c.) Bilateral – the parties are bound by reciprocal i. Entered into orally – the sale unenforceable
obligations (Art. 1403)

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The Law on Sales, Agency and Credit Transactions Sales Summary Report

ii. In a private instrument – the sale is valid 3. Delivery of incorporeal property (quasi-traditio)
iii. In a public instrument – the sale is valid a. By constructive tradition
o In order, however, that the sale may be recorded in the b. Placing the titles of ownership in the possession of
Register of Deeds, both the authority of the agent and the vendee (such as delivering the stock certificate
sale must be in a public instrument. (Art. 1358 p1&3) covering the shares of stocks sold)
c. Use by the vendee of his rights, with the consent of
Earnest money is part of the purchase price, while option the vendor (Art. 1501)
money is separate and distinct from the purchase price.
Warranty is any representation made by the seller of the thing
Earnest money is paid upon the perfection of a contract of sale, with respect to its character, quality, or ownership, by which he
while option money is paid for a sale that is yet to be perfected. induces the buyer to purchase the same relying on said
representation.
Obligations of the Vendor i. Express Warranty - any affirmation of fact or any
1. To transfer the ownership of the thing sold promise by the seller relating to the thing is an express
2. To deliver the thing sold warranty if the natural tendency of such affirmation or
3. To warrant the thing sold promise is to induce the buyer to purchase the same,
4. To take care of the thing sold with the diligence of a and if the buyer purchases the thing relying thereon.
good father of a good family unless the law or the ii. Implied warranty - arises from the mere fact that a
stipulation of the parties requires another standard of contract of sale is perfected. It does not apply to one
care (Art. 1163, Art. 1480) who sells by virtue of an authority in fact or in law
(sheriff sale). There are two kinds of implied warranty:
Obligations of the Vendee  Warranty against eviction- An implied warranty
1. To accept the delivery of the thing sold (Art. 1582) on the part of the seller that he has a right to sell
2. To pay the price of the thing (Art. 1582) at the time when ownership is to pass and that
the buyer shall from that time have and enjoy
Kinds of Delivery or Tradition the legal and peaceful possession of the thing.
1. Actual or real delivery  Eviction is the judicial process whereby
2. Constructive or legal delivery the vendee by virtue of a final judgment
a. By legal formalities based on a right prior to the sale or an
b. Symbolic delivery act imputable to the vendor, is deprived
c. Traditio longa manu of the whole or a part of the thing
d. Traditio brevi manu purchased.
e. Traditio constitutum possessorium

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The Law on Sales, Agency and Credit Transactions Sales Summary Report

 Warranty against hidden defects-An implied i. In case of sale on straight term.

warranty that the thing shall be free from any ii. If security foreclosed is other than the chattel
hidden defects or any change or encumbrances mortgage constituted on the thing sold.
not declared or known to the buyer iii. In the case of sale on execution of judgment in
 Hidden defects are those which are not favor of the seller
visible to vendee who is not an expert
and to a vendee who is an expert but Sale of Real Property in Installments (R.A. No. 6552, the
even with the use of his trade or Maceda Law)
profession could not detect such defect. The law is known as the “Realty Installment Buyer
 Requisites of hidden defects: The defect Act”. Its objective is to protect buyers of real estate on
must exist at the time of the sale, must installment payments against onerous and oppressive
be important or serious, notice was given conditions.
to the vendor within a reasonable time o Coverage: Residential Real Estate (Villanueva, p. 431)
and within prescriptive period and no o Exclude:
waiver was made a. Industrial lots
 In order for the vendor to be liable for his b. Commercial buildings (and commercial lots by
warranty, the vendor must be summoned in the implication)
suit for eviction at the instance of the vendee c. Sale to tenants under agrarian laws
and there is no waiver on the part of the vendee. i. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace period
Remedies of vendor in installment sales of personal property of 1 month for every year of installment payment.
(Recto Law, Art. 1484), and contracts purporting to be leases Grace period to be exercised once every 5 years.
of personal property with option to buy, when the lessor has b. When no payment – cancelled; buyer entitled to 50%
deprived the lessee of the possession or enjoyment of the thing: of what he has paid + 5% for every year but not
a. Exact fulfillment of the obligation, should the vendee, exceeding 90% of payments made.
should the vendee fail to pay. Note: Cancellation to be effected 30 days from notice &
b. If the vendee’s failure to pay covers, two or more upon payment of cash surrender value.
installments, he may, at his option, avail himself of the ii. Buyer paid less than 2 years installment
first remedy, or do either of the following: a. Grace period is not less than 60 days from due date
i. Cancel the sale b. Cancellation if failure to pay w/in 60 days grace
ii. Foreclose the chattel mortgage on the thing sold, c. 30 days notice before final cancellation
if one has been constituted. Note: buyer can still pay w/in the 30 days period with
c. When the deficiency may be recovered interest.

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The Law on Sales, Agency and Credit Transactions Sales Summary Report

iii. Additional right purchase. However with Section 23 of P.D. 957, the
1. The buyer shall have the right during the grace buyer can actually do 2 things:
period before the cancellation of the contract: i. Desist from further payment after due notice to
a. To sell his rights to another by notarial act; the owner or developer of the project
b. To assign his rights to another, by notarial act; and clearance from the Board (HLURB) as
or mandated in the 2009 revised implementing
c. To reinstate the contract by updating the rules and regulations for the decree.
account. ii. Demand to be reimbursed the total amount paid
2. To pay in advance any installment or the full unpaid including amortization interests but excluding
any time without interest. delinquency interests, with interest thereon at
3. To ask for the annotation of the full payment of the the legal rate.
purchase price in the certificate of title covering the
property.

Installment sale of subdivision lots and condominium (P.D.

No. 957, otherwise known as The Subdivision and
Condominium Buyers’ Protective Decree)
o No installment payment made by a buyer in a new or
existing subdivision or condominium project for the lot
or unit he contracted to buy shall be forfeited in favor
of the owner or developer when the buyer, after due
notice to the owner or developer desists from further
payment due to the failure of the owner or developer to
develop the project according to the approved plans and
within the time limit for complying with the same. Such
buyer may at his option be reimbursed the total amount
paid including amortization interests but excluding
delinquency interests, with interest thereon at the legal
rate.
o It is almost always that buyers of the condominium or
subdivision properties cannot do anything about the
announcement of delays in the delivery of their

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