Notes 2 - Law on Sales the parties is binding upon them.

There are, however, exceptions

such as:
ART. 1469. In order that the price may be considered (1) When the third person acts in bad faith or by mistake as when
certain, it shall be sufficient that it be so with reference to the third person fixed the price having in mind not the thing which is
another thing certain, or that the determination thereof be left the object of the sale, but another analogous or similar thing in which
to the judgment of a specified person or persons. case the court may fix the price. But mere error in judgment cannot
Should such person or persons be unable or unwilling serve as a basis for impugning the price fixed; and
to fix it, the contract shall be inefficacious, unless the parties (2) When the third person disregards specific instructions or the
subsequently agree upon the price. procedure marked out by the parties or the data given him, thereby
fixing an arbitrary price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
ILLUSTRATIVE CASES:
Where such third person or persons are prevented Facts: S executed a document whereby he agreed to
from fixing the price or terms by fault of the seller or the transfer to B “ the whole of the right, title, and interest” in a
buyer, the party not in fault may have such remedies against business. This whole was 4/173 of the entire net value of the
the party in fault as are allowed the seller or the buyer, as the business. The parties agreed that the price should be 4/173 of the
case may be. total net value. The ascertainment of such net value was left
unreservedly to the judgment of the appraisers.
When price considered certain. Issue: Is the price certain?
The price in a contract of sale ought to be settled for there can be no Held: Yes, for the minds of the parties have met on the
sale without a price. It must be certain or capable of being ascertained thing and the price. Nothing was left unfinished and all questions
in money or its equivalent; and money is to be understood as relating thereto were settled. This is an example of perfected sale.
currency, and its equivalent means promissory notes, checks and
other mercantile instruments generally accepted as representing ART. 1470. Gross inadequacy of price does not affect a
money. contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or
Under the above article, the price is certain if:
some other act or contract. (n)
(1) The parties have fixed or agreed upon a definite amount;
(2) It be certain with reference to another thing certain; or ART. 1471. If the price is simulated, the sale is void, but the
(3) The determination of the price is left to the judgment of a act may be shown to have been in reality a donation, or some
specified person or persons and even before such determination. other act or contract.
Effect of gross inadequacy of price in
voluntary sales.
Effect where price fixed by third person
designated.
(1) General rule. — While a contract of sale is commutative, mere
As a general rule, the price fixed by a third person designated by
1
inadequacy of the price or alleged hardness of the bargain (3) Where seller given the right to repurchase. — The
generally does not affect its validity when both parties are in a validity of the sale is not necessarily affected where the law gives
position to form an independent judgment concerning the to the owner the right to redeem, as when a sale is made at public
transaction. auction, upon the theory that the lesser the price, the easier it is
for the owner to buy back the property.
(2) Where low price indicates a defect in the consent. — The
inadequacy of price, however, may indicate a defect in the ART. 1472. The price of securities, grain, liquids, and
consent such as when fraud, mistake, or undue influence is other things shall also be considered certain, when the price
present (Art. 1355.) in which case the contract may be annulled fixed is that which the thing sold would have on a definite
not because of the inadequacy of the price but because the day, or in a particular exchange or market, or when an
consent is vitiated. amount is fixed above or below the price on such day, or in
such exchange or market, provided said amount be certain.
(3) Where price simulated. — If the price is simulated or false
such as when the vendor really intended to transfer the thing Price on a given day at particular market.
gratuitously, then the sale is void but the contract shall be valid as
a donation A price is considered certain if it could be determined with reference
to another thing certain.
(4) Where parties do not intend to be bound at all. — If the Note the last phrase of the above article: “provided said amount be
contract is not shown to be a donation or any other act or contract certain.” When an amount is fixed above or below the price on a given
transferring ownership because the parties do not intend to be day or in a particular exchange or market, the said amount must be
bound at all, the ownership of the this is not transferred. The certain; otherwise, the sale is inefficacious because the price cannot
contract is void and inexistent. be determined.

Effect of gross inadequacy of price in This article is especially applicable to fungible things like securities,
involuntary sales. grain, liquids, etc. the price of which are subject to fluctuations of the
market.
(1) General rule. — A judicial or execution sale is one made by
a court with respect to the property of a debtor for the satisfaction
ART. 1473. The fixing of the price can never be left to the
of his indebtedness.
discretion of one of the contracting parties. However, if the
price fixed by one of the parties is accepted by the other, the
(2) Where price so low as to be “shocking to conscience”.
sale is perfected.
— While it is true that mere inadequacy of price is not a sufficient
ground for the cancellation of a voluntary contract of sale, it has Fixing of price by one of the contracting
been held that where the price is so low that “a man in his senses parties, not allowed.
and not under a delusion” would not accept it, the sale may be set
The reason for the rule is obvious.
aside and declared an equitable mortgage to secure a loan.
(1) If consent is essential to a contract of sale, the
determination of the price cannot be left to the discretion of one of it is perfected at the moment of consent without the necessity of
the contracting parties; otherwise, it cannot be said that the other any other circumstances. From the moment there is a meeting of
consented to a price he did not and could not previously know. minds upon the thing which is the object of the contract and upon
(2) Moreover, to be just, the price must be determined impartially the price (see Art. 1624.), the reciprocal obligations of the parties
by both parties (Art. 1458.) or left to the judgment of a specified arise even when neither has been delivered.
person or persons. (Art. 1469.)
ART. 1476. In the case of a sale by auction:
ART. 1474. Where the price cannot be determined in
accordance with the preceding articles, or in any other (1) Where goods are put up for sale by auction in lots,
manner, the contract is inefficacious. However, if the thing or each lot is the subject of a separate contract of sale.
any part thereof has been delivered to and appropriated by (2) A sale by auction is perfected when the
the buyer, he must pay a reasonable price therefor. What is a auctioneer announces its perfection by the fall of the
hammer, or in other customary manner. Until such
reasonable price is a question of fact dependent on the
announcement is made, any bidder may retract his bid; and
circumstances of each particular case.
the auctioneer may withdraw the goods from the sale unless
the auction has been announced to be without reserve.
Effect of failure to determine price.
(3) A right to bid may be reserved expressly by or
(1) Where contract executory. — If the price cannot be on behalf of the seller, unless otherwise provided by law or
determined in accordance with Articles 1469 and 1472, or in any by stipulation.
other manner, and the bargain is still executory, the contract is (4) Where notice has not been given that a sale by
without effect. auction is subject to a right to bid on behalf of the seller, it
(2) Where delivery has been made. — If the thing or any shall not be lawful for the seller to bid himself or to employ or
part thereof has already been delivered and appropriated by the induce any person to bid at such sale on his behalf or for the
buyer, the latter must pay a reasonable price therefor. auctioneer, to employ or induce any person to bid at such
sale on behalf of the seller or knowingly to take any bid from
ART. 1475. The contract of sale is perfected at the the seller or any person employed by him. Any sale
moment there is a meeting of minds upon the thing which is contravening this rule may be treated as fraudulent by the
the object of the contract and upon the price. buyer.
Rules governing auction sales.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the law
1. Sales of separate lots by auction are separate sales. —
governing the form of contracts.
Where separate lots are the subject of separate biddings and are
Perfection of contract of sale. separately knocked down, there is a separate contract in regard to
each lot. As soon as the hammer falls on the first lot, the
This article follows the general rule that contracts are perfected by
purchaser of that lot has a complete and separate bargain.
mere consent. (Art. 1315.) The contract of sale being consensual,
3
 2. Sale perfected by the fall of the hammer. — In putting up the perfection of the contract to the time of delivery, shall be
goods for sale, the seller is merely making an invitation to those governed by articles 1163 to 1165, and 1262.
present to make offers which they do by making bids (Art. 1326.), one This rule shall apply to the sale of fungible things, made
of which is ultimately accepted. Each bid is an offer and the contract is independently and for a single price, or without consideration of
perfected only by the fall of the hammer or in other customary their weight, number, or measure.
manner. Should fungible things be sold for a price fixed according to
weight, number, or measure, the risk shall not be imputed to the
3. Right of seller to bid in the auction. — The seller or his agent vendee until they have been weighed, counted, or measured, and
may bid in an auction sale provided: (a) such right was reserved; (b) delivered, unless the latter has incurred in delay. (1452a)
notice was given that the sale is subject to a right to bid on behalf of
the seller; and (c) the right to bid by the seller is not prohibited by law
or by stipulation.

ART. 1477. The ownership of the thing sold shall be

transferred to the vendee upon the actual or constructive
delivery thereof.

ART. 1478. The parties may stipulate that ownership in

the thing shall not pass to the purchaser until he has fully
paid the price.

Ownership of thing transferred by delivery.

The delivery of the thing sold is essential in a contract of sale.

Without it, the purchaser may not enjoy the thing sold to him. It is only
after the delivery of the thing sold that the purchaser acquires a real
right or ownership over it.

ART. 1479. A promise to buy and sell a determinate thing for

a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate

thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.

ART. 1480. Any injury to or benefit from the thing sold, after
the contract has been perfected, from the moment of the