©️MICHELLE MANGLAPUS

▪ Services cannot be the object of a contract of sale

SALES // Chapter 1: Nature & Form of the Contract
Right of Vendor:
1. One can only sell what he owns
By the contract of sale one of the contracting parties obligates
 Must be the owner of the thing or at least be authorized by
himself to transfer the ownership of and to deliver a
Art. owner
determinate thing, and the other to pay therefore a price
1458 2. Sufficient if right exists at time of delivery
certain in money or its equivalent. A contract of sale may be
 Vendor does not have to be the owner at the time of sale, but
absolute or conditional.
must have the right to transfer the ownership when it is
delivered
Characteristics of a Contract of Sale:
1. Consensual - perfected by mere consent + meeting of minds on
object and its price A thing is determinate when it is particularly designated or
2. Bilateral - both contracting parties are bound to fulfill obligations physically segregated from all others of the same class.
reciprocally Art. The requisite that a thing be determinate is satisfied if at the
3. Onerous - valuable considerations are given by both parties to 1460 time the contract is entered into, the thing is capable of being
acquire rights made determinate without the necessity of a new or further
4. Commutative - thing sold is considered the equivalent of the price agreement between the parties.
paid and vice versa; contract may be aleatory *
5. Nominate - specially named "Sale" by the Civil Code  
6. Principal - can exist by independently from another contract for its Things having a potential existence may be the object of the
existence and validity, unlike guaranty, mortgage, pledge, etc. contract of sale.
* aleatory - one or both of the parties reciprocally bind themselves to give/do something in Art.
consideration of what the other will give/do upon the happening of an event which is The efficacy of the sale of a mere hope or expectancy is deemed
1461
uncertain or is to occur at an indeterminate time (e.g. insurance policy) subject to the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void.
Essential Requisites:
1. Consent or meeting of the minds
▪ Things having potential existence may be the object of a contract of
 Parties must have legal capacity to give consent and to
sale.
obligate themselves
1. Emptio rei speratae – sale of a future thing; thing sold must be
 An offer without the acceptance of the other party does not
existent otherwise sale will be ineffective
indicate consent 2. Emptio spei – sale of a present thing (the hope or expectancy); the
 Acceptance of payment by seller indicates consent to sale sale produces effects, even if the thing hoped for does not come
2. Object or subject matter into existence
 Thing must be determinate or at least capable of being made  Sale of vain hope or expectancy is void
determinate
3. Cause or consideration
 Price certain in money or its equivalent The goods which form the subject of a contract of sale may be
 There can be no sale without a price either existing goods owned or possessed by the seller or goods
to be manufactured, raised, or acquired by the seller after the
▪ Natural Elements - inherent in a contract of sale, which in the absence perfection of the contract of sale, in this title called "future
Art.
of stipulation excluding them, are deemed to exist (e.g., warranty against goods".
1462
eviction, warranty against defects)  
▪ Accidental Elements - may be present or absent, depending on There may be a contract of sale of goods, whose acquisition by
stipulation of parties (e.g., conditions, interest, penalty, time or place of the seller depends upon a contingency which may or may not
payment) happen.
 
Kinds of Contract of Sale: ▪ Future goods cannot be the subject of an executed sale
1. Absolute ▪ Goods must be manufactured, raised, or acquired by seller after the
perfection of the contract of sale
 Sale is not subject to any condition
 Title or ownership passes to the buyer upon delivery of the
thing
Art. The sole owner of a thing may sell an undivided interest
2. Conditional
1463 therein.
 Sale contemplates a contingency
 Contract is subject to certain conditions, e.g., full payment of
purchase price  The legal effect of the sale of an undivided interest in a thing is to make
 Delivery of the thing sold does not necessarily transfer the buyer a co-owner in the thing sold.
ownership until condition is fulfilled In the case of fungible goods, there may be a sale of an
  undivided share of a specific mass, though the seller purports
Art. The thing must be licit and the vendor must have a right to to sell and the buyer to buy a definite number, weight or
1459 transfer the ownership thereof at the time it is delivered. measure of the goods in the mass, and though the number,
weight or measure of the goods in the mass is undetermined.
Art. By such a sale the buyer becomes owner in common of such a
1464 share of the mass as the number, weight or measure bought
bears to the number, weight or measure of the mass. If the
mass contains less than the number, weight or measure bought,
Requisites on Object: the buyer becomes the owner of the whole mass and the seller
1. Within the commerce of men is bound to make good the deficiency from goods of the same
2. Licit i.e., not contrary to law, morals, good customs, public order kind and quality, unless a contrary intent appears.
or public policy
 Illicit things:  Fungible goods - interchangeable goods (such as grain, oil, etc.) that
 Per se: of its nature allow one to be replaced by another without loss of value
 Per accidens: provisions of law declaring it illegal  The aliquot share of each owner is determined only by measuring the
3. Determinate or capable of being determinate entire mass
 If quantity of mass contains less than the quantity sold, buyer becomes
▪ Rights that are neither intransmissible nor personal may be the object of the owner of the whole mass, while seller is bound to supply the
sale deficiency from goods of the same kind and quality
 ©️MICHELLE MANGLAPUS
 Point of difference of sale from barter: “price certain in money or
its equivalent”
Art. Things subject to a resolutory condition may be the object of
1465 the contract of sale.
In order that the price may be considered certain, it shall be
sufficient that it be so with reference to another thing certain,
 A deed of sale with Pacto de Retro entitles the vendor a retro to
or that the determination thereof be left to the judgment of a
repurchase or buy back the thing sold from the vendee a retro; the right
specified person or persons.
of repurchase is subject to a resolutory condition
Should such a person or persons be unable or unwilling to fix
it, the contract shall be inefficacious, unless the parties
In construing a contract containing provisions characteristic Art. subsequently agree upon the price.
Art. of both the contract of sale and of the contract of agency to 1469
If the third person or persons acted in bad faith or by mistake,
1466 sell, the essential clauses of the whole instrument shall be
the courts may fix the price.
considered.
Where such third person or persons are prevented from fixing
the price or terms by fault of the seller or the buyer, the party
 Contract of Agency - a person binds himself to render some service or not in fault may have such remedies against the party in fault
to do something in representation or on behalf of another, with the as are allowed the seller or the buyer, as the case may be.
consent or authority of the latter

Sale Agency to Sell  There can be no sale without a price by reason of the absence of
Buyer is the owner of the Agent receives goods but principal meeting of the minds between parties
goods retains ownership  Money – currency
Agent accounts for proceeds on behalf  Equivalent – promissory notes, checks and other mercantile
Buyer pays price instruments generally accepted as representing money
of owner
Buyer generally cannot return Agent can return unsold object to third
object sold person The price is certain if:
1. Parties have fixed or agreed upon a definite amount
Agent is liable as long as he is acting
Seller warrants thing sold If no amount was stipulated by the parties:
within his authority
2. It be certain with reference to another thing certain
Buyer can deal with thing as he Agent is bound to the instructions of his
3. The determination of the price is left to the judgment of a specified
pleases principal
person/s
This is binding, except when:
 Third person/s act/s in bad faith or by mistake; the court may
A contract for the delivery at a certain price of an article fix the price
which the vendor in the ordinary course of his business  Third person/s disregarded instructions or data given
manufactures or procures for the general market, whether the  If third person designated refuses or cannot fix the price, the
Art.
same is on hand at the time or not, is a contract of sale, but if contract shall become ineffective unless parties subsequently agree
1467
the goods are to be manufactured specially for the customer upon the price
and upon his special order, and not for the general market, it  If third person is prevented from fixing the price by the fault of the
is a contract for a piece of work. seller or buyer, party not in fault may choose:
 rescission + damages
 fulfillment + damages; the court shall fix the price
 Contract of Sale - goods are manufactured or procured for the
general market at a certain price, regardless if on hand or not
 Contract for a Piece of Work - goods are to be manufactured Gross inadequacy of price does not affect a contract of sale,
specially for the customer and not for the general market Art. except as it may indicate a defect in the consent, or that the
1470 parties really intended a donation or some other act or
contract.
 In a contract for a piece of work:
o The thing would not have existed had the interested  Judicial or execution sale – one made by a court with respect to the property
party not ordered it of a debtor for the satisfaction of his unpaid indebtedness
o The risk of loss before delivery is borne by the worker o Mere inadequacy of the price is not a sufficient ground for
or contractor, not the employer (one who ordered) the cancellation of an execution sale
o The Statute of Frauds does not apply o If price is so inadequate as “to shock the conscience of the
court” a judicial sale will be set aside
o If seller is given the right to repurchase, sale is still valid
If the consideration of the contract consists partly in money
 If low price indicates a defect in consent, contract may be annulled
and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
Art.
intention does not clearly appear, it shall be considered a If the price is simulated, the sale is void, but the act may be
1468 Art.
barter if the value of the thing given as a part of the shown to have been in reality a donation, or some other act or
consideration exceeds the amount of the money or its 1471
contract.
equivalent; otherwise it is a sale.
 Absolute simulation – parties do not intend to be bound; void
 Contract of barter or exchange – one of the parties binds himself  Relative simulation – parties conceal their true agreement; when it does
to give one thing in consideration of the other’s promise to give not prejudice a third person and is not illicit, binds parties to their real
another thing agreement
 If consideration of contract is partly in money and partly in  If price is simulated and parties intended to transfer things gratuitously,
another thing: the sale is void, but the contract shall be valid as a donation
 Manifest intention of parties will determine if contract is a sale or  If contract is neither a donation nor any other contract transferring
barter ownership because parties do not intend to be bound, contract is void
 If intention cannot be ascertained: and inexistent.
o Value of thing given > money/equivalent = barter
o Value of thing given < money/equivalent = sale
o Value of thing given = money/equivalent = sale/barter Art. The price of securities, grain, liquids, and other things shall
1472 also be considered certain, when the price fixed is that which
 If parties intend for a sale, then contract is a sale, regardless if the
the thing sold would have on a definite day, or in a particular
value of the thing given is greater than the money or its equivalent,
exchange or market, or when an amount is fixed above or
and vice versa
 ©️MICHELLE MANGLAPUS

below the price on such day, or in such exchange or market, by him. Any sale contravening this rule may be
provided said amount be certain. treated as fraudulent by the buyer.

 Separate lots = separate biddings = separate contracts

The fixing of the price can never be left to the discretion of one
Art.  Parties may subsequently consolidate all purchases into one
of the contracting parties. However, if the price fixed by one of
1473 transaction for the aggregate price
the parties is accepted by the other, the sale is perfected.
 Each bid is an offer, and the contract is perfected only by the fall of the
hammer or in other customary manner.
 The validity or compliance of the contract cannot be made to depend  Bidder may retract his bid and auctioneer may withdraw the goods from
upon the will of one party sale any time before the hammer falls
 Price must be determined impartially by both parties or by a specified  However, if sale has been announced to be without reserve, auctioneer
person/s; however, the acceptance of one party of the price fixed by the cannot withdraw goods from sale once a bid has been made and highest
other perfects the contract bidder has the right to enforce his bid

Seller or his agent may bid in an auction sale only if:

Where the price cannot be determined in accordance with the
1. Such right was reserved
preceding articles, or in any other manner, the contract is
2. Notice was given that the sale is subject to a right to bind on behalf of
inefficacious. However, if the thing or any part thereof has
Art. the seller
been delivered to and appropriated by the buyer, he must pay
1474  If no notice was given, it shall be unlawful for the seller to bid
a reasonable price therefor. What is a reasonable price is a
directly or indirectly, or for the auctioneer to employ or induce any
question of fact dependent on the circumstances of each
person to bid on behalf of the seller
particular case.
 Puffing – secret bidding by or on behalf of the seller by people
 If the price cannot be determined, vendor is not obligated to deliver who are not themselves bound; fraudulent
and vendee is not obligated to pay  If notice was given, the bidding is not considered fraudulent
 If the thing or any part has been delivered and appropriated by the 3. The right to bid by the seller is not prohibited by law or stipulation
buyer, he must pay a reasonable price therefor, which is generally,
the market price at the time and place fixed by the contracts or
by law for the delivery of the goods. Art. The ownership of the thing sold shall be transferred to the
1477 vendee upon the actual or constructive delivery thereof.

The contract of sale is perfected at the moment there is a

meeting of the minds upon the thing which is the object of the  Ownership is transferred by delivery, even if purchase price has
contract and upon the price. not been fully paid or if purchase was made on credit
Art.
1475 From that moment, the parties may reciprocally demand  In other words, if buyer has not paid the price after the thing has
performance, subject to the provisions of the law governing been delivered, ownership of the thing is not transferred, only if
the form of contracts. such is the stipulation of the parties

Stages of a contract:
1. Negotiation – period from the time the prospective contracting
parties indicate interest in the contract to the time it is perfected
2. Perfection – takes place upon the concurrence of the meeting of
the minds of the parties as to the object and its price
3. Consummation – begins when parties perform their respective
undertakings under the contract of sale, culminating in its
extinguishment
 Ownership is not transferred until delivery of the thing
 In case of noncompliance, injured party may sue for fulfillment or
rescission + damages in either case

 The owner of a thing has the right to quote his own price, reasonable or
unreasonable, and it is simply up to the prospective buyer to accept or
reject it.
 In case of vendee’s failure to pay the stipulated price
after the execution of the contract, vendor can demand
specific performance, or rescission + damages or
cancellation of the sale + damages

In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots,
each lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer,
or in other customary manner. Until each
announcement is made, any bidder may retract his
bid; and the auctioneer may withdraw the goods
from the sale unless the auction has been
Art.
announced to be without reserve.
1476
(3) A right to bid may be reserved expressly or on
behalf of the seller, unless otherwise provided by
law or by stipulation.
(4) Where notice has not been given that a sale by
auction is subject to a right to bind on behalf of the
seller, it shall not be lawful for the seller to bid
himself or to employ or induce any person to bid at
such sale on behalf of the seller or knowingly to
take any bid from the seller or any person employed