Law On Sale

Article 1458: By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

★​ Contract of sale - a contract whereby one of the parties (seller or vendor) obligates
himself to deliver something to the other (buyer/purchaser/vendee) who, on his part,
binds himself to pay therefor a sum of money or its equivalent (price).

Characteristics of a contract of sale:

1)​ Consensual - perfected by mere consent without any further act;
2)​ Bilateral - both contracting parties are bound to fulfill obligations reciprocally towards
each other - the seller, to deliver and transfer ownership of the thing sold and the buyer,
to pay the price.
3)​ Onerous - the thing sold is conveyed in consideration of the price and vice versa;
4)​ Commutative - thing sold is considered the equivalent of the price paid and vice versa.
However, the contract may be aleatory as in the case of the sale of a hope (sweepstakes
ticket);
5)​ Nominate - it is given a special name or designation in the civil code, namely “Sale”
6)​ Principal - it does not depend for its existence and validity upon another contract.

Essential requisites of a contract of sale:

1)​ Consent or meeting of the minds - consent on the part of the seller or vendor to
transfer and deliver and on the part of the buyer or vendee to pay.
2)​ Object or subject matter - determinate thing is which is the object of the contract. It
must be determinate or at least capable of being made determinate because if the seller
and the buyer differ in regard to the thing sold, there is no meeting of the minds;
3)​ Cause or consideration - “price certain in money or its equivalent” such as a check or
promissory note, or the assumption by the buyer of the mortgage debt of the seller,
which is the consideration for the thing sold. There can be no sale without a price.

Natural and Accidental elements

★​ Natural elements - deemed to exist in certain contracts, in the absence of any contrary
stipulations like warranty against eviction or hidden defects.
★​ Accidental Elements - may be present or absent depending on the stipulations of the
parties, like conditions, interest, penalty, time or place of payment, etc.

Two kinds of Contract of Sale:

1)​ Absolute - sale is not subj. to any condition whatsoever and where title or ownership
passes to the buyer upon delivery of the thing sold;
 2)​ Conditional - sale contemplates a contingency and in general, where the contract is
subject to certain conditions, usually the full payment of the purchase price.

Article 1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered.

Requisites concerning object:

1)​ Things - aside from being (a) determinate, the law requires the subj matter must be (b)
licit or lawful. It should not be contrary to law, morals, good customs, public order, or
public policy and should (c)not be impossible.
2)​ Rights - all rights which are not intransmissible or personal may also be the object of
sale, like the right of usufruct, the right of conventional redemption.
Ex. of rights which are intransmissible by law:
a)​ Right to vote
b)​ Right to public office
c)​ Marital and parental rights
​ ​ Ex. of rights which are personal in character:
a)​ Right to be a partner in a partnership
b)​ Right to act as an agent of another
c)​ Right to bailee to use the thing loaned in a contract of commodatum

Kinds of illicit things:

★​ Illicit per se (of its nature) - decayed food unfit for human consumption
★​ Illicit per accidens (some provisions of law declaring it illegal) - prohibited lottery
tickets and prohibited drugs.

Right of vendor to transfer ownership

1)​ One can sell only what he owns - essential in order for a sale to be valid thatthe
vendor must be able to transfer ownership and therefore, he must be the owner or at
least must be authorized by the owner of the thing sold.
2)​ Sufficient if right exists at time of delivery - exemption of 1). Art 1459 does not
require that the vendor must have the right to transfer ownership of the property sold at
the time of the perfection of the contract. It is sufficient if he has the right to sell the thing
at the time when the ownership is to pass.

Article 1460: A thing is determinate when it is particularly designated or physically

segregated from all others of the same class. The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement between parties.

Subject matter must be determinate.

(1)​ When thing determinate - a thing is determinate or specific (not generic) when it is
particularly designated or physically segregated from all others of the same class.
 ​ Determinate thing - identified by its individuality, the watch I am wearing, the
house located at the corner of Rizal and Del Pilar streets.
(2)​ Sufficient if subject matter capable of being made determinate - sufficient that the
thing is determinable or capable of being made determinate without the necessity of a
new or further agreement between the parties to ascertain its identity, quantity, or quality.

Article 1461: Things having a potential existence may be the object of the contract of
sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the
condition that the thing will come into existence. The sale of a vain hope or expectancy is
void.

➔​ Sale of things having potential existence - It is reasonably certain to come into

existence as the natural increment or usual incident of something in existence already
belonging to the seller, and the title will vest in the buyer the moment the thing comes
into existence.
➔​ Sale of hope or expectancy - “expected thing” which is not yet in existence, and not to
the hope or expectancy which already exists, in view of the condition that the thing will
come into existence.

Article 1462: The goods which form the subject of a contract of sale may be either
existing goods owned or possessed by the seller or goods to be manufactured, raised, or
acquired by the seller after the perfection of the contract of sale, in this title called “future
goods.” There may be a contract of sale of goods, whose acquisition by the seller
depends upon a contingency which may or may not happen.

➔​ Goods which may be the object of sale

a)​ Existing goods - goods owned or possessed by the seller
b)​ Future goods - goods to be manufactured, raised, or acquired.

★​ Sale of future goods - Valid only as an executory contrast to be fulfilled by the

acquisition and delivery of the goods specified.

Article 1463: The sole owner of a thing may sell an undivided interest therein.

➔​ Sale of undivided interest in a thing

a)​ By sale owner - may sell the entire thing; or only a specific portion thereof; or an
undivided interest therein and such interest may be designated as an aliqout part
of the whole.
b)​ By co-owner - being the owner of his undivided interest therein, can dispose of
his share even without the consent of the other co-owner/s

Article 1464: In the case of fungible goods, there may be sale of an undivided share of a
specific mass, though the seller purports to sell and the buyer to buy a definite number,
weight or measure of the goods in the mass, and though the number, weight or measure
of the goods in the mass is undetermined. By such a sale the buyer becomes owner in
common of such a 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, the buyer becomes the owner of the mass and the seller is
bound to make good the deficiency from goods of the same kind and quality, unless a
contrary intent appears.

➔​ Sale of an undivided share of a specific mass

a)​ Meaning of fungible goods - it means goods of which any unit is, from its
nature or by mercantile usage, treated as the equivalent of any other unit such as
grain, oil, wine, gasoline, etc.
b)​ Effect of sale - owner of a mass of goods may sell only an undivided shar
thereof, provided the mass is specific or capable of being made determinate.
i)​ By such sale, the buyer becomes a co-owner with the seller of the whole
mass in the proportion in which the definite share bought bears to the
mass.
ii)​ If discovered that the mass of fungible goods contains less that what was
sold, the buyer becomes the owner of the whole mass; furthermore, the
seller shall supply whatever is lacking from goods of same kind and
quality, subject to any stipulation to the contrary.
c)​ Risk of loss - the whole mass is at the risk of all the parties interested in it, in
proportion to their various holdings.
d)​ Subject matter - take note that in the sale of an undivided share, either of a thing
or that of goods, the subject matter is an incorporeal or intangible right.

➔​ Sale of thing subject to a resolutory condition

◆​ Resolutory condition - an uncertain event upon the happening of which the
obligation (or right) subject to it is extinguished. Hence, the right acquired in
virtue of the obligation is also extinguished.

Article 1466: In construing a contract containing provisions characteristic of both the

contract of sale and of the contract of agency to sell, the essential clauses of the whole
instrument shall be considered.

➔​ Sale distinguished from agency to sell

◆​ Contract of agency - a person binds himself to render some service or to do
something in representation or on behalf or another, with the consent or authority
of the latter (Art. 1868).

Sale may be distinguished from an agency to sell:

Sale Agency to sell

The buyer receives the goods as owner. The agent receives the goods as the goods of
 the principal who retains his ownership over
them.

The buyer has to pay the price. The agent has simply to account for the
proceeds of the sale he may make on the
principal’s behalf.

The buyer cannot return the object sold. The agent can return the object in case he is
unable to sell the same to a third person.

The seller warrants the thing sold. The agent makes no warranty for which he
assumes personal liability as long as he acts
within his authority and in the name of the
seller.

The buyer can deal with the sold as he The agent in dealing with the thing received,
pleases, being the owner. must act and is bound according to the
instructions of his principal.

Article 1467: A contract for the delivery at a certain price of an article which the vendor in
the ordinary course of his business manufactures or procures for the general market,
whether the same is on hand at the time or not, is a contract of sale, but if the goods are
to be manufactured specially for the customer and upon his special order. And not for
the general market, it is a contract for a piece of work.

➔​ Sale distinguished from contract for a piece of work

Contract for a piece of work - the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation.
1)​ The order of the party desiring to acquire it, while in a contract of sale, the
thing transferred is one which would have existed and been the subject of
sale to soem other person, even if the order had not been given.
2)​ Risk of loss before delivery is borne by the worker or contractor, not by
the employer.
3)​ Contracts for a piece of work, unlike “contract of sale,” are not withing the
statute of Frauds.

Article 1468: If the consideration of the contract consists partly in money, and partly in
another thing, the transaction shall be characterized by the manifest intention of the
parties. If such intention does not clearly appear, it shall be considered a barter if the
value of the thing given as a part of consideration exceeds the account of the money or
its equivalent; otherwise, it is a sale.

➔​ Sale distinguished from barter

◆​ Contract of barter or exchange - one of the parties binds himself to give one
thing in consideration of the other’s promise to give another thing.
 ●​ Above distinction is not always adequate to distinguish one from the
other.
○​ The manifest intention of the parties is paramount in determining
whether it is one of barter or of sale and such intention may be
ascertained by taking into account the contemporateous and
subsequent acts of the parties (Art. 1371)
○​ If the intention cannot be ascertained, then the last sentence of
the article applies.
●​ In the element which is present in sale but not in barter, namely: “price
certain in money or equivalent.”

Article 1469: In order that the price may be considered certain, it shall be sufficient that it
be so with reference to another thing certain, or that the determination thereof be left to
the judgment of a special person or persons. Should such person or persons be unable
or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently
agree upon the price. If the third person or persons acted in bad faith or by mistake, the
courts may fix the price. Where such third person or persons are prevented from fixing
the price or terms by fault of the seller or the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the seller or the buyer, as the case may
be.

★​ When price considered certain

○​ No sale if price not certain or ascertainable - money is to be understood as
currency and its equivalent means promissory notes, checks, and other
mercantile instruments generally accepted as representing money.
○​ Cases when price considered certain
■​ Parties have fixed or agreed upon a definite amount.
■​ It be certain with reference to another thing certain
■​ Determination of the price is left to the judgment of a specified person or
persons.

Article 1470: Gross inadequacy of price does not affect a contract of sale, except as it
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract.

➔​ Effect of gross inadequacy of price in voluntary sales.

◆​ General rule - contract of sale is commutative, mere inadequacy of the price or
fact that the bargain was a hard one generally does not affect its validity when
both parties are in position to form an independent judgment concerning the
transaction.
◆​ Where low price indicates defect in the consent - such as fraud, mistake, or
undue influence is present in which case the contract may be annulled not
because is vitiated; or where the price is so grossly inadequate or low as to be
“shocking to court’s conscience” that no man is his right mind would accept.
 ➔​ Effect of gross inadequacy of price in involuntary or execution sales.
◆​ General rule - judicial or execution sale is one made by a court with respect tot
the property of a debtor for the satisfaction of his unpaid indebtedness. Like in
voluntary sale, mere inadequacy of price is not a sufficient ground for the
cancellation of an execution sale.
◆​ Where price is so low as to be “shocking to conscience.” - a judicial sale,
say, of real property will be set aside.
◆​ Where seller given the right to repurchase - the validity of the sale is nor
necessarily affected where the law gives top the owner the right to redeem, as
when a sale is made at public auction.

Article 1471: If the price is simulated, the sale is void. But the act ,ay be shown to have
been in reality a donation, or some other act or contract.

➔​ Effect where price simulated.

◆​ If the price is simulated or false, such as when the vendor really intended to
transfer the thing gratuitously, then the sale is void but the contract shall be valid
as a donation.
◆​ If the contract is not shown to be a donation or any other act or contract
transferring ownership because the parties do not intend to be bound at all, the
ownership of the thing is not transferred. It is void.

Art. 1472. The price of securities, grain, liquids, and other things shall also be considered
certain, when the price fixed is that which the thing sold would have on a definite day, or
in a particular exchange or market, or when an amount is fixed above or below the price
on such day, or in such exchange or market, provided said amount be certain.

➔​ Applicable to fungible things that are subject to fluctuations of the market.

Art. 1473. The fixing of the price can never be left to the discretion of one of the
contracting parties. However, if the price fixed by one of the parties is accepted by the
other, the sale is perfected.

Art. 1474. Where the price cannot be determined in accordance with the preceding
articles, or in any other manner, the contract is inefficacious. However, if the thing or any
part thereof has been delivered to and appropriated by the buyer he must pay a
reasonable price therefor. What is a reasonable price is a question of fact dependent on
the circumstances of each particular case.

➔​ Effect of failure to determine price

◆​ Where contract executory - the contract is without effect.
◆​ Where delivery has been made - the latter must pay a reasonable price
therefor.
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

➔​ Right of owner to fix his own price.

◆​ The owner of a thing has the right to quote his own price, reasonable or
unreasonable. It is up to the prospective buyer to accept or reject it.
◆​ His right to quote a small or nominal consideration and such consideration is just
as effectual and valuable a consideration as a larger sum stipulated or paid.
➔​ Effect of failure to pay price/absence
◆​ Price stipulated - failure to pay the stipulated price after the execution of the
contract does not convert the contract into one without cause or consideration as
to vitiate the validity of the contract. The vendor’s remedy in such case is
generally to demand specific performance or rescission with damages in either
case.
◆​ No price stipulated - the above is to be distinguished from a contract of sale
where the purchase price which appears thereon as paid, has in fact, never been
paid by the buyer.

Art. 1476. 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 such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without reserve.​
(3) A right to bid may be reserved expressly by 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 bid 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 his behalf or for the auctioneer, 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 by him. Any sale contravening this rule may be
treated as fraudulent by the buyer.

➔​ Rules governing auction sales

◆​ Sales of separate lots by auction are separate sales - there is a separate
contract.
◆​ Sale perfected by the fall of the hammer - the seller is merely making an
invitation to those present to make offers which they do by making bids. Each bid
is an offer and the contract is perfected only by the fall of er or in other customary
manner.
 ◆​ Right of seller to bid in the auction
●​ Such right was reserved
●​ Notice was given that the sale is subject to a right to bid on behalf of
seller
●​ The right to bid by the seller is not prohibited by law or stipulation.
○​ Where no notice given of right to bid. This is to avoid puffing or
secret bidding by or on behalf of the seller by people who are not
themselves bound.
○​ Where notice given of right to bid - bidding by the seller or his
agent is fraudulent.

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

○​ Deliverof the thing sold - essential in a contract of sale. Without it the purchaser
may not enjoy the thing sold to him.
○​ Exemption:
■​ Parties may stipulate despite the delivery, the ownership of the thing shall
remain with the seller until the purchaser has fully paid the price

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 promissor if the promise is supported by a consideration distinct from
the price. (1451a)

Art. 1480. Any injury to or benefit from the thing sold, after the contract has been
perfected, from the moment of the perfection of the contract to the time of delivery, shall
be governed by Articles 1163 to 1165, and 1262.

This rule shall apply to the sale of fungible things, made independently and for a single
price, or without consideration of their weight, number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure,
the risk shall not be imputed to the vendee until they have been weighed, counted, or
measured and delivered, unless the latter has incurred in delay. (1452a)

Art. 1481. In the contract of sale of goods by description or by sample, the contract may
be rescinded if the bulk of the goods delivered do not correspond with the description or
the sample, and if the contract be by sample as well as description, it is not sufficient
that the bulk of goods correspond with the sample if they do not also correspond with
the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the description
or the sample. (n)

Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered
as part of the price and as proof of the perfection of the contract. (1454a)

Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable
statute, a contract of sale may be made in writing, or by word of mouth, or partly in
writing and partly by word of mouth, or may be inferred from the conduct of the parties.
(n)

Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following 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. (1454-A-a)

Art. 1485. The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-A-a)

Art. 1486. In the case referred to in two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the circumstances. (n)

Art. 1487. The expenses for the execution and registration of the sale shall be borne by
the vendor, unless there is a stipulation to the contrary. (1455a)

Art. 1488. The expropriation of property for public use is governed by special laws.
​