I. NATURE AND FORM OF CONTRACT
A. DEFINITION
Article 1458. By the contract of sale one of the
contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing,
and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or
conditional. (1445a)
Concept of Sale
a. Sale is a Transaction
- a transaction that is constituted when two
persons negotiate about a determinate thing;
come into an agreement whereby one of
them obligates himself to transfer ownership
of and to deliver such determinate thing to
the other party who, in return, binds himself
to pay therefor a sum of money or its
equivalent; and perform their respective
obligations under such agreement.
b. Sale is a Special Contract
- follows the general provisions regarding a
“contract” but is considered as “special
contract” because there is a set of specific
provisions under the Civil Code that governs
the same.
- Book IV, Title VI
c. Sale is a Source of Obligations
- 1st: for seller (vendor) to deliver and
transfer the ownership of the thing sold
2nd: for buyer (vendee) to accept such
delivery and pay the price therefor
B. CHARACTERISTICS
1. Nominate and Principal
- it is given a special name or designation, and it
does not depend its existence and validity upon
another contract.
2. Consensual
- perfected by mere consent without any further act
Article 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. (1450a)
B. de Leon | SALES (2017) | Atty. RRD
3. Bilateral and Reciprocal
- both parties are bound to fulfill correlative
obligations toward each other
- fulfillment of one party » delay of the other (1169)
→ No Demand = No Delay Rule is inapplicable in
reciprocal obligations
- power to rescind is implied in case of noncompliance (1191)
Article 1169. Those obliged to deliver or to do
something incur in delay from the time the
obligee judicially or extrajudicially demands
from them the fulfillment of their obligation
xxx
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready
to comply in a proper manner with what is
incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the
other begins. (1100a)
Article 1191(1). The power to rescind
obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what
is incumbent upon him.
4. Onerous
- the determinate thing is sold in consideration of
another valuable consideration
- the consideration for the vendor is the payment of
the purchase price; while the consideration for the
vendee is the delivery of the determinate thing and
the transfer of the ownership thereof.
5. Commutative
- the value of the determinate thing is considered or
assumed to be the equivalent of the price paid, and
vice-versa.
- lesion or inadequacy of cause shall not invalidate a
contract (1355), except as it may indicate a defect in
the consent or that they intended it to be a donation
(1470).
Article 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate
a contract, unless there has been fraud, mistake
or undue influence. (n)
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. (n)
1
6. Aleatory
- the fulfillment of the obligation of one of the
parties in a contract of sale of hope depends on the
happening of an event which is “uncertain”.
b.
C. ELEMENTS OF A CONTRACT OF SALE
c.
Essential Elements
1. CONSENT
→ consent to transfer and deliver, and to pay
→ conformity on the terms of the contract;
offer » acceptance
→ consent vs. intent vs. purpose
2. OBJECT or SUBJECT MATTER
→ the determinate thing which is the subject matter
of the contract
→ differ in regard to the thing to be sold = no
meeting of the minds » no sale
3. CAUSE or CONSIDERATION
→ the price certain in money or its equivalent
→ price must be real and not fictitious, otherwise,
void
Natural Elements – integral part of the contract of
sale unless there are provisions in the law on sales or
stipulations of the parties to the contrary.
- built-in elements (e.g. warranty against eviction,
warranty against hidden defects)
Accidental Elements – existence of these elements
will depend on the autonomy of the will of the
parties.
D. KINDS OF A CONTRACT OF SALE
1. As to the Presence or Absence of Condition:
a. Absolute Sale – where there is neither a
stipulation in the deed that title to the
property sold is reserved in the seller until
full payment of the price, nor one giving the
vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay
within a fixed period.
b. Conditional Sale – ownership remains with
the vendor and does not pass to the vendee
until full payment of the purchase price. The
full payment of the purchase price partakes
of a suspensive condition, and nonfulfillment of the condition prevents the
obligation from arising.
2. As to the Standing or Status of the Sale:
a. Valid – sale has all the essential elements for
its validity, and produces the desired legal
effect.
B. de Leon | SALES (2017) | Atty. RRD
d.
e.
Rescissible – sale is valid because all the
essential elements of a valid contract are
present. However, the sale has an extrinsic
defect because of the economic and financial
injury or prejudice to either of the parties, or
to a 3rd person. (1381)
Voidable – sale is valid until annulled. The
presence of a ground that vitiates the
consent of either party renders the contract
of sale voidable. (1390)
Unenforceable – sale cannot be enforced by
a proper action in court unless it is ratified,
because either it is entered into without or in
excess of authority, or it does not comply
with the Statute of Frauds, or both of the
parties do not possess the required legal
capacity. (1403)
Void – when any of the essential elements of
a valid contract of sale is lacking; or when
its cause, object, or purpose is contrary to
law, morals, good customs, public order, and
public policy, is prohibited by law or
declared by law to be void. It produces no
legal effect and cannot be cured by
ratification. (1409)
3. As to the Nature of the Object of Sale:
a. Movable or Personal Property
b. Immovable or Real Property
E. DISTINGUISHED FROM OTHER
CONTRACTS
RULE: It is not the title of the contract, but its
express terms or stipulations that determine the
kind of contract entered into by the parties.
1. Contract to Sell
- a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the
property despite delivery thereof to the prospective
buyer, binds himself to sell the property exclusively
to the prospective buyer upon the fulfillment of the
condition agreed upon.
CONTRACT
OF SALE
Conveys title to
the property upon
the perfection of
the contract
As to Title
As to Ownership
Passes to the
buyer upon the
CONTRACT
TO SELL
Prospective seller
explicitly
reserves the
transfer of the
title to the
prospective buyer
until the
happening of an
event
Still retained by
the seller despite
2
delivery of the
thing sold
As to Effect of
Non-Payment
As to Remedy of
the Seller in
Case of Default
in Payment
Non-payment of
the price is a
negative
resolutory
condition
Seller may either
sue for the
collection or have
the contract
judicially
resolved and set
aside.
delivery and is
not to pass until
the fulfillment of
the condition
Full payment of
the price is a
positive
suspensive
condition to the
coming into
effect of the
agreement
Seller can only
sue for damages
2. Donation
Article 725. Donation is an act of liberality
whereby a person disposes gratuitously of a
thing or right in favor of another, who accepts it.
(618a)
Article 726. When a person gives to another a
thing or right on account of the latter's merits or
of the services rendered by him to the donor,
provided they do not constitute a demandable
debt, or when the gift imposes upon the donee a
burden which is less than the value of the thing
given, there is also a donation. (619)
Article 745. The donee must accept the donation
personally, or through an authorized person with
a special power for the purpose, or with a general
and sufficient power; otherwise, the donation
shall be void. (630)
If the value of the personal property donated
exceeds five thousand pesos, the donation and
the acceptance shall be made in writing.
Otherwise, the donation shall be void. (632a)
Article 749. In order that the donation of an
immovable may be valid, it must be made in a
public document, specifying therein the property
donated and the value of the charges which the
donee must satisfy.
The acceptance may be made in the same deed of
donation or in a separate public document, but it
shall not take effect unless it is done during the
lifetime of the donor.
If the acceptance is made in a separate
instrument, the donor shall be notified thereof in
an authentic form, and this step shall be noted in
both instruments. (633)
Article 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.
(n)
As to its Essence
As to the
Governing Law
As to
Consideration
Article 746. Acceptance must be made during
the lifetime of the donor and of the donee. (n)
Article 747. Persons who accept donations in
representation of others who may not do so by
themselves, shall be obliged to make the
notification and notation of which article 749
speaks. (631)
As to its
Perfection and
Validity
CONTRACT
OF SALE
Transfer of
ownership of a
determinate thing
in exchange of a
price certain
Law on Sales
(Book IV, Title
VI, Arts. 14581637)
Price certain in
money or its
equivalent
Upon meeting of
the minds upon
the thing and
price. It becomes
valid upon
consent.
(consensual)
DONATION
Transfer
ownership of the
determinate thing
out of liberality
Law on Donation
(Book III, Title
III, Arts. 725773)
Purely the
liberality or
generosity of the
donor
From the moment
the donor knows
of the acceptance
by the donee. It
requires certain
formalities to be
valid. (formal)
Article 748. The donation of a movable may be
made orally or in writing.
An oral donation requires the simultaneous
delivery of the thing or of the document
representing the right donated.
B. de Leon | SALES (2017) | Atty. RRD
3
3. Dacion En Pago
- the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation.
Article 1245. Dation in payment, whereby
property is alienated to the creditor in
satisfaction of a debt in money, shall be
governed by the law of sales. (n)
Article 1619. Legal redemption is the right to be
subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in
payment, or by any other transaction whereby
ownership is transmitted by onerous title.
(1521a)
CONTRACT OF SALE
There is no pre-existing
credit
Obligations are created
Greater freedom in
determining the price
Buyer has to pay the price
DACION EN PAGO
There is a pre-existing
credit
Obligations are
extinguished
Less freedom in
determining the price
Payment is received by the
debtor before the contract is
perfected
4. Barter
Article 1638. By the 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. (1538a)
Article 1639. If one of the contracting parties,
having received the thing promised him in barter,
should prove that it did not belong to the person
who gave it, he cannot be compelled to deliver
that which he offered in exchange, but he shall
be entitled to damages. (1539a)
Article 1640. One who loses by eviction the
thing received in barter may recover that which
he gave in exchange with a right to damages, or
he may only demand an indemnity for damages.
However, he can only make use of the right to
recover the thing which he has delivered while
the same remains in the possession of the other
party, and without prejudice to the rights
acquired in good faith in the meantime by a third
person. (1540a)
B. de Leon | SALES (2017) | Atty. RRD
Article 1641. As to all matters not specifically
provided for in this Title, barter shall be
governed by the provisions of the preceding Title
relating to sales. (1541a)
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 the consideration exceeds the amount
of the money or its equivalent; otherwise, it is a
sale. (1446a)
CONTRACT OF SALE
The consideration is the
giving of the price certain,
in money or its equivalent
BARTER
The consideration is the
giving of another
determinate thing
5. Contract for a Piece of Work
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. (n)
Article 1713. By the 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. The contractor
may either employ only his labor or skill, or also
furnish the material. (1588a)
Article 1714. If the contractor agrees to produce
the work from material furnished by him, he
shall deliver the thing produced to the employer
and transfer dominion over the thing. This
contract shall be governed by the following
articles as well as by the pertinent provisions on
warranty of title and against hidden defects and
the payment of price in a contract of sale. (n)
Article 1715. The contract shall execute the
work in such a manner that it has the qualities
agreed upon and has no defects which destroy or
lessen its value or fitness for its ordinary or
stipulated use. Should the work be not of such
quality, the employer may require that the
contractor remove the defect or execute another
4
work. If the contract fails or refuses to comply
with this obligation, the employer may have the
defect removed or another work executed, at the
contractor's cost. (n)
CONTRACT OF SALE
Thing transferred is one
which would have existed
Sale of the manufactured
item
Governed by the Statute of
Frauds
CONTRACT FOR A
PIECE OF WORK
Thing transferred would not
have been in existence and
would never have existed
but for the order only
Services dominate the
contract even though there
is a sale of goods involved
Not within the Statute of
Frauds
6. Agency to Buy or Sell
7. Lease
- a consensual, bilateral, onerous, and commutative
contract, the owner temporarily grants the use of his
or her property to another who undertakes to pay rent
therefor
Article 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;
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. (n)
(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)
Article 1868. By the contract of agency a person
binds himself to render some service or to do
something in representation or on behalf of
another, with the consent or authority of the
latter. (1709a)
Article 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)
CONTRACT OF SALE
Buyer receives the goods as
owner
Buyer pays the price
Buyer cannot return the
object bought, generally
Buyer can deal with the
thing sold as he pleases as
he is the owner
Not unilaterally revocable
No Return, No Exchange
Mode is acquiring
ownership is though
delivery
AGENCY TO BUY OR
SELL
Agent receives the goods as
goods of the principal who
retains ownership
Agents delivers the price
which he got from his buyer
to his principal; he has the
duty to account
Agent can return in case he
is unable to sell it to a 3rd
person
Agent must act according to
the instructions of the
principal
Is unilaterally revocable
Consignment
Ownership retains with the
principal
Article 1643. In the lease of things, one of the
parties binds himself to give to another the
enjoyment or use of a thing for a price certain,
and for a period which may be definite or
indefinite. However, no lease for more than
ninety-nine years shall be valid. (1543a)
As to its
Essence
As to the Right
to Transfer in
the Concept of
an Owner
As to the Object
As to Period of
Transfer
B. de Leon | SALES (2017) | Atty. RRD
CONTRACT
OF SALE
Transfer of
ownership of a
determinate thing
in exchange for a
price certain
Vendor must
have the right to
transfer
ownership at the
time it is
delivered
Determinate
thing or right
Not covered by a
specific period
since it is
perpetual
CONTRACT
OF LEASE
Transfer of use or
enjoyment of a
determinate thing
for a price certain
Lessor does not
need to be the
owner of the
thing at the time
it is delivered to
the lessee
May be things,
work, or service
May be a definite
or indefinite
period but not
permanently
5
As to
Consideration
“Price” or
“Purchase Price”
because no lease
for more than 99
years shall be
invalid
“Rent”
II. OBJECT OF THE CONTRACT
A. REQUISITES OF A VALID SUBJECT
MATTER
1. Must be LICIT
2. Must be DETERMINATE or
DETERMINABLE
3. Must NOT BE IMPOSSIBLE
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. (n)
Article 1460. A thing is determinate when it is
particularly designated or physical 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 the parties. (n)
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. (n)
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. (n)
Article 1463. The sole owner of a thing may sell
an undivided interest therein. (n)
Article 1464. In the case of fungible goods, there
may be a sale of an undivided share of a specific
B. de Leon | SALES (2017) | Atty. RRD
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, 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
whole mass and the seller is bound to make good
the deficiency from goods of the same kind and
quality, unless a contrary intent appears. (n)
Article 1465. Things subject to a resolutory
condition may be the object of the contract of
sale. (n)
1st requisite: the object must be LICIT
 Must be lawful
Article 1409. The following contracts are
inexistent and void from the beginning:
(1) Those whose cause, object or purpose is
contrary to law, morals, good customs, public
order or public policy;
(2) Those which are absolutely simulated or
fictitious;
(3) Those whose cause or object did not exist at
the time of the transaction;
(4) Those whose object is outside the commerce
of men;
(5) Those which contemplate an impossible
service;
(6) Those where the intention of the parties
relative to the principal object of the contract
cannot be ascertained;
(7) Those expressly prohibited or declared void
by law.
These contracts cannot be ratified. Neither can
the right to set up the defense of illegality be
waived.
 Must not be outside the commerce of men
Article 1347. All things which are not outside
the commerce of men, including future things,
6
may be the object of a contract. All rights which
are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized
by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a contract.
(1271a)

The vendor must have the right to transfer
the ownership of the thing at the time the
object is delivered
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. (n)

Sale of animals with contagious disease, or
if they were found to be unfit for the use or
service which they were acquired for » void
Article 1575. The sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if
the use or service for which they are acquired has
been stated in the contract, and they are found to
be unfit therefor. (1494a)
2nd requisite: the object must be DETERMINATE
or DETERMINABLE
 Determinate: must be particularly designated
or physically segregated from the same class
 Determinable: sufficient that it is capable of
being determinate without the need of a new
or further agreement to ascertain its identity,
quantity, or quality.
 otherwise, it would be an obstacle to the
existence of the contract » void
Article 1460. A thing is determinate when it is
particularly designated or physical segregated
from all others of the same class. (determinate)
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 the parties. (determinable)
B. de Leon | SALES (2017) | Atty. RRD
3rd requisite: the object must NOT BE
IMPOSSIBLE
 goods can be:
1. existing – owned or possessed
2. future – to be manufactured, raised,
or acquired
 future inheritance
GR: void
3. contingent – dependent upon a
contingency
Article 1347. All things which are not outside
the commerce of men, including future things,
may be the object of a contract. All rights which
are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized
by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a contract.
(1271a)
Article 1348. Impossible things or services
cannot be the object of contracts. (1272)
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. (n)
a.
Emptio Rei Speratae v. Emptio Spei
EMPTIO REI
SPERATAE
Sale of the thing having
potential existence
Object is a future thing
Uncertainty is with regard
to the quality and quantity
of the thing, but not to its
existence
Produces no effect if he
thing does not come into
existence because the sale is
subject to the condition that
the thing should exist
EMPTIO SPEI
Sale of a mere hope or
expectancy
Object is a present thing
Uncertainty is with regard
to the existence of the thing
Produces effect even though
the thing does not come into
existence, unless it is a vain
hope
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b.
Undivided Interest
- ideal or abstract quota, or proportionate
share
- seller may sale the entire thing or only a
portion, making the buyer a co-owner
- effect: buyer becomes co-owner in in the
entire mass in proportion to the amount he
bought
Article 1463. The sole owner of a thing may sell
an undivided interest therein. (n)
Article 1385. Rescission creates the obligation
to return the things which were the object of the
contract, together with their fruits, and the price
with its interest; consequently, it can be carried
out only when he who demands rescission can
return whatever he may be obliged to restore.
Neither shall rescission take place when the
things which are the object of the contract are
legally in the possession of third persons who did
not act in bad faith.

Effect if the mass contains less than the
number bought: buyer becomes the owner
of the whole mass and the seller is bound
to make good the deficiency, unless a
contrary intent appears
Article 1464. In the case of fungible goods, there
may be a 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, 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
whole mass and the seller is bound to make good
the deficiency from goods of the same kind and
quality, unless a contrary intent appears. (n)
c.
Subject to a Resolutory Condition
- happening of the condition triggers the end
of the obligation
- e.g. contract of sale with the right of
repurchase
Article 1465. Things subject to a resolutory
condition may be the object of the contract of
sale. (n)
d.
Things in Litigation
- valid until rescinded; rescission only a
remedy
Article 1381. The following contracts are
rescissible:
(4) Those which refer to things under litigation if
they have been entered into by the defendant
without the knowledge and approval of the
litigants or of competent judicial authority;
B. de Leon | SALES (2017) | Atty. RRD
In this case, indemnity for damages may be
demanded from the person causing the loss.
(1295)
III. THE PRICE
- Price: signifies the sum stipulated as the equivalent
of the thing sold and also every incident taken into
consideration for the fixing of the price put to the
debit of the buyer and agreed to by him.
A. REQUISITES FOR A VALID PRICE
1. Must be REAL
2. Must be CERTAIN or
ASCERTAINABLE
3. Must be in MONEY or ITS
EQUIVALENT
1st requisite: the price must be REAL, not
simulated
 Real: true and not fictitious
 Simulated: buyer has no intention to pay
the price, while seller has no expectation
to receive it
Article 1318. There is no contract unless the
following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of
the contract;
(3) Cause of the obligation which is established.
(1261)
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
8
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. (1447a)

GR: Gross Inadequacy does NOT affect the
validity of a contract of Sale
XPN: indicative of a defect in consent
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. (n)
Article 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate
a contract, unless there has been fraud, mistake
or undue influence. (n)

a) If simulated: void, but act may be shown
to have been a donation or some other act or
contract.
b) If false: void, unless proven to be
founded on another true and lawful price
Article 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.
(n)
Article 1353. The statement of a false cause in
contracts shall render them void, if it should not
be proved that they were founded upon another
cause which is true and lawful. (1276)

Presumption: that there is a cause and such
is lawful
(no price stated v. no price at all)
Article 1354. Although the cause is not stated in
the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary.
(1277)
2nd requisite: the price must be CERTAIN or
ASCERTAINABLE
 how price is determined:
a. fixed by the agreement of the
parties
b. determination is left to the
judgement of a specified person
c. with reference to another thing
certain

GR: fixing of price can never be left to the
discretion of one of the parties
XPN: if he accepted, sale is perfected
Article 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. (1449a)
Article 1182. When the fulfillment of the
condition depends upon the sole will of the
debtor, the conditional obligation shall be void.
If it depends upon chance or upon the will of a
third person, the obligation shall take effect in
conformity with the provisions of this Code.
(1115)

GR: price fixed by a 3rd person designated
by the parties is binding upon them
XPNs:
1. If the 3rd party is unable and
unwilling: sale is inefficacious
- also contemplates a scenario
wherein a 3rd party was prevented
from fixing the price by another 3rd
person
2. If there was bad faith or mistake:
price will be fixed by the courts
- bad faith: disregarding specific
instructions
- mistake: contrary to instructions
3. If prevented from fixing price by
the fault of a contracting party:
innocent party may avail of the
remedies
- rescission or fulfillment, with
damages in both cases
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
B. de Leon | SALES (2017) | Atty. RRD
9
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. (1447a)
 with reference to another thing:
Article 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. (1448)

Effect of Failure to Determine Price:
GR: sale is inefficacious
XPN: if the thing or a part thereof has
been delivered and appropriated by the
buyer, he must pay a reasonable price
 reasonable price is a question of
fact dependent on the
circumstances of each particular
case
Article 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. (n)
3rd requisite: the price must be in MONEY or ITS
EQUIVALENT
 “or its equivalent” connotes other means of
exchange authorized by law or usage of
trade to be a substitute of money.
a. negotiable instruments
- promissory note, bill of exchange,
check, letter or credit
b. money orders
c. stored-value products
- gift certificates
B. de Leon | SALES (2017) | Atty. RRD

Rules if consideration is partly in money and
partly in another thing:
1. Determine the intention of the
parties to see whether it was a
barter or sale
2. If intention does not clearly appear:
 Thing > Money : Barter
 Thing = Money : Sale
 Thing < Money : Sale
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 the consideration exceeds the amount
of the money or its equivalent; otherwise, it is a
sale. (1446a)
 Dacion En Pago
Article 1245. Dation in payment, whereby
property is alienated to the creditor in
satisfaction of a debt in money, shall be
governed by the law of sales. (n)
B. OPTION MONEY v. EARNEST MONEY
Option Money – the distinct consideration in case
of an option contract. It does not form part of the
purchase price, hence, it cannot be recovered if the
buyer did not continue with the sale.
 secures the privilege to buy; the sale of a
right to purchase
 imposes no obligation to the person
holding the option
Article 1479(2). 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. (1451a)
Earnest Money – the money given to the seller by
the prospective buyer to show that the latter is truly
interested in buying the property and its aim is to
bind the bargain.
 option money may become earnest money
if the parties agreed to that effect
 effects of earnest money:
1. it is part of the purchase price,
hence deductible from the total
price
2. proof of perfection of the
contract
Article 1482. Whenever earnest money is given
in a contract of sale, it shall be considered as part
10
of the price and as proof of the perfection of the
contract. (1454a)
As to Money
Given
OPTION
MONEY
Distinct
consideration for
an option
contract
EARNEST
MONEY
Part of the
purchase price
As to Perfection
Applies to a sale
not yet perfected
Given only when
there is already a
sale
As to Obligation
of the Buyer
upon Payment
of Consideration
Prospective buyer
is not required to
buy
When given,
buyer is bound to
pay the balance
As to Recovery
It cannot be
recovered
As to Transfer
of Ownership
Reserved to the
seller until full
payment
As to Effect of
Non-Payment
Action for
Specific
Performance
It must be
returned
Passes to the
buyer upon
delivery of the
thing sold
Specific
Performance or
Rescission, both
with damages
Two kinds of Incapacity:
1. Absolute Incapacity – persons who cannot
bind themselves
2. Relative Incapacity – with reference to
certain persons or certain class of property
by reason of public policy, relation to
property, or for the protection of public and
private interests.
A. ABSOLUTE INCAPACITY
Article 1390. The following contracts are
voidable or annullable, even though there may
have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of
giving consent to a contract;
(2) Those where the consent is vitiated by
mistake, violence, intimidation, undue influence
or fraud.
These contracts are binding, unless they are
annulled by a proper action in court. They are
susceptible of ratification. (n)
IV. PARTIES TO A CONTRACT OF SALE
GR: all persons, whether natural or juridical, who
can bind themselves have the legal capacity to buy or
sell.
Article 1489(1). All persons who are authorized in
this Code to obligate themselves, may enter into a
contract of sale, saving the modifications contained
in the following articles.
Article 1393. Ratification may be effected
expressly or tacitly. It is understood that there is
a tacit ratification if, with knowledge of the
reason which renders the contract voidable and
such reason having ceased, the person who has a
right to invoke it should execute an act which
necessarily implies an intention to waive his
right. (1311a)
Article 44. The following are juridical persons:
Article 1397. The action for the annulment of
contracts may be instituted by all who are
thereby obliged principally or subsidiarily.
However, persons who are capable cannot allege
the incapacity of those with whom they
contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their
action upon these flaws of the contract. (1302a)
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for
public interest or purpose, created by law; their
personality begins as soon as they have been
constituted according to law;
(3) Corporations, partnerships and associations for
private interest or purpose to which the law grants a
juridical personality, separate and distinct from that
of each shareholder, partner or member. (35a)
Article 46. Juridical persons may acquire and possess
property of all kinds, as well as incur obligations and
bring civil or criminal actions, in conformity with the
laws and regulations of their organization. (38a)
B. de Leon | SALES (2017) | Atty. RRD
Article 1399. When the defect of the contract
consists in the incapacity of one of the parties,
the incapacitated person is not obliged to make
any restitution except insofar as he has been
benefited by the thing or price received by him.
(1304)
11

1
minors (necessaries are not included),
insane or demented persons, 3deaf-mutes
who do not know how to write
Article 1327. The following cannot give consent
to a contract:
2
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes
who do not know how to write. (1263a)
Article 1489(2). Where necessaries are those
sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to
in article 290. (1457a)
Art. 194. Support compromises everything
indispensable for sustenance, dwelling, clothing,
medical attendance, education and
transportation, in keeping with the financial
capacity of the family.
The education of the person entitled to be
supported referred to in the preceding paragraph
shall include his schooling or training for some
profession, trade or vocation, even beyond the
age of majority. Transportation shall include
expenses in going to and from school, or to and
from place of work. (290a)

In the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the common properties, the
other spouse may assume sole powers of
administration. These powers do not include
disposition or encumbrance without authority of
the court or the written consent of the other
spouse. In the absence of such authority or
consent, the disposition or encumbrance shall be
void. However, the transaction shall be construed
as a continuing offer on the part of the
consenting spouse and the third person, and may
be perfected as a binding contract upon the
acceptance by the other spouse or authorization
by the court before the offer is withdrawn by
either or both offerors. (206a)

Between spouses: 1donation, and 2cannot
sell property to each other
 Between common-law spouses: donation
Article 133. Every donation between the spouses
during the marriage shall be void. This
prohibition does not apply when the donation
takes effect after the death of the donor.
Neither does this prohibition apply to moderate
gifts which the spouses may give each other on
the occasion of any family rejoicing. (1334a)
Article 1490. The husband and the wife cannot
sell property to each other, except:
4
contracts entered into during a state of
drunkenness or during a hypnotic spell
Article 1328. Contracts entered into during a
lucid interval are valid. Contracts agreed to in a
state of drunkenness or during a hypnotic spell
are voidable. (n)
B. RELATIVE INCAPACITY

Administration and ownership in the event
that one spouse is incapacitated:
administration powers only – without
disposition or encumbrance.
 If 1no authority from the court or a 2written
consent of the spouse: disposition or
encumbrance is void
Art. 96. The administration and enjoyment of
the community property shall belong to both
spouses jointly. In case of disagreement, the
husband's decision shall prevail, subject to
recourse to the court by the wife for proper
remedy, which must be availed of within five
years from the date of the contract implementing
such decision.
B. de Leon | SALES (2017) | Atty. RRD
(1) When a separation of property was agreed
upon in the marriage settlements; or
(2) When there has been a judicial separation of
property under article 191. (1458a)
Article 1492. The prohibitions in the two
preceding articles are applicable to sales in legal
redemption, compromises and renunciations. (n)

Re: Minors
 cannot give consent to a contract
 restitution is not obliged except
insofar as he has been benefited
 if the object of sale are necessaries:
he is always obliged to pay for it
 enabled to administer his property
but he cannot borrow money or
alienate or encumber real property
without the consent of his father or
mother, or guardian (no more
unemancipated minors)
12
Article 1327. The following cannot give consent
to a contract:
(1) The guardian, the property of the person or
persons who may be under his guardianship;
(1) Unemancipated minors;
(2) Agents, the property whose administration or
sale may have been intrusted to them, unless the
consent of the principal has been given;
Article 1399. When the defect of the contract
consists in the incapacity of one of the parties,
the incapacitated person is not obliged to make
any restitution except insofar as he has been
benefited by the thing or price received by him.
(1304)
Article 1489. All persons who are authorized in
this Code to obligate themselves, may enter into
a contract of sale, saving the modifications
contained in the following articles.
Where necessaries are those sold and delivered
to a minor or other person without capacity to
act, he must pay a reasonable price therefor.
Necessaries are those referred to in article 290.
(1457a)
Article 290. Support is everything that is
indispensable for sustenance, dwelling, clothing
and medical attendance, according to the social
position of the family.
Support also includes the education of the person
entitled to be supported until he completes his
education or training for some profession, trade
or vocation, even beyond the age of majority.
(142a)
Article 399. Emancipation by marriage or by
voluntary concession shall terminate parental
authority over the child's person. It shall enable
the minor to administer his property as though he
were of age, but he cannot borrow money or
alienate or encumber real property without the
consent of his father or mother, or guardian. He
can sue and be sued in court only with the
assistance of his father, mother or guardian.
(317a)
C. SPECIAL DISQUALIFICATIONS

the contracts entered into by these person
with regard to the specific prohibited
property are void for being expressly
prohibited by law
Article 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through the
mediation of another:
B. de Leon | SALES (2017) | Atty. RRD
(3) Executors and administrators, the property
of the estate under administration;
(4) Public officers and employees, the property
of the State or of any subdivision thereof, or of
any government-owned or controlled
corporation, or institution, the administration of
which has been intrusted to them; this provision
shall apply to judges and government experts
who, in any manner whatsoever, take part in the
sale;
(5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and
other officers and employees connected with
the administration of justice, the property and
rights in litigation or levied upon an execution
before the court within whose jurisdiction or
territory they exercise their respective functions;
this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with
respect to the property and rights which may be
the object of any litigation in which they may
take part by virtue of their profession;
(6) Any others specially disqualified by law.
(1459a)
Article 1492. The prohibitions in the two
preceding articles are applicable to sales in legal
redemption, compromises and renunciations. (n)
V. FORMATION OF THE CONTRACT OF
SALE
Stages in the Life of a Contract of Sale:
a) NEGOTIATION/PREPARATORY –
begins from the time the prospective
contracting parties indicate interest in the
contract and ends at the moment of their
agreement;
b) PERFECTION – takes place when the
parties agree upon all the essential elements
of the contract; and
c) CONSUMMATION – occurs when the
parties fulfill or perform the terms agreed
upon, culminating in the extinguishment
thereof.
13
A. PREPARATORY
Article 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. (1451a)
a.
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. (1451a)
1.

Offer
in general:
a. Perfected upon the meeting of the
minds upon the thing and the price
b. The parties may reciprocally
demand performance
Article 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. (1450a)

GR: the offerer may withdraw his offer at
any time even without communicating such
withdrawal to the offeree
XPNs:
1) when the offerer has allowed the offeree
a certain period to accept, he may
withdraw the offer at any time before its
acceptance by the offeree, by
communicating such withdrawal to the
offeree
XPN: cannot be withdrawn within
a certain period if founded upon a
consideration
2) when there has been acceptance
already, the offerer may still withdraw
his offer at any time before the
acceptance is made known to him by
the offeree, by communicating such
withdrawal to the offeree
Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by
communicating such withdrawal, except when
the option is founded upon a consideration, as
something paid or promised. (n)
Article 1479. A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.
B. de Leon | SALES (2017) | Atty. RRD
Forms of Offer
1) Offer must be certain as to its object
and price
Article 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. (1262a)
2) GR: Business advertisements of things
for sale are not offers but mere
invitations to make an offer
XPN: unless it appears otherwise
Article 1325. Unless it appears otherwise,
business advertisements of things for sale are not
definite offers, but mere invitations to make an
offer. (n)
3) GR: Advertisement for bidders are
simply invitations to make proposals.
Advertiser is not bound to accept the
highest or lowest bid.
XPN: unless the contrary appears
Article 1326. Advertisements for bidders are
simply invitations to make proposals, and the
advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears. (n)
b.

Forms of Acceptance
in general:
a) express – definite “yes”
b) implied – can be inferred from the
contemporaneous and subsequent
acts by the contracting parties
c) absolute and must not qualify the
term of the offer – plain,
unequivocal, unconditional, and
without variance of any sort from
the proposal
d) must be identical in all respects
with that of the offer
14

Art. 1319:
a) Acceptance must be absolute
Article 1319(1). 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.
b) Acceptance through a letter or
telegram
- does not bind the offerer except
from the time it came to his
knowledge
Article 1319(2). 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.
(1262a)
c.
Vices Vitiating Consent
Article 1330. A contract where consent is given
through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)
Article 1390. The following contracts are
voidable or annullable, even though there may
have been no damage to the contracting parties:
(2) Those where the consent is vitiated by
mistake, violence, intimidation, undue influence
or fraud.
These contracts are binding, unless they are
annulled by a proper action in court. They are
susceptible of ratification. (n)
 Mistake:
Article 1331. In order that mistake may
invalidate consent, 1it should refer to the
substance of the thing which is the object of the
contract, or 2to those conditions which have
principally moved one or both parties to enter
into the contract.
 Rule when a Party is Illiterate:
Article 1332. When one of the parties is unable
to read, or if the contract is in a language not
understood by him, and mistake or fraud is
alleged, the person enforcing the contract must
show that the terms thereof have been fully
explained to the former. (n)

If party knew the doubt, contingency or risk,
there is no mistake:
Article 1333. There is no mistake if the party
alleging it knew the doubt, contingency or risk
affecting the object of the contract. (n)
 Mutual Error:
Article 1334. Mutual error as to the legal effect
of an agreement when the real purpose of the
parties is frustrated, may vitiate consent. (n)

Fraud:
The fraud must be “dolo causante” or the
reason why the party agreed to enter into a
contract, and not merely “dolo incidental”.
Article 1338. There is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to enter
into a contract which, without them, he would
not have agreed to. (1269)
2.
Article 1479(2). 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. (1451a)

Elements of a Valid Option Contract:
1) Consent – meeting of the minds of the
optioner and optionee
2) Subject Matter – the “option right”
3) Consideration – separate and distinct
from the purchase price
- any thing of value, whether paid or
promised
- option contract can only be binding in
the presence of a consideration; can still
be withdrawn by offerer, even if
accepted, if without consideration

a contract by which the owner of the
property agrees with another person that he
shall have the right to buy his property at a
fixed price within a certain time
Mistake as to the identity or qualifications of one
of the parties will vitiate consent only when such
identity or qualifications have been the principal
cause of the contract.
A simple mistake of account shall give rise to its
correction. (1266a)
B. de Leon | SALES (2017) | Atty. RRD
Option Contract
15




binding upon the promissor if the
promise is supported by a
consideration distinct from the
price
an option is not of itself a purchase,
but merely secures the privilege to
buy
not a sale of property but a sale of
the right to purchase
only a preparatory contract and a
continuing offer to enter into a
principal contract


c.
As to Consideration for the Grant of Right
 a party to a contract cannot unilaterally
withdraw a right of first refusal that
stands upon a valuable consideration
 the grant of the right is not without
consideration
 the consideration is based upon the
reciprocal obligations of the parties
d.
Price of the Determinate Thing
 exercise of the right would be
dependent on:
1) owner’s eventual intention to enter
into a binding juridical relation
with another
2) the terms – including the price
 if offered first to a 3rd person,
the offer must conform with
the same terms and conditions
as those given to the 3rd person
e.
Indivisibility of the Right
GR: when the right of first refusal is granted
to two or more persons, the right is
indivisible even if the object may be
physically divisible
 all grantees must agree to the
exercise of such right
XPN: unless the contrary is intended by the
parties
f.
Right of First Refusal in an Expired Lease
Agreement
 the right contained in the original lease
agreement is not revived in an implied
lease contract
 the option expired at the end of
the original lease period
 the terms revived are only
those which are germane to the
lessee’s right of continued
enjoyment of the property
leased
g.
Effects of the Violation of the Right
(a) valid but rescissible
 can be enforced through an action
for specific performance

the offerer may withdraw his offer if:
a) without consideration – any time
before the acceptance
- option contract is not deemed
perfected
b) with consideration – after the lapse
of the period agreed upon
- remedy: rescission + damages, but
not specific performance
Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by
communicating such withdrawal, except when
the option is founded upon a consideration, as
something paid or promised. (n)
Consideration
Reciprocity
Subject Matter
3.
CONTRACT
OF SALE
Price certain in
money or its
equivalent
Bilateral
The Contract of
Sale itself
OPTION
CONTRACT
Any thing of
value
Unilateral
The “option to
purchase”
Right of First Refusal
is a contractual grant whereby the owner
of the determinate thing, who is known as
the grantor, binds himself not to sell his
determinate thing, without first offering it
to the holder of the right, who is known as
the grantee.
 “the promise of the grantor to make an
offer to the grantee”

a.
As to its Form:
 need not be written to be enforceable
and may be proven by oral evidence
b.
As to its Legal Effect:
 the grantor may not sell to a 3rd person
his determinate thing without first
offering to sell it to the grantee
B. de Leon | SALES (2017) | Atty. RRD
gives the grantee the privilege to be
offered first of the determinate thing
once the grantor decides to sell it
it is only after the grantee failed to
exercise his right could the grantor sell
the determinate thing to other buyers
16
(b) if property is sold to a 3rd person in
good faith, the 3rd person’s right is
preferred
 remedy: action for recovery of
damages under Art. 19
4.
As to Remedy of
the Seller in
Case of Default
in Payment
Mutual Promise to Buy and Sell
Article 1479(1). A promise to buy and sell a
determinate thing for a price certain is
reciprocally demandable.



bilateral agreement – consisting of two
parties:
1) one who is willing to sell
2) one who is willing to buy
in reciprocal contracts, the promise of each
party is the consideration for that of the
other
Non-Fulfillment of the Suspensive
Condition:
1) prevents the prospective buyer’s
obligation to convey title from
becoming effective
 he is relieved from any
obligation to hold the
property in reserve for the
prospective buyer
2) parties stand as if the conditional
obligation never existed
CONTRACT
OF SALE
Conveys title to
the property upon
the perfection of
the contract
As to Title
As to Ownership
As to Effect of
Non-Payment
Passes to the
buyer upon the
delivery of the
thing sold
Non-payment of
the price is a
negative
resolutory
condition
B. de Leon | SALES (2017) | Atty. RRD
CONTRACT
TO SELL
Prospective seller
explicitly
reserves the
transfer of the
title to the
prospective buyer
until the
happening of an
event
Still retained by
the seller despite
delivery and is
not to pass until
the fulfillment of
the condition
Full payment of
the price is a
positive
suspensive
condition to the
coming into
effect of the
agreement
As to Effect of
Fulfillment of
Suspensive
Condition
Seller may either
sue for the
collection or have
the contract
judicially
resolved and set
aside.
CONDITIONAL
SALE
Contract of Sale
is thereby
perfected, such
that if there was
prior delivery,
ownership thereto
automatically
transfers to the
buyer by
operation of law
Seller can only
sue for damages
CONTRACT
TO SELL
There is still a
need to enter in
a Contract of
Sale and
ownership will
not
automatically
transfer to the
buyer although
the property
may have been
previously
delivered to
him
B. PERFECTION
GR: a contract of sale is perfected by mere consent
of the parties
XPN: if perfection is subject to a suspensive
condition
 consent is present, though it is conditioned
upon the happening of a contingent event
Article 1305. A contract is a meeting of minds
between two persons whereby one binds himself,
with respect to the other, to give something or to
render some service. (1254a)
Article 1475(1). 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.
Article 1319(1). Consent is manifested by the
meeting of the offer and the acceptance upon
1
the thing and 2the cause which are to constitute
the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance
constitutes a counter-offer.
17
1.

Effect of Perfection
main: the parties may reciprocally demand
performance of their undertakings
Article 1475(2). From that moment, the parties
may reciprocally demand performance, subject
to the provisions of the law governing the form
of contracts. (1450a)

parties may stipulate that ownership will not
be transferred until the full payment of the
price
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n)

in a sale of land by and agent, the authority
must be in writing → otherwise » void
Article 1874. When a sale of a piece of land or
any interest therein is through an agent, the
authority of the latter shall be in writing;
otherwise, the sale shall be void. (n)
2.

Place of Perfection and Delivery
Perfection: the place where the offer was
made
Article 1319(2). 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.
(1262a)


Place of Delivery: Order of Priority:
(1) place stipulated by the parties
 may be express or implied
in the contract
(2) place dictated by usage of trade
 provided by positive law
or by customs/traditions
(3) place of business of the seller
 presupposes that the seller
has a specific place where
he conducts his business
(4) place where the seller resides
(5) place where the specific goods are
Time of Delivery
(1) agreed time
 may be express or implied
in the contract
(2) reasonable time
 when the seller is bound to
deliver the goods to the
buyer but no time was
fixed
B. de Leon | SALES (2017) | Atty. RRD

question of fact dependent
on the circumstances
 contemplates, generally,
business hours
(3) fixed time
 contemplated that it is
with a period but such is
not fixed by the parties
 remedy: fixed by 1the
parties or 2the Court
Article 1521. Whether it is for the buyer to take
possession of the goods or of the seller to send
them to the buyer is a question depending in
each case on the contract, express or implied,
between the parties. Apart from any such
contract, express or implied, or usage of trade to
the contrary, the place of delivery is the seller's
place of business if he has one, and if not his
residence; but in case of a contract of sale of
specific goods, which to the knowledge of the
parties when the contract or the sale was made
were in some other place, then that place is the
place of delivery.
Where by a contract of sale the seller is bound to
send the goods to the buyer, but no time for
sending them is fixed, the seller is bound to send
them within a reasonable time.
Where the goods at the time of sale are in the
possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer
unless and until such third person acknowledges
to the buyer that he holds the goods on the
buyer's behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour.
What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and
incidental to putting the goods into a deliverable
state must be borne by the seller. (n)
3.
Expenses of Execution and Registration

GR: the vendor bears the expenses for the
execution and registration of the sale
XPN: unless there is a stipulation to the
contrary
Article 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)
18

GR: the seller bears the expenses of putting
goods in a deliverable state
XPN: unless otherwise agreed
Article 1521(5). Unless otherwise agreed, the
expenses of and incidental to putting the goods
into a deliverable state must be borne by the
seller. (n)

Goods in Possession of 3rd persons:
Seller has not fulfilled his obligation until
the 3rd persons acknowledges to the buyer
that he holds the goods on the buyer’s behalf
4.
Special Sales
a.
Sale by Auction
Auction – a method of selling property in a
public forum through an open and
competitive bidding

sale by auction in lots, one lot = one
separate contract of sale
Article 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.

Perfected when:
1) auctioneer announces perfection by
the fall of the hammer
2) other customary manner
 until such announcement, any bidder may
retract his bid
 if sale by auction without reserve, seller or
auctioneer cannot withdraw the goods
 only when no bid was made
Article 1476(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.

GR: Right to bid may be reserved expressly
by or on behalf of the seller
XPN: unless otherwise provided by law or
stipulation
Article 1476(3) A right to bid may be reserved
expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
B. de Leon | SALES (2017) | Atty. RRD

if there is no notice that the auction is
subject to a right to bind on behalf of the
seller, it shall be unlawful for:
a) the seller –
i. to bid for himself
ii. to employ or induce any person
to bid at such sale on his behalf
b) the auctioneer –
i. to employ or induce any person
to bid at such sale on behalf of
the seller
ii. knowingly to take any bid from
the seller or any person
employed by him
Article 1476(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. (n)

Statute of Frauds: any agreement for sale at
a price not less than P500 is unenforceable if
not in writing, except if a sale is made by
auction and entry is made by the auctioneer
in his sales book of the amount and kind of
property sold, terms of sale, price, names of
the purchasers and person on whose account
the sale is made, it is a sufficient
memorandum
Article 1403. The following contracts are
unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be
in writing, and subscribed by the party charged,
or by his agent; evidence, therefore, of the
agreement cannot be received without the
writing, or a secondary evidence of its contents:
(d) An agreement for the sale of goods, chattels
or things in action, at a price not less than five
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
action or pay at the time some part of the
purchase money; but when a sale is made by
19
auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale,
price, names of the purchasers and person on
whose account the sale is made, it is a sufficient
memorandum;
b.
Sale by Sample or Description
Sale by Sample – when a small quantity is
exhibited by the seller as a fair specimen of
the bulk, which is not present and there is no
opportunity to inspect or examine the same.
reasonable examination of the
sample or description and which
would render the goods
unmerchantable
 “merchantable quality” –
fitness and quality
 goods should be in a
satisfactory quality
enough to be saleable
 fit for their specific use
c.
Leases with Option to Buy
Sale by Description – where the seller sells
things as being of particular kind, the buyer
not knowing whether seller’s representations
are true or false, but relying on them as true.
Article 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.
Article 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)
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the
sample. (n)
Article 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)
Article 1565. In the case of a contract of sale by
sample, if the seller is a dealer in goods of that
kind, there is an implied warranty that the goods
shall be free from any defect rendering them
unmerchantable which would not be apparent on
reasonable examination of the sample. (n)

Conditions:
1) The goods must correspond with
the sample or description in quality
 the parties treated the
sample or description as
the standard of quality
 they contracted with
reference to the sample or
description
2) The buyer must have reasonable
opportunity of comparing the bulk
with the sample, or thing with the
description
 to ascertain whether they
are in conformity with the
contract
3) The goods shall be free from any
defect which is not apparent on
B. de Leon | SALES (2017) | Atty. RRD
Article 1486. In the case referred to in the 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)


d.
Two conditions for Art. 1485 to apply:
1) contract purports to be a lease of
personal property with option to
buy
2) lessor has deprived the lessee of
possession or enjoyment of the
thing
Stipulations that paid rentals will not be
returned are valid, unless unconscionable
Expropriation
Article 1488. The expropriation of property for
public use is governed by special laws. (1456)

Requirements for a valid exercise of eminent
domain power:
1) a statute or ordinance granted the
local chief executive or the
President to exercise such power
2) that the taking is for public use,
purpose, or welfare
3) payment of just compensation
20
4) there was a valid and definite offer
made to the owner of the property
but said offer was not accepted
C. FORMALITIES OF THE CONTRACT
1.
Form of Contracts
Article 1483. Subject to the provisions of the
Statute of Frauds and of any other applicable
statute, a contract of sale may be made 1in
writing, or 2by word of mouth, or 3partly in
writing and partly by word of mouth, or 4may be
inferred from the conduct of the parties. (n)

GR: contracts shall be obligatory in
whatever form they may have been entered
into
XPN: when the law requires that a contract
be on some form in order that it may be
valid and enforceable
 that requirement is absolute and
indispensable
 including transactions under Statute
of Frauds
Article 1356. Contracts shall be obligatory, in
whatever form they may have been entered into,
provided all the essential requisites for their
validity are present. However, when the law
requires that a contract be in some form in order
that it may be valid or enforceable, or that a
contract be proved in a certain way, that
requirement is absolute and indispensable. In
such cases, the right of the parties stated in the
following article cannot be exercised. (1278a)
Article 1358. The following must appear in a
public document:
(1) Acts and contracts which have for their
object the creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein are governed by articles 1403, No. 2, and
1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any
other power which has for its object an act
appearing or which should appear in a public
document, or should prejudice a third person;
B. de Leon | SALES (2017) | Atty. RRD
(4) The cession of actions or rights proceeding
from an act appearing in a public document.
All other contracts where the amount involved
exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods,
chattels or things in action are governed by
articles, 1403, No. 2 and 1405. (1280a)

if the law requires a document a special
form, the parties can compel each to observe
that from
Article 1357. If the law requires a document or
other special form, as in the acts and contracts
enumerated in the following article, the
contracting parties may compel each other to
observe that form, once the contract has been
perfected. This right may be exercised
simultaneously with the action upon the contract.
(1279a)
2.
Statute of Frauds
 aims to prevent and not to protect fraud
 does not deprive the parties of the right
to contract but merely regulates the
formalities of the contract necessary to
render it enforceable
 for convenience or evidentiary purposes
only
 simply provides the method by which
the contracts enumerated in the Statute
of Frauds may be proved, but it does not
declare them invalid because they are
not reduced to writing
 applicable only to executory contracts
Article 1403. The following contracts are
unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be
in writing, and subscribed by the party charged,
or by his agent; evidence, therefore, of the
agreement cannot be received without the
writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making
thereof;
(d) An agreement for the sale of goods, chattels
or things in action, at a price not less than five
21
hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the
evidences, or some of them, of such things in
action or pay at the time some part of the
purchase money; but when a sale is made by
auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale,
price, names of the purchasers and person on
whose account the sale is made, it is a sufficient
memorandum
(e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
Article 1405. Contracts infringing the Statute of
Frauds, referred to in No. 2 of article 1403, are
ratified by the failure to object to the
presentation of oral evidence to prove the same,
or by the acceptance of benefit under them.
3.
Electronic Commerce Act (R.A. 8792)
 a requirement of the law that a contract
of sale must be in writing is met even if
the contract is in the form of an
electronic document.
Section 7. Legal Recognition of Electronic
Documents - Electronic documents shall have
the legal effect, validity or enforceability as any
other document or legal writing, and (a) Where the law requires a document to be
in writing, that requirement is met by an
electronic document if the said electronic
document maintains its integrity and reliability
and can be authenticated so as to be usable for
subsequent reference, in that i. The electronic document has remained
complete and unaltered, apart from the addition
of any endorsement and any authorized change,
or any change which arises in the normal course
of communication, storage and display; and
(c) Where the law requires that a document
be presented or retained in its original form,
that requirement is met by an electronic
document if i. There exists a reliable assurance as to the
integrity of the document from the time when it
was first generated in its final form; and
ii. That document is capable of being displayed
to the person to whom it is to be presented:
Provided, That no provision of this Act shall
apply to vary any and all requirements of
existing laws on formalities required in the
execution of documents for their validity.
For evidentiary purposes, an electronic document
shall be the functional equivalent of a written
document under existing laws.
This Act does not modify any statutory rule
relating to admissibility of electronic data
massages or electronic documents, except the
rules relating to authentication and best evidence.
Section 8. Legal Recognition of Electronic
Signatures. - An electronic signature on the
electronic document shall be equivalent to the
signature of a person on a written document if
that signature is proved by showing that a
prescribed procedure, not alterable by the parties
interested in the electronic document, existed
under which (a) A method is used to identify the party sought
to be bound and to indicate said party's access to
the electronic document necessary for his
consent or approval through the electronic
signature;
(b) Said method is reliable and appropriate for
the purpose for which the electronic document
was generated or communicated, in the light of
all circumstances, including any relevant
agreement;
ii. The electronic document is reliable in the light
of the purpose for which it was generated and in
the light of all relevant circumstances.
(c) It is necessary for the party sought to be
bound, in or order to proceed further with the
transaction, to have executed or provided the
electronic signature; and
(b) Paragraph (a) applies whether the
requirement therein is in the form of an
obligation or whether the law simply provides
consequences for the document not being
presented or retained in its original from.
(d) The other party is authorized and enabled to
verify the electronic signature and to make the
decision to proceed with the transaction
authenticated by the same.
B. de Leon | SALES (2017) | Atty. RRD
22
Section 11. Authentication of Electronic Data
Messages and Electronic Documents. - Until
the Supreme Court by appropriate rules shall
have so provided, electronic documents,
electronic data messages and electronic
signatures, shall be authenticated by
demonstrating, substantiating and validating a
claimed identity of a user, device, or another
entity is an information or communication
system, among other ways, as follows;
(a) The electronic signature shall be
authenticated by proof than a letter, character,
number or other symbol in electronic form
representing the persons named in and attached
to or logically associated with an electronic data
message, electronic document, or that the
appropriate methodology or security procedures,
when applicable, were employed or adopted by
such person, with the intention of authenticating
or approving in an electronic data message or
electronic document;
(b) The electronic data message or electronic
document shall be authenticated by proof that an
appropriate security procedure, when applicable
was adopted and employed for the purpose of
verifying the originator of an electronic data
message and/or electronic document, or
detecting error or alteration in the
communication, content or storage of an
electronic document or electronic data message
from a specific point, which, using algorithm or
codes, identifying words or numbers,
encryptions, answers back or acknowledgement
procedures, or similar security devices.
The supreme court may adopt such other
authentication procedures, including the use of
electronic notarization systems as necessary and
advisable, as well as the certificate of
authentication on printed or hard copies of the
electronic document or electronic data messages
by electronic notaries, service providers and
other duly recognized or appointed certification
authorities.
The person seeking to introduce an electronic
data message or electronic document in any legal
proceeding has the burden of proving its
authenticity by evidence capable of supporting a
finding that the electronic data message or
electronic document is what the person claims it
be.
B. de Leon | SALES (2017) | Atty. RRD
In the absence of evidence to the contrary, the
integrity of the information and communication
system in which an electronic data message or
electronic document is recorded or stored may be
established in any legal proceeding a.) By evidence that at all material times the
information and communication system or other
similar device was operating in a manner that did
not affect the integrity of the electronic data
message and/or electronic document, and there
are no other reasonable grounds to doubt the
integrity of the information and communication
system,
b.) By showing that the electronic data message
and/or electronic document was recorded or
stored by a party to the proceedings who is
adverse in interest to the party using it; or
c.) By showing that the electronic data message
and/or electronic document was recorded or
stored in the usual and ordinary course of
business by a person who is not a party to the
proceedings and who did not act under the
control of the party using the record.
VI. RISK OF LOSS
A. IN GENERAL
generally, the owner bears the risk of loss of
the subject matter of the contract of sale
 the transfer of ownership of the determinate
thing is a pivotal event in determining the
rights and obligations of the parties in case
of its loss
Article 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)
23

general standard of care: diligence of a
good father of a family
Article 1163. Every person obliged to give
something is also obliged to take care of it with
the proper diligence of a good father of a family,
unless the law or the stipulation of the parties
requires another standard of care. (1094a)

GR: No liability if lost through fortuitous
events
XPNs:
1) if obligor incurred in delay
2) if obligor has promised to deliver
the same thing to two or more
persons who do not have the
same interest
Article 1164. The creditor has a right to the
fruits of the thing from the time the obligation to
deliver it arises. However, he shall acquire no
real right over it until the same has been
delivered to him. (1095)
Article 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by article 1170, may compel
the debtor to make the delivery.
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the
expense of the debtor.
If the obligor 1delays, or 2has promised to
deliver the same thing to two or more persons
who do not have the same interest, he shall be
responsible for any fortuitous event until he has
effected the delivery.

Effect of loss through fortuitous events of:
1) Determinate thing –
GR: extinguishment of obligation if it
was lost without his fault and before
he has incurred in delay
XPNs: still liable for damages:
1) if provided by law
2) by stipulation
3) if nature of the obligation
requires assumption of risk
2) Generic thing –
GR: does not extinguish the
obligation
Article 1262. An obligation which consists in
the delivery of a determinate thing shall be
extinguished if it should be 1lost or destroyed
without the fault of the debtor, and 2before he
has incurred in delay.
B. de Leon | SALES (2017) | Atty. RRD
When by law or stipulation, the obligor is liable
even for fortuitous events, the loss of the thing
does not extinguish the obligation, and he shall
be responsible for damages. The same rule
applies when the nature of the obligation requires
the assumption of risk. (1182a)
Article 1263. In an obligation to deliver a
generic thing, the loss or destruction of anything
of the same kind does not extinguish the
obligation. (n)

Rules re: Loss, Deterioration, and
Improvement of the Object
Article 1189. When the conditions have been
imposed with the intention of suspending the
efficacy of an obligation to give, the following
rules shall be observed in case of the
improvement, loss or deterioration of the thing
during the pendency of the condition:
(1) If the thing is lost without the fault of the
debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the
debtor, he shall be obliged to pay damages; it is
understood that the thing is lost when it perishes,
or goes out of commerce, or disappears in such a
way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault
of the debtor, the impairment is to be borne by
the creditor;
(4) If it deteriorates through the fault of the
debtor, the creditor may choose between the
rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by
time, the improvement shall inure to the benefit
of the creditor;
(6) If it is improved at the expense of the debtor,
he shall have no other right than that granted to
the usufructuary. (1122)
1.
Loss by Fault of a Party and through
Fortuitous Events

Rules in regard as to who bears the loss after
perfection but before delivery in fungible
things:
24
1) if made independently and for a
single price, or without
consideration of their weight,
number, or measure; the ownership
is transferred from the seller to the
buyer at the time of the delivery
to the buyer = buyer bears the loss
2) if sold for a price fixed according
to weight, number, or measure; the
ownership is transferred from the
seller to the buyer after they have
been weighed, counted, or
measured and delivered to the
buyer = seller bears the loss
Article 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.
Article 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the
buyer the goods are at the buyer's risk whether
actual delivery has been made or not, except that:
This rule shall apply to the sale of fungible
things, 1made independently and for a single
price, or without consideration of their weight,
number, or measure.
 application of Art. 1189 rules:
Article 1538. In case of loss, deterioration or
improvement of the thing before its delivery, the
rules in article 1189 shall be observed, the
vendor being considered the debtor. (n)
Should fungible things be 2sold 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)


GR: goods remain at the seller’s risk until
the ownership therein is transferred to the
buyer
XPNs:
1. unless otherwise agreed
2. delivery of the goods has been
made to the buyer or to a bailee for
the buyer but the ownership of the
goods has been retained by the
seller merely to secure performance
by the buyer of his obligations
under the contract = buyer bears the
risk from such delivery
3. actual delivery has been delayed
through the fault of either the buyer
or seller = party at fault bears the
risk
when the ownership is transferred to the
buyer the goods are at the buyer's risk
whether actual delivery has been made or
not
 “Res Perit Domino” – thing
perishes with the owner
B. de Leon | SALES (2017) | Atty. RRD
(1) Where delivery of the goods has been made
to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in
the goods has been retained by the seller
merely to secure performance by the buyer of
his obligations under the contract, the goods
are at the buyer's risk from the time of such
delivery;
(2) Where actual delivery has been delayed
through the fault of either the buyer or seller
the goods are at the risk of the party in fault. (n)
Article 1636. In the preceding articles in this
Title governing the sale of goods, unless the
context or subject matter otherwise requires:
(1) "Document of title to goods" includes any
bill of lading, dock warrant, "quedan," or
warehouse receipt or order for the delivery of
goods, or any other document used in the
ordinary course of business in the sale or transfer
of goods, as proof of the possession or control of
the goods, or authorizing or purporting to
authorize the possessor of the document to
transfer or receive, either by indorsement or by
delivery, goods represented by such document.
"Goods" includes all chattels personal but not
things in action or money of legal tender in the
Philippines. The term includes growing fruits or
crops.
"Order" relating to documents of title means an
order by indorsement on the documents.
"Quality of goods" includes their state or
condition.
"Specific goods" means goods identified and
agreed upon at the time a contract of sale is
made.
25
An antecedent or pre-existing claim, whether for
money or not, constitutes "value" where goods or
documents of title are taken either in satisfaction
thereof or as security therefor.
(2) A person is insolvent within the meaning of
this Title who either has ceased to pay his debts
in the ordinary course of business or cannot pay
his debts as they become due, whether
insolvency proceedings have been commenced
or not.
(3) Goods are in a "deliverable state" within the
meaning of this Title when they are in such a
state that the buyer would, under the contract, be
bound to take delivery of them. (n)
2.

Fruits or Improvements
GR: the vendor is obliged to deliver to the
buyer the thing sold as well as the fruits and
accessions that accrue from the moment of
the perfection of the contract of sale
XPN: unless there is a stipulation to the
contrary
 all the fruits of the thing which accrue or
collected before the fulfillment of the
condition shall still pertain to the owner
thereof
Article 1537. The vendor is bound to deliver the
thing sold and its accessions and accessories in
the condition in which they were upon the
perfection of the contract.
All the fruits shall pertain to the vendee from the
day on which the contract was perfected. (1468a)
B. EFFECT OF LOSS OF THING SOLD
1. Before perfection: seller still owns the
determinate thing = seller bears the risk
At the Time of Perfection:
a) if entirely lost = without any effect
b) if lost in part only = 1withdraw
from the contract or 2demand the
remaining part and pay a
proportionate part thereof
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
contract has been entirely lost, the contract shall
be without any effect.
the remaining part, paying its price in proportion
to the total sum agreed upon. (1460a)
Article 1494. Where the parties purport a sale of
specific goods, and the goods without the
knowledge of the seller have perished in part or
have wholly or in a material part so deteriorated
in quality as to be substantially changed in
character, the buyer may at his option treat the
sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so
much thereof as have not deteriorated, and as
binding the buyer to pay the agreed price for the
goods in which the ownership will pass, if the
sale was divisible. (n)
3.
After Perfection but Before Delivery:
GR: in accordance with their stipulation
XPN: in accordance with Arts. 1480 and
1538
4.
After the Delivery of the Determinate
Thing: buyer is the new owner = buyer
bears the risk
VII: RIGHTS AND OBLIGATIONS OF THE
VENDOR
A. TRANSFER OWNERSHIP AND TITLE
GR: ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive delivery
thereof
XPN: parties may stipulate that ownership in the
thing shall not pass to the purchaser until he has fully
paid the price
Article 1477. The ownership of the thing sold
shall be transferred to the vendee upon the actual
or constructive delivery thereof. (n)
2.
But if the thing should have been lost in part
only, the vendee may choose between
withdrawing from the contract and demanding
B. de Leon | SALES (2017) | Atty. RRD
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n)

Specific exceptions:
1) Conditional Sales – the execution of a
contract of conditional sale does not
immediately transfer title to the
property to be sold from the seller to
buyer; it is retained by the seller until
the fulfillment of the positive
suspensive condition
26
2) Contract to Sell – where the seller
promises to execute a deed of absolute
sale upon the completion by the buyer
of the payment of the purchase price,
the contract is a contract to sell even if
their agreement is denominated as deed
of conditional sale.
3) Sale or Return – the ownership passes
to the buyer upon delivery, but he may
revest the ownership in the seller by
returning or tendering the goods within
the time fixed in the contract, or if no
time has been fixed, within a reasonable
time
4) Sale on Approval or Trial – title to the
thing delivered passes only when the
buyer 1signifies his approval or
acceptance thereof to the seller, or when
a 2reasonable time expires.

Two main obligations of the vendor:
1
to transfer the ownership of and deliver, 2to
warrant the thing which is the object of the
sale
Article 1495. The vendor is bound to transfer the
ownership of and deliver, as well as warrant the
thing which is the object of the sale. (1461a)



the delivery of the thing and acceptance are
interrelated and intertwined with each other
that without delivery of the thing, there is no
corresponding obligation to accept it.
Non-Acceptance of the thing sold does not
render ineffective the obligation to deliver.
It only creates a 1right to demand for
specific performance or 2to rescind the
contract.
 the buyer should be afforded a
reasonable opportunity to examine
the goods when delivered, for the
purpose of ascertaining whether
they are in conformity with the
contract
Badges of Acceptance by the Buyer:
a) when he intimates to the seller
that he has accepted them
b) when the goods have been
delivered to him, and he does any
act in relation to them which is
inconsistent with the ownership
of the seller
c) when after a lapse of a reasonable
time, he retains the goods without
intimating to the seller that he has
rejected them
B. de Leon | SALES (2017) | Atty. RRD

acceptance of the buyer signifies his
confirmation of the contract; while actual
receipt refers only to the act of getting,
taking, or receiving of the goods delivered.
Article 1585. The buyer is deemed to have
accepted the goods when he intimates to the
seller that he has accepted them, or when the
goods have been delivered to him, and he does
any act in relation to them which is inconsistent
with the ownership of the seller, or when, after
the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has
rejected them. (n)
Article 599. The usufructuary may claim any
matured credits which form a part of the usufruct
if he has given or gives the proper security. If he
has been excused from giving security or has not
been able to give it, or if that given is not
sufficient, he shall need the authorization of the
owner, or of the court in default thereof, to
collect such credits.
The usufructuary who has given security may
use the capital he has collected in any manner he
may deem proper. The usufructuary who has not
given security shall invest the said capital at
interest upon agreement with the owner; in
default of such agreement, with judicial
authorization; and, in every case, with security
sufficient to preserve the integrity of the capital
in usufruct. (507)
1.
Sale by Person Not the Owner
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. (n)
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. (n)

GR: a seller without title cannot transfer a
better title than the has. Thus, the buyer
acquires no better title to the goods than the
seller had.
 “Nemo Dat Quod Non Habet” –
27
no one can give what one does not
have
XPNs:
1) if the true owner is thereof is
estopped from denying the seller’s
authority to sell (estoppel)
2) factors’ act
3) judicial sales
4) sale in merchant’s store, market or
fair
 If only the seller or grantor later acquires
title thereto, such title passes by operation
of law to the buyer or grantee
Article 1505. Subject to the provisions of this
Title, where goods are sold by a person who is
not the owner thereof, and who does not sell
them under authority or with the consent of the
owner, the buyer acquires no better title to the
goods than the seller had, 1unless the owner of
the goods is by his conduct precluded from
denying the seller's authority to sell.
acquires a good title to the goods, provided he
buys them in 1good faith, 2for value, and
3
without notice of the seller's defect of title. (n)

remedy of an owner who is unlawfully
deprived of his movable property:
GR: he may recover it from the person in
possession of the same
XPN: when the possessor had acquired the
movable in good faith at a public sale
Article 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or
has been unlawfully deprived thereof, may
recover it from the person in possession of the
same.
If the possessor of a movable lost or which the
owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the
owner cannot obtain its return without
reimbursing the price paid therefor. (464a)
Nothing in this Title, however, shall affect:
(1) 2The provisions of any factors' act, recording
laws, or any other provision of law enabling the
apparent owner of goods to dispose of them as if
he were the true owner thereof;
(2) 3The validity of any contract of sale under
statutory power of sale or under the order of a
court of competent jurisdiction;
(3) 4Purchases made in a merchant's store, or in
fairs, or markets, in accordance with the Code of
Commerce and special laws. (n)
Article 1434. When a person who is not the
owner of a thing sells or alienates and delivers it,
and later the seller or grantor acquires title
thereto, such title passes by operation of law to
the buyer or grantee.
2.

Sale by one having Voidable Title
contemplates a seller that has a voidable title
to the goods but his title thereto has not yet
been annulled at the time of the sale, and the
subsequent buyer of the goods was in good
faith
 in accordance with the rule that a
voidable contract is valid until
annulled
Article 1506. Where the seller of goods has a
voidable title thereto, but his title has not been
avoided at the time of the sale, the buyer
B. de Leon | SALES (2017) | Atty. RRD
3.

Estoppel
in order that there may be estoppel, the
owner must, by word or conduct, have
caused or allowed it to appear that title or
authority to sell is with the seller and the
buyer must have been misled to his damage
Article 1505(1). Subject to the provisions of this
Title, where goods are sold by a person who is
not the owner thereof, and who does not sell
them under authority or with the consent of the
owner, the buyer acquires no better title to the
goods than the seller had, 1unless the owner of
the goods is by his conduct precluded from
denying the seller's authority to sell.
Article 1431. Through estoppel an admission or
representation is rendered conclusive upon the
person making it, and cannot be denied or
disproved as against the person relying thereon.
B. DELIVERY OF THE THING SOLD
Article 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by article 1170, may compel
the debtor to make the delivery.
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the
expense of the debtor.
28
If the obligor delays, or has promised to deliver
the same thing to two or more persons who do
not have the same interest, he shall be
responsible for any fortuitous event until he has
effected the delivery. (1096)
1.

Manner of Transfer
the mode that transfers the ownership is
delivery and not contract of sale
 ownership acquired by the vendee from the
moment it is delivered to him
Article 1477. The ownership of the thing sold
shall be transferred to the vendee upon the actual
or constructive delivery thereof. (n)
Article 1496. The ownership of the thing sold is
acquired by the vendee from the moment it is
delivered to him 1in any of the ways specified in
articles 1497 to 1501, or 2in any other manner
signifying an agreement that the possession is
transferred from the vendor to the vendee. (n)
2.

General Obligation to Deliver
Delivery – a composite act, a thing in which
both parties must join and the minds of the
parties concur.
 one party parts with the title to and
the possession of the property, and
the other acquires the right to and
possession of the same
 may be actual or constructive
 the act of delivery must be coupled
with the intention of delivering the
thing
Article 1496. The ownership of the thing sold is
acquired by the vendee from the moment it is
delivered to him 1in any of the ways specified in
articles 1497 to 1501, or 2in any other manner
signifying an agreement that the possession is
transferred from the vendor to the vendee. (n)
Article 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee. (1462a)
3.
Kinds of Delivery
a.

Real or Physical
there is delivery when it is placed in the
control and possession of the vendee
Article 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee. (1462a)
B. de Leon | SALES (2017) | Atty. RRD
b.

Constructive Delivery
delivery takes place in another manner
which is indicative of the intention to deliver
the thing for the purpose of transferring
ownership thereof
i.
Delivery by the Execution of a
Public Instrument
 GR: execution of a public
instrument amounts to a
constructive delivery of the thing
subject of a contract of sale
XPNs:
1) when the contrary is
provided in the public
instrument
2) when mere presumptive
and no conclusive delivery
is created in cases where
the buyer fails to take
material possession of the
sale
 rationale: a person
who does not have
actual possession of
the thing sold cannot
transfer constructive
possession by the
execution and
delivery of a public
instrument
Article 1498(1). When the sale is made through
a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which
is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be
inferred.
ii.
Traditio Symbolica
Article 1498(2). With regard to movable
property, its delivery may also be made by the
delivery of the keys of the place or depository
where it is stored or kept. (1463a)
iii.
Traditio Longa Manu
the parties may agree for a specific
manner of delivery other than
actual delivery if the thing sold
cannot be transferred to the
possession of the vendee at the time
of the sale.
Article 1499. The delivery of movable property
may likewise be made by the mere consent or

29
agreement of the contracting parties, if the thing
sold cannot be transferred to the possession of
the vendee at the time of the sale, or if the latter
already had it in his possession for any other
reason. (1463a)
iv.
Traditio Brevi Manu
buyer already had the thing sold in
his possession
 buyer simply retains or continues to
possess the thing or premises but
now in the concept of an owner
Article 1499. The delivery of movable property
may likewise be made by the mere consent or
agreement of the contracting parties, if the thing
sold cannot be transferred to the possession of
the vendee at the time of the sale, or if the latter
already had it in his possession for any other
reason. (1463a)

v.
Traditio Constitutum Possessorium
the seller continues his possession
of the determinate thing – no longer
in the concept of an owner – but
under a different title or in a
different capacity
Article 1500. There may also be tradition
constitutum possessorium. (n)

vi.
Quasi-Tradition (Delivery of
Incorporeal Property)
 2nd sentence speaks of quasitradition wherein the delivery of
incorporeal property may be made
Article 1501. With respect to incorporeal
property, the provisions of the first paragraph of
article 1498 shall govern. In any other case
wherein said provisions are not applicable, the
1
placing of the titles of ownership in the
possession of the vendee or 2the use by the
vendee of his rights, with the vendor's consent,
shall be understood as a delivery. (1464)
vii.

Delivery Through a Carrier or
Courier and Effect of Form of Bill
of Lading
GR: Delivery of the goods to a
carrier is deemed to be delivery of
the goods to the buyer
XPNs:
1) the contrary intention
appears
2) the seller reserves the right
of possession until certain
B. de Leon | SALES (2017) | Atty. RRD
conditions have been
fulfilled
3) based on the bill of lading,
the goods are deliverable
to the seller or his agent,
or to the order of the seller
or of his agent
4) based on the bill of lading,
the goods are deliverable
to order of the buyer or of
his agent, but possession
of the bill of lading is
retained by the seller or
his agent
 F.O.B. place of shipment: the seller
pays to get the goods to the carrier
and the risk is transferred upon
placing the goods in the possession
of the carrier
 F.O.B place of destination: the
seller transports the goods at his
own expense and risk to that place
and delivers to the buyer there
 Free Along Side Ship (F.A.S):
good pass on delivery at the wharf,
alongside the vessel; the goods are
considered delivered; thus, the risk
is transferred to the buyer
 Cost, Insurance, and Freight
(C.I.F.): price fixed covers not only
the cost of the goods, but the
expense of freight and insurance to
be paid by the seller; no change in
the risk of loss
Article 1503. When there is a contract of sale of
specific goods, the seller may, by the terms of
the contract, reserve the right of possession or
ownership in the goods until certain conditions
have been fulfilled. The right of possession or
ownership may be thus reserved notwithstanding
the delivery of the goods to the buyer or to a
carrier or other bailee for the purpose of
transmission to the buyer.
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller or
his agent, or to the order of the seller or of his
agent, the seller thereby reserves the ownership
in the goods. But, if except for the form of the
bill of lading, the ownership would have passed
to the buyer on shipment of the goods, the
seller's property in the goods shall be deemed to
be only for the purpose of securing performance
by the buyer of his obligations under the
contract.
30
Where goods are shipped, and by the bill of
lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill
of lading is retained by the seller or his agent, the
seller thereby reserves a right to the possession
of the goods as against the buyer.
Where the seller of goods draws on the buyer for
the price and transmits the bill of exchange and
bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange,
the buyer is bound to return the bill of lading if
he does not honor the bill of exchange, and if he
wrongfully retains the bill of lading he acquires
no added right thereby. If, however, the bill of
lading provides that the goods are deliverable to
the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the
consignee named therein, one who purchases in
good faith, for value, the bill of lading, or goods
from the buyer will obtain the ownership in the
goods, although the bill of exchange has not
been honored, provided that such purchaser has
received delivery of the bill of lading indorsed
by the consignee named therein, or of the goods,
without notice of the facts making the transfer
wrongful. (n)

Obligation 1:
GR: the seller must make such
contract with the carrier on behalf
of the buyer as may be reasonable,
having regard to the nature of the
goods and the other circumstances
of the case
XPN: unless otherwise authorized
by the buyer
 Obligation 2:
GR: the seller must give notice to
the buyer that it is usual to insure
the goods under the circumstances
XPN: unless otherwise agreed
Article 1523. Where, in pursuance of a contract
of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer
or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to
the buyer, except in the cases provided for in
article 1503, first, second and third paragraphs,
or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the
seller must make such contract with the carrier
on behalf of the buyer as may be reasonable,
B. de Leon | SALES (2017) | Atty. RRD
having regard to the nature of the goods and the
other circumstances of the case. If the seller omit
so to do, and the goods are lost or damaged in
course of transit, the buyer 1may decline to treat
the delivery to the carrier as a delivery to
himself, or 2may hold the seller responsible in
damages.
Unless otherwise agreed, where goods are sent
by the seller to the buyer under circumstances in
which the seller knows or ought to know that it is
usual to insure, the seller must give such notice
to the buyer as may enable him to insure them
during their transit, and, if the seller fails to do
so, the 1goods shall be deemed to be at his risk
during such transit. (n)
4.
Exceptional/Special Cases
a.

Sale or Return
the ownership passes to the buyer upon
delivery, but he may revest the ownership in
the seller by returning or tendering the
goods within the time fixed in the contract,
or if no time has been fixed, within a
reasonable time
Article 1502(1). When goods are delivered to
the buyer "on sale or return" to give the buyer an
option to return the goods instead of paying the
price, the ownership passes to the buyer on
delivery, but he may revest the ownership in the
seller by returning or tendering the goods within
the time fixed in the contract, or, if no time has
been fixed, within a reasonable time. (n)
b.
–
Sale on Approval
title to the thing delivered passes only when
the buyer 1signifies his approval or
acceptance thereof to the seller, or when a
2
reasonable time expires.
Article 1502(2). When goods are delivered to
the buyer on approval or on trial or on
satisfaction, or other similar terms, the
ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance
to the seller or does any other act adopting the
transaction;
(2) If he does not signify his approval or
acceptance to the seller, but retains the goods
without giving notice of rejection, then if a time
has been fixed for the return of the goods, on the
expiration of such time, and, if no time has been
fixed, on the expiration of a reasonable time.
What is a reasonable time is a question of fact.
(n)
31
c.

Sale by Rate per Unit
a contract wherein the statement of area of
the subject immovable is not conclusive and
the price may be reduced or increased
depending on the area actually delivered
 If vendor delivers less than the area agreed
upon; remedies –
a) to demand all that may be stated in
the contract, if possible
b) to ask for a proportional reduction
of the price
c) to rescind the contract, if the lack in
the area be not less than one-tenth
of that stated
 If vendor delivers more than the area agreed
upon; remedies –
a) to accept only area that corresponds
to the amount agreed upon
b) to accept the whole area, provided
he pays for the additional area at
the contract rate
Article 1539. The obligation to deliver the thing
sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in
conformity with the following rules:
If the sale of real estate should be made with a
statement of its area, at the rate of a certain price
for a unit of measure or number, the vendor shall
be obliged to deliver to the vendee, if the latter
should demand it, all that may have been stated
in the contract; but, should this be not possible,
the vendee may choose between a proportional
reduction of the price and the rescission of the
contract, provided that, in the latter case, the lack
in the area be not less than one-tenth of that
stated.
The same shall be done, even when the area is
the same, if any part of the immovable is not of
the quality specified in the contract.
The rescission, in this case, shall only take place
at the will of the vendee, when the inferior value
of the thing sold exceeds one-tenth of the price
agreed upon.
Nevertheless, if the vendee would not have
bought the immovable had he known of its
smaller area of inferior quality, he may rescind
the sale. (1469a)
Article 1540. If, in the case of the preceding
article, there is a greater area or number in the
immovable than that stated in the contract, the
vendee may accept the area included in the
B. de Leon | SALES (2017) | Atty. RRD
contract and reject the rest. If he accepts the
whole area, he must pay for the same at the
contract rate. (1470a)
Article 1541. The provisions of the two
preceding articles shall apply to judicial sales.
(n)
d.

Sale by Lump Sum
GR: there shall be no increase or decrease of
the price, although there be a greater or less
area or number than that stated in the
contract
XPN: when the difference in the area is
obviously sizeable and too substantial to be
overlooked
Article 1542. In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or
less area or number than that stated in the contract.
The same rule shall be applied when two or more
immovables as sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in
every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall
be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to
do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number,
unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has
been stipulated. (1471)
Article 1543. The actions arising from articles 1539
and 1542 shall prescribe in six months, counted from
the day of delivery. (1472a)
5.

Accessory Obligations
GR: the vendor is obliged to deliver to the
buyer the thing sold as well as the fruits and
accessions that accrue from the moment of
the perfection of the contract of sale
XPN: unless there is a stipulation to the
contrary
Article 1537. The vendor is bound to deliver the
thing sold and its accessions and accessories in
the condition in which they were upon the
perfection of the contract.
All the fruits shall pertain to the vendee from the
day on which the contract was perfected. (1468a)
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