LAW ON SALES
CHARACTERISTICS OF A CONTRACT OF SALE (NP/C-BR/OC)
1. NOMINATE AND PRINCIPAL (legal name and nature)
- Nominate – the law provides a specific name
- Principal – it can exist by itself, it doesn’t need any other preliminary contracts
2. CONSENSUAL (important characteristic)
- Perfected by mere consent
3. BILATERAL AND RECIPROCAL (number of parties)
- Bilateral – Both the contracting parties are bound to fulfill correlative obligations to each other
- Reciprocal – the buyer and the seller are both debtors and creditors of each other
4. ONEROUS AND COMMUTATIVE (consideration)
- Onerous – the thing sold is conveyed in consideration and price
- Commutative – the thing sold is considered equivalent to price paid
SALE IS A TITLE AND NOT A MODE
Mode – legal means by which dominion or ownership is created, transferred or destroyed.
Title – is the legal basis by which to affect dominion or ownership.
SALE
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is not a mode but it is only a medium or a bridge towards the acquisition of a particular determinate
object.
Sale does not transfer or convey ownership; the most that sale does is to create the obligation to
transfer ownership.
Sale gives you a right to demand the transfer of ownership once you have paid the price as you
agreed upon.
It is tradition ort delivery, as a consequence of sale, that actually transfers ownership.
It acts as a bridge to the transfer of ownership.
STAGES OF THE CONTRACT OF SALE
1. POLICTATION – covers the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is perfected, it usually refers to negotiation stage.
2. PERFECTION – takes place upon the concurrence of the essential elements, which are the
meeting of the minds of the parties as to object of the contract and upon the price.
3. CONSUMMATION – begins when the parties perform their respective undertakings, culminating in
the extinguishment thereof. It is already presumed that the buyer has paid the purchase price and
the seller is ready to deliver the determinate object and ready to transfer the ownership.
SALE DISTINGUISHED FROM OTHER TYPES OF CONTRACTS
1. DONATION
Unlike a donation, sale is a disposition for valuable consideration, with no diminution of the estate
but merely substitution of values, with the property sold replaced by the equivalent monetary
consideration. In donation, the consideration is gratuitous or the liberality of the donor, he/she
freely gives his property. Donation is a decrease or subtraction of the estate of decedent
Donation entails a diminution of the estate (reduction) while Sale does not, it actually adds
up or retains equivalent value of the estate of the decedent.
Consideration in donation is the gratuity or liberality of the donor while in sales, consideration
may be monetary or any of its equivalent.
2. BARTER
It is an exchange where one of the parties binds himself to give one thing in consideration of the
other’s promiseq to give another thing. It is where one object is exchange to another.
In determining the real character of sale, courts look at the intent of the parties, their true aim and
purpose in entering into the contract, as well as “by their conduct, words, actions and deeds prior
to, during and immediately after executing the agreement,” and not at the nomenclature used to
describe it.
Simple exchange of two objects while sale there is a consideration in a sum certain in money.
3. CONTRACT FOR A PIECE OF WORK
If the thing is specially done only upon the specific order of another, this is a contract for a
piece of work. | If the thing is manufactured or procured for the general market in the ordinary
course of business, it is a contract of sale.
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.
a) In a contract for work, labor or materials for a piece of work, the thing transferred is one
not in existence and which would have never existed but for the order of the party
desiring to acquire it, while in a contract of sale, the thing transferred is one which
would have existed and been the subject of sale to some other person, even if the order
had not been given.
b) For contract of piece of work, the risk of loss before delivery is borne by the worker or
contractor, not by the employed (buyer) and for the contract of sale, the risk of loss is
borne by the buyer.
c) Contracts for a piece of work are not within the Statute of Frauds.
4. AGENCY TO SELL
One factor that most clearly distinguishes agency from other legal concepts, including sale, is
control, one person (agent) agrees to act under the control or direction of another (principal). In
agency, the principal is controlling the agent while in sales, the buyer is the one who has control.
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.
5. DACION EN PAGO
Is a transaction that takes place when property is alienated to the creditor in full satisfaction of a
debt in money. It involves the delivery and transmission of ownership of a thing as an accepted
equivalent of the performance of the obligation.
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In sales, there is no pre-existing credit while in dacion en pago there is.
In dacion en pago, it is meant to extinguish your obligation while in sales the purpose is to
create a new one.
In sales, the cause is the price paid of the viewpoint of the seller while in dacion en pago the
primary purpose is to extinguish your obligation
In sales, there is more freedom in fixing the price while in dacion en pago there is no such way
because the purchase price is the amount of debt.
In dacion en pago, there is no release of another sum of money because of the existing debt of
the debtor but in sales the buyer still has to pay the price as agreed upon in the contract.
In dacion en pago, there is an existing original obligation while in sales you are creating a
new obligation
6. LEASE
Is a consensual, bilateral, onerous and commutative contract by virtue of which one person binds
himself to grant temporarily the use of the thing or to render some service to another who
undertakes to pay some rent. No transfer of ownership is involved.
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In sales, once the buyer has paid the purchase price the seller is obligated to deliver the
determinate object and transfer ownership.
Lease refers to temporary use, temporary possession for the payment of rent while sales
have the transfer of ownership once the purchase price is paid.
PARTIES TO A CONTRACT OF SALE
1. GENERAL RULE
Every person having legal capacity to obligate himself, may validly enter into a contract of sale,
whether as seller or as buyer.
2. MINORS, INSANE AND DEMENTED PERSONS
Incapacitated person = no consent. Absent this consent, there can be no contract.
Under Art. 1322, 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; otherwise, sale is void.
3. SALE BY AND BETWEEN SPOUSES
a. Contracts with Third Parties
Under Art. 124 of Family Code, sale by husband of a conjugal property without the wife’s consent is
void and not merely voidable, since the resulting contract lacks one of the essential elements of
“full consent”.
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A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her
consent.
As an exception, husband may dispose of conjugal property without wife’s consent if such
sale is necessary to answer for conjugal liabilities mentioned in Family Code.
b. Between Spouses
Sales between spouses who are not governed by a complete separation of property regime are
void, not just voidable.
Since the spouses cannot validly sell property to one another under Art. 14890, then policy
consideration and the dictates of morality require that the prohibition should apply also to commonlaw relationships. (live-in partner)
Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and
public policy and “subversive” of the stability of the family, a basic social institution which public
policy cherishes and protects.
The prohibition under which a husband or wife governed by a conjugal partnership of gains is also
applicable to common-law relationships such as live-in partners.
4. OTHERS RELATIVELY DISQUALIFIED
Contracts entered into in violation of Arts. 1491 and 1492 are not merely voidable, but are null and
void.
a. Guardians, Agents and Administrators.
Sale is invalid because of their Conflict of Interest. They are supposed to be fiduciaries to the
properties of the testator/ward.
Hereditary rights are not included in the prohibition insofar as administrator or executor of the
estate of the deceased.
Prohibition against agent does not apply if the principal consents to the sale of the property in the
hands of the agent.
b. Attorneys
Prohibition against attorneys purchasing the properties of their clients in litigation applies:
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Only while litigation is pending even though litigation is not adversarial in. (handling lawyers
cannot purchase the property of their clients.)
Only to a lawyer of record and does not cover assignment of the property given in judgment
made by a client to an attorney, who has not taken part in the case. (as long as the lawyer is not
directly involved to the case, it is perfectly fine)
Not applicable to a lawyer who acquired property prior to the time he intervened as counsel in the
suit involving such property
Also, a Contingency fee arrangement granting the lawyer proprietary rights to the property in
litigation since the payment of said fee is not made during the pendency of litigation but only after
judgment has been rendered in the case.
c. Judges
A judge should restrain himself from participating in the sale of properties – it is incumbent upon
him to advise the parties to discontinue the transaction if it is contrary to law.
A judge who buys property in litigation before his court after the judgment becomes final does not
violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial
Ethics.
Even when the main cause is a collection of a sum of money or when they order an auction sale,
the properties levied are still subject to the prohibition as long as the litigation is still in pendency or
continuing without final judgment, a judge cannot be involved in purchasing the said properties.
SUBJECT MATTER IN A CONTRACT OF SALE
1. Subject must be EXISTING, FUTURE or CONTINGENT at perfection of contract.
a. Emptio Rei Speratae – the sale of a thing not yet in existence, subject to the condition that
the thing will exist and upon failure of the said condition, the contract becomes ineffective.
Hence, if the thing that was promised to be in existence did now occur the buyer has the
obligation to pay the price.
The future thing itself is certain but uncertain as to quality and quantity | Future Thing |
Subject to the Condition that the thing should exist, absence of which produces no contract.
Ex. Pending crops which have potential existence may be valid object of sale and such
transaction cannot be considered to effectively be sale of the land or any part thereof. (byproduct of the soil only)
b. Emptio Spei – the sale of the hope itself. What is being sold is the promise that the thing will
come to existence, where it is agreed where the buyer will pay the price even if the thing does
not come to his possession or even it does not eventually exist.
Sale of the Hope Itself | The thing exists or is present. You are hoping to possess it. | Even if
you do not possess it or it does not come into existence, contract is valid.
Ex. PCSO ticket or any other raffle ticket.
c. Subject to Resolutory Condition – uncertain event upon the happening of which, the
obligation or right subject of which is extinguished
Ex. Facto de retro sales or sales with the right to repurchase | Conventional Redemption
2. Subject matter must be LICIT
Requisites concerning subject matter:
a.) Determinate or Determinable
b.) Licit or lawful
c.) Not be impossible
d.) Within the commerce of men
Rights which are transmissible may be the object of a sale while rights that are not transmissible
may not be the object of sale.
Deals with the LEGALITY. Under Art. 1347, a sale involving future inheritance is void and cannot be
the source of any right nor create any obligation.
Mortgagor can legally sell the mortgaged property – mortgage is merely an encumbrance that does
not affect his principal attribute as owner thereof. Law even considers void a stipulation forbidding
owner from alienating mortgaged immovable.
3. Subject matter must be DETERMINATE or at least DETERMINABLE.
a. Non – Specific Things (Generic) may be the object of sale – subject matter is
determinable when from the formula or description adopted at perfection there is a way by
which the courts can delineate it independent of the will of the parties.
As long as you have the means to separate, segregate the thing from a particular genus can
be determinable. Determinable subject matter of sale is not subject to risk of loss until they
are physically segregated or particularly designated.
b. Undivided Interest or Undivided Share in a Mass of Fungible Goods – may result in co
– ownership.
4. Quantity and Quality of Goods is not Essential for Perfection – sale of grains is perfected
even when the exact quantity or quality is now known, so long as the source of the subject is
certain.
5. Seller’s Obligation to Transfer Ownership to the Buyer
a. Seller’s Ownership need not exist at perfection – a perfected sale cannot be challenged
on the ground of the seller’s non-ownership of the thing sold at the time of the perfection. It is
at delivery that the law requires the seller to have the ownership of the thing sold.
It is essential that seller is owner of the property/thing he is selling. The principal obligation of
a seller is “to transfer ownership of” the property sold. This law stems from the principle
that nobody can dispose of that which does not belong to him.
b. Subsequent Acquisition of Title by Non – Owner Seller – Title passes to the seller by
operation of law (Hereditary Succession).
Ex. You are the heir of your dead father’s estate. You can sell the said land while the “will or
estate” is just being settled.
c. Acquisition by the Buyer may even depend on Contingency – Sale of Future Goods or
Goods to be Manufactured is valid only as an executory contract, it only becomes a
completed sales contract when the manufacturer acquires the material and bring the deliver
the goods to the said buyer.
General Rule: As long as you are the owner of the subject matter at the time of delivery, then the said
contract of sale is valid. NEMO DAT QUOD NON HABET. No one gives what they do not have. | One can
sell only what he owns.
PRICE AND OTHER CONSIDERATION
Price signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into
account for the fixing of the same. It must be certain or capable of being ascertained or its equivalent.
Price to be certain is an order to fix the value of the said subject matter even before the consummation of
their agreement.
Ex. Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to
increased construction costs.
REQUISTIES FOR A VALID PRICE
1. Price must be REAL
- It cannot be Fictitious or Simulated.
- There is the complete satisfaction in payment of the agreed upon purchase price it cannot be
deceitful, fictitious or simulated just to make it appear as a contract of sale.
- It is a badge of simulated price, which render the sale void, when the price, which is stipulated
thereon to have been paid, has in face never been paid by the purchaser to the seller.
Ex. When Deed of Sale was executed to facilitate transfer of property to buyer to enable him to
construct a commercial building and to sell the property to the children, such arrangement being
merely a subterfuge (deceit) on the part of buyer, the agreement cannot also be taken as a
consideration and sale is void.
2. Price must be in Money or its Equivalent – Consideration for sale can take different forms,
such as the prestation or promise of a thing or service by another. ( Money, PN, Checks, Acceptable
goods or rendering of service) as long as the equivalent value is rich then price is still considered
valid.
Ex. When deed provides that the consideration was the expected profits from the subdivision
project.
3. Price must be Ascertain | Ascertainable at the Day of Perfection – Price Determined to be
Ascertainable is as follows:
a. Set by Third Person Appointed at Perfection
b. Set by the Courts
c. By Reference to a Definite Day, Particular Exchange or Market
d. By Reference to Another Thing Certain
If the price is not yet certain on the date of perfection, the contract will be inefficacious. Unless
there is a partial delivery of the subject matter then the buyer must pay the sum of money
equivalent to the thing delivered.
Remember: Consideration is generally agreed upon as whole even if it consists of several parts, and
even if it is contained in one or more instruments; otherwise, there would be no price certain, and
the contract of sale not perfected.
4. Manner of Payment must be determined
A definite agreement on the manner of payment of price is an essential element in the formation of
a binding and enforceable contract sale; without it the sale is void and an action for specific
performance must fail.
When the manner of payment of the price is not discussed after “acceptance”, then such
“acceptance” did not produce a binding and enforceable contract of sale. More often, when there is
no manner of payment provided, this results in ambiguity to the determination of the purchase
price.
Also, where there is no other basis for the payment of the subsequent amortizations in a Deed of
Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall be
made in the amount as the first payment.
GROSS INADEQUACY OF THE PRICE
Mere inadequacy of the price does not affect the validity of the sale when both parties are in a position to
form an independent judgment concerning the transaction, unless fraud, mistake, or undue influence
indicative of a defect in consent is present . The contract may be annulled for vitiated consent and not
due to the inadequacy of price.
Gross inadequacy of pricy by itself will not result in a void contract. It does not even affect the validity of a
contract of sale unless it signifies a defect in the consent, when there has been fraud, mistake or undue
influence or that the parties actually intended a donation or some other contract.
There is “gross inadequacy in price” if it is such that a reasonable man will not agree to dispose of his
property.
Gross Inadequacy of Price may avoid Judicia/Execution Sale; (Involuntary Sale)
1. Only when it is shocking to the conscience of man.
2. There is showing that, in the event of a resale, a better price can be obtained
When a judicial sale is voided without fault of purchaser, the latter is entitled to the return of price with
simple interest, together with all sums paid out by him in improvements introduced on the property,
taxes, and other expenses.
FORMALITIES AND FORMATION OF THE CONTRACT OF SALE
General Rule: A contract is valid in any form that it may be entered into. Provided, all the requisites for its
validity are present.
Stages in Formation of Contract of Sale
1. Policitacion | Negotiation
2. Perfection
3. Consummation
POLICITACION – an unaccepted unilateral promise to buy or to sell. It is on the part of one party and
not yet accepted. As long as the promise is not accepted it will not produce any juridical effect.
OPTION CONTRACT – an accepted unilateral promise to buy or sell, it is binding if it supported by a
consideration which is distinct from the purchase price or in other words it is a separate contract from
the actual contract of sale.
It is a contract granting a privilege to one of the parties for which he has paid for a consideration given him
the right to buy within the agreed period at a fixed price. It is a preparatory contract to the actual contract
of sale. It’s a preparatory contract that binds the party who gave the option not to enter into the principal
contract with anyone else during the period designated and agreed upon. It is not a sale; it merely secures
the privilege to buy.
The option contract cannot be withdrawn from the date specified or as agreed upon, but if the option was
withdrawn by one of the parties without any valid reason then there will be a breach of contract (the
option contract), since the contract is not yet perfected, specific performance cannot be the remedy but
instead the one who withdraw can be held liable for damages.
If the buyer exercises the option, it doesn’t necessarily mean that the buyer will pay the principal price
but instead pay it until the seller delivered the subject matter, the prescriptive period to enforce the option
contract is 10 years from the accrual of the cause of action.
If the other party accepts the option, it will be a bilateral promise to buy and to sell, it is now
reciprocally demandable because both of the parties have an obligation, the promise to sell and the
promise to buy, they are now bound to their respective undertakings
CONSIDERATION OF AN OPTION CONTRACT – Any valuable consideration which is sufficient to
support a contract and must be distinct and separate from the principal price.
If the consideration is not distinct and separate from the price, then it is void as an option contract but it
is valid as an offer, it may be withdrawn before acceptance.
RIGHT OF FIRST REFUSAL – It is a contractual grant, it’s not a contract in itself , of first priority to buy
the property if and when the owner decides to sell it. (Ex. Lease, when lessee may have the option to buy
the said property when the lessor decides to sell it, he will have the right of first refusal).
Has no price involved it is a simply a right to be offered the premises first. The Seller promise that if he
decides to sell, he can only offer to third persons if he first offers to the grantee of the right of first refusal,
if the grantee did not exercise his right to purchase then the sale to a third person is valid. In addition, if
the period of the right of first refusal lapse or expired then the seller has the right to sell it to third person.
It is an accessory to a contract and considered as built-in to the reciprocal obligation of the parties, the
main consideration in the right of first refusal is the main consideration of the principal contract.
It is sufficient that negotiation between the seller and the buyer are undertaken, it is not required that
they agreed on a price, as long as it is offered to be sold first to the buyer (grantee).
If the seller violates the right of refusal, the contract to the third person may be rescinded.
PERFECTION – Since a contract of sale is consensual, it is perfected at the moment of the minds of the
parties meet upon such a thing to be the object of the contract and upon the consideration or the price. If
the sale is subject to a suspensive condition, the contract will only be perfected if the condition is fulfilled.
AUCTION SALE – Rules of an auction sale are the following:
1. Sale of separate lots by auction are separate contracts of sale.
2. Sale is perfected by the fall of the hammer. Before the hammer falls, the bidder may retract his bid
or the auctioneer may withdraw the goods unless the auction is without reservation.
3. Seller has the right to bid in the auction, provided:
a. Such right was reserved
b. Notice was given that the sale was subject to a right to bid on behalf of the seller
c. Right is not prohibited by law or by stipulation.
(Purpose of this rule is to prevent puffing or secret bidding by or on behalf of the seller by people who are
not themselves bound)
4. Advertisements for bidders are simply invitation to make proposals, and the advertiser is not bound to
accept the highest or lowest bidder, unless the contrary appears.
EARNEST MONEY – (ARRAS) is something of value to show that the buyer was really in earnest, and
given to the seller to bind the bargain, it is considered as (a) part of the purchase price and (b) proof of
perfection of the contract, however, the best way to know whether the contract is perfect is knowing if the
essential elements are present.
Where the earnest money is forfeited, that forfeiture is not provided by law, rather it’s a contractual
stipulation, in other words that certain money will be forfeited. Forfeiture is allowed as long as there is a
stipulation, but without a stipulation, by virtue of mutual restitution, the earnest money shall also be
returned.
EARNEST MONEY VS. OPTION MONEY
Earnest Money
1.
2.
3.
4.
5.
The title of the thing passes to the buyer upon delivery.
There is already a sale.
Forms part of the purchase price.
When given, the buyer has to pay the balance.
In case of non-payment, an action for specific performance or for rescission can be filed by the
injured party.
Option Money
1. The title remains to the seller until the price is fully paid.
2. The sale is not yet perfected, there is still an option to enter or not.
3. Money given as a distinct and separate consideration for an option contract.
4. There is no balance to talk about because it is distinct and separate from the principal contract.
5. In case of non-payment, there can be action for specific performance.
SALE BY NON-OWNER (VOID TITLE)
General Rule: In a sale by a non-owner or someone who is not an owner of a thing, the buyer acquires no
better title (void title) to the goods than the seller had. The buyer merely steps into the shoes of the
seller. “No one can give what he does not have”.
Exceptions:
1. If the owner is estopped or precluded by his conduct, such as when he ratifies the sale by a nonowner or he has committed acts that led the buyer to believe the he was allowing the seller to sell
something that he owns.
2. In case of a sale by the registered or apparent owner according to registry laws. If the sale is
allowed under those laws and done by the registered/apparent owner then that sale will also be
valid and the buyer will acquire a better right than the seller ever had.
3. Sale sanction either by law or by judicial authority.
4. Purchases in a merchant’s store, fairs or markets.
5. In case a non-owner subsequently acquires title, then the title will pass to the buyer by operation of
law.
6. In case a co-owner sells the whole property which he co-owns or a definite portion of property
which does not belong to him then the sale will only affect his share.
General Rule is that the seller need not be the owner of the thing, he just has to have ownership at the
time of delivery of the thing.
Under the law on property, there is a general rule that states “possession of a movable or personal
property which is acquired in good faith is equivalent to title” (finders’ keepers).
Exception:
1. In case the owner of the thing either lost it or deprived of the possession of the thing unlawfully.
(stolen). The owner may recover the thing from you without reimbursing.
Exception to the Exception:
a. In case the buyer acquired the thing or personal property either in public sale in good faith or
purchase in merchant stores, markets or fairs then he has acquired a good title.
VOIDABLE TITLE – it is valid until it is annulled, either because there is a defect on consent, or if the
consent is vitiated due to fraud, mistake or undue influence, etc.
In case the seller has voidable title, and the buyer buys a thing from that seller, the buyer may acquire
good title if:
1. The buyer is in good faith
2. The buyer paid a valuable consideration
3. The buyer is not aware of the defect in the title of the seller
The sale of an owner or non-owner of a thing at the time of perfection is still valid because he/she can still
acquire title at the at the time of delivery then he is able to transfer the ownership to the buyer by
operation of law.
At consummation, the owner passes valid title while non-owner cannot pass title or nothing passes.
OBLIGATION OF THE VENDOR
The obligations of the vendor include:
1.
2.
3.
4.
5.
6.
7.
8.
To transfer ownership
To deliver the thing and its accessories and accessions.
To make warranties
To take care of the thing with proper diligence, pending delivery of the object.
Pay the expenses for execution and registration of the sale unless stipulated.
To give the buyer the right to examine the goods.
To enter into a contract on a carrier on the buyer’s behalf.
Notify the buyer of the necessity to ensure the goods if it is usual to ensure such goods.
TRANSFER OF OWNERSHIP
Ownership is transferred upon delivery either actual or constructive. Payment does not affect ownership.
Exception:
a. Contrary Stipulation – If there is contractual stipulation reserving ownership (pactum reservati
domini), ownership will be reserved until the payment of the price
b. Contract to Sell – are bilateral contracts which are subject to a suspensive condition, the obligation
to deliver and to enter into a contract of sale is subject to a suspensive condition usually full
payment of the purchase price.
c. Sales upon acceptance, trial, approval or satisfaction – In these kinds of sales, the ownership
passes through the buyer only when the buyer signifies his acceptance or approval or he performs
an act adopting the transaction. If he doesn’t signify his acceptance but he retains the goods
without giving notice of his rejection and if there is a period set which he must give notice and the
notice expires or if there is no period fix then upon expiration of a reasonable time.
d. Implied Reservation of Ownership – The seller retains ownership on the ff. instances.
a. If under the bill of lading, the goods are deliverable to seller or agent or their order.
b. If the bill of lading, although stating that the goods are to be delivered to the buyer or his
agent, is kept by the seller or his agent.
c. When the buyer, although the goods are deliverable to order of buyer, and although the bill of
lading is given to him, does not honor the bill of exchange sent along with it.
DELIVER THE THING AND ITS ACCESSION OR ACCESSORIES
Seller is bound to deliver all the goods and all the accession or accessories except if there is a stipulation
that delivery will be by installment. It must be delivered in the condition in which they were at the time of
perfection of contract and that the fruits, they pertain to the buyer on the day of which the contract is
perfected.
In order to be a valid delivery, there are three requisites:
1. There must be identity
2. There must be integrity
3. It must be intentional
FORMS OF DELIVERY
1. Actual or Real – that the control or possession is physically given to the buyer
2. Legal or Constructive – delivery is by representation of acts or signs indicating delivery, in other
words the seller has control, the buyer must be given control and there must be intent to give the
control.
a. Execution of a public instrument – merely executing a public instrument is enough in
constituting a delivery except:
i. If there is a stipulation that the date of taking of a possession or transfer is
stipulated upon the parties
ii. Ownership or possession will only be transferred upon payment of final installment.
iii. If there is a reservation of the right by the seller to use the thing until he has
finished gathering the fruits of the thing.
iv. The thing is not in control of the seller, the execution of the public instrument is only
a mere act.
v. There is no reasonable time given for the buyer to take control because the law
requires that reasonable time maybe given to the buyer within in which he may take
control of the thing subject to the public instrument
b. Traditio Symbolica – simply by giving a token or symbol of the thing such as house or
car, by delivery of the key.
c. Traditio longa manu – (long hand) when the seller merely points out to the thing and
says that the thing has been delivered now to the buyer
d. Traditio brevi manu – (short hand) the buyer is in possession of the thing and then later
on he becomes the owner such as when a person is leasing an apartment and sold to him.
e. Traditio constitutum possessorium – it is the seller in continuous of possession but he
is no longer the owner such as when a person is leasing an apartment and sold to him but
the seller stays at the apartment.
3. Quasi-Traditio – delivery of rights, credits or incorporeal property, made by:
a. Placing titles of ownership in the hands of the buyer
b. Allowing buyer to make use of rights
4. By Operation of Law – when a seller sells a thing without having title but subsequently acquires
title then the buyer will become the owner by operation of law.
5. Documents of Title – through this form, the seller is allowed to deal with the goods as if he
physically delivers it to the buyer and the buyer on the other hand, may take that document as
though he actually took possession or control over the goods.
Sale or Return – the ownership passes right away to the buyer, in which case, the buyer can revest
ownership in the seller by returning the goods within the fixed time and within a reasonable time if there is
no fixed time.
WHO BEARS THE RISK OF LOSS
DELIVERY OF MOVABLES (PERSONAL PROPERTY)
Where it is stipulated that deliveries must be made to the buyer or his duly authorized representative
named in the contracts, the seller is under obligation to deliver in accordance with such instructions.
DELIVERY OF IMMOVABLES (REAL PROPERTY)
In case of immovables, when 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, provided that:
(a) The thing sold is subject to the control of the seller and
(b) Such control should remain within a reasonable period after the execution of the instrument
CUSTOMARY STEPS IN THE SALE OF IMMOVABLES
SPECIAL RULES ON COMPLETENESS OF DELIVERY
ROLE OF THE SELLER IN CIF, FOB OR COD SALES
DOUBLE SALE
DOUBLE SALE THE OBJECT WAS SOLD BY THE SAME SELLER
INNOCENT PURCHASER
RULES IN DOUBLE SALES
Caveat Emptor (Buyer Beware)
Prior Tempore, Potior Jure
OBLIGATIONS OF THE BUYER
WARRANTIES AND CONDITION
WARRANTY
Is a statement or representation made by the seller of goods, contemporaneously and as part of the
contract of sale, having reference to the character, quality or title of the goods, and by which he promises
or undertakes to ensure that certain facts are or shall be as he then represents them
CONDITION
When a contract contains a condition, the happening/non-happening of which would not constitute a
breach but extinguishes the obligation. However, if party to the sales contract has promised that the
condition should happen or be performed, the non-performance of which may be treated by parties as
breach.
CONDITION VS. WARRANTY
CONDITION



Purports to existence of obligation
Obligation must be stipulated to form part of the contract of sale
May attach itself to obligation of seller to deliver possession and transfer the object
WARRANTY



Purports to the performance of the obligation
Need not be stipulated; may form part of obligation by provision of law
Relates to the subject matter itself or to obligation of the seller as to the subject matter of sale
TYPE OF WARRANTIES
1. Express Warranty
Warranties that are actually written and stipulated, the requisites are the following:



It must be an affirmation of fact or any promise by seller relating to the subject matter of sale
Natural tendency of affirmation or promise is to induce buyer to purchase subject matter
Buyer purchases the subject matter relying thereon.
2. Implied Warranty
Warranties that are deemed included in all contract of sale whether parties are actually aware or not
aware or whether they were intended or not; by operation of law.
Kinds of Implied Warranties
1. Warranty that seller has a right to sell
This refers to consummation stage since in consummation stage, it is where ownership is
transferred by delivery.
Note: This is not applicable to a sheriff, auctioneer, pledgee or mortgagee.
2. Warranty against eviction
Unless contrary provision appears in contract it is the warranty given by the seller that when
ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing.
Requisites of Breach of Warranty against Eviction
a.
b.
c.
d.
Buyer is evicted in whole or in part from the subject matter of sale;
There is a final judgement;
Basis of eviction is a right prior to sale or an act imputable to vendor;
Seller has summoned in the suit for eviction at the instance of buyer; or made by a 3 rd party
defendant through a third party complain brought by the buyer.

No appeal needed nor a need to resist eviction for right to accrue; enough that aforementioned
requisites are complied with
Warranty cannot be enforced until aforementioned requisites concur
Applies to judicial sale; judgement debtor responsible for eviction unless otherwise decreed in
judgement
Vendor not liable for eviction if adverse possession had been commenced before sale but
prescriptive period is completed after transfer



Liability of Seller (in case of eviction which caused buyer to lose whole subject matter)
a.
b.
c.
d.
e.
Value of the thing at time of eviction (whether or not -/+ than the price of sale)
Value of income of fruits
Cost of suit which caused the eviction
Expenses of contract of buyer paid for them
Damages & interest and ornamental expenses if sale was made in bad faith
Rights of buyer when deprived of only part of the subject matter but would not have bought
such part if not in relation for the whole:
a. Rescission
b. Mutual restitution
3. Warranty against Encumbrances
Encumbrances may mean liens, burden, easement or servitude attached to a immovable property
which may be apparent (may be seen) or non-apparent (may not be seen).
Requisites for non-apparent:
a. Immovable sold is encumbered with non-apparent burden or servitude not mentioned in the
agreement.
b. Nature of non-apparent servitude or burden is such that it must be presumed that the buyer
would not have acquired it had he been aware thereof;
 When breach of warranty exists; buyer may ask for rescission or indemnity;
 Warranty not applicable when non-apparent burden or servitude is recorded in the
Registry of Property – unless there is an express warranty that the thing is free from all
burdens & encumbrances.
4. Warranty against Hidden Defects
SELLER does not warrant patent defect; caveat emptor

Except when hidden: (Requisites)
a. Subject matter may be movable or immovable
b. Nature of hidden defect is such that is should render the subject matter unfit for the use
of which it was intended or should diminish its fitness.
c. Had the buyer been aware, he would not have acquired it or would have given a lower
price





When defect is visible or even if invisible if the buyer is an expert by reason of his trade or
profession, seller is not liable.
Obligation of seller for breach depends on whether he has knowledge of such defect or not
a. Seller is aware – seller should return price & refund expenses of contract with damages.
b. Seller is not aware – seller should return price and interest & refund expenses (no
damages)
Buyer may elect between withdrawing from contract or demanding proportionate reduction of
price with damages in either case
Applicable to judicial sale except judgment debtor who is not liable for damages
Action to prescribe in 6 months from delivery of subject matter
5. Warranty for Animals
 Even in case of professional inspection but hidden defect is of such nature that expert
knowledge is not sufficient – defect shall be considered as REDHIBITORY
 If vet fails to discover through ignorance or bad faith, he is liable for damages
a. A sale of animals on teams (2 or more)
 When only one is defective, only one is redhibited & not the others
 Exception: when it appears that purchase of team will not be done without the
defective one.
b. Sale of animals at fair or public auction
 No warranty against hidden defects
c. Sale of animals with contagious disease is void
d. Sale of unit of animal
 Void if use/service for which they are acquired has been stated in the contract and
they are found to be unfit thereof; prescription of action: 40 days from date of
delivery to buyer
 If sale is rescinded, animals to be returned in same condition when they are
acquired; buyer shall answer for injury/loss due to his fault
 Buyer may elect between withdrawing from sale or demanding proportionate
reduction of price with damages in either case
EXTINGUISHMENT OF SALE
CONVENTIONAL REDEMPTION
NATURE OF CONVENTIONAL REDEMPTION
1.
2.
3.
4.
5.
6.
7.
8.
Contractual
Real Right
Potestative – Will of the original vendor
Resolutory
Power or Privilege
Reserved at the Moment of Perfection of the Contract
Person entitled to exercise the right is the owner of the property
Gives Rise to Reciprocal Obligations
(Original Vendor returns Price, Original Vendee execute a DOAS back to the original vendor)
Conventional Redemption – Contract of Sale with a Right of Repurchase or Pacto de Retro Sales.
For validity: Right to repurchase must be constituted as part of a valid sale at perfection.
How to Redeem in Conventional Redemption
In order to exercise the right to redeem, only tender of payment is sufficient. But when tender not
possible, consignation should be made.
In this case, the filing of a judicial action, plus the consignation of the redemption price within the period of
redemption, is equivalent to a formal offer to redeem.
Option to Buy is different from Right of Repurchase
1. Option to Buy is commonly under a separate Contract preparatory to the Deed of Sale.
2. Right of Repurchase is the reservation made by the Vendor which is already integrated in the
Contract of Sale.
Equitable Mortgage
One which lacks the proper formalities, form of words, or other requisites prescribed by law for a
mortgage, but shows the intention of the parties to make the property subject of the contract as security
for a debt and contains nothing impossible or contrary to law.
When does a Conventional Redemption deemed an Equitable Mortgage (IPERTOD)
1.
2.
3.
4.
5.
Unusually Inadequate purchase price
Possession by the vendor remains, as lessee or otherwise
Extension of redemption period after expiration
Retention by the vendee of part of the purchase price
Vendor binds himself to pay the Taxes of the thing sold
6. Any Other case where the parties really intended that the transaction should secure the payment of
a debtor the performance of any obligation
7. When there is Doubt to as to whether contract is Contract of sale with right of repurchase or an
equitable mortgage.
Can the Period of Redemption be Extended
1. After the Expiration of the Period: No extension is feasible because that which is extinguished
cannot be extended and because ownership in the vendee is already consolidated and becomes
absolute.
2. Before the Expiration of the Period: Original period may be extended provided the extension,
including the original term, shall not extend beyond ten years; otherwise, the extension is void as to
the excess
What happens when no Redemption is Made
Buyer has now the right to consolidate his ownership. When it comes to real property, there must be a
judicial order before ownership of real property is consolidate in the buyer a retro.
Obligations of the Vendor when he exercises his Right to Redeem
1. To return to the vendee the price of the sale;
2. Payment of the expenses
3. Reimbursement of the necessary expenses
LEGAL REDEMPTION
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:
1. Purchase
2. Dation in payment; or
3. By any other transaction whereby ownership is transmitted by onerous title.
Instances of Legal Redemption under the Civil Code