THE LAW ON SALES

(Ref. Arts. 1458 -1637, Civil Code of the Phil.;

The Law on Sales, Agency and Credit
Transactions by: Hector S. De Leon)

CHAPTER I
NATURE AND FORM OF THE CONTRACT

ART. 1458.

 By the CONTRACT OF SALE

 one of the contracting parties (VENDOR) obligates
himself to transfer the ownership of &
deliver a determinate thing,

AND
 the other (VENDEE) to pay therefore a price
certain in money or its equivalent.

 CHARACTERISTICS OF A CONTRACT OF SALE:

i. Consensual;
ii. Bilateral;
iii. Onerous;
iv. Commutative (v = p);
v. Nominate;
vi. Principal.

 ESSENTIAL REQUISITES OF A CONTRACT OF

SALE:

1. Consent or meeting of the minds;

2. Object or subject matter;
3. Cause or consideration.

 TWO KINDS OF CONTRACT OF SALE:

1. Absolute;
2. Conditional.

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

 REQUISITES CONCERNING OBJECT:

1. Determinate (Arts. 1458, 1460);
2. Licit or lawful – that w/c is not contrary to laws
morals, good customs, public order, or public
policy
 Art. 1347
-things w/c are outside the
commerce of men;
3. Not impossible
 Art. 1348. Impossible things or
services cannot be the object of
contracts.
o EFFECT: Art. 1409.
- Contracts whose object is outside the
commerce of men and contemplates an
impossible service are void and cannot
be ratified.

 GENERAL RULE:
One can sell only what he owns. Nobody can
dispose of that w/c he does not have.
EXCEPTIONS:
Art. 1505.
1. When the owner of the goods is, by his
conduct, precluded from denying the seller’s
authority to sell;
2. Where the law enable the apparent owner to
dispose of the goods as if he were the true
owner thereof – (EX., Negotiable instruments
laws; Warehouse Receipts Law);
3. Where the sale is sanctioned by statutory or
judicial authority;
Art. 559. The possession of movable
property acquired in good faith
is equivalent to title.

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 4. Where the sale is made at merchant’s
stores, fairs or markets;

Art. 1506.
5. Where the seller has a voidable title which
has not been avoided at the time of the sale;

Art. 1390.
Voidable contracts:
a) One of the parties is incapable of
giving consent to a contract;
b) Where the consent is vitiated by
mistake, violence, intimidation,
undue influence or fraud.
6. Where seller subsequently acquires title.

ART. 1460.
 A thing is determinate when it is particularly
designated OR physically segregated from all
others of the same class.

The requisite that a thing be determinate is

satisfied if at the time the contract is entered
into, the thing is capable of being made
determinate w/o the necessity of a new or further
agreement between the parties.

ART. 1461.
 Things having a potential existence may be the
object of a 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.

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ART. 1462.
 The goods w/c form the subject of a contract of
sale may be either –
i. existing goods owned or possessed by the
seller
OR
ii. goods to be manufactured, raised, or
acquired by the seller after the perfection
of the contract of sale (future goods)
- executory contract; to be fulfilled
by the acquisition and delivery of
the goods specified;
- upon acquisition of the goods,
either party acquires the right to
demand the execution of the
contract of sale.

ART. 1463.
 The sole owner of a thing may sell an undivided
interest therein.

o EFFECT: The buyer becomes a co-owner

with the seller in the thing sold.

ART. 1464.
 In case of fungible goods,

there may be a sale of an undivided share of a

specific mass (provided the mass is specific and
capable of being made determinate)

o EFFECT: The buyer becomes a co-owner

w/ the seller of the whole mass in the
proportion in w/c the definite share bought
in the mass.

If it is discovered that the mass of

fungible goods contains less than what was
sold, the buyer becomes the owner of the
whole mass and the seller shall supply
whatever is lacking from goods of the same
kind and quality.

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ART. 1465.
 Things subject to a resolutory condition may be
the object of the contract of sale.

o A resolutory condition is an uncertain event

upon the happening of which the obligation
(or right) subject to it is extinguished.
ie., sale w/ right to repurchase;
redemption w/in 1 yr. from sale (mortgaged
property).

ART. 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.

o CONTRACT OF SALE (S) vs. CONTRACT OF

AGENCY TO SELL (AS)

1. In S - the buyer receives the goods as

owner;
In AS - the agent receives the goods as
the goods of the principal who retains his
ownership over them;

2. In S - the buyer has to pay the price;

In AS - the agent has simply to account
for the proceeds of the sale;

3. In S - the buyer, as a general rule,

cannot return the object sold;
In AS - the agent can return the object in
case he is unable to sell the same;

4. In S - the buyer can deal w/ the thing

sold as he pleases;
In AS - the agent must act and is bound
according to the instruction of the his
principal.
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ART. 1467.
 A contract for the delivery at a certain price of an
article w/c 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.

o CONTRACT OF SALE (S) vs. CONTRACT

FOR A PIECE OF WORK (POW)
1. In S - the thing transferred is one w/c
would have existed, and been the subject
of sale to some other persons, even if the
order had not been given;
In POW - the thing transferred is one not
in existence and w/c never would have
existed but for the order of the party
desiring to acquire it.

2. In S - the risk of loss is born by the buyer

(Arts. 1480, 1538, 1189);
In POW - the risk of loss before delivery
is borne by the worker or contractor
(Arts. 1717, 1718).

3. In S - the Statute of Frauds applies if the

price of the article is not less than P500;
In POW – not w/in the Statute of Frauds
(Arts. 1403 [2]).

ART. 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.

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 If such intention does not clearly appear, it shall
be considered a BARTER if the value of the thing
given as part of the consideration exceeds the
amount of the money or its equivalent; otherwise,
it is a sale.

o CONTRACT OF SALE (S) vs. CONTRACT OF

BARTER (B)
In S - the vendor gives a thing in
consideration for a price in money;
In B – one of the parties binds himself to
give one thing in consideration of the
other’s promise to give another thing.

ART. 1469.
 In order that the price may be considered certain,
it shall be sufficient that it be so w/ reference to
another thing certain,
OR
that the determination thereof be left to the
judgment of a specified person or persons.

Should such person/s be UNABLE or

UNWILLING to fix it, the contract shall be
inefficacious (ineffective), unless the parties
subsequently agree upon the price.
If the third person/s ACTED IN BAD FAITH or by
MISTAKE, the courts may fix the price.
Where such person/s 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.
- Art. 1192 [2] – rescission or fulfilment
w/ damages.

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  WHEN PRICE IS CONSIDERED CERTAIN:
The price is certain if –

1. The parties have fixed or agreed upon a

definite amount; or
2. It be certain w/ reference to another thing
certain (Art. 1472);
3. The determination of the price is left to the
judgment of a specified person/s.

ART. 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.
o Re: inadequacy of price
-in execution or judicial sale;
-in sale w/ right to repurchase
- where price is so low as to be
shocking to the conscience
(set aside) Dir of Lands v. Abarca, 61
Phil. 70)

ART. 1471.
 If the price is SIMULATED (false), the sale is
void, but the act may be shown to have been in
reality a donation, or some other act or contract.

ART. 1472.
 The price of securities, grain, liquids, and other
things shall also be considered certain --
when the price fixed is that w/c the thing
sold would have:
i. on a definite day OR
ii. in a particular exchange or market, OR
iii. when an amount is fixed above or below
the price on such day, or in such
exchange or market, provided such
amount be certain.

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

ART. 1474.
 Where the price cannot be determined – 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 reasonable price is a question of fact

dependent on the circumstances of each
particular case.

ART. 1475.
 The contract of sale is PERFECTED at the
moment there is a meeting of the mind s 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.

 FAILURE TO PAY PRICE (FTPP) vs. ABSENCE OF

PRICE (AOP)

FTPP – does not ipso facto dissolve the contract,

the vendor may demand specific
performance or rescission w/ damages.

AOP - (appears to have been paid, but not) – the

sale is void and non-existent.

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ART. 1476.
 In the case of a SALE BY AUCTION:

1. Sale of separate lots by auction are separate

sales;
2. Sale perfected by the fall of the hammer;

3. Seller may bid in the auction provided –

a) Such right was reserved;

b) Notice was given that the sale is
subject to a right to bid in behalf of the
seller;
c) The right to bid is not prohibited by
law or stipulation.

ART. 1477. [General Rule]

 The ownership of the thing sold shall be
transferred to the vendee upon the ACTUAL or
CONSTRUCTIVE delivery thereof.

ART. 1478. [Exception]

 The parties may stipulate that ownership in the
thing shall not pass to the purchaser until he has
fully paid the price.

ART. 1479.
 A promise to buy and sell a determinate thing for
a price certain is reciprocally demandable.
(BILATERAL PROMISE TO BUY & TO
SELL = perfected contract of sale)

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.

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ART. 1480.
 An 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 Arts.
1163 to 1165, and 1262.

This rule shall apply to the sale of fungible

things, made independently and for a single
price, or w/o consideration of the 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.

o GENERAL RULE:

RISK OF LOSS = BENEFIT OF FRUITS

*loss before *loss at time *loss after *loss after

perfection of perfection perfection delivery
SELLER * BUYER

o EXCEPTION:
[Fungible goods sold for a price fixed in
relation to weight, number, or measure.]

The BUYER bears the loss ONLY when

the goods are weighed, numbered or
measured and DELIVERED

UNLESS the buyer has incurred

delay in receiving the goods sold.

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ART. 1481.
 In the contract of sale of goods BY DESCRIPTION
or BY SAMPLE,
the contract may be rescinded
if the bulk of the goods delivered be not
correspond w/ the description OR the
sample.

If the contract be BY SAMPLE and BY

DESCRIPTION,
the contract may be rescinded
if the bulk of the goods delivered be not
correspond w/ the sample AND the
description.
The buyer shall have a reasonable opportunity of
compairing the bulk w/ the description or the
sample.

ART. 1482.
 Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price
AND as proof of the perfection of the contract.

ART. 1483.
 Subject to the provisions of the Statute of Frauds
and of any other applicable statute,

a contract of sale may be made –

i. in writing, or
ii. by a word of mouth, or
iii.partly in writing & partly by word of mouth, or
iv. may be inferred from the conduct of the
parties.

whenever earnest money is given in a contract of

sale, it shall be considered as part of the price
AND as proof of the perfection of the contract.

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 OPTION MONEY vs. EARNEST MONEY
1. OM – the money given as distinct consideration
for the option contract;
EM – part of the purchase price.

2. OM – applies to a sale not yet perfected;

EM – given only when there is already a sale.

3. OM – buyer is not required to buy;

EM – buyer is bound to pay the balance.

ART. 1484.
 In a contract of sale of personal property, the
price of w/c 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 2 or more installments;
3. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee’s failure to pay cover 2 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).

o The remedies are alternative and are not to

be exercised cumulatively.

ART. 1485.
 Art. 1484 shall apply to contracts purporting to
be leases of personal property w/ option to buy,
-when the lessor has deprived the lessee of
the possession or enjoyment of the thing.

 Leases of personal property w/ option to buy = a

contract of sale of personal property in
installments.

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ART. 1486.
 In cases referred to in Arts. 1484 & 1485, 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.

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

ART. 1488.
 The expropriation of property for public use is
governed by special law.

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