1. Define contract of sale.

3 pts

- Under art. 1458, a contract of sale is where one of the contracting parties obligates himself to transfer
the ownership of and deliver a determinate thing, and the other pay therefor a price certain money or its
equivalent. It may be absolute or conditional. In other words, a contract of sale is an agreement where by
one of the parties (seller or vendor) obligates himself to deliver something to the other (buyer or
purchaser or vendee) who, in his part, binds himself to pay therefor a sum of money or its equivalent.

2. The perfection of the contract of sale gives rise to two sets of obligations. What are these two sets of
obligations? Explain. 3pts

- The two sets of obligations are the obligation of the vendor and the obligation of the vendee. The
obligation of the vendor, art. 1495 provides, that the vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale. In which case, the vendor is obligated
to transfer ownership of the determinate thing sold, to deliver the thing, with its accessories, if any, in
condition in which they were upon the perfection of the contract, to warrant against eviction and hidden
defects, to take of the thing, pending delivery, with proper diligence, and to pay for the expenses of the
deed of sale, unless there is a stipulation to the contrary. The obligation of the vendee, under art. 1582, is
that the vendee is bound to accept delivery and to pay the price of the thing sold at that time and place
stipulated in the contract. Therefore, the vendee is obligated to accept delivery, of the thing sold, to pay
the price of the thing sold at the time and place stipulated in the contract, and to bear the expenses of the
execution and registration of the sale and putting the goods in deliverable state, if such is the stipulation.

3. What are the elements of a contract of sale? Explain each element. 4pts

The following are the elements of contract of sale:

a. Consent or meeting of the minds – refers to the consent on the part of the seller to transfer and
deliver and on the part of the buyer to pay. The parties must have legal capacity to give consent
and to obligate themselves. The essence of the consent is the conformity of the parties on terms of
the contract, the acceptance by one of the offers made by the other. The contract to sell is bilateral
contract. Where there is merely an offer by one party without the acceptance of the other, there is
no consent. The acceptance of payment is an indication of his consent of the contract of sale,
thereby precluding him from rejecting its binding effect.
b. Object or subject matter – refers to the determinate thing which is the object of the contract. The
thing must be determinate or at least capable of being made determinate because if the seller and
the buyer differ in regard to the thing sold, there is no meeting of the minds; therefore, there is no
sale. The subject matter may be personal or real property. The terms used in the law are “thing”,
goods, “personal property”, “property”, “movable property”, “real estate”, “immovable”, “immovable
property”, and “real property.”
c. Cause and consideration – refers to the “price certain in money or its equivalent” such as a check or
a promissory note, which is the consideration for the thing sold. It does not include goods or
merchandise although they have their own value in money. However, the words “its equivalent”
have been interpreted to mean that payment need not be in money, so that there can be a sale
where the thing given as token of payment has “been assessed and evaluated and its price
equivalent in terms of money [has] been determined.”

4. Distinguish between a conditional sale, on the one hand, and an absolute sale, on the other hand. 3 pts

- In absolute sale, where the sale is not subject to any condition whatsoever and where title passes to the
buyer upon delivery of the thing sold. Thus, it has been held that a deed of sale is absolute in nature
although denominated as a “Deed of Conditional Sale” in the absence of any stipulation that the title to
the property sold is reserved in the vendor until full payment of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period. While in conditional sale, the sale contemplates a contingency, and in general, where the contract
is subject to certain conditions, usually, in the case of the vendee, the full payment of the agreed purchase
price and in the case of the vendor, the fulfillment of certain warranties, e.g., the timely eviction of
squatters on the property sold.

5. Distinguish between a contract of sale and a contract to sell. 4 pts

As for transfer of title, In a contract of sale, title passes to the buyer upon delivery of the thing sold, while
in a contract to sell or of exclusive right and privilege to purchase, where it is stipulated that ownership in
the thing shall not pass to the purchaser until he has fully paid the price, ownership is reserved in the
seller and is not to pass until the full payment of the purchase price. In the absence of such stipulation,
especially where the buyer took possession of the property upon execution of the contract, indicates that
what the parties contemplated is a contract of absolute sale.

As for payment of price, in contract of sale, non-payment of the price is a negative resolutory condition,
and the remedy of the seller is to exact fulfillment or to rescind the contract, while in contract to sell, full
payment is a positive suspensive condition, the failure of which is not a breach, casual or serious, of the
contract but simply an event that prevents the obligation of the vendor to convey title from acquiring
binding force. Where the seller promises to execute a deed of absolute sale upon full payment of the
purchase price.

As for ownership of vendor, being contraries, their effect in law cannot be identical. In contract of sale, the
vendor has lost and cannot recover the ownership of the thing sold and delivered, actually or
constructively, until and unless the contract of sale itself is resolved and set aside. In the second case,
however, the title remains in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract. There is no actual sale until and unless full payment
of the price is made and a contract of sale is entered into to consummate the sale. If the vendor should
eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not
rescinding it. A contract to sell is commonly entered into so as to protect the seller against a buyer who
intend to buy a property in installments by withholding ownership over the property until the buyer
effects full payment therefore.

6. Explain: Sale is a form of “title” not a “mode”. 3 pts

- In the case of San Lorenzo Development Corporation vs. Court of Appeal, the court ruled that sale is not
a mode, but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred, or destroyed, but title is only the legal basis by which to affect dominion or ownership.
Contracts only constitute titles or rights to transfer or acquisition of ownership, while delivery or tradition
is the mode of accomplishing the same. Therefor, sale itself does not transfer or affect ownership, the
most that sale does is to create and obligation to transfer ownership. It is tradition or delivery, as a
consequence of contract of sale, that actually transfers ownership.

7. A transferred to B a parcel of land for the price of 1million pesos. It was agreed in the contract that B
will pay 400,000 in cash and that for the remaining amount, he will convey his old Ford Ranger Wildtrak,
now valued at 600,000. What kind of contract is this? 5pts

- In this case, the contract is a commutative contract because the thing sold, in this case, the parcel of land
at the price of one million, is considered the equivalent of the price paid, in which the payment is by
means of a cash of 400,000 pesos and an old Ford Ranger Wildtrak worth 600,000 pesos as that stipulated
in their contract.

8. A granted B the exclusive right to sell his assembled bicycles in Butuan City, the price is payable within
60 days from delivery, and promising B a commission of 20% on all sales. After the delivery of the bicycles
to B, but before he could sell any of the bicycles, B’s store was completely burned without his fault,
together with all of the bicycles. Must B pay A for his lost bicycles. Why? 5pts

- Yes. B must pay A for his bicycles.

The rule is that delivery passes title in the thing sold and after the delivery of the things sold to the buyer.
The risk of loss, therefore, as between the buyer and the seller, falls upon the buyer.
In this case, the bicycles have already been delivered, thus, the ownership was already transferred from A
to B. B now is the owner of the bicycles and responsible for the lost of the thing sold even if there is no
fault on his behalf. Therefore, he is liable for the lost of the bicycles and shall pay A for its price.

9. Spouses Kim and Kara wanted to sell their house. They found a prospective buyer Rey. Kara negotiated
with Rey for the sale of the property. They agreed on a fair price of 2 million pesos. Rey sent Kara a letter
confirming his intention to buy the property. Rey then prepared a deed of sale to be signed by the couple
and a manager’s check for 2 million. After receiving the 2 million, Kim signed the Deed of Sale. However,
Kara was not able to sign it because she was abroad. On her return she refused to sign the document
saying she changed her mind. Kara filed a suit for nullification of the Deed of Sale and for moral and
exemplary damages against Rey. Will the suit prosper? 10 pts

- Yes. The contract can be nullified because there is no consent, in this case, signature of Kara in the deed
of sale, on one of the spouses who sold their conjugal property.

Generally, a contract of sale is binding regardless of its form. However, in case the contract of sale should
fall within the provisions of the Statute of Frauds or of any other applicable statute which requires a
certain form for its enforceability or validity, then that form must be complied with.

In this case, the form used is by means of deed of sale, the negotiation of Kara and Rey for the price of 2
million pesos where both of them agreed and the letter of confirmation given by Rey cannot be regarded
as consent given by Kara. Thus, the contract of sale was not perfected because of the absent of one of the
elements for a perfected contract which is consent on the part of one of the sellers (Kara). Therefore, the
contract of sale is void.

10. In 1999, Vicente Salavador married Ignacia Avila but had been separated de facto in 2001. Lot was
registered under the name of the spouses. Vicente filed a petition for administration and appointment of
guardian where he misrepresented that his wife, Ignacia died in 2002 and that he and their minor children
were her only heirs.

In March 2004, respondent Spouses Mijares bought the lot thus a new title was issued to them. In
December 2005, Ignacia sent a letter demanding the return of her ½ share in the lot. Failing to settle
amicably, Ignacia instituted a complaint for Annulment of Sale against Spouses Mijares and Vicente.

The Spouses Mijares claimed that they are purchasers in good faith and that the sale was valid.

What is the status of the sale of the lot to respondent spouses, and should it be annulled in its entirety or
only with respect to the share of Ignacia? Were the respondents innocent purchasers for value? 10 pts

-In this case, the contract is voidable one. The contract should be annulled in its entirety because the
spouses Vicente and Ignacia are only separated de facto thus the property is still considered as a conjugal
property in which the consent of both parties is needed in order for the contract of sale to be perfected.

Provided that the respondents, spouses Mijares, have no knowledge on the fraudulent act of Vicente, they
can be considered as buyer in good faith therefor the property shall remain in the ownership of spouses
Mijares, and instead, the value of the property shall be paid by the person causing the fraud, which is
Vicente and he shall also be liable for damages. But if the spouses Mijares has knowledge on the
fraudulent act of Vicente, they are considered to be buyer in bad faith thus they are obliged to return the
thing sold, including its fruits and interest, and also be liable for damages.