CONTRACT OF SALE (1458) STAGES IN LIFE OF CONTRACT OF SALE CONTRACT OF SALE DISTINGUISHED FROM AGENCY

One of the contracting parties obligates himself to transfer the 1. Preparation - when the parties manifest their intention for
ownership of and to deliver a determinate thing, and the other to an agreement Agency Contract of Sale
pay therefor a price certain money or its equivalent. 2. Perfection – by mere consent; performance may be
demanded (specific performance) agent does not pay for the buyer pays for the price of
Elements: 3. Consummation - the point of which something is complete price but merely obliged to the object
● transfer ownership or finalized deliver the price received
● deliver a determinate thing from the buyer
● pay a price certain money or its equivalent CONTRACT OF SALE DISTINGUISHED FROM DONATION
principal remains the owner buyer becomes the owner of
General Rule: The title over the property passes to the buyer. DONATION SALE even if the object is delivered things
XPN: Contrary agreement to the agent
gratuitous onerous
The ownership passes to the buyer only upon full payment of the agent assumes no seller warrants
price. formal contract consensual risk/liability as long as within
authority given
● Nonpayment of the Purchase Price (Negative Resolutory governed by laws on governed by laws on sale
Condition) donation may be revoked unilaterally not unilaterally revocable
- the sale becomes ineffective upon the happening of because of fiduciary in nature
such condition
CONTRACT OF SALE DISTINGUISHED FROM BARTER
agent is not allowed to profit seller receives profit
● Payment in Full (Positive Suspensive Condition) BARTER SALE
- if the purchase price is not paid, the obligation to
personal and there can be no real contract
deliver and to transfer ownership on the part of the
consideration is giving of a consideration is giving of recission
seller does not becomes effective).
thing money as payment
ELEMENTS OF A CONTRACT OF SALE CONTRACT OF SALE v. CONTRACT TO SELL
value of thing is more than amount of money must be
● Essential Requisites - if one is missing then sale is the amount of money the equivalent of the thing
Article 1466. In construing a contract containing provisions
void/inexistent characteristic of both the contract of sale and of the contract of
a. Consent of the contracting parties (meeting of minds) CONTRACT OF SALE DISTINGUISHED FROM PIECE OF WORK agency to sell, the essential clauses of the whole instrument shall
b. Subject matter which should be a determinate thing be considered.
c. Price certain in money or it's equivalent Contract of sale - a contract for the delivery of an article which the
vendor in the ordinary course of business manufactures or Contract of sale - seller conveys ownership of the property to the
● Natural Elements - inherent in a contract of sale means that procures for the general market whether on hand or not. (1467) buyer upon the perfection of the contract. The non-payment of
if not stipulated, they are deemed to exist the price is a negative resolutory condition.
a. Warranty against eviction Piece of work - if the goods are to be manufactured specially for a
b. Warranty against hidden defects and encumbrance customer and upon special order and not for the general market. Contract to sell - seller retains ownership whether or not there is
delivery. It is subject to a positive suspensive condition. The buyer
● Accidental Elements - particular stipulations of the parties In the case of Celestino v CIR, G.R No. L-8506 — does not acquire ownership of the property until he fully pays the
Example: terms, place and time of payment, and other purchase price.
conditions agreed upon Contract of Sale - if the manufacturer engages in an activity
without the need to employ extraordinary skills or additional Article 1459. The thing must be licit and the vendor must have a
CHARACTERISTICS OF CONTRACT OF SALE equipment. Otherwise it would be a piece of work. right to transfer the ownership thereof at the time it is delivered.
a) Nominate - law provides a specific name
b) Principal - can stand on its own; unlike accessory contract Requisites of Contract of Sale
c) Bilateral - imposes obligation on both parties in the contract Piece of work Contract of Sale 1. Must be determinate or capable of being determinate
d) Onerous – with valuable consideration 2. Must be licit — should not be contrary to law, morals, good
e) Commutative – equal value is exchanged for equal value sale of service sale of things customs, public order, public policy
f) Consensual – meeting of minds makes a perfect contract of 3. Should not be impossible
sale but needs delivery to consummate essence is for service essence is an object 4. Rights that are transmissible or personal may also be an
g) Title and not a mode – gives rise to an obligation to transfer; object of the contract of sale.
it is delivery w/c transfer ownership; mode which transfer
ownership
Rights to Transfer Ownership Emptio rei speratae The sale and the right to repurchase were registered in the
- a sale of an expected thing subject to the condition that the Register of deeds where the lot is situated.
One can only sell what he owns, for the sale to be valid. thing will come to existence Three years after the sale, Vic sold the lot to Pia. The latter
- vendor must be the owner of the object of the contract of - if the thing did not come into existence, the contract is not became the owner of the lot subject to the right of Pauline to
sale (or authorized by the owner of the property to sell the effective and the buyer has no obligation to pay the price repurchase it within the 7 years from the time Pauline sold the lot
object) to transfer the ownership of the thing sold. - presumption is in favor of this kind of sale, because it is more to Vic.
in keeping with the commutative character of a sale
At the time of the delivery the right to transfer the ownership Article 1468. Rules if Consideration is PARTLY MONEY and PARTLY
exists, to make the contract valid. Emptio spei GOODS
- seller does not need to have the ownership of the object of - a sale of a hope or expectancy 1. Determine the intention of the parties.
the contract of sale during the formation of the contract for - contracting parties intended that contract of sale to exist at 2. If intention could not be determined, consider the value of
as long as the ownership exists during the delivery. all events, whether or not the expected thing will come into the thing given:
existence such that the buyer will have to pay the purchase
The rationale behind this is to give way for future goods that price, such that the contract becomes aleatory in nature Barter - value of the thing > value of the money
depend on contingency to the object of the contract of sale.
Future Goods that may be subject of a contract of sale Sale - value of the thing < value of the money
When is a thing determinate? (Article 1460) (Article 1462) - value of the thing = value of the money
➔ if it is particularly designated or physically segregated from 1. existing goods, owned or possessed by the seller
all others of the same class 2. goods to be manufactured, raised or acquired by the seller Article 1469. Price considered certain
➔ it is capable of being made determinate at the time the after the perfection of contract of sale - shall be sufficient that it be so regarding another thing
contract is entered into w/o the necessity of a new or 3. goods whose acquisition by the seller depends upon a certain, or that the determination thereof be left to the
further agreement between the parties contingency that may or may not happen judgment of a special person or persons
Example: Romeo's only horse named Alden, Kawasaki Raider with Example: Goods to be manufactured or acquired by the seller i.e, GR: Should such person or persons be unable or unwilling to fix it,
engine number 12345 and plate number HX1123, and Romeo's baby dresses to be sown the contract shall be inefficacious.
one and only Rolex 3310 made in China with serial number XPN: If the parties subsequently agree upon the price.
265747 Article 1463. The sole owner of a thing may sell an undivided
interest therein. If the third person or persons acted in bad faith or by mistake, the
Article 1461. Things having a potential existence may be the object courts may fix the price.
of the contract of sale. The efficacy of the sale of a mere hope or Article 1464. Purchase of an Undivided Share in Specific Mass of
expectancy is deemed subject to the condition that the thing will Fungible Goods. Where such third person or persons are prevented from fixing the
come into existence. The sale of a vain hope or expectancy is void. price or terms by the fault of the seller or the buyer, the party not
Rules: in fault may have such remedies against the party in fault as are
Here, one can sell a future harvest from a farm. But on the 1. If the aliquot part purchased from the seller is more than the allowed the seller or the buyer, as the case may be. (1447a)
condition that the thing must come into existence; Otherwise, the whole undetermined mass after it had been weighed or
sale will be considered ineffective for not having a subject matter. measured, then the buyer becomes the owner of the entire Price - the sum stipulated as the equivalent of the thing sold and
mass. also every incident taken into consideration for the fixing of the
2. If the aliquot part purchased is less than the whole price, which was agreed upon by both parties.
Emptio Rei Speratae Emptio Spei undetermined mass, the purchaser will become the
co-owner of the whole mass in the proportion in which the Rules if there is no specific amount stipulated as purchase price
contract of sale of future sale of a mere hope (e.g., number, weight or measure of what had been purchased
things which must be buying a lottery ticket) 1. It is still certain if it is determinable by making reference to
bears to the number, weight or measure of the mass or another thing which is itself certain
determinate or specific stock. 2. It is still certain if determination is entrusted to the judgment
of a specified person or persons
does not apply to generic sale is ineffective even if the What is fungible goods? 3. By reference to certain fact or facts (such as in Art.
things thing doesn’t appear unless - something (such as money or a commodity) of such a nature 1472—when the price is fixed is that which the thing sold
it’s a vain hope that one part or quantity may be replaced by another equal would have on a definite day or a particular exchange)
part or quantity in paying a debt or settling an account
uncertainty is concerning the object is a present thing w/c Effect if 3rd person fixed the price
quality and quantity of the is the hope or expectancy and Article 1465. Things subject to a resolutory condition may be the General Rule: It is binding upon the parties.
thing the uncertainty is concerning object of the contract of sale. Sale on a resolutory condition basis. Exceptions:
its existence 1. When the 3rd person acts in bad faith
Example: 2. When the 3rd person disregards the specific instructions or
Pauline sold her lot to Vic. Pauline was given a right to repurchase the procedure marked out by the parties
the lot within 7 years from the date of sale.
Effect when the price is not fixed by the 3rd person designated In the case of Unson Vs. Urquico, 50 Phil, 171, the concept of price promise is supported by a consideration distinct from the price.
1. If the 3 rd person refuses or cannot fix the price, the contract was explained by the court. (1451a)
shall become ineffective, unless the parties subsequently
agree upon the price Price is the sum stipulated as the equivalent of the thing sold, and Article 1480. Any injury to or benefit from the thing sold, after the
2. If the 3 rd person is prevented from fixing the price by the also every incident was taken into consideration for the fixing of contract has been perfected, from the moment of the perfection
fault of the seller or buyer, the party not in fault may obtain the same, to the debit of the vendee, and agreed to by him. of the contract to the time of delivery, shall be governed by
redress against the party in fault. articles 1163 to 1165, and 1262. This rule shall apply to the sale of
Article 1474. Effect of Gross Inadequacy of Price — NO EFFECT! fungible things, made independently and for a single price, or
Article 1470. Gross inadequacy of price does not affect a contract Exceptions: (meaning, sale is set aside) without consideration of their weight, number, or measure.
of sale, except as it may indicate a defect in the consent, or that 1. If consent is vitiated, such as VIMFU (Violence, Intimidation, Should fungible things be sold for a price fixed according to
the parties intended a donation or some other act or contract. Mistake, Fraud, Undue influence) weight, number, or measure, the risk shall not be imputed to the
2. If the parties intended a donation or some other act or vendee until they have been weighed, counted, or measured and
Article 1471. If the price is simulated, the sale is void, but the act contract delivered unless the latter has incurred in delay. (1452a) (Civil
may be shown to have been in reality a donation, or some other 3. If the price is so low as to be shocking to the conscience Code of the Philippines)
act or contract.
Article 1475. Perfection of contract of sale Art. 1163. Every person obliged to give something is also obliged to take
Simulated Price ➔ meeting of the minds upon the thing and price 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
Example: Effect: Parties may reciprocally demand performance Art. 1164. The creditor has a right to the fruits of the thing from the time
Tito and Joey entered into a contract where they made it appear the obligation to deliver it arises. However, he shall acquire no real right
that Tito sold his car to be for P200,000.00. While in truth and fact Article 1476. Rules on AUCTION SALES over it until the same has been delivered to him.
the former did not give P200,000. 00 to the latter. 1. Each lot is subject of a separate contract of sale
2. Auction sale is perfected when the auctioneer announces its Art. 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
The sale is void because of the absence of an essential perfection by the fall of the hammer or in other customary to make the delivery.
requirement which is the price. manner. If the thing is indeterminate or generic, he may ask that the obligation be
If the price is simulated, the contract is void for the lack of cause Pending announcement: complied with at the expense of the debtor.
or consideration but can be shown as a donation or some other ➔ Any bidder may retract his bid
contract. ➔ Auctioneer may withdraw the goods, unless auction is 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
w/o reserve
for any fortuitous event until he has effected the delivery
Disagreement on the matter of payment is tantamount to a failure 3. A right to bid may be reserved expressly by or on behalf of
on the price. the seller, unless otherwise provided by law or stipulation Art. 1262. An obligation which consists in the delivery of a determinate
4. Notice is essential for the seller or his representative to be thing shall be extinguished if it should be lost or destroyed without the fault
1. False Price (Relative Simulation) able to bid. of the debtor, and before he has incurred in delay.
- price stated in the contract is not the true price parties By-bidders or puffers: persons employed by auctioneer who
When by law or stipulation, the obligor is liable even for fortuitous events,
intended to be bound will bid w/o being bound but whose bids will have a the loss of the thing does not extinguish the obligation, and he shall be
tendency to induce or provoke higher bids from interested responsible for damages. The same rule applies when the nature of the
2. Simulated Price (Absolute Simulation) buyers, thus misleading the latter because of the inflated bid obligation requires the assumption of risk.
- price stated in the contract is not intended to be paid. price.
Parties never intended to be bound It is the secrecy of the puffing and not the authorized Article 1481. In the contract of sale of goods by description or by
- contract is void and inexistent bidding by the seller which makes it fraudulent. sample, the contract may be rescinded if the bulk of the goods
delivered do not correspond with the description or the sample,
Article 1472. The price of securities, grain, liquids, and other Article 1477. The ownership of the thing sold shall be transferred and if the contract is by sample as well as description, it is not
things shall also be considered certain when the price fixed is that to the vendee upon the actual or constructive delivery thereof. sufficient that the bulk of goods correspond with the sample if
which the thing sold would have on a definite day, or in a they do not also correspond with the description.
particular exchange or market, or when an amount is fixed above The time when ownership is transferred is important to determine
or below the price on such day, or in such exchange or market, the party who shall bear the loss. The buyer shall have a reasonable opportunity of comparing the
provided said amount be certain. (1448) bulk with the description or the sample.
Article 1478. The parties may stipulate that ownership in the thing
Article 1473. The fixing of the price can never be left to the shall not pass to the purchaser until he has fully paid the price. RECISSION ON THE PART OF THE BUYER
discretion of one of the contracting parties. However, if the price If the goods delivered do not correspond with the sample,
fixed by one of the parties is accepted by the other, the sale is Article 1479. A promise to buy and sell a determinate thing for a description. Or sample with description, as the case may be, the
perfected. (1449a) price certain is reciprocally demandable. buyer may ask for the rescission of the sale.

An accepted unilateral promise to buy or to sell a determinate

Fixing of Price thing for a price certain is binding upon the promisor if the Article 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 2) Cancel or rescind the sale Bachrach Motor Co. v Millan G.R. NO. L-42256, 25 APRIL 1935
perfection of the contract. (1454a) 3) Foreclose the mortgage on the property bought (if there
ever was a chattel mortgage) Facts:
Earnest Money Defendant Millan bought a second hand Renault touring car from
It is part of the purchase price Concerning the third, this happens when a person takes a loan to plaintiff Bachrach Motor Co. P939, 000.00 was the balance of the
It is given only when there is already a buy something and he mortgages the thing he bought to ensure purchase price of the said car which defendant and plaintiff
perfected sale the creditor that he will pay the loan. agreed that the payment of such balance shall be in a monthly
When it is given, the buyer is bound to pay the
installment basis. Thus, on December 12, 1933, owing to the said
balance of the agreed purchase price
If the sale does not materialize, the earnest
If you choose one remedy, you cannot choose the other. The transaction, the defendant executed a promissory note for the
money paid must be returned, unless a contrary above remedies are alternative, not cumulative.5 (Pacific sum of P939 and a chattel mortgage in favor of the defendant,
agreement had been stipulated Commercial Co. Vs. Dela Rama, 72 Phil 380) duly registered with the Register of Deeds of the City of Manila.
However, said the defendant failed to pay the installments which
Option Money These remedies are also available to the buyer. fell due on December 22, 1933, and January 22 and February 22,
It is given as a distinct consideration for an
1934, thus violating the terms of the said promissory note and
option contract which gives the buyer a specific
period within which to purchase the thing The Recto Law does not apply to a straight sale. chattel mortgage.
It is given at a time when the sale had not yet
been perfected. What had been perfected only The seller can assign his credit to another person, making that As of March 17, 1934, after crediting to the defendant of all the
is the option contract person the new creditor. payments made, the defendant still owes the sum of P928.50
Even if option money is paid by the together with the interest at the rate of 12 percent per annum.
would-be-buyer he is not bound to buy the If the buyer refuses to surrender the items to the seller, he Defendant offered to return the second hand Renault touring car
thing
becomes a perverse buyer-mortgagor. When that happens, the to the plaintiff in payment of the full amount under the
If the buyer decides not to buy the thing, he
cannot recover the option money he paid as seller can recover expenses and attorney's fees as well. promissory note and the chattel mortgage, but the plaintiff
consideration for the contract of option refused to receive and filed this complaint about the full amount
The law also covers leases with the option to purchase. of the purchase price.

Article 1483. Subject to the provisions of the Statute of Frauds and ILLUSTRATION Issue: Whether a vendor of personal property on the installment
any other applicable statute, a contract of sale may be made in Paolo sold his only car to Wally for P200,000.00 payable in 10 plan, upon the failure of the purchaser to comply with his
writing, or by word of mouth, or partly in writing and partly by equal monthly installments of P10,000.00 each. As security, Wally obligation under such a contract, exact the fulfillment of that
word of mouth, or may be inferred from the conduct of the executed a chattel mortgage on the car. The first three obligation?
parties. installments were paid but Wally, later on, defaulted in the
payment, the fourth as well as fifth installment. Ruling: Article 1454 of the Civil Code, as amended by Act No. 4122
Article 1484. In a contract of sale of personal property the price of of the Philippine Legislature, now reads:
which is payable in installments, the vendor may exercise any of What remedies are available to Paolo?
the following remedies: ART. 1454. When earnest money or a pledge has been given to
(1) Exact fulfillment of the obligation, should the vendee fail to Paolo may exact fulfillment of the obligation, i.e, he can demand bind the contract of purchase and sale, the contract may be
pay; payment of the installment defaulted only unless there is an rescinded if the vendee should be willing to forfeit the earnest
(2) Cancel the sale, should the vendee's failure to pay to cover acceleration clause, which may mean that the whole shall become money or pledge or the vendor to return double the amount.
two or more installments; due upon default of the payment of an installment or, citing Art
(3) Foreclose the chattel mortgage on the thing sold if one has 1198 of the Civil Code if the default of the buyer is under such ART. 1454-A. In a contract for the sale of personal property
been constituted, should the vendee's failure to pay cover circumstances as to make him lose the right to make use of the payable in installments, failure to pay two or more installments
two or more installments. In this case, he shall have no period given to him. shall confer upon the vendor the right to cancel the sale or
further action against the purchaser to recover any unpaid foreclose the mortgage if one has been given on the property,
balance of the price. Any agreement to the contrary shall be Can Paolo still cancel the sale or foreclose the chattel mortgage on without reimbursement to the purchaser of the installments
void. (1454-A-a) the car? already paid, if there be an agreement to this effect.

THE RECTO LAW No, not anymore. The remedy of canceling the sale or foreclosing However, if the vendor has chosen to foreclose the mortgage he
- prevent abuses in the foreclosure of chattel mortgages, such the chattel mortgage constituted on the thing is available only shall have no further action against the purchaser for the recovery
as when mortgagee-creditors foreclosed mortgaged when the default covers two or more installments. of any unpaid balance owing by the same, and any agreement to
property, bought them at a low price, then prosecuted the Wally defaulted in the payment of fourth and fifth installments the contrary shall be null and void.
mortgagor-debtors to recover the deficiencies. and as a result, Paolo foreclosed the chattel mortgage constituted
in the car. The same rule shall apply to leases of personal property with the
In the event a buyer of personal property defaults by failing to pay option to purchase when the lessor has chosen to deprive the
two or more of the agreed installments, the seller can do any of lessee of the enjoyment of such personal property.
the following: This amendment prevents mortgagees from seizing the mortgaged
1) Demand that the buyer pay property, buying it at a foreclosure sale for a low price, and then
bringing suit against the mortgagor for a deficiency judgment. and upon full payment of the cash surrender value to the buyer. given a grace period of sixty (60) days starting from the date of his
Thus, in all proceedings for the foreclosure of chattel mortgages, last installment to resume paying. This period can be increased by
Down payments, deposits, or options on the contract, shall be included in
executed on chattels which have been sold on the installment the seller. If after the grace period the buyer still can't pay, the
the computation of the total number of installment payments made."
plan, the mortgagee is limited to the property included in the seller must make a notarial demand to cancel the sale. The
mortgage. cancellation becomes effective thirty (30) days after the buyer was
ILLUSTRATION
notified. So it's possible that the buyer could be notified two
Harry sold his Toyota Corolla 1997 model car to Willy in the
Therefore, in a sale where personal property is involved in the months after the 60 days and then the 30-day period will begin.
amount of p100,000.00 payable in ten equal monthly installments
installment plan, the vendor may elect to exact the fulfillment of
of P10,000.00 each. As a security, the latter executed a chattel
the obligation, as the plaintiff has done in this case, cancel the sale If the buyer paid at least two years' installments, the buyer can
mortgage on the car and another chattel mortgage on his BMX
or foreclose his mortgage if one has been given on the property so pay the unpaid balance without interest. The grace period is
Bicycle.
sold. But if he elects to cancel or foreclose the mortgage, he is computed at one (1) month per year of installment payments. It
bound by the provisions of article 1454-A of the Civil Code. also begins from the time the buyer paid his last installment. The
After paying the first two installments for the Car, Willy defaulted
grace period can be used only once every five (5) years of the sales
On the other hand, Republic Act 6552 or the realty installment buyer act,
in the payment of the third, fourth and fifth installments. As a
contract's life -including its extensions. So it's possible to have a
also known as the Maceda law, is the real estate equivalent of the Recto consequence, Harry foreclosed the chattel mortgage on the BMX
grace period of a year if the buyer had been paying his
law. Bicycle which was sold for P75,000.00.
installments faithfully for 12 years. Once the buyer chooses to use
Under section 3, it applies to residential real estate, as it excludes other real the grace period, he can't get it again until another five years are
May Harry recover the deficiency of P5,000.00?
estates, such as industrial lots, commercial buildings [and/or commercial over.
lots by implication], and sale to tenants under agrarian laws. Moreover,
section 2 of this law provides that it was enacted to protect buyers of real Yes, because the prohibition of the recovery of the deficiency
If the seller wants to cancel the sale, he has to refund the buyer of
estate on installment payments against onerous and oppressive conditions. applies only when the chattel mortgage foreclosed was on the
50% of the actual payments. If the buyer paid more than five
thing sold, which was the Toyota Corolla 1997 model car.
Section 2. It is hereby declared a public policy to protect buyers of real
years' installments another 5% for every year is to be added to the
estate on installment payments against onerous and oppressive conditions. refund, but only up to 90% of the total payments made. The
Remulla sold his ring to Marcoleta for P50,000.00 under the
payments mentioned here include the downpayment, options,
Section 3. In all transactions or contracts involving the sale or financing of
following terms: down payment of P30,000.00; balance payable at
and deposits. The refund is made in this way: if the buyer paid
real estate on installment payments, including residential condominium month-end. As security, Marcoleta executed a chattel mortgage on
more 2 to 5 years' installments, he can get back 50% of the cash
apartments but excluding industrial lots, commercial buildings, and sales to the ring. He defaulted in the payment of the balance. By reason
surrender value. If he paid for more than 5 years, he can get 50%
tenants under the republic act numbered thirty-eight hundred forty-four, as thereof, Remulla foreclosed the chattel mortgage on the ring.
amended by republic act numbered sixty-three hundred eighty-nine, where plus 5% per year up to 90%.
However, only P15,000.00 was realized in the foreclosure sale.
the buyer has paid at least two years of installments, the buyer is entitled to
the following rights in case he defaults in the payment of succeeding The buyer is also allowed to make advanced payments, or even
installments: xxx" Can Remulla still proceed against Marcolleta to collect the
the full price, without interest. He can also assign his rights to
deficiency of P5,000.00?
another person, making that person the new buyer, but he can
Where the buyer has paid at least two years of installment, he shall have
the rights in case of default in payment of succeeding installments to (i) pay
only do that with a notarial deed of sale assignment.
Yes, because of Art. 1484 does not apply to a sale on a straight
without interest the balance within the grace period of one month for every term which is a sale where the balance is to be paid in its entirety
year of installment payment (the grace period, however, shall be exercised The Maceda Law cannot be used by a real estate developer. Also
once every five years); or (ii) in case the contract is canceled, the buyer shall
after the payment of an initial sum. This is an application of the
cannot be used by the highest bidder in foreclosure proceedings.
be entitled to 50 percent of what he has paid plus another five percent for general rule that if the foreclosure sale in chattel mortgage results
every year but not exceeding 90 percent of payments made. in deficiency, the same may be recovered by the creditor. Article
Presidential Decree No. 957 otherwise known as "Subdivision and
1484 is an exception to such general rule, i.e., no deficiency may
In all transactions or contracts involving the sale or financing of real estate Condominium Buyer's Protective Decree '' was initiated by the late
be recovered.
on installment payments, including residential condominium apartments President Ferdinand Marcos on July 12, 1976, and applied with the
but excluding industrial lots, commercial buildings, and sales to tenants latest revised implementing rules and regulations in 2009.
under the republic act numbered thirty-eight hundred forty-four, as THE MACEDA LAW (RA 6552)
amended by republic act numbered sixty-three hundred eighty-nine, where - real estate equivalent of the Recto Law. Like the Recto Law, it
The primary purpose of this decree is to protect the buyers of
the buyer has paid at least two years of installments, the buyer is entitled to also covers financing of sales of real property (which is why
the following rights in case he defaults in the payment of succeeding
condominium projects and subdivision developments against
mortgages also come in.) It doesn't apply, however, to the
installments: to pay, without additional interest, the unpaid installments misrepresentations and fraudulent activities of developers, sellers,
following sales:
due within the total grace period earned by him which is hereby fixed at the and operators.
rate of one month grace period for every one year of installment payments
1.) Industrial lots
made: provided, that this right shall be exercised by the buyer only once in 2.) Commercial buildings and lots
In the long line of cases, the Supreme Court ruled that this
every five years of the life of the contract and its extensions if any. 3.) Lands under the CARP Law
happens when sellers (property developers, operators, brokers,
If the contract is canceled, the seller shall refund to the buyer the cash and salespersons) over-promise something to clients but
Depending on when the buyer defaults, there are two (2) possible
surrender value of the payments on the property equivalent to fifty percent under-deliver, deceive the client by fraudulent presentation or by
scenarios: if the buyer paid at least two (2) years' installments and
of the total payments made, and, after five years of installments, an simply feeding the client with information which is not true,
additional five percent every year but not to exceed ninety percent of the if the buyer paid less than 2 years' installments.
incomplete or in comprehensive.
total payments made: provided, that the actual cancellation of the contract
shall take place after 30 days from receipt by the buyer of the notice of If the buyer paid less than 2 years' installments and defaults, he is
cancellation or the demand for rescission of the contract by a notarial act
Thus, this decree, PD 957, was passed to resolve these problems CASES MENTIONED: FACTS:
and to protect the welfare of the property buyers. Almeda and Engineering and Machinery Corporation signed a
1) Meeting of Minds contract, wherein Engineering undertook to fabricate, furnish and
Article 1485. The preceding article shall be applied to contracts install the air-conditioning system in the latter’s building along
purporting to be leases of personal property with the option to Fact: Buendia Avenue, Makati for P210,000.00. In the agreement, the
buy when the lessor has deprived the lessee of the possession or Concepcion alleged that respondent-spouses Eugenia and Antonio petitioner has to furnish the materials, labor, tools, and all services
enjoyment of the thing. (1454-A-a) owned a lot with an unfinished residential house sometime in required to fabricate and install said system. The system was
April 1987, she bought one-half of an undivided portion of the completed in 1963 and accepted by private respondent, who paid
Article 1486. In the case referred to in the two preceding articles, property from her daughter, Eugenia and the latter’s husband, at full the contract price.
a stipulation that the installments or rents paid shall not be Antonio, for One Hundred Thousand Pesos (P100,000.00). No
returned to the vendee or lessee shall be valid insofar as the same Deed of Absolute Sale was executed to evidence the transaction, Thereafter, Almeda learned the defects of the air-conditioning
may not be unconscionable under the circumstances. (Civil Code but cash payment was received by the respondents, and system of the building. Almeda spent for the repair of the
of the Philippines) ownership was transferred to Concepcion through physical air-conditioning system and eventually filed a case against the
delivery to her attorney-in-fact and daughter. Concepcion former. Almeda asked for the refund of the repair. The latter
Article 1487. The expenses for the execution and registration of authorized Natividad and the latter’s husband to occupy the contends that the contract was of sale and the claim is barred by
the sale shall be borne by the vendor unless there is a stipulation premises, and make improvements on the unfinished building. prescription since the responsibility of a vendor for any hidden
to the contrary. (1455a) (Civil Code of the Philippines) Thereafter, Concepcion alleged that without her consent, faults or defects in the thing sold runs only for 6 months (Arts
respondents caused the subdivision of the property into three 1566, 1567, 1571). Almeda contends that since it was a contract
Article 1488. The expropriation of property for public use is portions and registered it in their names in violation of the for a piece of work, hence the prescription period was ten years
governed by special laws. (1456) (Civil Code of the Philippines) restrictions annotated at the back of the title. The Regional Trial (Hence Art 1144 should apply on written contracts).
Court rendered judgment in favor of Concepcion. On appeal by
the respondents, the Court of Appeals reversed the decision of The Regional Trial Court found that the Corporation failed to install
the trial court, and declared the sale null and void. Hence this certain parts and accessories called for by the contract, and
case. deviated from the plans of the system, thus reducing its
operational effectiveness to achieve fairly desirable room
Issue: Whether the oral contract in the sale of the real property is temperature.
legal and binding?
ISSUE: Whether the said contract for the fabrication and
Held: installation of a central air-conditioning system in a building is to
Yes, the SC upheld the ruling of the lower court that the sale be considered as Contract of “sale” or “for a piece of work?”
between Eugenia and Concepcion was consummated when both
contracting parties complied with their respective obligations. HELD:
Eugenia transferred possession by delivering the property to The court ruled that a contract for a piece of work, labor, and
Concepcion who in turn paid the purchase price. It also declared materials may be distinguished from a contract of sale by the
that the transfer of the property did not violate the Statute of inquiry as to whether the thing transferred is one not in existence
Frauds because a fully executed contract does not fall within its and which would never have existed but for the order of the
coverage. The verbal contract of sale between Eugenia and person desiring it. In such a case, the contract is one for a piece of
Concepcion did not violate the provisions of the Statute of Frauds work, not a sale. On the other hand, if the thing subject of the
that a contract for the sale of real property shall be unenforceable contract would have existed and been the subject of a sale to
unless the contract or some note or memorandum of the sale is in some other person even if the order had not been given, then the
writing and subscribed by the party charged or his agent. When a contract is one of the sales.
verbal contract has been completed, executed or partially
consummated, as in this case, its enforceability will not be barred A contract for the delivery at a certain price of an article which the
by the Statute of Frauds, which applies only to an executory vendor in the ordinary course of his business manufactures or
agreement. Thus, where one party has performed his obligation, procures for the general market, whether the same is on hand at
oral evidence will be admitted to prove the agreement. In the the time or not is a contract of sale, but if the goods are to be
instant case, the oral contract of sale between Eugenia and manufactured specially for the customer and upon his special
Concepcion was evidenced by a receipt signed by Eugenia. order, and not for the general market, it is a contract for a piece of
Antonio also stated that his wife admitted to him that she sold the work. Thus, the said contract is one for a piece of work. It is not
property to Concepcion. the petitioner's line of business to manufacture air-conditioning
systems to be sold "off-the-shelf." Its business and particular field
2) Piece of Work vis-a-vis Contract of Sale of expertise is the fabrication and installation of such systems as
ordered by customers and following the particular plans and
ENGINEERING AND MACHINERY CORP. VS. COURT OF APPEALS specifications provided by the customers. Naturally, the price or
G.R. No. 52267 January 24, 1996 compensation for the system manufactured and installed will
depend greatly on the particular plans and specifications agreed
upon with the customers.

3) Contract of Sale vis-a-vis Contract to Sell

RAYMUNDO S. DE LEON VS.BENITA T. ONG

G.R. No. 170405 February 2, 2010

FACTS:
Raymundo de Leon sold three (3) parcels of land located in
Antipolo, Rizal to Benita Ong. As the properties were mortgaged
to Real Savings and Loan Association, Inc. (RSLAI), the parties
executed a notarized deed of absolute sale with assumption of
mortgage. The deed of Assumption of mortgage shall be executed
in favor of Ong after the payment of P415,000.00. Ong complied
with it. De Leon handed the keys to Ong and informed the loan
company that the mortgage had been assumed by Ong. Ong made
some improvements in the property.

After some time, Ong learned that the properties were sold to
another buyer, Leona Viloria and changed the locks to it. Ong went
to the mortgage company and learned that the mortgage was
already paid and the titles were given to Viloria.

Ong filed a complaint for specific performance, declaration of

nullity of the second sale and damages against petitioner and the
second buyer, Viloria.

De Leon contended that Ong does not have a cause of action

against him because the sale was subject to a condition which
requires the approval of the loan company and that he and Ong
only entered a contract to sell.

RTC ruled that the parties entered into a contract to sell while the
CA held that it was a contract of sale.

Issue:Whether the parties entered into a contract of sale or a

contract to sell.

Held:
In a contract of sale, the seller conveys ownership of the property
to the buyer upon the perfection of the contract. The
non-payment of the price is a negative resolutory condition.
Contract to sell is subject to a positive suspensive condition. The
buyer does not acquire ownership of the property until he fully
pays the purchase price. In the present case, the deed executed by
the parties did not show that the owner intends to reserve
ownership of the properties. The terms and conditions affected
only the manner of payment and not the immediate transfer of
ownership. It was clear that the owner intended a sale because he
unqualifiedly delivered and transferred ownership of the
properties to the respondent.