CHAPTER 1: NATURE AND FORM OF THE CONTRACT

Art. 1458. By the contract of sale one of the

contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent A contract of sale may be
absolute or conditional. [Refer to Art. 1475 & Earnest Money
1811]  shall be considered as part of the price
and as proof of the perfection of the
Contract of Sale contract
 one obliges himself to transfer the  constitutes an advance payment and
ownership of and deliver a must, there-fore, be deducted from the
determinate thing, and the other to total price
pay therefor a price certain in money  given by the buyer to the seller to bind
 perfected by mere consent which is the bargain
manifested by the meeting of the offer
and the acceptance upon the thing DACION EN PAGO VS. CONTRACT OF
and the cause which are to constitute SALE
the contract Dacion en pago
 a special mode of payment
STAGES OF A CONTRACT OF SALE  the debtor offers another thing to the
(NPC) creditor who accepts it as equivalent
(1) Negotiation of payment of an outstan-ding debt
(2) Perfection
(3) Consummation Art. 1459. The thing must be licit, and the
vendor must have a right to transfer the
TWO KINDS OF A CONTRACT SALE ownership thereof at the time it is delivered.
(1) Absolute: no conditions are attached to
the contract Licit
(2) Conditional: there are certain conditions  lawful; thing of the object of sale
attached to the contract should not be contrary to law, morals,
good customs, public order or public
ESSENTIAL ELEMENTS OF A CONTRACT policy
OF SALE
(1) Consent or meeting of the minds: Examples of Void Sale (Illicit Object):
consent to transfer ownership in (1) Sale of animals suffering from contagious
exchange for the price diseases
(2) Determinate subject matter (2) Sale of animals if the use or service for
(3) Price certain in money or its equivalent which they are acquired has been stated
in the contract, and they are found to be
CHARACTERISTICS OF A CONTRACT OF unfit therefor
SALE (3) Sale of future inheritance
(CB-NO-PC) (4) Sale of land in violation of the
(1) Consensual constitutional prohibi-tion against the
(2) Bilateral transfer of lands to aliens
(3) Nominate
(4) Onerous Art. 1460. A thing is determinate when it is
(5) Principal particularly designated or physically
(6) Commutative segregated from all others of the same class.
The requisite that a thing be
OPTION VS CONTRACT OF SALE determinate is satisfied if at the time the
contract is entered into, the thing is capable
of being made determinate without the
necessity of a new or further agreement
between the parties.

Determinate Thing
 particularly designated or physically
segregated from all other of the same
class

Requisites:
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
(1) At the time of the contract is entered into, (2) Future Goods: goods that are to be
the thing is capable of being made manufactured, raised, or acquired by the
determinate seller after the perfection of the contract
(2) There is no necessity of a new or further
agreement between the parties Art. 1463. The sole owner of a thing may
sell an undivided
Art. 1461. Things having a potential interest therein.
existence may be the object of the contract
of sale. Example: B owns a parcel of land with an
The efficacy of the sale of a mere area of 400 sq.m. If B decides to sell 100
hope or expectancy is deemed subject to the sq.m. to C then they will become co-owners
condition that the thing will come into of the said land. Thus, B owns 300 sq.m.
existence. (3/4) while C owns 100 sq.m. (1/4).
The sale of a vain hope or expectancy
is void. Article 1464. In the case of fungible goods,
there may be a sale of an undivided share of
Things having a potential existence a specific mass, though the seller purports to
 a future thing that can be the object of sell and the buyer to buy a definite number,
sale weight or measure of the goods in the mass,
Sale of a mere hope or expectancy and though the number, weight or measure
 subject to the condition that the thing of the goods in the mass is undetermined. By
will ome into existence such a sale the buyer becomes owner in
common of such a share of the mass as the
Example: Sale of sweepstakes ticket or lotto number, weight or measure bought bears to
ticket. The object of sale is the hope or the the number, weight or measure of the mass.
chance to win. If the mass contains less than the number,
NOTE: The sale of vain weight or measure bought, the buyer
hope or expectancy is Art. 1462. The becomes the owner of the whole mass and
void. (Sale of goods which the seller is bound to make good the
sweepstakes ticket or deficiency from goods of the same kind and
lotto ticket was already quality, unless a contrary intent appears.
run)
Example: S is engaged in the business of buy
and sell of rice and he owns a bodega fill
with undetermined sacks of rice.
Subsquently, B buys 100 sacks of rice. If
form the subject there are 300 sacks of rice stored in the
GR: A person cannot of a contract of
sell or convey what he bodega, then S and B will be co-owners
sale may be where S owns 200 sacks of rice while B owns
does not have or own. either existing
XPN: 100 sacks of rice. However, if there are only
goods, owned or 95 sacks of rice stored in the bodega, S is
(1) Sale of a thing possessed by the
having potential liable for the deficiency of 5 sacks of rice to B
seller, or goods because the contract of sale is still valid. The
existence to be
(2) Sale of future goods 5 sacks of rice should be of the same kind
manufactured, and quality.
(3) Contract for raised, or
delivery at a certain acquired by the
price of an article Art. 1465. Things subject to a resolutory
seller after the condition may be the object of the contract
which the vendor in perfection of the
the ordinary course of sale.
contract of sale,
of business in this Title
manufactures or Resolutory Condition
called "future  a condition that upon fulfillment
procures for the goods."
general market, terminates an al-ready enforceable
There may obligation
whe-ther the same be a contract of
is on hand at the  entitles the parties to be restored to
sale of goods, their original positions
time or not whose  a conditional obligation that may be
acquisition by the seller depends upon a immediately enforced but will come to
contingency which may or may not happen. an end when undertain event that is
specified occurs
KINDS OF GOODS
(1) Existing Goods: goods that are owned
NOTE: It is a condition
by the seller
the happening of
which will extin-
guished the obligation.
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
Example: S and B entered into a Contract of cash to S. What is the nature of their
Sale with a Right to Repurchase within 1 year agreement?
over the formers’ parcel of land. S then The nature of their agreement will
delivered said parcel of land to B. In this depend on their intention. If their intention is
case, the condition or uncertain event is a contract of sale then it is Sale or if their
whether S will repurchase the said parcel of intention is acontract of barter, then it is
land within 1 year. In the meantime, Barter.
however, B can sell this parcel of land to C, a Assuming that in the case at bar, there
third person. is no manifest intention then it is a Sale
because the value of the car and cash are
Art. 1466. In construing a contract equal.
containing provisions characteristic of both What if the car is worth P600,000?
the contract of sale and of the contract of Then it is Barter because the value of the car
agency to sell, the essential clauses of the is more than the money.
whole instrument shall be considered.
Article 1469. In order that the price may be
Art. 1467. A contract for the delivery at a considered certain, it shall be sufficient that
certain price of an article which the vendor in it be so with reference to another thing
the ordinary course of his business certain, or that the determination thereof be
manufactures or procures for the general left to the judgment of a special person or
market, whether the same is on hand at the persons.
time or not, is a contract of sale, but if the Should such person or persons be
goods are to be manufactured specially for unable or unwilling to fix it, the contract shall
the customer and upon his special order, and be inefficacious, unless the parties
not for the general market, it is a contract for subsequently agree upon the price.
a piece of work. If the third
Real price is not
person or
stated: sale is valid
persons acted in
but subject to re-
Contractor bad faith or by
formation
 reference to a person who, in the mistake, the
Price is simulated:
pursuit of the independent business, courts may fix
void
undertakes to do a specific job or the price.
piece of work for other persons Where such third person or persons
are prevented from fixing the price or terms
Test of Contractor by fault of the
NOTE: It is not the act
 would seem to be that he renders seller or the
of payment of price
service in the course of an buyer, the party
that deter-mines the
independent occupation not in fault may
validity of a contract of
 representing the will of his employer have such
sale.
only as to the result of his work remedies against
the party in fault as are allowed the seller or
Art. 1468. If the consideration of the the buyer, as the case may be.
contract consists partly in money, and partly
in another thing, the transaction shall be Requsites for a valid price:
characterized by the manifest intention of (1) Real: the price is not stimulated or not
the parties. If such intention does not clearly fictitious
appear, it shall be considered a barter if the (2) Certain or Ascertainable: expressed
value of the thing given as a part of the and agreed in terms of specific amount of
money or its eqivalent
NOTE: It is
ascertainable if it is (3) In money or
sufficient that it be so its
with reference to equivalent
another thing certain, (4) Manner of
or that the payment
determination thereof must be
be left to the judgment agreed upon
consideration exceeds the amount of the - the agree-
of a special person or
money or its equivalent; otherwise, it is a ment on the
persons.
sale. manner of
Example: S and B agreed that S will deliver payment goes into the price, such that a
his only parcel of land to B and B will deliver disagreement on the manner of payment
his only car worth P500,000 and P500,000
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
is tantamount to a failure to agree on the Art. 1474. Where the price cannot be
price determined in accordance with the
preceding articles, or in any other manner,
Art. 1470. Gross inadequacy of price does the contract is inefficacious. However, if the
not affect a contract of sale, except as it thing or any part thereof has been delivered
may indicate a defect in the consent, or that to and appropriated by the buyer, he must
the parties really intended a donation or pay a reasonable price therefor. What is a
some other act reasonable price is a question of fact
Rationale: The mere or contract. dependent on the circumstances of each
inadequacy of the particular case.
price does not
NOTE: Unless the price affect
isitsgrossly
validityinadequate
when both Example: S sold GR: When the price
orparties are in atopostion
shoc-king the to B his 5-year cannot be determined Art. 1475. The
to form
conscience, a sale is an old car for in accordance with contract of sale is
independent
not set aside. judgment P500,000 not preceding articles, or perfected at the
concerning the tran- knowing that in any other manner, moment there is
saction. the fair market the contract is a meeting of
A contract may value of which inefficacious. Hence, minds upon the
consequently be is P650,000. Is the sale is void. thing which is the
annulled on the ground the sale valid? XPN: If the thing or object of the
of vitiated consent and The sale is valid any part thereof has contract and
not due to the because gross been delivered to and upon the price.
inadequacy of the ineduacy of the appropriated by the From that
price. selling price buyer, he must pay a moment, the
Alleged does not reasonable price parties may
inadequacy of the invalidate a therefor. reciprocally
price does not contract of demand
necessarily void a sale. performance, subject to the provisions of the
contract of sale, law governing the form of contracts.
although it may Art. 1471. If
indicate that there was the price is Art. 1476. In the case of a sale by auction:
a defect in the simulated, the (1) Where goods are put up for sale by
consent. sale is void, but auction in lots, each lot is the subject of a
the act may be separate contract of sale.
shown to have been in reality a donation, or (2) A sale by auction is perfected when the
some other act or contract. auctioneer announces its perfection by
the fall of the hammer, or in other
Simulated Price customary manner. Until such
 fictitious price announcement is made, any bidder may
retract his bid; and the auctioneer may
NOTE: Contract of sale withdraw the goods from the sale unless
is not real contract, but Art.. 1472. The the auction has been announced to be
a con-sensual contract. price of without reserve.
A contract of sale securities, grain, (3) A right to bid may be reserved expressly
become binding and liquids, and other by or on behalf of the seller, unless
valid upon the meeting things shall also otherwise provided by law or by
of the minds as to be considered stipulation.
price. certain, when the (4) Where notice has not been given that a
price fixed is that sale by auction is subject to a right to bid
which the thing sold would have on a definite on behalf of the seller, it shall not be
day, or in a particular exchange or market, or lawful for the seller to bid himself or to
when an amount is fixed above or below the employ or induce any person to bid at
price on such day, or in such exchange or such sale on his behalf or for the
market, provided said amount be certain. auctioneer, to employ or induce any
person to bid at such sale on behalf of the
Art. 1473. The fixing of the price can never seller or knowingly to take any bid from
be left to the discretion of one of the the seller or any person employed by
contracting parties. However, if the price him. Any sale contravening this rule may
fixed by one of the parties is accepted by the be treated as fraudulent by the buyer.
other, the sale is perfected.
Sale by auction is perfected
Rationale: The reason
why price fixing cannot
be left to the discretion
of one of them, the
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
 the auctioneer announces its exclusively to the prospective buyer
perfection by the fall of the hammer or upon full payment of the purchase
in other customary manner price

BEFORE the fall of the hammer: Option Contract

(1) Any bidder may retract his bid  an agreement in writing to give a
(2) The auctionnner may withdraw the goods person the option or right to purchase
from the sale unless the auction has been lands within a given time at a named
announce to be without reserve price
 deed of option or the option clause
Art. 1477. The ownership of the thing sold indicates the definite price at which
shall be transferred to the vendee upon the the person granting the option is
actual or construtive delivery thereof. willing to sell

Rationale: The failure Right of First Refusal

of theTWO
buyerASPECTS
to pay theOF DELIVERY  the exercise of the right would be
purchase price within (1) The de jure dependent not only on the grantor’s
the stipulated period delivery or the eventual intention to enter into a
does not itself bar the execution of binding juridical relation with another
transfer or possession deeds of con-
of the property sold. veyance
Such failure will (2) The delivery
merely give the vendor of the
the option to rescind material
the contract of sale possession
judicially or by notarial
demand. (Art. 1592) Art. 1478. The
parties may
stipulate that ownership in the thing shall
not pass to the purchaser until he has fully
paid the price.

Rationale: Payment of
the purchase price is Art. 1479. A
not essential to the promise to buy
transfer of ownership and sell a
as long as the property determinate
sold has been thing for a price but also on terms
delivered (actual or certain is Art. 1480. Any injury to or benefit from the
construc-tive delivery). reciprocally thing sold, after the contract has been
Unless the demandable. perfected, from the moment of the
contract contains a An perfection of the contract to the time of
stipulation that accepted delivery, shall be governed by Articles 1163
ownership of the unilateral to 1165, and 1262.
things sold shall not promise to buy or This rule shall apply to the sale of
pass to the purchaser to sell a fungible things, made independently and for
until he has fully paid determinate a single price, or without consideration of
the price. thing for a price their weight, number, or measure.
Articles 1478 certain is binding Should fungible things be sold for a
does not require that upon the price fixed according to weight, number, or
such a stipulation be promisor if the measure, the risk shall not be imputed to the
expressly made. An promise is vendee until they have been weighed,
implied stipulation to supported by a counted, or measured and delivered, unless
that effect is consideration the latter has incurred in delay.
considered valid and, distinct from the
therefore binding and price. Object is Lost Before Perfection
enforceable between  the seller bears the loss
the parties. Contract to Sell
 prospectiv Object is Lost After Delivery to the
e seller Buyer
binds  the buyer bears the loss
himself to sell the said property
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
Object is Lost After Perfection But  there is an implied warranty that the
Before Delivery goods are merchantable quality
 the buyer bears the loss
 an exception to the principle of res Art. 1482. Whenever earnest money is
perit domino given in a contract of sale, it shall be
considered as part of the price and as proof
Res Perit Domino of the perfection of the contract.
 property lost to the owner
Earnest Money (“arras”)
Fungible Goods  a deposit GR: A contract of sale
 goods are interchangeable with one paid may be made in
another (often in writing, or by word of
 goods by nature or trade usage escrow) mouth, or partly in
 equivalent of any other like unit by a writing and partly by
(coffee or grain) word of mouth, or may
be inferred from the
Example: In one case, the sale between the conduct of the parties
parties is a sale of a specific mass or iron ore XPN: When a sale of a
because no provision was made in their piece of land or any
contract for the measuring or weighing of the interest therein is
ore sold in order to complete or perfect the through an agent, the
sale, nor was the price of P75,000 agreed authority of the latter
upon by the parties based upon any such shall be in writing;
measurement. otherwise, the sale
The seller was required to deliver all shall be void
ore found in the mass in good faith to the prospective buyer (esp. of real estate)
buyer, despite the quantity deli-vered being to show a good-faith in-tention to
less than the estimated amount. complete the transaction, and
ordinarily forfeited if the buyer
Art. 1481. In the contract of sale of goods defaults
by description or by sample, the contract
may be rescinded if the bulk of the goods Art. 1483. Subject to the provisions of the
delivered do not correspond with the Statute of Frauds and of any other applicable
description or the sample, and if the contract statute, a contract of sale may be made in
be by sample as well as description, it is not writing, or by word of mouth, or partly in
sufficient that the bulk of goods correspond writing and partly by word of mouth or may
with the sample if they do not also be inferred from the conduct of the parties.
correspond with the description. Form is Required for Enforceability
The buyer shall have a reasonable Under the Statute of Frauds, the following
opportunity of comparing the bulk with the contract of sale must be in writing to be
description or the sample. enforceable:
(1) Sale of real property
Sale by Sample (2) Sale of personal property at a price
 seller must present a small quantity as not less than P500
a fair speci-men of the bulk (3) Sale of property not to be performed
 must be treated as standard of quality within a year from the date thereof
 contracting parties agreed product
would corres-pond with sample Art. 1484. In a contract of sale of personal
 implied warranty covers defect-free property, the price of which is payable in
goods that are not visible upon installments, the vendor may exercise any of
examination and would render the the following remedies:
goods unmerchantable (1) Exact fulfillment of the obligation,
should the vendee fail to pay;
Sale by Description (2) Cancel the sale, should the vendee's
 a seller sells items of a specific kind, failure to pay cover two or more
buyer relying on seller's installments;
representations (3) Foreclose the chattel mortgage on the
 a seller's description of goods, which thing sold, if one has been
forms the basis of the transaction, constituted, should the vendee's
provides a warranty that the goods will failure to pay cover two or more
meet the specified description installments. In this case, he shall
have no further action against the
 CHAPTER 1: NATURE AND FORM OF THE CONTRACT
purchaser to recover any unpaid Art. 1487. The expenses for the execution
balance of the price. Any agreement and registration of the sale shall be borne by
to the contrary shall be void. the vendor, unless there is a stipulation to
the contrary.
Remedies are Alternative
 remedies provided for in Art. 1484 are GR: The expenses for
alternative, not cumulative the execution and Art. 1488. The
 the exercise of one bars the exercise registration of the sale expropriation of
of the others shall be borne by the property for
 this limitation applies to contracts vendor public use is
purporting to be leases of personal XPN: Contrary governed by
property with option to buy by virtue stipulation special laws.
of Art. 1485
Expropriation
Article 1484 of the new Civil Code  a governmental taking or modification
prescribes three remedies which a vendor of an indivi-dual’s property, rights,
may pursue in a contract of sale of personal esp. by eminent domain
property the price of which is payable in
installments:
(1) Exact fulfillment of the obligation
(2) Cancel the sale
(3) Foreclose the mortgage on the thing
sold

NOTE: If he chooses the third remedy, the

article pro-vides that he shall have no further
action against the purchaser to recover any
unpaid balance of the pur-chase price. It
even adds that any agreement to the
contrary shall be void.

Creditor Not Obliged to Foreclose

 the creditor is not obliged to foreclose
a chattel mortgage even if there is one
 precisely the law says that any of the
remedies “may” be exercised by the
seller

NOTE: He may still sue

for fulfillment or for Art. 1485. The
cancellation of the preceding article
obligation, if he does shall be applied
not want to foreclose. to contracts
He may avail himself purporting to be
of first remedy leases of
(specific perfor-mance) personal
and may still ask that a property with
real estate mortgage option to buy,
be executed to secure when the lessor
the payment of the has deprived the
obliga-tion, in which lessee of the
case and in the event possession or
of foreclosure, there enjoyment of the
can still be recovery of thing.
the deficiency.
Art. 1486. In the
case referred to in two preceding articles, a
stipulation that the installments or rents paid
shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
unconscionable under the circumstan-ces.