LAW ON SALES, AGENCY, LABOR AND OTHERS

PRELIMS:
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 of
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. (1445a)

Characteristics of a Contract of Sale

(1) Consensual, because it is perfected by mere consent without any further act;
(2) Bilateral,1 because both the contracting parties are bound to fulfill correlative obligations towards each
other — the seller, to deliver and transfer ownership of the thing sold and the buyer, to pay the price;
(3) Onerous, because the thing sold is conveyed in consideration of the price and vice versa.
(4) Commutative, because the thing sold is considered the equivalent of the price paid and vice versa. However,
the contract may be aleatory as in the case of the sale of a hope (e.g., sweepstakes ticket);
(5) Nominate, because it is given a special name or designation in the Civil Code, namely, “sale”.
(6) Principal, because it does not depend for its existence and upon another contract.

Essential Requisites of a Contract of Sale

(1) Consent or meeting of the minds. — This 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 consent is the conformity of the parties on the terms of the contract, the acceptance
by one of the offer made by the other.
(2) Object or subject matter. — This 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.
(3) Cause or consideration. — This 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.

Kinds of Contract of Sale as to Presence or Absence of Conditions

(a) Absolute. — 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.
(b) Conditional. — where 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.

Contract of Sale and Contract toSell with Reserved Title Distinguished

(1) Transfer of title. — In a contract of sale, title passes to thebuyer 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.
(2) Payment of price. — In the first case, 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 the second case, 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.
(3) Ownership of vendor. — Being contraries, their effect in law cannot be identical. In the first case, 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.
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.

Right to Transfer Ownership

(1) Seller must be owner or authorized by owner of thing sold. — It is essential in order for a sale to be valid
that the vendor must be able to transfer ownership and, therefore, he must be the owner or at least must be
authorized by the owner of the thing sold.
(2) Right must exist at time of delivery. — Article 1459, however, does not require that the vendor must have
the right to transfer ownership of the property sold at the time of the perfection of the contract.
(3) Where property sold registered in name of seller who employed fraud in securing his title. — Although
generally a forged or fraudulent deed is a nullity and conveys no title, there are instances when such a document
may become the root of a valid 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 without the necessity of a new or further agreement between the
parties.

Subject matter must be Determinate

(1) When thing determinate. — A thing is determinate or specific (not generic) when it is particularly
designated or physically segregated from all others of the same class.
(2) Sufficient if subject matter capable of being made determinate. — It is not necessary that the thing sold
must be in sight at the time the contract is entered into.

Art. 1461 - Things having a potential existence may be the object of the 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.

Art. 1462 - The goods which form the subject of a contract of sale may be either existing goods, owned
or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called “future goods.” There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency which may or may not happen.

Goods which may be the Object of Sale

(1) Existing Goods or goods owned or possessed by the seller; or
(2) Future Goods or goods to be manufactured

Art. 1465 - Things subject to a resolutory condition may be the object of the contract of sale.

A resolutory condition is an uncertain event upon the happening of which the obligation (or right) subject
to it is extinguished. Hence, the right acquired in virtue of the obligation is also extinguished. (Art. 1465)

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

By the contract of barter or exchange, one of the parties binds himself to give one thing in consideration
of the other’s promise to give another thing

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.

Effect of Gross Inadequacy of Price in Voluntary Sales

(1) General rule. — While a contract of sale is commutative,mere inadequacy of the price or alleged hardness
of the bargaingenerally does not affect its validity when both parties are in a position to form an independent
judgment concerning the transaction.
(2) Where low price indicates a defect in the consent. — The inadequacyof price, however, may indicate a
defect in the consent such as when fraud, mistake, or undue influence is present in which case the contract may
be annulled not because of the inadequacy of the price but because the consent is vitiated.

Art. 1475 - The contract of sale is perfected at the moment there is a meeting of minds 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.

A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or
in other customary manner. Until such announcement is made, any bidder may retract his bid; and the
auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.
(Art. 1476)

Art. 1477 - The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof.

Art. 1479 - A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An
accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor
if the promise is supported by a consideration distinct from the price.

An option is a privilege existing in one person for which he has paid a consideration which gives him the
right to buy/sell, for example, certain merchandise or certain specified property, from/to another person, if he
chooses, at any time within the agreed period at a fixed price, or under, or in compliance with certain terms and
conditions.

Option money is something of value given by the would-be buyer, he is not required to buy, but may even
forfeit it depending on the terms of the option.

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.

Earnest money is something of value given by the buyer to the seller to show that the buyer is really in
earnest, and to bind the bargain. It is actually a partial payment of the purchase price and is considered as proof
of the perfection of the contract.

Earnest money and option money distinguished

They may be distinguished as follows:
(1) Earnest money is part of the purchase price, while option money is the money given as distinct
consideration for an option contract.
(2) Earnest money is given only where there is already a sale, while option money applies to a sale not yet
perfected.
(3) When earnest money is given, the buyer is bound to pay the balance, while the would-be buyer who gives
option money is not required to buy.

Art. 1483 - Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of
sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be
inferred from the conduct of the parties.

Art. 1484 - In a contract of sale of personal property the price of which 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 two 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 two 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.

Remedies of vendor in sale of personal property payable in installments

The vendor of personal property payable in installments may exercise any of the following remedies:
(1) elect fulfillment upon the vendee’s failure to pay; or
(2) cancel the sale, if the vendee shall have failed to pay two or more installments; or
(3) foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more
installments.
CHAPTER 2: CAPACUTY TO BUY OR SELL

Art. 1489 - All persons who are authorized in this Code to obligate themselves, may enter into a contract of
sale, saving the modifications contained in the following articles. Where necessaries are sold and delivered to a
minor or other person without capacity to act, he must pay a reasonable price therefor.

Necessaries are those things which are needed for sustenance, dwelling, clothing, medical attendance,
education and transportation according to the financial capacity of the family of the incapacitated person.

Person who may enter into a contract of sale

As a general rule, all persons, whether natural or juridical, who can bind themselves have also legal capacity to
buy and sell. There are exceptions to this rule in those cases when the law determines that a party suffers from
either absolute or relative incapacity.

Such incapacity is absolute in the case of persons who cannot bind themselves; and relative where it exists
only with reference to certain persons or a certain class of property.

Art. 1490 - The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under article 191.

Marriage Settlement (also called “ante-nuptial contract”) is an agreement entered into by persons who are
about to be united in marriage, and in consideration thereof, for the purpose of fixing the property relations that
would be followed by them for the duration of the marriage.

CHAPTER 3: EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOSS

Art. 1493 - If at the time the contract of sale is perfected, the thing which is the object of the contract has been
entirely lost, the contract shall be without any effect. But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price
in proportion to the total sum agreed upon.

Effect of Loss of Thing at the time of Sale

(1) Thing entirely lost. — Where the thing is entirely lost at the time of perfection, the contract is inexistent and
void because there is no object. There being no contract, there is no necessity to bring an action for annulment.
(2) Thing only partially lost. — If the subject matter is onlypartially lost, the vendee may elect between
withdrawing fromthe contract and demanding the remaining part, paying its proportionateprice.

When a thing considered lost

The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is
unknown or it cannot be recovered.
The word “perishes” is sufficiently inclusive as to cover a case where there has been material deterioration or
complete change in the nature of the thing in such a manner that it loses its formerutility taking into
consideration the time the contract was entered into.

CHAPTER 4: OBLIGATIONS OF THE VENDOR

SECTION 1: General Provisions

Art. 1495 - The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is
the object of the sale.
Principal obligations of the vend
The principal obligations of a vendor are:
(1) to transfer the ownership of the determinate thing sold;
(2) to deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the
perfection of the contract;
(3) to warrant against eviction and against hidden defects;
(4) to take care of the thing, pending delivery, with proper diligence ; and
(5) to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary.

Art. 1496 - The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in
any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee.

Ways of effecting constructive delivery

(1) Equivalent to actual delivery. — Constructive delivery is ageneral term comprehending all those acts which,
although not conferring physical possession of the thing, have been held by construction of law equivalent to
acts of real delivery.
(a) by the execution of a public instrument
(b) by symbolical tradition or traditio symbolica
(c) by traditio longa manu (Art. 1499.);
(d) by traditio brevi manu (Ibid.);
(e) by traditio constitutum possessorium (Art. 1500.); or
(f) by quasi-delivery or quasi-traditio. (Art. 1501.)

SECTION 2: Delivery of the Thing Sold

Art. 1497 - The thing sold shall be understood as delivered, when it is placed in the control and possession of
the vendee.

Tradition is a derivative mode of acquiring ownership by virtue of which one who has the right and
intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same.

Art. 1498 - When the sale is made through a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. With regard to movable property, its delivery may also be made by the delivery of the keys
of the place or depository where it is stored or kept.

Symbolic tradition - Constructive delivery is symbolic when to effect the delivery, the parties make use of a
token symbol to represent the thing delivered.
The delivery of the key where the thing sold is stored or kept is equivalent to the delivery of the thing because
the key represents the thing. Similarly, there is symbolic delivery of goods to vendee upon delivery to him of
delivery orders which would authorize him to withdraw the goods from a warehouse. Upon withdrawal, there is
actual delivery (supra.) which consummates the sale.

Art. 1499 - The delivery of movable property may likewise be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of
the sale, or if the latter already had it in his possession for any other reason.

Traditio Longa Manu - This mode of delivery takes place by the mere consent or agreement of the contracting
parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of
the vendee.It should be noted that delivery “by the mere consent or agreement of the contracting parties” is
qualified by the phrase “if the thing sold cannot be transferred to the possession of the vendee at the time of the
sale.”

Traditio Brevi Manu - This mode of legal delivery happens when the vendee has already the possession of the
thing sold by virtue of another title as when the lessor sells the thing leased to the lessee. Instead of turning over
the thing to the vendor so that the latter may, in turn, deliver it, all these are considered done by action of law.

Art. 1500 - There may also be tradition constitutum possessorium.

Traditio constitutum possessorium - This mode of delivery is the opposite of traditio brevi manu. It takes
place when the vendor continues in possession of the property sold not as owner but in some other capacity, as
for example, when the vendor stays as a tenant of the vendee. In this case, instead of the vendor delivering the
thing to the vendee so that the latter may, in turn, deliver it back to the vendor, the law considers that all these
have taken place by mere consent or agreement of the parties.

Art. 1501 - With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall
govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the
possession of the vendee or the use by the vendee of his rights, with the vendor’s consent, shall be understood as
a delivery.

Quasi-traditio.
Tradition can only be made with respect to corporeal things. In the case of incorporeal things, delivery is
effected:
(1) by the execution of a public instrument; or
(2) when that mode of delivery is not applicable, by the placing of the titles of ownership in the possession of
the vendee; or
(3) by allowing the vendee to use his rights as new owner with the consent of the vendor. This mode of delivery
of incorporeal things or rights is known as quasi-traditio. Thus, the delivery to a person of a negotiable
document of title in which it is stated that the goods referred to therein will be delivered to the bearer amounts to
delivery of the goods to such person.