LEARNING

NOTREMODULE IN REGULATORY
DAME - SIENA FRAMEWORK
COLLEGE OF POLOMOLOK AND LEGAL ISSUES IN BUSINESS (AE 15)
Module No. Polomolok,
5&6 South Cotabato Inclusive week 4th week
Module
School Year Overview
2021-2022 References/ Research Links
 NATURE AND FORM OF CONTRACT  Civil Code of the Philippines
 Law on Sales by Hector de Leon & Azucena, CA
Jr.

ART. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof.
ART. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the
price.
NECESSITY OF DELIVERY
• It is only after delivery of the thing sold that the purchaser acquires real right or ownership over it
Exceptions to the rule.
(1) Contrary stipulation. — The ownership of things is transferred by delivery, and not by mere payment. However, the parties
may stipulate that despite the delivery, the ownership of the thing shall remain with the seller until the purchaser has fully paid the
price. (see Art. 1503.) In other words, non-payment of the price, after the thing has been delivered, prevents the transfer of
ownership only if such is the stipulation of the parties. This stipulation is usually known as pactum reservati dominii or
contractual reservation of title, and is common in sales on the installment plan. (Jovellanos vs. Court of Appeals, 210 SCRA 126
[1992].) A contract which contains this kind of stipulation is considered a contract to sell. The agreement may be implied. (Adelfa
Properties, Inc. vs. Court of Appeals, 58 SCAD 462, 240 SCRA 565 [1995].)
(a) Where in a contract of sale the seller agreed that the ownership of the goods shall remain with the seller until the purchase price
shall have been fully paid, merely to secure the performance by the buyer of his obligation, such stipulation cannot make the seller
liable in case of loss of the goods. (see Lawyers Cooperative Publishing Co. vs. Tabora, 13 SCRA 762 [1965]; see Art. 1503, par.
2.)
(b) If there is doubt by the wording of the contract whether the parties intended a suspensive condition (Art. 1478.) or a suspensive
period (Art. 1193, par. 1.) for the payment of the stipulated price, the doubt shall be resolved in favor of the greatest reciprocity of
interests. (see Art. 1378.) There can be no question that greater reciprocity will be obtained if the buyer’s obligation is deemed to
be actually existing, with only its maturity (due date) postponed or deferred. Sale is essentially onerous. (Gaite vs. Fonacier, 2
SCRA 830 [1961].)
(c) A stipulation that ownership in the thing sold shall not pass to the purchaser until after he has fully paid the price thereof could
only be binding upon the contracting parties, their assigns, and heirs (see Art. 1311, par. 1.) but not upon third persons without
notice. Such a stipulation is only a kind of security for the benefit of the vendor who has not been fully paid.
(2) Contract to sell. — In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the
price, such payment is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event
that prevents the obligation of the vendor to convey title from acquiring binding force. To say that there is only a casual breach is
to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not
the case. (Luzon Brokerage Co., Inc. vs. Maritime Bldg., Co.Inc., 43 SCRA 93 [1972] and 86 SCRA 305 [1978]; Manuel vs.
Rodriguez, 109 Phil. 1 [1960]; Roque vs. Lapuz, 96 SCRA 741 [1980]; see Art. 1184.)
(3) Contract of insurance. — A perfected contract of sale even without delivery vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject of insurance. (see Sec. 14[a], Insurance Code.) Thus, a perfected contract of sale
between the vendee-consignee and the shipper of goods operates to vest in the former an equitable title even before delivery or
before he performed the conditions of the sale, the contract of shipment, whether under F.O.B., or C.I.F., or C & F, being
immaterial in the determination of whether the vendee has an insurable interest or not in the goods. (Filipino Merchants Insurance
Co., Inc. vs. Court of Appeals, 179 SCRA 638 [1989].)

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.

Kinds of promise treated in Article 1479.

The above article refers to three kinds of promises, namely:
(1) An accepted unilateral promise to sell in which the promisee (acceptor) elects to buy;
(2) An accepted unilateral promise to buy in which the promisee (acceptor) elects to sell; and
(3) A bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to exact fulfillment.

Effect of unaccepted unilateral promise.

A unilateral promise or offer to sell or to buy a thing which is not accepted creates no juridical effect or legal bond. Such
unaccepted imperfect promise or offer is called policitacion. A period may be given to the offeree within which to accept the offer.
EXAMPLE:
S offers or promises to sell to B his car at a stated price and B just let the promise go by without accepting it. Neither S nor B is
bound by any contract. Obviously, this is not the one contemplated in Article 1479.

Effect of accepted unilateral promise.

The second paragraph of Article 1479 refers to what is called as “option” in the commercial world.
A unilateral promise to sell or to buy a determinate thing for a price certain does not bind the promissor even if accepted and
may be withdrawn at any time. It is only if the promise is supported by a consideration distinct and separate from the price that its
acceptance will give rise to a perfected contract.

Meaning of OPTION
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.

Nature of option contract.

(1) An option is a contract. It is a preparatory contract, separate and distinct from the main contract itself (subject matter of the 1
option) which the parties may enter into upon the consummation of the option.
(2) It gives the party granted the option the right to decide, whether or not to enter into a principal contract, while it binds
the party who has given the option, not to enter into the principal contract with any other person during the agreed time
and within that period, to enter into such contract with the one to whom the option was granted if the latter should decide