Law on Sales

Sale is a contract where one party (seller or vendor)

obligates himself to transfer the ownership of and to
deliver a determinate thing, while the other party (buyer
or vendee) obligates himself to pay for said thing a price
certain in money or its equivalent

PARTIES TO A CONTRACT OF SALE

1. Seller – one who sells and transfers the thing and ownership to the buyer

2. Buyer – one who buys the thing upon payment of the consideration
agreed upon
Characteristics of a contract of sale

1. Consensual
2. Bilateral
3. Onerous
The thing sold is conveyed in consideration of the price
and vice versa
4. Commutative
- 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
(Sweepstakes ticket)
5. Nominate
6. Principal
Essential Requisites of a Contract of Sale

1. Essential elements – for validity:

a. Consent – meeting of the minds to transfer ownership in exchange for
the price.
b. Determinate subject matter – determinate thing which is the object of
the contract.
c. Consideration – price certain in money or its equivalent.

2. Natural elements – those which are inherent in the contract, and which in
the absence of any contrary provision, are deemed to exist in the contract.
Examples:
a. Warranty against eviction
b. Warranty against hidden defects
3. Accidental elements – dependent on parties’ stipulations;
Examples:
a. Conditions
b. Interest
c. Time & Place of payment
d. Penalty
Two Kinds of Contract of Sale

1. Absolute
- Where the sale is not subject to any condition whatsoever and
where title or ownership passes to the buyer upon delivery of
the thing sold

2. Conditional
- where the sale contemplates a contingency and in general,
where the contract is subject to certain conditions usually the full
payment of the purchase price.
STAGES OF A CONTRACT OF SALE

1. Negotiation – begins from the time the prospective

contracting parties manifest their interest in the contract
and ends at the moment of agreement of the parties;

2. Perfection or birth – takes place when the parties agree

upon the essential elements of the contract;

3. Consummation – occurs when the parties fulfill or

perform the terms agreed upon in the contract
culminating in the extinguishment thereof
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 (NCC, Art. 1483). Contracts shall be obligatory, in whatever form
they have been entered into, provided all the essential requisites for their
validity are present.

XPNs:

a) If the law requires a document or other special form, the contracting

parties may compel each other to observe that form (NCC, Art. 1357).
b) Under Statute of Frauds, the following contracts must be in writing;
otherwise, they shall be unenforceable:
1. Sale of personal property at a price not less than P500;
2. Sale of a real property or an interest therein;
3. Sale of property not to be performed within a year from the date
thereof;
4. When an applicable statute requires that the contract of sale be in a
certain form [NCC, Art. 1403(2)].
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.

Art. 1460. A thing is determinate when it is particularly designated

or physical segregated from all other 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.

Note:

The vendor need not have the right to transfer ownership of the property
sold at the time of the perfection of the contract. It is sufficient if he has
the right to sell the thing at the time when the ownership is to pass.
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
KINDS OF OBJECT OF SALE

1. Existing Goods
Owned or possessed by seller at the time of
perfection.

2. Future Goods
Goods to be manufactured, raised, acquired by
seller after perfection of the contract or whose
acquisition by seller depends upon a contingency
 EMPTIO REI EMPTIO SPEI
SPERATAE
Definition Sale of thing having potential Sale of mere hope or
existence. expectancy.
Uncertainty Uncertainty is w/ regard to quantity Uncertainty is w/ regard to
& quality existence of thing.
Object of the Contract deals w/ future thing Contract deals w/ present
Sale thing – hope or expectancy
Effectivity Sale is valid only if the expected Sale is valid even though
thing will exist. So that if the expected thing does not come
condition is not fulfilled, if the thing into existence as long as the
does not come into existence, the hope itself validly existed e.g.
contract cannot have the effect for lotto NOTE: Sale of a vain
lack of an essential requisite. hope or expectancy however,
Although the vendee may have is void (NCC, Art. 1461).
reserve his right to claim indemnity
from the vendor in the event that
the latter knew that the thing could
not come into existence
Art. 1464. In the case of fungible goods, there may be a sale of an
undivided share of a specific mass, though the seller purports to sell
and the buyer to buy a definite number, weight or measure of the
goods in the mass, and though the number, weight or measure of the
goods in the mass is undetermined. By such a sale the buyer
becomes owner in common of such a share of the mass as the
number, weight or measure bought bears to the number, weight or
measure of the mass. If the mass contains less than the number,
weight or measure bought, the buyer becomes the owner of the
whole mass and the seller is bound to make good the deficiency
from goods of the same kind and quality, unless a contrary intent
appears. (n)
1. Fungible property – That property which belongs to a common genus
permitting its substitution
2. Non- fungible property – That property which is specified and not subject to
substitution
NOTE: As to whether a property is fungible or nonfungible is determined
by the agreement of the parties and not on the consumability of the thing.

Example:

Sara owns 1,000 cavans of palay stored in her warehouse. If Sara sells to Bitoy 250
cavans of such palay which cavans are not segregated from the whole mass, Bitoy
becomes a co-owner of the said mass to the extent of ¼ thereof while Sarah, to the
extent of ¾.
Art. 1467. A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and
not for the general market, it is a contract for a piece of work. (n)

Rules in determining if the contract is one of sale or a piece of work

1. Sale – if ordered or manufactured in the ordinary course of business (NCC,

Art. 1467).
– involves the sale of a thing or right
– obligation of seller is a real obligation or an obligation to give

2. Piece of work – if manufactured especially for the customer and upon his
special order, and not for the general market (NCC, Art. 1467).
– involves lease of service
– obligation of seller is personal or obligation to do
 Sale Contract For a
Piece-of-Work
Existence Manufactured in Manufactured
the ordinary upon special
course of order of a
business. customer
To Whom Made For the general Not for the
market. general market,
but especially for
the customer.
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.

SALE BARTER
Nature A thing is given in exchange of A thing is given in
a price certain in money or its exchange of another
equivalent. thing.
If consideration is The transaction is characterized by the manifest intention
partly in money of the parties.
and partly in If intention is not clear, and the If intention is not clear,
another thing value of thing is equal or less and the value of thing is
than amount of money = Sale more than amount of
money = Barter
PRICE
The sum stipulated as the equivalent of the thing sold and
also every incident taken into consideration for the fixing of
the price put to the debit of the buyer and agreed to by him
(Villanueva, 2004).

NOTE: A definite agreement on the manner of payment of the

price is an essential element in the formation of a binding and
enforceable contract of sale.
Requisites of price It must be:

1. Real not fictitious

2. Paid in money or its equivalent
3. For valuable consideration
4. Certain or ascertainable at the time of the perfection of the contract
5. In some cases, must not be grossly inferior to the value of the thing sold

When price is certain

1. If there is a stipulation
2. If it be with reference to another thing certain
3. If the determination of the price is left to the judgment of specified
person(s)
4. By reference to certain fact(s) as referred to in Art. 1472 (NCC, Art. 1469)
Simulated Price

The price is simulated when neither party had the intention that the amount
will be paid

Effect if price is simulated

GR: The sale is void.

XPN: If it can be shown to be a donation or another contract (NCC, Art.

1471).
Fixing of the price CANNOT be left to the discretion of one of the
contracting parties

GR: The price cannot be fixed unilaterally by one of the contracting

parties.

XPN: If the price fixed by one of the parties is accepted by the other, the
sale is perfected.

Effect when the price is unilaterally fixed by one of the contracting

parties without consent of the other party

There is no meeting of the minds. The sale is inefficacious.

Effect when the price is fixed by the third person
designated

GR: Price fixed by a third person designated by the

parties is binding upon them.

XPNs:

1. When the third person acts in bad faith or by mistake;

and
2. When the third person disregards the specific
instructions or the procedure marked out by the
parties.
Effect of Gross Inadequacy of Price (NCC, Art. 1470)

GR: It does not affect the validity of the sale.

XPN:

1. If Consent is vitiated (may be annulled or presumed to be equitable mortgage);

2. If the parties intended a Donation or some other act/ contract;
3. If the price is so low as to be “Shocking to the conscience”;
4. If in the event of Resale, a better price can be obtained.

WHEN NO PRICE IS AGREED UPON BY THE PARTIES

Effect of failure to determine the price

1. Where contract is executory – ineffective.

2. Where the thing has been delivered to and appropriated by the buyer – the
buyer must pay a reasonable price therefore.