The Law on Sales
by mere consent with-
SALES
Contract of Sale- The contract of sale
is an agreement whereby one of the
parties (called the seller or vendor)
obligates himself to deliver
something to the other (called the
buyer or purchaser or vendee) who,
on his part, binds himself to pay
therefor a sum of money or its
equivalent (known as the price).
Under the Spanish Civil Code, the
contract was referred to as
a contract of “purchase and sale.” As
every “sale” necessarily
presupposes a “purchase,” this name
was regarded as redundant.
Hence, the name of Title VI has been
simplified by calling it “sales”
and the name of the contract has been
changed for the same rea-
son to “contract of sale.” (Report of the
Code Commission, p. 141.)
“It is required in the proposed Code
that the seller transfers the ownership
of the thing sold. (Arts. 1458, 1459,
1495,
1547.) In the present Code (Art. 1445.),
his obligation is merely
to deliver the thing, so that even if the
seller is not the owner,
he may validly sell, subject to the
warranty (Art. 1474.) to
maintain the buyer in the legal and
peaceful possession of the thing sold.
The Commission considers the theory of
the present law unsatisfactory from the
moral point of view.”
(Ibid.)
Characteristics of a Contract of Sale
The contract of sale is:
(1) Consensual, because it is perfected
out any further act;
1
(2) Bilateral, 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 (see Gaite vs. Fonacier,
2 SCRA 820
[1961].);
(4) Commutative, because the thing
sold is considered the
equivalent of the price paid and vice
versa. (see Ibid.) However,
2
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”; and
(6) Principal, because it does not
depend for its existence and
validity upon another contract.
Essential requisites of Contract of
Sale
The rules of law governing contracts in
general are applicable to sales. Like
every contract, “sale” has the following
requisites or elements:
(1) Consent or meeting of the minds. —
This refers to the con-
sent on the part of the seller to transfer
and deliver and on the
part of the buyer to pay. (see Art.
1475.) The parties must have
legal capacity to give consent and to
obligate themselves. (Arts.
1489, 1490, 1491.) 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. The contract to
sell is a bilateral contract.
Where there is merely an offer by one
party without the acceptance of the
other, there is no consent. (Salonga vs.
Farrales, 105 SCRA 359 [1981].) The
acceptance of payment by a party is an
indication of his consent to a contract of
sale, thereby precluding
him from rejecting its binding effect.
(Clarin vs. Rulova, 127 SCRA
512 [1984].)
There may, however, be a sale against
the will of the owner in
case of expropriation (see Art. 1488.)
and the three different kinds
of sale under the law, namely: an
ordinary execution sale (see
Rules of Court, Rule 39, Sec. 15.),
judicial foreclosure sale (Ibid.,
Rule 68.), and extra-judicial
foreclosure sale. (Act No. 3135, as
amended.) A different set of law
applies to each class of sale
mentioned. (see Fiestan vs. Court of
Appeals, 185 SCRA 751[1990].)
The sale of conjugal property
requires the consent of both the
husband and the wife. The absence
of the consent of one renders
the sale null and void (see Art. 124,
Family Code.) while the vitiation
thereof (see Art. 1390.) makes it
merely voidable. (Guiang vs.
Court of Appeals, 95 SCAD 264, 290
SCRA 372 [1998].)
(2) Object or subject matter. — This
refers to the determinate thing
which is the object of the contract.
(Art. 1460.) 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.
The terms used in the
law are “thing” (e.g., Art. 1458), “article”
(Art. 1467), “goods” (e.g.,
Art. 1462), “personal property” (e.g.,
Art. 1484), “property” (e.g.,
Art. 1490), “movable property” (e.g., Art.
1498), “real estate” (e.g.,
Art. 1539), “immovable” (e.g., Ibid.),
“immovable property” (e.g.,
Art. 1544), and “real property.” (Art.
1607.)
A buyer can only claim right of
ownership over the object of
the deed of sale and nothing else.
Where the parcel of land de-
scribed in the transfer certificate of title
is not in its entirety the
parcel sold, the court may decree that
the certificate of title be
cancelled and a correct one be issued in
favor of the buyer, with-
out having to require the seller to
execute in favor of the buyer an
instrument to effect the sale and transfer
of the property to the
true owner. (Veterans Federation of the
Philippines vs. Court of
Appeals, 138 SCAD 50, 345 SCRA 348
[2000].)
The sale of credits and other
incorporeal rights is covered by
Articles 1624 to 1635; and
(3) Cause or consideration. — This
refers to the “price certain
in money or its equivalent” (Art. 1458.)
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. (see Arts. 1468, 1638.)
However, the words “its
equivalent” have been interpreted to
mean that payment need not
be in money, so that there can be a sale
where the thing given as
token of payment has “been assessed
and evaluated and [its] price
equivalent in terms of money [has] been
determined.” (see Re-
public vs. Phil. Resources Dev. Corp.,
102 Phil. 968 [1958].)
The price must be real, not fictitious;
otherwise, the sale is void
although the transaction may be shown
to have been in reality a
donation or some other contract. (Art.
1471.) A seller cannot render
invalid a perfected contract of sale by
merely contradicting the
buyer’s allegation regarding the price
and subsequently raising
the lack of agreement as to the price.
(David vs. Tiongson, 111
SCAD 242, 313 SCRA 63 [1999].)
The absence of any of the above
essential elements negates
the existence of a perfected contract of
sale.3 Sale, being a consensual contract
(see Art. 1475.), he who alleges it must
show its existence by competent proof.
(Dizon vs. Court of Appeals, 302
SCRA 288 [1999].)
Natural and Accidental Elements
The above are the essential
elements of a contract of sale or
those without which no sale can validly
exist. They are to be distinguished from:
(1) Natural elements or those which
are deemed to exist in certain contracts,
in the absence of any contrary
stipulations, like
warranty against eviction (Art. 1548.) or
hidden defects (Art.
1561.); and
(2) Accidental elements or those
which may be present or ab-
sent depending on the stipulations of the
parties, like conditions,
interest, penalty, time or place of
payment, etc.
Kinds of Contract of Sale
(1) As to presence or absence of
conditions. — A sale may be
either:
(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. (Dignos
vs.
Court of Appeals, 158 SCRA 375 [1988];
Pingol vs. Court of
Appeals, 44 SCAD 498, 226 SCRA 118
[1995]; People’s Indus-
trial and Commercial Corporation vs.
Court of Appeals, 88
SCAD 559, 281 SCRA 206 [1997].) In
such case, ownership of
the property sold passes to the vendee
upon the actual or constructive delivery
thereof. (see Art. 1497.)
Payment of the purchase price is
not essential to the transfer of ownership
as long as the property sold has been
delivered. Such delivery (see Art. 1497.)
operates to divest the vendor of title to
the property which may not be regained
or re-
covered until and unless the contract is
resolved or rescinded
in accordance with law (Philippine
National Bank vs. Court
of Appeals, 82 SCAD 472, 272 SCRA
291 [1997].); or
(b) Conditional. — where the sale
contemplates a contingency (Arts. 1461,
1462, par. 2; Art. 1465.), and in general,
where the contract is subject to certain
conditions (see Art.
1503, par. 1.), usually, in the case of the
vendee, the full payment of the agreed
purchase price (Art. 1478; see People’s
Homesite & Housing Corp. vs. Court of
Appeals, 133 SCRA
777 [1984].) and in the case of the
vendor, the fulfillment of
certain warranties, e.g., the timely
eviction of squatters on the
property sold. (Romero vs. Court of
Appeals, 65 SCAD 621,
250 SCRA 223 [1995].)
In sales with assumption of
mortgage, the assumption of
mortgage is a condition to the seller-
mortgagor’s consent to
the sale so that without approval by the
mortgagee no sale is
perfected and the seller remains the
owner and mortgagor of
the subject property with the right to
redeem in the case of
foreclosure. (Ramos vs. Court of
Appeals, 87 SCAD 24, 279
SCRA 118 [1997].)
However, a sale denominated as
a “Deed of Conditional
Sale’’ is still absolute where the contract
is devoid of any proviso that title is
reserved or the right to unilaterally
rescind is
stipulated, e.g., until or unless the price
is paid. (Heirs of Juan
San Andres vs. Rodriguez, 332 SCRA
769 [2000].)
The delivery of the thing sold does not
transfer title until
the condition is fulfilled. Where the
condition is imposed, in-
stead, upon the perfection of the
contract the failure of such
condition would prevent such perfection
(Galang vs. Court of
Appeals, 43 SCAD 737, 225 SCRA 37
[1993]; Roque vs. Lapuz,
96 SCRA 741 [1980]; Babasa vs. Court
of Appeals, 94 SCAD 679,
290 SCRA 532 [1998].) or the juridical
relation itself from com-
ing into existence.
If the condition is imposed on an
obligation of a party (e.g.,
ejection by the vendor of squatters
within a certain period
before delivery of property) not upon the
perfection of the
contract itself, which is not complied
with, the other party may
either refuse to proceed or waive said
condition. (see Art. 1545;
Romero vs. Court of Appeals, 65 SCAD
621, 250 SCRA 223
[1995].) The stipulation that the
“payment of the full consideration [of a
parcel of land] shall be due and payable
in five
(5) years from the execution of a formal
deed of sale’’ is not a
condition which affects the efficacy of
the contract of sale. It
merely provides the manner by which
the full consideration
is to be computed and the time within
which the same is to be
paid. (Heirs of Juan San Andres vs.
Rodriguez, supra.) Similarly, the mere
fact that the obligation of the buyer to
pay
the balance of the purchase price was
made subject to the
condition that the seller first deliver the
reconstituted title of
the house and lot sold does not make
the contract a contract
to sell for such condition is not
inconsistent with a contract of
sale. (Laforteza vs. Machuca, 127
SCAD 798, 333 SCRA 643
[2000].)
(2) Other kinds. — There are,
of course, other kinds of sale
depending on one’s point of view, e.g.,
as to the nature of the subject matter
(real or personal, tangible or intangible),
as to manner
of payment of the price (cash or
installment), as to its validity
(valid, rescissible, unenforceable, void),
etc.
Requisites concerning the object of
Sales
(1) Things. — Aside from being
(a) determinate (Arts. 1458,
1460.), the law requires that the subject
matter must be (b) licit or
lawful, that is, it should not be contrary
to law, morals, good cus-
toms, public order, or public policy (Arts.
1347, 1409[1, 4].), and
should (c) not be impossible. (Art. 1348.)
In other words, like any
other object of a contract, the thing must
be within the commerce of
men.
If the subject matter of the sale is
illicit, the contract is void
and cannot, therefore, be ratified. (Art.
1409.) In such a case, the
rights and obligations of the parties are
determined by applying
the following articles of the Civil Code:
“Art. 1411. When the nullity proceeds
from the illegality of
the cause or object of the contract, and
the act constitutes a criminal offense,
both parties being in pari delicto, they
shall have no
action against each other, and both shall
be prosecuted. Moreover, the provisions
of the Penal Code relative to the
disposal of
effects or instruments of a crime shall be
applicable to the things
or the price of contract.
This rule shall be applicable when
only one of the parties is guilty; but the
innocent one may claim what he has
given, and
shall not be bound to comply with his
promise.”
“Art. 1412. If the act in which the
unlawful or forbidden
cause consists does not constitute a
criminal offense, the following rules shall
be observed:
(1) When the fault is on the part of
both contracting par-
ties, neither may recover what he has
given by virtue of the
contract, or demand the performance of
the other’s undertaking;
(2) When only one of the
contracting parties is at fault, he
cannot recover what he has given by
reason of the contract, or
ask for the fulfillment of what has been
promised him. The
other, who is not at fault, may demand
the return of what he
has given without any obligation to
comply with his promise.”
(2) Rights. — All rights which are not
intransmissible or personal may also be
the object of sale (Art. 1347.), like the
right of
usufruct (Art. 572.), the right of
conventional redemption (Art.
1601.), credit (Art. 1624.), etc.
Examples of intransmissible
rights are the right to vote, right
to public office, marital and parental
rights, etc.
No contract may be entered upon future
inheritance except
in cases expressly authorized by law.
(Art. 1347, par. 2.) While
services may be the object of a contract
(Art. 1347, par. 3.), they
cannot be the object of a contract of
sale. (Art. 1458; see Art. 1467.)
Types of illicit things
The thing may be illicit per se (of
its nature) or per accidens (be-
cause of some provisions of law
declaring it illegal).
Article 1459 refers to both. Decayed
food unfit for consumption is illicit per
se, while lottery tickets (Art. 195,
Revised Penal
Code.) are illicit per accidens. Land sold
to an alien is also per accidens because
the sale is prohibited by the
Constitution.7 The rule is well-settled
that the mortgagor (or pledgor)
continues to be the
owner of the property mortgaged, and,
therefore, has the power
to alienate the same; however, he is
obliged, under pain of penal
liability, to secure the consent of the
mortgagee. (Service Special-
ist, Inc. vs. Intermediate Appellate Court,
174 SCRA 80 [1989].)
Rights of vendors 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 (Art.
1458.) and, therefore, he must
be the owner or at least must be
authorized by the owner of the
thing sold. This rule is in accord with a
well-known principle of
law that one can not transmit or dispose
of that which he does
not have — nemo dat quod non-habet.
Accordingly, one can sell only
what one owns or is authorized to sell,
and the buyer can acquire
no more than what the seller can
transfer legally. (Azcona vs. Reyes &
Larracas, 59 Phil. 446 [1934]; Manalo
vs. Court of Appeals, 366 SCRA 752
[2001]; Tangalin vs. Court of Appeals,
159 SCAD 343, 371 SCRA 49 [2001];
for exceptions, see Art. 1505.)
Thus, a sale of paraphernal
(separate) property of the deceased
wife by the husband who was neither an
owner nor administrator of the property
at the time of sale is void ab initio. Such
being
the case, the sale cannot be the subject
of ratification by the administrator or the
probate court. (Manotok Realty, Inc. vs.
Court
of Appeals, 149 SCRA 372 [1987].) Only
so much of the share of
the vendor-co-owner can be validly
acquired by the vendee even
if he acted in good faith in buying the
shares of the other co-own-
ers. (Segura vs. Segura, 165 SCRA 368
[1988].) Where the sale from
one person to another was fictitious as
there was no consideration, and,
therefore, void and inexistent, the latter
has no title to
convey to third persons. (Traders Royal
Bank vs. Court of Appeals,
80 SCAD 12, 269 SCRA 15 [1997].)
(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. (Martin vs. Reyes, 91 Phil. 666
[1952].) Perfection per se
does not transfer ownership which
occurs upon the actual or constructive
delivery of the thing sold. Sale, being a
consensual con SALES
tract, it is perfected by mere consent
(see Art. 1475.), and owner-
ship by the seller of the thing sold is not
an element for its perfection. It is
sufficient if the seller has the “right to
transfer the ownership thereof at the
time it is delivered.” Thus, the seller is
deemed only to impliedly warrant that
“he has a right to sell the thing at the
time when the ownership is to pass.”
(Art. 1547[1].)
The reason for the rule is
obvious. Since future goods (Arts.
1461, par. 1; 1462 par. 1.) or goods
whose acquisition by the seller
depends upon a contingency (Art. 1462,
par. 2.) may be the subject matter of
sale, it would be inconsistent for the
article to re-
quire that the thing sold must be owned
by the seller at the time
of the sale inasmuch as it is not
possible for a person to own a
thing or right not in existence. An
agreement providing for the
sale of property yet to be adjudicated by
a court is thus valid and
binding. (Republic vs. Lichauco, 46
SCRA 305 [1972].)
(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. One such
instance is where the certificate of title
was already transferred
from the name of the true owner to the
forger, and while it remained that way,
the land was subsequently sold to an
innocent
purchaser for value. Where there is
nothing in the certificate to
indicate any cloud or vice in the
ownership of the property, or any
encumbrance thereon, or in the absence
of any fact or circumstance
to excite suspicion, the purchaser is not
required to explore further than what the
Torrens title upon its face indicates in
quest for any hidden defect or inchoate
right that may subsequently
defeat his right thereto.
If the rule were otherwise, the
efficacy and conclusiveness of
the certificate of title which the Torrens
System seeks to insure
would entirely be futile and nugatory.
The established rule is that
the rights of an innocent purchaser for
value must be respected
and protected, notwithstanding the fraud
employed by the seller
in securing his title. The proper recourse
of the true owner of the
property who was prejudiced and
fraudulently dispossessed of
the same is to bring an action for
damages against those who caused or
employed the fraud, and if the latter are
insolvent, an action against the
Treasurer of the Philippines may be filed
for recovery of damages against the
Assurance Fund. (Fule vs. Legare, 7
SCRA 351 [1951]; Pino vs. Court of
Appeals, 198 SCRA 434 [1991]; Phil.
National Bank vs. Court of Appeals, 187
SCRA 735 [1990]; Eduarte vs. Court of
Appeals, 68 SCAD 179, 256 SCRA 391
[1996].)
(4) Where properly sold in violation
of a right of first refusal of
another person. — The prevailing unregistered right. The unrecorded sale
doctrine is that a contract of sale between the buyer and he seller is
entered into in violation of a right of first preferred for the reason that if the seller
refusal of another per- the original owner, had parted with his
son, while valid is rescissible. (Guzman, ownership of the thing sold then, he no
Bocaling and Co. vs. longer had ownership and free disposal
Bonnevie, 206 SCRA 668 [1992]; of that thing so as to be able to
Conculada vs. Court of Appeals, mortgage it again. Registration of the
156 SCAD 624, 367 SCRA 164 [2001].) mortgage is of no moment since it is
A right of first refusal is understood to be without prejudice to
neither “amorphous nor merely the better right of third parties. (State
preparatory’’ and can be executed Investment House, Inc. vs. Court of
according to its terms. In contracts of Appeals, 69 SCAD 135, 254 SCRA 368
sale, the basis of the right of [1996]; Dela Merced vs. GSIS, 154
first refusal must be the current offer of SCAD 816, 365 SCRA 1 [2001].)
the seller to sell or the
offer to purchase of the prospective
buyer. Only after the grantee
fails to exercise his right under the same
terms and within the period
contemplated can the owner validly offer
to sell the property to a third person,
again, under the same terms as offered
to the grantee (Polytechnic University of
the Philippines vs. Court of Appeals, 368
SCRA 691 [2001]; Equatorial Realty
Development, Inc. vs. Mayfair, Inc., 76
SCAD 407, 264 SCRA 483 [1996];
Parañaque King’s Enterprises, Inc. vs.
Court of Appeals, 79 SCAD 936, 268
SCRA 727 [1997].) Where, however,
there is no showing of bad faith on the
part of the vendee, the contract of sale
may not be rescinded (see Arts. 1380-
1381[3].), and the remedy of the person
with the right of first refusal is an action
for damages against the vendor.
(Rosencor Development Corporation vs.
Inquing, 145 SCAD 484, 354 SCRA 119
[2001].)
(5) Where real property, subject
of unrecorded sale, subsequently
mortgaged by seller which mortgage
was registered. — The mortgagee’s
registered mortgage right over the
property is inferior to that of the buyer’s