5.
Onerous – thing sold is conveyed in
Law on Sales
I. NATURE, FORMS AND REQUISITES
• Sale – a contract where one party
(seller/vendor) obligates himself to transfer the
ownership of and to deliver a determinate thing,
while the other party (buyer/vendee) obligates
himself to pay for said thing a price certain in
money or its equivalent. (Art. 1458, NIC)
• Essential elements of a contract of sale
(COC):
1. Consent – meeting of minds to transfer
ownership in exchange for the price
2. Object or Determinate subject matter –
determinate thing which is the object of the
contract
3. Consideration – price certain in money or its
equivalent
• 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.
• Characteristics of a contract of sale:
1. Consensual – sale is perfected by mere
consent, manifested by the meeting of the
minds as to the offer and acceptance on the
subject matter, price and terms of payment.
2. Bilateral – seller will deliver and transfer a
determinate thing to the buyer and the latter will
pay an ascertained price.
3. Commutative – thing sold is considered
equivalent of the price paid and the price paid is
the equivalent of the thing sold.
XPN: Aleatory – consideration is not
equivalent of what has been received
(e.g. purchase of a lotto ticket).
4. Principal – its existence does not depend
upon the existence and validity of another
contract
consideration of the purchase price, and vice
versa.
6. Nominate – it has a specific name given by
law.
• Formal requirement for the validity of a
contract of sale:
GR: Whatever form - may be made in
WRITING, or VERBAL, or PARTLY IN
WRITING and PARTLY IN VERBAL, or may be
inferred from the conduct of the parties.
XPN:
a) If the law requires a document or other
special form
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
c) Sale of large cattle – must be recorded with
the city/municipal treasurer and a certificate of
transfer be issued.
• Persons who may enter into a contract of
sale
GR: All persons, whether natural or juridical,
who can bind themselves, have legal capacity
to buy and sell.
XPNs:
1. Minors, insane and demented persons
and deaf-mutes who do not know how to
write
2. Persons under a state of drunkenness
or during hypnotic spell
3. Husband and wife – sale by and
between spouses
4. Sale between guardians and wards
5. Sale between agents and principals
(XPN to the XPN: Consent of the principal)
6. Sale between executors and
administrators of estate of the deceased
(does not include hereditary rights)
7. Sale involving property of the
government
8. Sale of property in litigation (Note:
Applies only to the lawyer by a client of the
property which is the object of litigation)
 III. RIGHTS/OBLIGATIONS OF VENDOR AND
• Requisites of a proper objects of sale: VENDEE
1. Things
a. Determinate/determinable • Obligations of the buyer
b. Lawful/licit 1. Payment of the price
c. Should not be impossible (within the 2. Accept delivery of thing sold
commerce of men) 3. Bear expenses for the execution and
2. Rights - must be transmissible (e.g. right of registration of sale and putting the goods in a
usufruct) deliverable state, if such is the stipulation

II. EARNEST MONEY v OPTION MONEY • Obligations of the seller

1. Deliver the thing sold
• Earnest money – is the money given to the 2. Deliver fruits and accessions/accessories
seller by the prospective buyer to show that the accruing from perfection of sake
latter is truly interest in buying the property, and 3. Transfer the ownership
its aim is to bind the bargain. It is actually a 4. Warranties
partial payment of the purchase price and is 5. Take care of the thing, pending delivery, with
considered as proof of the perfection of the proper diligence
contract. 6. Pay for the expenses of the deed of sale
unless there is a stipulation to the contrary
• Option money – is distinct consideration in
case of an option contract. It does not form part IV. WARRANTIES
of the purchase price, hence, it cannot be
recovered if the buyer did not continue with the • Warranty – a statement or representation
sale made by the seller of goods, as part of the
BASIS OPTION EARNEST contract of sale, having reference to the
MONEY MONEY character, quality, or title, of the goods, and by
As to money Distinct Forms part which he promises or undertakes to insure that
given consideratio of the certain facts are or shall be as he then
n for an purchase represents.
option price
contract • Remedies in case of breach of warranty:
As to Applies to a Given only 1. Accept goods and set up breach of warranty
perfection sale not yet when there by way of recoupment in diminution or
perfected is already a
extinction or the price
sale
2. Accept goods and maintain action against
Obligation of Prospective When given,
the buyer buyer is not the buyer is seller for damages
upon required to bound to 3. Refuse to accept goods and maintain action
payment of buy pay the against seller for damages
consideratio balance 4. Rescind contract of sale and refuse to
n receive goods/return them when already
As to If buyer does If sale did received
recovery not decide to not
buy, it cannot materialize, V. EXPRESS WARRANTIES
be it must be
recovered. returned • Express warranties – any affirmation of fact
As to Ownership is Title passes or any promise by the seller relating to the thing
transfer of reserved to to the buyer if the natural tendency of such affirmation or
ownership the seller upon
promise is to induce the buyer to purchase the
delivery of and is not to delivery of
same, and if the buyer purchases the thing
the thing pass until full the thing
sold payment sold relying thereon.
Effect of Specific Specific
non-payment performance performanc • Requisites:
e and 1. It must be an affirmation of fact relating to the
rescission subject matter of sale
2. Natural tendency is to induce buyer to
purchase subject matter
3. Buyer purchases the subject matter relying
thereon
• Liability of seller for breach of express
warranties – Seller is liable for damages
VI. IMPLIED WARRANTIES
• Implied warranties – deemed included in all
contracts of sale by operation of law
1. Warranty that seller has right to sell –
refers to consummations stage. Not applicable
to sheriff, auctioneer, mortgagee, pledgee
2. Warranty against eviction
Requisites:
a. Final judgment
b. Buyer is evicted in whole or in part from the
subject matter of sale
c. Basis of eviction is a prior to sale or act
imputable to seller
d. Seller has been summoned in the suit for
eviction at the instance of buyer; or made 3rd
party defendant through 3rd party complaint
brought by buyer
e. No waiver on the part of the buyer
3. Warranty against non-apparent
burden or servitude
Requisites:
a. Immovable sold is encumbered with non-
apparent burden or servitude not mentioned in
the agreement
b. Nature of non-apparent servitude or burden
is such that it must be presumed that the buyer
would not have acquired it had he been aware
thereof
XPN: Warranty not applicable when non-
apparent burden or servitude is recorded in the
Registry of Property, unless there is expressed
warranty that the thing is free from all burdens
and encumbrances.
4. Warranty against hidden defects
Requisites:
a. Defect is important or serious
i. The thing sold is unfit for the use which it
is intended
ii. Diminishes its fitness for such use or to
such an extent that the buyer would not have
acquired it had he been aware thereof
b. Defect is hidden
c. Defect exists at the time of the sale
d. Buyer gives notice of the defect to the seller
within reasonable time
e. Action for rescission or reduction of the price
is brought within the proper period
i. 6 months – from delivery of the thing sold
ii. Within 40 days – from delivery in case of
animals
f. There must be no waiver of warranty on the
part of the buyer
• Non-applicability of implied warranty
1. “As is and where is” sale
2. Sale of second hand articles
3. Sale by virtue of authority in fact or law
4. Sale at public auction for tax delinquency
• Effects of waiver of an implied warranty
1. Seller in bad faith and there is waiver against
eviction – void
2. When buyer without knowledge of a
particular risk, made general renunciation of
warranty – not a waiver but merely limits liability
of seller in case of eviction
3. When buyer with knowledge of risk of
eviction assumed its consequences and made
a waiver – seller not liable (applicable only to
waiver of warranty against eviction)
VII. INSTALLMENT SALES
VIII. PERSONAL PROPERTY (RECTO LAW)
• Installment Sales Law (“Recto Law”) –
provides for the remedies of a seller in the
contracts of sale of personal property by
installments.
▪ It is also applied to contracts
purporting to be leases of personal
property with option to buy, when the
lessor has deprived the lessee of the
possession or enjoyment of the thing.
• Requisites of Recto Law:
1. Valid contract of sale
2. Subject matter is personal property
3. Payable in installments
4. There has been a failure to pay two or more
installments
• Alternative remedies in case of sale of
personal property in installments:
1. Specific performance
GR: If availed of, the unpaid seller
cannot choose other remedies.
XPN: If after choosing it, it has become
impossible to perform it, rescission may
be allowed
2. Rescission
3. Foreclosure
▪ Seller shall have no further action
against buyer to recover any unpaid
balance of price.
IX. REAL PROPERTY (MACEDA LAW)
• Realty Installment Buyer Act (Maceda Law)
– provides for certain protection to particular
buyers of real estate payable on installments.
▪ After having paid installments for at least two
(2) years, the buyer is entitled to a
mandatory grace period of one month for
every year of instalment payments made, to
pay the unpaid installments without interest.
▪ If the contract is cancelled, the seller
shall refund to the buyer the cash
surrender value (50% of the total
payments made), and after five (5)
years of installments, an additional 5%
every year but not to exceed 90% of the
total payments made.
▪ In case the installments paid were less than 2
years, the seller shall give the buyer a grace
period of 60 days.
▪ If the buyer fails to pay the installments
due at the expiration of the grace period,
the seller may cancel the contract after
30 days from receipt by the buyer of the
notice of cancellation or demand for
rescission by notarial act.
• Transactions/sale covered by the Maceda
Law – immovables on installments, incl.
residential real estate
Excluded:
1. Industrial lots
2. Commercial buildings/lots
3. Sale to tenants under agrarian laws
4. Sale of lands payable in straight terms
• Other rights granted to a buyer under the
Maceda Law:
1. Sell or assign rights to another
2. Reinstate contract by updating within 30 days
before and cancellation
3. Deed of Sale to be done by notarial act
4. Pay full installment in advance the balance of
price anytime without interest
5. Have full payment annotated in certificate of
title
X. PD 957/CONDOMINIUM ACT
• The Subdivision and Condominium
Buyer’s Protection Decree (PD 957) (July 12,
1976)– was promulgated to encompass all
questions regarding subdivisions and
condominiums. It is aimed at providing for an
appropriate government agency, the HLURB, to
which all parties aggrieved in the
implementation of its provisions and the
enforcement of contractual rights with respect
to said category of real estate may take
recourse.
•
• Converting of a parcel of land into subdivision
or condominium project by the Registered
Owner is deemed to be registered upon
completion of the publication requirement.
• Issuance of license to sell: The owner or
dealer must first obtain a license to sell the
project within two weeks from the registration of
such project.
▪ After an examination of the registration
statement filed by said owner/dealer and
all the pertinent documents attached
thereto, the HLURB is convinced that the
owner/dealer is of good repute, that his
business is financially stable, and that the
proposed sale of the subdivision lots or
condominium units to the public would not
be fraudulent.
▪ HLURB may, motu proprio or upon
verified complaint by buyer of a subdivision
lot or condominium unit, suspend the
license to sell or revoke the registration by
issuing an order to this effect.
• Exempt transactions:
1. Sale of a subdivision lot resulting from the
partition of land among co-owners and co-heirs
2. Sale or transfer of a subdivision lot by the
original purchaser thereof and any subsequent
sale of the same lot
3. Sale of a subdivision lot or a condominium,
unit by or for the account of a mortgagee in the
ordinary course of business when necessary to
liquidate a bona fide debt
• Rule if the owner desires to make
alterations in the approved subdivision plan
GR: No owner or developer shall change or
alter the roads, open spaces, infrastructures,
facilities for public use and/or other form of
subdivision development as contained in the
approved subdivision plan and/or represented
in its advertisements.
XPN: If he has obtained the permission of the
HLURB and the written conformity or consent of
the duly organized homeowners association, or
in the absence of the latter, by the majority of
the lot buyers in the subdivision.
• No installment payments made by the buyer in
a subdivision or condominium project for the lot
or unit he contracts to buy shall be forfeited in
favor of the owner or developer when the buyer,
after due notice to the owner or developer
desists from further payment due to the
subdivision or condominium project according
to the approved plans and within the time limit
for complying with the same.
• The Condominium Act (RA 4726) (July 18,
1966) - establishes the legal framework for the
creation, governance, dissolution, and
assessment of condominiums in the
Philippines, ensuring fair treatment of unit
owners and compliance with legal requirements
to promote the growth of the condominium
industry.
• Condominium – is an interest in real property
consisting of separate interest in a unit in a
residential, industrial or commercial building
and an undivided interest in common, directly or
indirectly, in the land on which it is located and
in other common areas of the building.
• Requirements for creation of
condominium: ▪ This Act applies to property
divided or to be divided into condominiums
only if an enabling or master deed is
recorded in the Register of Deeds
▪ The enabling or master deed must contain
a description of the land, building, common
areas and facilities. It must also state the
nature of the interest acquired by the
purchaser in the separate units and common
areas. It must also include plans of the land
and building, and reasonable restrictions on
alienation or disposal of the condominium,
▪ The enabling or master deed can be
amended or revoked with the consent of the
registered owner and holders of any lien or
encumbrance on the property.
• Transfer and conveyance of units:
▪ It must include the transfer of undivided
interests in the common areas or
membership/shareholdings in the
condominium corporation.
▪ Condo units can only be transferred to
Filipino citizens or corporations with at least
60% Filipino ownership, except in case of
hereditary succession.
▪ If the common areas are held by a
corporation, no transfer of a unit is valid if it
exceeds the limits imposed by existing laws
on foreign ownership of corporations.
• Incidents of condominium grants:
1. Boundary of a unit includes the interior
surfaces of the walls, floors, ceilings,
windows and doors.
2. There shall pass with the unit, as an
appurtenance, an exclusive easement for
the use of the air space encompassed by
the boundaries of the unit as it exists at any
particular time and as the unit may lawfully
be altered or reconstructed from time to
time.
3. Common areas are held in common by
the unit owners in equal shares
4. Non-exclusive easement for ingress,
egress and support through the common
areas is appurtenant to each unit and the
common areas are subject to such
easements.
• Rights of condominium owner:
1. Exclusive right to paint, repaint, tile, wax,
paper or other refinish and decorate the
inner surfaces of the walls, ceilings, floors,
windows and doors bounding his own unit.
2. Exclusive right to mortgage, pledge or
encumber his condo and to have the same
appraised independently of the other
condos.
3. Absolute right to sell or dispose of his
condo. XPN: The master deed contains a
requirement that the property be first offered
to the condo owners within a reasonable
period of time before the same is offered to
outside parties.
• Partition –
GR: common areas shall remain undivided, and
there shall be no judicial partition thereof.
XPN: Where several persons own condos in a
condominium project, an action may be brought
by one or more such persons for partition
thereof by sale of the entire project, as if the
owners of all of the condos in such project were
co-owners of the entire project in the same
proportions as their interests in the common
areas.
• Registration of declaration of restrictions
and its effect – The owner of a project shall,
prior to the conveyance of any condo therein,
register a declaration of restrictions relating to
such project. These restrictions shall constitute
a lien upon each condo in the project, and shall
insure to and bind all condo owners in the
project.
XI. EXTINGUISHMENT OF A CONTRACT OF
SALE
• Causes for extinguishment of sale:
1. Same causes as how an obligation is
extinguished:
a. Payment or performance
b. Loss of the thing due
c. Condonation or remission of debt
d. Confusion or merger of the rights of
creditor and debtor
e. Compensation
f. Novation
g. Annulment
h. Rescission
i. Fulfillment of resolutory condition
j. Prescription
2. Conventional redemption
3. Legal redemption
• Redemption – is a mode of extinguishment
wherein the seller has the right to redeem or
repurchase the thing sold upon return of the
price paid.
XII. CONVENTIONAL REDEMPTION
• Conventional redemption – seller reserves
the right to repurchase thing sold coupled with
obligation to return the purchase price of the
sale, expenses incurred under the contract,
other legitimate payments and, necessary and
useful expenses made on the thing sold.
▪ Right to repurchase may be exercised
by any person to whom the right of
repurchase may be transferred.
▪ Right to repurchase must be reserved
at the time of perfection of sale
▪ If the contract of sale is void, the right to
repurchase reserved would also be void.
XIII. LEGAL REDEMPTION
• Legal redemption – is the right to be
subrogated upon the same terms and
conditions stipulated in the contract, in the
place of one who acquires the thing by
purchase or by dation en pago or by other
transaction whereby ownership is transmitted
by onerous title.
▪ Exercised within 30 days from the
notice in writing by the seller.
▪ Deed of sale shall not be recorded in
the Registry of Property unless
accompanied by an affidavit of seller that
he has given written notice thereof to all
possible redemptioners.
• Instances of legal redemption:
1. Sale of a co-owner of his share to a stranger
2. When a credit or other incorporeal right in
litigation is sold
3. Sale of an heir of his hereditary rights to a
stranger
4. Sale of adjacent rural lands not exceeding 1
hectare
5. Sale of adjacent small urban lands bought
merely for speculation
• Other instances when the right of legal
redemption is also granted:
1. Redemption of homesteads
2. Redemption in tax sales
3. Redemption by judgment debtor
4. Redemption in extrajudicial foreclosure
5. Redemption in judicial foreclosure of
mortgage.