Articles 1476-1481

Continuation - Law on Sales

Article 1476: Conditions for Valid Sales by Auction
Article 1477: Transfer of Ownership Upon Delivery
Article 1478: Stipulations for Ownership Transfer
Article 1479: Enforceability of Promises to Buy and
Sell
Article 1480: Principles Governing Benefit and Harm
of Sold Item
Article 1481: Rescission of Contract for Goods by
Description or Sample
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the
subject of a separate contract of sale.
(2) 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.
(3) A right to bid may be reserved expressly by on behalf of the seller,
unless otherwise provided by law or by stipulation.
 (4) Where notice has not been given that a sale by auction is
subject to a right to bid on behalf of the seller, it shall not be
lawful for the seller to bid himself or to employ or induce any
person to bid at such sale on his behalf or for the auctioneer, to
employ or induce any person to bid at such sale on behalf of the
seller or knowingly to take any bid from the seller or any person
employed by him. Any sale contravening this rule may be treated
as fraudulent by the buyer.
When Sale by Auction is Perfected
The sale is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner.
Before the Fall of the Hammer
May the bidder retract his bid?
Yes. (Art. 1476[2]).
Reason: Every bidding is merely an offer and, therefore,
before it is accepted, it may be withdrawn. The assent is
signified on the part of the seller by knocking down the
hammer.
May the auctioneer withdraw the goods from the sale?
Yes, unless the auction has been announced to be without
reserve. (Art. 1476[2]).
Reason: This bid is merely an offer, not an acceptance of an offer
to sell. Therefore it can be rejected. What the auctioneer does in
withdrawing is merely reject the offer. Art. 1326 of the Civil Code
which says that “advertisements for bidders are simply invitations to
make proposals, and the advertiser is not bound to accept the
highest or lowest bidder, unless the contrary appears.”
When Seller Can Bid
May the seller bid? If so, under what conditions, if any?
Yes, provided:
(a) such a right to bid was reserved;
(b) and notice was given that the sale by auction is
subject to a right to bid on behalf of the seller. (Art. 1476,
pars. 3 and 4).
When Seller May Employ Others to Bid for Him
May the seller employ others to bid for him?
Yes, provided he has notified the public that the auction is subject to
the right to bid on behalf of the seller. (Art. 1476, par. 4). People who bid
for the seller, but are not themselves bound, are called “by-bidders” or
“puffers.”
 In view of the notice, there would not be any fraud, and the
transaction with the rest should be considered as valid. (See Crowder v.
Austin, 3 Bing. 368). Without the notice, any sale contravening the rule
may be treated by the buyer as fraudulent. (Art. 1476, No. 4). In other
words, the purchaser could be relieved from his bid.
NOTE:

It may happen that the owner is not himself the auctioneer. Now
then if the auctioneer employs puffers and gives no notice to the
public, the sale would still be fraudulent, whether or not the owner of
the goods knew what the auctioneer had done.
Right of owner to prescribe terms of public auction.
The owner of property which is offered for sale, either at public or
private auction, has the right to prescribe the manner, conditions, and
terms of such sale. He may provide that all of the purchase price or
any portion thereof should be paid at the time of the sale, or that time
will be given for that payment, or that any or all bids may be rejected.
The conditions of a public sale announced by an auctioneer or by
the owner of the property at the time and place of the sale are binding
upon all bidders, whether they knew of such conditions or not.
(Leoquinco vs. Postal Savings Bank, 47 Phil. 772 [1925].)
Art. 1477. The ownership of the thing
sold shall be
transferred to the vendee upon the
actual or constructive delivery thereof.
When Ownership is Transferred
Ownership is not transferred by perfection but by delivery.
This is true even if the sale has been made on credit; payment of
the purchase price is NOT essential to the transfer of ownership, as
long as the property sold has been delivered. (Gabriel, et al. v.
Encarnacion, et al., C.A. L-11877-R, Jul. 8, 1955).

A contrary stipulation is, however, VALID. (Art. 1478).

Kinds of Delivery
1. Actual (Art. 1497, Civil Code) - consists in placing the thing sold in
the control and possession of the vendee

2. Legal or constructive (Arts. 1498-1601, Civil Code), including “any

other manner signifying an agreement that the the possession is
transferred.” (Art. 1496, Civil Code).
Legal or constructive delivery, on the other hand, may be
had through any of the following ways:
- the execution of a public instrument evidencing the sale
- symbolical tradition such as the delivery of the keys of the place
where the movable sold is being kept
- traditio longa manu or by mere consent or agreement if the
movable sold cannot yet be transferred to the possession of the
buyer at the time of the sale
- traditio brevi manu if the buyer already had possession of the
object even before the sale
- traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity
Art. 1478. The parties may stipulate
that ownership in the thing shall not
pass to the purchaser until he has fully
paid the price.
When Ownership is Not Transferred Despite Delivery
Generally, ownership is transferred upon delivery, but even if delivered,
the ownership may still be with the seller till full payment of the price is
made, if there is a stipulation to this effect. But, of course, innocent third
parties cannot be prejudiced.

The stipulation is usually known as pactum reservati dominii and is

common in sales on the installment plan.

NOTE: Although generally delivery should not be made till after payment,
still if it is stipulated that payment will be made only after a certain period,
delivery must be made, even before payment.
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.
● An accepted unilateral promise to sell in which the promisee
(acceptor) elects to buy;
● An accepted unilateral promise to buy in which the promisee
(acceptor) elects to sell; and
● A bilateral promise to buy and sell reciprocally accepted in which
either of the parties chooses to exact fulfillment. (10 Manresa 71)
Effect of unaccepted unilateral promise.
- Such unaccepted imperfect promise or offer is called policitacion.
- A unilateral promise or offer to sell or to buy a thing which is not
accepted creates no juridical effect or legal bond.
- 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
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 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 to use the option.
(3) An option must be supported by a consideration distinct from the price.
The promisee has the burden of proving such consideration.

(4) A consideration of an option contract is just as important as the

consideration for any other kind of contract. An option without consideration
is void; the effect is the same as if there was no option.
Effect of accepted unilateral promise.
The second paragraph of Article 1479 refers to what is called as “option”
in the commercial world.

Unilateral promises:
- do not bind the promissor even if accepted
- may be withdrawn at any time.
- 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
 The optionee (holder of the option), after accepting the option and
before he exercises it, has the right, but not the obligation, to buy or sell.

Once the option is exercised, a bilateral promise to sell and to buy

ensues and both parties are then reciprocally bound to comply with their
respective undertakings. It would be a breach of the option for the
optioner-offeror to withdraw the offer during the agreed period. If in fact,
he withdraws the offer before its acceptance (exercise of the option) by
the optionee-offeree, the latter may not sue for specific performance on
the proposed contract since it has failed to reach its own stage of
perfection.

The offeror, however, renders himself liable for damages for breach
of the option.
 Consideration in an option contract may be anything of value, unlike
in sale where it must be the price certain in money or its equivalent.
Lacking any proof of such consideration, the option is unenforceable.

A contract of option to buy is separate from the contract to sell, and

both contracts need separate and distinct considerations for validity.
EXAMPLE:
If B accepts the promise of S (this is a case of an accepted
unilateral promise to sell), S is not bound to sell his car to B because
there is no promise, in turn, on the part of B to buy.
However, if the promise is covered by a consideration (freebies
like free wrap, exhaust kit, wheel mags, engine upgrade)
 distinct from the price of the car, as when B paid or promised to
pay a sum of money to S for giving him the right to buy the car if he
chooses within an agreed period at a fixed price.
- its acceptance produces consent or meeting of the minds. A
legally binding and independent contract of option is deemed
perfected.
Full payment of price not necessary for exercise of
option to buy.
The obligations under an option to buy are reciprocal obligations
— the performance of one obligation is conditioned upon the
simultaneous fulfillment of the other obligation. (Art. 1169.)
In an option to buy, the party who has an option may validly and
effectively exercise his right by merely notifying the owner of the
former’s decision to buy and expressing his readiness to pay the
stipulated price.
 The notice need not be coupled with actual payment of the purchase
price so long as this is delivered to the owner of the property upon the
execution and delivery by him of the deed of sale. The payment of the price is
contingent upon the delivery of the deed of sale. Unless and until the owner
shall have done this, the buyer who has the option is not and cannot be held
in default in the discharge of his obligation to pay. Consequently, since the
obligation to pay is not yet due, consignation in court of the purchase price is
not required.

An option to buy is not, of course, a contract of purchase and sale.

Article 1479 and Article 1324 compared.
Article 1324 of the Civil Code provides as follows:

“When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn at any time before acceptance by communicating such withdrawal, except
when the option is founded upon a consideration, as something paid or promised.”

- when the offerer has allowed the offeree a certain period within which to accept
the offer, the offer may be withdrawn as a matter of right at any time before
acceptance.
- But if the option is founded upon a separate consideration, the offerer cannot
withdraw his offer, even if the same has not yet been accepted, before the
expiration of the stipulated period. Regardless of whether it is supported by a
consideration or not, the offer, of course, cannot be withdrawn after acceptance of
the offer.
 This general rule as embodied in Article 1324 was interpreted as
modified by the provision of Article 1479 which applies specifically to a
promise “to buy or to sell.”
As already stated, this rule requires that for a promise to sell to be
valid, it must be supported by a consideration distinct from the price.
– means that an offer, once accepted, cannot be withdrawn,
regardless of whether or not it is supported by a consideration
 However, in a later case (Sanchez vs. Rigos, 45 SCRA 368 [1972]), the
Supreme Court abandoned the view which holds that an option to sell can
still be withdrawn, even if accepted, if the same is not supported by any
consideration, and reaffirmed the doctrine in later cases, holding that it
could no longer be withdrawn after acceptance.

In essence:
- If acceptance is made before withdrawal, it constitutes a binding
contract of sale although the option is given without consideration.
- Before acceptance, the offer may be withdrawn as a matter of right.
The offerer cannot revoke, before the period has expired, in an
arbitrary or capricious manner the offer without being liable for
damages which the offeree may suffer under Article 19 of the Civil
Code.
Effect of bilateral promise to buy and sell.
When the promise is bilateral, that is, one party accepts the other’s
promise to buy and the latter, the former’s promise to sell a determinate thing
for a price certain, it has practically the same effect as a perfected contract of
sale since it is reciprocally demandable.
EXAMPLE:

Combo promised to sell his sports car to Lumibao and Lumibao promised
to buy the said car for P5,000,000.00. The parties are bound by their contract
so that in case one of them should not comply with what is incumbent upon
him, the other has the right to choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. (Art.
1191, par. 2.)
ART. 1480.
Any injury to or benefit from the thing
sold, after the contract has been perfected,
from the moment of the perfection of the
contract to the time of delivery, shall be
governed by articles 1163 to 1165, and 1262.
 This rule shall apply to the sale of fungible things,
made independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed
according to weight, number, or measure, the risk shall
not be imputed to the vendee until they have been
weighed, counted, or measured, and delivered, unless the
latter has incurred in delay. (1452a)
Risk of loss or deterioration.
Four rules may be given regarding risk of loss:

(1) If the thing is lost before perfection, the seller and not the one who intends
to purchase it bears the loss in accordance with the principle that the thing
perishes with the owner (res perit domino);

(2) If the thing is lost at the time of perfection, the contract is void or
inexistent. (Art. 1409[3].) The legal effect is the same as when the object is lost
before the perfection of the contract of sale (see Art. 1493.)
(3) If the thing is lost after perfection but before its delivery, that is, even
before the ownership is transferred to the buyer, the risk of loss is shifted to
the buyer as an exception to the rule of res perit domino (Arts. 1480, pars. 1
and 2, 1538, 1189, and 1269.); and

(4) If the thing is lost after delivery, the buyer bears the risk of loss following
the general rule of res perit domino.
Scope of Article 1480.
Article 1480 contemplates two rules:

(1) The first rule — where the thing is lost after perfection but before its
delivery — applies to non-fungible things and fungible things sold
independently and for a single price or for a price fixed without consideration
of their weight, number, or measure.

- follows the Roman Rule, the risk of the thing sold passes to the buyer,
even though the thing has not yet been delivered to him
- seller is not liable for anything which happens without his fraud or
negligence.
 In other words, the buyer assumes the risk of loss caused by fortuitous
event (Art. 1174.) without the fault of the seller (Art. 1262.), that is, in spite of
the exercise of due diligence on his part (Art. 1163.) and before he has
incurred in delay (Arts. 165, 1170, 1262.)

With respect to the fruits, the buyer has a right to the same from the time
the obligation to deliver the thing arises. (Art. 1164.) If the risk ought to belong
to the buyer before delivery, the benefit ought to belong to him who has the
risk. (see Arts. 1538, 1189[5].)
Article 1480, paragraph 1

- applicable only where the thing is determinate. (Art. 1460.)

- also applies to fungible things sold for a price not fixed in relation to
weight, number, or measure because in such case the fungible things
have been “particularly designated or physically segregated.”
 (2) The second rule relates to fungible things sold for a price fixed in
relation to weight, number, or measure. Under the third paragraph, “the risk
shall not be imputed to the vendee until they have been weighed, counted, or
measured, and delivered.

- Paragraph 3 is an exception to the rule that the vendee bears the loss
after the perfection of the contract and before delivery. However, the
vendee assumes the risk if he has incurred in delay in receiving the goods
sold.
ART. 1481.
In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk of the
goods delivered do not correspond with the description
or the sample, and if the contract be by sample as well as
by description, it is not sufficient that the bulk of goods
correspond with the sample if they do not also
correspond with the description.
The buyer shall have a reasonable opportunity of
Sale of goods by description
(1) Sale by description
- occurs where a seller sells things as being of a particular kind,
the buyer not knowing whether the seller’s representations are true or
false, but relying on them as true; or,
- as otherwise stated, where the purchaser has not seen the article
sold and relies on the description given him by the vendor, or has
seen the goods but the want of identity is not apparent on inspection.
 The reason for the rule is that a dealer who sells an article
describing it as the kind of an article of commerce the identity of
which is not known to the purchaser, must understand that such
purchaser relies upon the description as a representation by the seller
that it is the thing described.
- If the bulk of the goods delivered do not correspond with the
description, the contract may be rescinded. (Art. 1481.)
- But if the thing delivered is as described, the fact that the buyer
cannot use the thing sold for the purpose for which it was
intended without the seller’s fault does not exempt the buyer
from paying the purchase price agreed upon.
Sale by sample
- It must appear that the parties contracted solely with reference to
the sample, with the understanding that the bulk was like it.
- But a mere exhibition of a sample by the seller in the absence of
any showing that it was an inducement of the sale or formed the
sole basis thereof, does not amount to a sale by sample as where
the quality of the articles to be furnished is expressly described in
the contract without reference to the sample or the parties agree
that the goods ordered shall differ from the sample in some
particular matter.
- Whether a sale is by sample is determined by the intent of the
parties as shown by the terms of the contract and the
circumstances surrounding the transaction. In a sale by sample,
the vendor warrants that the thing sold and to be delivered by him
shall conform with the sample in kind, character, and quality.
Sale by description and sample.
- When a sale is made both by sample and by description, the
goods must satisfy all the warranties appropriate to either kind of
sale
- it is not sufficient that the bulk of the goods correspond with the
sample if they do not also correspond with the description, and
vice versa.
Let’s visualize
Sale by Description:

- Popping Rock Candy

- Sky Blue
- Can be in any other color needed
- Can be used as props
- Can also be eaten
- Can be added to alcoholic drinks
- Not too sweet
- With B-Vitamins
Sale by sample:
Sale by sample and description:
- Popping Rock Candy
- Sky Blue
- Can be in any other color needed
- Can be used as props
- Can also be eaten
- Can be added to alcoholic drinks
- Not too sweet
- With B-Vitamins
Meaning of “bulk of goods.”
- Not used to designate the greater portion of the goods.
- Rather, it is used to denote the goods as distinguished from the
sample with which they must correspond. The word “goods” in the
phrase is an oppositional genitive* defining “bulk.” In other words
“bulk of goods” mean the same as “goods” which, as a whole body,
must correspond substantially with the sample and description.
*genitive - a noun case which is used mainly to show possession
 The buyer is given a reasonable opportunity of comparing the bulk
with the description or the example. (Art. 1481, par. 2.)
“ Bakalon mo na ini padi na candy ko:
- Popping Rock Candy
- Sky Blue
- Can be in any other color needed
- Can be used as props
- Can also be eaten
- Can be added to alcoholic drinks
- Not too sweet
- With B-Vitamins ”
In summary…
Article 1476 concerns sales by auction and sets out the necessary
conditions for a valid sale (in an auction), including the announcement of
the auctioneer to perfect the sale, the right of the seller to bid, and the
prohibition on the seller or auctioneer taking any bid from each other or
any person employed by them.
Article 1477 deals with the transfer of ownership and provides that the
buyer obtains ownership of the thing sold upon actual or constructive
delivery.
Article 1478 allows parties to agree that ownership of the item sold does
not pass to the purchaser until full payment has been made.
Article 1479 addresses the enforceability of promises to buy and sell, stating that a
promise to purchase a determinate thing for a fixed price is binding if it is supported by
consideration separate from the price.

Article 1480 sets out the legal principles governing any benefit or harm resulting from
the sold item between the perfection of the contract and the time of delivery, including
the sale of fungible goods.

Article 1481 applies to the sale of goods by description or sample and provides the
buyer with the right to rescind the contract if the bulk of the goods delivered do not
correspond to the description or sample, after being given a reasonable opportunity to
compare the bulk with the description or sample.

*This summary was powered by:

FIN
Sources:
Law on Sales by Hector De Leon†
Civil Code of the Philippines Annotated by Edgardo
Paras†
Civil Code Codal