Essential Requisites of a Contract of Sale 1.

Consent or meeting of the minds refers to the conformity of the parties to the terms of the contract, the acceptance by one of the offer made by the other. As a bilateral contract, 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]. There may be a sale against the will of the owner in case of expropriation and the three different kinds of sale under the law ordinary execution sale, judicial foreclosure sale, and extra-judicial foreclosure sale. 2. Object or subject matter refers to the determinate thing which is the object of the contract; Even a future thing not existing at the time the contract is entered into may be the object of sale, provided it has a potential or possible existence, that is, it is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller, and the tile will vest the buyer the moment the thing comes into existence (Art. 1461). Emptio rei speratae Rei spetae (sale of thing expected) - the sale of a thing not yet in existence, subject to the condition that the thing will exist and on failure of the condition, the contract becomes ineffective and hence, the buyer has not obligation to pay the price; - the future thing is certain as to itself but uncertain as to its quantity and quality; - the sale of hope itself that the thing will come into existence, where it is agreed that the buyer will pay the price even if the thing does not eventually exist;

- like the sale of a sweepstake ticket, it is not certain that the thing itself (winning a prize) will exist, much less it quantity and quality; - contract deals with a future thing; - contract relates to a thing which exists or is present the hope or expectancy; - sale is subject to the condition that the thing - produces effect even though the thing does should exist, so that if it does not, there will not come into existence because the object of be no contract by reason of the absence of an the contract is the hope itself, unless it is a vain essential element. hope or expectancy (like the sale of a falsified sweepstakes ticket which can never win). 3. Cause or consideration refers to the price certain in money or its equivalent. Natural Elements those which are deemed to exist in certain contracts, in the absence of any contrary stipulations, like warranty against eviction; Accidental Elements those which may be present or absent depending on the stipulations of the parties, like conditions, interest, penalty, time or place of payment. Kinds of a Contract of Sale 1. As to presence or absence of conditions Absolute where the sale is not subject to any condition whatsoever and where the title passes to the buyer upon delivery of the thing sold. Conditional where the sale contemplates a contingency and where the contract is subject to certain conditions, usually in the case of the vendee, for the full payment of the agreed purchase price. 2. Other kinds As to the nature of the subject matter real or personal, tangible or intangible As to the manner of payment cash or installment

As to its validity valid, rescissible, unenforceable, void Contract of Sale Distinguished from Contract to Sell Contract of Sale

Contract to Sell

Transfer of - passes to the buyer upon - remains with the seller until full title: delivery of the thing sold. payment of the agreed price. Payment of - non-payment of the price is a - full payment is a positive price negative resolutory suspensive condition, the : condition, and the failure of which is not a remedy is to exact breach, casual or serious, fulfillment or to rescind of the contract but simply the contract. an event that prevents the obligation of the vendor to convey title from acquiring binding force. Ownership of - vendor loses and cannot recover - title remains in the vendor until vend ownership of the thing full payment of price. or: sold and delivered, actually or constructively until and unless the contract of sale itself is resolved and set aside. Sale Distinguished from Dation in Payment : Sale Dation in Payment - no pre-existing credit - there is pre-existing credit - gives rise to obligation - extinguishes obligation - cause or consideration is the price, or the - cause of consideration is extinguishment of the acquisition of title to the property debt (from the point of view of the offeror), and the acquisition of the object offered (from the point of view of the creditor) in lieu of the original credit - there is greater freedom in the determination - less freedom of the price - giving of the price may generally end the - the giving of the object in lieu of the credit obligation of the buyer may extinguish completely or partially the credit (depending on the agreement)

Sale of goods by description Sale of goods by sample occurs where the purchaser has not seen the article sold and relies on the description - the parties contracted solely with reference to given him by the vendor, or has seen the goods the sample, with the understanding that the bulk but the want of identity is not apparent on was like it.- the vendor warrants that the thing inspection.If the bulk of the goods sold and to be delivered by him shall conform delivered does not correspond with the with the sample in kind, charater, and quality. description, the contract may be rescinded. (Art. 1481.) Form of Contract of Sale Generally, a contract may be entered into in any form provided all the essential requisites for its validity are present (Art. 1356). It may be in writing, oral, or partly in writing and party oral. It -

may even be inferred from the conduct of the parties, since sale is a consensual contract that is perfected by mere consent. However, in case the contract of sale should be covered by the Statute of Frauds, the law requires that the agreement be in writing subscribed by the party charged, or by his agent; otherwise, the contract cannot be enforced by action [see Art. 1403]. Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the following contracts must be in writing to be enforceable: (a) sale of personal property at a price not less than P500; (b) sale of real property or an interest therein regardless of the price involved; and

(c) sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the price involved. The Statute Frauds specifies three (3) ways in which contracts of sales of goods within its terms may be made binding: (a) the giving of a memorandum; (b) acceptance and receipt of part of the goods (or things in action) sold and actual receipt of the same (Art. 1585); and (c) payment or acceptance at the time some part of the purchase price.

The Statute of Frauds is applicable only to executory contracts (where no performance, i.e., delivery and payment, has as yet been made by both parties), and not to contracts which are totally consummated or partially performed [Vda. De Espiritu vs. CFI of Cavite, 47 SCRA 354]. Recto Law (Art. 1484) Remedies of Vendor in Sale of Personal Property Payable in Installments : (a) elect fulfillment upon the vendees failure to pay; (b) cancel the sale, if the vendee shall have failed to pay two or more installments;

(c) foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more installments. These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to the others [Pacific Commerial Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140 SCRA 255]. In transactions involving the sale of financing of real estate on installment payments, including residential condominium apartments, the following are the rights given to the buyer who has paid at least two (2) years of installments in case he defaults in the payment of succeeding payments (a) to pay without additional interest the unpaid installments due within the total grace period earned by him fixed at the rate of one-month grace period for every one year of installment payments made this right shall be exercised by him only once in every five (5) years of the life of the contract and its extension, if any; and

(b) if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made and, after 5 years of installments, an additional 5% of every year but not to exceed 90% of the total payments made. [Sec. 3, RA 6552 or the Realty Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA 627]. (c) The buyer has the right to sell his right or assign the same before actual cancellation of the contract and to pay in advance any unpaid installment anytime without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. II. CAPACITY TO BUY OR SELL Persons Who May Enter Into a Contract of Sale As a general rule, all persons, whether natural or juridical, who can bind themselves, have the legal capacity to buy and sell. Persons Who Are Incapacitated to Enter Into a Contract of Sale 1. Absolute Incapacity pertains to persons who cannot bind themselves (a) Minor
(b) (c) Insane or demented persons Deaf-mutes who do not know how to read and write

Contracts entered into by a minor and other incapacitated persons arevoidable. However, where the necessaries are sold and delivered to him (without the intervention of the parent or guardian), he must pay a reasonable price therefor. The contract is therefore valid, but the minor has the right to recover any excess above a reasonable value paid by him. Sale of real property by minors who have already passed the ages of puberty and adolescence and are now in the adult age, when they pretended to have already reached their majority, while in fact they have not, is valid, and they cannot be permitted afterwards to excuse themselves from compliance with the obligations assumed by them or to seek their annulment. This is in accord with the doctrine of estoppel [Mercado and Mercado vs. Espiritu, 37 Phil. 265]. 2. Relative Incapacity where it exists only with reference to certain persons or class of property (Art. 1490-1491). The prohibition extends to sales by virtue of legal redemption, compromises, and renunciations. (a) Husband and wife to each other except when a separation of property was agreed upon in the marriage settlements, or when there has been a judicial separation of property (b) Guardian as to the property of his ward

(c) Agents as to the property whose administration or sale has been entrusted to them, unless consent of the principal is given (d) Executors or administrators as to the state under their administration

(e) Public officers and employees as to the property of the State or any subdivision thereof, or of the government-owned or controlled corporations, the administration of which is entrusted to them (f) Judges and government experts who take part in the sale of the property and rights under litigation

 The prohibition is based on the fiduciary relationship (based on trust), to prevent fraud and undue and improper influence. With respect to (b) to (d), the sale shall only be voidable because in such cases only private interests are affected. The defect can be cured by ratification by the seller. With respect to (e) and (f), the sale shall be null and void, public interests being involved therein. (g) Aliens who are disqualified to purchase private agricultural lands under Art. XII, Secs. 3 and 7 of the Constitution

(h) Unpaid seller having a right of lien or having estopped the goods in transitu (i) Officer holding the execution or his deputy III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST Where the thing is entirely lost at the time of perfection, the contract is inexistent and void because there is no object. There being no contract, there is no necessity to bring an action for annulment. Where the thing is only partially lost, the vendee may elect between withdrawing from the contract and demanding the remaining part, paying its proportionate price. The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered. IV. OBLIGATIONS OF THE VENDOR Principal Obligations of the Vendor to transfer the ownership of the determinate thing sold (Art. 1495);
The vendor need not be the owner of the thing at the time of perfection of the contract; it is sufficient that he has a right to transfer the ownership thereof at the time it is delivered (Art. 1459). If the seller promised to deliver at a stipulated period and such period is of the essence of the contract but did not comply with his obligation on time, he has no right to demand payment of the price. The vendee-buyer is fact may ask for the rescission or resolution of the sale. If the failure of the seller to deliver on time is not due to his fault, as when it was the buyer who failed to supply the necessary credit for the transportation of the goods, delay on the part of the seller may be said to be sufficiently excused. to deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the perfection of the contract (Art. 1537); to warrant against eviction and against hidden defects (Arts. 1495, 1547); to take care of the thing, pending delivery, with proper diligence (Art. 1163); to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art. 1487). Delivery or Tradition Tradition or delivery is a derivative mode of acquiring ownership by virtue of which one has the right and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same. Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver right away; he has one (1) year within which to redeem the property. Kinds of Delivery or Tradition

1. Actual or Real (Art. 1497) the thing sold is placed in the control and possession of the vendee or his agent. This involves the physical delivery of the thing and is usually done by the passing of a movable thing from hand to hand. 2. Legal or Constructive (Arts. 1498-1501) through the execution of a public instrument Legal formalities applies to real and personal properties, where the delivery is made through the execution of a public document; Traditio simbolica to effect delivery, the parties make use of a token symbol to represent the thing delivered; Traditio longa manu movable property is delivered by mere consent by the contracting parties if the thing sold cannot be transferred to the possession of the vendee at the time of the sale; Traditio brevi manu the vendee already has the possession of the thing sold by virtue of another title as when the lessor sells the thing leased to the lessee; Constitotum possessorium the vendor continues in possession of the property sold not as owner but in some other capacity (e.g., as tenant of the vendee). 3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real property, made by placing the titles of ownership in the hands of the vendee or lawyer, by execution of a public instrument, or by allowing the vendee to use his rights as new owner with the consent of the vendor. Requisites in constructive delivery before ownership may transferred : (a) Seller must have control over the thing; otherwise, can he put another in control? (b) (c) Buyer must be put under control; There must be the intention to deliver the thing for purposes of ownership. be

Rules of constructive delivery : 1. If a seller has an actual possession, he cannot transfer ownership by constructive delivery. 2. There can be no constructive delivery by means of a public instrument if there is a stipulation to the contrary. 3. The execution of a deed or contract is only presumptive delivery. An Unpaid Seller is one who has not been pair or rendered the whole price or who has received a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has been broken by reason of the dishonor of the instrument. Rights of an unpaid seller: 1. A lien on the goods or right to retain them for the price while in his possession 2. A right of stopping the goods in transitu in case of insolvency of the buyer; requisites: (a) the seller must be unpaid; (b) (c) the buyer must be insolvent; the goods must be in transit;

(d) the seller must either actually take possession of the goods sold or give notice of his claim to the carrier or other person in possession;

(e) the seller must surrender the negotiable document of title, if any, issued by the carrier or bailee; and (f) the seller must bear the expenses of delivery of the goods after the exercise of the right.

3. A right of resale 4. A right to rescind the sale Rules in case of loss, deterioration, or improvement of thing before delivery 1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished. 2. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages, if is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered. 3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor. 4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case. 5. If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor. 6. If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. Rules as to preference of ownership in case of double sale 1. If the property sold is movable, the ownership shall be acquired by the vendee who first takes possession in good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861]. 2. If the property sold is immovable, the ownership shall belong to: (a) the vendee who first registers the sale in good faith in the Registry of Deeds has preferred right over another vendee who has not registered his title even if the latter is in actual possession of the immovable property governed by the principle prius tempore, patior jure (first in time, stronger in right) knowledge by the first buyer of the second sale cannot defeat the first buyers right except when the second first registers in good faith the second sale; (b) in the absence of registration, the vendee who first takes possession in good faith; and (c) in the absence of both registration and possession, the vendee who presents the oldest title (who first bought the property) in good faith. Article 1544 has no application to lands not registered with the Torrens system. V. CONDITION AND WARRANTIES Condition means an uncertain event or contingency on the happening of which the obligation (or right) of the contract depends. Warranty is a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them. If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either (1) refuse to proceed with the contract, or (2) proceed with the contract, waiving the performance of the condition.

If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by the other party as a breach of warranty. Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he has a right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof. Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that the seller guarantees that the thing sold is reasonably fit for the known particular purpose for which it was acquired by the buyer or, where it was bought by description, that it is of merchantable quality. Essential elements of warranty against eviction 1. the vendee is deprived in whole or in part of the thing purchased; 2. the vendee is so deprived by virtue of a final judgment ; 3. the judgment is based on a right prior to the sale or an act imputable to the vendor; 4. the vendor was summoned in the suit for eviction at the instance of the vendee; and 5. there is no waiver on the part of the vendee. Kinds of waiver of eviction 1. Consciente the waiver is voluntarily made by the vendee without the knowledge and assumption of the risks of eviction. If the waiver was only conscious, the vendor shall pay only the value which the thing sold had at the time of eviction this is a case of solution indebiti the effect is to deprive the purchaser of the benefits mentioned in Nos. 2, 3, 4 and 5 of Article 1555. 2. Intencionada the waiver is made by the vendee with knowledge of the risks of eviction and assumption of its consequence. The vendor is exempted from the obligation 3. to answer for eviction, provided he did not act in bad faith [Andaya vs. Manansala, 107 Phil. 1151]. Rights of the vendee against the vendor in case eviction occurs (Art. 1555) 1. return of the value of the thing sold at the time of eviction; 2. income or fruits if he has been ordered to deliver them to the party who won the suit against him; 3. costs of the suit; 4. expenses of the contract; 5. damages and interests and ornamental expenses if the sale was made in bad faith. Redhibition Redhibitory action Redhibitory vice or defect - an action instituted to avoid a - a defect in the article sold - the avoidance of a sale on sale on account of some vice or against which defect the seller account of some vice or defect in the thing sold which is bound to warrant. The vice defect in the thing sold, whichrenders its use impossible, or so or defect must constitute an renders its use impossible, or inconvenient and imperfect that imperfection, a defect in its so inconvenient and imperfect it must be supposed that the nature, of certain importance; that it must be supposed that buyer would not have purchased and a minor defect does not the buyer would not have it had he known of the vice. The five rise to redhibition. The purchased it had he known of object is the rescission of the mere absence of a certain the vice. contract. If the object is to quality in the thing sold which procure the return of a part of the vendee thought it to contain the purchase price paid by the is not necessarily a redhibitory vendee, the remedy is known defect. One thing is that is as accion minoris orestimatoris. positively suffers from certain defects. Doctrines of caveat venditor and caveat emptor

Caveat venditor (Let the seller beware)

Caveat emptor (Let the buyer beware)

- the vendor is liable to the vendee for any - applies in sheriffs sale, sales of animals, and hidden faults or defects in the thing sold, even tax sales, for there is no warranty of title or though he was not aware thereof (Art. quality on the part of the seller in such sales. 1566).- Based on the principle that a sound - Also applies in double sales of property where price warrants a sound article. the issue is who between two vendees has a better right to the property . - Requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendors title takes all the risks and losses consequent to such failure [Solvoso vs. Tanega, 87 SCRA 349]. Alternative remedies of the buyer to enforce warranty (Art. 1567): 1. Accion redhibitoria to withdraw from the contract 2. Accion quanti minoris demand a proportionate reduction of the price, with a right to damages in either case Effect of loss of thing sold on account of hidden defects (Art. 1568) If the vendor was aware of the hidden defects (a) the expenses of the price paid in consequence of which the thing sold was b) the contract; and lost, he shall bear the loss because he acted in (c) damages. bad faith. In such case, the vendee has the right to recover: If the vendor was not aware of them, he shall (a) the price paid be obliged only to return: (b) interest thereon; and (c) expenses of the contract if paid by the vendee. He is not made liable for damages because he is not guilty of bad faith. VI. OBLIGATIONS OF THE VENDEE The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold. The following rules must be borne in mind: 1. In contract of sale, the vendor is not required to deliver the thing sold until the price is paid nor the vendee pay the price before the thing is delivered in the absence of an agreement to the contrary [La Font vs. Pascacio, 5 Phil. 591]. 2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the time and place designated. 3. If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to pay at the time and place of delivery. 4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected (Art. 1251). 5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is required to pay even before the thing is delivered to him; if only the time for payment of the price has been fixed, the vendee is entitled to delivery even before the price is paid by him (Art. 1524). Instances when the vendee may suspend the payment of the price: a) should he be disturbed in the possession or ownership of the thing sold; b) should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure of mortgage; These rights do not exist in the following cases:

(a) (b) (c) (d)

should there be a stipulation to that effect; or should the vendor give security for the return of the price; or should the vendor have caused the disturbance or danger to cease; or should the disturbance consist only of a mere act or trespass.