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SALES

ABSOLUTE AND CONDITIONAL SALES


A deed of sale, even though denominated as a Deed of Conditional Sale is absolute in
nature in the absence of stipulation that the title to the property sold is reserved in the vendor or
that the latter has the right to unilaterally rescind the contract upon the non-payment within a
fixed period. (Dignos vs. Court of Appeals, 158 SCRA 375)
OBJECT OF A CONTRACT OF SALE
Lands acquired by free or homestead patent shall not only be incapable of being
encumbered or alienated except in favor of the government, but shall not also be liable to the
satisfaction of debt within the prohibitive period of five (5) years. This prohibition is mandatory
and any sale made in violation thereof is null and void. This is true even if the sale involved is
not voluntary, such as a judicial sale. For the purpose of compliance with the law, it is
immaterial that the satisfaction of debt by alienation or encumbrance was made voluntarily or
not. (Artates vs. Urbi, 37 SCRA 395)
A bilateral promise to buy and sell and the agency to sell, entered into within five (5)
years from the date of the issuance of the homestead patent is in violation of the Public Land
Law although the execution of the sale was deferred until after the expiration of the five-year
prohibitory period. To all intents and purposes, there was an actual sale perfected during the
period of prohibition except that it was reciprocally demandable thereafter. The stipulation
deferring the effects of the sale was merely a device to circumvent the prohibition. Thereafter, a
compromise agreement wherein a grantee of a public land promised to sell the same and
entered into within the prohibitory period of five years is null and void ab initio. (Heirs of Enrique
Zambales vs. Court of Appeals, 120 SCRA 897)

CONTRACT OF SALE vs. AGENCY TO SELL


When one undertakes to deliver a thing at a stipulated price to another who is to pay the
price in a moment agreed upon, such constitutes the essential features of a contract of sale and
excludes the legal conception of an agency or order to sell. The contract entered into by the
parties was that the plaintiff was to furnish the defendant with the beds which the latter might
order at a stipulated price and that the defendant was to pay the price in the manner agreed
upon. This contract contains the essential features of a contract of sale unlike in an agency
whereby the agent receives the thing to sell it and does not pay its price but delivers to the
principal the price he obtains from the sale of the thing to a third person and if he does not
succeed in selling it, returns it. (Quiroga vs. Parsons Hardware Company, 38 Phil 501)
CONTRACT OF SALE vs. CONTRACT FOR A PIECE OF WORK
Selling or distribution is an essential ingredient of manufacturing. Manufacture, thereof,
of products for the general market involves the sale and distribution thereof and cannot be
regarded as contract for a piece of work, which the manufacturing of goods specially upon the
special order of customers, and not for the general market. A contract for the sale of an article
which the vendor in the ordinary course of his business manufactures or procures for the

general market, whether the same is on hand at the time or not is a contract for the sale of
goods. The claim of petitioner that it produces asphalt or concrete upon order of the customers,
therefore, a contract for a piece of work, cannot be accepted because it is only incidental
because of the highly perishable nature of asphalt and concrete mixed that makes it impossible
for them to be mass produced and stored. (Concrete Aggregates, Inc. vs. Court Of Tax Appeals,
185 SCRA 461)
PERFECTION OF CONTRACT OF SALE
In conditional obligations, the acquisition of rights, as well as the extinguishment or loss
of those already acquired, shall depend upon the happening of an event which constitutes the
condition. As such, a contract of sale subject to a condition is perfected only when said
condition is fulfilled. A contract of sale is perfected at the moment there is a meeting of the
minds upon the thing which is the object of the contract and upon the price. Under the facts of
the case, it cannot be said that there was a meeting of the minds on the purchase of the lot
because the condition has not been fulfilled. (Peoples Homesite and Housing Corp. vs. Court of
Appeals, 133 SCRA 777)
A definite agreement on the manner of payment of the price is an essential element in
the formation of a binding and enforceable contract of sale. This is so because the agreement
as to the manner of payment goes into the price such that a difference or disagreement in the
manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price
is an essential element of a binding agreement to sell personal property. In the case, nothing
on the agreement mentioned about the full purchase price and the manner the installments
were to be paid. (Toyota Shaw, Inc. vs. Court Of Appeals, 244 SCRA 321)
A definite agreement on the manner of payment of the price is an essential element in
the formation of a binding and enforceable contract of sale. The acceptance of an offer must
therefore be unqualified and absolute. In other words, it must be identical in all respects with
that of the offer so as to produce consent or meeting of the minds. (Limketkai Sons Milling Inc.
vs. Court of Appeals, 225 SCRA 266)
PROMISE TO BUY AND SELL VS ACCEPTED UNILATERAL PROMISE TO BUY OR TO
SELL
While it is true that under Art. 1324 of the Civil Code, the general rule regarding offer and
acceptance is that, when the offeror gives to the offeree a certain period to accept, the offer may
be withdrawn at anytime before acceptance when the option is not founded upon consideration
distinct from price. This general rule must be interpreted as modified by the provision of Article
1479 which applies to a promise to buy and sell specifically. This rule requires that a promise
to sell to be valid, must be supported by a consideration distinct from the price, which means
that the option can still be withdrawn, even if accepted, if the same is not supported by any
consideration. (Southwestern Sugar and Molasses Co. vs. Atlantic Gulf And Pacific, Co.,97
SCRA 249)
The acceptance of an offer to sell a determinate thing for a price certain creates a
bilateral contract to sell and to buy. The offer, upon acceptance, ipso facto assumes the
obligations of a purchaser. If an option is given without consideration, it is a mere offer of
contract of sale, which is not binding until accepted. If, however, acceptance is made before a

withdrawal, it constitutes a binding contract of sale even though the option was not supported by
a sufficient consideration. (Atkins, Kroll and Company vs, Cua Hian Tek, 102 SCRA 948)
There is no conflict between Articles 1324 and 1479. An accepted unilateral promise to
sell partakes the nature of an option, which, although not binding as contract in itself because of
lack of separate consideration, generates a bilateral contract of purchase and sale upon
acceptance. Article 1324 of the Civil Code which presumes the existence of a consideration in
every contract applies to contracts in general, whereas the second paragraph of Article 1479
thereof refers to sales in particular and more specifically to an accepted unilateral promise to
buy or to sell. (Sanchez vs. Rigos, 45 SCRA 368)
An extension of the period to redeem the property after the redemption period granted
by the President and Manager of a bank after the expiration of the redemption period could only
relate to the matter of resale of the property, not redemption. Even if it were to be understood as
an extension of the period of redemption, the bank is not bound by the promise not only
because it was not approved or ratified by the Board of Directors but also because, and more
distinctively, it was a promise not supported by a consideration distinct from the repurchase
price. (Natino vs. Intermediate Appellate Court, 197 SCRA 323)
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy
because upon the acceptance by the creditor of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which is determinate and to the price. In
which case, the parties may reciprocally demand performance. If an option is supported by a
consideration distinct from price, it is the duty of the vendor to remain open the offer until the
agreed period expires. The purchaser is then given the option to decide to purchase or not and
may not be compelled to exercise the option to buy before the term expires. (Serra vs. Court of
Appeals, 229 SCRA 60)
WHO BEARS THE RISK OF LOSS
The disappearance or loss of property which the owner intended or attempted to sell can
only interest the owner, who should suffer the loss, and not a third party who has acquired no
rights nor incurred any liability with respect thereto. In the case, the sale was not perfected for
failure of the owner to comply with the condition. It follows that the loss of the vessel should be
borne by the owner. (Roman vs. Grimalt, 6 Phil 96)
The issuance of sales invoice does not prove transfer of ownership of the thing sold
either actually or constructively. In all forms of delivery, it is necessary that the act of delivering
whether constructive or actual be coupled with the intention to transfer ownership and to deliver
the thing. Article 1496 of the Civil Code which provides that in the absence of an express
assumption of risk by the buyer, the things sold remain at the sellers risk until the ownership
thereof is transferred to the buyer. (Norkis Distributors, Inc. Vs. Court of Appeals, 193 SCRA
694)
RECTO LAW
In sales on installments, where the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not amount to a

foreclosure of the mortgage, hence, the seller-creditor is entitled to deficiency judgment. The
attachment and subsequent sale on public auction of the property was merely an incident to an
ordinary civil action and cannot be considered as equivalent to the remedy of foreclosure.
(Southern Motors, Inc. vs. Moscoso, 2 SCRA 163)
If the guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor-vendee pursuant
to Article 2066 of the Civil Code, so that ultimately, it would be the vendee who will be made to
bear the payment of the balance of the price, despite the earlier foreclosure of the chattel
mortgage. Thus, the protection given by Article 1484 would be indirectly subverted, and public
policy overturned. Therefore, foreclosure of the chattel mortgage releases the guarantor.
(Pascual vs. Universal Motors Corp., 61 SCRA 121)
The limitations set forth in Article 1484 also applies to leases of personal property with
option to buy as provided in Article 1485. It is also well-settled that the remedies provided for in
Article 1484 are alternative and not cumulative and therefore the exercise of one bars the
exercise of the others. Contract of lease with option to buy is at times resorted to as a means to
circumvent Article 1484 particularly paragraph 3 thereof, hence, Article 1485. (Filinvest Credit
Corporation vs. Court Of Appeals, 178 SCRA 188)
DELIVERY AS A MODE OF TRANSFERRING OWNERSHIP
The execution of a public instrument is equivalent to the delivery of the thing which is the
object of the contract, but in order that this symbolic delivery may produce the effect of tradition,
it is necessary that the vendor shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been made. (Addison vs. Felix and Tioco,
38 Phil 404)
Ownership is not transferred by perfection of the contract of sale but by delivery, either
actual or constructive. This is true even if the purchase has been made on credit pr payment of
the purchase price is not essential to the transfer of ownership as long as the property sold has
been delivered. Ownership is acquired from the moment the thing sold was delivered to the
vendee, as when it is placed in his control and possession. (Sampaguita Pictures, Inc. vs.
Jalwindor Manufacturers Inc., 43 SCRA 420)
ARTICLE 1491
The prohibition mandated by paragraph 2 of Article 1491 in relation to Article 1409 of the
Civil Code does not apply where the sale of the property in dispute was made under a special
power inserted in or attached to the real estate mortgage pursuant to Act no. 3135, as
amended. Under Section 5 of such Act, the title of the mortgagee-creditor over the property
cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser of
his own sale. (Fiestan vs. Court of Appeals, 185 SCRA 757)
ARTICLES 1506 AND 559
The right of the owner to recover personal property acquired in good faith by another is
based on his being dispossessed without his consent. The common law principle that where
one of the two innocent persons must suffer by a fraud perpetrated by another, the law imposes
upon the party who by his misplaced confidence, has enabled the fraud to be committed cannot
be applied to a person unlawfully deprived covered by an express provision of the Civil Code

specifically Article 559. Between a common law principle and a statutory provision, the latter
must prevail.
Concurring opinion of Justice Teehankee:
Unlawful deprivation is not merely contained in the specific sense of deprivation by
robbery or theft but extends to all cases where there has been no valid transmission of
ownership, including depositary or lessee who sold the same. It extends to all cases where
there has been no valid transmission of ownership. (Dizon vs. Suntay, 47 SCRA 160)
Possession of movable property acquired in good faith is equivalent to a title. Hence,
where there was a perfected contract of sale, it cannot be said that there is unlawful deprivation
so as to warrant recovery from a purchaser in good faith without reimbursement. (EDCA
Publishing And Distributing Corp. vs. Santos, 184 SCRA 614)
DOUBLE SALE
The first purchaser is necessarily a purchaser in good faith. Such good faith subsists
and continues to exist even if the first purchaser subsequently is informed of the existence of a
second sale. The governing principle here is first in time, stronger in right. The knowledge
gained by the first buyer of the second sale cannot defeat the first buyers good faith and the
right to register first. But conversely, knowledge gained by the buyer of the first sale defeats his
rights even if he be the one to register first as he then acts in bad faith. It has to be noted that
knowledge is tantamount to registration. (Carbonell vs. Court Of Appeals, 69 SCRA 99)
Where one of two conflicting sales of a piece of land was executed before the land was
registered, while the other was an execution sale made after the land had been registered, what
should apply is Section 35, Rule 39 (not Article 1544) which provides that purchaser of
execution sale acquires only the rights of the judgment debtor to the property as of the time of
the levy. Therefore, a prior sale, although unregistered cannot be deemed to be automatically
cancelled upon subsequent issuance of the Torrens title over the land. (Dagupan Trading Co.
vs. Macam, 14 SCRA 99)
Knowledge of a prior transfer of a registered property by a subsequent purchaser makes
him a purchaser in bad faith which vitiates his title and creates no right as against the first
purchaser. The knowledge contemplated here must be continuing- from the time of acquisition
until the title is transferred to him by registration a failing registration by delivery of possession.
The second buyer must show continuing good faith and innocence or lack of knowledge of the
first sale until his contract ripens into full ownership through prior registration as provided by law.
(Cruz vs. Cabana, 129 SCRA 656)
Article 1544 specifically provides who shall be the owner in case of a double sale of an
immovable property. To give full effect to this provision, the status of the two contracts must be
determined and clarified. One contract must be declared valid so that one vendee may exercise
all the rights of an owner, while the other contract must be declared void to cut off all rights
which may arise from said contract. (Caram, Jr. vs. Laureta, 103 SCRA 7)
The rule in case of double sale is that the disputed property being immovable, the
ownership should belong to the vendee who in good faith first recorded it in the Registry of
Property. (Nuguid vs. Court Of Appeals, 171 SCRA 213)
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property. Should there be no inscription, the

ownership shall pertain to the person who in good faith was first in the possession and in the
absence thereof, to the person who presents the oldest title, provided there is good faith. The
annotation of the adverse claim in good faith in the Registry of Property by a person establishes
a superior right over the immovable property, which annotation is effectively a notice to the
whole world. (Spouses Valdez vs. Court Of Appeals, 194 SCRA 360)
As between two purchasers, the one who registered the sale in his favor has a preferred
right over the other who has not registered his title, even if the latter is in actual possession of
the immovable property. (Tanedo vs. Court Of Appeals, 252 SCRA 80)
Article 1544 does not apply to land not registered under the Torrens system. The
provisions in Act No. 3344 should be made applicable, which states that registration of
instruments affecting unregistered lands is without prejudice to a third party with a better right.
This is because the purchaser of unregistered land at a sheriffs execution sale only steps into
the shoes of the judgment debtor, and merely acquires the latters interest in the property sold
as of the time the property was levied upon. (Radiowealth Finance Co. vs. Palileo, 197 SCRA
245)
BREACH OF WARRANTY
As a general rule, there is no implied warranty in a sale of second hand goods.
However, this general rule is not without exceptions. Article 1562 of the Civil Code states that
where the buyer expressly or by implication makes known to the seller the particular purpose
for which the goods are acquired and it appears that the buyer relied on the sellers skill or
judgment, there is an implied warranty that the goods shall be reasonably fit for such purpose.
In the certification that the machine was in A1 condition must be considered an express
warranty and their binding on the seller. Such condition or certification was a condition sine qua
non for the release of the petitioners loan which was used for the payment of the purchase
price. Seller must be bound by it. ( Moles vs. Intermediate Appellate Court, 169 SCRA 777)
While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six
months for a redhibitory action, a cursory of the preceding ten articles will reveal that said rule
may be applied only in case of implied warranties. In case of express warranty, the prescriptive
period is the one specified in the warranty and in the absence of such period, the general rule
on rescission of contracts which is four (4) years shall apply. (Villostas vs. Court Of Appeals,
210 SCRA 490)
RIGHT OF REDEMPTION
Where the true intention of the parties show that the transaction shall secure the
payment of the debt, such a transaction shall be presumed to be an equitable mortgage under
paragraph 6 of Article 1602. Settled is the rule that to create the presumption enunciated by
Article 1602, the existence of one circumstance is enough. (Ramos vs. Court Of Appeals, 180
SCRA 635)
While in ordinary sales for reason and equity a transaction may be invalidated on the
ground of inadequacy of price or when such inadequacy shocks ones conscience as to justify
the courts to interfere, such does not follow when the law gives to the owner the right to redeem
as when a sale is made at public auction, upon the theory that the lower the price, the easier it
is for the owner to effect the redemption. And so it was aptly said that when there is the right to

redeem, inadequacy of the price should not be material because the judgment debtor may
redeem the property. (De Leon vs. Salvador, 36 SCRA 567)
The requirement set by Articles 1606 and 1607 as to the consolidation of ownership
shall not be given application to vested rights prior to the effectivity of the New Civil Code. A
pacto de retro dale is a contract with a resolutory condition, whereby the rights are conferred
subject only to that condition. (Flores vs. So, 162 SCRA 117)
Co-heirs may redeem the shares sold by any of their co-heirs within 30 days from written
notice of the sale. However, strict application of this legal mandate would amount to injustice
when there is an actual knowledge though no written notice is given. In such case, mere
technicality should not defeat the purpose of the law, i.e. to notify the redemptioners whose
actual knowledge is equivalent to notice. (Alonzo vs. Intermediate Appellate Court, 150 SCRA
259)
A formal offer to redeem, accompanied by a bona fide tender of payment of redemption
price is not essential where the right to redeem is exercised through a judicial action within the
redemption period and simultaneously depositing the redemption price. The filing of action itself
is equivalent to a formal offer to redeem. There is actually no prescribed form for an offer to
redeem to be properly effected, what is paramount is the availment of the right to legally redeem
within the fixed period. (Lee Chuy Realty Corp. vs. Court Of Appeals, 250 SCRA 596)
While it is true that written notice by the vendor is required by law under Article 1623, it is
equally true that the same Article 1623 does not prescribe any distinctive method for notifying
the redemptioner so long, therefore, as the latter is informed in writing of the sale and the
particulars thereof, the 30 days for redemption starts running and the redemptioner has no real
cause to complain. (Etcuban vs. Court Of Appeals, 148 SCRA 587)

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