Atty. Teodoro A.

Pastrana
Law on Sales
Chapter 1 Nature of Sale
Definition Article 1458 By the contract of sale on of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent

I.

Nature of the obligations created in sale

(a) Two obligations of the seller to:

1. Transfer the ownership
2. Deliver the possession of the subject matter
(b) Obligation of the buyer to:
1. Pay the price

II.

Subject matter of Sale

(a) Possible thing that is:

1. Existing goods Article 1462 The goods which form the subject of a
contract of sale may be existing goods
2. Having potential existence Article 1461 Things having potential
existence may be the object of the contract of sale
3. Future goods Article 1462 Goods to be Manufactured, Raised or
Acquired by the seller after the perfection of the contract of sale, In this
title called future goods
4. Subject to a Contingency 1462 There may be a contract of sale of
goods, whose acquisition by the seller depends upon a contingency which
may or may not happen
5. Subject to a resolutory condition- Article 1465 Things subject to a
resolutory condition may be the object of the contract of sale.
(b) It must be licit:
-

Article 1459 The thing must be licit

(c) It must be Determinate or at least Determinable

1. Determinate Article 1460 A thing is determinate when it is
particularly designated or physically segregated from all others of the
same class
2. Determinable Article 1460 The requirement that the thing be
determinate is satisfied if at the time the contract is entered into, the

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thing is capable of being made determinate without the need of a new or

further agreement between the parties.

III.

Elements of Contract of Sale

1. Consent
2. Subject Matter
3. Price

IV.

Stages in the life of Sale

1. Policitacion Negotiation or preparation stage, period of negotiation and

bargaining
2. Perfection Birth of the contract, point in time when the parties come to
agree on the terms of the sale
3. Consummation Death of the contract, process of fulfilment or performance
of the terms agreed upon in the contract, whereby by each party fulfils his
undertaking resulting to the extinguishment of the contract

V.

Essential Characteristics of Sale

1. Nominate it has been given a particular name by law

2. Principal it can stand on its own and its existence and validity does not

depend upon another contract

3. Consensual it is perfected by mere consent
4. Bilateral it imposes obligations on both parties to the relationship
5. Reciprocal the obligation arises from the same cause
6. Onerous it imposes a valuable consideration as a prestation
7. Commutative a thing of value is exchange for another thing of equal

value.
Buenaventura vs CA: There is no requirement that the price be equal to the
exact value of the subject matter, all that is required is for the seller to believe
that what was received was the commutative value of what he gave
8. Title not Mode Creates an obligation on the part of the seller to transfer

the ownership of and to the deliver possession.

VI.

Sales Distinguished from other Contracts

1. Donation Article 726 - When the donor imposes upon the donee a burden
which is less than the value of the thing given there is a donation - Gratuitous
Article 725

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2. Barter Article 1468 If the consideration of the contract consists partly in

money and partly in another things, the transaction shall be characterized by
the manifest intention of the parties. If such intention does not clearly
appear, it shall be considered barter if the value of the thing given as a part
of the consideration exceeds the amount of money or its equivalent,
otherwise it is sale.
3. Contract for a Piece of Work Article 1467 A contract for the delivery at
a certain price of an article which the vendor in the ordinary course of his
business manufacture or procures for the general market, whether the same
is on hand at the time or not, is a contract of sale, but if the goods are to
manufactured specially for the customer and upon his special order, and not
for the general market, it is a contract for a piece of work.
Celestino Co. vs CIR The essence of a contract for a piece-of-work is the
sale of service unlike in a sale where the essence is the sale of an object
Prevailing Doctrine: Engineering & Machinery Corp. vs CA If the
essence is the object, irrespective of the person giving or executing it, the
contract is sale, If the essence is service, knowledge or even reputation of
the person who executes or manufactures the object, the contract is for a
piece-of-work
4. Sale and Agency to Sell/Buy
Sale

Agency

Not unilaterally revocable

Unilaterally revocable

Buyer pays for the price

Agent does not pay for the price

Buyer becomes owner after delivery

Does not become owner of the thing

delivered

Seller warrants

No personal liability if acted within scope

of Authority and in the name of the
principal

Parties Profit from the transaction

Disqualified to profit from the transaction

5. Dacion en Pago Article 1245 - whereby property is alienated to the

creditor in satisfaction of a debt in money
Requisites:
1. Animo Solvendi, Performance of a prestation in lieu of payment
2. Aliud Pro alio, Some difference between the prestation due and that which is
given in substitution

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3. Agreement between the debtor and creditor that the obligation shall be
extinguished by reason of the performance of the prestation different from
that due
6. Lease - Art. 1643. In the lease of things, one of the parties binds himself to
give to another the enjoyment or use of a thing for a price certain, and for a
period which may be definite or indefinite. However, no lease for more than
ninety-nine years shall be valid.

Doctrines to remember:
Chapter 1: Nature of Sale
See ABOVE and most importantly:
Gaite vs Fonacier In case of doubt (If donation or sale, then sale)
We interpret in favor of the greater reciprocity of interest
Chapter 2: Parties of Sale
Domingo vs Court of Appeals - incomptence
The general rule is that a person is not incompetent merely because of
advanced years or by reason of physical infirmities. However when such age
or infirmities have impaired the mental faculties so as to prevent the person
from properly, intelligently and firmly protecting her property rights then she
is undeniably incapacitated
Calimlim-Canullas vs Fortun Live-in
The prohibition shall apply to a couple living as husband and wife without
benefit of marriage, otherwise, the condition of those who incurred guilt
would turn out to be better than those in legal union
Philippine Trust Co. vs Roldan Guardians, Executors and
Administrators
The general doctrine that each of such relationship is a trust of the highest
order, and the trustee cannot be allowed to have any inducement to neglect
his wards interest
Macariola vs Asuncion Judges
The doctrine of prohibition under article 1491 is applicable only during the
period of litigation should cover not only lawyers by judges as well

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Fabillo vs IAC
A contingent fee arrangement is not covered by article 1491 because
payment of said fee is not made during the pendency of the litigation but
only after judgment has been rendered
As long as the lawyer does not exert undue influence on his client, that no
fraud is committed or imposition applied, or that compensation is clearly not
excessive as to amount to extortion, a contract for contingent fee is valid
and enforceable
Chapter 3 Subject Matter
Sibal vs Valdez Emptio rei speratae
Pending crops which have potential existence maybe the object of a
contract of sale, and may be dealt with separately from the land on which
they grow
Polytechnic University vs CA Coverage of Sale
The civil code provisions on sale are in effect a catch all provision which
effectively bring within their grasp a whole gamut of transfers whereby
ownership is ceded for a consideration
Atilano vs Atilano Lot no.
One sells or buys property as he sees it in its actual setting and by its
physical metes and bounds, and not by the mere lot number assigned to it in
the certificate of title
National Grains Authority vs IAC Quantity
Specific quantity of the subject matter is not important when it is still
possible to determine the quantity without a new or further agreement
between the parties
Chapter 4 Price and Other Consideration
Price signifies the sum stipulated as the equivalent of the thing sold and
also every incident taken into consideration in fixing the price put to the
debit of the buyer and agreed to by him
Price is False When there is a real price upon which the minds of the
parties had met, but not declared, and what is stated in the covering deed is
not the one intended to be paid
Price Simulated Absolutely or Relatively Art. 1345. Simulation of a
contract may be absolute or relative. The former takes place when the

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parties do not intend to be bound at all; the latter, when the parties
conceal their true agreement.

Montecillo vs Reynes lack of consideration vs failure to pay

consideration
Failure to pay consideration is different from lack of consideration. The
former results in a right to demand the fulfilment or cancellation of the
obligation under an existing valid contract while the latter prevents the
existence of a valid contract
Mater vs CA Price simulated still valid
When undoubtedly the price stipulated the covering instrument is
simulated, the underlying sale would still be valid and enforceable provided
there is another consideration to support the sale.
Torres vs CA Profits as consideration
The expectation of profits constitutes valid cause and consideration to
validate the sale
Navarra vs Planters Dev. Bank Manner of payment rationale
Manner of payment goes into the essence of what makes a price certain
1179 all obligations without conditions or periods are demandable
at once

Tayengco vs CA Inadequacy of Price

Inadequacy of price may be a ground for setting aside an execution sale,
but it is not sufficient grounds for the cancellation of a voluntary contract of
sale which is otherwise free of invalidating defects such as vitiated consent,
even if shocking to the conscience.
Chapter 5 Formation of Sale
Option contract Carceller vs CA An option contract is a preparatory
contract in which one party grants to the other, for a fixed period and under
specified conditions, the power to decide, whether or not to enter into the
principal contract
Sanchez vs Rigos Option contract without consideration
Without a consideration separate from the purchase price, an option
contract would be void, but would still constitute a valid offer, so that if the
option is exercised prior to its withdrawal, it would give rise to a valid and
binding sale

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Right of first refusal A promise on the part of the owner that if he

decides to sell the property in the future, he would first negotiate its sale to
the promise
Guzman, Bocaling & Co. vs Bonnevie Right of first refusal
prevailing doctrine
A sale entered into in violation of a right of first refusal of another person
found in a valid principal contract is recissible
Villonco vs Bormaheco Clarificatory Changes are allowed
Simulation- Loyola vs CA The declaration of a fictitious will, deliberately
made by the agreement of the parties, in order to produce, for purposes of
deception, the appearance of a juridical act which does not exist or is
different from what which was really executed

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