SALES AND LEASE

Atty. Zarah Villanueva-Castro

I. CONCEPTS; CONTRACT OF SALE (Art. 1458)
By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price
certain in money or its equivalent.
Characteristics:
Consensual (Art. 1475) perfected by mere consent.
Bilateral (Art. 1458) imposes obligation on both
parties; obligation to transfer ownership and deliver
on the part of the seller and to pay the price on the
part of the buyer.
Onerous (Art. 1350) with valuable consideration.
Commutative (Art. 2010) each party gives and
receives an equivalent.
Nominate (Art. 1458) has given a special name or
designation in the Civil Code.
Principal can stand on its own and does not
depend on other contracts for its existence and
validity.
Essential Requisites/Elements:
Consent of the contracting parties
Subject matter (things and rights)
Cause (price)

Jurisprudence:
Leabres v. CA
G.R. No. L-41847; 12 December 1986
DOCTRINE: An examination of the receipt reveals that the
same can neither be regarded as a contract of sale or a
promise to sell.
The requisites of a valid contract of sale namely:
(1) consent or meeting of the minds of the parties;
(2) determinate subject matter;
(3) price certain in money or its equivalent; - are lacking
in said receipt and therefore the "sale" is not valid nor
enforceable.
Distinguished from other contracts:
Barter (Art. 1468, 1638, 1954)
In barter, the consideration is the giving of a thing; In
sale, it is giving of money as payment.
Both are governed by law on sales.
If consideration consists partly in money and partly by
thing, look at manifest intention.
Depends on the intention of the parties if they
consider their transaction as barter or sale.
If the value of thing is equal or less than amount of
money, it is sale.

SALES AND LEASE

Atty. Zarah Villanueva-Castro
If the value of thing is more than amount of money, it
is barter.

Donation (Art. 725)

Donation is gratuitous while sale is onerous.
Donation is formal contract; sale is consensual.
Donation is governed by law on donation; sale is
governed by law on sales.

Contract for a Piece of Work (Art. 1467)

Also known as Massachusetts Rule.
If the contract for delivery of an article which the
vendor in the ordinary course of business
manufactures or procures for general market, whether
on hand or not, it is a sale.
If goods are to be manufactured especially for a
customer and upon special order and not for the
general market, it is a contract for piece of work.
Jurisprudence:
CO v. CIR
G.R. No. L-8506; 31 August 1956
The important thing to remember is that Celestino Co
& Company habitually makes sash, windows and doors, as it
has represented in its stationery and advertisements to the
public. That it "manufactures" the same is practically

admitted by appellant itself. The fact that windows and doors

are made by it only when customers place their orders, does
not alter the nature of the establishment, for it is obvious that
it only accepted such orders as called for the employment of
such material-moulding, frames, panels-as it ordinarily
manufactured or was in a position habitually to manufacture.
CIR v. Arnoldus Carpentry Shop
GR No. 71122; 25 March 1988
DOCTRINE:
Based on Article 1467, what determines whether the
contract is one of work or of sale is whether the thing has
been manufactured specially for the customer and upon his
special order. Thus, if the thing is specially done at the
order of another, this is a contract for a piece of work. If, on
the other hand, the thing is manufactured or procured for the
general market in the ordinary course of ones business, it is
a contract of sale. The distinction between a contract of sale
and one for work, labor and materials are tested by the
inquiry whether the thing transferred is one not in
existence and which never would have existed but for
the order of the party desiring to acquire it, or a thing
which would have existed and has been the subject of
sale to some other persons even if the order had not
been given.

SALES AND LEASE

Atty. Zarah Villanueva-Castro
The one who has ready for the sale to the general
public finished furniture is a manufacturer, and the mere fact
that he did not have on hand a particular piece or pieces of
furniture ordered does not make him a contractor only. A
contract for the delivery at a certain price 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 of sale,
but if the goods are to be 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
Agency to sell (Art. 1466)
In agency to sell, agent is not obliged to pay for price
but merely obliged to deliver price received from
buyer; in sale, the buyer pays for the price of the
object.
In agency, the principal remains the owner even if
object is delivered to agent; in sale, buyer becomes
owner of thing.
In agency, agent assumes no risk/liability as long as
within the authority given; In sale, seller warrants.
In agency, may be revoked unilaterally because
fiduciary and even revoked it without ground; in sale,
not unilaterally revocable.
In agency, agent is not allowed to profit; in sale, seller
receives profit.

Agency is a personal contract; sale is a real contract

(to give), rescission is not available in agency.

Jurisprudence:
Quiroga v. Parsons
G.R. No. L-11491; 23 August 1918
RULING: The Court ruled that the contract by and between
the plaintiff and the defendant was one of purchase and
sale, and that the obligations the breach of which is alleged
as a cause of action are not imposed upon the defendant,
either by agreement or by law.
In order to classify a contract, due attention must be given to
its essential clauses.
In the contract in question, what was essential, as
constituting its cause and subject matter, is that:
The plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that
the defendant was to pay the price in the manner stipulated.
Payment was to be made at the end of sixty days, or before,
at the plaintiffs request, or in cash, if the defendant so
preferred, and in these last two cases an additional discount
was to be allowed for prompt payment.

SALES AND LEASE

Atty. Zarah Villanueva-Castro

These are precisely the essential features of a contract of

purchase and sale. There was the obligation on the part of
the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the
legal conception of an agency or order to sell whereby the
mandatory or agent received 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, he returns it.
By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without any
other consideration and regardless as to whether he had or
had not sold the beds. In respect to the defendants
obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only
entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the
plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
Lease
In sale, obligation is to absolutely transfer ownership
of thing; in lease, use of thing is for a specified period
only with an obligation to return.

In sale, consideration is price; in lease, consideration

is rent.
In sale, seller needs to be the owner of the thing to
transfer ownership; in lease, lessor need not be the
owner for ownership does not pass to the lessee.
Contract of Lease with Option to Buy (Art. 1485)
Really a contract of sale but designated as lease in
name only.
It is a lease of personal property where rents are
considered as payment on installments.

Kinds of Sale
(1) Absolute seller does not reserve his title over the
thing sold and thus, upon delivery, ownership passes
regardless of WON buyer has paid.
(2) Conditional condition/s are imposed by the seller
before ownership will pass
*CONDITION An event may may give rise or extinguish
and obligation as agreed by the contracting parties.
May be a past event if the knowledge there of is unknown
yet.
Contract to Sell
Ownership is reserved by the seller despite delivery;
considered as a special kind of conditional sale; the

SALES AND LEASE

Atty. Zarah Villanueva-Castro
buyer has the right to compel the seller to execute a
final deed of sale.
A preparatory stage before the perfection of Contract
of sale
Jurisprudence:
Dignos v. CA
G.R. No. L-59266; 29 February 1988
Held: The Court ruled that there is an absolute contract of
sale. That a deed of sale is absolute in nature although
denominated as a Deed of Conditional Sale where
nowhere in the contract in question is a proviso or stipulation
to the effect that title to the property sold is reserved in the
vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind
the contract the moment the vendee fails to pay within a
fixed period
Rayos v. CA
G.R. No. 135528, 14 July 2004
Held: The Court ruled that the parties executed a contract to
sell and not a contract of sale.

The petitioners retained ownership without further remedies

by the respondents until the payment of the purchase price
of the property in full. Such payment is a positive suspensive
condition, failure of which is not really a breach, serious or
otherwise, but an event that prevents the obligation of the
petitioners to convey title from arising, in accordance with
Article 1184 of the Civil Code.
The non-fulfillment by the respondent of his obligation to
pay, which is a suspensive condition to the obligation of the
petitioners to sell and deliver the title to the property,
rendered the contract to sell ineffective and without force
and effect. The parties stand as if the conditional obligation
had never existed.
Clemeno, Jr. v. Lobregat
G.R. NO. 137845; 9 September 2004
Held: The Court ruled that the contract between the parties
was a perfected verbal contract of sale and not a contract to
sell over the subject property, with the petitioner as vendor
and the respondent as vendee.
Sale is a consensual contract and is perfected by mere
consent, which is manifested by a meeting of the minds as to
the offer and acceptance thereof on three elements: subject
matter, price and terms of payment of the price.

SALES AND LEASE

Atty. Zarah Villanueva-Castro

II. OBJECT OF SALE (Art. 1306)

(a) Subject matter must be LICIT (Art. 1459) within
the commerce of man.
Illicit per se refers to its nature.
Illicit per accidens made illegal by provisions
of law.
Illicit contracts are null and void.
(b) Subject matter must be DETERMINATE (Art. 1460)
not essential at the time of perfection; particularly
designated or physically segregated from all others of
the same class. The requisite that a thing must be
determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made
determinate without the necessity of a new further
agreement between the parties
(c) Sale of things having POTENTIAL EXISTENCE
(Art. 1461) animals not yet born, fruits of trees, rice
to be harvested.
Thus, a valid sale may be made of the wine a vine is
expected to produce; or the grain a field may grow in
a given time; or the milk a cow may yield during the
coming year; or the wool that shall thereafter grow
upon a sheep; or what may be taken at the next cast

of a fishermans net; or the goodwill of a trade, or the

like. The thing sold, however, must be specific and
identified. They must be also owned by the vendor at
the time.
(d) Sale of HOPE or EXPECTANCY (Art. 1461)
Emptio rae speratae sale of an expected
thing; if does not materialize, the sale is not
effective (future thing).
Depends on the existence
Emptio spei sale of mere hope; does not
matter whether it materializes or not, as long
as the hope itself validly existed (present
thing).
Ex: lottery ticket it is the chance
which the buyer actually buys
Mere hope or expectancy
VALID as long as it will come into
existence.
Vain hope or expectancy VOID
(e) Sale of EXISTING and FUTURE GOODS (Art. 1462)
The goods which form the subject of a contract of sale
may be either existing goods, owned or possessed by
the seller, or goods to be manufactured, raised, or
acquired by the seller after the perfection of the
contract of sale, in this Title called "future goods."

SALES AND LEASE

Atty. Zarah Villanueva-Castro
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen. (n)
This is an EXECUTORY contract already perfected
but to be performed or complied with by the seller.
(f) Sale of UNDIVIDED INTEREST (Art. 1463)
A sole owner of a thing may sell an undivided
interest.
Jurisprudence:
Almendra v. IAC
G.R. No. 75111; 21 November 1991
The owner of a thing may sell his interest in the land
but with now specification as to what specific part
since the property is still not yet partitioned.
Thus, the sale is valid as regard 50% of the property
and the rights therein
(g) Sale of FUNGIBLE GOODS (Art. 1464)
It means goods of which any unit is, from its nature or
by mercantile usage, treated as the equivalent of any
other unit (Uniform Sales Act, Sec. 76.), such as
grain, oil, wine, gasoline, etc.

(h) Sale of THINGS subject to RESOLUTORY

CONDITION (Art. 1465)
A resolutory condition is an uncertain event upon the
happening of which the obligation (or right) subject to
it is extinguished. Hence, the right acquired in virtue
of the obligation is also extinguished.
Example:
For failure to pay his debt, the land of S (mortgagor)
was sold to B, the highest bidder and purchaser in an
extrajudicial foreclosure of a real estate mortgage.
Under the law (Act No. 3135, as amended.), the
mortgagor may redeem the property at any time
within one year from and after the date of the
registration of the sale. If S redeems the property,
then the sale made to B is extinguished.
One of the obligations of the vendor is to transfer the
ownership of the thing object of the contract. (Art.
1458.) If the resolutory condition attaching to the
object of the contract, which object may include things
as well as rights (Arts. 1427, 1347, par.1.), should
happen, then the vendor cannot transfer the
ownership of what he sold since there is no object.