SALES

Coverage: Article 1458 to Article 1544

Vendor/Seller Vendee/Buyer Object of the Contract of Sale Cause/Consideration of the Contract of Sale
• To transfer the To pay the price • Must be licit (Art. 1459) -price certain in money or its equivalent (Art. 1458)
ownership of and to certain in money or • Must be determinate at the time the -Partly in money and partly in another thing
deliver the object of its equivalent (Art. contract is entered (Art.1460) • the transaction shall be characterized by the manifest intention
the contract of sale 1458) • Having a potential of existence Intention does not clearly appears:
(Art. 1458) (mere hope or expectancy valid): a) • if thing is more valuable than money – BARTER
• Must have the right an expected thing; b) hope itself. • if 50-50 – SALE
to transfer at the Note: vain hope or expectancy is • if the thing is less valuable than money – SALE. (Art. 1468)
time of delivery void. (Art. 1461) - Price may be considered certain:
(Art. 1459) 1) sufficient that it be so with reference to another thing certain.
• Can be an existing goods or a future
• May sell an goods which are still to be: 1. 2) Determination left to the judgment of a specified person or
undivided interest. manufactured; 2. raised; 3. acquired persons (third person)
Art (1463) (hereafter-acquired property); 4. a) unable or unwilling to fix – contract shall be inefficacious, unless
whose acquisition depends upon a the parties subsequently agree upon the price.
contingency which may or may not b) Acted in bad faith or mistake – the courts may fix the price
happen. (Art. 1462) 3) third person/persons are prevented to fix the price or term by fault
• May be an undivided interest (Art. of the seller or buyer – party not in fault may have such remedies.
1463) (Art. 1469)
• Things subject to a resolutory -Gross inadequacy of price dose not affect a contract of sale.
condition EXCEPTIONS: 1) as it may indicate a defect in the consent; 2) the parties
really intended a donation or some other act or contract. (Art. 1470)

- If the price is simulated – the sale is void, but the act may be a donation
or some other act or contract. (Art. 1471)
The price of the securities, grains, liquid, and other things shall also be
considered certain, when the price fixed is that which the thing sold would
have on: 1) a definite day; 2) or particular exchange or market; 3) or when
an amount is fixed above or below the price on such day, or in such
exchange or market, provided said amount is certain. (Art. 1472)
The fixing of price can never be left to the discretion of one of the
contracting parties. However, if the price fixed by one is accepted by the
other, the sale is perfected. (Art. 1473)
Where the price cannot be determined – the contract is inefficacious.
However, if the thing or any part thereof has been delivered to and
appropriated by the buyer, he must pay the reasonable price therefor. What
is a reasonable price is a question of fact dependent on the circumstances
of each particular case. (Art. 1474)

Perfection of Contract of Sale:

 • The moment when there is meeting of the minds upon the thing (object of the contract of sale) and the price (cause or condition of the contract of sale). (Art. 1475)
• From the moment it is perfected, the parties may reciprocally demand performance of obligations. (Art. 1475)
• Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of perfection of the contract. (Art. 1482)

Art. 1476. Sale by Auction:

• Each lot is the subject of a separate contract of sale.
• Perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Before the perfection: a) the bidder may retract his bid, or b) the auctioneer may withdraw
the goods from the sale, unless the auction to be announced without reserve.
• The auctioneer cannot bid or employ others to bid for him unless there is reservation made and notice was given that the auctioneer reserved the right to bid.
• If there’s such no announcement, it shall not be lawful if the auctioneer or through another participates the bid and as such, the bid may be treated as fraudulent by the buyer.
When ownership over the object of the contract transferred to the vendee?
1) upon the actual or constructive delivery. (Art.1496) – General Rule; EXCEPTION: ownership is not transferred, although there has been perfection and delivery, if it was intended that no such transfer of
ownership until full payment is effected. The parties may stipulate that ownership of the thing shall not pass to the purchaser until full payment is effected. (Art. 1478)
2) the thing sold shall be understood as delivered, when it placed in the control and possession of the vendee. (Art. 1497 – speaks of real or actual delivery)
Kinds of delivery:
a) Actual or real;
b) Legal or constructive:
a. Legal formalities – execution of public instrument (Art. 1498, par 1)
b. Traditio simbolica – delivery of the keys. (Art. 1498, par 2)
c. Tradition longa manu – 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. (Art. 1499)
d. Traditio brevi manu – when one’s possession over the thing graduates to the possession in the concept of an owner.(Art. 1499)
e. Traditio constitutum possessorium- opposite of tradition brevi manu. (Art. 1500)
When obligations of the parties demandable?
1) From the moment the contract is perfected, the obligations are reciprocally demandable. (Art. 1475) – General Rule
2) Mutual promise to buy and to sell at an agreed price, clearly a bilateral reciprocal contract, treated as a perfected sale. (Art. 1479, par 1)
3) An accepted unilateral promise to buy or to sell a determinate thing for a price is binding upon the promissor if supported by a consideration distinct from the price. (Art. 1479, par 2).
NOTE: If a unilateral promise is not accepted, it is referred as “Policitacion”. This produces no juridical effect, and creates no legal bond. This is a mere offer, and has not yet been converted into a contract.

Who bears the risk of loss?

1) Before contract is perfected – the seller bears the loss, clearly, there was no contract.
2) After contract is perfected, but before delivery – the buyer bears the loss, as exception to the rule of res perit domino. Reason: As any benefit would accrue to the buyer during the intervening period, indeed,
it is just and reasonable that he bears the loss if misfortune might occur instead.
3) The object lost after delivery – the buyer bears the loss, as a rule the buyer becomes the owner after the delivery. This is in accord with the principle “Res perit domino”.
Contract of Sale By Description, By Sample, or By Description and Sample: ( Art. 1481)
1) Sale by description – if the goods delivered did correspond to the description, the buyer may rescind the contract.
2) Sale by sample – if the goods delivered did not correspond to the sample, the buyer may rescind the contract.
3) Sale by description and sample – if the goods delivered did not correspond to the sample and description, the buyer may rescind the contract.
NOTE: In such a case, there was no perfected contract.
Remedies available to the vendor of personal property sold in installment: (Art. 1484). These are alternative remedies, not commutative. Applicable also to contracts purporting be leases with option to buy, when
the lessor has deprived the leases of personal property the lessee of the possession or enjoyment of the thing. (Art. 1485)
1) Should the vendee fail to pay – exact fulfillment of the obligation;
2) Vendee’s failure to pay cover two or more installments – cancel the sale;
3) Vendee’s failure to pay cover two or more installments if chattel mortgage is constituted on the thing sold – forclose the chattel. In this case the creditor shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void. (Recto Law)

Stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (Art. 1486)

NOTE: Parallel to “Recto Law” is the “Maceda Law” which covers sale or financing by installment payments of real properties, including residential apartments but excluding industrial lots, commercial building and
sales to tenants under CARP Law;
a) To pay without, additional interest, the unpaid installments due within total grace period (GP) earned by him. GP = one month/year, such right shall be exercised only once for every five years of the life of
contract and its extensions.

b) If the contract is cancelled – the seller shall refund to the buyer the cash surrender value of the payments of the property = 50% of total payments made; additional of 5% every year; but the total payment
reimbursed shall not exceed 90% of the total payments made. The actual cancellation shall take effect 30 days from the receipt by the buyer of notice of cancellation or demand of rescission of the contract
by notarial act and upon payment of full payment of cash surrender value to the payment.

c) Installment payments shall be less than 2 years – the GP shall not be less than 60 days form the date the installment became due. After the expiration period, the seller may cancel the contract after 30 days
from receipt by the buyer of notice of cancellation or demand of rescission of the contract by notarial act

Who pays for expenses in execution and registration?

- As a rule, the seller must pay unless there is a stipulation to the contrary. (Art. 1487)

Who are capacitated to buy or sell or to enter into a contract of sale? SHALL APPLY ALSO TO CONTRACT OF LEASE
All persons, except:
1) Those who are absolutely – when party cannot bind himself in any case. (minors, suffers penalty of civil interdiction)
2) Those who are relatively incapacitated: Reason: Public policy prohibits the transaction in view of fiduciary relationship involved.
a) Between husband and wife; Reasons: 1) to avoid prejudice to third persons; 2) to prevent one spouse from unduly influencing the other; and 3) to avoid by indirection the violation of prohibition
against donation; EXCEPTIONS a) when there’s prenuptial agreement on separation of property; or b) when there is judicial declaration of separation of property.
b) Guardian with respect to the property of the ward.
c) Agent with respect to the property of the principal.
d) Administrator/Executor with respect to the property under his administration.
e) Public officers and employees with respect to the property of the State, the administration of which has been entrusted to them; also apply to judges and government experts who, in any manner take
part in the sale.
f) Justices, judges, prosecuting attorneys, clerk of superior courts, and other officers and employees connected with the administration of justice before the court exercising jurisdiction where the
property and rights are under litigation or levied upon; also applies to lawyers with respect to the property and rights under litigation in which they may take part by virtue of their profession.
g) Any others specially disqualified by law.
Effects of the contract when the thing sold has been lost:
1) Loss of object before sale - It is evident that there would be no cause or consideration; hence the contract is void. (Completely lost)
2) Partly or partially loss of the object before sale; remedies: 1) withdrawal or rescission; or 2) specific performance as to remainder by payment of proportional price. Exercised at the option of the vendee.
(Arts. 1493 & 1494)