SALES
1. Price Must Be Real (Art. 1471)
Article 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in reality
a donation, or some other act or contract. (n)
a. When Price Is Simulated
b. When Price Is False (Arts. 1353 and
1354)
Article 1353. The statement of a false cause in
contracts shall render them void, if it should not be
proved that they were founded upon another cause
which is true and lawful. (1276)
Article 1354. Although the cause is not stated in the
contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary. (1277)
c. Effect of Non-Payment of Price
2. Price Must Be in Money or Its Equivalent
(Arts. 1458 and 1468)
Article 1458. By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
(1445a)
Article 1468. If the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characterized by the manifest
intention of the parties. If such intention does not
clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration
exceeds the amount of the money or its equivalent;
otherwise, it is a sale. (1446a)
3. Price Must Be Certain or Ascertainable at
Perfection (Art. 1469)
Article 1469. In order that the price may be
considered certain, it shall be sufficient that it be so
with reference to another thing certain, or that the
determination thereof be left to the judgment of a
special person or persons.
Should such person or persons be unable or unwilling
to fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
Where such third person or persons are prevented
from fixing the price or terms by fault of the seller or
the buyer, the party not in fault may have such
remedies against the party in fault as are allowed the
seller or the buyer, as the case may be. (1447a)
a. Price Is Ascertainable When:
(1) Set by Third Person Appointed at
Perfection (Art. 1469)
(2) Set by the Courts (Art. 1469)
(3) By Reference to a Definite Day,
Particular Exchange or Market (Art.
1472)
Article 1472. The price of securities, grain, liquids,
and other things shall also be considered certain,
when the price fixed is that which the thing sold
would have on a definite day, or in a particular
exchange or market, or when an amount is fixed
above or below the price on such day, or in such
exchange or market, provided said amount be certain.
(1448)
(4) By Reference to Another Thing Certain
b. Price Can Never Set By One or Both Parties
After Alleged Perfection, Unless Such Price
Is Separately Accepted by the Other Party.
(Arts. 1473, 1182)
Article 1473. The fixing of the price can never be left
to the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected. (1449a)
Article 1182. When the fulfillment of the condition
depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends
upon chance or upon the will of a third person, the
obligation shall take effect in conformity with the
provisions of this Code. (1115)
c. Effects When Price Is Neither Certain or
Ascertainable: Sale Is Inefficacious
BUT: If Buyer Appropriates the Object, He
Must Pay a Reasonable Price (Art. 1474)
Article 1474. Where the price cannot be determined
in accordance with the preceding articles, or in any
other manner, the contract is inefficacious. However,
if the thing or any part thereof has been delivered to
and appropriated by the buyer he must pay a
reasonable price therefor. What is a reasonable price
is a question of fact dependent on the circumstances
of each particular case. (n)
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4. Manner of Payment of Price IS ESSENTIAL
(Art. 1179)
Article 1179. Every obligation whose performance
does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is
demandable at once.
Every obligation which contains a resolutory
condition shall also be demandable, without prejudice
to the effects of the happening of the event. (1113)
5. Inadequacy of Price (Arts. 1355 and 1470)
Article 1355. Except in cases specified by law, lesion
or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence. (n)
Article 1470. Gross inadequacy of price does not
affect a contract of sale, except as it may indicate a
defect in the consent, or that the parties really
intended a donation or some other act or contract. (n)
a. Simple Inadequacy of Price Does Not
Affect Ordinary Sales
b. Gross Inadequacy of Price May:
(1) Raise the Presumption of Equitable
Mortgage in an Ordinary Sale (Art.
1602)
Art. 1602 The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase
is unusually inadequate;
(2) When the vendor remains in possession as lessee
or otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of
the purchase price;
(5) When the vendor binds himself to pay the taxes
on the thing sold;
(6) In any other case where it may be fairly inferred
that the real intention of the parties is that the
transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be subject to the usury laws. (n)
(2) Render Voidable a Judicial Sale:
(3) Render Rescissible a Sale by
Fiduciary, where Beneficiary
suffers lesion of more than 1/4 of
value of thing sold, unless approved
by the courts (Arts. 1381and1386)
Article 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians
whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the
things which are the object thereof;
(2) Those agreed upon in representation of absentees,
if the latter suffer the lesion stated in the preceding
number;
(3) Those undertaken in fraud of creditors when the
latter cannot in any other manner collect the claims
due them;
(4) Those which refer to things under litigation if they
have been entered into by the defendant without the
knowledge and approval of the litigants or of
competent judicial authority;
(5) All other contracts specially declared by law to be
subject to rescission. (1291a)
Article 1386. Rescission referred to in Nos. 1 and 2
of article 1381 shall not take place with respect to
contracts approved by the courts. (1296a)
V. FORMATION OF THE CONTRACT OF
SALE
A. POLICITACION STAGE (Art. 1479)
Article 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promisor if the promise is
supported by a consideration distinct from the price.
(1451a)
1. OPTION CONTRACT
a. Meaning of Separate Consideration (Arts.
1479 and 1324)
Article 1479. A promise to buy and sell a determinate
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thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promisor if the promise is supported by a
consideration distinct from the price. (1451a)
Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when the
option is founded upon a consideration, as something
paid or promised. (n)
b. Option With No Separate Consideration:
Void as Option, Valid as a Certain Offer
c. The Double Acceptance Rule
d. Exercise of Option Contract
2. RIGHT OF FIRST REFUSAL
3. MUTUAL PROMISES TO BUY AND SELL (Art.
1479):
Article 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promisor if the promise is
supported by a consideration distinct from the price.
(1451a)
B. PERFECTION STAGE OF SALE (Arts. 1475,
1319, 1325 and 1326)
Article 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts. (1450a)
Article 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer
was made. (1262a)
Article 1325. Unless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n)
Article 1326. Advertisements for bidders are simply
invitations to make proposals, and the advertiser is
not bound to accept the highest or lowest bidder,
unless the contrary appears. (n)
1. Absolute Acceptance of a Certain Offer (Art.
1475)
Article 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts. (1450a)
2. When Deviation Allowed
3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)
Article 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by
auction in lots, each lot is the subject of a
separate contract of sale.
(2) A sale by auction is perfected when the
auctioneer announces its perfection by the
fall of the hammer, or in other customary
manner. Until such announcement is made,
any bidder may retract his bid; and the
auctioneer may withdraw the goods from the
sale unless the auction has been announced
to be without reserve.
(3) A right to bid may be reserved expressly
by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(4) Where notice has not been given that a
sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for
the seller to bid himself or to employ or
induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or
induce any person to bid at such sale on
behalf of the seller or knowingly to take any
bid from the seller or any person employed
by him. Any sale contravening this rule may
be treated as fraudulent by the buyer. (n)
Article 1403. The following contracts are
unenforceable, unless they are ratified:
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(2) Those that do not comply with the Statute of

Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence
of its contents:

(d) An agreement for the sale of goods,

chattels or things in action, at a price not less
than five hundred pesos, unless the buyer
accept and receive part of such goods and
chattels, or the evidences, or some of them,
of such things in action or pay at the time
some part of the purchase money; but when
a sale is made by auction and entry is made
by the auctioneer in his sales book, at the
time of the sale, of the amount and kind of
property sold, terms of sale, price, names of
the purchasers and person on whose account
the sale is made, it is a sufficient
memorandum;

Article 1326. Advertisements for bidders are simply

invitations to make proposals, and the advertiser is
not bound to accept the highest or lowest bidder,
unless the contrary appears. (n)

4. Earnest Money (Art. 1482)

Article 1482. Whenever earnest money is given in a
contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
(1454a)

5. Differences Between Earnest Money

and Option Money.