SALES 8/2/2018 11:30:00 AM

Sales- a contract whereby one of the contracting parties (seller), obligates

himself to transfer the ownership of and to deliver a determinate thing, and
the other party (buyer), obligates himself to pay thereof a price certain in
money or its equivalent.

Elements of a Contract of Sale

1. Essential Elements
a. Consent of the contracting parties
b. Subject Matter w/c should be a determinate thing
c. Price certain in money or its equivalent
2. Natural Elements
a. Warranty against eviction
b. Warranty against hidden defects and encumbrances
3. Accidental Elements
a. Ex. Terms, place and time of payment & others

Characteristics of a Contract of Sale

1. Consensual- perfected by mere consent
2. Principal- exist by itself w/o being dependent upon another contract
3. Bilateral- bound by reciprocal obligations
4. Onerous- valuable considerations are given by both parties to acquire
rights
5. Commutative- parties exchange almost equivalent values
6. Nominate- has special name given to it by law

SALE vs. Dacion en pago

SALE
No pre-existing credit
Creates obligation
Cause or consideration
Seller’s POV- Price
Buyer’s POV- Delivery of the
object
Greater freedom in fixing the price
Dacion en pago
There is a pre-existing credit
Extinguishes obligation
Cause or consideration
Creditor’s POV- Delivery of the
object
Debtor’s POV- Extinguishment of
the Obligation
Less freedom in fixing the price (coz
 of pre-existing credit)

SALE vs Payment by cession (cession de bienes)

SALE
No pre-existing credit
Creates an Obligation
Cause or consideration
Seller’s POV- Price
Buyer’s POV- Delivery of the
object
Greater freedom in fixing the price
Ownership is transferred to the buyer
Payment by cession
There are pre-existing credits
Extinguishes an obligation
Cause or consideration
Creditor’s POV- Delivery of the
object
Debtor’s POV- Extinguishment of
the Obligation
Less freedom in fixing the price (coz
of pre-existing credit)
Creditors do not become the owners
of the properties assigned to them
(only a right to sell such properties &
apply the proceeds to their claims)

SALE vs. Contract for a piece of work

Sale- made in the ordinary course of business
Contract for a piece of work- specially made
SALE vs. Exchange (barter)
Sale- cause or consideration is money
Barter- cause or consideration is another thing
Note: if consideration is partly in money and partly in another
thing, the contract shall depends on:
1. Intention of the parties
2. If not clear:
a. Barter- value of the thing > value of money
b. Sale- Value of money ≥ value of the thing
SALE vs. Contract to sell

Sale Contract to sell

Title passes to buyer upon Title passes to buyer upon full
delivery payment of the purchase price
 Non-payment of price- negative
resolutory condition
Risk of loss is on buyer
SALE vs. agency to sell
Sale
Title of goods is transferred to
buyer upon delivery
Buyer is required to pay the
price
Full payment of the price-
positive suspensive condition
Risk of loss is on the seller
Title of goods is not transferred
to the agent upon delivery
Agent is required to turnover the
principal
OBJECT of the contract of sale 8/2/2018 11:30:00 AM

1. Requisites
a. Thing must be within the commerce of men
b. Thing must be licit (not contrary to law, morals, good customs,
public order or public policy)
c. Thing must be determinate
2. The vendor must have the right to transfer the ownership of the thing at
the time the ownership was delivered
 It is not necessary that the vendor must be the owner at the time
of sale
3. Things having a potential existence may be the object of a contract of
sale
Sale of an expected thing Sale of the hope itself (emptio
(emptio rei sperati) spei)
Sale of future thing Sale of present thing
Thing sold must come to Sale produces effects even if the
existence; otherwise, the sale thing hoped for does not come
will not be effective into existence.
Note: sale of vain hope or
expectancy is void

4. The goods may be

a. Existing goods owned or possessed by the seller
b. Goods to be manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, called future goods, or goods
whose acquisition by the seller depends upon contingency which
may or may not happen.
5. The sole owner of a thing may sell an undivided interest therein
6. Sale of fungible goods
 Refer to interchangeable goods such as grain, oil, etc., that allow
one to be replaced by another without loss of value
7. Things subject to a resolutory condition may be the object of a contract of
sale
 Ex. S sold his lot to B with S being the right to repurchase the lot
w/in 5 yrs. After 2 yrs, B sold his lot to X. X became the owner of
the lot subject to the right of repurchase
PRICE in a contract of sale 8/2/2018 11:30:00 AM

Price- the sum stipulated as the equivalent of the thing sold, and also every
incident taken into consideration for the fixing if the same, put to the debit
of the vendee, and agreed to buy him.
Rules
1. Certainty of price
 Price must be certain; otherwise, void. (rationale: no meeting of
minds)
 Fixing of the price can never be left to the discretion of one of the
contracting parties, however if it is accepted by the other party, the
sale is perfected.
 Certain with reference to another thing certain
 Determination of the price is left to the judgment of a specified
person or persons (third persons or court)
2. Gross inadequacy of price
 Does not affect the contract of sale
 May indicate a defect in the consent
3. Simulated price
 Sale is void
CONTRACT OF SALE 8/2/2018 11:30:00 AM

When a contract of sale perfected?

 At the moment there is a meeting of minds upon the thing which
is the object of the contract upon the price.
FORM of a contract of sale
1. Subject to provision of statute of frauds
2. Statute of frauds- must be in writing to be enforceable
 Sale of real property
 Sale of goods which is P500 or more
3. Sale of a piece of land through an agent- must be in writing; otherwise,
the sale is void.

Rules in case of sale by auction

1. Sale by auction in lots
 Each lot is the subject of a separate contract of sale
2. When sale by auction is perfected
a. Fall of the hammer
b. In any other manner
 Rights of parties before perfection
o Any bidder may retract his bid
o Auctioneer may withdraw
 Auction with reserve
 Auction without reserve
 Rights of parties after perfection
o Both parties (auctioneer, bidder) cannot retract their (offer,
bid) since there is already a perfected contract.
3. Rights of seller to bid
 By bidders or puffers

When ownership of the thing sold is transferred?

 Transferred upon the actual or constructive delivery thereof.

Promise to buy and/or sell

1. Bilateral Promise- reciprocally demandable/ as good as a perfected
contract of sale. (should also comply with statute of frauds)
2. Unilateral promise- made by only one party
 a. If not accepted by the promissee (policitaction)- does not produce
any legal effect
b. If accepted by the promissee
o Supported by a consideration (price)- binding upon the
promissor
o Not supported- not binding

Earnest Money vs. Option Money

Earnest Money (arras) Option Money
Part of the purchase price Not part of the purchase price
Paid upon the perfection of a Paid for a sale that is yet to be
contract of sale perfected

Rules on preservation of, injury to or benefit from the thing sold before or
after perfection.
1. Duty of seller to preserve the thing after perfection but before
delivery
o The seller is obliged to take care of the thing with the
diligence of a good father of a family unless the law or the
stipulation of the parties requires another standard of care
2. Rights of the buyer to the fruits
o The buyer has rights to the fruits of the thing from the time of
the perfection of the contract ( no real right if the fruits is not
yet delivered to him)
3. Loss of or injury to the thing
o Loss before perfection (including quality deterioration)
 Complete loss- sale is void
 Partial loss
 Withdrawal from the contract (rescission)
 Demanding the remaining part & paying its
proportionate price
o Loss after perfection
  First view- buyer bears the risk of loss ( he must pay
the price)
 Rationale: after perfection but before delivery;
because any benefit inures to the buyer from that
point forward.
 Second View- seller bears the risk of loss ( buyer is not
obliged to pay the price)
 Rationale: after perfection, the goods remain at
the seller’s risk until the ownership of the goods is
transferred to the buyer by actual or constructive
delivery.
 Res perit domino – loss of the property falls upon
the owner

Sale by sample; description; and sample and description

 Sale by sample
o Parties contract solely with reference to the sample.
 Sale by description
o Parties contract solely to the description
 Sale by sample & descriptio

Rescission by buyer
 If the goods delivered do not correspond with the sample,
description, or sample and description, the buyer may ask for the
rescission of the sale

Remedies of vendor in installment sales of personal property (Recto

Law), and contracts purporting to be lease of personal property with
option to buy, when the lessor has deprived the lessee of the possession or
enjoyment of the thing
 Exact fulfillment of the obligation, should the vendee fail to pay
 Vendee’s failure to pay covers two or more installments, he
may, at his option, avail himself of the first remedy, or do either of
the following
o Cancel the sale or
 o Foreclose the chattel mortgage on the thing sold, if one has
been constituted

Sale of real property in installments (MACEDA LAW) [REALTY INSTALLMENT

BUYER ACT] – objectives: to protect buyers of real estate on installment
payments against onerous and oppressive conditions.
 Coverage:
o Residential condominium apartments
 XPN’s
o Industrial lots, commercial bldgs., & sales to tenants under
Land reform law (RA no. 3844) where the buyer has paid at
least 2 yrs of installments
 Rights of the buyer
o Grace period to pay installment in case of default
 At least 2 yrs had been paid @ the time of default
 To pay w/o additional interest, can only be
exercised at least once every 5 yrs
 If contract is cancelled- entitled to refund of the
CSV equivalent to 50% of total payments made &
 After 5 yrs of installments, additional 5% every
year but not exceeding 90%
 When cancellation shall take place?
 After 30 days from the receipt of the buyer
of the notice of cancellation & upon
fulfillment of the CSV to the buyer
 If less than 2 yrs of installments had been paid at the
time of default
 Buyer shall be given a grace period of not less
than 60 days from the date the installment
became due
 When cancellation shall take place?
 If the buyer fails to pay installment due
upon the expiration of the grace period, the
seller may cancel the sale after 30 days.
o Additional rights
 Rights during grace period
  To sell his right to another by notarial act
 To assign his rights to another, by notarial act
 To reinstate the contract by updating the account
 To pay in advance any installment or the full unpaid
balance any time w/o interest
 To ask for the annotation of the full payment of the
purchase price in the certificate of title covering the
property

Installment sale of subdivision lots and condominiums

Capacity to buy or sell

 Who may enter into a contract of sale?
o All those who may oblige themselves may enter into a
contract of sale
 Kinds of incapacity in a contract of sale
o Absolute incapacity
 Applies to persons who cannot bind themselves and
includes minors, insane or demented persons, and deaf-
mutes who do not know how to write. (VOIDABLE)
o Relative incapacity
 Applies to persons, who cannot purchase certain
property
 Husband & wife cannot sell property to each other
(VOID), except:
 There is a full separation of property
 There has been a judicial separation of property
 Persons prohibited from acquiring by purchase
1. Guardian
 The property under his guardianship
2. Agents
 The property that are entrusted to them,
except the principal gives his consent
3. Executors and administrators
  The property of the estate under his
administration
4. Public offices & employees
 The property of the estate
5. Justices, judges prosecuting attorneys & others
 The property and rights in litigation or
levied upon execution before the court
exercises its function
 1-3 VOIDABLE- since private interests are
involved
 4-5 VOID- since public interests are involved
OBLIGATIONS OF THE VENDOR 8/2/2018 11:30:00 AM

1. To transfer the ownership of the thing sold

2. To deliver the thing sold
3. To warrant the thing sold
4. To take care of thing sold with the diligence of a god father of a family

Delivery or tradition
Kinds
1. Actual or real delivery
2. Constructive delivery
a. By legal formalities
b. Symbolic delivery (traditio simbolica)
c. Traditio longa manu
d. Traditio brevi manu
e. Traditio constitutum possessorium
3. Delivery of incorporeal property (quasi-traditio)

Sale or return and sale on approval

 Sale or return- ownership is transferred upon delivery, but the
buyer has the option to return the goods within the time fixed in
the contract, or w/in a reasonable time.
 Sale on approval or on trial or on satisfaction- ownership of the
goods remains with the seller despite delivery, but shall be
transferred to the buyer in the ff. cases:
o When he accepts
o When he does an act adopting the transaction
o When he does not signify his approval or acceptance of the
goods but retains the goods w/o giving notice of rejection
w/in the time fixed in the contract, & such time has expired
Sale or return Sale on approval
Ownership passes upon delivery Ownership does not passes upon
delivery
Risk of loss is on the buyer Risk of loss is on the seller
The buyer may return the goods Buyer has no right to return the
even if he is satisfied with the goods if he is satisfied of its
 goods quality

Transfer of ownership by delivery or specific goods to carrier or other bailee

Gen. Rule: Delivery of specific goods to a carrier or other bailee for
the purpose or transmission to the buyer, transfers ownership to
the buyer
XPN’s:
o Where there is stipulation
o When by the terms of the bill of lading, the goods are to be
delivered to the seller or his agent or to the order of the seller
or his agent
o When by the terms of the bill of lading, the goods are to be
delivered to the buyer, but the bull of lading is retained by
the seller or his agent
o Buyer dishonors such bill of exchange
Sale by a person who is not the owner of the thing sold
Gen rule: the buyer acquires no better title than the seller had,
except in the following cases:
1. When the sale is made under authority or with the consent of the
owner
2. When the owner is precluded by his conduct from denying the
seller’s authority to sell
3. When the sale is made under the provisions of any factor’s acts.
Laws. Etc…
4. When the sale is made under a statutory power of sale or under the
order of court of competent jurisdiction
5. When the purchase is made in a merchant’s store, or in fairs, or
markets.

When the seller’s title to the goods is voidable

 The buyer acquires good title to the goods, provided he buys them
in good faith, for value, & without notice of the seller’s defect of
title.
Document of title 8/2/2018 11:30:00 AM

Common forms of documents of title

1. Bill of lading
 Written acknowledgement of the receipt of the goods by a carrier,
and an agreement to transport and to deliver the goods at a
specified place to a person named therein, or to his order or to
bearer.
2. Dock warrant
 a warrant given by a dock owner to the owner of the goods
imported and warehoused on the dock upon the faith of the bulling,
as a recognition of the title to the goods of the owner
3. Warehouse receipt or order (quedan)
a. Written acknowledgement of a warehousemen of the receipt of the
goods w/c are in placed in his possession
Classes of documents of title
1. Negotiable documents of title- delivered to bearer, or order of any person
named in such document
2. Non-negotiable documents of title
How negotiable document of title negotiated
1. By delivery
a. Deliverable to bearer
b. Deliverable to the order of
2. By indorsement plus delivery

Who may negotiate negotiable document of title

1. By the owner thereof
2. By the person to whom the possession or custody of the document has
been entrusted by the owner in the ff: cases.
Unpaid Seller 8/2/2018 11:30:00 AM

Unpaid seller

Rights of unpaid seller

Effect of possessory lien or right of stoppage in transit if buyer has sold or

disposed of the goods

Sale of real estate with a statement of its area at the rate of a certain price
per unit of measure or number

Sale of real estate for a lump sum and not at the rate of a certain sum for a
unit of measure or number

Rules of preference in case of double sale

CONDITIONS AND WARRANTIES 8/2/2018 11:30:00 AM

Conditions in a contract of sale

Kinds of warranties

Warranty in case of eviction

Vendor’s liability in case of eviction

Kinds of waiver of eviction

Warranty against hidden defects of or encumbrance upon the thing sold

Redhibition

Distinguish warranty of merchantability and warranty of fitness

Responsibility for hidden defects

OBLIGATIONS OF THE VENDEE 8/2/2018 11:30:00 AM
EXTINGUISHMENT OF SALE 8/2/2018 11:30:00 AM
8/2/2018 11:30:00 AM