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SALES
(Articles 1458–1637)
Governing Law.
The New Civil Code of the Philippines
governs the law on Sales.
Sources of our law on Sales:
(1) Admixture of civil law and common law
principles; and
(2) Uniform Sales Law of the American
Union.
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
therefore a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
“Contract of sale”–An agreement whereby
seller or vendor obligates himself to deliver
something and transfer ownership to the
vendee or buyer in consideration of price
certain in money or its equivalent.
Characteristics of a contract of sale:
(a) Consensual – Perfected by mere consent
without any further act;
(b) Bilateral – Because both the contracting
parties are bound to fulfil correlative
obligations towards each other—the
seller, to deliver and transfer
ownership of the thing sold and the
buyer, to pay the price;
(c) Onerous – Because the thing sold is
conveyed in consideration of the price
and vice versa;
(d) Commutative – Because the thing sold is
considered the equivalent of the price
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paid and vice versa. However, the
contract may be aleatory as in the case
of the sale of a hope;
(e) Nominate – Because it is given a special
name or designation in the Civil Code,
namely, “sale”; and
(f) Principal –Because it does not depend
for its existence and validity upon
another contract.
Essential requisites of a contract of sale:
(i) Consent or meeting of the minds –
This refers to the consent on the
part of the seller to transfer and
deliver and on the part of the buyer
to pay. The essence of consent is the
conformity of the parties on the
terms of the contract, the
acceptance by one of the offer made
by the other.
(ii) Object or subject matter –
The object must be a determinate
thing or capable of being made
determinate because if the seller
and the buyer differ in regard to the
thing sold, there is no meeting of
the minds; therefore, there is no
sale. The subject matter may be
personal or real property.
(iii) Cause or consideration –
This refers to the “price certain in
money or its equivalent” (Art.
1458.) such as a check or a
promissory note, which is the
consideration for the thing sold.
Notes: There is sale even against the will of the
owner in case of expropriation and three
different kinds of sale, namely: (a) Ordinary
execution of sale; (b) Judicial foreclosure sale;
and (c) extra–judicial foreclosure sale.
The sale of conjugal property requires the
consent of both the husband and the wife. The
absence of the consent of one renders the sale
Law on Sale 1
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null and void while the vitiation thereof makes
it merely voidable.
A buyer can only claim right of ownership over
the object of the deed of sale and nothing else.
Where the parcel of land described in the
transfer certificate of title is not in its entirety
the parcel sold, the court may decree that the
certificate of title be cancelled and a correct one
be issued in favor of the buyer, without having
to require the seller to execute in favor of the
buyer an instrument to effect the sale and
transfer of the property to the true owner.
(Veterans Federation of the Philippines vs.
Court of Appeals, 138 SCAD 50, 345 SCRA 348
[2000].)
It does not include goods or merchandise
although they have their own value in money.
However, the words “its equivalent” have been
interpreted to mean that payment need not be
in money, so that there can be a sale where the
thing given as token of payment has “been
assessed and evaluated and its price equivalent
in terms of money [has] been determined.”
(Republic vs. Phil. Resources Dev. Corp., 102
Phil. 968 [1958].)
The price must be real, not fictitious; otherwise,
the sale is void although the transaction may be
shown to have been in reality a donation or
some other contract.
A seller cannot render invalid a perfected
contract of sale by merely contradicting the
buyer’s allegation regarding the price and
subsequently raising the lack of agreement as to
the price. (David vs. Tiongson, 111 SCAD 242,
313 SCRA 63 [1999].)
Stages of Contract of Sale:
(1) Negotiation – Consideration is agreed
upon;
(2) Perfection – Meeting of the minds of the
parties;
Xhavier D. Bataan Law on Sale
(3) Consummation – Performance of their
respective undertakings which will
result to extinguishment of the contract.
Natural & accidental elements:
(a) Natural elements – Those which are
deemed to exist in certain contracts, in
the absence of any contrary
stipulations, like warranty against
eviction (Art. 1548.) or hidden defects
(Art. 1561.); and
(b) Accidental elements – Those which may
be present or absent depending on the
stipulations of the parties, like
conditions, interest, penalty, time or
place of payment, etc.
What is the effect of absence of price? The
contract of sale is void and produces no effect.
The elements of a valid contract of sale are
consent, object and consideration. Further, the
cause in sale is, as to the seller, the buyer’s
promise to pay the price, and as to the buyer,
the seller’s promise to deliver the thing sold.
Hence, the effect of absence of price renders the
contracts of sale void and produces no effect for
there is absence of cause or consideration.
What is the effect of absence of non–
payment of price? The contract of sale is still
valid. The elements of sale are consent, object
and cause. The contract of sale is a consensual
contract which is perfected by mere agreement
of the parties. Here, absence of payment of the
price does not negate the existence of the
presence of the given price. Thus, the contract is
valid since absence of payment of price does not
negate the existence of the presence of the
given price.
What are the remedies available for the
non–payment of price? Rescission or specific
performance. Under Article 1191 of the Civil
Code, the power to rescind obligations is
implied in reciprocal ones, in case one of the
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obligors should not comply with what is
incumbent upon him. Here, there was the
absence of the payment of price. Therefore,
rescission or specific performance is the
remedy available for non–payment of price as
per Article 1191 of the CC.
Transfer of title to property for a price,
essence of sale.
The delivery of the thing bought or the
payment of the price is not necessary for the
perfection of the contract of sale for it being
consensual, it is perfected by mere consent. It is
only upon the existence of the contract of sale
that the seller is obligated to transfer
ownership to the buyer and the buyer, to pay
the purchase price to the seller. In defining the
contract of sale, Article 1458 merely specifies
the obligations of the parties to transfer
ownership and to pay under the contract. The
parties will have these obligations even without
Article 1458.
Note: Where the seller can no longer deliver the
object of the sale to the buyer because the latter
has already acquired title and delivery thereof
from the rightful owner, such contract may be
deemed to be inoperative and may thus fall, by
analogy, under Article 1409(5) of the Civil Code:
"those which contemplate an impossible
service," since delivery of ownership is no
longer possible. (Nool vs. Court of Appeals, 84
SCAD 941, 276 SCRA 149 [1997]; Heirs of San
Miguel vs. Court of Appeals, 364 SCRA 523
[2001].)
Kinds of contract of sale:
(i) Absolute sale – Sale is not subject to
any condition whatsoever and
where title passes to the buyer
upon delivery of the thing sold.;
Note: Payment of the purchase price is not
essential to the transfer of ownership as long as
Xhavier D. Bataan Law on Sale
the property sold has been delivered. Such
delivery operates to divest the vendor of title to
the property which may not be regained or
recovered until and unless the contract is
resolved or rescinded in accordance with law
(Philippine National Bank vs. Court of Appeals,
82 SCAD 472, 272 SCRA 291 [1997].)
A “Deed of Conditional Sale” in the absence of
any stipulation that the title to the property
sold is reserved in the vendor until full payment
of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay
within a fixed period. (Dignos vs. Court of
Appeals, 158 SCRA 375 [1988
(ii) Conditional sale – Sale contemplates
a contingency, and in general,
where the contract is subject to
certain conditions, usually, in the
case of the vendee, the full payment
of the agreed purchase price and in
the case of the vendor, the
fulfillment of certain warranties;
Note: In sales with assumption of mortgage, the
assumption of mortgage is a condition to the
seller-mortgagor’s consent to the sale so that
without approval by the mortgagee no sale is
perfected and the seller remains the owner and
mortgagor of the subject property with the right
to redeem in the case of foreclosure. (Ramos vs.
Court of Appeals, 87 SCAD 24, 279 SCRA 118
[1997].)
A sale denominated as a “Deed of Conditional
Sale’’ is still absolute where the contract is
devoid of any proviso that title is reserved or
the right to unilaterally rescind is stipulated,
e.g., until or unless the price is paid. (Heirs of
Juan San Andres vs. Rodriguez, 332 SCRA 769
[2000].)
The delivery of the thing sold does not transfer
title until the condition is fulfilled. Where the
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condition is imposed, instead, upon the Contract of Contract to

perfection of the contract the failure of such Sale Sell
condition would prevent such perfection or the Title passes to Where it is Transfer of
juridical relation itself from coming into the buyer stipulated title
existence (Galang vs. CA, 43 SCAD 737, 225 upon delivery that
SCRA 37 [1993]) of the thing ownership in
sold. the thing shall
The mere fact that the obligation of the buyer to not pass to
pay the balance of the purchase price was made the purchaser
subject to the condition that the seller first until he has
deliver the reconstituted title of the house and fully paid the
lot sold does not make the contract a contract to price,
sell for such condition is not inconsistent with a ownership is
contract of sale. (Laforteza vs. Machuca, 127 reserved in
SCAD 798, 333 SCRA 643 [2000].) the seller and
If the condition is imposed on an obligation of a is not to pass
party not upon the perfection of the contract until the full
itself, which is not complied with, the other payment of
party may either refuse to proceed or waive the purchase
said condition. (see Art. 1545; Romero vs. Court price.
of Appeals, 65 SCAD 621, 250 SCRA 223 Non-payment Full payment Payment of
[1995].) of the price is is a positive price
a negative suspensive
The stipulation that the “payment of the full resolutory condition, the
consideration [of a parcel of land] shall be due condition, and failure of
and payable in five (5) years from the execution the remedy of which is not a
of a formal deed of sale’’ is not a condition the seller is to breach, casual
which affects the efficacy of the contract of sale. exact or serious, of
It merely provides the manner by which the full fulfillment or the contract
consideration is to be computed and the time to rescind the but simply an
within which the same is to be paid. (Heirs of contract event that
Juan San Andres vs. Rodriguez, supra.) prevents the
obligation of
(iii) Other kinds – There are, of course, the vendor to
other kinds of sale depending on convey title
one’s point of view, e.g., as to the from
nature of the subject matter (real or acquiring
personal, tangible or intangible), as binding force.
to manner of payment of the price The vendor The title Ownership of
(cash or installment), as to its has lost and remains in vendor
validity (valid, rescissible, cannot the vendor if
unenforceable, void), etc. recover the the vendee
ownership of does not
Contract of sale versus contract to sell with
the thing sold comply with
reserved title.

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and delivered, the condition transfer ownership.

actually or precedent of
constructively, making
until and payment at Contract to sell – A bilateral contract whereby
unless the the time the prospective seller, while expressly reserving
contract of specified in the ownership of the subject property despite
sale itself is the contract. delivery thereof to the prospective buyer, binds
resolved and himself to sell the said property exclusively to
set aside the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of
the purchase price.
Note: If the vendor should eject the vendee for
failure to meet the condition precedent he is With regard to the transfer of title to
enforcing the contract and not rescinding it. the buyer, in contract to sell, upon the
Article 1191 is not applicable. fulfillment of the suspensive condition which is
the full payment of the purchase price,
A contract to sell is commonly entered into so ownership will not automatically transfer to the
as to protect the seller against a buyer who buyer although the property may have been
intends to buy a property in installments by previously delivered to him. The prospective
withholding ownership over the property until seller still has to convey title to the prospective
the buyer effects full payment therefore. (City of buyer by entering into a contract of absolute
Cebu vs. Heirs of C. Rubi, 106 SCAD 61, 306 sale to consummate the transaction.
SCRA 408 [1999].)
In conditional sale, the first element of
A stipulation in a contract providing for consent is present, although it is conditioned
automatic rescission upon non-payment of the upon the happening of a contingent event which
purchase price within the stipulated period is may or may not occur. If the suspensive
valid. (see Art. 1191.) It is in the nature of an condition is not fulfilled, the perfection of the
agreement granting a party the right to rescind contract of sale is completely abated. However,
a contract unilaterally in case of breach without if the suspensive condition is fulfilled, the
need of going to court. (Pangilinan vs. CA, 87 contract of sale is thereby perfected, such that if
SCAD 408, 279 SCRA 590 [1997].) there had already been previous delivery of the
property subject of the sale to the buyer,
Contract to Sell versus Condition Sale. ownership thereto automatically transfers to
the buyer by operation of law without any
Contract to Sell Conditional Sale
further act having to be performed by the seller.
Upon the fulfillment of Fulfillment of a
the suspensive conditional sale’s With regard to sale of subject
condition, gives rise to suspensive condition property to a 3rd person, in a contract to sell,
another contract perfects the sale; there there being no previous sale of the property, a
conveying ownership is nothing left to be third person buying such property despite the
of the thing; there are done. A conditional fulfillment of the suspensive condition such as
further actions needed sale transfers the full payment of the purchase price, for
to be performed. A ownership. instance, cannot be deemed a buyer in bad faith
contract to sell does and the prospective buyer cannot seek the relief
not automatically of reconveyance of the property. There is no

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double sale in such case. Title to the property
will transfer to the buyer after registration
because there is no defect in the owner-seller’s
title per se, but the latter, of course, may be
sued for damages by the intending buyer.
In a conditional contract of sale,
however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this
will definitely affect the seller’s title thereto. In
fact, if there had been previous delivery of the
subject property, the seller’s ownership or title
to the property is automatically transferred to
the buyer, such that the seller will no longer
have any title to transfer to any third person.
Applying Article 1544 of the Civil Code, such
second buyer of the property who may have
had actual or constructive knowledge of such
defect in the seller’s title, or at least was
charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such
second buyer cannot defeat the first buyer’s
title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the
property subject of the sale.
Other cases of contract to sell:
(i) Where the subject matter is not
determinate or the price is not
certain;
Note: For purposes of the perfection of a
contract of sale, there is already a price certain
where the determination of the price is left to
the judgment of a specified person or persons,
and notwithstanding that such determination
has yet to be made.
(ii) A sale of future goods even though
the contract is in the form of a
present sale operates as a contract
to sell the goods;
(iii) Where the stipulation of the parties
is that the deed of sale and
corresponding certificate of sale
Xhavier D. Bataan Law on Sale
would be issued only after full
payment of the purchase price, the
contract entered into is a contract
to sell and not a contract of sale.
(David vs. Tiongson, [1999].)
Note: The act of the vendor of delivering the
possession of the property (land) to the vendee
contemporaneous with the contract (deed of
sale in a private instrument) was an indication
that an absolute contract of sale was intended
by the parties and not a contract to sell. (Dignos
vs. CA, [1988].)
Article 1459. The thing must be licit and the
vendor must have a right to transfer the
ownership thereof at the time it is delivered.
In its simple sense, if the thing is illicit
and the vendor does not have the right to
transfer ownership at the time it was delivered,
the contract of sale is void and thus, cannot be
subject to ratification.
What can be the objects of a sale?
a. Real;
b. Licit;
c. Determinable;
d. Within the commerce of men;
e. Rights which are transmissible.
Requisites concerning objects:
(i) Things – the thing must be
determinate, lawful and not
impossible or within the commerce
of men.
(ii) Rights – All rights which are not
intransmissible or personal may
also be the object of sale, such as
usufruct, right of conventional
redemption, and credit.
Kinds of illicit things:
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(i) Illicit per se or of its nature such as
decayed food unfit for
consumption;
(ii) Illicit per accidens or because of
some provisions of the law declaring
it illegal.
Note: The mortgagor (or pledgor) continues to
be the owner of the property mortgaged, and,
therefore, has the power to alienate the same;
however, he is obliged, under pain of penal
liability, to secure the consent of the mortgagee.
(Service Specialist, Inc. vs. Intermediate
Appellate Court, 174 SCRA 80 [1989].)
Right to transfer ownership:
(a) Seller must be the owner or authorized
by the owner of the thing sold – This is
anchored with the principle of law that
one cannot transmit or dispose of that
which he does not have — nemo dat
quod non-habet. Accordingly, one can
sell only what one owns or is
authorized to sell, and the buyer can
acquire no more than what the seller
can transfer legally.
(b) Rights must exist at the time of delivery –
Article 1459 of the CC does not require
that the seller must have the right to
transfer ownership of the property sold
at the time of the perfection of the
contract since perfection per se does
not transfer ownership which occurs
upon the actual or constructive delivery
of the thing sold.
(c) Where property sold registered in the
name of the seller who employed fraud in
securing his title – Generally, a forged or
fraudulent deed is a nullity and conveys
no title. By way of exception, where the
certificate of title was already
transferred from the name of the true
owner to the forger and was
subsequently old to an innocent
Xhavier D. Bataan Law on Sale
purchaser for value and where there is
nothing in the certificate to indicate any
cloud or vice in the ownership of the
property, or any encumbrance thereon,
or in the absence of any fact or
circumstance to excite suspicion, the
purchaser is not required to explore
further than what the Torrens title
upon its face indicates in quest for any
hidden defect or inchoate right that
may subsequently defeat his right
thereto, such that the title is valid.
Note: The established rule is that the rights of
an innocent purchaser for value must be
respected and protected, notwithstanding the
fraud employed by the seller in securing his
title. The proper recourse of the true owner of
the property who was prejudiced and
fraudulently dispossessed of the same is to
bring an action for damages against those who
caused or employed the fraud, and if the latter
are insolvent, an action against the Treasurer of
the Philippines may be filed for recovery of
damages against the Assurance Fund.
(d) Where the property sold in violation of a
right of first refusal of another person –
The prevailing doctrine is that a
contract of sale entered into in violation
of a right of first refusal of another
person, while valid is rescissible. In
contracts of sale, the basis of the right of
first refusal must be the current offer of
the seller to sell or the offer to purchase
of the prospective buyer. Only after the
grantee fails to exercise his right under
the same terms and within the period
contemplated can the owner validly
offer to sell the property to a third
person, again, under the same terms as
offered to the grantee.
(e) Where real property, subject of
unrecorded sale, subsequently
mortgaged by seller which mortgage was
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registered – The mortgagee’s registered
mortgage right over the property is
inferior to that of the buyer’s
unregistered right and the unrecorded
sale between the buyer and the seller is
preferred for the reason that if the
seller the original owner, had parted
with his ownership of the thing sold
then, he no longer had ownership and
free disposal of that thing so as to be
able to mortgage it again. Further,
registration of the mortgage is of no
moment since it is understood to be
without prejudice to the better right of
third parties.
Article 1460. A thing is determinate when it
is particularly designated or physical
segregated from all others of the same class.
The requisite that a thing 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
or further agreement between the parties.
In simple sense, if the contract is not
determinate or not capable of being made
determinate without further new agreement,
the contract is void for such contract of sale
cannot be ratified by the parties.
Determinate Thing – A thing is determinate or
specific (not generic) when it is particularly
designated or physically segregated from all
others of the same class. This is anchored with
the general rule that the object of every contract
must be determinate as to its kind, which must
also be identified by its individuality.
Prestation is capable of being made
determinate – The subject matter of the
contract of sale need not be in sight at the time
the contract is entered into but it is sufficient
that the thing is determinable or capable of
Xhavier D. Bataan Law on Sale
being made determinate without the necessity
of a new or further agreement between the
parties.
Rules and Doctrines: A person may validly sell
all the cavans of rice in a particular bodega or a
parcel of land located at a particular street but if
the bodega is not specified and the seller has
more than one bodega or owns more than one
parcel of land at the particular street, and it
cannot be known what may have been sold, the
contract shall be null and void.
Where the respondent purchased a portion of a
lot containing 345 square meters, which portion
is located in the middle of another lot with a
total area 854 square meters, and referred to in
the receipt as the “previously paid lot”, the
subject lot is capable of being determined
without the need of any new contract since the
lot subsequently sold to respondent is said to
adjoin the ‘previously paid lot’ on three sides
thereof. The fact that the exact area of these
adjoining residential lots is subject to the result
of a survey does not detract from the fact that
they are determinateor determinable.’’ (Heirs of
Juino San Andres vs. Rodriguez, 337 SCRA 769
[2000].)
Article 1461. Things having a potential
existence may be the object of the contract
of sale.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the
condition that the thing will come into
existence.
The sale of a vain hope or expectancy is void.
Sale of things have a potential existence –
Even a future thing not existing at the time the
contract is entered into may be the object of
sale provided it has a potential or possible
existence, that is, it is reasonably certain to
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come into existence as the natural increment or existence, whatever its

usual incident of something in existence already quantity or quality
belonging to the seller, and the title will vest in The sale is subject to The second produces
the buyer the moment the thing comes into the condition that the effect even though the
existence. The thing sold, however, must be thing should exist, so thing does not come
specific and identified. They must be also that if it does not, into existence because
owned by the vendor at the time. there will be no the object of the
contract by reason of contract is the hope
Sale of mere hope or expectancy –It is a valid the absence of an itself, unless it is a
contract. It refers to an “expected thing” which essential element vain hope or
is not yet in existence and not to the hope or expectancy.
expectancy which already exists, in view of the
The contract deals The contract relates to
condition that the thing will come into
with a future thing a thing which exists or
existence. It is where the object of the sale is the
is present–the hope or
expectancy of a future event, albeit uncertain.
expectancy.
But the sale of a mere hope or expectancy is
valid even if the thing hoped or expected does
not come into existence. An example of this is Presumption in case of doubt.
the sale of a lottery ticket.
The presumption is in favour of emptio
Sale of vain hope – Such sale is void ab initio. It rei speratae which is more in keeping with the
is when what is being sold is certain to not commutative character of the contract.
occur. For example, a fake lottery ticket.
Article 1462. The goods which form the
Sale of Thing Sale of subject of a contract of sale may be either
Expected Hope existing goods, owned or possessed by the
Emptio rei speratae Emptio spei seller, or goods to be manufactured, raised,
The sale of a thing not The sale of the hope or acquired by the seller after the perfection
yet in existence itself that the thing of the contract of sale, in this Title called
subject to the will come into "future goods."
condition that the existence, where it is
thing will exist and on agreed that the buyer There may be a contract of sale of goods,
failure of the will pay the price even whose acquisition by the seller depends
condition, the contract if the thing does not upon a contingency which may or may not
becomes ineffective eventually exist. happen.
and hence, the buyer
has no obligation to
pay the price Goods which maybe the object of sale:
The future thing is It is not certain that
(i) Existing goods or goods owned or
certain as to itself but the thing itself
possessed by the seller; or
uncertain as to its (winning a prize) will
(ii) Future goods or goods to be
quantity and quality. exist, much less its
manufactured, raised or acquired;
Such sale is subject to quantity and quality.
the condition that the The rules on future goods as object of sale:
thing will come into

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(a) A sale of future goods, even though the
contract is in the form of a present sale,
is valid only as an executory contract to
be fulfilled by the acquisition and
delivery of the goods specified.
(b) “Property or goods which at the time of
the sale are not owned by the seller but
which thereafter are to be acquired by
him, cannot be the subject of an
executed sale but may be the subject of
a contract for the future sale and
delivery thereof,” even though the
acquisition of the goods depends upon a
contingency which may or may not
happen. In such case, the vendor
assumes the risk of acquiring the title
and making the conveyance, or
responding in damages for the vendee’s
loss of his bargain. (Martin vs. Reyes, 91
Phil. 666 [1952])
(c) Paragraph 1 of Article 1462 does not
apply if the goods are to be
manufactured especially for the buyer
and not readily saleable to others in the
manufacturer’s regular course of
business. The contract, in such case,
must be considered as one for a piece of
work.
(d) Article 1462 contemplates a contract of
sale of specific goods where one of the
contracting parties binds himself to
transfer the ownership of and deliver a
determinate thing and the other to pay
therefore a price certain in money or its
equivalent. The said article requires
that there be delivery of goods, actual
or constructive, to be applicable. It does
not apply to a transaction where there
was no such delivery; neither was there
any intention to deliver a determinate
thing. Thus, a “futures” contract where
the parties merely speculate on the rise
and fall on the price of the goods
subject matter of the transaction is a
Xhavier D. Bataan Law on Sale
form of gambling was declared null and
void by Article 2018 of the Civil Code.
ART. 1463. The sole owner of a thing may
sell an undivided interest therein.
Article 1463 covers only the sale by a
sole owner of a thing of an undivided share or
interest thereof.
What may a sole owner sell?
(a) The entire thing; or
(b) Only a specific portion thereof; or
(c) An undivided interest therein and such
interest may be designated as an
aliquot part of the whole.
Note: The legal effect of the sale of an undivided
interest in a thing is to make the buyer a co-
owner in the thing sold. As co-owner, the buyer
acquires full ownership of his part and he may,
therefore, sell it. Such sale is, of course, limited
to the portion which may be allotted to him in
the division of the thing upon the termination of
the co-ownership. This rule operates similarly
with respect to ownership of fungible goods.
Article 1464. In the case of fungible goods,
there may be a sale of an undivided share of
a specific mass, though the seller purports to
sell and the buyer to buy a definite number,
weight or measure of the goods in the mass,
and though the number, weight or measure
of the goods in the mass, and though the
number, weight or measure of the goods in
the mass is undetermined. By such a sale the
buyer becomes owner in common of such a
share of the mass as the number, weight or
measure bought bears to the number,
weight or measure of the mass. If the mass
contains less than the number, weight or
measure bought, the buyer becomes the
owner of the whole mass and the seller is
bound to make good the deficiency from
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goods of the same kind and quality, unless a
contrary intent appears.
Fungible Goods – 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. Further, the old Civil Code
defined it as those which cannot be used
without being consumed.
Effect of Sale.
The buyer becomes a co-owner with the
seller of the whole mass in the proportion in
which the definite share bought bears to the
mass since the owner of a mass of goods may
sell only an undivided share thereof, provided
the mass is specific or capable of being made
determinate. Further, it must follow that the
aliquot share of each owner can be determined
only by the measurement of the entire mass. If
later on it be discovered that the mass of
fungible goods contains less than what was
sold, the buyer becomes the owner of the whole
mass and furthermore, the seller shall supply
whatever is lacking from goods of the same kind
and quality, subject to any stipulation to the
contrary.
Risk of loss.
If the buyer becomes a co–owner, with
the seller, or other owners of the remainder of
the mass, it follows that the whole mass is at the
risk of all the parties interested in it, in
proportion to their various holdings.
Subject matter.
The subject matter is an incorporeal
right in a sale of an undivided share, either of a
thing or that of mass of goods.
Applicability of Article 1464 to non–fungible
goods.
Xhavier D. Bataan Law on Sale
Although Article 1464 speaks of
“fungible goods,” nevertheless it may also apply
to goods not strictly fungible in nature. “Indeed,
the earliest case in which the doctrine was
applied related to barrels of flour. Though flour
of the same grade is fungible in the strictest
sense, barrels of flour are necessarily so. Other
cases also have applied the doctrine to goods in
barrels. So it has been applied to bales of cotton
and even to cattle or sheep. It is obvious that all
cattle are not alike and that some cattle in a
herd are more valuable than the others. But in
the cases under consideration, the parties had
virtually agreed to act on the assumption that
all were alike and it can be seen that this is
really the essential thing.”
Article 1465. Things subject to a resolutory
condition may be the object of the contract
of sale.
Resolutory condition – An uncertain event
upon the happening of which the obligation (or
right) subject to it is extinguished.
Suspensive condition – The happening of the
condition, which is uncertain, shall give rise to
the obligation.
Note: 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.
Article 1466. In construing a contract
containing provisions characteristic of both
the contract of sale and of the contract of
agency to sell, the essential clauses of the
whole instrument shall be considered.
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A contract is what the law defines it to
be, and not what it is called by the contracting
parties. (Quiroga vs. Parson Hardware Co., 38
Phil. 501 [1918])
Contract of agency – A person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter. (Art. 1868.)
Difference between “Contract of Sale” and
“Contract of Agency to Sell”
Sale Agency to Sell
The buyer receives the The agent receives the
goods as the owner. goods as the goods of
the principal who
retains his ownership
over them and has the
right to fix the price
and the terms of the
sale and receive the
proceeds less the
agent’s commission
upon the sales made.
The buyer has to pay The agent has simply
the price. to account for the
proceeds of the sale he
may make on the
principal’s behalf
Generally, the buyer The agent can return
cannot return the the object in case he is
object sold. unable to sell the same
to a third person.
The seller warrants The agent makes no
the thing sold. warranty for which he
assumes personal
liability as long as he
acts within his
authority and in the
name of the seller.
The buyer can deal The agent in dealing
with the thing sold as with the thing
he pleases being the received must act and
owner. is bound according to
Xhavier D. Bataan Law on Sale
the instructions of his
principal.
The transfer of title or The essence of an
agreement to transfer agency to sell is the
it for a price paid or delivery to an agent,
promised is the not as his property,
essence of sale. If such but as the property of
transfer puts the his principal, who
transferee in the remains the owner
position of an owner and has the right to
and makes him liable control sales, fix the
for the agreed price, price and terms,
the transaction is a demand and receive
sale. the proceeds less the
agent’s commission
upon sales made.
Question: Can a contract create both sale and
agency relationship?
Answer: Yes, a contract can create both sale
and agency relationship. An automobile dealer
receives title to the cars he orders from the
manufacturer and that transaction is a sale; but
he is an agent to the extent that he is authorized
to pass on to the ultimate purchaser the limited
warranty of the manufacturer. In any event, the
courts must look at the entire transaction to
determine if it is a principal-agent relationship
or a buyer-seller relationship.
Article 1467. 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.
Contract for a piece of work – By the contract
for a piece of work the contractor binds himself
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to execute a piece of work for the employer, in
consideration of a certain price or
compensation. The contractor may either
employ his labor or skill, or also furnish the
material. (Art. 1713 of the CC) Further, a piece
of work is one when the thing in consideration
would not have existed were it not for the
request of the vendee. It is hinged upon the skill
and ability of the vendor to produce.
The rule in Article 1468 for those cases
in which the thing given in exchange consists
partly in money and partly in another thing.
Contract of Barter – By the contract of barter
or exchange, one of the parties binds himself to
give one thing in consideration of the other’s
promise to give another thing. (Art. 1638 of the
New Civil Code)

Difference between “Contract for a Piece of Contract of Sale – By the contract of sale, the
Work” & “Contract of Sale” vendor gives a thing in consideration for a price
in money. (Art. 1458 of the Civil Code)
A piece of work Sale
The contract is one for The contract is one of Note: The manifest intention of the parties is
work, labour and sale. paramount in determining whether it is one of
materials. barter or of sale and such intention may be
ascertained by taking into account the
The risk of loss before Where the primary
contemporaneous and subsequent acts of the
delivery is borne by objective of a contract
parties. (Art. 1371.)
the worker or is a sale of a
contractor, not by the manufactured item, it If this intention cannot be ascertained, then the
employer or the is a sale of goods even last sentence of the article applies. But if the
person who ordered. though the item is intention is that the contract shall be one of
Further, it is a services manufactured by labor sale, then such intention must be followed even
dominate that furnished by the seller though the value of the thing given as a part
contract even though and upon previous consideration is more than the amount of the
there is a sale of goods order of the customer. money given.
involved.
Not within the statute It is within the Statute The only point of difference between the two
of Frauds of Frauds. contracts is in the element which is present in
sale but not in barter, namely: “price certain in
money or its equivalent.”
Article 1468. If the consideration of the
contract consists partly in money, and partly Difference between “Sale” and “Lease”
in another thing, the transaction shall be
characterized by the manifest intention of Sale Lease
the parties. If such intention does not clearly The seller transfers One of the parties
appear, it shall be considered a barter if the ownership of the thing binds himself to give
value of the thing given as a part of the sold. to another the
consideration exceeds the amount of the enjoyment or use of a
money or its equivalent; otherwise, it is a thing for a price
sale. certain and for a
period which may be
definite or indefinite.
In other words, the

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landlord or lessor persons.

transfers merely the
temporary possession Should such person or persons be unable or
and enjoyment of the unwilling to fix it, the contract shall be
thing leased. inefficacious, unless the parties
subsequently agree upon the price.

Dation in payment or Dacion en pago – The If the third person or persons acted in bad
alienation of property to the creditor in faith or by mistake, the courts may fix the
satisfaction of a debt in money. It is governed by price.
the law on sales. As such the essential elements
of a contract of sales, namely: consent, object Where such third person or persons are
certain, and cause or considerations, must be prevented from fixing the price or terms by
present. fault of the seller or the buyer, the party not
in fault may have such remedies against the
Difference between “Contract of Sale” and
party in fault as are allowed the seller or the
“Dation in payment”
buyer, as the case may be.
Sale Dacion en pago
There is no pre– There is pre–existing
In the contract of sale, the price must be
existing credit. credit.
certain or capable of being ascertained in
Obligations are Obligations are
money or its equivalent. The “money” is to be
created. extinguished.
understood as currency. “Its equivalent” means
The cause is the price The extinguishment of
promissory notes, checks and other mercantile
paid, from the the debt, from the
instruments generally accepted as representing
viewpoint of the seller, viewpoint of the
money. If price is not certain or incapable of
or the thing sold, from debtor, or the object
being ascertained, the sale is inefficacious.
the viewpoint of the acquired in lieu of the
buyer. credit, from the Note: The fact that the exact amount to be paid
viewpoint of the for the thing sold is not precisely fixed, is no bar
creditor. to an action to recover such compensation,
There is more There is no or less provided the contract, by its terms furnishes a
freedom in fixing the freedom in fixing the basis or measure for ascertaining the amount
price. price. agreed upon. (Majarabas vs. Leonardo, 11 Phil.
The buyer has still to The payment is 272 [1908])
pay the price. received by the debtor
before the contract is Under Article 1469, the price is certain if:
perfected.
(a) The parties have fixed or agreed upon a
definite amount; or
Article 1469. In order that the price may be (b) It be certain with reference to another
considered certain, it shall be sufficient that thing certain; or
it be so with reference to another thing (c) The determination of the price is left to
certain, or that the determination thereof be the judgment of a specified person or
left to the judgment of a special person or persons and even before such
determination.

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 Fraternal Order of Utopia
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Note: It must be understood that the last two
cases are applicable only when no specific
amount has been stipulated by the parties.
Price fixed by 3rd person designated.
As a general rule, the price fixed by a
third person designated by the parties is
binding upon them. Exceptions to the rule are:
(a) When the third person acts in bad faith
or by mistake as when the third person
fixed the price having in mind not the
thing which is the object of the sale, but
another analogous or similar thing in
which case the court may fix the price.
But mere error in judgment cannot
serve as a basis for impugning the price
fixed; and
(b) When the third person disregards
specific instructions or the procedure
marked out by the parties or the data
given him, thereby fixing an arbitrary
price.
Price not fixed by 3rd person designated.
(a) If the third person designated by the
parties to fix the price refuses or cannot
fix it, without fault of the seller and the
buyer, the contract shall become
ineffective, as if no price had been
agreed upon unless, of course, the
parties subsequently agree upon the
price. (par. 2.)
(b) If such third person is prevented from
fixing the price by the fault of the seller
or the buyer, the party not in fault may
obtain redress against the party in fault
which consists of a choice between
rescission or fulfillment, with damages
in either case. If the innocent party
chooses fulfillment, the court shall fix
the price.
Article 1470. Gross inadequacy of price does
Xhavier D. Bataan Law on Sale
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
Rules on gross inadequacy of price in
voluntary sales:
(a) The general rule as to gross inadequacy
of price in voluntary sales is that mere
inadequacy of the price or alleged
hardness of the bargain does not affect
its validity when both parties are in a
position to form an independent
judgment concerning the transaction.
This rule holds true in voluntary
contracts of sale otherwise free from
invalidating defects, even though a
contract of sale is commutative. A
valuable consideration, however small
or nominal, if given or stipulated in
good faith is, in the absence of fraud,
sufficient. In determining whether the
price is adequate or not, the price
obtaining at the date of the execution of
the contract, not those obtaining a
number of years later, should be
considered.
(b) The rule as to gross inadequacy of price
in voluntary sales where low price
indicates a defect in the consent is that
contract may be annulled not because
of the inadequacy of the price but
because the consent is vitiated since the
inadequacy of price may indicate a
defect in the consent such as when
fraud, mistake, or undue influence is
present.
Note: Contracts of sale entered into by
guardians or representatives of absentees are
rescissible whenever the wards or absentees
whom they represent suffer lesion by more
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than 1/4 of the value of the things which are the
object thereof. (Art. 1381[1, 2].)
The unsupported claim that the sale of property
was made for an inadequate price is a mere
speculation which has no place in our judicial
system. Since every claim must be substantiated
by sufficient evidence, such a conjectural
pretension cannot be entertained. Allegation of
inadequacy of price must be proven. (Ng Cho
Cio vs. Ng Diong, 1 SCRA 275 [1961].)
(c) The rule as to gross inadequacy of price
in voluntary sales where price is so low
as to be “shocking to conscience” is that
sale may be set aside even though mere
inadequacy of price is not a sufficient
ground for the cancellation of a
voluntary contract of sale. But where
the price paid is much higher than the
assessed value of the property and the
sale is effected by a father to his
daughter in which filial love must be
taken into account, the price is not to be
construed “as so inadequate to shock
the court’s conscience.”
Involuntary sales – There is an involuntary
sale when a judicial or execution sale is made by
a court with respect to the property of a debtor
for the satisfaction of his indebtedness.
Rules on gross inadequacy of price in
involuntary sales:
(a) The general rule as to inadequacy of
price in involuntary sales is that mere
inadequacy of price is not a sufficient
ground for the cancellation of an
execution sale if there is no showing
that in the event of a resale, a better
price can be obtained.
(b) The rule as to gross inadequacy of price
in involuntary sales where price is so
low as to be “shocking to the conscience
Xhavier D. Bataan Law on Sale
of the Court” is that a judicial sale will
be set aside.
(c) The rule on gross inadequacy of price in
involuntary sales where seller is given
the right to repurchase is that validity
of the sale is not necessarily affected.
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.
Simulation – Occurs when an apparent
contract is a declaration of a fictitious will
deliberately made by agreement of the parties,
in order to produce, for the purpose of
deception, the appearance of a juridical act
which does not exist or is different from that
which was really executed.
Requisite of Simulation:
(i) An outward declaration of will
different from the will of the
parties;
(ii) The false appearance must have
been intended by mutual
agreement; and
(iii) The purpose is to deceive third
persons.
Rules where price is simulated:
(a) The sale is void but the contract shall be
valid as a donation if the price is
simulated or false such as when the
vendor really intended to transfer the
thing gratuitously.
(b) The contract is void if the contract is
not shown to be a donation or any other
act or contract transferring ownership
because the parties do not intend to be
bound at all, and ownership of the thing
is not transferred. The action or defense
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for the declaration of the inexistence of
a contract does not prescribe.
Case Law:
(a) The fact that the seller continues to pay
realty taxes on the land sold even after
the execution of the contract to sell
does not necessarily prove ownership,
much less simulation of said contract.
The non-payment of the price does not
prove simulation; at most, it gives the
seller the right to sue for collection.
Generally, in a contract of sale, payment
of the price is a resolutory condition
and the remedy of the seller is to exact
fulfillment or, in case of a substantial
breach, to rescind the contract.
(Villaflor vs. CA [1997].)
(b) The non-payment of the price by the
supposed buyer, a minor, when taken
into account together with the many
intrinsic defects of the deed of sale,
may, however, show that the price is
simulated, making the sale void.
(Lebagela vs. Santiago [2001].)
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.
This Article follows the principle in
Article 1469 of the CC that a price is considered
certain if it could be determined with reference
to another thing certain. This article is
especially applicable to fungible things like
securities, grain, liquids, etc. the price of which
are subject to fluctuations of the market.
Xhavier D. Bataan Law on Sale
“provided said amount be certain” – When an
amount is fixed above or below the price on a
given day or in a particular exchange or market,
the said amount must be certain; otherwise, the
sale is inefficacious since price cannot be
determined.
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.
As a general rule, the fixing of the price
by one of the contracting parties is not allowed
for if consent is essential to a contract of sale,
the determination of the price cannot be left to
the discretion of one of the contracting parties.
By way of exception, where the price fixed by
one party is accepted by the other, the contract
is deemed perfected because there exists a true
meeting of minds upon the price.
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.
Reasonable price (value of goods) – Generally
the market price at the time and place fixed by
the contract or by law for the delivery of the
goods. It is a question of fact dependent on case
to case basis.
Fair market value – Reasonable sum which
property would bring on a fair sale by a man
willing but not obliged to sell to a man willing
but not obliged to buy.
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Rules on failure to determine price:
(i) As a rule on failure to determine
price and where contract is
executory, the contract is without
effect since price certain is an
element of the contract of sale.
Consequently, there is no obligation
on the part of the vendor to deliver
the thing and on the part of the
vendee to pay.
(ii) As a rule on failure to determine the
price and where delivery has been
made and appropriated by the
buyer, the latter must pay a
reasonable price therefore. This
obligation of buyer is sometimes
contractual, if the agreement omits
any reference to price, and
sometimes, quasi–contractual, if the
agreement provides that the parties
are thereafter to agree on the price.
Example:
(a) If a buyer, for example, orders a cavan
of rice from a store, nothing being said
as to the price, the parties intend and
understand that a reasonable price shall
be paid. The obligation here is
contractual. The law merely enforces
the intention of the parties.
(b) Article 1474 applies only where the
means contemplated by the parties for
fixing the price have, for any reason,
proved ineffectual. In this case, the
obligation of the buyer to pay a
reasonable price is an obligation
imposed by law as distinguished from a
contractual obligation. It is based on the
fundamental principle that no one
should enrich himself at the expense of
another. (Ibid.) In case, however, the
Xhavier D. Bataan Law on Sale
parties do not intend to be bound until
after the price is settled, the buyer must
return any goods already received or if
unable to do so, must pay their
reasonable value at the time of delivery
and the seller must return any portion
of the amount received.
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.
Perfection of contract of sale
The contract of sale is a consensual
contract which is thus, perfected by mere
agreement or meeting of the minds upon the
thing, which is the prestation, and the price,
which is the consideration, between the parties.
From the moment of perfection of contract of
sale, reciprocal obligations between the parties
arise and both of them can demand to perform
their respective undertakings. However, the
transmission of ownership of the thing is
generally perfected upon actual or constructive
delivery of the object of sale unless the parties
stipulated that ownership in the thing shall not
pass to the purchaser until full payment has
been made, notwithstanding the delivery.
Reciprocal obligation – Those which arise
from the same cause and in which each party is
a debtor and creditor of the other, such that the
performance of one is designed to be the
equivalent and the condition for the
performance of the other. In other words, the
performance of one is conditioned upon the
simultaneous fulfillment on the part of the
other.
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Non–reciprocal obligation – Those which do
not impose simultaneous and correlative
performance on both parties. In other words,
the performance of one party is not dependent
upon the simultaneous performance by the
other.
Rules with respect to offer:
(1) Offer must be certain;
(2) The person making the offer may fix the
time, place, and manner of acceptance,
all of which must be complied with;
(3) 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;
(4) An offer becomes ineffective upon
death, civil interdiction, insanity or
insolvency of either party before
acceptance is conveyed.
Rule on conduct of parties:
Appropriate conduct by the parties may
be sufficient to establish an agreement since the
actions of the parties may indicate that a
binding obligation has been undertaken even
though there may be instances where
interchanged correspondence does not disclose
the exact point at which the deal was closed.
(Maharlika vs. Tagle) There is, however, no
perfected sale where it is conditional and the
condition is not fulfilled. (People’s Homesite vs.
CA)
Rule on transfer of ownership:
Generally, delivery of the thing
constitutes transfer of ownership. By way of
exception, the parties may stipulate that the
ownership of the thing shall not be transferred,
notwithstanding its delivery, until after the
Xhavier D. Bataan Law on Sale
purchaser has fully paid the purchase price
thereof.
Rule on form of contract:
Generally, a contract of sale is binding
regardless of its form. By way of exception, in
case the contract of sale should fall within the
provisions of the Statute of Frauds or of any
other applicable statute which requires a
certain form for its enforceability or validity,
then that form must be complied with. A
contract of sale may be in a private instrument;
the contract is valid and binding between the
parties upon its perfection and a party may
compel the other to execute a public instrument
embodying the contract.
Rule as to effectivity against 3rd person for
sale of real estate:
The sale of real estate, whether made as
a result of a private transaction or of a
foreclosure or execution sale, becomes legally
effective against third persons only from the
date of its registration. (Campillo vs. Phil.
National Bank, 28 SCRA 720 [1969].)
Rule on receipt as contract of sale:
Where a letter–offer to buy a particular
property for a specified price was received by
the offeree who annotated on the copy the
phrase “Received original, 9-4-89’’ beside which
appears his signature, such receipt cannot be
regarded as a contract of sale nor a promise to
sell since it cannot be construed as an
acceptance but is merely a memorandum of the
receipt by him of the offer. The requisites of a
valid contract of sale are lacking in said receipt.
(Jovan Land, Inc. vs. Court of Appeals, [1997].)
Rule as to consent reluctantly given:
There is still a consummated contract of
sale where consent was reluctantly given since
there is no difference in law where a person
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gives his consent reluctantly and even against
his good sense and judgment as when he acts
voluntarily and freely. (Acasio vs. Corp. de los
PP. Dominicos de Filipinas, 100 Phil. 253
[1956].)
Rule as to Notarized deed of sale:
The unsupported verbal claim of the
seller that the sale of a motor vehicle was not
consummated for failure of the purchaser to
pay the purchase was held insufficient to
overthrow a notarized deed of sale wherein it is
recited that the seller “sold, transferred and
conveyed” the motor vehicle to the purchaser
“for and in consideration of the amount of P10,
000 and other valuable considerations, receipt
of which is hereby acknowledged.”
To overcome a public document
solemnly executed before a notary public, the
evidence to the contrary must be clear, strong,
and convincing. Parol evidence will not suffice
to negate the clear and positive recitals of a
public document not otherwise tainted with
fraud or falsification. (Regalario vs. Northwest
Finance Corporation, 117 SCRA 45 [1982].)
Rule on applicant’s qualification to buy still
subject for investigation:
Where the agreement denominated as
“contract of sale” was considered by the court
as a mere application to buy the land in
question, and not a perfected contract of sale
ratiocinating that although it embodied all the
essential elements of a contract of sale by
installment, it appearing that “after the
approval of such application it was still
necessary to have the applicant’s qualifications
investigated as well as whether he has complied
with the provisions of the law regarding the
disposition of lands by the Board of
Liquidators,” the application was subject to
revocation in case the applicant was found not
to possess the qualifications necessary. (Alvarez
Xhavier D. Bataan Law on Sale
vs. Board of Liquidators, 4 SCRA 95 [1962];
Galvez vs. Tagle Vda. de Kangleon, 6 SCRA 162
[1962].)
Rule on chattel mortgage of car by
mortgagor–buyer prior to transfer of title to
his name:
The fact that the chattel mortgage of a
car by the buyers in favour of the seller was
executed on a date earlier than the transfer of
the registration certificate thereof in the name
of the buyers does not render the said mortgage
made by the buyers invalid, because the
mortgagors were already the owner of the car
when the mortgage was executed, inasmuch as
at the time of the sale wherein the parties
agreed over the car and the price, the contract
became perfected, and when part of the
purchase price was paid and the car was
delivered, upon the execution of the promissory
note and the mortgage by the mortgagors, the
sale became consummated. The registration of
the transfer of automobiles and of the
certificates of license for their use in the Bureau
of Land Transportation merely constitutes an
administrative proceeding which does not bear
any essential relation to the contract of sale
entered into between the parties. (Montano vs.
Lim Ang, 7 SCRA 250 [1963].)
The registration of motor vehicles is
required not because it is the operative act that
transfers ownership in vehicles (as in land
registration cases), but because it is the means
to identify the owner thereof in case of accident
so that responsibility for the same can be fixed.
(De Peralta vs. Mangusang, 11 SCRA 598
[1964].)
Rule on non–fulfilment by one party of his
obligation:
Where one of the contracting parties
should not comply with what is incumbent
upon him, the contract is still valid, and the
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injured party may sue for fulfillment or
rescission with the payment of damages in
either case since this right is predicated on the
violation of the reciprocity between the parties
brought about by a breach of obligation by one
of them.
Rules as to definite agreement on the
manner of payment:
(i) A contract of sale between the
parties is binding upon the
agreement of the parties as to the
price, despite the manner of
payment, or even the breach of that
manner of payment since it is not
the act of payment of price that
determines the validity of a
contract of sale. By way of
exception, there is no perfected
contract of sale where parties still
have to meet and agree on how and
when the down–payment and
installment payments are to be
made.
(ii) The terms and conditions of
payment are merely accidental, not
essential elements of the contract of
sale except where the parties
themselves clearly stipulate that in
addition to the subject matter and
the price, they are essential or
material to the contract.
(iii) A disagreement on the manner of
payment is tantamount to a failure
to agree on the price. (Swedish
Match vs. CA, [2004].)
(iv) An agreement on the price but a
disagreement on the manner of its
payment will not result in consent
since agreement on the manner of
payment goes into the price such
that a disagreement on the manner
of payment is tantamount to failure
to agree on the price.
Xhavier D. Bataan Law on Sale
Rules on failure to pay the price stipulated
by parties:
(i) The contract of sale is still valid
even though one party fails to pay
the price of the object after
execution of contract since sale,
being a consensual contract, is
perfect by mere agreement of the
parties as to the price of the object
and non–payment of the purchase
price is not among the instances
where the law declares a contract of
sale to be null and void. The
vendor’s remedy, under Article
1191 of the CC, is to file an action
for fulfilment or rescission.
(ii) A contract of sale is null and void
where the purchase price, which
appears thereon as paid, has, in fact,
never been paid by the buyer to the
seller for the sale is without cause
of consideration.
(iii) If the real price is not stated in the
contract, then the contract is valid
but subject to reformation. If there
is no meeting of the minds of the
parties as to the price, because the
price stipulated in the contract is
simulated, then the contract is void
since Article 1471 of the CC states
that if the price is simulated, the
sale is void.
Rule as to right of owner to fix his own price:
(i) The seller may give a price to what
he sells, and it is only a matter of
whether the buyer would accept or
reject the price. He may even
impose a condition hard to fulfil
and name a price quite out of
proportion to the real value of the
thing offered for sale. (Cornejo vs.
Calupitan, [1950].)
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(ii) The seller of the object is well
within his right to quote a small or
nominal consideration and such
consideration is just as effectual
and valuable a consideration as a
larger sum stipulated or paid.
(Pelacio vs. Adiosola, [1952])
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.
Xhavier D. Bataan Law on Sale
Sale by auction – A public sale where various
intending buyers offer bids for the goods and
try to outbid each other. Ultimately, the goods
are sold to the highest bidder. An auction sale is
complete when the auctioneer announces its
completion by the fall of the hammer or in other
customary manner.
Rules governing auction sales:
(a) Where the goods are put up by for sale
by auction in lots, each lot is the subject
of a separate contract of sale.
(b) An offer shall be deemed accepted upon
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.
(c) The buyer or his agent may participate
in the auction provided: (i) such right
was reserved; (ii) notice was given that
the sale is subject to a right to bid on
behalf of the seller; and (iii) the right to
bid by the seller is not prohibited by
law or by stipulation.
(d) Where there is no notice that the sale is
subject to seller’s right to bid, it shall be
unlawful for the seller to bid either
directly or indirectly or for the
auctioneer to employ or induce any
person to bid on behalf of the seller.
(e) Though bidding by the seller or his
agent is fraudulent, a right to bid may
be expressly reserved by or on behalf of
the seller. It is, therefore, the secrecy of
puffing which renders it a fraud upon
bidding. Where there is notice of the
intention to bid by the seller, the
bidding in such a case would not
operate as a fraud.
(f) A contract not to bid or to make an
agreement for a consideration that only
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one of them shall bid, in order that the
property may be knocked down at a low
price is not permissible and the bargain
is fraudulent as regards the seller
though the agreement is without
consideration, if it is actually carried
out, for the fraud against the seller is
the same as if there were
considerations.
(g) 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.
Rule as to right of owner to prescribe terms
of public auction:
The owner of property which is offered
for sale, either at public or private auction, has
the right to prescribe the manner, conditions,
and terms of such sale. He may provide that all
of the purchase price or any portion thereof
should be paid at the time of the sale, or that
time will be given for that payment, or that any
or all bids may be rejected. The conditions of a
public sale announced by an auctioneer or by
the owner of the property at the time and place
of the sale are binding upon all bidders,
whether they knew of such conditions or not.
(Leoquinco vs. Postal Savings Bank, [1925].)
Article 1477. The ownership of the thing
sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
Generally, ownership of the thing is
transmitted by actual or constructive delivery
to the vendee. By way of exception, ownership
over the object is not transmitted even after the
Xhavier D. Bataan Law on Sale
delivery if the parties agreed that ownership
shall not pass to the purchaser until he has fully
paid the price. However, it must be noted that
the delivery must be coupled with the intention
to transfer object or ownership. Absence of such
intention will not result to transmission of
ownership.
Contractual reservation of title or pactum
reservati dominii – Non–payment of the price,
after the thing has been delivered, prevents the
transfer of ownership only if such is the
stipulation of the parties. Common in sales on
the installment plan. Embodied in Article 1478
of the CC.
Actual delivery – When the thing sold is placed
in the control and possession of the purchaser
(Article 1497 of the Civil Code)
Constructive delivery – A general term
comprehending all those acts which, although
not conferring physical possession of the thing,
have been held by construction of law
equivalent to acts of real delivery. Symbolic
when to effect the delivery, the parties make
use of a token symbol to represent the thing
delivered.
Personal right – The right or power of a person
(creditor) to demand from another (debtor), as
a definite passive subject, the fulfillment of the
latter’s obligation to give, to do, or not to do.
Real right – The right or interest of a person
over a specific thing (like ownership,
possession, mortgage, lease record) without a
definite passive subject against whom the right
may be personally enforced.
Rules and Doctrines as to transmission of
ownership:
The registration of motor vehicles is
required not because it is the operative act that
transfers ownership in vehicles (as in land
registration cases), but because it is the means
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to identify the owner thereof in case of accident (1) An accepted unilateral promise to sell in
so that responsibility for the same can be fixed. which the promisee (acceptor) elects to
(De Peralta vs. Mangusang, 11 SCRA 598 buy;
[1964].) (2) An accepted unilateral promise to buy
in which the promisee (acceptor) elects
Payment of the purchase price is not to sell; and
essential to the transfer of ownership, as long as (3) A bilateral promise to buy and sell
the property sold has been delivered. reciprocally accepted in which either of
(Sampaguita Pictures, Inc. vs. Jalwindor the parties chooses to exact fulfillment
Manufacturers, Inc., [1979].)
Disparity between Unaccepted unilateral
Actual or constructive delivery must be promise and bilateral promise
coupled with intention to transfer object or
ownership to effect transmission of ownership. Unaccepted Bilateral Promise
(Union Motor Corp vs. CA, [2001]) Unilateral promise
Does not create Creates juridical effect
A stipulation that ownership in the juridical effect or legal or legal bond and thus
thing sold shall not pass to the purchaser until bond and thus not binding to both parties
after he has fully paid the price thereof could binding since contract since contract of sale
only be binding upon the contracting parties, of sale is consensual is consensual which is
their assigns, and heirs not upon third persons which is perfected by perfect by agreement
without notice since such a stipulation is only a agreement of both of both parties.
kind of security for the benefit of the vendor parties. Also called
who has not been fully paid. policitacion.
It has been settled that the registration
is not a mode of acquiring ownership. (Bollozo
Option – A privilege existing in one person for
vs. Yu Tieng Su, [1987].)
which he has paid a consideration which gives
A perfected contract of sale even him the right to buy/sell from/to another
without delivery vests in the vendee an person, if he chooses, at any time within the
equitable title, an existing interest over the agreed period at a fixed price, or under, or in
goods sufficient to be the subject of insurance. compliance with certain terms and conditions.

Article 1479. A promise to buy and sell a Nature of option contract

determinate thing for a price certain is
 An option is a contract. It is a
reciprocally demandable.
preparatory contract, separate and
distinct from the main contract itself
An accepted unilateral promise to buy or to
(subject matter of the option) which the
sell a determinate thing for a price certain is
parties may enter into upon the
binding upon the promisor if the promise is
consummation of the option.
supported by a consideration distinct from
 It gives the party granted the option the
the price.
right to decide, whether or not to enter
into a principal contract, while it binds
Kinds of promise treated in Article 1479: the party who has given the option, not
to enter into the principal contract with

Xhavier D. Bataan Law on Sale 24

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any other person during the agreed
time and within that period, to enter
into such contract with the one to
whom the option was granted if the
latter should decide to use the option.
 An option must be supported by a
consideration distinct from the price.
The promisee has the burden of proving
such consideration.
 A consideration of an option contract is
just as important as the consideration
for any other kind of contract. An option
without consideration is void; the effect
is the same as if there was no option.
Rule as to accepted unilateral promise:
(a) A unilateral promise to sell or to buy a
determinate thing for a price certain
does not bind the promissor even if
accepted and may be withdrawn at any
time. It is only if the promise is
supported by a consideration distinct
and separate from the price that its
acceptance will give rise to a perfected
contract.
(b) The optionee (holder of the option),
after accepting the option and before he
exercises it, has the right, but not the
obligation, to buy or sell, as the case
may be. Once the option is exercised,
offer is accepted before a breach of the
option, a bilateral promise to sell and to
buy ensues and both parties are then
reciprocally bound to comply with their
respective undertakings. It would be a
breach of the option for the optioner-
offeror to withdraw the offer during the
agreed period.
(c) Consideration in an option contract
may be anything of value, unlike in sale
where it must be the price certain in
money or its equivalent. Lacking any
proof of such consideration, the option
is unenforceable.
Xhavier D. Bataan Law on Sale
(d) A contract of option to buy is separate
from the contract to sell, and both
contracts need separate and distinct
considerations for validity.
Rule as to full payment of price being not
necessary for exercise of option to buy:
(a) In an option to buy, the party who has
an option may validly and effectively
exercise his right by merely notifying
the owner of the former’s decision to
buy and expressing his readiness to pay
the stipulated price. The notice need
not be coupled with actual payment of
the purchase price so long as this is
delivered to the owner of the property
upon the execution and delivery by him
of the deed of sale. The payment of the
price is contingent upon the delivery of
the deed of sale. Unless and until the
owner shall have done this, the buyer
who has the option is not and cannot be
held in default in the discharge of his
obligation to pay.
(b) Consequently, since the obligation to
pay is not yet due, consignation in court
of the purchase price is not required.
(c) An option to buy is not, of course, a
contract of purchase and sale.
Article 1479 and Article 1324 compared
Under Article 1324 of the CC, the general
rule is that when the offerer has allowed the
offeree a certain period within which to accept
the offer, the offer may be withdrawn as a
matter of right at any time before acceptance.
But if the option is founded upon a separate
consideration, the offerer cannot withdraw his
offer, even if the same has not yet been
accepted, before the expiration of the stipulated
period. Regardless of whether it is supported by
a consideration or not, the offer, of course,
cannot be withdrawn after acceptance of the
offer.
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Under Article 1479 of the CC, the law specifically
applies to a promise “to buy or sell.” This rule
requires that for a promise to sell to be valid, it
must be supported by a consideration distinct
from the price. An option to sell can still be
withdrawn, even if accepted, if the same is not
supported by any consideration.
Southwestern Sugar vs. AG&P: An option to
sell can still be withdrawn, even if accepted, if
the same is not supported by any consideration.
Atkins, Kroll & Co., Inc. vs. Cua Hian Tek: If
acceptance is made before withdrawal, it
constitutes a binding contract of sale although
the option is given without consideration.
Before acceptance, the offer may be withdrawn
as a matter of right. Be that as it may, the offerer
cannot revoke, before the period has expired, in
an arbitrary or capricious manner the offer
without being liable for damages which the
offeree may suffer under Article 19 of the Civil
Code.
In Sanchez vs. Rigoz, the doctrine laid
down in the Atkins case is reaffirmed, and,
insofar as inconsistent therewith, the view
adhered to in Southwestern case should be
deemed abandoned or modified.
Article 1480. Any injury to or benefit from
the thing sold, after the contract has been
perfected, from the moment of the
perfection of the contract to the time of
delivery, shall be governed by articles 1163
to 1165, and 1262.
This rule shall apply to the sale of fungible
things, made independently and for a single
price, or without consideration of their
weight, number, or measure.
Should fungible things be sold for a price
fixed according to weight, number, or
measure, the risk shall not be imputed to the
vendee until they have been weighed,
Xhavier D. Bataan Law on Sale
counted, or measured and delivered, unless
the latter has incurred in delay.
Four rules regarding risk of loss:
(1) If the thing is lost before perfection, the
seller and not the one who intends to
purchase it bears the loss in accordance
with the principle that the thing
perishes with the owner (Res perit
domino);
(2) If the thing is lost at the time of
perfection, the contract is void or
inexistent since the legal effect is the
same as when the object is lost before
the perfection of the contract of sale;
(3) If the thing is lost after perfection but
before its delivery, the risk of loss is
shifted to the buyer as an exception to
the rule of res perit domino;
(4) If the thing is lost after delivery, the
buyer bears the risk of loss following
the general rule of res perit domino.
Question: Who bears the risk of loss if the thing
is lost after perfection but before its delivery?
Generally, the buyer. Exception is when:
i. The thing is lost through the fault of
the seller;
ii. The thing lost is a generic thing;
iii. The things lost are fungible things
sold for a price fixed according to
weight, number or measure;
iv. The thing lost falls under the
definition of goods.
Question: Who bears the impairment when the
thing deteriorates after perfection but before its
delivery? Generally, the buyer. However, if the
thing deteriorates through the fault of the seller,
the seller bears the risk.
Article 1481. In the contract of sale of goods
by description or by sample, the contract
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may be rescinded if the bulk of the goods
delivered do not correspond with the
description or the sample, and if the
contract be by sample as well as description,
it is not sufficient that the bulk of goods
correspond with the sample if they do not
also correspond with the description.
The buyer shall have a reasonable
opportunity of comparing the bulk with the
description or the sample.
This article covers a sale of goods by
description, by sample, and by sample as well as
by description. It provides a cause for rescission
distinct from those stated in Article 1597.
Sale by description – Occurs where a seller
sells things as being of a particular kind, the
buyer not knowing whether the seller’s
representations are true or false, but relying on
them as true; or, as otherwise stated, where the
purchaser has not seen the article sold and
relies on the description given him by the
vendor, or has seen the goods but the want of
identity is not apparent on inspection.
Rule on seller by description:
If the bulk of the goods delivered do not
correspond with the description, the contract
may be rescinded. But if the thing delivered is
as described, the fact that the buyer cannot use
the thing sold for the purpose for which it was
intended without the seller’s fault does not
exempt the buyer from paying the purchase
price agreed upon. (Pacific Commercial Co. vs.
Ermita Market & Cold Stores, [1931].)
Sale by sample – To constitute a sale by
sample, it must appear that the parties
contracted solely with reference to the sample,
with the understanding that the bulk was like it.
It is determined by the intent of the parties as
Xhavier D. Bataan Law on Sale
shown by the terms of the contract and the
circumstances surrounding the transaction.
Rules on Sale by sample:
But a mere exhibition of a sample by the
seller in the absence of any showing that it was
an inducement of the sale or formed the sole
basis thereof, does not amount to a sale by
sample as where the quality of the articles to be
furnished is expressly described in the contract
without reference to the sample or the parties
agree that the goods ordered shall differ from
the sample in some particular matter.
In a sale by sample, the vendor
warrants that the thing sold and to be delivered
by him shall conform with the sample in kind,
character, and quality.
Sale by description & Sample – When a sale is
made both by sample and by description, the
goods must satisfy all the warranties
appropriate to either kind of sale, and it is not
sufficient that the bulk of the goods correspond
with the sample if they do not also correspond
with the description, and vice versa.
Bulk of goods – does not refer to greater
portion of good but rather goods as
distinguished from the sample with which they
must correspond. The word “goods” in the
phrase is an oppositional genitive defining
“bulk.” In other words “bulk of goods” means
the same as “goods” which, as a whole body,
must correspond substantially with the sample
and description. The buyer is given a reasonable
opportunity of comparing the bulk with the
description or the example.
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.
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Earnest money – Something of value given by
the buyer to the seller to show that the buyer is
really in earnest, and to bind the bargain. It is
actually a partial payment of the purchase price
and is considered as proof of the perfection of
the contract. Since earnest money constitutes
an advance payment, it must be deducted from
the total price.
Rules on Earnest money:
(1) By agreement of the parties, the amount
given may be merely a deposit of what
would eventually become earnest
money or down–payment should a
contract of sale be made by them, not as
a part of the purchase price and as
proof of the perfection of the contract of
sale but only as a guarantee that the
buyer would not back out of the sale.
(2) The earnest money forms part of the
consideration only if the sale is
consummated upon full payment of the
purchase price. (Chua vs. CA, [2003].)
(3) Under Article 145423 of the old Civil
Code, it has been held that the delivery
of part of the purchase price should not
be understood as constituting earnest
money to bind the agreement in the
absence of something in the contract
showing that such was the intention of
the parties. (Salas Rodriguez vs.
Leuterio, [1925].)
Disparity between earnest money and
option money
Earnest Money Option Money
Part of the purchase Money given as
price. distinct consideration
for an option contract.
Given only where Applies to a sale not
there is already a sale. yet perfected.
When earnest money Would-be buyer who
is given, the buyer is gives option money is
Xhavier D. Bataan Law on Sale
bound to pay the not required to buy.
balance.
But option money may become earnest money
if the parties so agree.
Article 1483. Subject to the provisions of the
Statute of Frauds and of any other applicable
statute, a contract of sale may be made in
writing, or by word of mouth, or partly in
writing and partly by word of mouth, or may
be inferred from the conduct of the parties.
Generally, a contract may be entered
into in any form provided all the essential
requisites for its validity are present. It may be
in writing; it may be oral; it may be partly in
writing and partly oral. It may even be inferred
from the conduct of the parties. By way of
exception, where contract of sale should be
covered by the Statute of Frauds, the law
requires that the agreement be in writing
subscribed by the party charged, or by his
agent; otherwise, the contract is unenforceable.
Form of contract. – Refers to the manner in
which it is executed or manifested.
Unenforceable contract – those that cannot be
enforced in court by reason of defects provided
by law unless ratified. It occupies an
intermediate ground between a voidable and a
void contract.
Statute of Frauds (Article 1403 (2) [a, d, and
e] of the Civil Code):
(1) Sale of personal property at a price not
less than P500;
(2) Sale of real property or an interest
therein regardless of the price involved;
and
(3) Sale of property not to be performed
within a year from the date thereof
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regardless of the nature of the property
and the price involved.
The purpose of the Statute of Frauds is
to prevent fraud and perjury in the enforcement
of obligations depending for their evidence
upon the unassisted memory of witnesses by
requiring certain enumerated contracts and
transactions to be evidenced in writing.
Contracts infringing the Statute of
Frauds are ratified when the defense fails to
object to the introduction of parol evidence, or
asks questions on cross-examination, which
elicits evidence proving the existence of a
perfected contract of sale.
The Statute of Frauds refers to specific
kinds of transactions and cannot apply to any
other transaction that is not enumerated
therein. The application of the Statute
presupposes the existence of a perfected
contract. The Statute of Frauds applies not only
to goods but to things in action as well.
Rules as to form of contract:
(a) Where the “applicable statute” requires
that the contract of sale be in a certain
form for its validity, the required form
must be observed in order that the
contract may be both valid and
enforceable.
(b) Where form is required only for the
convenience of the parties and in order
that the sale may be registered in the
Registry of Deeds to make effective as
against third persons the right acquired
under such sale. As between the
contracting parties, the form is not
indispensable since they are allowed by
law to compel each other to observe
that form.
(c) The fact that a deed of sale is a
notarized document does not
necessarily justify the conclusion that
Xhavier D. Bataan Law on Sale
the said sale is a true conveyance to
which the parties thereto are
irrevocably bound and while its
notarization vests in its favour the
presumption of regularity and due
execution, it is not the function of the
notary public to validate and make
binding an instrument never intended
by the parties to have any binding legal
effect upon them since intention of the
parties still and always is the primary
consideration in determining the true
nature of the contract.
(d) Where the vendor did not personally
appear before the notary public, such
fact raises doubt regarding the vendor’s
consent to the sale notwithstanding
that the deed states the contrary. (Tan
vs. Mandap, [2004].)
(e) An invalidly notarized deed of sale must
be considered merely as a private
document. Even if validly notarized, the
deed would still be classified as a
private document if it is merely
subscribed and sworn to by way of jurat
but was not properly acknowledged.
(Tigno vs. Aquino, [2004].)
Rules governing sale of real property or an
interest therein:
(a) A sale of a piece of land or interest
therein when made through an agent is
void unless the agent’s authority is in
writing. (Art. 1874; see Copon vs. Umali,
[1950].)
(b) For the sale of real property to be
effective against third persons, the sale
must be registered in the Registry of
Deeds (or Property) of the province or
city where the property is located. The
sale must be in a public document for
otherwise, the registration will be
refused.
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(c) The real purpose of registration of a
contract of sale being to give notice to
third persons and to protect the buyer
against claims of third persons arising
from subsequent alienations by the
vendor, it is certainly not necessary to
give efficacy to the deed of sale, as
between the parties to the contract and
their privies because actual notice is
equivalent to registration. It is settled
that registration is not a mode of
acquiring ownership.
(d) The sale of land in a private instrument
is valid and binding upon the parties,
for the time–honoured rule is that even
a verbal contract of sale of real estate
produces legal effects between the
parties since sale is a consensual
contract and is perfected by mere
consent.
(e) The fact that the notarization of a deed
of sale of real property is false is of no
consequence, for it need not be
notarized; it is enough that it be in
writing. (Heirs of Amparo del Rosario
vs. Santos, [1981].)
Modes of satisfaction of Statute of Frauds:
(a) The giving of a memorandum;
(b) Acceptance and receipt of part of the
goods (or things in action) sold and
actual receipt of the same (see Art.
1585.); and
(c) Payment or acceptance at the time some
part of the purchase price.
Application of Statute of Frauds.– The Statute
of Frauds is applicable only to executory
contracts (where no performance has as yet
been made by both parties) and not to contracts
which are totally or partially performed. It does
not forbid oral evidence to prove a
consummated sale since partial performance
like the writing, furnishes reliable evidence of
Xhavier D. Bataan Law on Sale
the intention of the parties or the existence of
the contract.
The application of the Statute of Frauds
presupposes the existence of a perfected
contract and requires only that a note or
memorandum subscribed by the party charged
or by his agent be executed in order to compel
judicial enforcement. Where there is no
perfected contract, there is no basis for the
application of the Statute.
Rule on partial performance.– Where there is
partial performance of a parol contract of sale
of realty, the principle excluding evidence of
such contract does not apply.
Circumstances indicating partial
performance of an oral contract of sale of
realty:
(a) relinquishment of rights;
(b) continued possession by a purchaser who
is already in possession;
(c) building of improvements, tender of
payment;
(d) rendition of services;
(e) payment of taxes;
(f) surveying of the land at the vendee’s
expense;
Electronic Commerce Act or RA 8792.–
Information shall not be denied validity or
enforceability solely on the ground that it is in
the form of an electronic data message or
electronic document, purporting to give rise to
such legal effect. Electronic data messages or
electronic documents shall have the legal effect,
validity or enforceability as any other document
or legal writing.
Rules:
(a) A requirement under law that
information is in writing is satisfied if
the information is in the form of an
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electronic data message or electronic reference, in that it has

document. remained complete and
(b) A requirement under law for a person unaltered, apart from the
to provide information in writing to addition of any endorsement
another person is satisfied by the and any authorized change, or
provision of the information in an any change which arises in the
electronic data message or electronic normal course of
document. communication, storage and
(c) A requirement under law for a person display and it is reliable in the
to provide information to another light of the purpose for which it
person in a specified non-electronic was generated and in the light
form is satisfied by the provision of the of all relevant circumstances.
information in an electronic data (g) Where the law requires that a
message or electronic document if the document be presented or retained in
information is provided in the same or its original form, that requirement is
substantially the same form. met by an electronic document or
(d) Nothing limits the operation of any electronic data message if:
requirement under law for information  There exists a reliable
to be posted or displayed in specified assurance as to the integrity of
manner, time or location; or for any the electronic document or
information or document to be electronic data message from
communicated by a specified method the time when it was first
unless and until a functional equivalent generated in its final form and
shall have been developed, installed, such integrity is shown by
and implemented. (Sec. 7, Rules.) evidence aliunde (that is,
(e) Information shall not be denied validity evidence other than the
or enforceability solely on the ground electronic data message itself)
that it is not contained in an electronic or otherwise; and
data message or electronic document  The electronic document or
but is merely incorporated by reference electronic data message is
therein. capable of being displayed to
(f) Where the law requires a document to the person to whom it is to be
be in writing, or obliges the parties to presented.
conform to a writing, or provides  For the purpose of the 1st
consequences in the event information proviso above, the criteria for
is not presented or retained in its assessing integrity shall be
original form, an electronic document whether the information has
or electronic data message will be remained complete and
sufficient if the latter: unaltered, apart from the
addition of any endorsement
 maintains its integrity and and any change which arises in
reliability; and the normal course of
 can be authenticated so as to be communication, storage and
usable for subsequent display and the standard of

Xhavier D. Bataan Law on Sale 31

 Fraternal Order of Utopia
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reliability required shall be
assessed in the light of the
purpose for which the
information was generated and
in the light of all relevant
circumstances.
(h) An electronic data message or
electronic document meeting and
complying with the requirements of
Section 6 or 7 of R.A. No. 8792 shall be
the best evidence of the agreement and
transaction contained therein. (Sec. 11)
(i) When the law requires that a contract
be in some form in order that it may be
valid or enforceable or that a contract is
proved in a certain way, that
requirement is absolute and
indispensable since no provision of the
R.A. No. 8792 shall apply to vary any
and all requirements of existing laws
and relevant judicial pronouncements
respecting formalities required in the
execution of documents for their
validity.
(j) An electronic signature relating to an
electronic document or electronic data
message shall be equivalent to the
signature of a person on a written
document if the signature:
 is an electronic signature as
defined in Section 6(g) of the
Rules; and
 is proved by showing that a
prescribed procedure, not
alterable by the parties
interested in the electronic
document or electronic data
message, existed under which a
method is used to identify the
party sought to be bound and to
indicate said party’s access to
the electronic document or
electronic data message
Xhavier D. Bataan Law on Sale
necessary for his consent or
approval through the electronic
signature. Said method is
reliable and appropriate for the
purpose for which the
electronic document or
electronic data message was
generated or communicated, in
the light of all circumstances,
including any relevant
agreement. It is necessary for
the party sought to be bound, in
order to proceed further with
the transaction, to have
executed or provided the
electronic signature. And, the
other party is authorized and
enabled to verify the electronic
signature and to make the
decision to proceed with the
transaction authenticated by
the same.
The parties may agree to adopt
supplementary or alternative procedures
provided that the requirements of paragraph
(b) are complied with. (Sec. 13, Rules.)
(k) Except as otherwise agreed by the
parties, an offer, the acceptance of an
offer and such other elements required
under existing laws for the formation
and perfection of contracts may be
expressed in, demonstrated and proved
by means of electronic data message or
electronic documents and no contract
shall be denied validity or
enforceability on the sole ground that it
is in the form of an electronic data
message or electronic document, or that
any or all of the elements required
under existing laws for the formation of
the contracts is expressed,
demonstrated and proved by means of
electronic documents. (Sec. 21, Rules.)
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(l) Electronic transactions made through
networking among banks, or linkages
thereof with other entities or networks,
and vice versa, shall be deemed
consummated under rules and
regulations issued by the BSP, upon the
actual dispensing of cash or the debit of
one account and the corresponding
credit to another, whether such
transaction is initiated by the depositor
or by an authorized collecting party.
The obligation of one bank, entity, or
person similarly situated to another
arising therefrom shall be considered
absolute and shall not be subjected to
the process of preference of credits. The
foregoing shall apply only to
transactions utilizing the Automated
Teller Machine switching network.
(m) Without prejudice to the foregoing, all
electronic transactions involving banks,
quasi-banks, trust entities, and other
institutions which under special laws
are subject to the supervision of the
Bangko Sentral ng Pilipinas shall be
covered by the rules and regulations
issued by the same pursuant to its
authority under Section 59 of R.A. No.
8791 (The General Banking Act), R.A.
No. 7653 (the Charter of the Bangko
Sentral ng Pilipinas) and Section 20,
Article XII of the Constitution.
(n) As between the originator and the
addressee of an electronic data message
or electronic document, a declaration of
will or other statement shall not be
denied legal effect, validity or
enforceability solely on the ground that
it is in the form of an electronic data
message or electronic document. (Sec.
23)
Article 1484. In a contract of sale of personal
property the price of which is payable in
installments, the vendor may exercise any of
Xhavier D. Bataan Law on Sale
the following remedies:
(1) Exact fulfillment of the obligation,
should the vendee fail to pay;
(2) Cancel the sale, should the vendee's
failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on
the thing sold, if one has been
constituted, should the vendee's
failure to pay cover two or more
installments. In this case, he shall
have no further action against the
purchaser to recover any unpaid
balance of the price. Any agreement
to the contrary shall be void.
Remedies of vendor in sale of personal
property payable in installments:
(1) Elect fulfillment upon the vendee’s
failure to pay; or
(2) Cancel the sale, if the vendee shall have
failed to pay two or more installments;
or
(3) Foreclose the chattel mortgage, if one
has been constituted, if the vendee shall
have failed to pay two or more
installments.
Remedies alternative. – These are not to be
exercised cumulatively or successively and the
election of one is a waiver of the right to resort
to the others.
Rules governing applicability of Article 1484
of the Civil Code:
(1) Article 1484 of the CC does not apply to
a sale of personal property on straight
term or partly in cash and partly in
term. Where the balance, after payment
of the initial sum, should be paid in its
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totality at the time specified, the
transaction is not by installment as
contemplated in Article 1484. (Levi
Hermanos, Inc. vs. Gervacio, [1939].)
(2) Neither does the article apply to sale of
immovable property nor to real estate
mortgage. Under Article 1484, the
creditor is given the right or option to
seize the chattel and dispose of the
same in accordance with the Chattel
Mortgage Law, while the mortgage on
real property may only be foreclosed in
conformity with the provisions of the
Rules of Court, or those of Act No. 3135,
if a special power to sell is granted to
the creditor under the contract. (Pacific
Commercial Co. vs. Jocson, 1859.)
(3) It does not also apply to an action of
replevin since an action by the
mortgagee for recovery of possession of
personal property with replevin as a
provisional remedy is not an action for
collection much less for foreclosure
(extra-judicial) of chattel mortgage. It is
a preliminary step to foreclosure which
should be conducted in accordance with
Section 14 of Act No. 1508.
Rules governing the right of vendor to
recover unpaid balance of purchase price:
(1) The vendor who has chosen to exact the
fulfillment of the obligation is not
limited to the proceeds of the sale of the
mortgaged goods. He may still recover
from the purchaser the unpaid balance
of the price, if any on the real and
personal properties of the purchaser
not exempt by law from attachment or
execution. The mere fact that the seller
secures possession of the personal
property through an attachment after
filing an action for collection of the
unpaid balance, with a prayer for an
issuance of a writ of preliminary
Xhavier D. Bataan Law on Sale
attachment does not necessarily mean
that he intends to resort to a
foreclosure of the mortgage. Unlike in a
judicial foreclosure sale, there is no
need for the court to confirm the sale on
execution. (Palma vs. CA, [1994])
(2) If the vendor chooses rescission or
cancellation of the contract upon the
vendee’s failure to pay two or more
installments, the latter can demand the
return of payments already made
unless there is a stipulation about
forfeiture.
(3) Where for failure of the buyer to pay
two or more installments, the vendor-
mortgagee (or his assignee)
repossessed the car. The receipt issued
by the vendor’s assignee to the vendee
when it took possession of the vehicle
states that the vehicle could be
redeemed within 15 days, meaning that
should the vendee fail to redeem within
the said period by paying the balance of
the purchase price, the assignee would
retain permanent possession of the
vehicle as it did in fact. It was held that
by this act, the vendor exercised its
option to cancel the contract of sale,
barring it from exacting payment of the
balance of the purchase price. “It cannot
have its cake and eat it too.” (Nonato vs.
Intermediate Appellate Court, [1985])
(4) If the vendor has chosen the third
remedy of foreclosure of the chattel
mortgage if one has been given on the
property, he is not obliged to return to
the vendee the amount of the
installments already paid should there
be an agreement to that effect. But he
shall have no further action against the
vendee for the recovery of any unpaid
balance of the price remaining after the
foreclosure and actual sale of the
mortgaged chattel, and any agreement
to the contrary is void.
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(5) Article 1484(3) of the Civil Code is
inapplicable where the amounts
adjudged in favour of the vendor-
mortgagee were not part of the unpaid
balance of the purchase price or in the
concept of a deficiency judgment but
were expenses of the suit.
(6) Neither can the vendor after the
foreclosure of the chattel mortgage
proceed against any third party who
may have guaranteed the vendee’s
performance of his obligation, for “if the
guarantor should be compelled to pay
the balance of the purchase price, the
guarantor will, in turn, be entitled to
recover what he has paid from the
debtor–vendee; so that ultimately, it
will be the vendee who will be made to
bear the payment of the balance of the
price, despite the earlier foreclosure of
the chattel mortgage given by him.
(7) When the vendor assigns his credit to
another person, the latter is likewise
bound by the same law. Accordingly,
when the assignee forecloses on the
mortgage, there can be no further
recovery of the deficiency and the
seller-mortgagee is deemed to have
renounced any right thereto. However,
it does not bar one to whom the seller-
mortgagee has assigned on a with-
recourse basis his credit against the
buyer from recovering from the seller
the assigned credit in full although the
seller may have no right of recovery
against the buyer for the deficiency.
Rule as to the term “exercise” used in Article
1484 of the Civil Code.– Where the plaintiff–
mortgagee after informing the defendant–
mortgagor of its intention to foreclose on the
same mortgage and the voluntary acceptance of
such step (foreclosure) by the defendants, the
plaintiff is not barred from suing on the unpaid
Xhavier D. Bataan Law on Sale
balance since in desisting from a foreclosure of
chattel mortgage, and suing instead for the
unpaid balance, the creditor does not assume
really inconsistent positions, nor is he estopped
considering that detriment to the opposing
party is a prerequisite to the operation of
estoppel. For this reason, it could not be
considered as having “exercised” (the Code uses
the word “exercise”) the remedy of foreclosure
because of its incomplete implementation.
(Radiowealth, Inc. vs. Lavin, [1963])
Rule as regard to the term “action” used in
Article 1484 of the Civil Code.– Action refers
to any judicial or extra–judicial proceeding by
virtue of which the vendor may lawfully be
enabled to exact recovery of the supposed
unsatisfied balance of the purchase price from
the purchaser or his privy.
Rule regarding the term “unpaid balance”
used in Article 1484 of the Civil Code.– Refers
to deficiency judgment to which the mortgagee
may be entitled where, after the mortgaged
chattel is sold at public auction, the proceeds
obtained therefrom are insufficient to cover the
full amount of the secured obligation It includes
all other claims that may likewise be called for
such as interest on the principal, attorney’s fees,
expenses of collection, and the costs. Were it the
intention of the legislature to limit its meaning
to the unpaid balance of the principal, it would
have so stated.
Rules as regard to the term “foreclosure”
used in Article 1484 [3] of the Civil Code.–
Article 1484(3), in referring to foreclosure of a
chattel mortgage given to secure payments in
installments of the purchase price of the thing
sold, means foreclosure by the usual methods
including sale of the thing at public auction.
 Where there is no sale because the
sheriff released the property without
proceeding to sell the same and the sale
was not rescinded by the vendor, the
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latter was not precluded from suing the ineffectual or unavailing due to no fault
vendee for the balance of the purchase on his part.
price. (Pacific Commercial Co. vs. De La
Rama, [1941].) Alternative Alternative
 where the action instituted is for Obligation Remedy
specific performance and the Mere choice The choice
mortgaged property is subsequently categorically and generally
attached and sold by virtue of an unequivocally becomes
execution, the sale thereof does not made and then conclusive only
amount to a foreclosure of the communicated by upon the exercise
mortgage; hence, the seller–creditor is the person entitled of the remedy.
entitled to deficiency judgment and for to exercise the
an alias writ of execution for the option concludes
portion of the judgment that has not the parties.
been satisfied.
 The delivery by the mortgagor of the
possession of the mortgaged chattel to  Actual sale in accordance with the
the mortgagee preparatory for its Chattel Mortgage Law (Act No. 1508,
foreclosure sale can only operate to Sec. 14.) resulting in a deficiency of the
extinguish the mortgagor’s liability if mortgaged chattel is the foreclosure
the mortgagee had actually caused the contemplated by law. But the taking by
foreclosure of the property when it the mortgagee of the mortgaged chattel
recovered possession thereof since it is without proceeding to the sale of the
the fact of foreclosure and actual sale of same at public auction is not lawful. The
the mortgaged chattel that bars the express purpose of taking the
recovery by the vendor of the balance of mortgaged property is to sell the same
the vendee’s outstanding obligation not and/or foreclose the mortgage
satisfied by the sale. constituted thereon either judicially or
 The mortgagee who accepted delivery extra-judicially and thereby liquidate
of the mortgaged property is not the indebtedness in accordance with
estopped from demanding payment of law.
the unpaid obligation in the absence of
clear consent on his part to accept the Rule regarding the prohibition of recovery
delivery in full satisfaction of the after foreclosure.–The prohibition prevent
mortgaged debt in the concept of dacion mortgagees from seizing the mortgaged
en pago. property, buying it at foreclosure sale for a low
 In ordinary alternative obligations, a price and then bringing suit against the
mere choice categorically and mortgagor for a deficiency judgment. The
unequivocally made and then almost invariable result of this procedure was
communicated by the person entitled to that the mortgagor found himself minus the
exercise the option concludes the property and still owing practically the full
parties. The creditor may not thereafter amount of his original indebtedness. The
exercise any other option, unless the mortgagee is limited to the property included in
chosen alternative proves to be the mortgage.

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Where the obligation of the vendee had
already been discharged by sale at public
auction of the property subject of the chattel
mortgage, no deficiency amount can be
recovered by the assignee since the assignment
by the vendor of his rights to the sale of
personal property on installment basis covered
by Article 1484 of the Civil Code does not
change the nature of the transaction between
the parties—the vendor and the vendee. It
remains the same. (Zayas, Jr. vs. Luneta Motor
Company, [1982])
Rules on sale or financing of real estate on
installment payments:
(1) Rights of buyer.– in transaction or
contracts involving the sale or financing
of real estate on installment payments,
including residential condominium
apartments, the following are the rights
given to the buyer who has paid at least
two (2) years of installments in case he
defaults in the payment of succeeding
payments:
(a) To pay without additional interest,
the unpaid installments due within
the total grace period earned by
him fixed at the rate of one (1)-
month grace period for every one
(1) year of installment payments
made. This right however, shall be
exercised by him only once in every
five (5) years of the life of the
contract and its extension, if any;
and
(b) If the contract is cancelled, the
seller shall refund to the buyer the
cash surrender value of the
payments on the property
equivalent to 50% of the total
payments made and, after five (5)
years of installments, an additional
5% every year but not to exceed
90% of the total payments made.
Xhavier D. Bataan Law on Sale
(c) The buyer has the right to sell his
right or assign the same before
actual cancellation of the contract
and to pay in advance any unpaid
installment anytime without
interest and to have such full
payment of the purchase price
annotated in the certificate of title
covering the property.
(2) The actual cancellation shall take place
after 30 days from receipt by the buyer
of the notice of cancellation or the
demand for rescission by a notarial act
and upon full payment of the cash
surrender value to the buyer. Down
payments, deposits or options on the
contract shall be included in the
computation of the total number of
installment payments made. In case the
defaulting buyer has paid less than two
(2) years of installments, the seller shall
give him a grace period of not less than
60 days from the date the installment
became due. If he fails to pay the
installments due at the expiration of the
grace period, the seller may cancel the
contract after 30 days from receipt by
the buyer of the notice of cancellation
or the demand for rescission of the
contract by a notarial act. (Sec. 4, R.A.
No. 6552.)
(3) The Act excludes from its operation
sales on installments of industrial lots,
commercial buildings, and sales to
tenants under the Code of Agrarian
Reforms. (Luzon Brokerage Co., Inc. vs.
Maritime Bldg. Co., Inc., [1978])
(4) The purpose of the law is to protect the
buyers of real estate on installment
payments against onerous and
oppressive conditions. (Sec. 2, R.A. No.
6552.)
Article 1485. The preceding article shall be
applied to contracts purporting to be leases
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of personal property with option to buy,
when the lessor has deprived the lessee of
the possession or enjoyment of the thing
Lease of personal property with option to
buy.
(1) Nature of transaction.– Leases of
personal property with option to buy
on the part of the lessee who takes
possession or enjoyment of the
property leased are really sales of
personalty payable in installments.
Accordingly, the rules provided in
Article 1484 are equally applicable to
the so-called leases of personal
property. Sellers desirous of making
conditional sales of their goods but do
not wish openly to make a bargain in
that form, for one reason or another,
have frequently resorted to the device
of making contracts in the form of
leases either with option to the buyer to
purchase for small consideration at the
end of the term provided the so-called
rent has been duly paid, or with the
stipulation that if the rent throughout
the term is paid, the title shall
thereupon vest on in the lessee.
(Filinvest Credit Corp. vs. Court of
Appeals, 178 SCRA 188 [1989].)
(2) Purpose of provision.– To prevent
vendors from resorting to this form of
contract which usually is in reality
contract of sale of personal property
payable in installments in
contravention of the provisions of
Article 1484. Through the set-up, the
vendor by retaining ownership over the
property in the guise of being the lessor,
retains likewise the right to repossess
the same, without going through the
process of foreclosure, in the event the
vendee-lessee defaults in the payment
Xhavier D. Bataan Law on Sale
of the installments. There arises,
therefore, no need to constitute a
chattel mortgage over the movable sold.
More important, the vendor, after
repossessing the property and, in effect,
cancelling the contract of sale, gets to
keep all the installments-cumrental
already paid. (Filinvest Credit Corp. vs.
Court of Appeals, 178 SCRA 188
[1989].)
Article 1486. In the case referred to in the
two preceding articles, a 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.
 Where the monthly installment payable
by defendants (buyers) was P774.00
and the P5, 655.92 installment
payments corresponded only to seven
(7) monthly installments, the treatment
of the installment as rentals as
stipulated in the contract of sale for
failure of the defendants to comply with
the terms thereof, was held not
unconscionable, since they admitted
having used the air-conditioners sold
for 22 months, meaning they did not
pay 15 monthly installments on the said
air-conditioners and were thus using
the same free for said period to the
prejudice of the plaintiff (seller). (Delta
Motor Sales Corp. vs. Nui Kim Duan,
[1992].)
 The forfeiture of the installments paid
as rentals, was applied only to the
purchase price of P3, 556 which was
considered as fair and reasonable rental
for the period in which the property
was under the control of the awardee of
the homelot but not to the overpayment
of the amount of P8,244.00 for “a
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contrary ruling would unjustly enrich
the vendor to the prejudice of the
vendee." (Gomez vs. CA, [2000].)
Article 1487. The expenses for the execution
and registration of the sale shall be borne by
the vendor, unless there is a stipulation to
the contrary.
As a general rule, the vendor shall
defray not only the expenses for the execution
of the sale but also for the registration of the
same in the absence of any agreement between
the parties to the contrary.
Expenses incurred subsequent to the
transfer of title are to be borne by the buyer,
unless caused by the fault of the seller.
Article 1488. The expropriation of property
for public use is governed by special laws.
The procedure for the exercise of the
power of eminent domain is provided for in
Rule 67 of the Rules of Court. Expropriation
must be decreed by competent authority and
for public use and always upon payment of just
compensation. (Art. 435, par. 1, Civil Code; Art.
III, Sec. 9, Constitution.)
Article 1489. All persons who are authorized
in this Code to obligate themselves may
enter into a contract of sale, saving the
modifications contained in the following
articles.
Where necessaries are those sold and
delivered to a minor or other person
without capacity to act, he must pay a
reasonable price therefor. Necessaries are
those referred to in article 290.
Xhavier D. Bataan Law on Sale
 Generally, all natural and juridical
persons can give consent to contract of
sale. Exceptions are:
(i) Unemancipated minor;
(ii) Demented persons;
(iii) Deaf Mute; and
(iv) Persons who cannot write.
Note: There are no incapacities except those
provided by law and such incapacities cannot
be extended to other cases by implication for
the reason that such construction would be in
conflict with the very nature of Article 1489.
Kinds of incapacity:
(i) Absolute incapacity– Persons who
cannot bind themselves.
(ii) Relative incapacity– Exist only with
reference to certain persons or certain
class or property.
Necessaries– Those things which are needed
for sustenance, dwelling, clothing, medical
attendance, education and transportation
according to the financial capacity of the family
of the incapacitated person.
 Contracts entered into by persons
incapable of giving consent makes the
contract voidable. However, where
necessaries are sold and delivered to
him, without the intervention of the
parent or guardian, he must pay a
reasonable price therefor. The contract
is, therefore, valid but the minor has the
right to recover any excess above a
reasonable value paid by him.
 The sale of real estate effected by
minors who have already passed the
ages of puberty and adolescence and
are now in the adult age, when they
pretended to have already reached
their majority, while in fact they have
not, is valid, and they cannot be
permitted afterwards to excuse
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themselves from compliance with the
obligations assumed by them or to seek
their annulment.
Article 1490. The husband and the wife
cannot sell property to each other, except:
1) When a separation of property was
agreed upon in the marriage
settlements; or
2) When there has been a judicial
separation of property under article
191.
 Generally, sale between husband and
wife is void. Exceptions are:
(i) If there is separation of
property agreed upon before
marriage;
(ii) Where there is a judicial
separation of property under
the Family Code.
 Marriage Settlemen (ante–nuptial
contract) – An agreement entered into
by persons who are about to be united
in marriage, and in consideration
thereof, for the purpose of fixing the
property relations that would be
followed by them for the duration of the
marriage.
Reason for prohibition: Protection of third
persons who, relying upon supposed property
of either spouse, enters into a contract with
either of them only to find out that the property
relied upon was transferred to the other
spouse.
Persons permitted to question sale contract:
 Heirs of either spouse;
 Creditors of either spouse at the time of
transfer; and
 The government.
Xhavier D. Bataan
Article 1491. The following persons cannot
acquire by purchase, even at a public or
judicial auction, either in person or through
the mediation of another:
(1) The guardian, the property of the
person or persons who may be under
his guardianship;
(2) Agents, the property whose
administration or sale may have
been intrusted to them, unless the
consent of the principal has been
given;
(3) Executors and administrators, the
property of the estate under
administration;
(4) Public officers and employees, the
property of the State or of any
subdivision thereof, or of any
government-owned or controlled
corporation, or institution, the
administration of which has been
intrusted to them; this provision
shall apply to judges and
government experts who, in any
manner whatsoever, take part in the
sale;
(5) Justices, judges, prosecuting
attorneys, clerks of superior and
inferior courts, and other officers
and employees connected with the
administration of justice, the
property and rights in litigation or
levied upon an execution before the
court within whose jurisdiction or
territory they exercise their
respective functions; this prohibition
includes the act of acquiring by
assignment and shall apply to
lawyers, with respect to the property
and rights which may be the object of
any litigation in which they may take
part by virtue of their profession;
(6) Any others specially disqualified by
law.
Law on Sale 40
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private interest. The defect can be

ratified by the seller.
Persons prohibited to acquire property by  With respect to judges, justices, lawyer,
reason of relation: public officers and others disqualified
by law, the sale is void as such sale
a) Guardians;
affects public interest.
b) Agents;
c) Executors or administrators; Article 1492. The prohibitions in the two
d) Judges, Justices & Lawyer; preceding articles are applicable to sales in
e) Public officers; and legal redemption, compromises and
f) Others disqualified by law. renunciations.
Others disqualified by law are:

(i) Aliens who are disqualified to purchase Compromise– An amicable settlement of

private agricultural lands; controversy by reciprocal concession.
(ii) an unpaid seller having a right of lien or Renunciation– A creditor gratuitously
having estopped the goods in transitu, abandons his right against his creditor. The
who is prohibited from buying the other terms used by the law are condonation
goods either directly or indirectly in the and remission.
resale of the same at a public or private
sale which he may make Article 1493. If at the time the contract of
(iii) The officer conducting the execution sale is perfected, the thing which is the
sale or his deputies cannot become a object of the contract has been entirely lost,
purchaser, or be interested directly or the contract shall be without any effect.
indirectly in any purchase at an
execution sale. But if the thing should have been lost in part
only, the vendee may choose between
Note: The persons disqualified to buy referred
withdrawing from the contract and
to in Articles 1490 and 1491 are also
demanding the remaining part, paying its
disqualified to become lessees of the things
price in proportion to the total sum agreed
mentioned thereon. (Art. 1646.)
upon.
Reason for prohibition: Ground upon public
policy considerations which disallow the
Article 1493 of the Article 1480 & 1504
transactions entered into by them, whether
Civil Code of the Civil Code
directly or indirectly, in view of the fiduciary
Loss or injury Loss or injury
relationship involved or the peculiar control
occurred before or at occurred after the
exercised by these individuals over the
the time the contract contract is perfected
properties or rights covered.
of sale is perfected. but prior to the time of
Effect of sale in violation of prohibition: delivery.

 With respect to guardians, agents and

executors or administrators, the sale is Rules regarding loss of the thing at the time
voidable as such sale affects only of sale:

Xhavier D. Bataan Law on Sale 41

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 Where the thing is entirely lost at the
time of perfection, the contract is
inexistent and void. There being no
contract, there is no necessity to bring
an action for annulment.
 Where the subject matter is partially
lost, the vendee may elect between:
(i) Withdrawing from the sale and
demanding the remaining part;
and
(ii) Paying its proportional price.
A thing is considered lost: The thing is lost
when it perishes or goes out of commerce or
disappears in such a way that its existence is
unknown or it cannot be recovered.
A thing is considered perish: A thing perishes
if there is material and substantial deterioration
which completely alters the quality and nature
of the thing, former utility is lost.
Article 1494. Where the parties purport a
sale of specific goods, and the goods without
the knowledge of the seller have perished in
part or have wholly or in a material part so
deteriorated in quality as to be substantially
changed in character, the buyer may at his
option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or
in so much thereof as have not
deteriorated, and as binding the
buyer to pay the agreed price for the
goods in which the ownership will
pass, if the sale was divisible.
Article 1493 of the Article 1494 of the
Civil Code Civil Code
Applies to sale of Applies to sale of
specific thing. goods, that is, the
object of the sale
consists of a mass of
“specific goods”.
Xhavier D. Bataan Law on Sale
Specific Goods –Goods identified and agreed
upon at the time a contract of sale is made.
Divisible Contract Indivisible Contract
Consideration is made Consideration is entire
up of several parts. and single.
Doctrines under Article 1494:
 Where the buyer elects to buy a
partially lost indivisible thing, he shall
pay for the proportional price of the
thing.
 Where without knowledge of the seller,
the specific goods have perished in part
or wholly, the buyer may treat the sale
as avoided.
 Where without knowledge of the seller,
the specific goods have perished in part
or wholly and sale was divisible, the
buyer may treat the sale as valid and as
binding the buyer to pay the agreed
price for the goods in which the
ownership will pass.
Seller’s correlative right: The right to receive
the purchase price for the thing sold.
Article 1495. The vendor is bound to
transfer the ownership of and deliver, as
well as warrant the thing which is the object
of the sale.
Principal obligations of the vendor:
(i) To transfer the ownership of the
determinate thing sold;
(ii) To deliver the thing, with its accessions
and accessories, if any, in the condition
in which they were upon the perfection
of the contract (Art. 1537.);
(iii) To warrant against eviction and against
hidden defects (Arts. 1495, 1547.);
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(iv) To take care of the thing, pending
delivery, with proper diligence (see Art.
1163.); and
(v) To pay for the expenses of the deed of
sale, unless there is a stipulation to the
contrary. (Art. 1487.)
Doctrines under Article 1496 of the CC:
 The vendor need not be the owner of
the thing at the time of perfection of the
contract, it is sufficient that he has “a
right to transfer the ownership thereof
at the time it is delivered.
 One who sells something he does not
yet own is bound by the sale when he
acquires it later. (Bucton vs. Gabar,
[1974])
 When a property belonging to a person
is unlawfully taken by another, the
former has the right of action against
the latter for the recovery of the
property. Such right may be transferred
by the sale or assignment of the
property and the transferee can
maintain such action against the
wrongdoer. (Heirs of Q.Seraspi vs. CA)
 The transfer of ownership and the
delivery of the thing sold are not
essential to the perfection of the sale
contract. The buyer’s remedy is to ask
for rescission of fulfilment with
damages.
 The purchaser in execution sales is not
entitled to immediate possession of the
property sold since the effective
conveyance of the land is accomplished
by the deed which is issued only after
the period of redemption has expired.
 In a sale of registered land, the vendee
has a right to receive and the vendor
the corresponding obligation to transfer
to him, not only the possession and
employment of the land but also the
Xhavier D. Bataan Law on Sale
certificate of title.(Gabila vs. perez,
[1989])
 The purchaser is entitled to recover the
money paid by him where the contract
is set aside by reason of the mutual
material mistake of the parties as to the
identity or quantity of the land sold.
And where the purchaser recovers the
purchase price from a vendor who fails
or refuses to deliver the title, he is
entitled, as a general rule, to interest on
the money paid from the time of
payment.
Article 1496. The ownership of the thing
sold is acquired by the vendee from the
moment it is delivered to him in any of the
ways specified in articles 1497 to 1501, or in
any other manner signifying an agreement
that the possession is transferred from the
vendor to the vendee.
Generally, actual or constructive
delivery of the thing sold constitutes transfer of
ownership. By way of exception, the parties
may stipulate that ownership shall pass only
after full payment or fulfilment of certain
conditions.
Obligation of the seller before delivery to
the buyer: This obligation states that the seller
should take care of the thing, pending delivery,
with proper diligence. The seller should
exercise diligence of a good father of a family
and deliver the accessories and accessions.
Ways of effecting delivery:
a) By actual or real delivery (Art. 1497.);
b) By constructive or legal delivery (Arts.
1498-1501.); or
c) By delivery in any other manner
signifying an agreement that the
possession is transferred to the vendee.
(Arts. 1496-1499.)
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Note: The “delivery” must be with actual Contract of Sale Contract of Sale
intention of the vendor to deliver and transfer Delivery of the thing The moment where
ownership to the vendee and the acceptance of sold coupled with the meeting of the minds
the latter. The delivery must be made to the payment of the price. of the parties take
vendee or his authorized representative. Where place. (Consensual)
the vendee did not name any person to whom
the delivery shall be made in his behalf, the
vendor is bound to deliver exclusively to him. Contracts Delivery/Tradition
Constitute titles or Method of
Constructive delivery–A general term rights to the transfer accomplishing the
comprehending all those acts which, although or acquisition of same, the title and the
not conferring physical possession of the thing, ownership method of acquiring it
have been held by construction of law being different in our
equivalent to acts of real delivery. law.

Ways of effecting constructive delivery:

Notes:
(i) By execution of public instrument
(Article 1498 of the CC);
(ii) By symbolical tradition or traditio
symbolica;
(iii) By traditio longa manu (Art. 1499.);
(iv) By traditio brevi manu;
(v) By traditio constitutum possessorium
(Art. 1500.); or
(vi) By quasi-delivery or quasi-traditio. (Art.
1501.)
Article 1497. The thing sold shall be
understood as delivered, when it is placed in
the control and possession of the vendee.
Tradition or delivery–A derivative mode of
acquiring ownership, by virtue of which one
who has the right and intention to alienate a
corporeal thing, transmits it by virtue of a just
title to one who accepts the same.
Actual delivery–The thing sold is placed in the
control and possession of the vendee or his
agent. This involves the physical delivery of the
thing and is usually done by the passing of a
movable thing from hand to hand.
Perfection of Consummation of
 Delivery is also necessary to enable the
vendee to enjoy and make use of the
property purchased.
 Our law does not admit the doctrine of
transfer of property by mere consent.
(Chua vs. CA. [2003])
 There is no delivery as to transfer
ownership where the vendee takes
possession of the personal property
subject matter of the contract of sale by
stealing the same while in the custody
of the vendor or his agent.
 Generally, a perfected contract of sale
cannot be challenged on the ground of
the seller’s non-ownership of the thing
sold at the time of the perfection of the
contract.
 When the thing subject of the sale is
placed in the control and possession of
the vendee or his agent, the delivery is
complete and the vendee cannot avoid
liability in case the thing is
subsequently lost without the fault of
the vendor.
 Where the buyer has not become the
owner for lack of delivery, his action is
not accion reinvidicatoria but one

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against the vendor for specific
performance or rescission, with
damages in either case. (Art. 1191.)
 Actual or manual delivery of an article
sold is not always essential to the
passing of title thereto. The parties to
the contract may agree when and on
what conditions the ownership in the
subject of the contract shall pass to the
buyer.
Article 1498. When the sale is made through
a public instrument, the execution thereof
shall be equivalent to the delivery of the
thing which is the object of the contract, if
from the deed the contrary does not appear
or cannot clearly be inferred.
With regard to movable property, its
delivery may also be made by the delivery of
the keys of the place or depository where it
is stored or kept.
Doctrines:
 Article 1498 pertains to symbolic
delivery.
 The execution of a public instrument as
a manner of delivery applies to movable
as well as the immovable property since
the law does not make any distinction
and it can be clearly inferred by the use
of the word “also” in paragraph 2 of
Article 1498.
 Prior physical delivery or possession is
not legally required since the execution
of the deed of conveyance is deemed
equivalent to delivery.
 The mere execution of the deed of sale
in a public document is equivalent to
the delivery of the property “if from the
deed the contrary does not appear or
cannot clearly be inferred.
Xhavier D. Bataan Law on Sale
 Where it appears from the document or
it can be inferred therefrom that it was
not the intention of the parties to make
delivery, no tradition can be deemed to
have taken place.
 Presumptive delivery by execution of
public instrument can also be negated
by failure of the vendee to take material
possession of the land subject of the
sale in the concept of purchaser-owner.
 Symbolic delivery by the execution of a
public instrument is equivalent to
actual delivery only where the thing is
subject to the control of the vendor and
there is no impediment that may
prevent the passing of the property
from the hands of the vendor into those
of the vendee.
 It is not enough to confer upon the
purchaser the ownership and the right
of possession. The thing sold must be
placed in his control in order that it can
be said that delivery has been effected.
Property Registration Decree (PD 1529):
 The provisions of Article 1498
regarding passing of title upon delivery
by execution of a public instrument
must be deemed modified by this law.
Section 51 of PD1529:
 No deed purporting to convey or affect
registered land, shall take effect as a
conveyance or bind the land (as against
third persons) until its registration. In
accordance with this section, no act of
the parties can transfer the ownership
of real estate under the Torrens System.
That is done by the act of registration of
the conveyance which the parties have
made.
Symbolic Tradition:
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 Constructive delivery is symbolic when
to effect the delivery, the parties make
use of a token symbol to represent the
thing delivered.
 Delivery of key where the thing sold is
stored.
 There is symbolic delivery of goods to
the vendee upon delivery to him of
delivery orders which would authorize
him to withdraw the goods from a
warehouse.
Article 1499. The delivery of movable
property may likewise be made by the mere
consent or agreement of the contracting
parties, if the thing sold cannot be
transferred to the possession of the vendee
at the time of the sale, or if the latter already
had it in his possession for any other reason.
Traditio longa manu – 1st part of Art. 1499. A
mode of delivery which takes place by the mere
consent or agreement of the contracting parties
as when the vendor merely points to the thing
sold which shall thereafter be at the control and
disposal of the vendee.
“By the mere consent or agreement of the
contracting parties”– Qualified by the phrase
“if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale.”
Traditio Brevi Manu – A mode of legal delivery
where vendee has already the possession of the
thing sold by virtue of another title as when the
lessor sells the thing leased to the lessee.
Instead of turning over the thing to the vendor
so that the latter may, in turn, deliver it, all
these are considered done by action of law.
Article 1500. There may also be tradition
constitutum possessorium
Traditio Constitutum Possessorium:
Xhavier D. Bataan Law on Sale
 Opposite of Traditio brevi manu
 Takes place when the vendor continues
in possession of the property sold not
as owner but in some other capacity.
Article 1501. With respect to incorporeal
property, the provisions of the first
paragraph of article 1498 shall govern. In
any other case wherein said provisions are
not applicable, the placing of the titles of
ownership in the possession of the vendee
or the use by the vendee of his rights, with
the vendor's consent, shall be understood as
a delivery.
Incorporeal thing–Without material form or
substance. Corporeal is the opposite.
Traditio: Tradition can only be made with
respect to corporeal things.
Quasi–Traditio: Delivery is effected by:
a) By execution of public instrument; or
b) When the mode of delivery is not
applicable, by the placing of the titles of
ownership in the possession of the
vendee; or
c) By allowing the vendee to use his rights
as new owner with the consent of the
vendor.
Notes w/ respect to Traditio:
 In all the forms of delivery, it is
necessary that the act be coupled with
the intention of delivering the thing.
 Issuance of sale invoice does not prove
transfer of ownership of the thing sold
to the buyer since invoice is nothing
more than a detailed statement of the
nature, quality and cost of the thing sold
and has been considered not a bill of
sale.
 Any act, although not provided for in
the preceding articles, but accompanied
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by the evident intention of the vendor Sale on trial or approval–A contract in the
to deliver or of the vendee to receive nature of an option to purchase if the goods
the thing sold, will be considered as prove satisfactory, the approval of the buyer
constituting tradition. being a condition precedent.
 In all different modes of effecting
delivery, it is the real intention of the On sale or return Sale on trial
parties, to deliver on the part of the Subject to resolutory Subject to suspensive
vendor, and to accept on the part of the condition condition
vendee, which gives legal effect to the Depends entirely on Depends on the
act. Without such intention, there is no the will of the buyer character or quality of
tradition. goods
ownership of the ownership remains in
When goods are delivered to the buyer "on goods passes to the the seller until the
sale or return" to give the buyer an option to buyer on delivery and buyer signifies his
return the goods instead of paying the price, subsequent return of approval or
the ownership passes to the buyer on the goods reverts acceptance to the
delivery, but he may revest the ownership in ownership in the seller
the seller by returning or tendering the seller
goods within the time fixed in the contract, risk of loss or injury Risk still remains with
or, if no time has been fixed, within a rests upon the buyer the seller.
reasonable time.
When goods are delivered to the buyer on
approval or on trial or on satisfaction, or Note: Article 1502 of the CC uses the phrase “on
other similar terms, the ownership therein sale or return.” If the contract uses instead the
passes to the buyer: phrase “for sale or return,” the intention may be
1) When he signifies his approval or to enter into a contract of agency.
acceptance to the seller or does any
Article 1503. When there is a contract of sale
other act adopting the transaction;
of specific goods, the seller may, by the
2) If he does not signify his approval or
terms of the contract, reserve the right of
acceptance to the seller, but retains
possession or ownership in the goods until
the goods without giving notice of
certain conditions have been fulfilled. The
rejection, then if a time has been
right of possession or ownership may be
fixed for the return of the goods, on
thus reserved notwithstanding the delivery
the expiration of such time, and, if no
time has been fixed, on the of the goods to the buyer or to a carrier or
expiration of a reasonable time. other bailee for the purpose of transmission
What is a reasonable time is a to the buyer.
question of fact
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller
On Sale or return–A contract by which or his agent, or to the order of the seller or
property is sold but the buyer, who becomes of his agent, the seller thereby reserves the
the owner of the property on delivery, has the ownership in the goods. But, if except for the
option to return the same to the seller instead form of the bill of lading, the ownership
of paying the price. would have passed to the buyer on shipment

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of the goods, the seller's property in the
goods shall be deemed to be only for the
purpose of securing performance by the
buyer of his obligations under the contract.
Where goods are shipped, and by the bill of
lading the goods are deliverable to order of
the buyer or of his agent, but possession of
the bill of lading is retained by the seller or
his agent, the seller thereby reserves a right
to the possession of the goods as against the
buyer.
Where the seller of goods draws on the
buyer for the price and transmits the bill of
exchange and bill of lading together to the
buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby. If, however, the bill of
lading provides that the goods are
deliverable to the buyer or to the order of
the buyer, or is indorsed in blank, or to the
buyer by the consignee named therein, one
who purchases in good faith, for value, the
bill of lading, or goods from the buyer will
obtain the ownership in the goods, although
the bill of exchange has not been honored,
provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods,
without notice of the facts making the
transfer wrongful.
 Generally, the ownership in the goods
sold passes to the buyer upon their
delivery to the carrier and consequently
the risk of loss falls upon the buyer.
Exceptions are:
i. if a contrary intention appears
by the terms of the contract;
Xhavier D. Bataan Law on Sale
ii. in the cases provided in the
second and third paragraphs of
Article 1523; and
iii. In the cases provided in the
first, second, and third
paragraphs of Article 1503.
When carrier becomes bailee for seller:
Where goods are shipped and by bill of lading,
the goods are deliverable to the seller or his
agent or to the order of the seller or his agent,
the seller thereby reserves the ownership in the
goods and the carrier is a bailee for him and not
the buyer. This principle is applicable even
though the goods are shipped on the buyer’s
vessel.
Rights of seller:
i. Retain the goods until the buyer
performs the obligation under the
contract;
ii. Dispose the goods to third persons (but
seller is liable for damages to buyer.)
second buyer has better right over the
goods.
Bill of Lading:
 It is a contract and a receipt for the
transport of goods and their delivery to
the person named therein, to order, or
to bearer. Involves three person,
carrier, shipper, and consignee. It is
issued by the carrier to the shipper
detailing goods and destination.
 The form of bill of lading is not
conclusive. The intention of the parties
is important.
Rules with respect to form of bill of lading:
 Where the seller has named the buyer
as consignee, the property has passed
to the consignee or at least it seems to
have been so to one who inspects the
document.
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 Where the bill of lading, though naming
the seller as consignee, is indorsed by
him to the buyer or in blank, the
possession of the document by the
buyer gives him, if not the actual title, at
least an apparent ownership.
 Where the bill of lading names the
seller or a third person as consignee
and no indorsement of the document
had been made, possession by the
buyer would not indicate that the buyer
had title.
Seller holds title merely for security:
 Buyer bears the risk of loss;
 The title does not pass to the buyer
until he receives the order bill of lading
properly indorsed; and
 The buyer has more than a mere
contract right in regards to the goods.
As beneficial owner, he may, as against
anyone except an innocent purchaser
for value of the bill of lading from the
consignee, bring an action based on
ownership on making tender of the
price.
Doctrines under paragraph 3 of Art. 1503:
 The effect of the retention of the bill of
lading, under such circumstances,
controlling as it does the possession of
the goods, is, therefore, closely
analogous to the retention of a lien by
the seller after the property has passed
to the buyer.
 It is necessary that the order bill,
properly indorsed, must be
surrendered.
 Where what is issued is a straight bill of
lading, identification of the consignee is
sufficient and does not require the
surrender of the bill by the consignee in
order for the latter to get the goods.
Xhavier D. Bataan Law on Sale
Methods or devices which the seller of goods
retains a hold upon them by means of the
bill of lading after he has shipped them:
i. By consigning the goods to himself,
either by an order bill or a straight bill;
ii. By consigning the goods to the order of
the buyer and retaining possession of
the bill of lading; and
iii. By consigning the goods to a third
person (usually a banker) requesting
the latter to retain the bill of lading or
goods until payment of the price. When
the price is paid, the consignee of the
goods indorses the bill or delivers the
goods to the buyer.
Notes:
 In third device, it is immaterial whether
the bill is a straight bill or order bill so
far as the protection of the seller is
concerned.
 By naming a third person as consignee
of the bill of lading, the seller vests a
legal title in the third person.
 The buyer bears the risk of loss.
 Where the document gives the buyer
apparent ownership and a third person
purchases the goods relying thereon, it
seems clear on broad principles of
justice that since one of two innocent
parties must suffer, he should suffer
whose act has brought about the loss.
Consequently, the seller ought not to be
allowed to recover the goods from the
third person.
Article 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the
ownership therein is transferred to the
buyer, but when the ownership therein is
transferred to the buyer the goods are at the
buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has
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been made to the buyer or to a bailee
for the buyer, in pursuance of the
contract and the ownership in the
goods has been retained by the seller
merely to secure performance by the
buyer of his obligations under the
contract, the goods are at the buyer's
risk from the time of such delivery;
(2) Where actual delivery has been
delayed through the fault of either
the buyer or seller the goods are at
the risk of the party in fault.
Res perit domino: The risk of loss is borne by
the owner of the thing at the time of the loss
where thing is loss by fortuitous event.
Exceptions are:
i. Where the seller reserves the
ownership of the goods merely to
secure the performance by the buyer of
his obligations under the contract, the
ownership is considered transferred to
the buyer who, therefore, assumes the
risk from the time of delivery; and
ii. Where actual delivery had been delayed
through the fault of either the buyer or
seller, the goods are at the risk of the
party at fault with respect to any loss
which might not have occurred but for
such fault. The law punishes the party
at fault.
Article 1505. Subject to the provisions of this
Title, where goods are sold by a person who
is not the owner thereof, and who does not
sell them under authority or with the
consent of the owner, the buyer acquires no
better title to the goods than the seller had,
unless the owner of the goods is by his
conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
Xhavier D. Bataan Law on Sale
1) The provisions of any factors’ act,
recording laws, or any other
provision of law enabling the
apparent owner of goods to dispose
of them as if he were the true owner
thereof;
2) The validity of any contract of sale
under statutory power of sale or
under the order of a court of
competent jurisdiction;
3) Purchases made in a merchant's
store, or in fairs, or markets, in
accordance with the Code of
Commerce and special laws.
Generally, no one can give what he has
not or transfer a greater right to another than
he himself has. Exceptions are:
i. Where owner of the goods is, by his
conduct, precluded from denying the
seller’s authority to sell;
ii. Where the law enables the apparent
owner to dispose of the goods as if he
were the true owner thereof;
iii. Where the sale is sanctioned by
statutory of judicial authority;
iv. Where the sale is made at merchant’s
stores, fairs or markets.
v. Where the seller has a voidable title
which has not been avoided at the time
of the sale;
vi. Where seller subsequently acquires
title.
Notes:
 Factors Acts are designed to protect
third persons, who under specified
conditions, deal with an agent believing
him to be the owner of goods.
 Examples of Recording Laws:
i. Property Registration Decree
(PD 1529);
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ii. Land Transportation & Traffic document is a negotiable document of title.

Code (RA 4136); and
iii. Revised Administrative Code
with regard to sale of large Definition of terms:
cattle (Sec 529) and sale of
 Document of title of goods–Includes any
vessels. (Sec 1171)
bill of lading, dock warrant, “quedan,”
 Examples of any other provisions:
or warehouse receipt or order for the
i. Negotiable Instruments Law
delivery of goods, or any other
(Act 2031); and
document used in the ordinary course
ii. Warehouse Receipt Law (Act
of business in the sale or transfer of
2137)
goods, as proof of the possession or
 When a person conveys property to
control of the goods, or authorizing or
another of which at the time he is not
purporting to authorize the possessor
the owner, his subsequent acquisition
of the document to transfer or receive,
of title validates his previous
either by indorsement or by delivery,
conveyance. This doctrine is equally
goods represented by such document.
applicable to conveyance of usufructs as
well as to transfers of full ownership.
 Goods–Included all chattels personal
Article 1506. Where the seller of goods has a but not things in action or money of
voidable title thereto, but his title has not legal tender in the Philippines. The term
been avoided at the time of the sale, the includes growing fruits or crops.
buyer acquires a good title to the goods,
provided he buys them in good faith, for  Order–Relating to documents of title
value, and without notice of the seller's means an order by indorsement on the
defect of title. documents.

Nature & function of document of title:

Requisites for the acquisition of good title by
i. Receipts of, or orders upon, a bailee of
the buyer where the seller has only voidable
goods represented;
title to the goods:
ii. Evidence of transfer of title and
a) Before title of seller has been avoided; possession of goods and contract
b) In good faith for value; and between the parties.
c) Without notice to seller’s defect of title.
Most common forms of documents of title:
Basis of Article 1506 of the CC: Predicated on
 Bill of lading–It is a contract and a
the principle that where loss has happened
receipt for the transport of goods and
which must fall on one of two innocent persons,
their delivery to the person named
it should be borne by him who is the occasion of
therein, to order, or to bearer. It usually
the loss.
involves three persons—the carrier, the
Article 1507. A document of title in which it shipper, and the consignee. The shipper
is stated that the goods referred to therein and the consignee may be one and the
will be delivered to the bearer, or to the same person. Its acceptance generally
order of any person named in such

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constitutes the contract of carriage even
though not signed;
 Dock warrant–It is an instrument given
by dock owners to an importer of goods
warehoused on the dock as a
recognition of the importer’s title to the
said goods, upon production of the bill
of lading; and
 Warehouse receipt–A contract or receipt
for goods deposited with a title has been indorsed in blank or to bearer,
warehouseman containing the latter’s
undertaking to hold and deliver the said
goods to a specified person, to order, or
to bearer.
 Quedan–A warehouse receipt usually
for sugar received by a warehouseman.
Laws governing documents of title:
i. The Civil Code;
ii. The Warehouse Receipt Law; and
iii. The Code of Commerce.
Classes of documents of titles:
 Negotiable documents of title–Those by
the terms of which the bailee
undertakes to deliver the goods to the
bearer and those by the terms of which
the bailee undertakes to deliver the
goods to the order of a specified person;
or
 Non–negotiable documents of title–
Those by the terms of which the goods
covered are deliverable to a specified
person.
Article 1508. A negotiable document of title
may be negotiated by delivery:
(1) Where by the terms of the document
the carrier, warehouseman or other
bailee issuing the same undertakes
to deliver the goods to the bearer; or
(2) Where by the terms of the document
the carrier, warehouseman or other
bailee issuing the same undertakes
Xhavier D. Bataan Law on Sale
to deliver the goods to the order of a
specified person, and such person or
a subsequent indorsee of the
document has indorsed it in blank or
to the bearer.
Where by the terms of a negotiable
document of title the goods are deliverable
to bearer or where a negotiable document of
any holder may indorse the same to himself
or to any specified person, and in such case
the document shall thereafter be negotiated
only by the indorsement of such indorsee.
 Negotiable document of title is
negotiable by delivery: Where goods
deliverable to the bearer, or when it is
indorsed in blank or to the bearer by
the person to whose order the goods
are deliverable or by a subsequent
indorsee.
 Indorsement in blank: Where the
holder merely signs his name at the
back of the receipt without specifying to
whom the goods are to be delivered.
 Where document is specially
indorsed: Becomes an order document
of title and negotiation can only be
effected by the indorsement of the
indorsee.
 Special Indorsement: Specifies the
person to whom or to whose order the
goods are to be delivered.
Note: Article 1508 is similar to Section 37 of the
Warehouse Receipts Law (Act No. 2137.) except
that the latter treats only of a negotiable receipt
which may be issued by a warehouseman.
Article 1509. A negotiable document of title
may be negotiated by the indorsement of the
person to whose order the goods are by the
terms of the document deliverable. Such
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indorsement may be in blank, to bearer or to
a specified person. If indorsed to a specified
person, it may be again negotiated by the
indorsement of such person in blank, to
bearer or to another specified person.
Subsequent negotiations may be made in
like manner.
Negotiable of negotiable document by
indorsement:
 A negotiable document of title by the
terms of which the goods are
deliverable to a person specified
therein may be negotiated only by the
indorsement of such person.
 If indorsed in blank or to bearer, the
document becomes negotiable by
delivery.
 If indorsed to a specified person, it may
be again negotiated by the indorsement
of such person in blank, to bearer, or to
another specified person. Delivery
alone is not sufficient.
Note: A party is liable only as guarantor and not
as indorser if his indorsement is made for the
purpose of identification only.
Article 1510. If a document of title which
contains an undertaking by a carrier,
warehouseman or other bailee to deliver the
goods to bearer, to a specified person or
order of a specified person or which
contains words of like import, has placed
upon it the words "not negotiable," "non-
negotiable" or the like, such document may
nevertheless be negotiated by the holder
and is a negotiable document of title within
the meaning of this Title. But nothing in this
Title contained shall be construed as
limiting or defining the effect upon the
obligations of the carrier, warehouseman, or
other bailee issuing a document of title or
Xhavier D. Bataan Law on Sale
placing thereon the words "not negotiable,"
"non-negotiable," or the like.
 Under Article 1510, the words “not
negotiable,” “non-negotiable” and the
like when placed upon a document of
title in which the goods are to be
delivered to “order” or to “bearer” have
no effect and the document continues to
be negotiable.
 Under the Warehouse Receipts Law,
any provision inserted in a negotiable
receipt that it is non-negotiable is
declared void. (Sec. 5, par. 2.)
 Where the document of title is to order,
the bailee is obliged to take it up before
delivering the goods. Accordingly, he is
liable to the holder of an order
document if the goods are delivered to
the consignee without surrender of the
document even though the latter was
marked “not negotiable.”
Note: The 1st sentence of Article 1510 should
read “to a specified person or order or to the
order of a specified person.”
Article 1511. A document of title which is
not in such form that it can be negotiated by
delivery may be transferred by the holder by
delivery to a purchaser or donee. A non-
negotiable document cannot be negotiated
and the indorsement of such a document
gives the transferee no additional right.
 A non-negotiable document of title
cannot be negotiated. Nevertheless, it
can be transferred or assigned by
delivery. In such a case, the transferee
or assignee acquires only the rights
stated in Article 1514. Even if the
document is indorsed, the transferee
acquires no additional right.
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 Article 1511 is exactly the same as
Section 39 of the Warehouse Receipts
Law.
Article 1512. A negotiable document of title
may be negotiated:
1. By the owner thereof; or
2. By any person to whom the
possession or custody of the
document has been entrusted by the
owner, if, by the terms of the
document the bailee issuing the
document undertakes to deliver the
goods to the order of the person to
whom the possession or custody of
the document has been entrusted, or
if at the time of such entrusting the
document is in such form that it may
be negotiated by delivery.
Persons who may negotiate a document:
i. The owner;
ii. Any person to whom the possession or
custody of the document has been
entrusted by the owner; and
iii. The holder or the bearer if such
document is a bearer document of title.
Article 1513. A person to whom a negotiable
document of title has been duly negotiated
acquires thereby:
(1) Such title to the goods as the person
negotiating the document to him had
or had ability to convey to a
purchaser in good faith for value and
also such title to the goods as the
person to whose order the goods
were to be delivered by the terms of
the document had or had ability to
convey to a purchaser in good faith
for value; and
(2) The direct obligation of the bailee
issuing the document to hold
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possession of the goods for him
according to the terms of the
document as fully as if such bailee
had contracted directly with him.
Rights of person to whom document has
been negotiated:
a) The title of the person negotiating the
document, over the goods covered by
the document;
b) The title of the person (depositor or
owner) to whose order by the terms of
the document the goods were to be
delivered, over such goods; and
c) The direct obligation of the bailee
(warehouseman or carrier) to hold
possession of the goods for him, as if
the bailee had contracted directly with
him.
Note: One who purchases, therefore, a
negotiable document of title issued to a thief
acquires no right over the goods as the thief has
no right to transfer, notwithstanding that such
purchaser is innocent. But the purchaser
acquires a good title where the owner, by his
conduct, is estopped from asserting his title.
Article 1514. A person to whom a document
of title has been transferred, but not
negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to
the terms of any agreement with the
transferor.
If the document is non-negotiable, such
person also acquires the right to notify the
bailee who issued the document of the
transfer thereof, and thereby to acquire the
direct obligation of such bailee to hold
possession of the goods for him according to
the terms of the document.
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Prior to the notification to such bailee by the
transferor or transferee of a non-negotiable
document of title, the title of the transferee
to the goods and the right to acquire the
obligation of such bailee may be defeated by
the levy of an attachment of execution upon
the goods by a creditor of the transferor, or
by a notification to such bailee by the
transferor or a subsequent purchaser from
the transferor of a subsequent sale of the
goods by the transferor.
Rights of the person to whom a negotiable
document of title (not duly negotiated) has
been transferred (par. 1.) or of the
transferee of a non-negotiable document.
(pars. 2 and 3.):
i. The title to the goods as against the
transferor;
ii. The right to notify the bailee of the
transfer thereof; and
iii. The right, thereafter, to acquire the
obligation of the bailee to hold the
goods for him.
Note: The right of the transferee is not absolute
as it is subject to the terms of any agreement
with the transferor. He merely steps into the
shoes of the transferor.
Attachment of goods covered by document
transferred:
 The transfer of a non-negotiable
document of title does not effect the
delivery of the goods covered by it.
Accordingly, before notification, the
bailee is not bound to the transferee
whose right may be defeated by a levy
of an attachment or execution upon the
goods by the creditor of the transferor
or by a notification to such bailee of the
subsequent sale of the goods.
Xhavier D. Bataan Law on Sale
 Where the document is negotiable, the
goods cannot be attached or be levied
under an execution unless the
document be first surrendered to the
bailee or its negotiation enjoined.
Note: The word “of” between “attachment” and
“execution” in the third paragraph should more
properly read “or”.
Article 1515. Where a negotiable document
of title is transferred for value by delivery,
and the indorsement of the transferor is
essential for negotiation, the transferee
acquires a right against the transferor to
compel him to indorse the document unless
a contrary intention appears. The
negotiation shall take effect as of the time
when the indorsement is actually made.
Rights of a person to whom an order
document of title, which may not properly
be negotiated by mere delivery, has been
delivered, without indorsement:
i. The right to the goods as against the
transferor; and
ii. The right to compel the transferor to
indorse the indorsement.
Determining whether transferee is a
purchaser for value in good faith without
notice:
 Transferee is purchaser for value in
good faith without notice where at the
time of indorsement, purchaser had no
notice of seller’s defect of title since
negotiation becomes complete only at
the time of indorsement.
 Transferee is purchaser for value not in
good faith or with notice where at the
time of indorsement, purchaser had
notice of seller’s defect of title since
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negotiation becomes complete only at
the time of indorsement.
Article 1516. A person who for value
negotiates or transfers a document of title
by indorsement or delivery, including one
who assigns for value a claim secured by a
document of title unless a contrary intention
appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate
or transfer it;
(3) That he has knowledge of no fact
which would impair the validity or
worth of the document; and
(4) That he has a right to transfer the
title to the goods and that the goods
are merchantable or fit for a
particular purpose, whenever such
warranties would have been implied
if the contract of the parties had
been to transfer without a document
of title the goods represented
thereby.
A person negotiating or transferring
documents for value warrants that:
i. Document is genuine;
ii. Person has legal right to negotiate or
transfer;
iii. No infirmity to the document; and
iv. Person has right to transfer title to the
goods and goods are merchantable or
fit for particular purpose.
Notes:
 It is the duty of every indorsee to know
that all previous indorsements are
genuine; otherwise, he will not acquire
a valid title to the instrument.
 The last indorser warrants that all
previous indorsements are genuine.
Xhavier D. Bataan
Article 1517. The indorsement of a
document of title shall not make the
indorser liable for any failure on the part of
the bailee who issued the document or
previous indorsers thereof to fulfill their
respective obligations.
 An indorser is not a guarantor since the
indorsement of a document of title
amounts merely to a conveyance by the
indorser, not a contract of guaranty.
 Article 1517 of the CC is similar to Sec.
45 of the Warehouse Receipt Law
Article 1518. The validity of the negotiation
of a negotiable document of title is not
impaired by the fact that the negotiation was
a breach of duty on the part of the person
making the negotiation, or by the fact that
the owner of the document was deprived of
the possession of the same by loss, theft,
fraud, accident, mistake, duress, or
conversion, if the person to whom the
document was negotiated or a person to
whom the document was subsequently
negotiated paid value therefor in good faith
without notice of the breach of duty, or loss,
theft, fraud, accident, mistake, duress or
conversion.
 Negotiable document may be
negotiated by any person in possession
of the same, however such possession
may have been acquired. In other
words, it may be negotiated even by a
thief or finder and the holder thereof
would acquire a good title thereto if he
paid value therefor in good faith
without notice of the seller’s defect of
title.
Article 1519. If goods are delivered to a
bailee by the owner or by a person whose
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act in conveying the title to them to a
purchaser in good faith for value would bind
the owner and a negotiable document of title
is issued for them they cannot thereafter,
while in possession of such bailee, be
attached by garnishment or otherwise or be
levied under an execution unless the
document be first surrendered to the bailee
or its negotiation enjoined. The bailee shall
in no case be compelled to deliver up the
actual possession of the goods until the
document is surrendered to him or
impounded by the court.
 While in the possession of such bailee,
the goods cannot be attached or levied
under an execution unless the
document be first surrendered, or its
negotiation prohibited by the court.
 The bailee cannot be compelled to
deliver up the possession of the goods
until the document is surrendered to
him or impounded by the court. This
prohibition is for the protection of the
bailee since he could be made liable to a
subsequent purchaser for value in good
faith.
 The provisions of Article 1519 do not
apply if the person depositing is not the
owner of the goods (like a thief) or one
who has no right to convey title to the
goods binding upon the owner. Neither
does it apply to actions for recovery or
manual delivery of goods by the real
owner nor to cases where the
attachment is made before the issuance
of the negotiable document of title.
 The rights acquired by attaching
creditors cannot be defeated by the
issuance of a negotiable document of
title thereafter. Article 1519 is similar
Xhavier D. Bataan Law on Sale
to Section 25 of the Warehouse Receipt
Law.
Article 1520. A creditor whose debtor is the
owner of a negotiable document of title shall
be entitled to such aid from courts of
appropriate jurisdiction by injunction and
otherwise in attaching such document or in
satisfying the claim by means thereof as is
allowed at law or in equity in regard to
property which cannot readily be attached
or levied upon by ordinary legal process
 Inasmuch as the goods themselves
cannot readily be attached or levied
upon by ordinary legal process, as
limited by the preceding article, this
article expressly gives the court full
power to aid by injunction and
otherwise a creditor seeking to get a
negotiable document covering such
goods. However, if an injunction is
issued but the negotiable document of
title is negotiated to an innocent
person, the transfer is nevertheless
effectual.
Article 1521. Whether it is for the buyer to
take possession of the goods or of the seller
to send them to the buyer is a question
depending in each case on the contract,
express or implied, between the parties.
Apart from any such contract, express or
implied, or usage of trade to the contrary,
the place of delivery is the seller's place of
business if he has one, and if not his
residence; but in case of a contract of sale of
specific goods, which to the knowledge of
the parties when the contract or the sale was
made were in some other place, then that
place is the place of delivery.
Where by a contract of sale the seller is
bound to send the goods to the buyer, but no
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time for sending them is fixed, the seller is
bound to send them within a reasonable
time.
Where the goods at the time of sale are in
the possession of a third person, the seller
has not fulfilled his obligation to deliver to
the buyer unless and until such third person
acknowledges to the buyer that he holds the
goods on the buyer's behalf.
Demand or tender of delivery may be
treated as ineffectual unless made at a
reasonable hour. What is a reasonable hour
is a question of fact.
Unless otherwise agreed, the expenses of
and incidental to putting the goods into a
deliverable state must be borne by the
seller.
Rules governing place of delivery of goods
sold:
(a) Where there is an agreement, express
or implied, the place of delivery is that
agreed upon;
(b) Where there is no agreement, the place
of delivery is that determined by usage
of trade;
(c) Where there is no agreement and there
is also no prevalent usage, the place of
delivery is the seller’s place of business;
(d) In any other case, the place of delivery
is the seller’s residence; and
(e) In case of specific goods, which to the
knowledge of the parties at the time the
contract was made were in some other
place, that place is the place of delivery,
in the absence of any agreement or
usage of trade to the contrary.
Note: The presumption is that the buyer must
take the goods from the seller’s place of
Xhavier D. Bataan Law on Sale
business or residence rather than the seller to
deliver them to the buyer.
 Where delivery was not effected at the
place specified in the contract but the
buyer accepted the goods nevertheless
without complaint, the buyer would be
deemed to have waived the seller’s
failure to deliver according to the terms
of the contract, and would be liable to
pay the price agreed upon.
Rules governing time of delivery of goods
sold:
(a) Where no time is fixed by the contract,
then the seller is bound to send the
goods to the buyer within a reasonable
time;
Reasonable time–A question of fact as
it is dependent upon the circumstances
attending the particular transaction,
such as the character of the goods, the
purpose for which they are intended,
the ability of the seller to produce the
goods if they are to be manufactured,
the facilities available for
transportation and distance the goods
must be carried, and the usual course of
business in the particular trade.
(b) Where the contract provides a fixed
time for performance, the question is
whether time is of the essence, and if so,
whether correct performance was
offered within that time. If time is not of
the essence, the question is whether
correct performance was offered within
a reasonable time; and
(c) Where the contract does not specify the
time for delivery so that delivery is to
be made within a reasonable time, time
is not of the essence.
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Rules governing delivery of goods in
possession of 3rd person:
 The seller is not discharged from his
obligation where the goods are in the
possession of a third person by simply
telling the buyer that they are there or
by notifying the bailee to deliver to the
buyer.
 The seller is not discharged where the
bailee has become by operation of law
the agent for the buyer.
 To affect third persons, the person
holding the goods must acknowledge
being the bailee for the buyer.
Doctrines governing hour of delivery of
goods sold:
(a) The demand or tender of delivery to be
effectual must be made at a reasonable
hour of the day.
Reasonable hour– A question of fact
largely dependent upon the
circumstances. Generally, where all that
is required of the other party is to
receive a payment or performance
which can readily be accepted, it seems
probable that any hour when the debtor
could find the creditor would be
reasonable for that purpose.
(b) In case of goods which are bulky or
needed special care, an hour might be
unreasonable which would not be so in
an ordinary payment of a small sum of
money.
(c) Where the question is not merely one of
tender but also of demand,
reasonableness will depend on the
justifiable expectation that the hour is
reasonable for giving as well as
receiving.
Xhavier D. Bataan Law on Sale
Rule on duty of the seller to put goods in
deliverable condition.– The seller bears the
expenses to place the thing in a deliverable
state in such that the buyer would, under the
contract, be bound to take delivery of them
unless otherwise agreed. The buyer is not
bound to make tender of payment until the
seller has complied with his obligations.
Article 1522. Where the seller delivers to
the buyer a quantity of goods less than he
contracted to sell, the buyer may reject
them, but if the buyer accepts or retains the
goods so delivered, knowing that the seller
is not going to perform the contract in full,
he must pay for them at the contract rate. If,
however, the buyer has used or disposed of
the goods delivered before he knows that
the seller is not going to perform his
contract in full, the buyer shall not be liable
for more than the fair value to him of the
goods so received.
Where the seller delivers to the buyer a
quantity of goods larger than he contracted
to sell, the buyer may accept the goods
included in the contract and reject the rest.
If the buyer accepts the whole of the goods
so delivered he must pay for them at the
contract rate.
Where the seller delivers to the buyer the
goods he contracted to sell mixed with goods
of a different description not included in the
contract, the buyer may accept the goods
which are in accordance with the contract
and reject the rest.
In the preceding two paragraphs, if the
subject matter is indivisible, the buyer may
reject the whole of the goods.
The provisions of this article are subject to
any usage of trade, special agreement, or
course of dealing between the parties.
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 Where the seller is under a contract to
deliver a specific quantity of goods and
he delivers a smaller quantity as full
performance of his obligation, the buyer
may reject the goods so delivered.
Where the buyer accepts the goods in
which case he must pay for their price
at the contract rate if he knew that no
more were to be delivered or the fair
value to him of the goods, if he did not
know that the seller is going to be guilty
of a breach of contract.
Fair value to him– The benefit which
the buyer may have received from the
goods. It is not necessarily the market
value. Since the defaulting seller is the
wrongdoer, the buyer is not required to
pay the contract price if such price for
the goods is more than fair value to him
of the goods.
 Where the seller delivers a quantity
larger than that contracted for, the
buyer may accept the quantity
contracted for and reject the excess.
However, if he accepts all the goods
delivered, he makes himself liable for
the price of all of them.
 The offer of a quantity not contracted
for is a manifestation of the seller’s
willingness to sell that quantity; and the
act of the buyer in knowingly taking
them is sufficient evidence of assent. If
by the terms of the original contract, the
price of the goods was based on their
number, weight, or measure, the same
must be paid for the larger quantity.
 Where the goods delivered are mixed
with goods of different description not
included in the contract, the buyer may
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accept those which are in accordance
with the contract and reject the rest.
The buyer, of course, may accept them
all if he so desires.
 Where the subject matter of the sale is
indivisible, in case of delivery of a larger
quantity of goods or of mixed goods, the
buyer may reject the whole of the
goods. The buyer has the right of
rejecting the whole of the goods
delivered in the last two cases
mentioned only if the subject matter is
indivisible.
Usage of trade– Any practice or method of
dealing having such regularity of observance in
a place, vocation or trade as to justify an
expectation that it will be observed with respect
to the transaction in question. The existence
and scope of such a usage are to be proved as
facts.
Course of dealing– A sequence of previous
conduct between the parties to a particular
transaction which is fairly to be regarded as
establishing a common basis of understanding
for interpreting their expressions and other
conduct.
Article 1523. Where, in pursuance of a
contract of sale, the seller is authorized or
required to send the goods to the buyer,
delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose
of transmission to the buyer is deemed to be
a delivery of the goods to the buyer, except
in the cases provided for in article 1503,
first, second and third paragraphs, or unless
a contrary intent appears.
Unless otherwise authorized by the buyer,
the seller must make such contract with the
carrier on behalf of the buyer as may be
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reasonable, having regard to the nature of
the goods and the other circumstances of the
case. If the seller omits so to do, and the
goods are lost or damaged in course of
transit, the buyer may decline to treat the
delivery to the carrier as a delivery to
himself, or may hold the seller responsible
in damages.
Unless otherwise agreed, where goods are
sent by the seller to the buyer under
circumstances in which the seller knows or
ought to know that it is usual to insure, the
seller must give such notice to the buyer as
may enable him to insure them during their
transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk
during such transit.
 Generally, where the seller is
authorized or required to send the
goods to the buyer, delivery of such
goods to the carrier constitutes delivery
to the buyer, whether the carrier is
named by the buyer or not. Exceptions
fall under par. 1, 2 & 3 of Article 1503 of
the CC and when a contrary intent
appears, that is, the parties did not
intend the delivery of the goods to the
buyer through the carrier. The seller is
not responsible for misdelivery by the
carrier where the carrier was chosen
and authorized by the buyer to make
the delivery.
Seller’s duty after delivery to carrier:
(a) To enter on behalf of buyer into such
contract reasonable under the
circumstances.– if seller omits to do, the
buyer may decline to treat the delivery
to the carrier as a delivery to himself in
case the goods are lost or damaged in
course of transit, or the buyer may hold
Xhavier D. Bataan Law on Sale
the seller responsible in damages. If the
buyer exercises the first right, the
transfer of ownership will be deemed
not to have taken place.
(b) To give notice to buyer regarding
necessity to insure goods.– Where seller
fails to give notice, seller bears the risk.
But the seller who had failed to give
notice is not liable for loss of goods, if
the buyer had all the information
necessary to insure.
Definition of Shipping Terms:
(i) Collect on Delivery (C.O.D.)– The
carrier acts for the seller in
collecting the purchase price. The
buyer must pay for the goods
before he can obtain possession.
C.O.D. terms do not prevent title
from passing to the buyer on
delivery to the carrier where they
are solely intended as security for
the purchase price;
(ii) Free on Board (F.O.B.)– Goods are to
be delivered free of expense to the
buyer to the point where they are
F.O.B.
(iii) Cost, Insurance and Freight (C.I.F.)–
Signifies that price fixed covers not
only the cost of the goods, but the
expense of freight and insurance to
be paid by the seller (ibid.) up to
the point of destination. Title passes
to the buyer at the moment of
delivery to the point especially
named.
Note: Both the terms “F.O.B.” and “C.I.F.” merely
make rules of presumption which yield to proof
of contrary intention.
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If the buyer is to pay the freight, it is reasonable
to suppose that he does so because the goods
become his at the point of shipment. On the
other hand, if the seller is to pay the freight, the
inference is equally strong that the duty of the
seller is to have the goods transported to their
ultimate destination and that title to property
does not pass until the goods have reached their
destination.
Article 1524. The vendor shall not be bound
to deliver the thing sold, if the vendee has
not paid him the price, or if no period for the
payment has been fixed in the contract
 A vendor who continued to effect sales
and deliveries to the vendee even
without promptly getting paid is
considered for all intents and purposes,
to have sold on credit. (Castro vs.
Mendoza [1993])
 Generally, the thing shall not be
delivered unless the price is paid. By
way of exception, the thing must be
delivered though the price be not first
paid, if time for such payment has been
fixed in the contract.
 Where a period has been fixed for the
payment of the price, the vendor is not
bound to deliver in case the vendee has
lost the right to make use of the period
and still has not paid the price.
Article 1525. The seller of goods is deemed
to be an unpaid seller within the meaning of
this Title:
(1) When the whole of the price has not
been paid or tendered;
(2) When a bill of exchange or other
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negotiable instrument has been
received as conditional payment, and
the condition on which it was
received has been broken by reason
of the dishonor of the instrument,
the insolvency of the buyer, or
otherwise.
In articles 1525 to 1535 the term "seller"
includes an agent of the seller to whom the
bill of lading has been indorsed, or a
consignor or agent who has himself paid, or
is directly responsible for the price, or any
other person who is in the position of a
seller.
Unpaid seller meaing:
 One who has not been paid or tendered
the whole price or who has received a
bill of exchange or other negotiable
instrument as conditional payment and
the condition on which it was received
has been broken by reason of the
dishonor of the instrument;
 Includes agent of the seller;
 Includes a consignor or agent who has
himself paid or is directly responsible
for the price or any other person in the
position of the seller. A seller is unpaid
within the definition whether title has
or has not passed.
Rules where whole of price has not been
paid:
(a) Although tender of payment is not the
same as performance, and a seller to
whom the price of goods has been
tendered is strictly unpaid, and can,
therefore, bring an action subsequently
for the price, which he has refused, yet
tender destroys the seller’s lien.
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(b) Payment of a part only of the price does
not destroy a seller’s lien. The seller
remains an unpaid seller even if title
has passed to the buyer.
(c) Where payment has been made in a
negotiable instrument, the delivery of
promissory notes payable to order, or
bills of exchange or other mercantile
documents shall produce the effect of
payment only when they have been
cashed or when through the fault of the
creditor they have been impaired.
Article 1526. Subject to the provisions of this
Title, notwithstanding that the ownership in
the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain
them for the price while he is in
possession of them;
(2) In case of the insolvency of the
buyer, a right of stopping the goods
in transitu after he has parted with
the possession of them;
(3) A right of resale as limited by this
Title;
(4) A right to rescind the sale as likewise
limited by this Title.
Where the ownership in the goods has not
passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of
withholding delivery similar to and
coextensive with his rights of lien and
stoppage in transitu where the ownership
has passed to the buyer.
Special remedies of an unpaid seller;
(a) A lien on the goods or right to retain
them for the price while in his
possession (Arts. 1527-1529.);
Xhavier D. Bataan Law on Sale
(b) A right of stopping the goods in transitu
in case of insolvency of the buyer (Art.
1530.);
(c) A right of resale (Art. 1533.); and
(d) A right to rescind the sale. (Art. 1534.)
Note: Where the unpaid seller still retains
ownership in the goods, he cannot be said to
have a lien (on his goods). But he does have, in
addition to his other remedies, right of
withholding delivery.
Possessory lien
 Possessory lien (Art. 1527-1529)
distinguished from preferred claim or
lien (Article 2241 [3]).
 The possessory lien entitles the seller to
retain possession of the goods as
security for the purchase price. Where
the goods are in the possession of the
buyer, the seller has no more
possessory lien but his claim for the
unpaid price is a preferred claim or lien.
Simply stated, upon delivery, the
seller’s possessory lien on the goods is
lost, but his lien on the price remains.
Article 1527. Subject to the provisions of this
Title, the unpaid seller of goods who is in
possession of them is entitled to retain
possession of them until payment or tender
of the price in the following cases, namely:
1. Where the goods have been sold
without any stipulation as to credit;
2. Where the goods have been sold on
credit, but the term of credit has
expired;
3. Where the buyer becomes insolvent.
The seller may exercise his right of lien
notwithstanding that he is in possession of
the goods as agent or bailee for the buyer
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The unpaid seller may exercise possessory
lien where:
(a) Sale contract was without stipulation as
to credit;
(b) goods have been sold on credit but the
term of credit has expired; and
(c) When the buyer becomes insolvent.
Notes:
 In the absence of any stipulation as to
the credit, the seller is entitled to the
payment of the price at the same time
that he transfers the possession of the
goods.
 By the nature of a credit sale, the buyer
is entitled to possession of the goods
without paying the price; but if he fails
to exercise his right until the term of
credit has expired and the price
becomes due, he loses the right which
he theretofore had.
 The insolvency of the buyer is another
situation where the lien of the seller in
possession is revived even though the
time for payment of the price has not
yet arrived since when one party to a
bilateral contract is incapacitated from
performing his part of the agreement,
the other party also is excused from
performing. It should be noticed that
insolvency does not dissolve the
bargain; it merely revives the seller’s
lien.
 A person is “insolvent” who either has
ceased to pay his debts in the ordinary
course of business or cannot pay his
debts as they become due, whether
insolvency proceedings have been
commenced or not.
 It is immaterial that the seller holds the
goods as bailee for the buyer.
Article 1528. Where an unpaid seller has
Xhavier D. Bataan Law on Sale
made part delivery of the goods, he may
exercise his right of lien on the remainder,
unless such part delivery has been made
under such circumstances as to show intent
to waive the lien or right of retention.
Generally, where part of the goods are
delivered, the unpaid seller has a lien upon the
remainder for the proportion of the price which
is due on account of the goods so retained. By
way of exception, where the delivery of the part
is intended as symbolical delivery of the whole,
and therefore, a waiver of any right of retention
as to the remainder, the lien is lost. The intent
to make such waiver may be inferred from the
circumstances.
Article 1529. The unpaid seller of goods
loses his lien thereon:
1. When he delivers the goods to a
carrier or other bailee for the
purpose of transmission to the buyer
without reserving the ownership in
the goods or the right to the
possession thereof;
2. When the buyer or his agent lawfully
obtains possession of the goods;
3. By waiver thereof.
The unpaid seller of goods, having a lien
thereon, does not lose his lien by reason
only that he has obtained judgment or
decree for the price of the goods.
The unpaid seller loses his possessory lien:
(a) Where the goods have been delivered to
agent or bailee of buyer;
(b) Possession by buyer of his agent; and
(c) The seller waives his lien.
Notes:
 If the goods are already in the
possession of the buyer at the time of
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the bargain, it is plain that when the
ownership is transferred, the seller has
no lien simply because he has no
possession necessary for a lien. The
wrongful taking of the goods by the
buyer without the seller’s consent does
not destroy the lien.
 The seller may lose his lien either by
express agreement to surrender it.
 Mere judgment by a court obtained by
the unpaid seller for the price of the
goods is not a ground for the loss of his
lien.
Rule on revival of lien after deliver:
 Where the buyer refuses to receive the
goods after they have been delivered to
a carrier or other bailee on his behalf,
though the seller has parted with both
the ownership and the possession, he
may reclaim the goods and revest
himself with his lien.
 Where the buyer returns the goods in
wrongful repudiation of the sale, the
lien is revived.
Article 1530. Subject to the provisions of this
Title, when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted
with the possession of the goods has the
right of stopping them in transitu, that is to
say, he may resume possession of the goods
at any time while they are in transit, and he
will then become entitled to the same rights
in regard to the goods as he would have had
if he had never parted with the possession.
The right of stoppage in transitu arises
solely when an unpaid seller has shipped goods
to an insolvent buyer. The right to retake
continues only while the goods are in transit.
Requisites for the exercise of right of
stoppage in transitu:
Xhavier D. Bataan Law on Sale
(a) The seller must be unpaid;
(b) The buyer must be insolvent (need not
be judicially declared);
(c) The goods must be in transit;
(d) The seller must either actually take
possession of the goods sold or give
notice of his claim to the carrier or
other person in possession;
(e) The seller must surrender the
negotiable document of title, if any,
issued by the carrier or bailee; and
(f) The seller must bear the expenses of
delivery of the goods after the exercise
of the right.
Basis/nature of right of stoppage in transitu:
 The injustice of allowing the buyer to
acquire ownership and possession of
the goods when he has not paid and,
owing to his insolvency, cannot pay the
price which was to be given in return
for the goods.
 This right does not proceed from any
agreement of the parties but is
independently conferred by law. It may
be regarded as a legal extension of the
unpaid seller’s lien.
Article 1531. Goods are in transit within the
meaning of the preceding article:
(1) From the time when they are
delivered to a carrier by land, water,
or air, or other bailee for the purpose
of transmission to the buyer, until
the buyer, or his agent in that behalf,
takes delivery of them from such
carrier or other bailee;
(2) If the goods are rejected by the
buyer, and the carrier or other bailee
continues in possession of them,
even if the seller has refused to
receive them back.
Goods are no longer in transit within the
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meaning of the preceding article:
(1) If the buyer, or his agent in that
behalf, obtains delivery of the goods
before their arrival at the appointed
destination;
(2) If, after the arrival of the goods at the
appointed destination, the carrier or
other bailee acknowledges to the
buyer or his agent that he holds the
goods on his behalf and continues in
possession of them as bailee for the
buyer or his agent; and it is
immaterial that further destination
for the goods may have been
indicated by the buyer;
(3) If the carrier or other bailee
wrongfully refuses to deliver the
goods to the buyer or his agent in
that behalf.
If the goods are delivered to a ship, freight
train, truck, or airplane chartered by the
buyer, it is a question depending on the
circumstances of the particular case,
whether they are in the possession of the
carrier as such or as agent of the buyer.
If part delivery of the goods has been made
to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in
transitu, unless such part delivery has been
under such circumstances as to show an
agreement with the buyer to give up
possession of the whole of the goods
Goods are in transit where:
(1) after delivery to a carrier or other
bailee and before the buyer or his agent
takes delivery of them; and
(2) if the goods are rejected by the buyer,
and the carrier or other bailee
continues in possession of them.
Xhavier D. Bataan Law on Sale
Goods considered no longer in transit:
(1) After delivery to the buyer or his agent
in that behalf;
(2) If the buyer or his agent obtains
possession of the goods at a point
before the destination originally fixed;
(3) If the carrier or bailee acknowledges to
hold the goods on behalf of the buyer;
and
(4) If the carrier or bailee wrongfully
refuses to deliver the goods to the
buyer.
Notes:
 The right to stop the goods may be
terminated not simply by delivery to
the buyer, but by attornment of the
bailee to the buyer.
 The carrier is not allowed to enlarge the
seller’s right by wrongfully refusing to
deliver or attorn as the buyer’s agent.
But a rightful refusal by the carrier,
based for instance, on the refusal of the
buyer or his agent to pay the freight will
not terminate the right to stop.
Rules on delivery to a ship chartered or
owned by the buyer;
 The mere fact that the carrier is
chartered by the buyer does not make a
delivery to the carrier a delivery to the
buyer.
 The delivery to the vessel owned by the
buyer is delivery to the buyer.
Rule on partial delivery: Generally, the mere
fact that part of the goods has been delivered
does not deprive the seller of the right to stop
with respect to the remainder just as the seller
may still exercise his right of lien on the
remainder after part of the goods had been
delivered. However, it may be shown that the
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seller has an agreement with the buyer to give
up possession of the whole of the goods.
Article 1532. The unpaid seller may exercise
his right of stoppage in transitu either by
obtaining actual possession of the goods or
by giving notice of his claim to the carrier or
other bailee in whose possession the goods
are. Such notice may be given either to the
person in actual possession of the goods or
to his principal. In the latter case the notice,
to be effectual, must be given at such time
and under such circumstances that the
principal, by the exercise of reasonable
diligence, may prevent a delivery to the
buyer.
When notice of stoppage in transitu is given
by the seller to the carrier, or other bailee in
possession of the goods, he must redeliver
the goods to, or according to the directions
of, the seller. The expenses of such delivery
must be borne by the seller. If, however, a
negotiable document of title representing
the goods has been issued by the carrier or
other bailee, he shall not be obliged to
deliver or justified in delivering the goods to
the seller unless such document is first
surrendered for cancellation
Ways of exercising the right to stop:
a) By taking actual possession of the
goods; and
b) By giving notice of his claim to the
carrier or bailee.
Notes:
 The seller’s power to stop in transitu
includes not only the power to counter
delivery to the buyer but to order
redelivery to himself.
 To make a notice effective as a stoppage
in transitu, it must be given at such
Xhavier D. Bataan Law on Sale
time, and under such circumstances
that the principal, by the exercise of
reasonable diligence, may communicate
it to his agent to prevent the delivery to
the buyer. There is no form of notice
which is essential; it is only necessary
that the goods be sufficiently described
for identification.
 Where the goods are covered by
negotiable document of title, the carrier
or bailee has no obligation to deliver
the goods to the seller unless such
document is first surrendered for
cancellation.
 Should the carrier surrender the goods
to the seller and afterwards the bill of
lading be negotiated to an innocent
purchaser for value, the latter would be
entitled to demand delivery of the
goods.
Article 1533. Where the goods are of
perishable nature, or where the seller
expressly reserves the right of resale in case
the buyer should make default, or where the
buyer has been in default in the payment of
the price for an unreasonable time, an
unpaid seller having a right of lien or having
stopped the goods in transitu may resell the
goods. He shall not thereafter be liable to the
original buyer upon the contract of sale or
for any profit made by such resale, but may
recover from the buyer damages for any loss
occasioned by the breach of the contract of
sale.
Where a resale is made, as authorized in this
article, the buyer acquires a good title as
against the original buyer.
It is not essential to the validity of resale
that notice of an intention to resell the goods
be given by the seller to the original buyer.
But where the right to resell is not based on
the perishable nature of the goods or upon
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an express provision of the contract of sale,
the giving or failure to give such notice shall
be relevant in any issue involving the
question whether the buyer had been in
default for an unreasonable time before the
resale was made.
It is not essential to the validity of a resale
that notice of the time and place of such
resale should be given by the seller to the
original buyer.
question whether the buyer has been in
default for an unreasonable time. What
is reasonable time will vary according
to the circumstances of the case.
 The seller is only required to exercise
reasonable care and judgment in
making a resale. However, he cannot
directly or indirectly, buy the goods.

The seller is bound to exercise reasonable

care and judgment in making a resale, and
subject to this requirement may make a
resale either by public or private sale. He
cannot, however, directly or indirectly buy
the goods.

When can unpaid sellers having a right of

lien or having stopped the goods in transitu
exercise right to resell:

a) Where the goods are perishable in

nature;
b) Where the right to resell is expressly
reserved in case the buyer should make
a default; and
c) Where the buyer delays in the payment
of the price for an unreasonable time.

Notes:

 In the event of resale, seller is not liable

for any profit made by such resale; but
if he sells for less than the price, he has
a right to sue for the balance.
 The new buyer acquires good title to
the goods as against the original buyer.
 As enunciated in par. 3 of Article 1533,
that except in the case of perishable
goods, which it is obvious may require
an expeditious sale, and where the right
to resell is reserved, the failure to give
notice shall be relevant upon the

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