Syllabus for Law on Sales

By: Atty. AAS

Source Law: Civil Code of the Philippines

I. NATURE, FORMS, and REQUISITES

a. Definition – (Art. 1458)
Article 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

Definition: A contract of sale is a contract where one party obligates himself to deliver
a determinate thing to another part, who in turn, obligates himself to the other to pay
a sum of money or its equivalent.

b. Stages of Contract of Sale

i. San Miguel Properties v. Spouses Huang, GR No. 137290, 31 July 2000
1. POLICITATION/NEGOTIATION – covers the period from the time the
prospective contracting parties indicate interest in the contract to the time the
contract is perfected, it usually refers to negotiation stage. *An unaccepted
unilateral promise to buy or to sell. It is on the part of one party and not yet
accepted. As long as the promise is not accepted it will not produce any juridical
effect. *
2. PERFECTION – takes place upon the concurrence of the essential
elements, which are the meeting of the minds of the parties as to object of the
contract and upon the price.
3. CONSUMMATION – begins when the parties perform their respective
undertakings, culminating in the extinguishment thereof. It is already
presumed that the buyer has paid the purchase price and the seller is ready to
deliver the determinate object and ready to transfer the ownership

c. Essential Characteristic of Sale

i. Consensual (Important characteristic) - Perfected by mere consent
ii. Nominate (legal name) - the law provides a specific name
iii. Principal (Nature) - it can exist by itself, it doesn’t need any other preliminary
contracts
iv. Bilateral (number of parties) - Both the contracting parties are bound to fulfill
correlative obligations to each other.
Reciprocal – the buyer and the seller are both debtors and creditors of each other
v. Onerous (Consideration) - the thing sold is conveyed in consideration and price
vi. Commutative (Consideration) - the thing sold is considered equivalent to price
paid

d. Requisites
i. Consent – (Art. 1475)
Also called meeting of the minds. mutual agreement, or consensus ad idem. It
essentially refers to a situation where the two parties of the contract have a mutual
understanding in the formation of the contract of sale. This essentially means that
there is consent in the part of the seller to transfer ownership of the determinate
thing and in the part of the buyer to pay the equivalent price.
Note that both of the parties must have the legal capacity to give their consent.

1. Auction Sale - (Art. 1476)

Rules of an auction sale are the following:
1. Sale of separate lots by auction are separate contracts of sale.
2. Sale is perfected by the fall of the hammer. Before the hammer falls, the bidder
may retract his bid or the auctioneer may withdraw the goods unless the auction
is without reservation.
3. Seller has the right to bid in the auction, provided:
a. Such right was reserved
b. Notice was given that the sale was subject to a right to bid on behalf of
the seller
c. Right is not prohibited by law or by stipulation.
(Purpose of this rule is to prevent puffing or secret bidding by or on
behalf of the seller by people who are not themselves bound)
4. Advertisements for bidders are simply invitation to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears.

2. Reciprocal Obligation - (Art. 1479)

Article 1479. A promise to buy and sell a determinate thing for or a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price.
1st
par - mutual promise - as good as perfected sale
2nd par - accepted unilateral promise to buy or sell. It is binding on the promissor
only if the promisee paid a consideration called Option Money

3. Option Money v. Earnest Money - (Art. 1479 and 1482)

a. Rizalino v. Paraiso Development Corporation, GR No. 157493, 05
February 2007
b. Elements of Option Contract
i. Philippine National Oil Company v. Keppel Philippines, GR No.
202050, 25 July 2016
OPTION CONTRACT – an accepted unilateral promise to buy or sell, it is
binding if it supported by a consideration which is distinct from the
purchase price or in other words it is a separate contract from the
actual contract of sale.
It is a contract granting a privilege to one of the parties for which he
has paid for a consideration given him the right to buy within the agreed
period at a fixed price. It is a preparatory contract to the actual contract
of sale. It’s a preparatory contract that binds the party who gave the
option not to enter into the principal contract with anyone else during
the period designated and agreed upon. It is not a sale; it merely
secures the privilege to buy.
The option contract cannot be withdrawn from the date specified
or as agreed upon, but if the option was withdrawn by one of the parties
 without any valid reason, then there will be a breach of contract (the
option contract), since the contract is not yet perfected, specific
performance cannot be the remedy but instead the one who withdraw
can be held liable for damages.
If the buyer exercises the option, it doesn’t necessarily mean that
the buyer will pay the principal price but instead pay it until the seller
delivered the subject matter, the prescriptive period to enforce the
option contract is 10 years from the accrual of the cause of action.
If the other party accepts the option, it will be a bilateral promise
to buy and to sell, it is now reciprocally demandable because both of
the parties have an obligation, the promise to sell and the promise to
buy, they are now bound to their respective undertakings.

CONSIDERATION OF AN OPTION CONTRACT – Any valuable

consideration which is sufficient to support a contract and must be
distinct and separate from the principal price.
If the consideration is not distinct and separate from the price, then
it is void as an option contract but itis valid as an offer, it may be
withdrawn before acceptance.

EARNEST MONEY – (ARRAS) is something of value to show that the buyer

was really in earnest, and given to the seller to bind the bargain, it is
considered as (a) part of the purchase price and (b) proof of perfection
of the contract, however, the best way to know whether the contract is
perfect is knowing if the essential elements are present.
Where the earnest money is forfeited, that forfeiture is not provided by
law, rather it’s a contractual stipulation, in other words that certain
money will be forfeited. Forfeiture is allowed as long as there is a
stipulation, but without a stipulation, by virtue of mutual restitution, the
earnest money shall also be returned.

EARNEST MONEY VS. OPTION MONEY

Earnest Money Option Money
1. The title of the thing passes to 1. The title remains to the seller
the buyer upon delivery. until the price is fully paid.
2. There is already a sale. 2. The sale is not yet perfected,
3. Forms part of the purchase there is still an option to
price. enter or not.
4. When given, the buyer has to 3. Money given as a distinct and
pay the balance. separate consideration for
5. In case of non-payment, an an option contract.
action for specific 4. There is no balance to talk
performance or for rescission about because it is distinct
can be filed by the injured and separate from the
party. principal contract.
5. In case of non-payment,
there can be action for
specific performance.
4. Sale by Sample v. Sale by Description - (Art. 1481)
Art. 1481. In the contract of sale of goods by description or by sample, the contract
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. (n)

Sale by description Sale by Sample

1. Seller sells things as being of certain 1. Seller warrants that the bulk (not
kind, the buyer relying on the seller’s the major part) of the goods shall
representations or description. correspond with the sample in
2. The goods to be delivered must kind, quality and character.
correspond with the description,
otherwise the contract may be
avoided.
3. However, if the goods delivered tally
with the descriptions even if the
intention of the buyer is not fitted.
The contract cannot be avoided.

5. Who are capacitated to buy and sell? (Art. 1489)

Art. 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. (1457a)

BASED FROM OBLIGATIONS AND CONTRACTS: MINORS, INSANE OR DEMENTED

PERSONS AND ALSO DEAF MUTES WHO DO NOT KNOW HOW TO WRITE are
incapacitated or is no longer able allowed to enter into a contract.

TWO KINDS OF INCAPACITY:

1. ABSOLUTE INCAPACITY: - When a person cannot bind himself in any case.
- A person who is absolute incapacitated cannot enter into any kind of contract.
2. RELATIVE INCAPACITY: RELATIVE INCAPACITY - When certain persons, under
any circumstances cannot buy a certain property.
- This person is capacitated, but under the certain property or certain circumstances
the person is already incapacitated.

GENERAL RULE ON CAPACITY (Article 1489) All persons who are authorized in
this Code to obligate themselves, may enter into a contract of sale, saving the
modifications provided by law.
“Basta pwede mong obligahin yung sarili mo, pwede kang pumasok sa contract of
 sale, but there are qualifications provided by law”
LIABILITIES FOR NECESSARIES OF MINOR OR OTHER PERSON WITHOUT
CAPACITY TO ACT.
 DEFINITION OF NECESSARIES:
o Article 290: Necessaries is defined in Art. 194 of the Family Code
as everything indispensable for sustenance, dwelling, clothing,
medical attendance, education, and transportation in
keeping with the financial capacity of the family of the
incapacitated person.
“Especially in education, given to minor it is included even if it
reaches or beyond the age of 18 or age of minority. Kailangan
makatapos ka ng degree, vocational or profession”
o “When minors buy the contract is generally voidable, but in
the case of necessaries “where necessaries are sold and
delivered to a minor or other person without a capacity to act
(without the intervention of the parent or guardian) he must pay a
reasonable price therefore.
o ARTICLE 290: Necessaries are those referred here “The contract is
therefore valid, but the minor has the right to recover any excess
above a reasonable value paid by him.”

6. Sale by minor and incapacitated persons – (Art. 1327)

a. Labagala v. Santiago, 371 SCRA 360 2001
RULES REGARDING MINORS: “RULES ON MINORS, INSANE OR DEMENTED
PERSONS, AND DEAF MUTES WHO DONOT KNOW HOW TO WRITE” -these are
known as the persons who are incapacitated.
 Article 1327: Generally, have no capacity to contract and are therefore,
disqualified from being parties to a sale.
 BUT the contracts entered by them is not void, but merely voidable,
subject to annulment or ratification. “Voidable contracts are valid until
they are annulled. Voidable contracts can be annulled or ratified. If you
ratified a contract, it cannot be annulled anymore.”
 Article 1397: The action for annulment cannot be instituted by the
capacitated person, since he is disqualified from alleging the incapacity of
the person with whom he contracts.
 “VOIDABLE LANG ANG CONTRACT IF IT IS ENTERED BY INCAPACITATED
PERSON WITH CAPACITATED PERSON.”
WHAT IF THERE ARE 2 INCAPACITATED OR MINORS WHO ENTERED INTO A
CONTRACT?
 The status of that contract is, UNENFORCEABLE CONTRACT.

7. Sale between spouses – (Art. 1490)

Art. 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 or property under Article 191.
(1458a)

RULES REGARDING SPOUSES:

1. RULES ON RELATIVE INCAPACITY OF HUSBAND-AND-WIFE - Husband and Wife
 are relatively incapacitated, because both of them can enter into a contract both
of them can buy a sale, but when it comes to the spouse properties these cannot
be sold by the husband or the wife to each other.
A. GENERAL RULE
1. The husband and the wife are prohibited by the above article from selling
property to each other. A sale between husband and wife in violation of the
Article 1490 is inexistent and void from the beginning because it is a contract
and sale are expressly prohibited by law.
2. They are also prohibited from making donations to each other during the
marriage except moderate gifts on the occasion of any family rejoicing.
Moderate Gift: katamtaman depends on the status of the person. (Wealthy or poor)

B. EXCEPTION
1. When a separation of property was agreed upon the marriage settlements.
2. When there has been a judicial separation of property decreed between them by
the court, the sales between husband and wife are allowed. They have capacity to
buy or sell to each other.
Note: When you get married, you will enter into a marriage settlement, you will enter
into a property regime
.
3 PROPERTY REGIME: (The 3 choices that you can pick)
1. Absolute Community of Property (ACP) - given automatically after the family
code.
- is everything that the husband would be and would be the wife owns, that
brings into the marriage’s community property.
- Everything that the husband would be and the would-be wife owns and brings
into the marriage.
- Ito yung lahat ng mga pag-aari ninyo bago ikasal at dadalhin ninyo dun sa
inyong pagsasama is community property.
-Example: I, the husband brings 1million and My wife brings 2 pesos yun yung
community property so what will happen? Hati kayo dun sa 1 million mo at hati
kayo dun sa 2 piso nya.
2. Conjugal Partnership of Gains- the one that is given by the law to husband and
wife that didn’t pick before the family code.
- these refers to the properties during the marriage that you will both ponder or
maipupundar ninyo yun ang property ng conjugal partnership.
- Properties acquire after the marriage will become conjugal property.
3. Complete Separation of Property -the most ideal property regime.
- Ang property ni husband ay kay husband lang, ang kay wife ay kay wife lang.

NOTE:
 If there is a complete separation of property the husband and wife can sell
to one another.
 Before the marriage you should choose a property regime, because it will
be putted into your marriage contract.
 If you didn’t choose it will automatically ABSOLUTE COMMUNITY OF
PROPERTY. If you change your mind, go to court and apply for a JUDICIAL
SEPERATION OF PROPERTY. So the court will separate your
properties. It will enable the husband and wife to sell one
 another.
REASONS FOR PROHIBITION:
1. To prevent a spouse from defrauding his creditors by transferring his properties
to the others.
Defraud: means to illegally obtain money from someone.
- Example: Me the obligor have a lot of liabilities so yung gagawin ko I will
transfer all the title of my properties to the name of my husband syempre
that’s against the law.
2. To avoid a situation where the dominant spouse would unduly take advantage
of the weaker spouse; thereby effectively defrauding the latter.
In a relationship, theres always a weaker spouse and a dominant spouse.
Example of these
- DOMINANT SPOUSE: “Kung mahal mo talaga ako bigay mo sakin itong
property mobenta mo saken, etc. etc.” So in the end kawawa naman si
weaker spouse.
- Remember: Hindi pwede magbenta ng properties ang spouses sa isat isa,
unless they fall under the exceptions.
3. To avoid an indirect violation of the prohibition against donations between
spouses (Article 87, The Family Code of the Philippines, Executive Order No.
209)

PERSONS PERMITED TO QUESTION SALE:

(1) Creditors at the same timer of the transfer can attack the validity of the sale but
not creditors who became such only after the transaction.
(2) The government can also question the validity and legitimacy of sale subject to
tax between husband and wife whenever to prevent tax evasion.
a. As distinguished from a sale made by a spouse to third persons

8. Persons prohibited to contract a sale by reason of their

profession/function - (Art. 1491)
INCAPACITY IN RELATION TO PROPERTY:
o The law enumerates the persons who, by reason of the relation of
trust with the person under their charge or their peculiar control
over the property are prohibited from acquiring said property
either directly or indirectly and whether in private or public sale or
juridical auction, either in person or through the mediation of
another.
o The person disqualified to buy referred to in Article 1490 and 1491
are also disqualified to become lessees of the things mentioned
thereon.

WHO ARE THE PERSONS DISQUALIFIED?

A. Guardians
o With respect to the property of the person or persons who may be
under his guardianship.
o He is not allowed to buy the property of his ward.
o WARD: it is the person under the care of the guardian maybe a
minor, incapacitated person andic. Example: I’m a minor and may
guardian ako, hindi nya pwedeng bilhen ung properties ko.
B. Agents
o With respect to the property who’s administration or sale may have
been entrusted to them, unless the concept of the principal has been
given.
o PRINCIPAL: it is the person who authorizes the agent to represent
him.
o Example: The principal has properties na pinapabenta kay agent
hindi pwedeng si agent mismoang bumile, the agent is not allowed to
sell to himself. Unless authorizes by the principal.
C. Executors and Administrators
o With respect to the property of the estate under administration.
o EXECUTOR: is the one who will execute or give effect to your last
will and testament. He’s the one who will manage on your estate
when you die,
o ADMINISTRATOR: he’s also the one who will manage your estate,
the main difference is just usually court appointed and you have no
last will and testament, unlike the executor you’re the one who
appointed.
o EXECUTOR AND ADMINISTRATOR: The main point also here is that
he can’t buy your estate that he handles. Example: You died and
you left 10 hectares of land that you manage and administer to an
executor, then the executor is not allowed to buy those lands.
D. Public Officers and Employees
o With respect to the property of the state of any subdivision thereof,
or of any government owned or controlled corporation or institution
the administration of which has been entrusted to them; this
provision shall apply to the judges and government experts, who in
any manner whatsoever and take part of the sale.
o Any public officer or employee involved in a property owned by
the government including GOCC’s so if they are entrusted with the
administration of these properties, they cannot deal with these
properties
E. Judicial officers and employees, and lawyers.
o With respect to the property and rights in litigation or levied upon
an execution before the court within whose jurisdiction or territory
or they exercise their respective functions. This prohibition includes
the acts of acquiring by assignments.
o Any property in litigation, for example: May case na pending kay
judge sa court si judge bawalnyang bilhin yung land, si fiscal who
prosecutes the accuse with a property involves he is not also allowed
to buy the certain property. They cannot deal with property involved
litigation.
F. Any other persons disqualified by law.
o This refers to those prohibited by reason of the fiduciary involved.
o This is so by the principle of “ejusdem generis”
o EJUSDEM GENERIS: these are series of enumerations general words
like “and others” placed at the end thereof are understood to
embrace only those situated under the same class or group of those
listed down in an enumeration.
 OTHER PERSONS DISQUALIFIED:
A. Aliens who are disqualified to purchase private agricultural lands.
o This is express prohibition of the constitution.
B. An unpaid seller who exercises his right of lien or having stopped the
goods in transit, who is prohibited from buying the goods either
directly or indirectly in the resale of the same at a public or private
sale which he may make.
o Unpaid seller: hindi pa nababayaran, where the goods na dapat
mapunta kay buyer who reserved the right of lien dahil hindi sya
nababayaran the goods that we should be given to the buyer ay
were just sell for public sale.
C. The officer conducting an execution sale of property to enforce a court
judgment rendered against the owner thereof cannot become a
purchaser or be interested directly or indirectly in any purchase at
such sale.
o EXECUTION SALE -sale to be done when the debtor is a judge
liable.
o Wala ng maipambayad si debtor so kukunin ang kanyang mga
properties that are not exempt from execution.
o Properties taken by the court then they sell it. An execution sale
to satisfy your judgement in making the debt liable.
o
EFFECT OF SALE IN VIOLATION OF PROHIBATION:
If the sale is made, would the transaction be void or merely voidable?
1. With respect to No. 1s and 3, the sale shall only be voidable
because in such cases only private interests are affected. The defect
can be cured by ratification of the seller.
2. With respect, however to numbers 4 and 6, the sale shall be null
and void, public interests being involve therein.

ARE LAWYERS DISQUALIFIED IN PROSECUTING PROPERTY?

o Lawyers are prohibited in buying the land of their clients. So,
there are cases that the lawyers are not allowed to purchase the
property of his clients which is in litigation, when he brought it
that is malpractice.
o HOLDER CONTIGENT FEE: percentage a lawyer can get from the
land of the client.

ii. Object – (Arts. 1459 – 1465)

1. Emptio Rei Speratae – (Art. 1461)
2. Emptio Spei – (Art. 1461)
3. Test of Determinability of Object
a. Atilano v. Atilano, 28 SCRA 231 1969
4. Sale of Undivided Interest – (Art. 1463)
5. Sale of Undivided Share in Mass
a. Gaite v. Fonacier, 2 SCRA 831 1961
6. Effect when the object of sale is lost - (Art. 1493)
 7. Effect when the object of sale is deteriorated - (Art. 1494)
iii. Consideration – (Art. 1469 - 1474)
1. Requisites for Valid Price
2. Manner of Payment
a. Velasco v. CA, 51 SCRA 439 (1973)
3. Contract of Piece of Work – (Art. 1467)
a. Dino v. CA, 359 SCRA 156, 165 (1996)
4. Barter – (Art. 1468)
iv. Delivery – (Art. 1477)
1. Seller’s ability to transfer ownership, when required?
a. Quijada v. Court of Appeals, 299 SCRA 695, 696 (1998)
2. Types of Delivery
a. Actual
b. Constructive
i. Execution of Public Instrument – (Art. 1498)
ii. Symbolic Delivery – (Art. 1498)
iii. Constitutum Possessorium – (Art. 1500)
iv. Traditio Brevi Manu – (Art. 1499)
v. Tradition Longa Manu – (Art. 1499)
3. Contract to sell – (Art. 1478 and 1524)
4. Place and Time of Delivery – (Art. 1521)
5. Partial delivery
e. Forms of Contract of Sale – (Art. 1483)

II. OBLIGATIONS OF THE VENDOR

a. When is the thing considered delivered? - (Arts. 1495-1497)
b. Delivery of personal and real properties – (Art. 1498)
c. Delivery when there is “Sale on Approval” – (Art. 1502)
d. Delivery when there is “Sale or Return” – (Art. 1502)
e. Delivery of specific goods – (Art. 1503)
f. Delivery by bill of lading/agent – (Art. 1503)
g. Delivery with payment of bill of exchange – (Art. 1503)
h. Delivery of accessions and accessories – (Art. 1537)
i. Loss, deterioration, or improvement before delivery – (Art. 1538)
j. Delivery and acceptance of object as stipulated in the contract – (Art. 1539)
k. Delivery and acceptance of immovable objects – (Art. 1540-1542)
l. Rules on Double Sale – (Art. 1544)

III. OBLIGATIONS OF THE VENDEE

a. Acceptance of the thing sold – (Arts. 1582-1588)
b. Payment of interest – (Art. 1589)
c. Suspension of Payment of the Price – (Art. 1590)

IV. RIGHTS OF VENDOR

a. Unpaid seller – (Art. 1525)
i. Rights of unpaid seller – (Art. 1524)
ii. Remedies of unpaid seller – (Art. 1526)
1. Lien - (Art. 1527)
 2. Stoppage in transit – (Arts. 1530-1532)
3. Resale – (Art. 1533)
4. Rescission – (Art. 1534)

V. CONDITIONS AND WARRANTIES

a. Condition – (Art. 1545)
b. Warranty – (Art. 1546-1547)
i. Implied Warranty (under RA 7394 - Consumer Act of the
Philippines)
1. Implied Warranty of Merchantability (Art. 68 of RA 7394)
a. Duration
b. Breach of Warranties
2. Warranties in Supply of Services (Art. 69 of RA 7394)
ii. Warranty Against Eviction (Arts. 1548 – 1560)
iii. Warranty Against Hidden Defects (Arts. 1561-1581)

VI. INSTALLMENT SALES

a. Recto Law – Act. No. 4122
i. Spouses Alfredo v. PCI Leasing, GR No. 139233, 11 November 2005
b. Maceda Law – R.A. No. 6552
i. Covered Properties – (Sec. 2)
ii. Rights of buyer in case of default in payments – (Sec. 3)
iii. Grace period – (Sec. 4)
iv. Right to assign and sell the buyer’s interest – (Sec. 5)
v. Advance Payment – (Sec. 6)
vi. Void stipulations – (Sec. 7)
c. Condominium Law – P.D. 957
i. Requirements for Registration – (Sec. 4)
ii. License to sell and performance bond – (Sec. 5-6)
1. Exempt transactions – (Sec. 7)
2. Suspension – (Sec. 8)
3. Revocation of License – (Sec. 9)
iii. Registration of brokers, dealers, and salesman – (Sec. 11)
iv. Alteration of Plans – (Sec. 22)
v. Non-Forfeiture of Payments –(Sec. 23)
vi. Failure to pay installments – (Sec. 24)
vii. Issuance of Title – (Sec. 25)
VII. EXTINGUISHMENT OF CONTRACT OF SALE – (Art. 1600)

VIII. REDEMPTION
a. Conventional (Art. 1601)
i. Equitable Mortgage – (Art. 1602)
1. Repula v. Estate of Spouses Otillo , GR No. 219638, 07 December
2016
ii. Period of validity – (Art. 1606)
b. Legal Redemption (Art. 1619)
i. Instances of Legal Redemption – (Art. 1620 – 1622)
ii. Period – (Art. 1623)
c. Extrajudicial and Judicial Redemption
i. Extrajudicial – (Act. No. 3135)
1. GE Money v. Spouses Victorino, GR No. 184301, 23 March 2015
ii. Judicial - Spouses Rosales v. Spouses Alfonso, GR No. 137792, 12 August
2003