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.

Sale vs. Agency
SALE AGENCY
The buyer pays for the price of
the goods/property purchased
The agent does not pay for the
price. He merely accounts for the
proceeds of the sale.
The buyer becomes the owner of
the goods/property purchased
The agent does not become the
owner of the goods/property
delivered to him for sale.
Buyer cannot return the
goods/property when the sale is
defective
The agent returns the
goods/property if he was not able
to sell the same
The seller warrants the
goods/property sold
The agent does not make any
warranty as long as he acts within
his authority and in the name of
the principal
The seller has full freedom to
enter into any terms or conditions
on the contract of sale
The agent must follow the
instructions of the principal

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 The article sold is specially manufactured
and upon the special order of the customer. Article is not sold in the
ordinary course of business.
Contract for a piece of work Contract of Sale
The thing transferred is one not
in existence and w/c never
would have existed but for the
order of the party desiring to
acquire it
The thing transferred is one which
would have existed and would have
been the subject of sale to some
other person, even if the order had
not been given
The services dominate the
contract even though there is a
sale of goods involved
The primary objective of the
contract is a sale of the
manufactured item; it is a sale of
goods even though the item is
manufactured by labor furnished by
the seller and upon previous order
of the customer
Not w/in the Statute of Frauds Governable by the Statute of Frauds

Article 1468. If the consideration of the contract consists partly in
money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such intention
does not clearly appear, it shall be considered a barter if the value of
the thing given as a part of the consideration exceeds the amount of
the money or its equivalent; otherwise, it is a sale.

Sale Barter
Consideration: giving of money as
payment
Consideration: giving of a thing
Governed by law on sales: species of the genus sales
If consideration consists party in money and partly by thing look at
manifest intention;
If intention is not clear: value of
thing is equal
or less than amount of money
sale
If intention is not clear: value of
thing is more
than amount of money barter

Rules if Consideration is partly Money and Partly Goods
1. Determine the intention of the parties.
2. If intention could not be determined, consider the value of the thing
given:
a. If value of the thing more than value of the money, it is BARTER
b. If value of the thing less than value of the money, it is SALE
c. If both values are the same, SALE

Article 1470. Gross inadequacy of price does not affect a contract of
sale, except as it may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract.

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.

EFFECT OF GROSS INADEQUACY OF PRICE

NOTE: Mere inadequacy of the price does not affect the validity of the
sale, except
(1) When there is fraud, mistake, or undue influence indicative of a
defect in consent is present,
(2)When it shows that the parties really intended a donation or some
other act or contract.

EFFECT WHERE PRICE IS SIMULATED

1. The act may be shown to have been in reality a donation, or some
other act or contract
2. If not and neither party had any intention whatsoever that the
amount will be paid (absolutely simulated): the sale is void
3. If there is a real price but what is stated in the contract is not the one
intended to be paid (only relatively simulated): the contract of sale is
valid but subject to reformation

Effect of Gross Inadequacy of Price. No effect.
Exceptions: (meaning, sale is set aside)
1. If consent is vitiated, such as VIMFU (Violence, Intimidation, Mistake,
Fraud, Undue influence)
2. If the parties intended a donation or some other act or contract
3. If the price is so low as to be shocking to the conscience

Effect of Simulated Price. Sale is void, unless it could be shown that the
parties intended a donation or some other act of liberality.
o Price Simulated- No price to support a contract of sale, such that
neither party had any intention that the amount will be paidvoid
o Price is False- there is a real price not declaredcontract is valid,
but the underlying deed is subject to reformation to indicate the real
price upon which the minds of the parties have met.

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. Meeting of the minds upon the
thing and price.
Effect: Parties may reciprocally demand performance

GENERAL RULE: A contract of sale is perfected at the moment there is a
meeting of the minds upon the thing which is the object of the contract
and upon the price; consensual contract
Exception: When the sale is subject to a suspensive condition

REQUIREMENTS:
1. When parties are face to face when there is absolute acceptance of
an offer that is certain
2. When thru correspondence or telegram when the offer or receives
or had knowledge of the acceptance
3. When the sale is subject to a suspensive condition from the
moment the condition is fulfilled
NOTES: Qualified acceptance: mere counter-offer which needs to be
absolutely accepted to give rise to perfected contract of sale. Business
ads are mere invitations to make an offer except when it appears to be
otherwise.

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.

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, counted, or measured and delivered, unless
the latter has incurred in delay.

Legal consequences from point of perfection are the same in both legal
systems: upon perfection of an unconditional contract of sale involving
specific or determinate subject matter, the risk of loss deterioration and
the benefits of fruits and improvements, were fro the account of the
buyer.

WHO BEARS RISK OF LOSS/ DETERIORATION/
FRUITS:
1. BEFORE PERFECTION
a. Res perit domino
b. Owner is seller so seller bears risk ofloss
2. AT PERFECTION
o Res perit domino
o Contract is merely inefficacious because loss of the subject matter
does not affect the validity of the sale
o Seller cannot anymore comply with obligation so buyer cannot
anymore be compelled
3. AFTER PERFECTION BUT BEFORE DELIVERY
o Loss confused state
o Paras: BUYER
o Tolentino: SELLER
o Deterioration and fruits Buyer bears loss;
4. AFTER DELIVERY
o Res perit domino
o Delivery extinguishes ownership visa-vis the seller and creates a new
one in favor of the buyer

Article 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.

Sale of Goods By Description- where a seller sells a thing as being of a
certain kind verbally describing them and the buyer simply relies on the
sellers descriptions of the things, not knowing whether the sellers
representations are true or not.

Sale by Sample- Where the seller warrants that the bulk of goods being
sold correspond with the sample or samples exhibited not only in kind
but also in quality and character.

Sale by Description and Sample- Where the seller has to satisfy the
requirements in sale by description and sample. There are two-fold
warranty here:
(a) the goods purchased matched with the description and
(b) the goods also matched in kind, quality and character with that of
the sample or samples exhibited to the buyer or his representative

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.

EARNEST MONEY vs. OPTION MONEY
Earnest Money Option Money
It is part of the purchase price It is given as a distinct consideration
for an option contract which gives
the buyer a specific period within
which to purchase the thing
It is given only when there is
already a perfected sale
It is given at a time when the sale
had not yet been perfected. What
had been perfected only is the
option contract
When it is given, the buyer is
bound to pay the balance of the
agreed purchase price
Even if option money is paid by the
would-be-buyer he is not bound to
buy the thing
If the sale does not materialize,
the earnest money paid must be
returned, unless a contrary
agreement had been stipulated
If the buyer decides not to buy the
thing, he cannot recover the option
money he paid as consideration for
the contract of option

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.

FORM OF SALES
I. Form not important in validity of sale
a. Sale being consensual, may be oral or written, perfected by mere
consent as to price and subject matter
b. If particular form is required under the statute of frauds:
i. valid and binding between parties but not binding to 3rd persons
c. Reason: purposes of convenience only and not for validity and
enforceability; cause of action is granted to sue and compel other
party to execute the document

II. When form is important for validity; exception by specific provision
of law;
a. Power to sell a piece of land granted to an agent otherwise VOID
b. Sale of large cattle; must also be registered with Municipal treasurer
otherwise VOID
c. Sale of land by non-Christian if not approved by Governor VOID

III. When form is important for enforceability (STATUTE OF FRAUDS
Article 1403 (2))
a. A sale agreement which by its terms is not to be performed within a
year from the making thereof;
b. An agreement for the sale of goods, chattels or things in action, at a
price not less than P500.00; and
c. A sale of real property or of an interest therein.

IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in writing and subscribed to by
party or his agent (contains essential terms of the contract)
2. When there has been partial performance/execution (seller delivers
with intent to transfer title/receives price)
3. When there has been failure to object to presentation of evidence
(oral)
4. When sales are effected through electronic commerce

Article 1484. In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of 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.

Article 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or
enjoyment of the thing.

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.

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.

Article 1488. The expropriation of property for public use is governed
by special laws.

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.

Two Kinds of Incapacity:
1. Absolute Incapacity- Party cannot bind himself in any case.
2. Relative Incapacity- Certain Persons under certain circumstances
cannot buy certain property.
** Minors in contract for necessaries must pay reasonable price.

Necessariesthose things which are needed for sustenance, dwelling,
clothing and medical attendance, in keeping with the financial capacity
of the family of the incapacitated person.

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.

Prohibition against Husband and Wife. Exceptions.
Rationale: PID
a. To avoid Prejudice to 3
rd
Persons
b. To prevent one spouse from unduly influencing the other.
c. To avoid by indirection the violation of the prohibition against
donations.

Who may assail illegality?
a. Creditors prior to the sale
b. Heirs of either spouse.

** Either spouse may not assail illegality because they are parties
thereto.
** A spouse designated as agent of the other spouse may sell the latters
exclusive property.

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.

Persons Relatively Incapacitated to Buy. (PAGEJO)
1. Public Officers and employeesProperty Of State.
2. AgentsProperty of Principal unless with consent.
3. GuardianProperty of Ward.
4. Executors and administratorsEstate
5. Justices, Judges, Prosecuting Attorneys, Clerks and employees of
courtProperty/Rights under litigation.
6. Others disqualified by law. (Ex. *aliens who are disqualified to
purchase private agricultural lands; *an unpaid seller having a right of
lien or having stopped the goods in transitu, who is prohibited from
buying the goods either directly or indirectly in the resale of the same at
a public or private sale w/c he may make. Art. 1533, par.5)

Rationale: Fiduciary relationship
Status of Sale: Voidable (1-3); Void (4-6)

Article 1492. The prohibitions in the two preceding articles are
applicable to sales in legal redemption, compromises and
renunciations.

Article 1493. If at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the contract
shall be without any effect.

But if the thing should have been lost in part only, the vendee may
choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed
upon.

Partial Loss Rules:
1. Vendee may withdraw from the contract
2. Demand the remaining part, paying its price in proportion to the
total sum agreed upon

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.

Loss/Substantial Deterioration of Specific Goods without sellers
knowledge.
1. Buyer may avoid the sale or
2. May treat sale as valid w/ respect to the existing goods

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.

Obligations of Vendor. (TDWP)
1. Transfer Ownership (not waivable)
2. Deliver (not waivable)
3. Warrant Object (waivable and may be modified)
4. Preserve Thing from perfection to delivery (Art. 1163)
5. Pay for the execution and registration of the sale unless there is a
contrary agreement

**Execution sales do not require the delivery of thing since a one year
period of redemption is available to seller.

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.

Article 1497. The thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee.

Control and Possession necessary in Delivery.
Exception: Art. 1478. Stipulation as to full payment of price.

Delivery- a mode of acquiring ownership as a consequence of a contract
of sale by virtue of which actually or constructively the object is placed
in the control and possession of the vendee.

KINDS OF DELIVERY
1. Actual or Real. (1497)
2. Legal or Constructive
a. Legal Formalities (1498); execution of public instrument.
b. Symbolical Tradition (1498 par 2)- keys delivered.
c. Traditio Longa Manu- by mere consent /agreement. If the
movable sold cannot yet be transferred to the possession of the
buyer at the time of the sale. (1499)
d. Traditio Brevi Manu- if the buyer had already the possession the
object even before the purchase. (lessee becomes owner)
e. Traditio constitutum possessorium- possession as owner
changed. (Owner becomes lessee)

3. Quasi-Tradition- Delivery of Rights, credits or incorporeal property
made by:
a. Execution of public instrument
b. Placing titles of ownership in the hands of a lawyer.
c. Allowing the buyer to make use of the rights (1501)

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.

Requirements:
1. Sellers Control.
2. Sellers Control transferred to buyer.
3. Intention to deliver for ownership.

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.

Article 1500. There may also be tradition constitutum possessorium.

Different forms of Constructive Delivery - Constructive delivery has
same legal effect as actual or physical delivery

1. Traditio Longa Manu Delivery of thing by mere agreement; when
SELLER points to the property without need of actually delivering
2. Traditio Brevi Manu Before contract of sale, the would be buyer
was already in possession of the would be subject matter of sale (ex: as
lessee)
3. Symbolic delivery As to movables ex: delivery of the keys to a car
4. Constitutum possessarium When at the time of the perfection of
the contract of sale, seller had possession of the subject matter in the
concept of owner and pursuant to the contract, seller continues to hold
physical possession no longer in the concept of an owner but as a lessee
or any other form of possession other than in the concept of owner.
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.
Article 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer on delivery, but
he may revest the ownership in the seller by returning or tendering
the goods within the time fixed in the contract, or, if no time has
been fixed, within a reasonable time.
When goods are delivered to the buyer on approval or on trial or
on satisfaction, or other similar terms, the ownership therein
passes to the buyer:
(1) When he signifies his approval or acceptance to the seller or does
any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but
retains the goods without giving notice of rejection, then if a time has
been fixed for the return of the goods, on the expiration of such time,
and, if no time has been fixed, on the expiration of a reasonable time.
What is a reasonable time is a question of fact.

Transaction on Sale or Return. Subject to Resolutory Condition.
Difference with Delivery with option to purchase- Ownership is
transferred in Sale or Return

Transaction on Approval or Trial/Satisfaction. Subject to Suspensive
Condition.
Rules:
1. Risk of loss to seller until the sale becomes absolute. (Exceptions:
Buyer in default; Buyer agreed to bear the loss)
2. Buyer must give goods a trial except when it is evident that it cannot
perform the work intended.
3. Period of signifying acceptance commences to run only when all the
parts essential for operation has been delivered.
4. A provision that a 3
rd
person must satisfy approval is valid but he must
be in Good faith.
5. Generally the Sale and Delivery to an expert buyer is not a sale on
approval/trial.

Sale or Return vs. Sale on Approval
Basis Sale or Return Sale on Approval
Condition Subject to Resolutory
condition
Subject to suspensive
condition
Premise It depends upon the
will of the buyer
It depends upon the
suitability, quality or
character of the
goods
Transfer of ownership Ownership
immediately passes
to the buyer on
Ownership does not
immediately pass to
the buyer. It passes
delivery only upon approval or
satisfaction of the
buyer duly
manifested after trial
Revesting of
ownership in the
owner
Ownership is
revested in the seller
if the buyer so
decides
There is no revesting
of ownership because
it is retained by the
seller until the sale
becomes absolute
Risk of loss or
deterioration
The risk rests on the
buyer before the
revestment of
ownership
The risk remains in
the seller while the
goods are on trial