What is a contract of sale?

According to Art. 1458 of the New Civil Code, it is defined as:

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.

*It is an agreement between two parties whereby one, who is the seller or vendor, obligates himself
to deliver something to the other party who is the buyer or vendee who is bound to pay a sum of
money or its equivalent.

What are the essential elements of a contract of sale?

In general, the rules governing a simple contract also apply to a contract of sale. The following
must be present:

1. Consent or meeting of the minds wherein 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 thereof. This is when the seller agrees to deliver the thing subject of the contract and
the buyer, the price thereof. The essence of this is that the parties agree to the terms of the
contract which will bind them.

2. Object or subject matter or the determinate thing, as what the law referred to which the
seller is bound to deliver and the buyer is bound to receive upon payment of its sum.

3. Cause or consideration or the price certain in money or its equivalent which does not
include goods or merchandise although they have their own value in money. Its equivalent
may mean any goods given as the token of payment and where these are assessed and
evaluated as its price equivalent. The price however must not be fictitious or else it would
be void.

What are the characteristics of a contract of sale?

Consensual because it can be perfected by the mere giving of consent and meeting of the minds
of the parties;

Bilateral because both of the parties are bound to fulfil correlative obligations such as the seller
is to deliver the thing which is the subject of the contract and the buyer, to pay the price;

Onerous because the thing sold is conveyed in exchange for the purchase price and the price is in
consideration of the thing sold;

Nominate because it is given a name in the Civil Code

Principal because it does not require the existence of another contract for it to be valid and
existing.

What are the types of Sales Agreement?

1. Absolute Sale- one wherein there is no condition whatever and imposes upon the vendor
the obligation to deliver the real estate, subject matter of the agreement to the vendee who
upon the receipt of the property hands over and pays the purchase price that has been
previously agreed upon with the vendor.

 The Deed of Absolute Sale where both parties agree on and accept the real estate to be or
being conveyed and price therefore that the vendee should pay for it. This transaction is
the most common where the title of the real estate, subject sale, is free from and clear of
any alien or encumbrance whatever. No other condition is necessary except the actual
delivery and transfer of the property to the vendee without delay. The deed will then be
registered to the proper Registry of Deeds as required by the Torrens Registration Law.

 Sale in Exchange or Barter where the real properties is subject to the transaction is deeded
in exchange of and for another real property that is acceptable to the vendor without any
additional monetary consideration. It is essential in the transaction that the title of both
properties in the exchange is valid and unencumbered or free from any liens or
encumbrances of any nature.

2. Conditional Sale-This is an agreement to sell or buy real estate with certain conditions that
must be accomplished by either or both the parties so as to extinguish and or create
ownership over the subject property. This is merely an executory contract in contemplation
of the law and the right of ownership is withheld for the meantime. In other words, the
certificate of title of the real property is not turned over to the vendee until and after certain
conditions have been accomplished by either or both the parties. Then it becomes an
executed contract.

It may be:

 Sale on installments- commonly adopted for the sale of lots in a land subdivision or units
in a condominium or townhouse project. Its principal feature is that the purchase price is
fixed at a certain amount that shall be paid in equal monthly or yearly installments for a
period of five or ten years.

 Contract to Sell- This is similar to sale on installments except that the period allowed for
the final payment of the purchase price is much shorter in duration.

 Pacto de Retro- The sale in which the vendor is granted the right to repurchase the property
sold on a certain date fixed in the Contract. This is done by returning to the vendee the
entire purchase price including the expenses for the preparation of the contract and the
necessary and useful expenses on the property sold. This is termed as conventional
redemption under Article 1691 of the New Civil Code.
There are other forms of Conditional Sale where ownership and possession of subject property are
transferred to the vendee upon execution of the contract such as:

1. Sale with mortgage- A portion of the purchase price is initially paid by the vendee and the
vendor delivers possession and ownership of subject property tot eh vendor who, thereafter,
execute a Deed of Mortgage on the same property in favor of the vendor to guarantee
payment in full of the balance of the purchase price.

2. Sale with assumption of mortgage- The Vendor pays in cash a portion of subject property
to the vendee who assumes the payment of the existing mortgage on the property that
represents the balance of the purchase price.

3. Dacion en Pago- This is an agreement where the encumbered property of the vendor is sold
by the latter to his creditor or mortgagee as vendee to satisfy or in payment of his existing
loan and other charges.

What is the difference between a contract to sell and a conditional sale?

1. Transfer of title– In a contract to sell, the title does not automatically pass to the buyer
upon payment of the price, a contract of absolute sale still has to be entered into by the
parties.

In a conditional sale, the sale will be deemed fulfilled upon the happening of the condition which
may or may not occur. If the condition do not happen then the contract of sale will be abated.

2. Sale of property to a third person– In a contract to sell, a third person not an immediate
party to the contract cannot be considered a buyer in good faith despite payment of the
price and the prospective buyer cannot recover the property. This in effect will cause defect
in the title of the buyer.

In a conditional sale, upon the happening of the suspensive condition, the title of the seller or
ownership to the thing sold will automatically transfer to the buyer and will bar the seller to transfer
it to any other person. In this case, the first buyer may seek reconveyance of the property since the
second buyer will be deemed a buyer in bad faith and will have a defect in his title