LAW ON SALES

OUTLINE

I. THE NATURE OF SALE

A. DEFINITION OF SALE (Art. 1458)
1. Elements of Sale
2. Stages of Contract of Sale
3. Sale Creates Real Obligations “To Give” (Art. 1165)
4. Essential Characteristics of Sale:
a. Nominate and Principal
b. Consensual (Art. 1475)
c. Bilateral and Reciprocal (Arts. 1169 and 1191)
d. Onerous
Gaite v. Fonacie r, 2 SCRA 830 [1961]
e. Commutative ( Arts. 1355 and 1470)
Buenaventura v. CA, 416 SCRA 263 (2003).
f. Sale Is Title and Not Mode
B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS
1. Donation (Arts. 725 and 1471)
2. Barter (Arts. 1468, 1638 to 1641)
3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)
Celestino& Co. v. Collector, 99 Phil. 841 (1956).
Commissioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590
(1975).
4. Agency to Sell(Art. 1466)
Quiroga v. Parsons, 38 Phil. 501 (1918);
Puyat v. Arco Amusement Co., 72 Phil. 402 (1941).

5. Dacion En Pago (Arts. 1245 and 1934)

Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).
6. Lease (Arts. 1484 and 1485)

II. PARTIES TO A CONTRACT OF SALE (Arts. 1489-1492)

1. General Rule: (Art. 1489)
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
a. Necessaries (Arts. 1489 and 290)
b. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332)
Paragas v. Heirs of DominadorBalacano, 468 SCRA 717 (2005)
3. Sales By and Between Spouses:
a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984)
4. Others Relatively Disqualified (Arts. 1491 and 1492)
Rubias v. Batiller, 51 SCRA 120 (1973).
a. Guardians, Agents and Administrators
Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956).
b. Attorneys.
Rubias v. Batiller, 51 SCRA 120 (1973);
Fabillo v. IAC, 195 SCRA 28 (1991).
c. Judges

III. SUBJECT MATTER OF SALE (Arts. 1459 to 1465)

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1. Must Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)
a. EmptioReiSperatae (Arts. 1461 and 1347)
b. EmptioSpei (Art. 1461)
c. Subject to Resolutory Condition (Art. 1465)
2. Must Be Licit (Arts. 1347, 1459 and 1575)
3. Must Be Determinate or At Least “Determinable” (Art. 1460)
Atilano v. Atilano, 28 SCRA 231 (1969).

a. Generic things may be object of sale (Arts. 1246 and 1409[6])

Melliza v. City of Iloilo, 23 SCRA 477 (1968).

b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art.
1464) – May result it co-ownership.
4. Quantity of Subject Matter (Art. 1349)
NGA v. IAC, 171 SCRA 131 (1989).
Johannes Schuback& Sons Phil. Trading Corp. v. CA, 227 SCRA 719 (1993).
5. Seller’s Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Seller's Ownership Need Not Exist at Perfection:
Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434)
c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462).

IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474)

1. Price Must Be Real(Art. 1471)
a. When Price “Simulated”
Mapalo v. Mapalo, 17 SCRA 114 (1966),
Rongavilla v. Court of Appeals, 294 SCRA 289 (1998).
Mate v. CA, 290 SCRA 463 (1998)
Yu Bun Guan v. Ong, 367 SCRA 559 (2001).
b. When Price is “False” (Arts. 1353 and 1354)
c. Non-Payment of Price
2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468)
Ong v. Ong, 139 SCRA 133 (1985);
Bagnas v. CA, 176 SCRA 159 (1989);
Republic v. Phil. R sources Dev., 102 Phil. 960 (1958).e
3. Must Be Certain or Ascertainable at Perfection (Art. 1469)
a. How Price Determined to be Ascertainable
(i) Set by third person appointed at perfection (Art. 1469)
(ii) Set by the courts (Art. 1469)
(iii) By reference to a definite day, particular exchange or market (Art. 1472)
(iv) By reference to another thing certain
b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price is separately
accepted by the other party.
c. Effects of Unascertainability:
(Art. 1474)
4. Manner of Payment of Price ESSENTIAL
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).
5. Inadequacy of Price (Arts. 1355 and 1470)
a. Gross Inadequacy of Price
b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by
court . (Art. 1386).
c. Gross inadequacy of price may raise the presumption of equitable mortgage. (Art. 1602).

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V. FORMATION OF CONTRACT OF SALE (Arts. 1475-1488)
A. POLICITACION STAGE (Art. 1479)
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
1. Option Contract
Carceller v. Court of Appeals, 302 SCRA 718 (1999).
Tayag v. Lacson, 426 SCRA 282 (2004).
a. Meaning of “Separate Consideration” (Arts. 1479 and 1324)
Villamor v. Court of Appeals, 202 SCRA 607 (1991)
b. No Separate Consideration:

Sanchez v. Rigos, 45 SCRA 368 (1972).

c. There Must Be Acceptance of Option Offer.

Vazquez v. CA, 199 SCRA 102 (1991).

d. Proper Exercise of Option Contract.

Nietes v. CA, 46 SCRA 654 (1972).

Carceller v. Court of Appeals, 302 SCRA 718 (1999).
2. Right of First Refusal
Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994).
Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., 264 SCRA 483 (1996)
Paranaque Kings Enterprises, Inc. v. CA, 268 SCRA 727, 741 (1997).
Vasquez v. Ayala Corp., 443 SCRA 231 (2004).
Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002).
4. Mutual Promises to Buy and Sell(Art. 1479): “True Contract to Sell”
Macion v. Guiani, 225 SCRA 102 (1993).

B. PERFECTION STAGE (Arts. 1475, 1319, 1325 and 1326)

1. Absolute Acceptance of a Certain Offer (Art. 1475)
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
2. When “Deviation” Allowed:
Villonco v. Bormaheco, 65 SCRA 352 (1975).
3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)
4. Earnest Money (Art. 1482)
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
5. Difference Between Earnest Money and Option Money.
Oesmer v. Paraiso Dev.Corp., 514 SCRA 228 (2007).
6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)
C. FORMAL REQUIREMENTS OF SALES (Arts. 1357, 1358, 1406 and 1483)

Fule v. CA, 286 SCRA 698 (1998);

Dalion v. CA, 182 SCRA 872 (1990)
Secuya v. Vda. De Selma, 326 SCRA 244 (2000)
a. STATUTE OF FRAUDS (Arts. 1403 and 1405)
EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R.A. 8792)

Yuviengco v. Dacuycuy, 104 SCRA 668 [1981];

Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 [1995];
Ortega v. Leonardo, 103 Phil. 870 (1958);
Claudel v. Court of Appeals, 199 SCRA 113 (1991).
Alfredo v. Borras, 404 SCRA 145 (2003).
Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995).

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b. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)

VI. CONSUMMATION (Arts. 1493-1506) AND

PERFORMANCE OF CONTRACT (Arts. 1536-1544, 1582-1590)
A. OBLIGATIONS OF SELLER
1. Preserve Subject Matter (Art. 1163)
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
3. DELIVER THE SUBJECT MATTER (Art. 1477) (Art. 1478) (Art. 1497)(Art. 1498)
Santos v. Santos, 366 SCRA 395 (2001).
(i) As to Movables (Arts. 1498-1499, 1513-1514;

Dy, Jr. v. CA, 198 SCRA 826).

(ii) As to Immovables (Art. 1498)

Addison v. Felix, 38 Phil. 404 (1918);
Danguilan v. IAC, 168 SCRA 22 (1988);
Pasagui v. Villablanca, 68 SCRA 18 (1975).
Power Commercial and Industrial Corp. v. CA, 274 SCRA 597 (1997).

Chua v. Court of Appeals, 401 SCRA 54 (2003).

Vive Eagle Land, Inc. v. Court of Appeals, 444 SCRA 445 (2004).
Chua v. Court of Appeals, 401 SCRA 54 (2003).
(iii) As to Incorporeal Property (Arts. 1498 and 1501).
e. ConstitutumPossessorium (Art. 1500) –
f. TraditioBrevi Manu –
4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)
a. When Buyer Refuses to Accept (Art. 1588)
b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)
5. Taking-Out Insurance Coverage (Art. 1523)
6. Time and Place of Delivery (Art. 1521).
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in Deliverable
Estate (Art. 1521).
B. SPECIAL RULES ON COMPLETENESS OF DELIVERY
1. In Case of Movables (Art. 1522 and 1537, 1480)
a. Rules on Delivery to Carrier (Art. 1523)
(i) FAS Sales –
(ii) FOB Sales
Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
(iii) CIF Sales
General Foods v. NACOCO, 100 Phil. 337 (1956).
Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
Pacific Vegetable Oil Corp. v. Singzon, G.R. No. L-7917, April 29, 1955
b. Sale on Approval, Trial or Satisfaction (Art. 1502)
c. Sale by Description and/or Sample (Art. 1481)
d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier
delivers COD.
2. In Case of Immovables
a. Where Sold Per Unit or Number (Arts. 1539 and 1540)
Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005).
b. Where Sold for a Lump Sum (Art. 1542)
C. DOUBLE SALES (Arts. 1544 and 1165)
Naawan Community Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003).
Naval v. Court of Appeals, 483 SCRA 102 (2006).

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Carillo v. Court of Appeals, 503 SCRA 66 (2006).
Carbonell v. CA, 69 SCRA 99 (1976).
San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005).
Mendoza v. Kalaw, 42 Phil. 236 (1921);
Adalin v. CA, 280 SCRA 536 (1997).
Cheng v. Genato, 300 SCRA 722 (1998).
Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005)

Abrigo v. De Vera, 432 SCRA 544 (2004).

Dagupan Trading Co. v. Macam, 14 SCRA 179 (1965).
Carumba v. CA, 31 SCRA 558 (1970).
Acabal v. Acabal, 454 SCRA 555 (2005).
D. OBLIGATIONS OF BUYER
1. Pay the Price (Art. 1582)
2. Accept Delivery (Arts. 1582-1585)
VII. DOCUMENTS OF TITLE (Arts. 1507-1520)
1. Definition (Art. 1636)
2. Purpose of Documents of Title
3. Negotiable Documents of Title
a. How Negotiated (Arts. 1508-1509)
b. Who Can Negotiate (Art. 1512)
c. Effects of Negotiation (Art. 1513)
d. Unauthorized Negotiation (Art. 1518)
4. Non-negotiable Documents of Title
a. How Transferred or Assigned (Art. 1514)
b. Effects of Transfer (Art. 1514).
5. Warranties of Seller of Documents of Title (Art. 1516)
6. Rules of Levy/Garnishment of Goods (Arts. 1514, 1519, 1520).

VIII. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE: LIFE OF A CONTRACT OF

SALE
1. Effect of Sale Where Seller Not Owner at Time of Delivery (Art. 1505;
Paulmitan v. Court of Appeals, 215 SCRA 866 [1992]).
Mindanao v. Yap, 13 SCRA 190 (1965).
2. Exceptions: When Ownership Transfers by Act of the Non-Owner Art. 1434)
Bucton v. Gabar, 55 SCRA 499 (1974).
City of Manila v. Bugsuk, 101 Phil. 859 (1957);
3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559)
EDCA Publishing v. Santos, 184 SCRA 614 (1990).
Aznar v. Yapdiangco, 13 SCRA 486 (1965).
Cruz v. Pahati, 98 Phil. 788 (1956)
Dizon v. Suntay, 47 SCRA 160 (1972).

IX. LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

1. No Application When Subject Matter is Determinable (Art. 1263)
2. Effect of Loss/Deterioration of Thing Sold:
a. Before Perfection
Roman v. Grimalt, 6 Phil. 96 [1906]).
b.At Time of Perfection (Arts. 1493 and 1494).
c. After Perfection But Before Delivery (Arts. 1164, 1189, and 1262).

(1) Loss by Fault of a Party (Arts. 1480, 1504, 1538)

(2) Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189;

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(3) Deterioration (Arts. 1480, 1163-65, and 1262; Arts. 1189 and 1538)
(5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1480, 1537-
1538).
d. After Delivery (Art. 1504)
Lawyer's Coop v. Tabora, 13 SCRA 762 (1965)
X. REMEDIES FOR BREACH OF CONTRACT OF SALE (Arts. 1594-1599)
A. ON PART OF SELLER
1. In Case of Movables ((Arts. 1593, 1595 to 1597)
2. Unpaid Seller of Goods (Arts. 1524-1535)
a. Definition of “Unpaid Seller” (Art. 1525)
b. Rights of Unpaid Seller:
 Possessory lien (Arts. 1526-1529, 1503, 1535)
 Stoppage in transitu (Arts. 1530-1532, 1535, 1636[2])
 Right of Resale (Art. 1533)
 Right to Rescind (Art. 1534)
3. RECTO LAW: SALES OF MOVABLES ON INSTALLMENTS (Arts. 1484, 1485, 1486)
Levy v. Gervacio, 69 Phil. 52 (1939).
Delta Motor Sales Corp. v. Niu Kim Duan, 213 SCRA 259 (1992).
Tajanglangit v. Southern Motors, 101 Phil. 606 (1957)
Nonato v. IAC, 140 SCRA 255 (1985
Ridad v. Filipinas Investment, 120 SCRA 246 (1983).
Zayas v. Luneta Motors, 117 SCRA 726 (1982
Northern Motors v. Sapinoso, 33 SCRA 356 (1970).
Cruz v. Filipinas Investment & Finance Corp., 23 SCRA 791 (1968)
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937).
Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564 (1969).
PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a . Anticipatory Breach (Art. 1591)

Legarda v. Saldaña, 55 SCRA 324 (1974).

5. MACEDA LAW: SALES OF RESIDENTIAL REALTY ON INSTALLMENTS (R.A. 6552).
Orbe vs. Filinvest Land, Inc. G. R. NO. 208185, 6 September 2017
Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
McLaughlin v. CA, 144 SCRA 693 (1986).
6. RESCISSION ON SALES OF NON-RESIDENTIAL IMMOVABLES ON INSTALLMENTS (Arts. 1191 and 1592)
B. ON PART OF BUYER
1. In case of Movables (Arts. 1598-1599)
2. In case of Immovables (Arts. 1191; Secs. 23 and 24, P.D. 957)
3. Suspension of Payment (Art. 1590)

XI. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING IMMOVABLES: CONTRACT

OF SALE versus CONTRACT TO SELL
A. NATURE OF REMEDY OF RESCISSION (RESOLUTION) (Arts. 1191, 1479, 1592)
1. Mutual Restitution and Forfeiture (Art. 1385)
B. DISTINCTIONS BETWEEN CONTRACT OF SALE AND CONTRACT TO SELL
1. CONTRACT OF SALEversusCONTRACT TO SELL (Art. 1458)

Adelfa Properties, Inc. v. CA, 240 SCRA 575 (1995).

Coronel v. CA, 263 SCRA 15, 27 (1996
PNB v. CA, 262 SCRA 464 (1996).

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Babasa v. Court of Appeals, 290 SCRA 532 (1998).
Valdez v. Court of Appeals, 439 SCRA 55 (2004
Dignos v. Court of Appeals, 158 SCRA 375 (1988).
a. Issue of Substantial Breach (Arts. 1191 and 1234)
2. Cancellation of Contract to Sell
University of the Philippines v. De los Angeles, 35 SCRA 103 (1970);
Palay Inc. v. Clave, 124 SCRA 638 (1983)
Lim v. Court of Appeals, 182 SCRA 564 (1990).
AFP Mutual Benefit Assn., Inc. v. CA, 364 SCRA 768 (2001

XII. CONDITIONS AND WARRANTIES

1. Conditions (Art. 1545)
Laforteza v. Machuca, 333 SCRA 643 (2000).
Heirs of Pedro Escanlar v. Court of Appeals, 281 SCRA 176 (1997).
2. Conditions versus Warranties.
Power Commercial and Industrial Corp. v. Court of Appeals, 274 SCRA 597 (1997).
3. Express Warranties (Art. 1546)
Guinhawa v.People, 468 SCRA 278 (2005).

4. Implied Warranties (Art. 1547)

a. Seller Has Right to Sell
b. Warranty Against Eviction (Arts. 1548-1560)

c. Warranty Against Non-Apparent Servitudes(Arts. 1560)

d. Warranty Against Hidden Defects (Arts. 1561-1580)
Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004)
e. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
5. Effects of Warranties
6. Effects of Waivers
7. Buyer's Options in Case of Breach of Warranty (Art. 1599).
Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004).

XIII. EXTINGUISHMENT OF SALE

A. IN GENERAL (Arts. 1231, 1600).
B. CONVENTIONAL REDEMPTION
1. Definition (Art. 1601)
Roberts v. Papio, 515 SCRA 346 (2007).
2. Redemption Period
Misterio v. Cebu State College of Science and Technology, 461 SCRA 122 (2005).
3. Situation Prior to Redemption
4. Who Can Redeem (Arts. 1611 to 1614)
5. How Redemption Effected (Art. 1616)
6. Redemption Price (Art. 1616)
7. Fruits (Art. 1617)
8. Effect When No Redemption Made: Consolidation (Art. 1607)
9. EQUITABLE MORTGAGE (Arts. 1602-1604)
a. Badges of Equitable Mortgage (Art. 1602
b. Remedies Allowed for Equitable Mortgage (Art. 1602, 1605).
c. PactumCommissorium (Art. 2088)
Solid Homes, Inc. v. Court of Appeals, 275 SCRA 267 (1997).
A. Francisco Realty v. Court of Appeals, 298 SCRA 349 (1998).
e. Final Chance to Redeem in “Mistaken Equitable Mortgage” (Art. 1606)

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Abilla v. Gobonseng, 374 SCRA 51 (2002
C. LEGAL REDEMPTION
1. Definition (Art. 1619)
2. Legal Redemption Rights under the Civil Code
a. Among Co-heirs (Art. 1088)
b. Among Co-owners (Art. 1620)
c. Distinguishing Between Right of Redemption of Co-heirs and Co-owners –
d. Among Adjoining Owners (Arts. 1621 and1622)
e. Sale of Credit in Litigation (Art. 1634)
3. When Period of Legal Redemption Begins (Art. 1623)
Francisco v. Boiser, 332 SCRA 305 (2000),
4. OTHER LEGAL REDEMPTION RIGHTS
a. Redemption in Patents (Sec. 119, C.A. 141)
b. Redemption in Tax Sales (Sec. 215, NIRC of 1997)
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
d. Redemption in Extrajudicial Foreclosure (Sec. 6, Act 3135)
e. Redemption in judicial foreclosure of mortgage (Sec. 47, R.A. 8791)
Soriano v. Bautista, 6 SCRA 946 (1962).
f. Redemption in Foreclosure by Rural Banks (R.A. No. 720)

XIV. ASSIGNMENT (Arts. 1624-1635)

1. Definition and Nature of Assignment
2. Perfection by Mere Consent (Art. 1624)
3. But Must Be in Public Instrument to Affect Third Parties (Art. 1625).
4. Effects of Assignment
(Art. 1626)
(Art. 1627)
5. Warranties of Assignor (Art. 1628)
Nyco Sales Corp. v. BA Finance,200 SCRA 637 (1991).
6. Right of Repurchase on Assignment of Credit under Litigation (Arts. 1634 and1635)
7. Subrogation versus Assignment of Credit (Art.1301)
Licaros v. Gatmaitan, 362 SCRA 548 (2001
8. Assignment of Copyright (Sec. 180, Intellectual Property Code)

XV. BULK SALES LAW (ACT NO. 3952)

DBP v. The Honorable Judge of the RTC of Manila, (05 February 1990).
XVI. RETAIL TRADE LIBERALIZATION ACT OF 2000 AND RELATED PROVISIONS OF THE
ANTI-DUMMY LAW
Balmaceda v. Union Carbide Philippines, Inc. 124 SCRA 893 (1983
Goodyear Tire v. Reyes, Sr., 123 SCRA 273 (1983).

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