GENERAL PRINCIPLES

DEFINITION

(Art. 1458)

PARTIES

OBLIGATIONS
(1) TO TRANSFER
OWNERSHIP

SELLER
Real Obligations

SALE

CONSENT
Meeting of Minds

BUYER
1

SUBJECT
MATTER

(2) TO DELIVER
POSSESION

Real Obligation
(3) TO

PAY

PRICE

ESSENTIAL CHARACTERISTICS OF SALE:

NOMINATE

vs.

Innominate

vs.

Accessory

vs.

Solemn

BILATERAL/
RECIPROCAL

vs.

Unilateral

ONEROUS

vs.

Gratuitious

COMMUTATIVE

vs.

PRINCIPAL
CONSENSUAL

TITLE
2

vs.

Aleatory
Mode

vs.

vs.

Prefaratory
Real

ESSENTIAL CHARACTERISTICS OF SALE:

NOMINATE

vs.

Innominate

vs.

Accessory

vs.

Solemn

BILATERAL/
RECIPROCAL

vs.

Unilateral

ONEROUS

vs.

Gratuitious

COMMUTATIVE

vs.

PRINCIPAL
CONSENSUAL

TITLE
3

vs.

Aleatory
Mode

vs.

vs.

Prefaratory
Real

CONTRACTS TO SELL
Versus

CONDITIONAL CONTRACTS OF SALE

Art. 1458 Defines a Sale to covered both Absolute and Conditional

Both Contracts are usually bound by same condition: Full payment of the
Price

Both Contracts are consensual, onerous, commutative, and cover

bilateral obligations

K TO SELL VS. K OF SALE

contd

Power to Rescind is inherently Judicial

Rescission requires a positive act

Non-fulfillment of Condition ipso jure destroys contract

Substantial Breach Relevant to Contract of Sale, Irrelevant to Contracts

to Sell

K TO SELL VS. K OF SALE

contd

1. In

Contract to Sell Ownership if Reserved by Seller,

while in a Contract to Sell ownership transfers to
Buyer upon delivery.
Ergo: K to Sell must have express reservation of ownership

To execute a formal Deed of Sale

Only receipt of payment evidences sale

Seller retained original titles

K TO SELL VS. K OF SALE

contd

2. Rescission of Contract to Sell is a matter of right upon non-happening of

the condition

Ergo: K to Sell must have express right to rescind the contract

upon default of the Buyer

A written notice of cancellation must be served

upon Buyer even when Contract to Sell
UP v. Delos Angeles, 35 SCRA 103 (1970)

SUBJECT MATTER
(OBLIGATION to Transfer Ownership and Deliver Possession)
1.
2.
3.

POSSIBLE THING

vs.

Impossible things

LICIT

vs.

Illicit

DETERMINATE

vs.

Non-Determinable
GENERICS

DETERMINABLE
RATIONALE:

Transfer of Ownership/Possession of the

Subject Matter is the ESSENCE of SALE
Obligation should therefore not be illusory
To comply with the Obligatory Force principle

in Contract Law
8

SALES

vs.

AGENCY TO SELL/BUY
REPRESENTATIVE

AGENCY

FIDUCIARY

Essentially revocable
Fruits and of principal

NOT PERSONNALY LIABLE FOR THE

OBLIGATION CREATED BY THE SALE
CONTRACT

AGENT

NOT OBLIGED TO PAY THE PRICE

DOES NOT ASSUME THE RISKS OF
OWNERSHIP TO THE OBJECT OF SALE

SALES vs. AGENCY TO SELL/BUY

Contd

THEREFORE:
is deemed to be Seller/Buyer when
contracted to assume Risks and Obligations
contrary to his representative/ fiduciary role:
AGENT

(a)

HE ASSUMES OBLIGATION TO PAY THE PRICE

RISKS OF LOSS
(b)

SUBJECT MATTER

INSURABLE INTEREST
MAINTENANCE

10

SALES

vs.

CONTRACT FOR PIECE-OF-WORK:

K for Piece-of-Work:

Service is the Subject Matter

Ineluctably, whether the contract be one of sale or one

for a Piece of Work, a transfer of ownership is involved
and a party necessarily walks away with an object.
Commission of Internal Revenue v. Court of Appeals, 271 SCRA 605 (1997)

Although there is the primary obligation to

pay fee (or price), the main motivation is the
reputation, skill, mastery of contractor.
Engineering & Machinery Corp. v. Court of Appeals, 252 SCRA 156
(1996)

BUT:
11

THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FOR

PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT
(ALWAYS A SALE)

SALES

versus

BARTER:

BARTER IS SALE, BUT WITH THE PRICE BEING REPLACED WITH

AN
OBLIGATION
TO
TRANSFER
OWNERSHIP/POSSESSION OF ANOTHER
SUBJECT MATTER

THEREFORE: BARTER GOVERNED BY LAW ON SALES

BUT:
12

NOT COVERED BY STATUTE OF FRAUDS

SALE

versus

LEASE:

LEASE
TEMPORARY

ESSENTIALLY

INVOLVES

ENJOYMENT

POSSESSION

OF

THE
OF

THE SUBJECT MATTER

FEW INSTANCES:

13

TREATED
AS
SALE
ON
INSTALLMENTS
WHEN
LEASE
STRUCTURED IN SUCH A WAY AS
TO AVOID APPLICATION OF THE
RECTO LAW

SALES

versus

DACION EN PAGO:

DACION IS PROCESS OF EXTINGUISHMENT OF PRE-EXISTING

OBLIGATION (CONTRACTS)

(a) There must be delivery of subject matter in lieu of

an pre-existing obligation;
(b) There must be difference between prestation due
and what is give in substitute;
(c) There must be a clear meeting of minds that the
pre-existing obligation is extinguished by reason
of the prestation substituted.

Lo v KJS Eco. Formwork System Phil.,

Inc., 413 SCRA 182 (2003)

DACION NOVATES THE ORIGINAL CONTRACTUAL RELATIONS

INTO A FULLY EXECUTED SALE

ESSENTIALLY: DACION
14

GOVERNED BY

LAW ON SALES

PRICE & OTHER CONSIDERATION

(The Obligation to Pay)
1. REAL/TRUE

vs.

FALSE

vs.

(Reformation)
2.

3.

Money or its Equivalent vs.

VALUABLE CONSIDERATION
CERTAIN

vs.

ASCERTAINABLE
4.

MANNER OF PAYMENT
RATIONALE:

15

vs.

SIMULATED
(Void)

PURE

vs.

LIBERALITY

NOMINAL
CONSIDERATION

UNASCERTAINABLE
UNASCERTAINABLE

Must comply with Obligatory Force principle in

Contract Law
Must meet Onerous and Commutative characteristics
of SALE

STAGES IN LIFE OF SALE

NEGOTIATION

Covers the period from the time the prospective

contracting parties indicate interest in the contract up to the
time immediate before the contract is perfected.
PERFECTION
Takes place upon the concurrence of the essential
elements of the Sale which are:
the meeting of the minds of the
parties
as to the object of the contract
upon the price.
CONSUMMATION
It begins when the parties perform their respective
undertaking under the perfected contract of sale, culminating
in the extinguishments thereof.
Jovan Land, Inc. v. CA, 268 SCRA 160 (1997)
San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)
16

PERFECTION STAGE
PERFECTION
OFFER HAS
ACCEPTANCE

HAPPENS WHEN A CERTAIN

BEEN MET BY AN ABSOLUTE

THE ONLY POINT IN TIME TO DETERMINE

VALIDITY OR INVALIDITY OF A CONTRACT OF SALE

THE

Birth sets the essence of the Sale

ESTABLISHES THE CONTRACTUAL

17

PRINCIPLES

CONSENSUALITY

MUTUALITY OR OBLIGATORY FORCE

RELATIVITY

OF:

CONSUMMATION STAGE
(3) REMEDIES
(1)

PERFORMANCE
DELIVERY OF
SUBJECT MATTER
PAYMENT OF PRICE

(2) RISK OF LOSS

(5) EXTINGUISHMENT

SPECIFIC PERFORMANCE CONVENTIONAL

REDEMPTION (SALE
RESCISSION
A RETRO)
EQUITABLE
DOUBLE SALES RULE
MORTGAGES
SUBDIVISION LOTS &
LEGAL
CONDO UNITS RULES
REDEMPTION
RECTO LAW
MACEDA LAW
(4) CONDITIONS AND
WARRANTIES
EFFECTS OF CONDITIONS
EXPRESS WARRANTIES
IMPLIED WARRANTIES

19

OBLIGATIONS OF SELLER
1. TO PRESERVE THE THING WITH DILIGENCE OF A GOOD
FATHER OF A FAMILY
2. TO DELIVER THE SUBJECT MATTER
3. To DELIVER FRUITS, ACCESSORIES AND
ACCESSIONS

4. To COMPLY WITH WARRANTIES

OBLIGATIONS OF BUYER
1. TO PAY THE PRICE
2. TO ACCEPT DELIVERY OF SUBJECT MATTER
20

DELIVERY OF SUBJECT MATTER

TRADITION AS THE MODE TO
TRANSFER OWNERSHIP
-

Actual or Physical Delivery

- Constructive Delivery

MAGIC OF
TRADITION

Fulfillment of the Primary

Obligation of the Seller
Transfer Ownership/
Possession to the Buyer

21

DOCTRINES ON CONSTRUCTIVE DELIVERY

EXECUTION OF PUBLIC INSTRUMENT
- No Contrary Stipulation/ Intention
- Seller Must Have Control
- Passage of Reasonable Time

EXCEPTION: WHEN BUYER TAKES

THE

RISK

Produces the Same Magic of

Actual Delivery

CONSTRUCTIVE DELIVERY
CONSTITUTUM POSSESORIUM
TRADITIO BREVI MANU
TRADITIO LONGA MANU OR SYMBOLIC DELVERY

Public Instrument

DELIVERY FOR
INTANGIBLES

Transfer/Negotiation of the
Evidences the Intangible

Title

Enjoyment of Rights and Privileges

with the consent of the Seller
DELIVERY THROUGH CARRIER

- FAS
- FOB
- CIF
DOCUMENTS TO
23

TITLE

OPTION CONTRACT:
ACCEPTANCE of OFFER

SUBJECT MATTER:

to give on Option to Buy/to Sell

Option or Privilege to Sell/ Purchase:

AN OBJECT:
- Possible

- Licit
- Determinate/
Determinable
Ascertainable

CONSIDERATION:
24

AT A
-

PRICE:

Real
- Valuable
- Certain/

Anything separate and distinct from

Price

Ang Yu Asuncion v. Court of Appeals

238 SCRA 602 (1994)

1.

If no separate consideration, Option Contract

void, but may constitute certain Offer which
can be withdrawn by Offeror, but if accepted
before withdrawal would give rise to a valid
Sale (Sanchez v. Rigos doctrine)

If withdrawal of option/offer whimsical or

arbitrary, could give rise to damage claim
under Art. 19 of Civil Code
3. When there is separate consideration, an
Option Contract deemed perfected:
2.

(a) If exercised within option period, gives

rise to Sale, which can be enforced by
specific performance
25

Ang Yu Asuncion v. Court of Appeals

contd

(b)

Would be a breach of the Option Contract,

for Offeror to withdraw the offer during the
agreed period, but withdrawal destroys
nevertheless the Option

(c)

But if, however, Optioner-Offeror withdraws

Offer even during option period before its
acceptance (i.e., exercise):
Optionee-Offeree may not sue for specific
performance on the Sale since it has
failed to reach its own perfection stage
Optioner-Offeror,
however,
renders
himself liable for damages for breach of
option

26

RIGHT OF FIRST REFUSAL

ESSENCE:

CONDITION:

OFFEROR BOUNDS HIMSELF TO FIRST

OFFER SUBJECT MATTER TO OFFEREE FOR
SALE

IN THE EVENT OFFEROR EVER DECIDES TO

SELL IT
Possible thing

SUBJECT MATTER
PRICE:
27

Licit

Determinate/Determinabl
e

THAT WILL HEN (HAPPENING OF CONDITION) BE

AGREED UPON

DOCTRINES ON RIGHTS OF FIRST REFUSAL

Ang Yu Asuncion v. Court of Appeals

Generally, RFRs would be none contracts, for

lack of cause or consideration, or failure to agree

the valid Price for the expectant contract
Merely innovative juridical relation
RFR
Cannot be enforced by specific performance
Not

being a Contract, it lacks essence of

consensuality, obligatory force or mutuality

Breach allows recovery of damage based on Art.

19 principle of Abuse of right

28

DOCTRINES ON RFR

contd

Equatorial Realty Dev., Inc. v. Mayfair Theater

264 SCRA 483 (1996)

29

When RFR attached to a valid principal contract

(e.g. Lease), its enforcement takes its vitality
from the obligatory force of the principal
contract

Such RFR, when breached may be enforced, at

the Price at which Subject Matter sold to Third
Party

The Third-Party Buyers purchase may be

rescinded under accion pauliana, i.e., entered
into in breach and in fraud of Optionees
contractual right

DOCTRINES ON RFR

contd

Paraaque Kings Enterprises v. CA

268 SCRA 727 (1997)

RFR is complied with by first offering the

Subject Matter to the Optionee and negotiating

for a Sale

There is no obligation to reach a sale,

obligation is to negotiate in good faith

Only when negotiations do not ripen into a

Sale, can Subject Matter be offered to ThirdParty Buyer, but at same price and terms
asked of the Optionee
Otherwise, must re-offer under new terms to

Optionee
30

FORM OF SALE
GENERALLY:

None, because Sale is consensual contract

FOR ENFORCEABILITY:
1.

Sale which by its terms is not to be performed

within one (1) year.

2.

Sale of Movables, at least P500

3.

Sale of Immovables, at any price

31

STATUTE OF FRAUDS

Must be in writing signed by the party sought

to be bound

RULES FOR
IMPROVEMENTS

DETERIORATION,

FRUITS

AND

RULES HAVE NO APPLICATION IF SUBJECT

MATTER IS MERELY DETERMINABLE (Art. 1263)

ROMAN LAW DOCTRINE:

Buyer bears the consequences of

Deterioration, but benefits from
the Fruits and Improvements

Arts. 1480, 1163-1262

Arts. 1189, 1537 and 1538
32

RULES WHEN SUBJECT MATTER LOST:

1.

BEFORE PERFECTION:

2. AT TIME

OF PERFECTION:

Sale is rendered inefficacious

33

Res Perit Domino

Roman v. Grimalt, 6 Phil. 96 (1906)

Seller (Arts. 1493 and 1494)

SUBJECT MATTER LOST:

contd

3. AFTER PERFECTION BUT BEFORE DELIVERY

Arts. 1164, 1189, and 1262(

General Rule:

For Goods, risk borne by Seller under

Res perit domino rule
Chrysler Phil. v. CA, 133 SCRA 567 (1984)
Union Motor Corp v. CA, 361 SCRA 506 (2001)

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

LOSS

BY FORTUITOUS EVENT: Two Schools of

Thought

Arts. 1480, 1163, 1164, 1165

Arts. 1504, 1538, and 1189

34

SUBJECT MATTER LOST:

contd

4. AFTER DELIVERY: BUYER

BEARS RISK, UNDER

Res Perit Domino

EXCEPT: When retention of Possession by Seller for purpose of

securing payment of the Purchase Price

Art. 1504
Song Fo & Co. v. Oria, 33 Phil. 3 (1915)
Lawyer's Coop v. Tabora, 13 SCRA 762 (1965)
Lawyer's Coop v. Narciso, 55 O.G. 3313)

35

FORM OF SALE

contd

Memo must contain Description of:

Possible
thing
(a) SUBJECT MATTER
Licit
Determinate/
Determinabl
real e
valuable
(b) PRICE
certain/ascertainable
manner of payment
provided
(c) SIGNED BY THE PARTY
SOUGHT TO BE CHARGED
Exception: Electronic Document

OR PARTIALLY EXECUTED
(Estoppel)
OR WAIVER OF ADDUCEMENT OF ORAL EVIDENCE

TRIAL
36

AT

FORM OF SALE

contd

What Constitutes Partial Execution?

Subject Matter
(a)

(b)

37

Performance Must
Touch Upon

Price
Cannot Cover
Other
Consideration

Must Involve/Compromise Party Sought to be

Charged

FORMS THAT VOID CONTRACT OF SALE:

1.

SALE OF REALTY THROUGH AGENT:

AGENTS AUTHORITY MUST BE IN WRITING

OTHERWISE:

SALE VOID:

38

EVEN IF DEED OF SALE IN WRITING

and/or NOTARIZED
EVEN
IF THERE HAS BEEN
PARTIAL/ FULL PAYMENT
EVEN
IF THERE HAS BEEN
DELIVERY OF SUBJECT MATTER
EVEN IF SALE REGISTERED

SALES OF IMMOVABLES
1.

PRIVATE DOCUMENT
BETWEEN PARTIES

NEEDED

TO

BE

ENFORCEABLE

EXCEPT: PARTIAL EXECUTION/WAIVER

2.

MUST BE IN A PUBLIC INSTRUMENT

-TO BIND THE PUBLIC
-TO BE REGISTRABLE WITH REGISTRY OF DEEDS

3.

FOR REAL ESTATE, MUST BE REGISTERED TO BE VALID AND

BINDING AGAINST THE WORD
- Authority of Agent must be in writing VOID
- Bound by actual possession situation, otherwise not
in good faith

39

REMEDIES FOR CONTRACTS OF SALE

1. REMEDIES OF UNPAID SELLER OF GOODS
Possessory lien (Arts. 1526-1529, 1503, 1535)
Stoppage in transitu (Arts. 1530-1532, 1535, 1636[2])

Special Right of Resale (Art. 1533)

Special Right to Rescind (Art. 1534)

40

2.

RECTO LAW:

SALES OF MOVABLES ON

(a) Meaning
(b)

INSTALLMENTS

of Installment Sale

Levy v. Gervacio, 69 Phil. 52 (1939)

Contracts to Sell Movables Not Covered

Co.,

(c) Nature

Visayan Sawmill
Inc. v. CA, 219 SCRA 378 (1993)

of Remedies of Unpaid Seller

Remedies under Art. 1484 are not cumulative,

but alternative and exclusive.
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996)

Seeking a writ of replevin consistent with all

three remedies
Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 (1969)

41

RECTO LAW: contd

(d) REMEDY OF SPECIFIC PERFORMANCE:

No bar to full
recovery

Tajanglangit v. Southern Motors, 101 Phil. 606 (1957)

Even when it is mortgaged property that is

sold on execution.
Southern Motors v. Moscoso, 2 SCRA 168 (1961)

Even with replevin and recovery of the subject

property, the action may still be for specific
performance.
Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977)

42

RECTO LAW: contd

(e)

NATURE OF REMEDY OF RESCISSION

Inherent
Barring
Effect
of
Rescission
Surrender of mortgaged property not
equivalent to rescission.
Vda. de Quiambao v. Manila Motors Co., Inc.,
3 SCRA 444 (1961)

Stipulation on non-return of payments

is valid provided not unconscionable.
Delta Motor Sales Corp. v. Niu Kim Duan,
213 SCRA 259 (1992)

43

RECTO LAW: contd

(f) REMEDY OF FORECLOSURE
(i) Third

Party Mortgage
Ridad v. Filipinas Investment, 120 SCRA 246 (1983)

(ii) Assignor-Assignee;

Financing Transactions
Zayas v. Luneta Motors, 117 SCRA 726 (1982)

When seller assigns his credit to another, the

assignee is likewise bound by the terms of the
Recto Law.
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).

44

RECTO LAW: contd

(iii) H-V

Barring Effects of Foreclosure

Foreclosure on the chattel mortgage prevents further action on

the supporting real estate mortgage.
Cruz v. Filipinas Investment & Finance Corp.,23 SCRA 791 (1968)
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996)

(iv)

Amounts Barred from Recovery

Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937)

(v)

Perverse Buyer
Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564 (1969)

45

RECTO LAW: contd

(g)

PURPORTED LEASE WITH OPTION TO BUY:

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. (Art. 1485)

When purported Lessor takes possession of

subject movable, it is treated legally as a foreclosure
and the barring effects applicable to foreclosure
remedy, not rescission, are given application.
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)
Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)
U.S. Commercial v. Halili, 93 Phil. 271 (1953)
H.E. Heacock v. Bantal Manufacturing, 66 Phil. 245 (1938)
Manila Gas Corp. v. Calupita, 66 Phil. 747 (19 38)
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)
46

3. MACEDA LAW: SALES OF RESIDENTIAL REALTY

INSTALLMENTS (R.A. 6552)
(a)

ON

Role of Maceda Law

Lagandaon v. CA, 290 SCRA 463 (1998)

(b) Transactions Covered

The formal requirements of rescission under

the Maceda Law apply even to contracts entered
into prior to its effectivity.
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994)

BUT SEE:

47

Peoples Indl and Comm. Corp. v. CA, 281 SCRA 206 (1997)

MACEDA LAW

contd

The Maceda Law makes no distinctions between option and sale

which under P.D. 957 also includes an exchange or attempt to sell, an option of
sale or purchase, a solicitation of a sale or an offer to sell directly.
Realty Exchange Venture Corp. v. Sendino, 233 SCRA 665 (1994)

Curiously:

No application to Contract to Sell because

said law presupposes the existence of
a valid and effective contract to sell a
condominium.
Mortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000)

48

MACEDA LAW

contd

Pursuant to Art. 1253 of Civil Code, in a contract involving

installments with interest chargeable against the remaining
balance of the obligation, it is the duty of the creditor-seller to
inform the debtor-buyer of the interest that falls due and that is
applying the installment payments to cover said interest.
Otherwise, the creditor cannot apply the payments to the
interest and then hold the debtor in default for non-payment of
installments on the principal.
Rapanut v. CA, 246 SCRA 323 (1995)

(c) How

Cancellation of Contract Can Be Effected:

Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002)

49

MACEDA LAW

contd

OTHER RIGHTS GRANTED

TO BUYER

(a) To sell/assign his rights to another person

(b) To reinstate contract by updating account

during grace period, before actual

cancellation of contract
(c) To pay in advance installments or in full
unpaid balance of Price any time without
interest and have same annotated in title
Any stipulation in any contract
entered into contrary to the provisions of
the Law, shall be null and void. (Art. 7)

50

4. OTHER REMEDIES ON SALE OF REAL ESTATE

(a)

(b)

ANTICIPATORY BREACH (ART. 1591)

RESCISSION ON SALE ON NON-RESIDENTIAL REALTY
ON INSTALLMENTS (Arts. 1191 and 1592)

(c) SEC. 23 AND 24, PRES. DECREE 957

51