SALES
Chapter 1 – Nature and Form of the Contract
CHAPTER 1
NATURE AND FORM OF THE CONTRACT
Article 1458 . By contract of sale one of the
contracting parties obligate himself to transfer the
ownership and to deliver a determinate thing, and
the other to pay therefore a price certain in money or
its equivalent.
Sales – a contract where one party (seller or vendor)
obligates himself to transfer the ownership of and to deliver
a determinate thing, while the other party (buyer or vendee)
obligates himself to pay for said thing a price certain in
money or its equivalent.
Under Roman Law, sale was termed avenditio. Today the
French refer to the contract as a venta
 The vendor need not be the owner at the time the
sale is perfected. It is sufficient that he is the owner
at the time the thing sold is deliver.
 Suppose Art. 1458 did not specify that the seller
must transfer the ownership of the object, he still
have this obligation for after all the transfer of
ownership is the fundamental aim of the contract. A
buyer is not interested in a mere physical transfer, he
is after the ownership.
Essential Characteristics of the Contract of Sale
a. Consensual – perfected by mere consent.
b. Bilateral reciprocal – both parties are bound by
obligations dependent upon each other.
c. Onerous – to acquire the rights, valuable
consideration must be given.
d. Commutative – the values exchanged are almost
equivalent to each other.
Note: By way of exception, some contracts are aleatory.
Ex: Sale of a genuine sweepstakes ticket.
e. Principal (as distinguished from accessory
contract) – there is no necessity for it to depend
upon the existence of another valid contract. (Ex:
Contracts of pledge and mortgage)
f. Nominate (as distinguished from an innominate
contract) – a special designation or name. (Ex: the
contract of sale)
Elements of the Contract of Sale
a. Essential elements (those without which there
can be no valid sale)
1. Consent or meeting of the minds – (Ex:
consent to transfer ownership I exchange for
the price.
2. Determinate subject matter (generally
there is no sale of generic thing; moreover, if
the parties differ as to the object, there can
be no meeting of the minds.
3. Price certain in money or its equivalent –
(This is the cause or consideration) (The price
need not be in money.)
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Chapter 1 – Nature and Form of the Contract

b. Natural elements (those which are inherent in c. As to whether the object is tangible or
the contract, and which in the absence of any intangible
contrary provision, are deemed to exist in the
contract.) 1. sale of property (tangible or corporeal)

1. warranty against eviction (deprivation of the 2. sale of a right (assignment of a right or a credit, or
property bought) some other intangibles such as a copyright, a
trademark, or goodwill.)
2. warranty against hidden defects
tangible – chose of possession.
c. Accidental elements (those which may be present or
absent in the stipulation, such as the place or time of intangible – chose of action.
payment, or the presence of conditions.)
 The term “goods” as used in the Uniform Sales Act
Stages in the Contract of Sale does not ordinarily include choses in action (things in
action). Neither does the term include money.
a. Generation or negotiation
d. As to the validity or defect of the transaction
b. Perfection – meeting of the minds
1. valid sale
c. Consummation – when the object is delivered and
the price is paid. 2. rescissible sale

Kinds of Sales 3. voidable sale

a. As to the nature of the subject matter 4. unenforceable sale

1. sale of real property 5. void sale

2. sale of personal property e. As to the legality of the object

b. As to the value of the things exchanged 1. sale of a licit object

1. commutative sale 2. sale of an illicit object

2. aleatory sale
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Chapter 1 – Nature and Form of the Contract

f. As to the presence or absence of conditions Sale distinguished from “Dation in Payment”

(Adjudicacion en Pago, or Dacion en Pago or Dacion
1. absolute sale (no condition) en Solutum)

2. conditional sale (as to whether there is a sale with a SALE DATION IN PAYMENT
pacto de retro, a right to repurchase or redeem; or
when there are suspensive conditions, or when the 1. There is no pre-existing 1. There is a pre-existing
things sold merely possess a potential existence, credit. credit.
such as the sale of the future harvest of a designated
parcel of land; or when, for example, all the personal 2. Gives rise to obligations. 2. extinguishes obligations.
properties in an army depot would be sold “except all
3. The cause or 3. The cause or
combat materials” that may be found therein.
consideration here is the consideration here, from the
Therefore such combat materials should be excluded
price, from the viewpoint of viewpoint of the person
from sale.)
the seller, or the obtaining of offering the dation in
g. As to whether wholesale or resale the object, for the viewpoint payment, is the extinguishin
of the buyer. of his debt; from the
1. wholesale –if to be resold for a profit the goods being viewpoint of the4 creditor, it
unaltered when resold, the quantity being large. 4. There is greater freedom is the acquisition of the
in the determination of the object offered in lieu of the
2. retail – if otherwise (also sold to tailors) price. original credit.

h. A to the proximate inducement for the sale 5. The giving of the price 4. There is less freedom in
may generally end the the determination of the
1. sale by description obligation of the buyer. price.
2. sale by sample
5. The giving of the object in
3. sale by description and sample lieu of the credit may
extinguish completely or
i. As to whether the price is tendered partially the credit
(depending on the
1. cash sale agreement)

2. sale on the installment plan


Contract of Sale distinguished from Contract to Sell
CONTRACT OF SALE
1. The non-payment of price
is a resolutory condition. (ex:
the contract of sale may by
such occurrence put an end
to a transaction that once
upon a time existed.)
2. Title to the property
generally passes to the
buyer upon delivery.
3. After delivery has been
made, the seller has lost
ownership and cannot
recover it unless the contract
is resolved or rescinded.
SALES
Chapter 1 – Nature and Form of the Contract
CONTRACT TO SELL
1. The payment in full of the
price is a positive suspensive
condition. Hence, if the price
is not paid, it is as if the
obligation of the seller to
deliver and to transfer
ownership never became
effective and binding.
2. Ownership is retained by
the seller, regardless of
delivery and is not to pass
until full payment of the
price.
3. Since the seller retains
ownership, despite delivery,
he is enforcing and not
rescinding the contract if he
seeks to oust the buyer for
failure to pay.
Sale distinguished from Assignment of Property in Favor of Creditors
(Cession or Cession de Bienes)
SALE CESSION
1. As defined, there is 1. The assignee or creditor
transfer of ownership and does not acquire ownership
delivery of a determinate over the things assigned, but
thing. only the right to sell said
things.
Cession – consists in the abandonment of all the
property of the debtor for the benefit of his creditors in
order that the latter may apply the proceeds thereof to
the satisfaction of their credits.
Dacion in payment distinguished from Cession
DATION IN PAYMENT CESSION
1. One creditor is sufficient. 1. There must be two or
more creditors.
2. Not all properties of the
debtor are conveyed. 2. All the debtor’s properties
are conveyed.
3. Debtor may be solvent or
insolvent. 3. Cession takes place only if
the debtor is insolvent.
4. The creditor becomes the
owner of the thing conveyed. 4. The creditors do not
become owners of the thing
conveyed.
Sale distinguished from lease
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Chapter 1 – Nature and Form of the Contract
In a sale, the seller transfers ownership; in a lease, the
lessor or landlord transfers merely the temporary
possession and use of the property.
Kinds of Extrajudicial Foreclosure Sale
1. Ordinary execution – governed by the
pertinent provisions of Rule 39 of the Rules of
Court.
2. Judicial foreclosure – governed by Rule 68
of the Rules of Court.
3. Extrajudicia foreclosure – governed by Act
3135, as amended by Act 4118, otherwise
known as “An Act to Regulate the Sale of
Property Under Special Powers Inserted In or
Annexed to Real Estate Mortgages.”
Article 1459. The thing must be licit and the vendor
must have a right to transfer the ownership thereof
at the time it is delivered.
Lawfulness of the Object and Right to Transfer
Ownership
Two rules:
a. The object must be LICIT.
b. The object must have the RIGHT to transfer
OWNERSHIP at the time the object is delivered.
Licit – lawful, within the commerce of man.
Things may be illicit:
1. per se (of its nature) Ex: Sale of human flesh for human
pleasure.
2. per accidens (made illegal by provision of the law) Ex:
sale of land to an alien after the effective date of the
Constitution; Sale of illegal lottery tickets.
* If the object of sale is illicit, the contract is null and void.
(Art 1409), and cannot, be ratified.
* The right of redemption may be sold. So also may literary,
artistic, and scientific works. A usufruct may also be sold.
Transfer of Ownership
a. It is essential for a seller to transfer ownership (Art. 1458)
and, therefore, the seller must be the owner of the subject
sold. Nemo dat quad non habet – nobody can dispose of
that which does not belong to him.
b. But although the seller must be the owner, he need not
be the owner at the time of the perfection of the contract. It
is sufficient that he is the owner at the time the object is
delivered; otherwise he may be held liable for breach of
warranty against eviction.
* The contract of sale by itself, is not a mode of acquiring
ownership.
* The contract transfers no real rights; it merely causes
certain obligations to arise.
c. The seller need not be the owner at the time of perfection
because, after all, “future things or goods” inter alia, ,may
be sold.
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Chapter 1 – Nature and Form of the Contract

* While there can be sale of future property, there can The efficacy of the sale of a mere hope or expectancy
generally be no donation of future property. is deemed subject to the condition that the thing will
come into existence.
d. A person has a right over a thing (although he is not the
owner of the thing itself) may sell such right. Hence, a The sale of a vain hope or expectancy is void.
usufructuary may generally sell his usufructuary right/
Selling a thing having a potential existence – this is a
e. If the buyer was already the owner of the thing sold at the future thing that may be sold.
time of sale, there can be no valid contract.
Examples:
Article 1460. A thing is determinate when it is
particularly designated or physically segregated from a. young animals not yet in existence or still ungrown fruits.
all others of the same class.
b. the wine that a particular vineyard is expected to
The requisite that a thing be determinate is satisfied produce.
if at the time the contract is entered into, the thing is
c. the wool that shall, thereafter, grow upon a sheep
capable of being made determinate without the
necessity of a new or further agreement between the d. the expected goodwill of a business enterprise
parties.
the sale of “a mere hope or expectancy” – should refer
Determinate – specific, but it is not essential really that at to a sale of “an expected thing” not to the hope or
the time of perfection, the object be already specific. It is expectancy for the hope or expectancy already exists.
sufficient that it be capable of being determinate without
need of any new agreement. Thus, there can be a sale of 20
kilos of sugar of a named quality.

 However, from the viewpoint of risk or loss, not until

the object has really been made determinate can we
say that the object has been lost, for as is well
known, “generic thins cannot be lost.”

Article 1461. Things having a potential existence may

be the object of the contract of sale. Emptio Rei Sperati (Sale of an expected thing)
distinguished form Emptio Spei (Sale of the hope itself)

Emptio Rei Sperati (Sale of Emptio Spei (Sale of the

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Chapter 1 – Nature and Form of the Contract

an expected thing) hope itself) Future goods

1. If the expected thing does
not materialize, the sale is
not effective.
2. Deals with a future thing –
that which is expected.
Ex: Sale of a valid
sweepstakes ticket whether
it wins or not, the sale itself
is valid.
1. It does not matter whether
the expected thing
materialized or not, what is
important is that the hope
itself validly existed.
2. Deals with a present thing
– for certainly the hope or
expectancy already exists.
a. Those still to be manufactured (like a future airplane) or
printed (like a subscription to a newpaper)
b. Those still to be raised (like young animals, whether
already conceived or not at the same time of perfection of
the contract), or future agricultural products (like copra still
to be manufactured.)
c. Those still to be acquired by seller after the perfection of
the contract (like land which the seller expects to buy.) This
is also referred to as the sale of “hereafter-acquired”
property.)

d. Things whose acquisition depends upon a contingency

* If the hope or expectancy itself is vain, the sale is itself
which may or may not happen. Ex: I can sell you now a
void. BE it noted that this is not an aleatory contract for
specific car which my father promised to give me, should I
while in an aleatory contract there is an element of chance,
pass the bar next year. The moment I get the car however,
here, there is completely no chance. (Ex: Sale of a losing
in accordance with my father’s promise you do not
ticket for a sweepstakes already run. Except if the ticket be
necessarily become its owner, for before title can pass to
a collector’s item)
you, I must first deliver the car to you, actually or
Article 1462. The goods which form the subject of a constructively.
contract of sale may be either existing goods, owned
Article 1463. The sole owner of a thing may sell an
or possessed by the seller, or goods to be
undivided interest therein.
manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this Title
called “future goods.”

There may be a contract of sale of goods, whose

acquisition by the seller depends upon a contingency
which may or may not happen.
 Goods may be future or existing goods.
Example of Sale of undivided interest
a. If I own a house, I may sell an aliquot part thereof (say ½
or 1/3) to somebody, in which case he and I will become co-
owners.
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Chapter 1 – Nature and Form of the Contract

b. A full owner may sell the usufruct of his land leaving the b. A usufruct that may end when the naked owner becomes
naked ownership to himself. a lawyer may be sold.

Article 1464. In the case of fungible goods, there may Article 1466. In construing a contract containing
be a sale of an undivided share of a specific mass, provisions characteristic of both the contract of sale
though the seller purports to sell and the buyer to and of the contract of agency to sell, the essential
buy a definite number, weight or measure of the clauses of the whole instrument shall be considered.
goods in the mass, and though the number, weight or
measure of the goods in the mass undetermined. By
such a sale the buyer becomes owner in common of
Contract of Sale distinguished from Agency to Sell
such a share of the mass as the number, weight or
(like a Consignment for Sale)
measure bought bears to the number, weight or
measure of the mass. If the mass contains less than CONTRACT OF SALE AGENCY TO SELL
the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller 1. The buyer pays the price. 1. The agent delivers the
is bound to make good the deficiency from goods of price which in turn he got
the same kind and quality, unless a contrary intent 2. The buyer after delivery from his buyer.
appears. becomes the owner.
2. The agent who is
Example of Share in a Specific Mass 3. The seller warrants. supposed to sell does not
become the owner, even if
In a stock of rice, the exact number of cavans which is still the property has already
unknown, Jose buys 100 cavans. If there are really 150, Jose been delivered to him.
becomes co-owner of the whole lot, his own share being 2/3
thereof. The sale is of a specific object since the mass is 3. The agent who sells
specific. assumes no personal liability
as long as he acts within his
Article 1465. Things subject to a resolutory condition authority and in the name of
may be the object of the contract sale. the principal.

Article 1467. A contract for the delivery at a certain

Sale of things subject to a Resolutory Condition
a. A property subject to reserve troncal may be sold.
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
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Chapter 1 – Nature and Form of the Contract
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.
Rules to Determine if the Contract is One of Sale or a
Piece of Work
a. If ordered in the ordinary course of business - SALE
b. If manufactured specially and not for the market piece of
work contract
Schools of Thought
a. Massachusetts Rule – If specially done at the order of
another, this is a contract for a piece of work.
b. New York Rule – If the thing already exists, it is a SALE; if
not, WORK.
c. English Rule – If material is more valuable, sale; if skill is
more valuable, work.
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.
Rules to determine whether contract is one of Sale or
Barter
a. First rule – Intent.
b. If intent does not clearly appear –
1. If thing is more valuable than money – BARTER
2. If 50-50 – SALE
3. If thing is less valuable than the money – SALE
Article 1469. In order that the price may be
considered certain, it shall be sufficient that it be so
with reference to another thing certain, or that the
determination thereof be left to the judgment of a
specified person or persons.
Should such person or persons be unable or unwilling
to fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith, or
by mistake, the courts may fix the price.
Where such third person or persons are prevented
from fixing the price or terms by fault of the seller or
the buyer, the party in fault as are allowed the seller
or the buyer, as the case may be.
Certainty of the Price
 The price must be certain; otherwise, there is no true
consent between the parties.
 There can be no sale without a price.
 If the price is fixed but is later on remitted or
condoned, this is perfectly all right, for then the price
would not be fictitious.
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Chapter 1 – Nature and Form of the Contract
 The failure to pay the agreed price does not cancel a
sale for lack of consideration, for the consideration is
still there, namely, the price.
 If the money paid is counterfeit, the sale would still
be valid for we cannot say that the consideration or
cause of the contract is the illegal currency. The real
consideration or caused is still the VALUE or price
agreed upon.
When no specific amount is stipulated
If no specific amount has been agreed upon, the price is
still considered certain:
a. If it be certain with reference to another thing certain.
b. If the determination of the price is left to the judgment
of a specified person or persons.
c. In the cases provided for under Art. 1472, Civil Code.
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.
Effect of Gross Inadequacy of Price
a. In ordinary sale, the sale remains valid even if the price is
very low. If there was vitiated consent (such as fraud, or
undue influence is present) the contract may be annulled
but only due to such vitiated consent.
b. In execution of judicial sales – While mere inadequacy of
price will not set aside a judicial sale of real property, still if
the price is so inadequate as to shock the conscience of the
Court, it will not be set aside.
In case Contract was really a Donation
It is possible that a donation, not a sale, was really intended.
In such a case, the parties may prove that the low price is
sufficiently explained by the consideration of liberality.
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.
Simulated price
a. The price must not be fictitious. Therefore if the price is
merely simulated, the contract as a sale is void. It may
however be valid as a donation or some other agreement,
provided the requirements of donations or other agreements
have been complied with. If these requirements do not exist,
then, as a sale, the contract is absolutely void, not merely
voidable. An action for annulment is therefore not essential.
b. A simulated price is fictitious. There being no price, there
is no cause or consideration; hence, the contract is void as a
sale. However, it is enough that the price be agreed on at
the time of perfection. A rescission of the price will not
invalidate the sale.
Fictitious sale
If the sale of conjugal property is fictitious and therefore
non-existent, the widow who has an interest in the property
subject of the sale may be allowed to contest the sale, even
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Chapter 1 – Nature and Form of the Contract
BEFORE the liquidation of the conjugal partnership, making
the executor a party-defendant if he refuses to do so.
Article 1472. The price of securities, grain, liquids,
and other things shall also be considered certain,
when the price fixed is that which the thing sold
would have on a definite day, or in a particular
exchange or market, or when an amount is fixed
above or below the price on such day, or in such
exhange or market, provided said amount be certain.
Certainty of Price of Securities
Ex: I can sell to you today my Mont Blanc fountain pen at
the price equivalent to the stock quotation two days from
today of 100 shares of PLDT.
If stock market price cannot be ascertained
If the stock quotation price two days later cannot really be
ascertained at that time (2 days later), the sale is
inefficacious.
Article 1473. The fixing of the price can never be left
to the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is
accepted by the other, the sale is perfected.
Price cannot be left to one’s party’s discretion
Reason: The other could not have consented to the price,
for he did not know what is was.
Article 1474. Where the price cannot be determined
in accordance with the preceding articles, or in any
other manner, the contract is inefficacious. However,
if the thing or any part thereof has been delivered to
and appropriated by the buyer, he must pay a
reasonable price therefore. What is a reasonable
price is a question of fact dependent on the
circumstances of each particular case.
Effect if the price cannot be determined
a. If the price cannot really be determined, the sale is void
for the buyer cannot fulfill his duty to pay.
b. If the buyer has made use of it, he should not be allowed
to enrich himself unjustly at another’s expense. So he must
pay a “reasonable price.” The seller’s price, however, must
be the one paid if the buyer knew how much the seller was
charging and there was an acceptance of the goods
delivered. Here, there is an implied assent to the price fixed.
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.
Nature of Contract
Sale is a consensual contract (perfected by mere consent).
Therefore, delivery or payment is not essential for
perfection.
Note: The contract of sale is consummated upon
delivery and payment.
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Chapter 1 – Nature and Form of the Contract
Requirements for Perfection
a.When parties are face to face, when an offer is accepted
without conditions and without qualifications. (A conditional
acceptance is a counter-offer.)
Note: if negotiated thru a phone, it is as if the parties are
face to face.
b.When contract is thru correspondence or thru telegram,
there is perfection when the offeror receives or has
knowledge of the acceptance by the offeree.
Note: If the buyer has already accepted, but the seller does
not know yet of the acceptance, the seller may still
withdraw.
c.When a sale is made subject to a suspensive condition,
perfection is had from the moment the condition is fulfilled.
Before perfection
 Before perfection of the contract of sale, no mutual
rights and obligations exist between the would-be
buyer and the would-be seller. The same thing is true
when perfection is conditioned upon something, and
that thing is not performed.
Accepted Bilateral Promise to Buy and Sell
 In a sense similar to, but not exactly the same as, a
perfected contract of sale.
Note: From the moment the parties have agreed upon
the kind of rice and the price thereof, they are deemed
to have entered into a perfected contract of purchase
and sale, the terms and conditions of which may not be
held to depend on subsequent events or acts of the
parties unless the contrary is stipulated. The mere fact
that the seller thereafter sells an object of the same kind
to another at a lesser price is no ground for the previous
buyer to be entitled to claim the excess, his contract
being independent of the other.
Formalities for Perfection
Under the statute of Frauds, the sale of:
a. Real Property (regardless of the amount)
b. Personal Property (if 500 or more must be in writing to be
enforceable.
* If orally made, it cannot be enforced by a judicial action,
except if it has been completely or partially executed, or
except if the defense of the Statute of Frauds is waived.
Note: Also in writing should be sales which are to be
performed only after more than one year (from the time the
agreement was entered into) – regardless as to whether the
property is real or personal, and regardless of the price
involved.
Perfection in the Case of Advertisements
 Advertisements are mere invitations to make an offer
(Art. 1325, Civil Code) and, therefore, one cannot
compel the advertiser to sell.
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Transfer of Ownership  In sales of textiles, if it be bought for resale at a

a.Mere perfection of the contract does not transfer
ownership. Ownership of the object sold is transferred only
after delivery (tradition), actual, legal or constructive.
The rule is, therefore, this: After delivery of the object,
ownership is transferred.
b.It is valid If it is stipulated that even with delivery there
will be no change or transfer of ownership till the purchase
price has been fully paid. (But the stipulation is not binding
on innocent third persons such as customers at a store. The
customers must not be prejudiced.
The Sales Tax
Even if the object sold has not yet been delivered, once
there has been a meeting of the minds, the sale is perfected
and, therefore, the sales tax (15% on the gross) is already
due. It accrues on perfection, not on the consummation of
the sale.
 Retail sales of flour to bakeries to be manufactured
into bread are subject to tax; if wholesale, they are
not subject to tax.
profit, the goods being unaltered when resold, the
original sale is wholesale. If he resells the goods only
after altering them by using his skill (as when he
transforms them to shirts), the original sale is retail.
Same rule applies in the case of the retail of the
following:
1. Copra for the manufacture of soap or
oleomargarine.
2. Hemp used to make twine or rope
3. In general, raw materials that are used in or
that entered into the manufacture of finished
products.
Effect of Perfection
After perfection the parties must now comply with their
mutual obligations. Thus, for example, the buyer can now
compel the seller to deliver to him the object purchased. In
the meantime, the buyer has only the personal, not a real
right. Hence, if the seller sells again a parcel of land to a
stranger who is in good faith, the proper remedy of the
buyer would be to sue for damages.

 To determine if a sale is wholesale or retail, we must

not consider the quantity sold, but the character of
the purchase. If the buyer buys the commodity for
his own consumption, the sale is RETAIL, if for
resale, the sale is deemed wholesale, regardless of
quantity, and is not subject to the particular tax
referred to.
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Chapter 1 – Nature and Form of the Contract
Article 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in
lots, each lot is the subject of a separate contract of
sale.
(2) A sale by auction is perfected when the
auctioneer announces its perfection by the fall of the
hammer, or in other customary manner. Until such
announcement is made, any bidder may retract his
bid; and the auctioneer may withdraw the goods from
the sale unless the auction has been announced to be
without reserve.
(3) A right to bid may be reserved expressly by on
behalf of the seller, unless otherwise provided by law
or by stipulation.
(4) Where notice has not been given that a sale by
auction is subject to a right to bid on behalf of the
seller, it shall not be lawful for the seller to bid
himself or to employ or induce any person to bid at
such sale on behalf of the seller or any person
employed by him. Any sale contravening this rule
may be treated as fraudulent by the buyer.
When Sale by Auction is Perfected
 The sale is perfected when the auctioneer announces
its perfection by the fall of the hammer or in other
customary manner.
Before the Fall of the Hammer
- The bidder may retract hi bid because every bidding
is merely an offer and, therefore, before it is
accepted, it may be withdrawn. The assent is
signified on the part of the seller by knocking down
the hammer.
- The Auctioneer may withdraw the goods from the
sale, unless the auction has been announced to be
without reserve. Reason: The bid is merely an offer,
not an acceptance of an offer to sell. Therefore, it can
be rejected. What the auctioneer does in withdrawing
is merely reject the offer.
Conditions when a seller may bid
a. Provided such a right to bid was reserved;
b. and notice was given that the sale by auction is
subject to a right to bid on behalf of the seller.
 A seller may employ others to bid for him provided
he has notified the public that the auction is subject
to the right to bid on behalf of the seller. People who
bid for the seller, but are not themselves bound, are
called “by-bidders” or “puffers.” In view of the
notice, there would not be any fraud, and the
transaction with the rest should be considered as
valid. Without the notice, any sale contravening the
rule may be treated by the buyer as fraudulent. In
other words, the purchaser could be relieved from his
bid.
Note: It may happen that the owner is not himself
the auctioneer. Now then if the auctioneer employs
puffers and gives no notice to the public, the sale
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Chapter 1 – Nature and Form of the Contract

would still be fraudulent, whether or not the owner of b. Constructive (Arts. 1498 – 1601, Civil Code), including
the goods knew what the auctioneer had don “any other manner signifying an agreement that the
possession is transferred.” (Art. 1496, Civil Code)

Article 1478. The parties may stipulate that

Rule in case of a Private Sale
 A private sale authorized by a probate court (and
without objection on the part of the heirs or
creditors) cannot be assailed by a person who is not
an “interested party” (such as an heir or creditor).
One who merely offered a higher price (without
actually buying the property) is not “interested
party.” It would have been different had there been a
public auction.
ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
When ownership is not transferred despite delivery
Generally, ownership is transferred upon delivery, but even
if delivered, the ownership may still be with the seller till full
payment of the price is made, if there is a stipulation to this
effect. This stipulation is usually known as pactum
reservati dominii and is common in sales on the
installment plan. But of course, innocent third parties cannot
be prejudiced.

Article 1477. The ownership of the thing sold shall be Article 1479. A promise to buy and sell a determinate
transferred to the vendee upon the actual or thing for a price certain is reciprocally demandable.
constructive delivery thereof.
An accepted unilateral promise to buy or to sell a
When Ownership is Transferred determinate thing for a price certain is binding upon
the promissory if the promise is supported by a
Ownership is not transferred by perfection but by delivery.
consideration distinct from the price.
(This is true even f the sale has been made on credit;
First paragraph Second paragraph
payment of the purchase price is NOT essential to the
(MUTUAL PROMISE) (ACCEPTED UNILATERAL
transfer of ownership, as long as the property sold has been
PROMISE)
delivered. (Gabriel et. al. v. Encarnacion et. al.) A contrary
A promise to buy something Only one makes the promise.
stipulation is, however, VALID.
and B promises to sell it at This promise is accepted by
KINDS OF DELIVERY an agreed price. (This is a the other. Hence, A promise
promise to buy and sell, to sell to B accepts the
a. Actual (Art. 1497, Civil Code) clearly a bilateral reciprocal promise, but does not in turn
contract.) promise to buy.
 SALES
Chapter 1 – Nature and Form of the Contract
Policitacion – a unilateral promise to buy or to sell which is
not accepted. This produces no juridical effect, and creates
no legal bond. This is a mere offer, and has not yet been
conversed into a contract.
Bilateral Promise – to buy and sell a certain thing for a
price certain gives to the contracting parties personal rights
in that each has the right to demand from the other the
fulfillment of the obligation.
Unilateral Promise – The acceptance of a unilateral
promise to sell must be plain, clear, and unconditional.
Therefore, if there is a qualified acceptance with terms
different from the offer, there is no acceptance, that is, there
is no promise to buy and there is no perfected sale.
Option – a contract granting a person the privilege to buy
or not to buy certain objects at any time within the agreed
period at a fixed price.
The contract of option is a separate and distinct contract
from the contract which the parties may enter into upon the
consummation of the contract; therefore, an option must
have its own cause or consideration.
Contract to SELL is NOT an Absolute Sale
A contract or promise to sell, a parcel of land for example, is
not a contract of sale. Such a contract to sell would exist
when for instance, land is promised to be sold, and title
given only after the down payment and the monthly
installment therefor shall have all been paid. Failure to make
the needed payment is failure to comply with the needed
suspensive condition. Hence, promissor was never really
obliged to convey title. Nothing wrong if he sells the
property to another, after an unsuccessful demand for said
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
1166, and 1262.
(Art. 1163. Every person obliged to give something is also
obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the
parties requires another standard of care. (1094a))
(Art. 1164. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has been
delivered to him. (1095))
(Art. 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by
Article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same
thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event
until he has effected the delivery. (1096))
 SALES
Chapter 1 – Nature and Form of the Contract
(Art. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and accessories,
even though they may not have been mentioned. (1097a))
(Art. 1262. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost
or destroyed without the fault of the debtor, and before he
has incurred in delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish
the obligation, and he shall be responsible for damages. The
same rule applies when the nature of the obligation requires
the assumption of risk. (1182a))
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 delay.
Who Bears the Risk of Loss
a. If the object has been lost before perfection, the seller
bears the loss. Reason: There was no contract, for there was
no cause or consideration. Being the owner, the seller bears
the loss. This means that he cannot demand payment of the
price.
b. If the object was lost after delivery to the buyer, clearly
the buyer bears the loss. (Res perit domino – the owner
bears the loss.)
c. If the object is lost after perfection but before delivery,
the buyer bears the loss, as exception to the rule of res perit
domino.
Exceptions to the rule that between perfection and
delivery, the buyer bears the loss:
a. If the object sold consists of fungibles sold for a price
fixed according to weight, number, or measure. (Here, if
there has been no delivery yet, the seller bears the loss,
unless the buyer is in mora accipiendi.) Last par. 1480
b. If the seller is guilty of fraud, negligence, default, or
violation of contractual term. Arts. 1165, 1262, 1170)
c. When the object sold is generic because “genus does not
perish” (genus nunquam perit) Note: the unfortunate effect
of Art. 1504 on the question of the risk of loss is discussed
under said article.)
Fungibles – personal property which may be replaced with
equivalent things.
Consumables and non-consumables distinguished
from fungibles and non-fungibles
The former is based on the nature of the thing, while the
latter is based on the intention.
 SALES
Chapter 1 – Nature and Form of the Contract
Article 1481. In the contract 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 by 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 by description – Where seller sells things as being of
a certain kind, the buyer merely relying on the seller’s
representations or descriptions. Generally, the buyer has not
previously seen the good, or even if he has seen them, he
believes (sometimes erroneously) that the description tallies
with the goods he has seen.
Sale by sample – that where the seller warrants that the
bulk (not the major part or the majority of the goods but the
goods themselves) of the goods shall correspond with the
sample in kind, quality, and character. On the sample is
exhibited. The bulk is not present, and so there is no
opportunity to examine or inspect it.
Sale by description and sample – must satisfy the
requirements in both, and not in only one.
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 – (“arras”) something of value to show that
the buyer was really in earnest, and given to the seller to
bind the bargain.
Significance of earnest money
a. Part of the purchase price. (Hence, from the total price
must be deducted the arras; the balance is all that has to be
paid.)
b. Proof of the perfection of the contract.
Option money – applies to a sale not yet perfected; the
money is not part of the purchase price; the would be buyer
is not required to buy.
When arras must be returned
If merchandise cannot be delivered, the arras must be
returned. Of course, this right may be renounced since
neither the law nor public policy is violated.
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.
If sale is made thru an Agent
The sale of a piece of land or interest therein when made
thru an agent is void. (not merely unenforceable) unless the
 SALES
Chapter 1 – Nature and Form of the Contract
agent’s authority is in writing. (Art. 1874). This is true even
if the sale itself s in a public instrument, or even registered.
Interest therein – refers to easement or usufruct for
example.
 If notary public is not authorized, the sale would still
be valid since for validity of the sale, a public
instrument is not even essential.
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.
Requisites before Art. 1484 may be applied
a. There must be a contract
b. The contract must be one of sale (absolute sale, not a
pacto de retro transaction, where redemption is effected in
installments)
c. What is sold is personal property (sale of real property in
installments is governed by RA 6552 – the Maceda Law –
which took effect on the date of its approval Sept. 14, 1972.
d. The sale must be on the installment plan (an installment
– is any part or portion of the buying price, including the
down payment)
Purpose of the Rules For Sale of Personal Property on
the Installment Plan
- To prevent abuse in the foreclosure of chattel
mortagages by selling at a low price and then suing
for the deficiency, is the precise purpose of this
article. Otherwise, the buyer would find himself
without the property, and still indebted.
Cancellation requires mutual restitution
- It is clear that when the remedy of cancellation is
availed of, there must be a mutual restitution of
whatever had been received by either party.
Ex: When the seller of a car on installment asks for
cancellation of the sale, the car must be returned to
him, and he in turn must give back all installments
he has received, including the downpayment.
Instances when Art. 1484 cannot be applied
 SALES
Chapter 1 – Nature and Form of the Contract
a.Real estate mortgage because it can only be foreclosed
only in conformity with special provisions.
b. Sale of personal property on straight terms, in which the
balance, after the payment of the initial sum should be paid
in its totality at the time specified. Therefore, in a sale on
straight terms, the mortgagee-seller will still be entitled to
recover the unpaid balance.
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.
Leases of Personal Property with Option to Buy
- This may really be considered a sale of personal
property in installments. Therefore, the purpose of
Art. 1485 is to prevent an indirect violation of Art.
1484.
“when the lessor has deprived lessee of the
possession or enjoyment of the thing”
For failure to pay, the lessor is apparently exercising the
right of an unpaid seller, and has taken possession of the
property. This is so even if the property had been given up in
obedience to the lessor’s extrajudicial demand, such
surrender not really being voluntary.
When lease construed as sale
Even if the word lease is employed, when a sale on
installment is evidently intended, it must be construed as a
sale.
Article 1486. In the cases 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 be
unconscionable under the circumstances.
Non-return of Installments Paid
a. As a general rule, it is required that a case of rescission or
cancellation of the sale requires mutual restitution, that is,
all partial payments of price or “rents” must be returned.
b. However, by way of exception, it is valid to stipulate
that there should be NO returning of the price that has been
partially paid or of the “Rents” given, provided the
stipulation is not unconscionable.
SALE OF REAL PROPERTY IN INSTALLMENTS
REPUBLIC ACT No. 6552
AN ACT TO PROVIDE PROTECTION TO BUYERS OF
REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act
No. 6552)
Section 1. This Act shall be known as the "Realty
Installment Buyer Act."
Section 2. It is hereby declared a public policy to protect
buyers of real estate on installment payments against
onerous and oppressive conditions.
 SALES
Chapter 1 – Nature and Form of the Contract
Section 3. In all transactions or contracts involving the sale
or financing of real estate on installment payments,
including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants
under Republic Act Numbered Thirty-eight hundred forty-
four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following
rights in case he defaults in the payment of succeeding
installments:
(a) To pay, without additional interest, the unpaid
installments due within the total grace period earned
by him which is hereby fixed at the rate of one month
grace period for every one year of installment
payments made: Provided, That this right shall be
exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund
to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent
of the total payments made, and, after five years of
installments, an additional five per cent every year
but not to exceed ninety per cent of the total
payments made: Provided, That the actual
cancellation of the contract shall take place after
thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of
the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be
included in the computation of the total number of
installment payments made.lawphi1™
Section 4. In case where less than two years of
installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the
installment became due.
If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall have the
right to sell his rights or assign the same to another person
or to reinstate the contract by updating the account during
the grace period and before actual cancellation of the
contract. The deed of sale or assignment shall be done by
notarial act.
Section 6. The buyer shall have the right to pay in advance
any installment or the full unpaid balance of the purchase
price any time without interest and to have such full
payment of the purchase price annotated in the certificate
of title covering the property.
Section 7. Any stipulation in any contract hereafter entered
into contrary to the provisions of Sections 3, 4, 5 and 6, shall
be null and void.
Section 8. If any provision of this Act is held invalid or
unconstitutional, no other provision shall be affected
thereby.lawphi1™
Section 9. This Act shall take effect upon its approval.
Approved: August 26, 1972.
Raison d’ Etre” of the Maceda Law
 SALES
Chapter 1 – Nature and Form of the Contract

- To help especially the low income lot buyers, Art. 1488. The expropriation of property for public
delineating the rights and remedies of lot buyers and use is governed by special laws.
protect them from one-sided and pernicious contract
stipulations. The Act’s declared public policy is to Expropriation – involuntary in nature, that is, the
protect buyers or real estate or installment basis owner may be compelled to surrender the property after
against onerous and oppressive conditions. More all the essential requisites have been complied with.
specifically, the Act provided for the rights of the Therefore, generally expropriation does not result in a
buyer in case of default in the payment of sale.
succeeding installments, where he has already paid
One exception to the rule
at least two years of installments.
Gutierrez v. CTA – SC held that the acquisition by the
- The act seeks to address the acute housing shortage
government of private properties thru the exercise of
problem in our country that has prompted thousands
eminent domain, said properties being justly
of middle or lower class buyers of houses, lots, and
compensated, is a sale or exchange within the meaning
condominium units to enter into all sorts of contracts
of the income tax laws and profits derived therefrom are
with private housing developers involving installment
taxable as capital gain; and this is so although the
schemes.
acquisition was against the will of the owner of the
Art. 1487. The expenses for the execution and property and there was no meeting of the minds
registration of the sale shall be borne by the between the parties.
vendor, unless there is a stipulation to the
When Transaction is one of Sale
contrary.
If the property owner voluntarily sells the property to the
Who Pays for Expenses in Execution and
government, this would be a sale, and not an example
Registration
of expropriation.
Observe that as a rule the seller pays for the expenses
Eminent Domain distinguished from Expropriation
of:
Eminent Domain refers to the right given to the state,
a.The execution (of the deed) of sale;
whereas, expropriation usually refers to the process.
b. its registration.
Essential requisites for Expropriation
NOTE: There can, however, be a contrary stipulation.
1. Taking by competent authority

2. Observance of due process of law.

 SALES
Chapter 1 – Nature and Form of the Contract
3. Taking for public use.
4. Payment of just compensation.
Just Compensation – market value (the price which the
property will bring when it is offered for sale by one who
desires but is not obliged to sell it, and is bought by one
who is under no necessity of having it) PLUS the
consequential damages, if any, MINUS the consequential
benefits, if any. BUT the benefits may be set off only
against the consequential damages, and not against the
basic value of the property taken.
 The fixing of just compensation in expropriation
proceedings shall be made in accordance with Rule
67 of the Rules of Court and not on the basis of the
valuation declared in the tax declaration of the
subject property by the owner or assessor which ahs
been declared unconstitutional.
CHAPTER 2
CAPACITY TO BUY OR SELL
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)
Incapacity to Buy may be Absolute or Relative
a.Absolute incapacity – when party cannot bind himself in
any case.
b.Relative incapacity – when certain person, under
certain circumstances, cannot buy certain property.
(Wolfson v. Estate of Martinez)
Note: Among people relatively incapacitated are those
mentioned in Arts. 1490 and 491, Civil Code.)
Purchase by Minors
 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 capacity to act, he must pay a
reasonable price therefor.
Necessaries – include everything that is indispensable for
sustenance, dwelling, clothing, and medical attendance,
according to the social position of the family.
Support – also includes education of the person entitled to
be supported until he completes his education or training for
some profession, trade, or vocation, even beyond the age of
majority.” (Art. 290, Civil Code)
Husbands
Under this Code, the husband may sell, alienate, or
encumber, even without the consent of his wife, his
exclusive property acquired before the effectivity of the Civil
Code. The wife cannot even ask for the annulment of the
sale on the ground that it is in fraud of her rights when the
purpose of the transaction is to benefit the family, that is, to
raise money for a business venture. (See Arts. 166 and 173
of the Code)
 SALES
Chapter 1 – Nature and Form of the Contract
 If the deed of sale of the land lists as purchasers both
the husband and the wife, the presumption is that it
is paraphernal property. (Castillo v. Castillo)
 If a Filipino sells a parcel of land to a Chinese who
later sells the same to another Filipino, the second
sale is VALID because the purpose of the Constitution
of preserving the land in favor of Filipinos has not
been frustrated.
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)
NOTE: Under these two exceptions, the sale is generally
valid, but of course, should there be vitiated consent (as
in the case of undue influence) the sale is voidable.
 Just as a married couple cannot generally sell to each
other, they also generally cannot donate to each
other. This prohibition also applies to common-law
husband and wife on the theory that here there can
be an even greater degree of undue influence.
Reason why Generally a Husband and Wife cannot
Sell to Each Other
1. To avoid prejudice to third persons;
2. To prevent one spouse from unduly influencing the
other;
3. To avoid by indirection the violation of the prohibition
against donations.
Effect of Sale
 Generally, a sale by one spouse to another is void.
However, not everybody can assail the validity of
the transaction.
(Thus creditors who became such after the
transaction cannot assail its validity for the
reason that they cannot be said to have been
prejudiced. But prior creditors (creditors at the time
of transfer) as well as the heirs of either spouse may
invoke the nullity of the sale.
Art. 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 entrusted 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
 SALES
Chapter 1 – Nature and Form of the Contract
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.
(1459a)
This article refers to relative incapacity.
Reason for the Law
 Public policy prohibits the transactions in view of the
fiduciary relationship involved.
Purchase Thru Another
“Thru the mediation of another” - this must be
proved, that is, that there was really an agreement
between the intermediary and the person
disqualified; otherwise, the sale cannot be set aside.
(Rodriguez v. Mactual)
Purchase by Agent for Himself
An agent is not allowed, without his principal’s
permission, to sell to himself what he has been
ordered to buy; or to buy for himself what he has
been ordered to sell. (Moreno v. Villones)
-The fiduciary relations between them estop the
agent from asserting a title adverse to that of the
principal. And therefore such a sale to himself would
be ineffectual and void, because it is expressly
prohibited by law. The agent may, of course, buy
after the termination of the agency.
NOTE: Under Art. 1459 of the old Civil code, an agent
or administrator was disqualified from purchasing
property in his hands for sale or management.
However, under Art. 1491 of the new Civil Code, this
prohibition was modified in that the agent may now
buy the property placed in his hand for sale or
administration, provided the principal gives his
consent thereto.
Purchase by Attorney
A lawyer is not allowed to purchase the property of
his client which is in litigation. To do otherwise would
be a breach of professional conduct, and would
constitute malpractice.
But assigning the amount of judgment by the client
to his attorney, who did NOT take any part in the
case where said judgment was rendered, is valid.
When a thing is said to be in litigation
 SALES
Chapter 1 – Nature and Form of the Contract
A thing is said to be in litigation not only if there is
some contest or litigation over it in court, but also
from the moment that it became subject to the
judicial action of the judge.
 Art. 1491 does not prohibit a lawyer from acquiring a
certain percentage of the value of the properties in
litigation that may be awarded to his client. A
contingent fee based on such value is allowed.
If however the attorney participates in the sale, not
as buyer but as agent for the buyer, there is no
violation of the law.
Meaning of “Any others specially disqualified by law”
This refers to prohibited by reason of the fiduciary
relationship involved.
 Aliens though not allowed to buy land under the
Constitution, they do not fall under the above phrase.
Thus, while those disqualified under Art. 1490 and
491 may not become lessees (Art. 1646), still aliens
may become lessees even if they cannot buy lands.
Status of the Sale
Generally, sales entered into in disregard of the prohibition
under this article are not void. They are merely voidable.
(Wolfson v. Estate of Martinez)
Art. 1492. The prohibitions in the two preceding
articles are applicable to sales in legal redemption,
compromises and renunciations.
Applicability of Relative Incapacity to Legal
Redemption, Compromises, and Renunciation
Example:
If a ward’s property is sold, the guardian, even if he be an
adjacent owner, and even if all the other requisites for legal
redemption are present, cannot exercise the right of legal
redemption.
Cross Reference
Legal Redemption – the right to be subrogated upon the
same terms and conditions stipulated in the contract. (Art.
1619, Civil Code)
Compromises – Contract whereby the parties, by making
reciprocal concessions, avoid a litigation or to put an end to
one already commenced. (Art. 2028, Civil Code)
Renunciation – rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with right recognized
by law. (Art. 6, Civil Code)
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Chapter 1 – Nature and Form of the Contract
Renunciation - condonation or remission is essentially
gratuitous and requires the acceptance by the obligor. May
be made expressly or impliedly. (Art. 1270, Civil Code)
CHAPTER 3
EFFECTS OF THE CONTRACT WHEN THE THING SOLD
HAS BEEN LOST
Art. 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. (1460a)
Lost of the object before sale
This refers to a case of loss of the object even before the
perfection of the contract. It is evident that there would be
no cause or consideration; hence, the contract is void.
Observe that it is the seller here who naturally will have to
bear the loss.
Complete Loss Distinguished from Partial Loss
When the object has been Partly or Partially Lost
REMEDIES:
1. Withdrawal or rescission.
2. Specific performance as to remainder by payment of
proportional price.
Art. 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 of Specific Goods
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Chapter 1 – Nature and Form of the Contract

This article practically reiterates the principle involved in the

preceding article.s

REMEDIES:

1. Cancellation (avoidance);

2. Specific performance as to the remaining existing

goods. (if the sale was divisible).