CHAPTER 1 – NATURE AND FORM OF THE CONTRACT
ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself to transfer ownership and to
deliver a determinate things, and the other to pay thereof a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
WHAT IS A CONTRACT OF SALE?
–By the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to
deliver, a determinate things, and the other to pay thereof a price certain in money or its equivalent.
– A contract of sale is a consensual contract and, thus, is perfected by mere consent which is manifested by
the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract.
– Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.
– The essential elements of a contract of sale are:
a. consent or the meeting of minds, that is, consent to transfer ownership in exchange of price.
B. Determinate subject matter; and
C. Price certain in money or its equivalent.
The absence of any of the essential elements shall negate the existence of a perfected contract of sale.
STAGES OF A CONTRACT OF SALE
1. Negotiation
It covers the period from the time the prospective contracting parties indicate interest in the
contract at the time of the contract is perfected.
2. Perfection
It takes place upon the concurrence of the essential elements of the sale, which is the meeting of
minds of the parties as to the object of the contract and upon price.
3. Consummation
It begins when the parties perform their respective undertakings under the contract of sale,
culminating in the extinguishment thereof.
SALE AS A TITLE
–The perfection of a contract of sale should not, however, be confused with its consummation. In relation to
the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title.
–Amode is the legal means by which dominion or ownership is created, transferred or destroyed.
– A title is only the legal basis by which to affect dominion or ownership.
– Under Article 712 of the Civil Code, “ownership and other real rights over properties are acquired and
transmitted by law, by donation, by testate and intestate succession, and in consequence for certain
contracts, by tradition.”
– Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.
– Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the
obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers
ownership.
TWO KINDS OF A CONTRACT OF SALE
1. Absolute
There are no conditions attached to the contract.
2. Conditional
There are certain conditions attached to the contract.
A CONTRACT OF SALE MAY BE ABSOLUTE OR CONDITIONAL.
–Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer ownership of and deliver a determinate thing, and the other to
pay thereof a price certain in money or its equivalents.
– A 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 the price.
–From the averment of perfection, the parties are bound, not only to the fulfillment if what has been
expressly stipulated, but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law
– On the other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.
Note:
A deed of sale is considered absolute in nature whether there is neither a stipulation in the deed that the
title to the property sold is reserved in the seller until the full payment of the price, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.
ESSENTIAL ELEMENTS OF A CONTRACT OF SALE
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following:
1. Consent or the meeting of minds
That is, consent to transfer the ownership in exchange of its price;
2. Determinate subject matter; and
3. Price certain in money or its equivalent
CONTRACT TO SELL IS NOT A CONTRACT OF SALE
AContract to Sell may not be considered as a Contract of Sale because the first essential element is lacking.
In contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price.
What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him.
In other words, the full payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer.
I. CONSENT
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
constitute the agreement.
ACCEPTANCE
As to the matter of acceptance, the same may be evidenced by some acts, or conduct, communicated to the
offeror, either, either in formal or an informal manner, that clearly manifest the intention or determination
to accept the offer.
Example:
In one case, acceptance on the part of the vendee was manifested through a plethora of acts, such as
payment of the purchase price, declaration of the property for taxation purposes, and payment of real
estate taxes thereon, and similar acts showing vendee’s assents to the contract.
II. OBJECT
The object of every contract must be determinate as to its kind.
The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided
it is possible to determine the same, without the need of a new contract between the parties.
A thing is determinate when its particularly designated and/or physically segregated from all others of the same
class.
In general, the cause is the why of the contract or the essential reason which moves the contracting parties to
enter into the contract.
For the cause to be valid, it must be lawful such as it is not contrary to the law, morals, good customs, public
order or public policy.
III. PRICE
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real
property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale.
The fixing of price can never be left to the decision of one of the contracting parties.
But a price fixed by one of the contracting parties, if accepted by the other, give rise to a perfected sale.
It is not enough for the parties to agree on the price of the property.
The parties must also agree on the manner of payment of the price of the price of the property to give rise
to a binding and enforceable contract of sale or contact to sell.
This is so because the agreement as to the manner of payment goes into the price, such that a disagreement
on the manner of payment is tantamount to a failure to agree on the price.
GROSS INADEQUACY OF PRICE, ITS EFFECT
In Hulst v. PR Builders, Inc., we further elaborated on this principle.
Gross inadequacy of price does not nullify an execution sale.
In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of
price, or when such inadequacy shock one’s conscience as to justify the courts to interfere; such does not
follow when the law gives the owner the right to redeem as when a sale is made at public auction, upon the
theory that the lesser the price, the easier it is for the owner to effect redemption.
Thus, respondent stood to gain rather than be harmed by the low sale value if the auctioned properties
because it possesses the right to redemption.
Note:
Consideration and consent are essential elements in a contract of sale.
Where a party’s consent to a contract of sale is vitiated or where there is lack of consideration due to a
simulated price, the contract is null and void ab initio.
CHARACTERISTIC OF A CONTRACT OF SALE
1. Consensual
The contract is perfected by mere consent.
2. Bilateral
The seller and the buyer are bound by obligations dependent upon each other.
3. Onerous
It imposes a valuable consideration, which is a price certain in money or its equivalent.
4. Commutative
The thing of value is exchange for equal value.
5. Nominate
The Civil Code refers to it by a special name, “contract of sale”.
6. Principal
It can stand on its own and does not depend on another contract for its validity.
CONTRACT OF SALE IS CONSENSUAL
A contract of sale is classified as a consensual contract, which means that the sale is perfected by mere
consent.
No particular form is required for its validity.
Upon the perfection of the contract, the parties may reciprocally demand performance, I.e., the vendee may
compel transfer of ownership of the object of the sale, and the vendor may require the vendee to
pay the things sold.
CONTRACT OF SALE IS COMMUTATIVE AND ONEROUS
A contract of sale is normally commutative and onerous; not only does each time of the parties assume a
correlative obligation (the seller to deliver and transfer ownership of the thing sold and the buyer to
pay the price), but each party anticipates performance by the other from the very start.
While in sale, the obligation of one party can be lawfully subordinated to an uncertain event, so that the
other understands that he assumes the risk of receiving nothing for what he gives ( as in the case of
a sale of hopes or expectations, emptio spei), it is not in the usual course of business to do so; hence,
the contingent character of the obligation must clearly appear.
WHAT IS OPTION OR “UNACCEPTED OFFER”?
An option, as used in the law on sales, is continuing offer or contract by which the owner stipulates with
another that the latter (another) shall have the right to buy the property at a fixed price within a
certain time, or under, or in compliance with, certain terms and conditions, or which gives the owner
of the property the right to sell or demand a sale.
An option is not of itself a purchase but merely secures the privilege to buy.
It is not a sale of property but a sale of the right to purchase.
