Contract of sale vs. Contract to sell Category:Contracts inShare In an ideal world, people honor their obligations.

A simple handshake would be e nough and there's no need for a written contract. Pinoy Entrepreneurs would not be too concerned with seemingly trivial matters, perhaps like a distinction betw een acontract of saleand acontract to sell. Unfortunately, this is a world full of flaws and imperfections. So the Pinoy Entrepreneur would have to deal with the fact that there's a distin ction between acontract to sellandcontract of sale. We bump into these terms in, w ell, sales. For instance, if you purchase a house and lot, you have to check wha t's the nature of the contract you're signing. But why would that matter? In acontract of sale, the title passes to the buyer upon the delivery of the thin g sold. The vendor has lost and cannot recover the ownership of the property unt il and unless the contract of sale is itself resolved and set aside. On the othe r hand, in acontract to sell, the seller retains ownership over the subject matte r of the sale. Ownership doesn't pass to the buyer until the full payment of the purchase price is made. "Full payment" are the magic words. The title remains i n the vendor if the vendee does not comply with the condition of making payment at the time specified in the contract. You can't sell what you don't yet own. There's a technical distinction (i.e., non-payment of the price is a negative re solutory condition incontract of sale, while full payment is a positive suspensiv e condition in acontract to sell), but that's not crucial for ordinary purposes. Suffice it to say that the non-payment of the purchase price renders a contract to sell ineffective and without force and effect. Much ado over nothing? It depends. If the seller and the buyer dutifully complie s with each other's obligation, the end result would be the same. But, again, th at's in the ideal world. Problems do arise down here. In acontract of sale, the b uyer's failure to pay the full price or the seller's failure to deliver the thin g sold is most likely a breach of contract. Should the buyer fail to pay in a co ntract of sale, the seller has the option of either compelling the payment or te rminating the contract. In acontract to sell, the buyer's failure to pay the full price, the contract bec omes ineffective and is set aside. In other words, if you buy a parcel of land a nd enters into a contract to sell, the seller can't force you to pay the full pr ice in the event that you can't pay it. Maybe a portion of the installment will be forfeited in favor of the seller, which is a standard provision in such kind of contracts. Incidentally, the discussion onoption money, earnest money and down paymentwould most likely come into play. As always, there will be exceptions and each transaction will be decided based o n the facts present. This discussion is for information only and should not be c onstrued as an advice. (Source: Ayala Life Assurance, Inc. vs. Ray Burton Develo pment Corporation, G.R. No. 163075, 23 January 2006)