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Prelim Notes: Preliminary Discussion

1. Contract of Sale Defined: Sale is 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. (Art. 1458, Civil Code)

2. Etymology of the word "Sale":

Roman law, a sale is termed as "vendito". French refers to contract of sale as “vente”,
Italians refer to it as “vendita” and the Spaniards call it a "venta". The Pilipino term for
sale is “bilihan”.

Origin of the Philippine Law on Sales

Prior to the adoption of the New Civil Code, Philippine law on Sales were based on the
Spanish Civil Code of Spain of 1887 and the Spanish Code of Commerce of 1885. In 1947,
however a Code Commission was created to draft and update the Civil Code. The Code
Commission completed its work sometime in December, 1947 and the New Civil Code actually
took effect on August 30, 1950. Provisions on the sales of the Spanish Code of Commerce were
repealed and the distinction between Civil and Commercial sales was eliminated.

Instead the Code Commission had adopted majority of the provisions of the American
Uniform Sales Act which was prepared by the National Conference of Commissioners on
Uniform State Laws of 1907, the principal objective of which was to eliminate the diversities in
the law on sales which existed as a result of the divergent interpretations of sales contracts by
courts of different states in America.

The Uniform Sales Act was largely declaratory of the common law rules which had been
developed and generally followed by the different states in America at the time it was drafted.
Report of the Code Commission states “majority of the provisions of the Uniform Sales Law”
which is in force in 31 States and Territories of the American Union have been adopted in the
New Civil Code with modifications to suit the principles of Philippine Law.” The Philippine Law
on Sales today, as covered by the Title VI, Articles 1458 to 1637 of the New Civil Code, is a
blend of Civil Law and Common Law principles.

Sale As a contract :
Article 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

Parties involved:

Seller or Vendor
Buyer or Vendee

Principles of Contracts

Autonomy of Will

Article 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.

Obligatory in Force
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Article 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

Mutuality of contracts

The contract must bind both contracting parties; its validity or compliance cannot be left to the
will of one of them.

Exception:

Article 1309. The determination of the performance may be left to a third person, whose
decision shall not be binding until it has been made known to both contracting parties. (n)

Article 1310. The determination shall not be obligatory if it is evidently inequitable. In such
case, the courts shall decide what is equitable under the circumstances

Principle of consensuality.

Article 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of 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.

Principle of Relativity

Article 1311. Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heir is not
liable beyond the value of the property he received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may


demand its fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a
favor upon a third person.

Hence death of any of the contracting parties in a contract of sale after its perfection
does not extinguish the obligations and rights arising therefrom. ( Relate provision with
transmissibility of rights in Article 1178)

Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible,
if there has been no stipulation to the contrary.

Exceptions: a. when there is stipulation otherwise


b. When the law provides it is intransmissible such as in contracts of
partnership, agency and commodatum
c. When nature of the obligation requires it to be non-transmissible

Essential Characteristics of the Contract of Sale:


a) Consensual (as distinguished as real), because the contract is perfected by mere
consent;
See Article 1315 on principle of consensuality.

Article 1315. Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated but
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also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law.

Article 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

b) Bilateral reciprocal - because both parties are bound by obligations dependent upon
each other. ( reiterated by Article 1191)
c) Onerous, because to acquire the rights, valuable considerations must be given.
d) Commutative, as a rule, because the values exchanged are almost equivalent to each
other.
(NOTE: By way of exception, some contracts of sale are aleatory, that is, what one
receives may in time greater or smaller than what he has given. Example: The sale of
genuine sweepstakes ticket.)
Test: subjective – as long as parties in all honesty that he is receiving equal value then
it complies with test & would not be deemed a donation; but must not be absurd.
Inadequacy of price or aleatory character not sufficient ground to cancel contract
of sale; inadequacy can show vitiation of consent & sale may be annulled based on vice
but not on inadequacy
e) Principal (as distinguished from an accessory contract), because for the contract of sale
to be validly exist, there is no necessity for it to depend upon the existence of another
valid contract.
f) Nominate because the Code refers to it by a special designation or name, that is the
contract of sale.

g) Title & not a mode – gives rise to an obligation to transfer; it is delivery w/c actually
transfer ownership; mode which actually transfer ownership.

Obligations arising in a contract of sale

a. obligation of seller – transfer ownership & deliver


b. obligation of buyer – pay for price

Consequence: power to rescind is implied in bilateral contracts

Elements of the Contract of Sale:

a) Essential elements (those without which there can be no valid sale)


- Consent or meeting of the minds, that is consent transfer ownership in exchange for
the price.
Meaning of consent:

Article 1319. Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter-
offer.

Acceptance made by letter or telegram does not bind the offerer except from the
time it came to his knowledge. The contract, in such a case, is presumed to have
been entered into in the place where the offer was made.

Characteristics of consent
Intelligent
Free and Voluntary
Conscious and spontaneous
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- Determinate subject matter (generally, there is no sale of generic thing, moreover, if


the parties differ as to the object, there be no meeting of the minds).

Notes:

Article 1347. All things which are not outside the commerce of men, including future
things, may be the object of a contract. All rights which are not intransmissible may
also be the object of contracts.

No contract may be entered into upon future inheritance except in cases expressly
authorized by law.

All services which are not contrary to law, morals, good customs, public order or
public policy may likewise be the object of a contract. (1271a)

Be it noted that the object of contract of sale are THINGS AND RIGHTS only.
Services cannot be an object of sale

Article 1348. Impossible things or services cannot be the object of contracts. (1272)

Meaning of Determinate:

Article 1460. A thing is determinate when it is particularly designated or physical


segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into,
the thing is capable of being made determinate without the necessity of a new or further
agreement between the parties. – Relate this paragraph with Art. 1349

Article 1349. 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.

B. Price certain in money or its equivalent (this is the cause or consideration) (The price
need not be in money)

Notes:

Article 1249. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency
which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other


mercantile documents shall produce the effect of payment only when they have
been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in the
abeyance.
- Capacity of the contracting parties. In other words, the contracting parties must
have the legal capacity to engage in lawful commerce.

Updates:

Payment of debts in money shall be made only in the Philippine currency which the legal
tender pursuant to Art. 1249 of the Civil Code in relation to Republic Act No. 8183. Obligation
shall now be payable in the legal tender in the Philippines. Legal tender means the currency
which the debtor may compel his creditor to accept payment of his debt. However, the parties
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may stipulate that the payment may be made in currency under than the legal tender of
Philippines at the time of payment. ( R.A. No. 8183)

But pursuant to Section 52 of Republic Act No.. 7653 (The New Central Bank Act),
"Legal Tender Power - All notes and coins issued by the Bank shall be fully guaranteed by the
Government of the Republic of the Philippines and shall be legal tender in the Philippines for all
debts, both public and private. " This might mean, all notes and coins being served or issued by
the Central Bank of the Philippines When Offered in payment extinguishes the debt is legal
tender.
One Peso coin is no longer valid tender of payment to any amount.

According to BSP Circular No.. 537 issued by the Central Bank of the Philippines on July
18, 2006, pursuant to Section 52 of RA 7653 (New Central Bank Act) and the Monetary Board
Resolution No.. 862 dated 6 July 2006, "the maximum amount of coins to be considered as
legal tender is adjusted as Follows:

1. One thousand pesos (P1, 000.00) for denominations of 1, Piso, Piso 5, and 10 pesos
coins; and
2. One hundred pesos (P100.00) for denominations of 1-cent, 5-cent, 10-cent, 25-cent
coins.

Query:

A sold a piano to B, by private instrument, for P 10,000. In that contract of sale, which
is the object, and which is the cause?

Answer: There are at least two viewpoints here, the latter of which appears to be preferable.

FIRST VIEW - The object (subject matter) of the sale is the piano, while the cause
(consideration) is the P 1,000 ( or, as the same authority puts in, the giving of the P 1,000, at
least insofar as the seller A is concerned.

Insofar as the buyer B is concerned, the object is the P 1,000. While the cause
(consideration for which he parted with his money) is the piano (or, as the same authority puts
in, the giving of the piano)

SECOND VIEW - Insofar as both the seller and the buyer are concerned, there is
only one subject matter, namely, the piano. The cause or consideration for the seller is the
price paid; for the buyer, it is the delivery to him of the piano.

RULE:

What is the object in a contract of sale? Determinate thing


What is the cause in the contract of sale? Price certain in money or its equivalent

a) Natural elements (those which are inherent in the contract, and which in the absence of
any contrary provision, are deemed to exist in the contract)
- Warranty against eviction, deprivation of the property bought)
- Warranty against Hidden Defects

Natural elements – inherent in the contract, and which in the absence of any contrary provision,
are deemed to exist in the contract:
1. Warranty against eviction
2. Warranty against hidden defects

Accidental elements (those which may be present or absent in the stipulation, such as the place
or time of payment, or the presence of conditions)
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Accidental elements – may be present or absent depending on the stipulation of the parties
(e.g.: conditions, interest, penalty, time or place of payment, etc.)

3. Stages in the Contract of Sale:

a) Generation or Negotiation
b) Perfection - Meeting of the Minds
c) Consummation - when the object is delivered and the price is paid.

4. Kinds of Sales

a) As to the subject matter:


-sale of real property
-sale of personal property

b) As to the value of things exchanged:


-Commutative
-Aleatory

c) As to whether the object is tangible or intangible:


- Sale of property (tangible or corporeal)
- Sale of Rights (Assignment of a right or a credit, or some other intangibles such as
copyright, trademark or goodwill)

(NOTE: If the object is tangible, it is called a chose in possession; if the object is


intangible, as in the case of a right, it is chose in action.

d) As to the validity or defect of the transaction:


-valid sale
-rescissible sale
-voidable sale
-unenforceable sale
-void sale

e) As to the presence or absence of conditions:


-Absolute Sale (no conditions imposed)
-Conditional Sale (As when there is a sale with a pacto de retro, a right to
repurchase or redeem; or when there are suspensive
conditions, or when the things sold merely possess potential
existence, such as sale of future harvest of a designated
parcel of land.)

f) As to the legality of the object:


-Sale of a licit object
-Sale of an illicit object

g) As to whether wholesale or retail:


- Wholesale, if to be resold for a profit the goods being unaltered when resold,
the quantity being large.
- Retail, if otherwise

h) As to proximate inducement for the sale:


- Sale by description
- Sale by sample
- Sale by description and sample (Art.1481)

i) As to when the price is tendered:


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- Cash sale
- Sale on the installment plan

Sale Distinguished from Dation in Payment


SALE DATION IN PAYMENT

1. There is no pre-existing credit. 1. There is a pre-existing credit.

2. Give rise to an obligation. 1. Extinguishes obligations.

3. The cause or consideration here is the 3. The cause or consideration here, from
price, from the viewpoint of the seller; the viewpoint of the person offering
or of the obtaining of the object from the dation, is the extinguishing of his
the viewpoint of the buyer. debt; from the viewpoint of the creditor
is the acquisition of the object offered
in lieu of the original credit.

4. There is greater freedom in the 4. There is less freedom in the


determination of the price. determination of the price

5. The giving of the price may generally 5. The giving of the object in lieu of the
end the obligation of the buyer. credit may extinguish completely or
partially the credit depending on the
agreement.

Example: I owe Maria P 100. But I ask her if she is willing to accept my watch, instead of the
money. If Maria agrees, my debt will be extinguished. Please observe that in this example ,
although what happened is dation in payment, it is as if I sold my watch for P 100. Hence, we
have to distinguish between the two transactions.

8. Difference between a Contract of Sale and a Contract to Sell

- In a Contract of Sale, the non-payment of the price is a resolutory condition, that is


the contract of sale may by such occurrence put an end to a transaction that once
upon a time existed. ; In a Contract to Sell, 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.

- In the Contract of Sale, title over the property generally transfer to the buyer upon
delivery; in the Contract of Sell, ownership is retained by the seller, regardless of the
delivery and it will not pass until full payment of the price.

- In a contract of Sale, after delivery has been made, the seller has lost ownership and
cannot recover it unless the contract is resolved or rescinded. In a Contract to Sell,
since the seller retains ownership, despite delivery, he is enforcing the contract if he
seeks to oust the buyer for failure to pay.

Problem:
"A" agrees to sell a sewing machine to "B" for P 4,000 in cash, and places the machine
aboard the truck of "B", while "B" goes home to fetch money. Before "B" returns, "C"
appears and claim ownership of the sewing machine, exhibiting a document signed by
"B" selling the machine to "C". A rejects "C's" claim alleging that he is still the owner.
Decide with reasons.

Answer:
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It is submitted that the claim of "A" that he is still the owner of the sewing machine is
correct. While it is true that there is already a perfected contract of sale between "A"
and "B" and that apparently, there is already an actual delivery when the former placed
the sewing machine onboard the truck of the latter, nevertheless, such delivery did not
vest ownership thereof in the vendee. In other words, we have here a simple case of
reservation of the vendor of his right over the thing sold. That this can be done
expressly or impliedly. In the case at bar, the agreement between "A" and "B" is that
the sale must be in cash. Hence, it can be easily inferred that at the precise moment
while "A" was waiting for "B" return with the P 4,000 purchase price, which the latter
was supposed to fetch in his house, his intention, in spite of actual delivery, was to
reserve ownership in himself and to vest such ownership in the vendee only upon the
actual payment of the purchase price. Beside we have here a clear case of a Contract to
Sell. Well-settled is the rule that in a Contract to Sell, as distinguished from a Contract
of Sale, ownership is reserved to the vendor and not to pass to the vendee until full
payment of the purchase price.

9. The object of Sale must be LICIT and the Vendor must have the right to transfer
ownership at the time the object is delivered. (Art. 1459)
- Things may be illicit or unlawful, per se (of its nature) Example: Sale of human flesh
for human pleasure) or per accidens (made illegal by provision of the law). Example
is sale of land to an alien.
- As to transfer of ownership, it is essential for a seller to transfer ownership (art.
1458) and therefore the seller must be the owner of the object sold. This stems
from the principle that nobody can dispose of that, which does not belong to him -
Nemo dat quad non habet. 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. Be it noted that the contract of sale by itself, is
not a mode of acquiring ownership. The contract transfers no real right, it merely
causes certain obligation to arise.

10. The object of the sale must be determinate, that is specific, but it is not essential
really that at the time of perfection, the object be already specific. It is sufficient
that it be capable of being determinate without nee of any new agreement. Thus, there can
be a sale of 20 kilos of sugar of a named quality. However in 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 things cannot be lost."

11. Things of potential Existence may be an object of sale. This is a future thing that
may be sold. Example: "All my rice harvest next year." Note however that future
inheritance cannot be sold, however. (Art. 1347, par. 2, Civil Code)
Other examples of things possessed of a potential existence:
a) Young animals not yet in existence or still ungrown fruits;
b) The wine that a particular vineyard is expected to produce;
c) Expected goodwill of a business

Requisites for things potential existence:


-The object need not be in actual existence at the time of perfection of
the contract;
-The object is capable of potential existence;
-The thing sold must be determinate or capable of being determinate;
-The thing sold belong to the vendor at the time of the perfection of
the sale

12.Sale of expected thing and sale of mere hope or expectancy). Art. 1461
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Sale of expected thing (Emptio Rei Speratae)


Sale of hope itself (Emptio Spei)

NOTE: If the expected thing in (a) does not materialize, the sale is not effective. In
the second, it does not matter whether the expected thing materialized or not; what IS
IMPORTANT IS THAT THE HOPE ITSELF VALIDLY EXISTED. The first deals with
future thing - that which is expected; the second deals with the present thing - certainty the
hope or expectancy already exist.
Example of Emptio Spei: Sale of a valid sweepstakes ticket. Whether the sweepstake
ticket wins or not, the sale is valid.
NOTE: If the hope or expectancy itself is in vain, the sale is itself VOID. Be it noted
that this is not an aleatory contract for while in aleatory contract there is an element of
chance, here there is completely no chance.
Example : Sale of a losing ticket for a sweepstake already drawn.

Graphic Distinction between emptio speratae & emptio spei


Point of Distinction Emptio Rei Speratae Emptio Spei
Object of Sale Things having potential There is hope or expectancy
existence
Existence of Condition Conditional Absolute
Validity of Contract of Sale Valid Valid as long as the sale is
not vain hope or expectancy
Effect of failure of object to Contract become ineffective It does not invalidates sale
come into existence.

13 Goods may be future or existing goods.

The New Civil Code enumerates different kinds of future goods:


a) Existing Goods which may be either be owned or possessed by the seller; and
b) Non-existing of future goods having potential existence, when may come to existence either
by:
(1) those still to be manufactured, (2) raised or (3) those acquired by the seller after the
perfection of the contract. Art. 1462
c) Sale of goods the acquisition of which depends upon a contingency is valid.

14. An undivided Interest may also be sold. Art 1463. Notwithstanding the fact that an
object may be divisible, the owner thereof has the perfect right to dispose of the same as a
whole as a natural consequence of ownership or he may sell only a portion of that entire object
if he be the owner only of a portion thereof.

15. Sale of undivided share of a specific mass.

The subject matter of the sale is incorporeal right. (Act 1501)

Meaning of fungible goods – It means goods of which any unit is, from its nature or by
mercantile usage, treated as the equivalent of any other unit, Sec. 76 of the US Uniform Sales
Act). It includes movable substances or goods that are replaceable distinguishable as to
undivided parts in quantity.

Effect of sale – The owner of a mass of goods may sell only an undivided share thereof,
provided the mass is specific or capable of being made determinate. (Art. 1460)

(a) By such sale, the buyer becomes a co-owner with the seller of the whole mass in the
proportion in which the definite share bought bears to the mass. It must follow that
the aliquot share of each owner can be determined only by the measurement of the
entire mass.
(b) If later on it be discovered that the mass of fungible goods contain less than what was
sold, the buyer becomes the owner of the whole mass and furthermore, the seller shall
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supply whatever is lacking from goods of the same kind and quality, subject to any
stipulation to the contrary.

16. Also things subject to a resolutory condition may be sold. Art. 1465

A resolutory condition is that the happening of which depends on the extinction of the
obligation. In other words, a resolutory condition is that which puts an end to an obligation.

So long as the object of the sale is licit or lawful and the vendee has the right to transfer
ownership thereof at the time it has to be delivered, it is a valid object of such sale, even if it be
subject to a resolutory condition.

Example is pacto de retro sale.

17. Distinction between a Contract of Sale and An Agency to Sell (Art. 1466)
CONTRACT OF SALE AGENCY TO SELL

1. In contract of sale, the buyer pays the 1. In an agency to sell, the agent delivers
price. the price which in turn he got from his
buyer;
2. In sale, the buyer after delivery 2. The agent who is supposed to sell does
becomes the owner; not become the owner, even if the
property has been delivered to him;
3. In sale, the seller warrants 3. The agent who sells assumes no
personal liability as long as he acts
within his authority and in the name of
the principal.

Graphic Distinction between sale and agency to sell


Point of Distinction Contract of Sale Contract of Agency
Governing Law Law on Sales Law on Agency
Objections created The obligation of vendor in a The obligation of the agent in
contract of sale is to deliverthe agency to sell is to render
the thing sold and the buyer account and deliver the
to pay the price. proceeds to the principal who
in turn should pay agent
commission.
Existence of trust and Unnecessary because it does Necessary because it is the
confidence between parties. no affect the contract. basis of the contract.

Illustrative (Decided) Cases:

Case I
X Co. granted to A the exclusive right to sell in the Visayas a certain number of beds
which the company was manufacturing at the invoice price of the beds in Manila, with a
discount of 20%, the price to be paid at the end of 60 days. What contract is perfected - a
contract of sale or a contract of agency to sell?

ANSWER: The contract perfected here is a contract of sale. The essential features of
sale are present in this case. There is the obligation on the part of X Company to supply the
beds and the obligation on the part of A to pay the purchase price. These features exclude the
legal conception of a contract of agency to sell where the agent receives the thing in order to
sell it without paying the price but with the obligation to deliver to the principal the price which
he may have obtained from sale of the thing to third person, then if he does not succeed in
selling it, he returns it. In the contract between X Co., and A, the latter, on receiving the beds,
was necessarily obliged to pay the price within the term fixed, without any other consideration
and regardless as to whether he had or had not sold the beds.

Case II
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In a case where the consignor or firm delivers goods to a distributor for resale to
customers, retaining the ownership of such goods, and the price and term are still subject to
the control of the firm, but with the understanding that the distributor is not the agent or legal
representative of the firm for any purpose whatsoever, what kind of contract was perfected - a
contract of sale or a contract of agency to sell? Explain.

ANSWER: The contract is still a contract of agency to sell. Since the company retained
ownership of the goods, even as it delivered possession to the dealer for resale to customers,
the price terms of which were subject to the company's control, the relationship between the
company and dealer is one of agency.

Summary as the Requisites Nature of the Object of Contract of Sale

18. Requisites in order that a thing may be the object of sale:

(1) The thing must be existing, or at least, have a future or contingent existence (Arts.
1461, 1462, 1465);
(2) It must be determinate or determinable by description or segregation (Art. 140);
(3) It must be licit or legal (Art. 1459)
(4) The vendor must have real right to transfer ownership of the thing at the time it is
delivered (Art. 1459)

19. Objects of Contract of Sale:

The following may be the objects of sale:


(a) Things having potential existence (Art. 1461, NCC);
(b) Things that are existing or to be manufactured, raised or acquired in the future or
future goods (Art. 1462, NCC)
(c) Those whose acquisition by the seller depends upon contingency which may or may not
happen (Art. 1462, NCC);
(d) Things subject to a resolutory condition (Art. 1465)

20. Contract of Sale as against Contract for a Piece of Work:

By the contract for a piece of work, the contractor binds himself to execute a piece of work
for the employer (e.g., to construct a house) in consideration of a certain price or
compensation. The contractor may either employ his labor or skill, or also furnish the
material. (Art. 1713.)
A contract for the delivery at a certain 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 are to be
manufactured especially for the customer and upon his special order (e.g. dress made on
the basis of the body measurement of the customer) and not for the general market, it is a
contract for a piece of work. (Art. 1467)

Graphic distinction between contract of sale and contract of piece of work


Point of Distinction Contract of Sale Contract of Piece of Work
Governing Law Arts. 1458-1637, NCC Arts. 1713 -1731, NCC
Obligations of vendor Delivery of the object Delivery of object
manufactured on ordinary manufactured specially for the
course of business customer.
Existence of special order of Special order of customers not Special order of customer is
customers necessary necessary.
Applicability of Statute of Applicable Not applicable
Frauds
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21. Rules to determine whether contract is sale or barter. In a contract where


the consideration is partly money and partly goods, the following rules shall apply:

(a) the intention of the parties must be determined;


(b) If the intent is not clear, then apply the following rules:
1. If the sold thing is more valuable than money, the contract is barter;
2. If the money and the thing are equal value, the contract is sale;
3. If the thing is less valuable than money, the contract is a contract of sale (Art.
1468, NCC)

Note: Meaning of contract of barter or exchange: One of the parties binds


himself to give one thing in consideration of the other's promise to give another
thing. (Art. 1638) In contrast to the contract of sale, the vendor gives a thing in
consideration for a price.

Graphic distinction between contract of sale and contract of barter


Point of Distinction Contract of Sale Contract of Barter
Governing Law Arts. 1458-1637, NCC Arts. 1638-1641, NCC
Consideration A price certain in money or its Non-fungible things (Art.
equivalent 1954)

Nature/Requisites for Cause

22. Requisites of price in a contract of sale:

(a) The price must be in money or its equivalent (Art. 1458)


(b) It must be certain or ascertainable (Art. 1469)
(c) It must be real, i.e., not simulated, (Art. 1471)

23. Meaning of a price certain:

(a) The parties have fixed or agreed upon a definite amount; or


(b) It be certain with reference to another thing certain (See Art. 1472), as where the
buyer agrees to pay the price as indicated in the invoices;
(c) The determination of the price is left to the judgment of a specified person or persons
(Art. 1469)

The last two cases are applicable only when no specific amount has been stipulated by
the parties.

24. Rules if price is to be determined by a third person:

(a) The price fixed by the third person is binding except when he acts in bad faith or by
mistake;
(b) In such case, the courts may fix the price;
(c) If the third person is unable or unwilling to fix the price, the contract shall be
inefficacious (without effect), unless the parties subsequently come to an agreement ;
and
(d) If the third person is prevented from fixing the price by the fault of the seller or buyer,
the party not in fault may choose between rescission and fulfillment with damages in
either case. (Art. 1469)

22. The fixing of the price may not be left to the discretion of one of the contracting
parties, as it cannot be said that there is meeting of minds upon the fixed price.
(Art. 1308) But if the other accepts price fixed, the sale is deemed perfected.

23. If the price cannot be determined, the contract is inefficacious. However, if the
thing or any part thereof has been delivered to and appropriated by the buyer, he is under
obligation to pay reasonable price thereof. (Art. 1474)
13

24. Effect of Gross Inadequacy of Price:

It does not affect the contract of sale except when the inadequacy may indicate that there
is a defect in the consent, or that the parties really intended a donation or some other act
or contract.

Inadequacy of the cause (lesion) may only be an effect of vitiated consent and so the
contract becomes voidable under Article 1390. If damage or lesion is suffered by ward or
absentee more than ¼ of the value of the property, contract is rescissible under Articles
1381 pars. 1 & 2.

25. Simulation of the Price (Art. 1471)


There is simulation of the price in a contract of sale when for the purpose of deceiving
others, the parties thereto made it appear in document either:
a) There is a price when actually there is none at all. In this case being absolutely
simulated contract is void. (Art. 1346)
b) That the price stated is different from the actual price. This merely relative simulation
of the price and does not render the contract of sale null and void. The parties are
bound by their true agreement as long as the same does not prejudice a third person
and is not contrary to law, morals, good customs, public order or public policy ( Arts.
1345 & 1346)

26. When price of securities, grains, liquids and other things considered certain:
a. The price fixed is that which things sold would have on a definite day;
b. The price fixed is that which the thing sold would have in a particular exchange or
market;
and
c. or the price fixed is an amount above or below the price on such day or on such
exchange or market.