KORBEL FOUNDATION COLLEGE, INC.

Purok Spring 1, Brgy. Morales, Koronadal City

Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

WEEK 8 or affect ownership. Instead, it only creates an

obligation to transfer ownership or it only creates
title. It is tradition or delivery, as a consequence
SALES of sale that actually transfer ownership.
Concept
c. It creates Reciprocal Obligation

Essence of Contract A contract of sale creates reciprocal obligations,

where the seller obligates himself to transfer the
It is a contract involving the exchange of a thing ownership of and deliver a determinate thing, and
the buyer obligates himself to pay therefor a price
or right in consideration of the payment of a price
certain in money or equivalent.
certain in money or its equivalent. The
d. It is ordinary commutative and onerous
consideration for the delivery of a thing or right
must be payment of a price in money or the Ordinarily, the contract of sale is commutative
and onerous in that each one of the parties
equivalent of money. assume a correlative obligation the seller to
deliver and transfer ownership of the thing sold
SALES DISTINGUISHED FROM BARTER and the buyer to pay the price.

SALES BARTER e. It is also nominate and a principal contract

Consideration is price Consideration is
Kinds of contract of Sale
in money or its equivalent another thing
a. Absolute contract
SALES DISTINGUISHED FROM DONATION
When the sale is devoid of any condition imposed
on the passing of the title of the thing to be
SALES DONATION
conveyed or on the obligation of a party thereto
Onerous Consideration is and hence title to the property passes to the
another thing vendee upon delivery of the thing sold.
Perfected by mere Must comply with b. Conditional Sale
consent the formalities
required by law. When the sale is subject to any condition
imposed on the passing of the title of the thing to
be conveyed or on the obligation of a party
Nature and Characteristics thereto.
a. It is a consensual contract Contract of Sale Contract to sell
Ownership is Ownership is only
From the point of view of perfection, the contract transferred upon transferred upon full
of sale is a consensual contract which means the delivery payment of price
sale is perfected by mere consent. The delivery of
Non-payment is a Full payment is a
the ting bought or payment of the price is not
resolutory condition positive suspensive
necessary for the perfection of the contract.
condition, hence
Instead, upon perfection of the contract it creates
non-payment would
an obligation to make the delivery of the thing
not give rise to the
bought
obligation to
transfer ownership
b. It is not a mode, but only creates title

The contract of sale is not a mode of transmitting

ownership. Upon perfection, it does not transfer
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

Elements and Formalities Capacities of Parties

General Rule:
Essential Elements Same as ordinary Contract

1. Consent Prohibited sales

Perfection 1. Between husband and wife unless their
a. Consensual contract property regime is complete separation but only
A contract of sale is a consensual contract which the heirs and creditors can question its nullity.
means that the sale is perfected by mere consent
or is perfected by mere consent or is perfected at 2. The same prohibition also applies to common-
the moment there is a meeting of minds upon the law relationships because of policy considerations
thing which is the object of the contract and upon and the dictates of morality.
the price
3. The guardian cannot acquire by purchase even
b. Sale by Auction at public auction or juridical auction the property
A sale by auction is perfected when the of the ward under his guardianship, so long as the
auctioneer announces its perfection by fall of the guardianship still exist
hammer or in other customary manner. Until such
announcement is made, any bidder may retract 4. The agent cannot acquire by purchase even at
his bid and the auctioneer may withdraw the a public auction or juridical auction the property of
goods from the sale unless the auction has been the principal
announced to be without reserve.
5. The executor or administrator cannot acquire
Effect of loss prior to perfection by purchase even at a public auction or juridical
auction the property of the estate under his
1. For things other than goods The contract is administration
without effect
2. In case of specific goods If they perished in 6. The public officer cannot acquire by purchase
part or have wholly or in material part so even at a public auction or juridical auction the
deteriorated in quality as to be substantially property of the state or any subdivision thereof or
changed in character without the knowledge of any government owned and controlled
the seller, the buyer at his option treat the sale as corporation or institution trusted to them
either void or valid as to all of the existing goods 7. Justices, judges, prosecuting attorneys and
or in so much thereof as have not deteriorated. clerk of superior and inferior courts and other
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

officers and employees connected to the consumable or non-consumable, corporeal or

administration of justice including attorneys or incorporeal, present or future and even a mere
lawyers cannot acquire by purchase even at a hope or expectancy may be object of sale.
public auction or juridical auction the property
under litigation or even those levied. Requisites
1. The thing must be licit
Formalities in a Contract of Sale 2. The thing may or may be existing at the time of
a. Requirement as to Validity the perfection of the contract so long as it has the
Whatever may be its subject matter, no particular potential or possibility of existence at some future
form is required in a contract of sale for validity. time
The only exception is the sale of large cattle
which requires that the same be recorded with the The goods which form the subject of a contract of
city/municipal treasurer and that a certificate of sale may be either existing goods, owned or
transfer to be issued. Thus an oral sale of a possessed by the seller or goods to be
parcel of land is a valid contract manufactured, raised or acquired by the seller
after the perfection of the contract of sale.
b. Requirement as to Enforceability
The sale of personal property at a price not less The sale of future things in which the amount and
than 500 pesos and the sale of real property must quality of the thing is uncertain and the sale is
be in writing under the statute of frauds otherwise subject to the condition that the thing should
the contract is unenforceable. come into existence such that if the condition is
not fulfilled or if the thing does not come into
Sale of Lands need not to be in public document existence the contract becomes ineffective.
and be recorded to the registry of deeds to be
valid. The sale of hope or expectancy is allowed by the
law but a vain hope or expectancy is void.

2. Object Sale of Things Having Potential Existence

Sale of a Sale of a Sale of a
General Rule:
thing MERE HOPE VAIN HOPE
Any thing that has a value can be assessed in expected or Or expectancy Or expectancy
future thing
money, whether immovable or movable,
Valid Valid Void
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

Example: Example: Example:

Price
Sale of the Sale of a Sale of a fake
grain a field valid lottery lottery ticket Price signifies the sum stipulated as the
may grow in a ticket
given time equivalent of the thing sold and also every
incident taken into consideration for the fixing of

3. The thing must be determinate the price put to the debit of the buyer and agreed
to by him.

It is already particularly designated or physically

segregated from all other of the same class or Requisite of Price

atleast determinable that is the thing is capable of

being made determinate without necessary of a 1. The price must be real or true

new or further agreement between the parties. If the price is simulated, the contract is void, but
the act may be shown to have been in reality a

4. Requirement of Ownership donation or some other act or contract. Thus, a

Ownership by the seller of the thing sold at the deed of sale, in which stated consideration had

time of the perfection of the contract of sale is not not in fact been paid is null and void. On the other

an element for its perfection hence regardless of hand, if the price agreed upon is true, the failure

the true owner the sale is valid. to pay the price does not affect the validity of the
contract but merely resultsin a right to demand

If the seller is not the owner but he was able to the fulfilment or cancellation of the obligation

deliver the thing sold to the buyer, the latter does under an existing valid contract.

not acquire ownership because no one can give 2. The consideration must be in money or

what one does not have. Except, when the title is equivalent (Letters of credit)

void to a third person who purchased it for value 3. Price must be certain

in good faith a. In order that the price may be considered

certain it shall be sufficient that it be so with

3. Consideration reference to another thing certain, or that the

determination thereof be left to the judgement of a

As to the buyer the Consideration is the delivery specified persons

of the thing sold while as to the seller the b. If the person be unable or unwilling to fix the

payment of the price in money or its equivalent. price, the contract shall be inefficacious unless

Both parties must agree on the amount of price the parties subsequently agree upon the price

as well as to the manner of payment to a c. If the third person/s acted in bad faith or by

perfected contract of sale. mistake, the court may fix the price
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

d. Where the third person/s are prevented from 1. To deliver the thing sold
fixing the price or terms by fault of the seller or 2. To transfer ownership over the thing sold
buyer, the party not in fault may have such 3. To warrant the following
remedies against the party in fault as are allowed a. That he has the right to sell the thing at
the seller or the buyer, as the case may be. the time when the ownership is to pass
e. The fixing of the price can never be left to the (warranty of ownership)
discretion of one of the contracting parties, b. That the buyer shall enjoy legal and
however, if the price is fixed by one of the parties peaceful possession of the thing (warranty
is accepted by the other the sale is perfected. against eviction)
f. Where the price cannot be determined in any c. That the thing sold if free from any
other manner, the contract is inefficacious. hidden faults or defects (warranty against
defect)
Earnest Money
Paid in advance of the purchase price agreed Obligation to deliver and Transfer Ownership
upon by the parties in a contract of sale, given by
the buyer to the seller, to bind the latter to the a. Sale not a mode but merely title
bargain. In sales the purpose of delivery is not only to
transfer possession but precisely to transfer
Option Money ownership to the buyer. The sale by itself does
Separate and distinct consideration from the not transfer or affect ownership the most that sale
purchase price. When given, the would-be-buyer does is to create the obligation to transfer
is not required to buy, but may even forfeit it ownership.
depending on the terms of the option
When to deliver
In reciprocal, as in contract of sale, the general
rule is that the fulfilment of the parties respective
obligations should be simultaneous thus, the
vendor is not bound to deliver the thing sold if the
vendee has not paid him the price or if no period
Obligation of The Partes for the payment has been fixed in the contract.

Obligation of the Seller Exception:

Where a period for the payment of the price has
General been fixed in the contract, the vendor is already
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

bound to deliver the thing sold although the Example : possess the thing as a lessee or a
period has not elapsed or consequently although mere usufructuary.
he has not collected the price.
Intention to deliver important
Forms of Delivery In all forms of delivery it is necessary that the act
of delivery whether constructive or actual should
a. Actual Delivery be coupled with the intention of delivering the
In the case of a movable thing, it consist in thing, without that intention there is no tradition.
actually handing it over to another or
In case of immovable, it consist of material and Delivery on “sale or return”
possessory acts done by the vendee in the When goods are delivered to the buyer “on sale
presence of and with the consent of the vendor or return” to give the buyer an option to return the
b. Constructive Delivery goods instead of paying the price, the ownership
1. Traditio simbolica (Symbolic Delivery) passes to the buyer the delivery but he any re-
Such as the delivery of movable property may be vest the ownership to the seller by returning or
made by the delivery of the keys of the place or tendering the goods within the time fixed in the
depository where it is stored or kept, or the contract.
delivery of a negotiable document of title or the
execution of a public instrument. Double sale
2. Traditio longa manu General Rule: Prior tempore, prior jure (“First in
Delivery is effected by the vendor by simply time, priority in right”) applies.
pointing to the vendee the thing to be transferred
and which at that time must be within sight. Requisites:
3. Traditio brevimanu (1) 2 or more valid sales;
The vendee already had the thing in his (2) Same subject matter;
possession for any other reason or by reason of (3) 2 or more buyers with conflicting interests over
another distince title and the mere agreement of the rightful ownership of the thing sold;
the parties that the vendee shall now hold the (4) Same seller. [Cheng v Genato, 1998]
thing as its owner amounts to delivery
4. Traditio constitutumpossesorium
The vendor continues to be in possession of the
thing but in some other capacity and no long as
an owners, as when he.
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

Rules on double sale

Warranty against Hidden Defects
Sale of Movables Nature of defects
Ownership shall be transferred to the person who 1. It must be hidden, hence, the vendor shall not
may have first taken possession in good faith be answerable for patent defects or those which
may be visible or those which are not visible if the
Sale of Immovables: vendee is an expert who by reason of his trade or
Registered Land Ownership belongs to the profession should have known them.
person who: 2. Such defects have rendered the thing unfit for
(1) In good faith first recorded the sale in the the use for which it is intended or have diminished
Registry of Property; or its fitness for such use to such an extent that had
(2) If there is no inscription of sale on the title, the vendee been aware thereof, he would not
ownership passes to the person who in good faith have acquired it or would have given a lower
was first in possession; or price for it.
(3) In the absence thereof, to the person who
presents the oldest title, provided there is good Obligations of Buyer
faith.
The obligation of the buyer is to pay a price
Warranties certain in money or its equivalent.
A. Express Warranties
For there to be express warranty, the following Rights granted to the buyer in relation to payment
requisites must concur: (APIR) of price
(1) An affirmation of fact or any promise relating
to the thing sold 1. Right to suspend payment
(2) The natural tendency of such affirmation or Should the vendee be disturbed in the possession
promise is to induce the buyer to buy; or ownership of the thing acquired orshouldhe
(3) The buyer buys the thing relying thereon. [Art. have reasonable ground to fear such disturbance
1546] or danger to cease.
(4) Made before the sale not upon delivery or any
other point In sale of Subdivision Lots or Condominium Units
In case of failure of the owner or developer to
B. Implied Warranties develop the approved plans and within the time
1. Warranty of ownership limit for complying the same, the buyer may
2. Warranty against eviction suspend the payment and wait for further
3. Warranty against hidden defects
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

development or he may demand reimbursement Rights of Buyer who paid atleast 2 years of
of the total amount paid. instalments
He is entitled to a grace period of one month for
2. Right to Grace Period every one year of installment payments paid. The
a. If granted by contract seller may cancel the contract only after the grace
When grace period is provided for in the contract period but must comply with the requirements that
of sale, the same is a right, not an obligation of it must send a notarized notice of cancelation to
the debtor and when unconditionally conferred, the buyer and to refund the cash surrender value
the grace period is effective without further need (atleast 50% of total payments and after 5 years
of demand either calling for the payment of the of installment 5% additional every year but not
obligation or for honouring the right. exceed 90%) .

b. In sale of Realty by Instalments (Maceda Buyer can still pay even after expiration of grace
Law) period as long as no demand for rescission has
Applicable to sale of real property by instalments been made, whether judicially or by notarial act.
except sale of industrial lots, commercial buildings
Types of Pricing Agreements in Sale involving
and tenants. Real Estate

1. Unit Price Contract

Rights of Buyer who paid less than 2 years of
instalments Wherein the purchase price is determined by way
of reference to a stated rate per area (ex: 1,000
pesos per square meter).
He is entitled to a grace period of 60 days from
If the vendor delivers less than the agreed upon
the date the instalments became due. Within the the vendee may obliged the vendor to deliver all
that may be stated in the contract if possible or
said period, the buyer may still update the the vendee may either demand for the
payment without the obligation to pay interest and proportionate reduction of the purchase or ask for
rescission of the contract if the lacking area is not
penalties. The seller may cancel the contract only less than 1/10 of stated area.
after the expiration of the grace period but the
2. Lump Sum Contract
notice of cancellation must be by way of notarial
Which states a full purchase price for an
act. The cancellation becomes effective 30 days
immovable the area of which may be declared
from receipt of such notice of cancellation. based on the estimated or where both the area
and boundaries are stated.

In case the area of the immovable is stated in the

contract based on the estimate the actual area
delivered may not measure up exactly with the
area stated in the contract. There shall be no
increase or decrease of price although there be
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

greater or lesser area or number than that stated sale is in writing and already complies with the
in the contract. However, the discrepancy must requirement of the statute of frauds. However, if
not be substantial to justify the same. the grant of right to repurchase was made long
after the sale was already perfected, the
Where both the area and the boundaries of the transaction is not a pacto de retro sale but merely
immovable are declared the area covered within a grant of an option to buy back.
the boundaries of the immovable prevails over the
stated area. In a true pacto de retro sale, title to and
ownership are immediately vested in a vendee a
retro, subject only to the resolutory condition that
Remedies of Seller if Price Not Paid in Sale of the vendor repurchases it within the stipulated
Personal Property on Instalments period.

a. Three alternative remedies Period of Redemption (Repurchase)

1. Exact fulfilment of the obligation (action for

collection of price), available even if failure to pay Period
covers only single installment The period expressly agreed upon but such
cannot exceed 10 years.
2. Rescission or cancellation of sale. if the failure
to pay covers two or more instalments In the absence of an express agreement it shall
be four years from the date of the contract.
3. Foreclose the chattel mortgage if the failure to
pay covers two or more instalments If the vendor questions the transaction as an
equitable mortgage but the court eventually rules
Only one remedy can be used and availing of one that it was indeed a pacto de retro sale, the
will renounce the other. vendor may still exercise the right to repurchase
within 30 days from finality of judgment.
If the seller chooses to Foreclose Chattel
Mortgage the seller is prohibited from recovering What must be paid to the vendee upon
any unpaid price. repurchase

Pacto De Retro Sale and Equitable Mortgage a. The price of sale

b. The expenses of the contract and any other
1. Pacto De Retro Sale legitimate payments made by reason of the sale
c. The necessary and useful expenses made on
Definition the thing sold.

A sale with a right of repurchase, also known as Equitable Mortgage

conventional redemption, takes place when the
vender reserves the right to repurchase the thing Definition
sold, with the obligation of returning to the vendee
the price of the sale, the expenses of the contract An equitable mortgage has been defined as one
and any other legitimate payments made by which although lacking in some formality or forms
reason of the sale, the necessary and useful or words or other requisite demanded by a
expenses made on the thing sold, and the statute, nevertheless reveals the intention of the
obligation of complying with such other stipulation parties to charge real property as security for a
which may have been agreed upon. debt and contains nothing impossible or contrary
to law.
Grant of Right of Repurchase must be
Simultaneous Requisite
1. The parties enter into what appears to be
The grant of right to repurchase must be made contract of sale
simultaneously with the sale although not 2. but their intention is to secure an existing debt
necessarily in the same instrument in fact, the by way of mortgage
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
Lecturer: John Jay A. Locsin, JD A.Y. 2nd SEMESTER, 2021-2022

Presumption of Equitable Mortgage

Apply when
1. When the price of a sale with right to
repurchase is unusually inadequate
2. When the vendor remains in possession as
lessee or otherwise
3. When upon or after the expiration of the right to
repurchase another instrument extending the
period of redemption or granting a new period is
executed
4. When the purchaser retains for himself a part
of the purchase price
5. When the vendor binds himself to pay the
taxes on the thing sold
6. In any other case where it may be fairly
inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt
or the performance of any other obligation.

Effect if Pacto De Retro Sale is actually

Equitable Mortgage

1. Any money, fruits or other benefit to be

received by the vendee as rent or otherwise shall
be considered as interest which shall be subject
to usury law.

2. The apparent vendor who in reality is a

mortgagor, may ask for the reformation of the
instrument since the true intention of the parties is
not expressed in the instrument.

3. If there is a stipulation in the sale with pacto de

retro that complete and absolute title shall be
vested on the vendee should the vendors fail to
redeem the property on the specified date, the
same is void.

4. The proper remedy in case the borrower

refuses to pay the price is to foreclose on the
mortgage.