Nature and Form of The Contract

NATURE AND FORM
OF THE
CONTRACT
CHAPTER1
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer
the ownership and to deliver a determinate
thing, and the other to pay therefor a price
certain in money or its equivalent
A contract of sale may be absolute or conditional.
 Absolute - There are no conditions attached.
 Conditional- There are certain conditions attached to the

contract.
Stages of a contract of sale
 1. Negotiation - It covers the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract isperfected.
 2. Perfection - It takes place upon the concurrence of the essential

elements of the sale, which is the meeting of the minds of the parties
as to the object of the contract and upon the price.
 3. ConsummationI - It begins when the parties perform their

respective undertakings under the contract of sale, culminating in
the extinguishment thereof.
SALE IS A TITLE
 In relation to the acquisition and transfer of ownership, it should be
noted that sale is not a mode, but merely a title.
 A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by
which to affect dominion or ownership.
 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.
Contract to sell not a contract of sale
 A Contract to Sell may not be considered as a Contract of Sale because
the first essential element is lacking. In a 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.
 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.
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:
 Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
 Determinate subject matter, and
 Price certain in money or its equivalent.
Art. 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.
Art. 1181. In conditional obligations, the acquisition of rights,

as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes
the condition
Characteristics of a contract of sale
 Consensual - The contract is perfected by mere consent.
 Bilateral - The seller and the buyer are bound by obligations dependent
upon each other.
 Onerous - It imposes a valuable consideration, which is a price certain in
money or its equivalent.
 Commutative -The thing of value is exchanged for equal value.
 Nominate - The Civil Code refers to it by a special name, “contract of
sale.”
 Principal - It can stand on its own and does not depend on another
contract for its validity.
Examples are located on page 5.
OPTION VS. CONTRACT OF SALE
Option Contract of Sale
An option is an unaccepted offer. Fixes definitely the relative rights and
obligations of both parties at the time of its
execution.
It states the terms and conditions on which the The offer and the acceptance are ell concurrent,
owner is willing to sell the land, if the holder since the minds of the co contracting parties
elects to accept them within the time limited. meet in the d. terms of the agreement.
If the holder does so elect, he must give notice
to the other party, and the accepted offer
thereupon becomes valid and binding
a.contract.
If an acceptance is not made within the time
fixed, the owner is no longer bound by his
offer, and the option is at an end.
What is the test in determining whether it is
a "contract of sale or purchase or a mere
option"?
 The test in determining whether a contract is a "contract of
sale or purchase" or a mere "option" is whether or not the
agreement could be specifically enforced.
Earnest money
 It is a statutory rule that 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.
 It constitutes an advance payment and must, therefore, be
deducted from the total price.
 Also, earnest money is given by the buyer to the seller to bind
the bargain.15
EARNEST MONEY VS. OPTION MONEY
Earnest money Option money

Part of the purchase price. Money given as a distinct
consideration for an option
contract.
Is given only where there Applies to a sale not yet
isalready a sale. perfected.
When earnest money is given,the When the would-be buyer gives
buyer is bound to pay the option money, he is not required
balance. to buy.
CONTRACT FOR A PIECE OF WORK
VS. CONTRACT OF SALE
 "A contract for a piece of work, labor and materials may be
distinguished from a contract of sale by the inquiry as to whether the
thing transferred is one not in existence and which would never have
existed but for the order of the person desiring it.
 In such case, the contract is one for a piece of work, not a sale.
 On the other hand, if the thing subject of the contract would have
existed and been the subject of a sale to some other person even if the
other had not been given then the contract is one of the sale.
Example could be seen on page 10.
DACION EN PAGO vs. CONTRACT OF SALE
In dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of
payment of an outstanding debt.
In order that there be a valid dation in payment, the following
are the requisites:
 There must be the performance of the prestation in lieu of payment (animo solvendi)
which may consist in the delivery of a corporeal thing real right or a credit against the
third person:
 There must be some difference between the prestation due and that which is given in
substitution (aliud pro alio);
 There must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from
that due. The undertaking really partakes in one sense of the nature of sale, that is, the
creditor is really buying the thing or property of the debtor, payment for which is to be
charged against the debtor's debt.
Art. 1459. The thing must be licit and the vendor must have a
right to transfer the ownership thereof at the time it is
delivered.
Examples of Void Sale (Illicit object)

 Sale of animals suffering from contagious diseases.
 Sale of animals if the use or service for which they are acquired has
been stated in the contract, and they are found to be unfit therefor
 Sale of future inheritance, and
 Sale of land in violation of the constitutional prohibition against
thetransfer of lands to aliens.
Note: Licit means lawful. The thing object of sale should not be contrary to law,
morals, good customs, public order or public policy.
EXAMPLES ARE LOCATED ON PAGE 11.
Art. 1460. A thing is determinate when it is particularly designated or
physically 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.
DETERMINATE THINGS
A thing is determinate when it is particularly designated or physically
segregated from all others of the same class.
EXAMPLE: “My only one baby”.
REQUISITES:
At the time the contract is entered into the thing is capable of being made
determinate; and
 There is no necessity of a new or further agreement between the parties.
EXAMPLE ARE LOCATED ON PAGE 12

Nature and Form of The Contract

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Nature and Form of The Contract

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NATURE AND FORM

 Conditional- There are certain conditions attached to the

 2. Perfection - It takes place upon the concurrence of the essential

 3. ConsummationI - It begins when the parties perform their

The essential elements of a contract of sale are the

From that moment, the parties may reciprocally demand

Art. 1181. In conditional obligations, the acquisition of rights,

Earnest money Option money

Examples of Void Sale (Illicit object)

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