Legal Questions

How is a contract of sale distinguished from all other contracts?

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1. Donation

donation is gratuitous; sale is onerous

donation is formal contract; sale is consensual

donation is governed by law on donation; sale is governed by law on sales.

2. Barter

in barter, the consideration is the giving of a thing; in sale, it is giving of money as payment

both are governed by law on sales; both are species of the genus sales

if consideration consists partly in money & partly by thing – look at manifest intention; if intention is not clear (Article 1468 of the Civil Code of the Philippines):

a. if value of thing = or < than amount of money then it is a sale

b. if value of thing > amount of money then it is a barter

3. Contract for piece of work

Test in Article 1467 (Civil Code):

a. contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market ( whether on hand or not ) – sale

b. goods are to be manufactured specially for a customer and upon special order and not for the general market – contract for piece of work.


a. Timing test – under Art. 1467; Inchausti; whether the thing transferred would have never existed but for the order – contract for piece of work (abandoned)

b. Habituality test – enunciated in  Celestino v CIR; contract of sale if manufacturer engages in activity without need to employ extraordinary skills and equipment; contract for piece of work is sale of service; contract of sale is sale of things.

c. Nature of the object test – enunciated in EEI v CIR; each product’s nature of execution differs from the others; products are not ordinary products of manufacturer.

main factor in decision of the SC: essence of why parties enter into it:

a. essence is object – contract of sale

b. essence is service – contract for piece of work

4. Agency to sell

in sale, buyer pays for price of object; in agency to sell, agent not obliged to pay for price, merely obliged to deliver price received from buyer.

in sale, buyer becomes owner of thing; in agency; principal remains owner even if object delivered to him

in sale, seller warrants; in agency, agent assumes no risk/liability as long as within authority given

in sale, not unilaterally revocable; in agency, may be revoked unilaterally because fiduciary & even w/o ground

in sale, seller receives profit; in agency, agent not allowed to profit

TEST: essential clauses of whole instrument (art 1466 – motherhood statement, not good law)

Agency is a personal contract; sale is real contract ( to give ) – rescission not available in agency.

5. Dacion en pago

In dacion, there is a pre-existing credit. In sale there is none.

In dacion: obligation is extinguished. In sale, it gives rise to obligations.

In dacion, there is less freedom in determining the price. In Sale, there is greater freedom as to price determination.

In dacion, partial or complete fulfillment may be had by the giving of the object. In sale, the giving of the price may generally end the obligation of the buyer.

6. Lease

in sale:  obligation = to absolutely transfer ownership of thing; in lease:  use of thing is for specified period only with obligation to return

in sale: consideration is price; in lease:  consideration is rent

in sale:  seller needs to be owner of thing to transfer ownership; in lease: lessor need not be owner

lease with option to buy: really  a contract of sale but designated as lease in name only.

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