Contract of Sale in the Philippines: How It Works, Step by Step
A contract of sale in the Philippines is perfected the moment buyer and seller agree on a determinate thing and a price certain (Civil Code Arts. 1458 and 1475). From then on, the seller must deliver, transfer ownership and warrant the thing, and the buyer must accept it and pay. Ownership passes on delivery, not on payment, unless the parties agree otherwise. Most disputes come from skipping one of these stages.
This guide walks through a sale from first offer to after-sale problems. It is the overview; each stage links to a deeper CivilLaw.PH guide. For the remedies when one side does not pay or deliver, see the buyer and seller remedies hub.
What makes a contract of sale under Philippine law?
Article 1458 defines it: one party binds 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.” That gives three essentials, on top of the ordinary requisites of any contract (consent, object and cause):
- Consent — a meeting of minds on the thing and the price. Capacity rules apply, with special bans: spouses generally cannot sell to each other (Art. 1490), and guardians, agents, executors, public officers and court personnel cannot buy property under their charge (Art. 1491).
- A determinate thing — particularly designated, or capable of being made determinate without a new agreement (Art. 1460). It must be lawful, and the seller must have the right to transfer ownership at the time of delivery (Art. 1459), not necessarily when the contract is signed. Future goods can be sold (Arts. 1461–1462).
- A price certain — fixed, or fixable by reference to something certain or by a named third person (Art. 1469). It can never be left to one party’s discretion (Art. 1473). A low price alone does not void a sale (Art. 1470), but a simulated price does (Art. 1471).
What are the stages of a sale, and what does each require?
Every sale moves through the same five stages. The table shows what the law expects at each one and the mistake that most often causes a dispute.
| Stage | What the law requires | Common mistake | Civil Code |
|---|---|---|---|
| Negotiation | Offers, counter-offers, option or earnest money | Treating a reservation fee as a binding option | Arts. 1479, 1482 |
| Perfection | Meeting of minds on the thing and the price | Assuming nothing binds until the deed is notarized | Arts. 1475, 1483 |
| Form and documentation | Writing for land and for goods of ₱500 or more to be enforceable; public instrument for land | Paying for land on a handshake | Arts. 1358, 1403(2) |
| Delivery and transfer | Actual or constructive delivery; registration for land against third persons | Never registering the deed of sale | Arts. 1477, 1498; PD 1529 Sec. 51 |
| Payment and after-sale | Buyer pays and accepts; seller warrants title and quality | Missing the six-month hidden-defect deadline | Arts. 1547, 1571, 1582 |
The sections below take each stage in turn.
When is a sale perfected, and does it need to be in writing?
A 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” (Art. 1475). From that moment each side can demand performance from the other. Article 1483 confirms that a sale may be written, oral, partly both, or inferred from conduct.
Form still matters in two ways. First, under the Statute of Frauds (Art. 1403(2)), a sale of real property or an interest in it, and a sale of goods at a price of ₱500 or more, cannot be enforced in court without a note or memorandum signed by the party charged — unless the goods were partly received or part of the price was paid at the time. Second, Article 1358 requires sales of real property to appear in a public (notarized) document; once the sale is perfected, either party can compel the other to execute that document (Art. 1357). See which contracts need a writing and whether oral agreements bind.
Two pre-sale payments are often confused. Earnest money in a sale is part of the price and proof that the sale was perfected (Art. 1482). Option money is a separate consideration that makes a promise to sell binding on the seller for the option period (Art. 1479). The difference decides whether you can walk away. See earnest money vs down payment vs option money.
When does the buyer become the owner?
Ownership passes “upon the actual or constructive delivery” of the thing (Art. 1477) — not when the contract is signed and not when the price is fully paid. Delivery can be physical, by placing the thing in the buyer’s control (Art. 1497), or symbolic: executing a notarized deed of sale is itself delivery unless the deed shows otherwise, and handing over the keys of a storeroom delivers the goods inside (Art. 1498).
The parties can change this. Under Article 1478 they may agree that ownership stays with the seller until the price is fully paid. That is the core of a contract to sell, which has different cancellation rules and, for real estate on installments, the protections of the Maceda Law.
For titled land, a third step matters. Under Section 51 of the Property Registration Decree (PD 1529), an unregistered deed operates only as a contract between the parties; “the act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned.” That is why a buyer who does not register risks losing to a second buyer who registers first in good faith (Art. 1544; see double sale).
Risk of loss generally follows ownership: goods remain at the seller’s risk until ownership passes, and at the buyer’s risk afterwards, with exceptions for delivery made while the seller keeps title only as security and for delay caused by one party (Art. 1504). See risk of loss before delivery.
What must the seller do?
Article 1495 lists three duties: transfer ownership, deliver, and warrant the thing. The seller must deliver the thing with its accessions and accessories in the condition it was in when the sale was perfected, and the fruits belong to the buyer from perfection (Art. 1537). The seller is not bound to deliver if the buyer has not paid and no period for payment was agreed (Art. 1524).
A seller who does not own the thing cannot pass a better title than he has, unless the owner’s conduct prevents the owner from denying the seller’s authority, or a recording law or a purchase in a store, fair or market under special laws protects the buyer (Art. 1505). For land sold through an agent, the agent’s authority must be in writing or the sale is void (Art. 1874).
What warranties does every seller give?
Warranties are where many buyers lose rights they did not know they had. Some exist even if the contract says nothing.
| Warranty | What it covers | Buyer’s remedy | Key limit |
|---|---|---|---|
| Express warranty (Art. 1546) | Seller’s statements of fact or promises that induced the purchase | Remedies for breach of warranty (Art. 1599 for goods) | Mere opinion or “sales talk” on value is not a warranty |
| Against eviction (Arts. 1547–1548) | Buyer loses the thing by final judgment based on a right before the sale | Value at eviction, fruits, costs, expenses; damages if seller acted in bad faith (Art. 1555) | Needs a final judgment, and the seller must be summoned in the suit (Arts. 1557–1558) |
| Against hidden defects (Art. 1561) | Hidden faults that make the thing unfit or less fit for its use | Withdraw from the sale or reduce the price, with damages (Art. 1567) | Six months from delivery (Art. 1571); no cover for visible defects |
| Fitness and merchantable quality (Art. 1562) | Goods for a purpose the seller knew; goods bought by description from a dealer | Remedies for breach of warranty (Art. 1599) | No fitness warranty for an article bought by trade name, unless agreed (Art. 1563) |
Three points readers miss. The seller answers for hidden defects even if he did not know of them, unless the parties stipulated otherwise and the seller really was unaware (Art. 1566). The parties may increase, reduce or remove the eviction warranty by agreement (Art. 1548). And the six-month period in Article 1571 runs from delivery, not from discovery — so test, inspect and complain in writing early. Consumer purchases may also carry warranties under the Consumer Act (RA 7394).
What must the buyer do?
The buyer must accept delivery and pay the price at the time and place agreed; if none was agreed, payment is due at the time and place of delivery (Art. 1582). The buyer owes interest between delivery and payment if stipulated, if the thing produces fruits or income, or from demand once in default (Art. 1589).
A buyer who is disturbed in possession or ownership by a vindicatory action or a mortgage foreclosure — or has reasonable grounds to fear it — may suspend payment until the seller removes the threat, unless the seller gives security or the contract says otherwise. Mere trespass is not enough (Art. 1590). Goods are deemed accepted when the buyer says so, acts as owner, or keeps them beyond a reasonable time without rejecting them (Art. 1585).
What special rules change the answer?
- Land sold on installments: the Maceda Law (RA 6552) may require grace periods, a notarial notice and refunds before cancellation. For immovables in general, the buyer may still pay after the due date until the seller demands rescission judicially or by notarial act (Art. 1592).
- Personal property on installments: the Recto Law (Art. 1484) limits the seller to one of three remedies and bars recovery of any deficiency after foreclosing a chattel mortgage. See the Recto Law guide.
- Area of land: whether the price was per square metre or a lump sum decides what happens when the land is smaller or bigger than stated. See Articles 1539 to 1543.
- Married sellers: property belonging to the spouses’ community or conjugal partnership may need the other spouse’s consent; check this before you pay (see the deed of sale checklist).
Your options and what to do next
Pick the line that matches where you are.
Before you buy or sell
- Decide whether you want a contract of sale (ownership passes on delivery) or a contract to sell (seller keeps title until full payment), and say so expressly in the document.
- Put the thing, the price, the payment schedule, the delivery date and any warranty terms in writing, signed by both sides. For land, use a notarized deed.
- For land, verify the title with the Registry of Deeds, check the seller’s authority (written SPA if an agent signs) and spousal consent.
- Label any advance payment clearly as earnest money, down payment, option money or reservation fee.
After the sale, if something goes wrong
- Hidden defect found (buyer): document it with photos and an inspection report, then send a written demand choosing withdrawal or price reduction. Act well within six months of delivery (Art. 1571).
- Someone sues to take the property (buyer): notify the seller and have him summoned in the suit; without that, the eviction warranty cannot be enforced (Art. 1558).
- Seller will not deliver or sign the deed (buyer): send a written demand (it puts the seller in delay — see when a demand letter is required), then sue for specific performance or resolution with damages (Art. 1191).
- Buyer will not pay (seller): demand payment in writing; for land, use a judicial or notarial demand before treating the sale as rescinded (Art. 1592). Check Maceda or Recto first.
- You registered nothing yet (land buyer): pay the transfer taxes and register the deed with the Registry of Deeds where the land lies without delay (PD 1529 Sec. 51).
Where to go. If both parties live in the same city or municipality, most disputes between individuals must first go through barangay conciliation before a court case can be filed. Pure money claims may fit small claims (check the current ceiling on the Supreme Court website before filing); claims involving title to or possession of land go to the first- or second-level court depending on the property’s assessed value. If you cannot afford a lawyer, ask the Public Attorney’s Office (PAO) whether you qualify.
What to bring. The contract or deed, receipts and proof of payment, messages showing the agreed price and terms, title or tax declaration for land, delivery receipts, photos or inspection reports of defects, and copies of every demand you sent.
Deadlines. Actions on a written contract prescribe in ten years from accrual (Art. 1144); hidden-defect actions in six months from delivery (Art. 1571). Do not let a short deadline lapse while negotiating.
First action today: gather the contract and proof of payment, and write down the exact date of delivery — it starts the shortest clock.
Key takeaways
- A sale is perfected by agreement on the thing and the price (Art. 1475); notarization is about form and enforceability, not perfection.
- Ownership passes on delivery (Art. 1477), and a notarized deed of sale is itself a form of delivery (Art. 1498) — unless the parties agreed title stays with the seller until full payment (Art. 1478).
- For titled land, registration is what binds third persons (PD 1529 Sec. 51).
- Every seller warrants against eviction and hidden defects even if the contract is silent (Art. 1547).
- Hidden-defect claims expire six months after delivery (Art. 1571).
- Installment sales of land and of personal property follow special rules (Maceda Law; Art. 1484).
Frequently asked questions
Is a sale valid if the deed is not notarized?
Generally yes between the parties, because a sale is perfected by consent (Arts. 1475 and 1356). But a sale of land must appear in a public document (Art. 1358), and either party can compel the other to execute one (Art. 1357). Without notarization the deed cannot be registered, so it will not bind third persons.
I paid in full but have no title yet. Am I the owner?
Under a contract of sale, ownership passed when the thing was delivered, including by executing a notarized deed (Arts. 1477 and 1498). Against third persons, though, your protection for titled land comes from registering the deed (PD 1529 Sec. 51). Register as soon as the taxes are paid.
The seller said “as is.” Can I still claim for hidden defects?
It depends. A stipulation excluding liability works only if the seller was in fact unaware of the defect (Art. 1566). A seller who knew of a hidden defect and stayed silent remains liable. Visible defects, and defects an expert buyer should have spotted, are not covered (Art. 1561).
Can a seller back out after accepting earnest money?
Earnest money is part of the price and proof that the sale was perfected (Art. 1482), so the sale binds both sides and the buyer can demand performance. If the payment was really option money or a reservation fee, the rules differ. Read the receipt and the contract wording.
Sources
- Civil Code of the Philippines (RA 386) — Arts. 1144, 1191, 1356–1358, 1403, 1458–1462, 1469–1479, 1482–1484, 1490–1491, 1495–1498, 1504–1505, 1524, 1537, 1544, 1546–1548, 1555, 1557–1558, 1561–1567, 1571, 1582, 1585, 1589–1592, 1599, 1874
- Property Registration Decree (PD 1529) — Sec. 51
- Consumer Act of the Philippines (RA 7394)
Sources rechecked as of: 7 October 2026.
This article is general legal information, not legal advice. Sales disputes turn on the exact contract terms, the documents and the facts. For advice on your situation, consult a Philippine lawyer or the Public Attorney’s Office.