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This article was originally published on June 1, 2022 and has been updated to reflect recent legal developments.

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

AT A GLANCE:

Article 1466 of the Civil Code of the Philippines provides that in construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered.

Agency to sell is different from a Contract of Sale. But how do these two concepts differ?

Contract of Agency

Article 1868 of the Civil Code of the Philippines provides that in a contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. 

Contract of Sale

Article 1458 of the Civil Code of the Philippines provides that by the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.  

Contract of Agency to Sell as distinguished from a Contract of Sale

Article 1466 of the Civil Code of the Philippines provides that in construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered.

The Supreme Court, in Ker & Co., Ltd., v. Jose B. Lingad, G.R. No. L-20871, April 30, 1971, laid down the distinction between the two contracts.The transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent’s commission upon sales made. 

This distinction becomes particularly significant in transactions involving real property. In Yoshizaki v. Joy Training Center of Aurora, Inc. G.R. No. 174978, July 31, 2013, the Supreme Court ruled that as a general rule, a contract of agency may be oral. However, it must be written when the law requires a specific form. Specifically, Article 1874 of the Civil Code provides that the contract of agency must be written for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the Civil Code, states that special powers of attorney are necessary to convey real rights over immovable properties. The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act.

Related Articles:

• Can a Contract to Sell be considered as a Conditional Contract of Sale?
• The Supreme Court decides: The distinction between a contract of sale and contract to sell is well-established in the decisions of the Court.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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