What exactly is a deed of sale? (2024)

We have all been there.We’re up and ready to buy a new (to us) secondhand vehicle. We have cash in hand, and as we go up to shake the seller’s hand, he instead turns over a piece of paper labeled a deed of saleand tells us to sign it. Most would not even think twice about signing it just so we could get the sale over and done with, because who actually enjoys the paperwork part of the car-buying experience?

Before you sign on the dotted line, though, it may do you well to understand exactly what you are signing and what that document is. In that case, you have come to the right place.

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What is a deed of sale for a motor vehicle?

A deed of sale is, in its most basic form, a contract. A contract, under Philippine law, has three elements: the consent of the contracting parties, an object certainthat is the subject matter of the contract, and the cause of the obligationthat is established. In a contract of sale, as in this case, the perfection of the contract is consummated at the moment that there is a meeting of minds upon the subject and the price. The subject in this case is the motor vehicle.

Why is this document important?

A deed of sale is evidence of the sale of the motor vehicle. While yes, you can buy a car verbally, a verbal contract for a motor vehicle would be considered unenforceable without an exchange of goods, which would ratify the sale (in this case, the motor vehicle). An unenforceable contract would mean that the courts cannot compel the parties to honor their agreement. Ratification means that the parties did an act that proved the sale and made it enforceable, in this case, the exchange of the motor vehicle can be used to prove the enforceability of the contract.

Other than this, though, the language used is not so important unless it comes to registering the sale with the Land Transportation Office (LTO).

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When is a deed of sale needed and who prepares it?

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A deed of sale would be required when you sell or purchase a motor vehicle.

While it is generally prepared by the seller, this is not a hard and fast rule. I, for example, always prepare a deed of sale just in case the person selling me the motor vehicle does not come prepared with one. The reason a seller is usually the one who prepares it isthat he/she generally has more to lose when it comes to the timely and proper execution of the deed of sale. Remember, motor vehicles are subject to the registered owner rule, which provides that in case of doubt when there is an accident, there is a presumption created that the person liable or driving the vehicle is the registered owner.

This is why it is important, as a seller, to ensure that the deed of sale is prepared properly to facilitate the transfer of ownership as well as to serve as evidence that the motor vehicle is no longer his. This being the case, there is nothing in the law or anywhere else that states that it is the seller who should prepare it, so the buyer is free to make one of his own accord.

What details are included in the deed of sale?

Deeds of sale generally require the names and identity of the parties (including their addresses), the details of the vehicle, the general details in the certificate of registration (make, series, type, year model, motor and chassis numbers, plate number, LTO file number, and certificate of registration number), the sum paid for the vehicle, and an acknowledgment (notarization).

The notarization turns the private document into a public one, which means when it comes to proving the authenticity of the document and its due execution, the mere fact of having an acknowledgment generally means it is easier to prove these in a court of law.

Finally, the deed of sale is generally accompanied by photocopies of the valid government identification cards of the parties (usually two), with specimen signatures (usually three) on the photocopy page. This is something the LTO generally looks for when transferring a motor vehicle.

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What are the consequences of not having this document?

It just would make it so that there would not be proper evidence of the sale of the motor vehicle. Does this mean the buyer does not now own the vehicle? No, there was a meeting of the minds and the sale was consummated, but what this does mean is the LTO would not let you transfer the vehicle to or from your name to the buyer. This, as we have discussed, would run you afoul of the registered owner rule.

Finally, it may be considered (as unlikely as it sounds) as an improperly registered vehicle, which is considered a traffic law violation.