Short answer. At delivery. Article 1459 requires that the thing be licit and that the vendor have a right to transfer ownership at the time it is delivered — not necessarily at the moment you sign. So a seller can validly agree to sell something he does not yet own, as long as he can transfer ownership by the time of delivery.
What the law says
The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.
Civil Code, Article 1459 — Licit Object; Right to Transfer. Read the full provision →
Ownership is tested at delivery
Article 1459 fixes the moment that matters, and it is not the signing. It provides: The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. The words at the time it is delivered are the key. A perfected contract of sale creates obligations — chiefly, for the seller to transfer ownership — but ownership itself is expected to pass on delivery. So the law measures the seller's right to convey ownership as of the delivery, allowing the parties to bind themselves first and for the seller to secure his title afterwards.
You can sell what you do not yet own
Because the test is applied at delivery, a seller may validly enter a sale of something he does not own when the contract is signed. A dealer can agree today to sell goods he will buy from his supplier tomorrow; a person can contract to sell land he expects to acquire. The sale is not void merely because, at signing, the seller lacked title. What the law requires is that, by the time he must deliver, he has the right to transfer the ownership. This is what makes ordinary commerce, and sales of future or not-yet-acquired goods, possible in the first place.
The two requirements: licit and transferable
The article actually sets two conditions. First, the thing must be licit — the object of the sale must be lawful; you cannot validly sell something outside the commerce of man or forbidden by law. Second, the vendor must have the right to transfer the ownership at delivery. Note that it says a right to transfer, which is broader than being the owner himself: an agent or someone authorised to convey another's property can satisfy it. Both conditions look to substance — that a lawful thing actually changes hands to a buyer who receives real ownership.
If the seller cannot convey ownership
If, when delivery falls due, the seller has no right to transfer ownership, he has not performed what the sale requires of him. The buyer is not made to keep something the seller could not lawfully give; the seller may answer for breach, and a buyer who is later dispossessed by the true owner has remedies against the seller. So the delivery-time rule cuts both ways: it lets a seller contract before acquiring title, but it also holds him to actually having the right to convey when the moment comes. His continuing lack of title does not excuse the promise to sell.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- The Heirs of Zenaida B. Gonzales, represented by Arnel B. Gonzales vs. Spouses Dominador, G.R. No. 206847, June 15, 2022 — read the decision on LawPhil →
- Extraordinary Development Corporation vs. Hermina F. Samson-Bico, et al, G.R. No. 191090, October 13, 2014 — read the decision on LawPhil →
- Heirs of Gregorio Lopez, represented by Rogelia Lopez, et al. vs. Development Bank of the Philippines (now substituted by Philippine Investment Two , Inc.), G.R. No. 193551, November 19, 2014 — read the decision on LawPhil →
- Strategic Alliance Development Corporation vs. Radstock Securities Limited and Philippine National Construction corporation, G.R. No. 178158 / G.R. No. 180428, December 4, 2009 — read the decision on LawPhil →