What Is a Contract to Sell?
A Contract to Sell is an agreement by which the seller (vendor) commits to transfer ownership of a property to the buyer (vendee) only after the buyer has paid the purchase price in full. Full payment operates as a positive suspensive condition: until it happens, no sale and no transfer of ownership takes place. It is the instrument used for installment and financed purchases of real estate, while the actual transfer of title is carried out later through a separate Deed of Absolute Sale once the price is fully settled.
Contract to Sell vs. Deed of Absolute Sale
This is the distinction that trips up the most buyers and sellers. The two documents look similar but produce very different legal effects:
- When ownership transfers — In a Deed of Absolute Sale, ownership passes immediately on execution and delivery. In a Contract to Sell, ownership is reserved by the seller and passes only upon full payment.
- Nature of the conveyance — The Deed of Absolute Sale is an absolute, unconditional conveyance. The Contract to Sell is a conditional promise to convey in the future.
- Effect of the buyer's default — If a Contract to Sell buyer fails to pay in full, the obligation to convey simply never arises; the seller generally need not sue to rescind. If a Deed of Absolute Sale buyer defaults after ownership has already passed, the seller must usually pursue rescission or collection in court.
- Taxes on signing — A Deed of Absolute Sale triggers capital gains tax and documentary stamp tax at execution. A Contract to Sell does not transfer title at signing, so capital gains tax is generally not yet due; those taxes attach when the Deed of Absolute Sale is later executed.
- Registration — A Deed of Absolute Sale is registered to issue a new title in the buyer's name. A Contract to Sell is typically not registered for transfer; instead the buyer may protect their interest by annotating an adverse claim or notice on the title.
Reservation of Title and Default
The defining clause of a Contract to Sell is the reservation of title: ownership remains with the vendor until the last peso is paid. Even if the buyer is allowed to take possession early, that possession does not transfer ownership — the buyer holds the property subject to the seller's reserved title. The contract should make this explicit and restrict the buyer from selling, mortgaging, or materially altering the property while payments are ongoing.
On default, the contract usually provides for cancellation and a forfeiture of part of the payments as liquidated damages. That forfeiture is enforceable only insofar as it does not fall below the floor set by law for installment buyers of real estate.
The Maceda Law (RA 6552)
Republic Act No. 6552, the Realty Installment Buyer Protection Act (commonly called the Maceda Law), gives the buyer of residential real estate on installments mandatory rights that cannot be waived by contract:
- Two or more years of installments paid — the buyer is entitled to a grace period of one month for every year of paid installments, and on cancellation to a cash surrender value of the payments made (50% of total payments, rising up to 90% for buyers who have paid for more than five years).
- Less than two years paid — the buyer is entitled to a grace period of at least 60 days from the date the installment became due to cure the default.
- Cancellation formalities — the seller may cancel only after serving a notarized notice of cancellation and the lapse of 30 days from the buyer's receipt of that notice, with payment of any cash surrender value due.
Any clause in the contract that is less favorable to the buyer than RA 6552 is void to that extent. A well-drafted Contract to Sell expressly states that the parties' rights on default, grace period, refund, and forfeiture are subject to the mandatory provisions of the Maceda Law.
Free Contract to Sell Template
This Contract to Sell is made and executed at Quezon City, Philippines, on this January 15, 2026, by and between:
Juan Dela Cruz, of legal age, Filipino, single, and a resident of 123 Mabuhay Street, Barangay San Antonio, Quezon City, hereinafter referred to as the "VENDOR";
-and-
Maria Santos, of legal age, Filipino, single, and a resident of 456 Mabini Street, Barangay Poblacion, Makati City, hereinafter referred to as the "VENDEE";
WITNESSETH: That —
WHEREAS, the VENDOR is the true, lawful, and registered owner of a parcel of land located at 789 Bonifacio Avenue, Barangay Kapitolyo, Pasig City, covered by Transfer Certificate of Title No. T-123456 issued by the Registry of Deeds of Quezon City, which parcel of land is more particularly described as follows:
a parcel of residential land with an area of 200 square meters, more or less, together with the improvements thereon
WHEREAS, the VENDEE has offered to buy and the VENDOR has agreed to sell the above-described property (the "PROPERTY") subject to the terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the foregoing premises and the payment of the agreed purchase price in the manner herein stipulated, the VENDOR hereby agrees to SELL, TRANSFER, and CONVEY unto the VENDEE, and the VENDEE hereby agrees to BUY, the PROPERTY subject to the following terms and conditions:
1. PURCHASE PRICE. The total purchase price of the PROPERTY shall be Three Million Pesos (3,000,000.00), Philippine currency, which the VENDEE agrees to pay to the VENDOR in the manner hereinafter set forth.
2. DOWN PAYMENT. Upon the execution of this Contract to Sell, the VENDEE shall pay to the VENDOR the sum of Six Hundred Thousand Pesos (600,000.00), Philippine currency, as and by way of down payment.
3. BALANCE OF THE PURCHASE PRICE. The balance of the purchase price shall be paid by the VENDEE to the VENDOR as follows: the balance of ₱2,400,000.00 payable in sixty (60) equal monthly installments
4. PREPAYMENT. The VENDEE may prepay the whole or any portion of the outstanding balance at any time without penalty, unless otherwise agreed by the parties in writing.
5. TAXES AND FEES. The capital gains tax and the broker's professional fee, if any, shall be for the account of the VENDOR. The documentary stamp tax, transfer tax, registration fees, and all other expenses necessary for the transfer of title to the PROPERTY shall be for the account of the VENDEE.
6. POSSESSION. Possession of the PROPERTY shall be delivered by the VENDOR to the VENDEE upon full payment of the down payment, or as the parties may otherwise agree in writing.
7. RESTRICTIONS PENDING FULL PAYMENT. Until full payment of the purchase price and the execution of the Deed of Absolute Sale, the VENDEE shall not sell, assign, transfer, lease, mortgage, encumber, or introduce any material alteration to the PROPERTY without the prior written consent of the VENDOR. Should possession of the PROPERTY be delivered to the VENDEE prior to full payment, such delivery shall not be construed as a transfer of ownership, and the VENDEE shall keep the PROPERTY in good condition and pay all utilities, association dues, and other charges accruing during the period of such possession.
8. TRANSFER OF OWNERSHIP. Title to and ownership of the PROPERTY shall remain with the VENDOR and shall not pass to the VENDEE until full payment of the purchase price. Upon full payment of the purchase price, the VENDOR shall execute and deliver to the VENDEE a DEED OF ABSOLUTE SALE over the PROPERTY, together with the owner's duplicate copy of the Transfer Certificate of Title, the latest tax declaration, the real property tax clearance, and all other documents necessary for the transfer of title to the name of the VENDEE.
9. WARRANTIES OF THE VENDOR. The VENDOR warrants that the VENDOR is the true and lawful owner of the PROPERTY, with full right and authority to sell and convey the same, and that the PROPERTY is free from all liens, encumbrances, adverse claims, tenants or occupants, unpaid real property taxes, and pending litigation, except as may appear on the title.
10. TIME IS OF THE ESSENCE. Time is of the essence with respect to the payment of the purchase price and the performance of the obligations of the parties under this Contract, subject to any grace period, notice requirement, or other protection granted by applicable law.
11. DEFAULT. In case of default by the VENDEE in the payment of any installment or other amount due under this Contract, the VENDOR may avail of the remedies available under this Contract and applicable law, including cancellation or rescission, subject to prior written notice to the VENDEE and to any mandatory grace period, refund right, or other protection granted by law. The remedies of the VENDOR are cumulative and without prejudice to any other right available at law or in equity.
12. FORFEITURE. In the event of cancellation or rescission as provided above, the VENDOR shall refund to the VENDEE the amounts paid, less 20% thereof as liquidated damages and reasonable compensation for the use of the PROPERTY; provided that, where this Contract is covered by Republic Act No. 6552, the refund and forfeiture shall in no case be less favorable to the VENDEE than what is mandated by said law.
13. STATUTORY BUYER PROTECTION. If this Contract is covered by Republic Act No. 6552 (the Realty Installment Buyer Protection Act, or "Maceda Law"), the rights and remedies of the parties in case of default, cancellation, forfeiture, refund, or grace period shall be subject to the mandatory provisions of said law, and nothing in this Contract shall be construed as a waiver of any right granted by law to the VENDEE.
14. MISCELLANEOUS. This Contract to Sell shall be binding upon the parties, their respective heirs, executors, administrators, successors, and assigns. Should any provision hereof be declared invalid or unenforceable, the remaining provisions shall continue in full force and effect. This Contract constitutes the entire agreement between the parties and supersedes all prior negotiations, representations, and agreements on the subject matter.
IN WITNESS WHEREOF, the parties have hereunto set their hands this January 15, 2026 at Quezon City, Philippines.
BEFORE ME, a Notary Public for and in the above jurisdiction, personally appeared:
| Name | Competent Evidence of Identity |
|---|---|
| JUAN DELA CRUZ | Philippine Passport No. P1234567A |
| MARIA SANTOS | Philippine Passport No. P7654321B |
who are known to me and to me known to be the same persons who executed the foregoing CONTRACT TO SELL, and who acknowledged to me that the same is their free and voluntary act and deed.
WITNESS MY HAND AND SEAL on the date and at the place first above written.
Generate Your Contract to Sell with a Pro Plan
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Subscribe to Pro — Generate NowHow to Generate a Contract to Sell — Step by Step
- Identify the parties — enter the vendor and vendee full names, civil status, and addresses. Choose single, spouses, or married-with-consent so the marital consent clause is handled correctly.
- Describe the property — supply the TCT number, the Registry of Deeds that issued it, the location, and the technical description. Disclose any liens or encumbrances; leave the field blank for a clean title.
- Set the payment terms — enter the total purchase price, the down payment, and exactly how the balance is paid (for example, the number and amount of monthly installments). The amounts are automatically spelled out in words.
- Set the default terms — choose the forfeiture percentage applied on cancellation. The contract automatically caps this against the Maceda Law floor for installment buyers.
- Add execution details — the date and place of signing, and optional instrumental witnesses.
- Review and export — preview the live draft, optionally polish it with AI, then download as Word or print for signing and notarization.
Common Mistakes to Avoid
- Using a Deed of Absolute Sale for an installment purchase. If payment is staggered, an absolute deed transfers ownership before the seller is fully paid — exactly the risk a Contract to Sell is meant to avoid.
- Forgetting the reservation-of-title clause. Without an explicit statement that ownership stays with the vendor until full payment, the document can be misread as a present sale.
- Drafting forfeiture terms that ignore the Maceda Law. A blanket "all payments are forfeited" clause is unenforceable for installment buyers of residential real estate; RA 6552 sets a mandatory floor.
- Skipping the notarized notice on cancellation. Sellers often cancel verbally or by ordinary letter; the law requires a notarized notice and a 30-day waiting period.
- Not protecting the buyer's interest on the title. Because a Contract to Sell is usually not registered for transfer, the buyer should consider annotating an adverse claim or notice at the Register of Deeds.
- Leaving the balance terms vague. "Payable in installments" without a schedule invites disputes — state the number, amount, and due dates clearly.