Deed of Absolute Sale of a Motor Vehicle

What is a Deed of Absolute Sale of a Motor Vehicle?

A Deed of Absolute Sale of a Motor Vehicle is an agreement used for the sale of a motor vehicle and entered into between a buyer and a seller. With this document, the buyer and seller can outline the terms and conditions of the sale, including a description of the motor vehicle to be sold and the purchase price to be paid.

This document can be used to record the sale of all types of land vehicles that must be registered with the Land Transportation Office such as passenger cars, motorcycles, trucks, etc.

What are the different types of contracts for the sale of a motor vehicle?

The following are the different types of contracts for the sale of a motor vehicle:

• Deed of Absolute Sale. A Deed of Absolute Sale is entered into when the ownership is transferred to the buyer upon the notarization of the Agreement or the physical delivery of the motor vehicle to the buyer and full payment of the purchase price.
• Deed of Conditional Sale. A Deed of Conditional Sale is a contract where the buyer can use the motor vehicle even if the purchase price is not yet fully paid. Before it is fully paid, the seller retains ownership. Once the purchase price is fully paid, then the buyer will automatically own the motor vehicle sold by the seller without the need to enter into a new agreement.
• Contract to Sell. A Contract to Sell is an agreement to sell the Motor Vehicle to the buyer, usually after the payment of the full purchase price. In this case, the buyer can also use the motor vehicle while the seller retains the ownership. Once the purchase price is paid, the buyer and the seller need to subsequently execute a Deed of Absolute Sale to transfer ownership of the motor vehicle to the buyer.

Take note of other types of sale contracts:

• Deed of Sale of Real Property. This involves the sale of real property such as lands and buildings, and requires registration of the sale before the Register of Deeds where the property is located.
• Sale of Goods Agreement. This is a document that a seller and a buyer can enter when goods are being sold.

What is the most common type of Sale Contract for Motor Vehicles?

A Deed of Absolute Sale is more commonly used than a Deed of Conditional Sale or Contract to Sell. This is because most sale transactions of motor vehicles in the Philippines involve used or second-hand ones. Further, a Deed of Absolute sale is the fastest way among the three types of motor vehicle sales contract to transfer ownership to the buyer as there is no need to enter into another agreement (i.e. in the case of a Contract to Sell) or to wait for the full payment of the purchase price (i.e. in the case of a Deed of Conditional Sale).

Is it mandatory to have a Deed of Absolute Sale?

Yes, a Deed of Absolute Sale is mandatory if the buyer and the seller want to validly transfer the ownership of the motor vehicle from the seller to the buyer. This is because all transfers of ownership by sale of a motor vehicle must be registered before the Land Transportation Office, and the main requirement for this is an existing relevant sale agreement between the buyer and the seller whether deed of absolute sale, deed of conditional sale, or contract to sell.

What are the prerequisites of a Deed of Absolute Sale?

The buyer must inspect the condition of the motor vehicle to determine its working condition. The website of the Land Transportation Office should be checked to verify whether the seller is the registered owner of the motor vehicle using the details in the official receipt and the certificate of registration (OR/CR).

Who can enter into a Deed of Absolute Sale?

The buyer and the seller are the parties who should sign the Deed of Absolute Sale. Note that the seller must be the owner of the motor vehicle. If the buyer or the seller is an organization, the signatory may be the organization's representative.

The organization's representative must be equipped with a Secretary's Certificate if the buyer or the seller is a corporation, a Partners' Certificate if the buyer or the seller is a partnership, or a Special Power of Attorney if the buyer or the seller is a sole proprietorship or individual before they sign the Deed of Absolute Sale.

What has to be done once the Deed of Absolute Sale is ready?

Once the Deed of Absolute Sale is completed, at least four original copies of the same must be printed. The attachments if any should be attached to all original copies of the document (i.e. Proof of authorization, Official Receipt, and Certificate of Registration). Once the Deed of Absolute Sale has been printed and the attachments attached if any, the buyer and the seller should review and sign all original copies of the same.

The buyer and the seller should notarize the document by acknowledging the same before a notary public. Notarization is needed so that the transfer of ownership or possession to the buyer becomes publicly recorded. To notarize the document, the buyer and the seller must personally appear before a notary public to acknowledge that they have signed the document freely and voluntarily. They should also present a valid I.D. issued by an official agency bearing their photograph and signature such as a driver's license or a passport, among others.

The notary public will require one original copy of the document. Once notarized, the seller and the buyer should each keep at least one original copy of the notarized document. Then, the fourth original copy can be used to register the transfer of ownership at the Land Transportation Office.

Note that the Land Transportation Office may require other documents aside from the original Deed of Absolute Sale (official receipt, certificate of registration, and other forms to be filled out) to register the transfer of ownership or possession of a motor vehicle.

Which documents should be attached to the Deed of Absolute Sale?

The following should be attached, if applicable:

• The proof of authorization for the representatives should be attached if any:
  • A Secretary's Certificate if the buyer or the seller is a corporation.
  • A Partners' Certificate if the buyer or the seller is a partnership.
  • A Special Power of Attorney if the buyer or the seller is a sole proprietorship or individual.
• A copy of the official receipt and certificate of registration (OR/CR) of the motor vehicle issued by the Land Transportation Office.

Is it necessary to notarize a Deed of Absolute Sale for it to be valid?

Yes. A Deed of Absolute Sale, Conditional Sale, and Contract to sell a Motor Vehicle are documents that must be notarized because these are documents that must be submitted to a government agency i.e. the Land Transportation Office. Note that it is mandatory for government agencies to only accept notarized documents.

Further, notarization of the Deed of Absolute Sale converts the same from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity, meaning, the document will be presumed to be validly written and signed once it is shown to the court in case a dispute is brought before it.

Is it necessary to register the Deed of Absolute Sale?

Yes. The Deed of Absolute Sale must be registered before the Land Transportation Office for the ownership or possession of the vehicle to be transferred to the buyer.

What are the costs involved in the finalization of the Deed of Absolute Sale?

Notarization fees for a Deed of Absolute Sale are typically PHP100 to PHP500. However, some notaries public may charge based on the percentage of the purchase price, which is usually ay 1% e.g. if the purchase price is PHP 100,000.00, then the notary public may charge PHP1000.00.

Further, registration fees which may range from PHP240 to PHP12,000 should also be paid for the registration to be made before the Land Transportation Office.

What must the Deed of Absolute Sale contain?

The Deed of Absolute Sale contains the following information:

• The identity of the buyer and the seller,
• The details of the motor vehicle to be sold, and
• The payment details for the sale.

Which laws are applicable to a Deed of Absolute Sale of a Motor Vehicle?

The Civil Code of the Philippines governs sales of motor vehicles in the Philippines as well as the rules and regulations of the Land Transportation Office.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.