sales -marianne consolidated notes (chapters 1-3)

8/13/2019 SALES -Marianne Consolidated Notes (Chapters 1-3)

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consolidated notes on

SALES M.Cabacungan EH-406AY 2013-2014

RA 386

TITLE VI - SALES

CHAPTER 1

NATURE AND FORM OF THE CONTRACT

Art. 1458. By the contract of sale one of the contracting partiesobligates himself to transfer the ownership and to deliver adeterminate thing, and the other to pay therefor a price certain inmoney or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

I. Nature and Characteristics

A. Definition

1. Sale is a contract where one party (se ller or vendor) obligates himselfto transfer the ownership of and to deliver a determinate thing , whilethe other party (buyer or vendee) obligates himself to pay for saidthing a price certain in money or i ts equivalent .

2. CONTRACT OF SALE an agreement whereby a party called theSELLER of VENDOR obligates himself to deliver and transfer theownership of a determinate thing to another party called the BUYEROR VENDEER who in turn obligates himself to pay therefore, a pricecertain in money or its equivalent to the former.

A contract of sale is, under Article 1475 of the Civil Code,"perfected at the moment there is a meeting of mindsupon the thing which is the object of the contract andupon the price. From that moment, the parties mayreciprocally demand performance of contracts." Sincethere was, between the parties, a meeting of minds uponthe object and the price, there was already a perfectedcontract of sale. What was, however, left to be done wasfor either party to demand from the other their respectiveundertakings under the contract. It may be demanded atany time either by the private respondents, who maycompel the petitioners to pay for the property or thepetitioners, who may compel the private respondents todeliver the property. (Villamor Case)

B. Elements (COC)

a. Essential Elements

(without which there can be no valid of sale)

(1) CONSENT The vendor obligates himself to transfer the ownership of and todeliver a determinate thing, and the vendee obligates himself to pay therefore aprice certain in money or its equivalent.

(2) OBJECT CERTAIN which is the subject matter of the contract. The objectmust be licit and at the same time determinate or, at least, capable of beingmade determinate without the necessity of a new or further agreement betweenthe parties. *segregated/separated of the same class

(3) CAUSE OF THE OBLIGATION which is established. The cause as far as thevendor is concerned is the acquisition of the price certain in money or its

equivalent, while the cause as far as the vendee is concerned is the acquisitionof the thing which is the object of the contract.

b. Natural Elements

(those which are inherent in the contract, and which in the absence of anycontrary provision, are deemed to exist in the contract)

1. warranty against eviction (deprivation of the property bought)

2. warranty against hidden defects

c. Accidental Elements(those which may be present or absent in the stipulation, such as the place or

time of payment, or the presence of conditions)Effects of Presence, absence, incomplete elements-when all 3 elements are present - Perfected Contract-if not present, there is no perfected contract-if all the elements are present but there is a defect/illegal, the contract isvoidable/void

Cases:

Effect of offer and counter-offer

Manila Metal Container Corporation v. PNB, GR No. 166862, Dec. 20,2006

Facts : To secure a loan it had obtained from PNB, petitioner executed a real estate mortgageover the lot. Petitioner executed an Amendment of Real Estate Mortgage over its property.Petitioner secured another loan from PNB, payable in quarterly installments of P32,650.00,plus interests and other charges.

PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought tohave the property sold at public auction and was declared the winning. The Certificate of Saleissued in its favor was registered and was annotated at the dorsal portion of the title on

February 17, 1983. Thus, the period to redeem the property was to expire on February 17,1984. Petitioner reiterated its request for a one year extension from February 17, 1984 withinwhich to redeem/repurchase the property on installment basis. It reiterated its request torepurchase the property on installment. Meanwhile, some PNB personnel informed petitionerthat as a matter of policy, the bank does not accept "partial redemption." Since petitionerfailed to redeem the property, the Register of Deeds issued a new title in favor of respondentPNB. Petitioner's offers had not yet been acted upon by respondent PNB. SAMD recommendedto the management of respondent PNB that petitioner be allowed to repurchase the propertyfor P1,574,560.00. PNB management informed petitioner that it was rejecting the offer andthe recommendation of the SAMD. (Gracies Note: In a nutshell, there was a series of offersand counter-offers.)

Petitioner filed a complaint against PNB for "Annulment of Mortgage and MortgageForeclosure, Delivery of Title, or Specific Performance with Damages." PNB averred that it hadacquired ownership over the property after the period to redeem had elapsed. It claimed thatno contract of sale was perfected between it and petitioner after the period to redeem theproperty had expired.

Issue : whether or not the offer and counter-offer resulted to a perfected contract of sale

Ruling : There was NO perfected contract of sale between the parties.

A contract is a meeting of minds between two persons whereby one binds himself, withrespect to the other, to give something or to render some service.41 Under Article 1318of the New Civil Code, there is no contract unless the following requisites concur: (1)Consent of the contracting parties; (2) Object certain which is the subject matter of thecontract; (3) Cause of the obligation which is established.

Contracts are perfected by mere consent. Once perfected, they bind other contractingparties and the obligations arising have the form of law between the parties and shouldbe complied with in good faith. The parties are bound not only to the fulfillment of whathas been expressly stipulated but also to the consequences which, according to theirnature, may be in keeping with good faith, usage and law. By the contract of sale, oneof the contracting parties obligates himself to transfer the ownership of and deliver adeterminate thing, and the other to pay a price certain in money or its equivalent. Theabsence of any of the essential elements will negate the existence of a perfectedcontract of sale. In Boston Bank of the Phils. v. Manalo : A definite agreement as to theprice is an essential element of a binding agreement to sell personal or real propertybecause it seriously affects the rights and obligations of the parties. Price is an essentialelement in the formation of a binding and enforceable contract of sale. The fixing of theprice can never be left to the decision of one of the contracting parties. But a price fixedby one of the contracting parties, if accepted by the other, gives rise to a perfectedsale.

A contract of sale is consensual in nature and is perfected upon mere meeting of theminds. When there is merely an offer by one party without acceptance of the other,there is no contract. When the contract of sale is not perfected, it cannot serve as abinding juridical relation between the parties. The stages of a contract of sale are asfollows: (1) negotiation; (2) perfection; and (3) consummation.

Stages of a contract of sale:(1) negotiation , covering the period from the time the prospective contractingparties indicate interest in the contract to the time the contract is perfected;(2) perfection , which takes place upon the concurrence of the essential elementsof the sale which are the meeting of the minds of the parties as to the object ofthe contract and upon the price; and(3) consummation , which begins when the parties perform their respectiveundertakings under the contract of sale, culminating in the extinguishmentthereof.

A negotiation is formally initiated by an offer, which, however, must be certain. At anytime prior to the perfection of the contract, either negotiating party may stop thenegotiation. At this stage, the offer may be withdrawn; the withdrawal is effectiveimmediately after its manifestation. To convert the offer into a contract, the acceptancemust be absolute and must not qualify the terms of the offer; it must be plain,unequivocal, unconditional and without variance of any sort from the proposal.

A qualified acceptance or one that involves a new proposal constitutes a counter-offerand a rejection of the original offer. A counter-offer is considered in law, a rejection ofthe original offer and an attempt to end the negotiation between the parties on adifferent basis. Consequently, when something is desired which is not exactly what isproposed in the offer, such acceptance is not sufficient to guarantee consent becauseany modification or variation from the terms of the offer annuls the offer. Theacceptance must be identical in all respects with that of the offer so as to produceconsent or meeting of the minds.

Toyota Shaw, Inc. v. CA, L-116650, May 23, 1995

Facts : Sosa wanted to purchase a Toyota Lite Ace. Upon contacting Toyota Shaw, Inc., hewas told that there was an available unit. There they met Popong Bernardo, a salesrepresentative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989.Bernardo assured Sosa that a unit would be ready for pick up. Bernardo then signed the"Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreedupon by the parties that the balance of the purchase price would be paid by credit financingthrough B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents ofToyota and B.A. Finance pertaining to the application for financing. Sosa and Gilbert went toToyota to deliver the downpayment of P100,000.00, but Bernardo told them that the car couldnot be delivered.

Toyota contends that the Lite Ace was not delivered to Sosa because of the disapproval byB.A. Finance of the credit financing application of Sosa. It further alleged that a particular unithad already been reserved and earmarked for Sosa but could not be released due to theuncertainty of payment of the balance of the purchase price. Toyota then gave Sosa theoption to purchase the unit by paying the full purchase price in cash but Sosa refused.


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After it became clear that the L ite Ace would not be delivered to him, Sosa asked that hisdownpayment be refunded. Toyota did so on the very same day by issuing a Far East Bankcheck for the full amount of P100,000.00, the receipt of which was shown by a check voucherof Toyota, which Sosa signed with the reservation, "without prejudice to our future claims fordamages."

Issue : whether or not there was a perfected contract of sale

Rule : There is NO perfected contract of sale .

. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosaand no correlative obligation on the part of the latter to pay therefore a price certainappears therein.

This Court had already ruled that a definite agreement on the manner ofpayment of the price is an essential element in the formation of a binding and enforceablecontract of sale. This is so because the agreement as to the manner of payment goes intothe price such that a disagreement on the manner of payment is tantamount to a failure toagree on the price. Definiteness as to the price is an essential element of a bindingagreement to sell personal property.

C. Characteristics

a. Consensual perfected by mere consent.

b. Bilateral (reciprocal) both parties are bound by obligations dependent uponeach other. The power to rescind is implied, neither party incurs delay if theparty does not comply, from the moment one of the parties fulfills his obligation,the default by the other begins w/out need o f prior demand.

c. Onerous valuable consideration must be given in order to acquire rights.

d. Nominate the Code refers to it by special designation or name, that is, thecontract of sale.

e. Principal for the contract of sale to validly exist, there is no necessity for it todepend upon the existence of another contract.

f. Commutative the values exchanged are almost equivalent to each other(general rule). By way of exception, some contracts of sale are aleatory, that is,one receives may in time be greater or smaller that what he has given, i.e. saleof genuine sweepstakes ticket.

g. Delivery transfers ownership ownership does not pass until delivery.

D. To differentiate sale from (Agency to Sell, Piece of Work, Barter)

Sale vs. Agency to sell (1466)

Art. 1466. In construing a contract containing provisions characteristicof both the contract of sale and of the contract of agency to sell, theessential clauses of the whole instrument shall be considered.

Art. 1467. A contract for the delivery at a certain price of an articlewhich the vendor in the ordinary course of his business manufacturesor procures for the general market, whether the same is on hand at thetime or not, is a contract of sale, but if the goods are to bemanufactured specially for the customer and upon his special order,and not for the general market, it is a contract for a piece of work. (n)

a.

Sale vs. Agency to SellThis is tested by the criterion that if such transfer puts thetransferee in the attitude or position of an owner and makeshim liable to the transferor as a debtor for the agreed price,and not merely as an agent who must account for the proceedsof a resale, the transaction is that of a sale. But if the deliveryis to another, not as his property, but as the property of theprincipal, who remains the owner and has the right to controlsales, fix the price, and terms, demand and receive theproceeds less the agent's commission upon sales made, thetransaction is that of an agency to sell. Since the companyretained ownership of the goods, even as it deliveredpossession unto the dealer for resale to customers, the priceand terms of which were subject to the company's control, therelationship between the company and the dealer is one ofagency. (Commissioner of Internatl Revenue v. Engineering)

1. Effect of agreement for exclusivesale of beds where the other party isentitled to commission, amongothers

Quiroga v. Parsons Hardware Co.

Facts: A contract was executed between Quiroga and J. Parsons for the exclusive right to sellQuiroga beds in the Visayan Islands. Quiroga, says that Parsons caused a breach in thecontract on through: to sell the beds at invoice price or lower; to have an establishment in

Iloilo; pay the advertisement expenses; and to order the beds by the dozen. SC holds thatsince it was a contract of purchase and sale, and thus J. Parsons is not held liable for thebreach of the contract.

For the classification of contracts, due regard must be paid to their essentialclauses. In the contract in the instant case, what was essential, constituting itscause and subject matter, was that the plaintiff was to furnish the defendantwith the beds which the latter might order, at the stipulated price, and that thedefendant was to pay this price in the manner agreed upon. These are preciselythe essential features of a contract of purchase and sale. There was theobligation on the part of the plaintiff to supply the beds, and, on that of thedefendant, to pay their price. These features exclude the legal conception of anagency or older to sell whereby the mandatary or agent receives the thing to sellit, and does not pay its price, but delivers to the principal the price he obtainsfrom the sale of the thing to a third person, and if he does not succeed in selling

it, he returns it, Held: That this contract is one of purchase and sale, and not ofcommercial agency.

The agreements contained in the contract constitute, according to law,covenants of purchase and sale, and not of commercial agency. It must beunderstood that a contract is what the law defines it to be, and not what it iscalled by the contracting parties.

Only the acts of the contracting parties, subsequent to and in connection with,the performance of the contract must be considered in the interpretation of thecontract when such interpretation is necessary, but not when, as in the instantcase its essential agreements are clearly set forth and plainly show that thecontract belongs to a certain kind and not to another.

In fact, not a single one of the clauses in the contact necessarily conveys theidea of an agency. The words commission on sales used mean nothing else thana mere discount on the invoice price. The word agency, also used, onlyexpresses that the defendant was the only one that could sell the plaintiff's bedsin the Visayan Islands.

Adviento: If it were a contract of agency, then Parsons would be liable.

b. Sale vs. Lease of service or piece of work (1467)

Contract of Sale v. Contract of Services; Test. The distinction betweena contract of sale and one for work, labor and materials is tested by theinquiry whether the thing transferred is one not in existence and whichnever would have existed but for the order of the party desiring to acquireit, or a thing which would have existed but has been the subject of sale tosome other persons even if the order had not been given. If the articleordered by the purchaser is exactly such as the seller makes and keeps onhand for sale to anyone, and no change or modification of it is made atpurchaser's request, it is a contract of sale even though it may be entirelymade after, and in consequence of the purchaser's order for it.(Commissioner of Internal Revenue v. Engineering)

1. Nature of transactions ofcompany engaged in thedesign, supply, and installation

of certain type of airconditioning system

Commissioner of Internal Revenue v. Engineering Equipment andSupply Co.

Facts: Engineering Equipment and Supply Co., a domestic corporation, is engaged in thedesign and installation of central type air conditioning system, pumping plants and steelfabrications. CIR now denounced Engineering for tax evasion by misdeclaring its imports andfailing to pay the correct percentage taxes due thereon in connivance with its foreignsuppliers. The Commissioner contends that Engineering is a manufacturer and seller of airconditioning units and parts or accessories thereof and, therefore, it is subject to the 30%advance sales tax. Engineering is a contractor this subject only to the 3% tax imposed oncontractors.

Contract of Sale v. Contract of Services; Test. The distinction between acontract of sale and one for work, labor and materials is tested by the inquirywhether the thing transferred is one not in existence and which never wouldhave existed but for the order of the party desiring to acquire it, or a thing which

would have existed but has been the subject of sale to some other persons evenif the order had not been given. If the article ordered by the purchaser is exactlysuch as the seller makes and keeps on hand for sale to anyone, and no changeor modification of it is made at purchaser's request, it is a contract of sale eventhough it may be entirely made after, and in consequence of the purchaser'sorder for it.

Engineering is a contractor rather than a manufacturer. Supply of air conditioningunits to Engineer's various customers, whether the said machineries were inhand or not, was especially made for each customer and installed in his buildingupon his special order. The air conditioning units installed in a central type of airconditioning system would not have existed but for the order of the partydesiring to acquire it and if it existed without the special order of Engineering'scustomer, the said air conditioning units were not intended for sale to thegeneral public. Moreover, it advertises itself as a contractor and pays thecontractor's tax for design and construction of central type air conditioningsystems, and does not have ready-made air-conditioning units for sale, but mustdesign and construct each unit to meet the particular requirements of itscustomers , said taxpayer is considered a contractor rather than a manufacturerfor purposes of the Tax Code. Thus, such taxpayer is not a manufacturer subjectto the 30% advance sales tax prescribed in Section 185 (m) in relation to Section194 of the Tax Code, but is a contractor subject to the 3% tax imposed bySection 191 of the same Code.

A taxpayer is required by law to truly declare his importation in the importentries and internal revenue declarations before it is released. Thus, by requiringits foreign supplier to change the nomenclature of air conditioning parts andaccessories, and misdeclaring its importation so as to make them subject to thelower rate of 7% percentage tax under Section 186 of the Tax Code, therebyevading the payment of the 30% tax under Section 185(m) thereof, saidtaxpayer is subject to the payment of the 50% fraud surcharge prescribed bySection 183(a).


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c. Sale vs Barter (1468)

Art. 1468. If the consideration of the contract consis ts partly in money,and partly in another thing, the transaction shall be characterized bythe manifest intention of the parties. If such intention does not clearlyappear, it shall be considered a barter if the value of the thing given asa part of the consideration exceeds the amount of the money or itsequivalent; otherwise, it is a sale. (1446a)

-if the value of the thing is more than the value of the money or itsequivalent, the contract is a barter . - If the value of the thing is lessthan the value of the money, then the contract is a sale .

d. Sale vs. dation in payment - dation in payment implies thatthere is an existing obligation whereas contract of sale, there isno prior obligation. There is a pre-existing obligation to pay asum of money which is thereby extinguished (look at pg. 9 ofparas)

e. Sale vs. lease of things - in that delivery in this lattercontract does not involve a transfer of ownership

f. Sale vs. donation- in that this latter contract is gratuitousand requires special formalities

E. . PROMISE TO SELL: WHEN BINDING (Art. 1479)

Art. 1479: A promise to buy and sell a determinate thing for a pricecertain is reciprocally demandable.

An accepted unilateral promise to buy or to sell adeterminate ting for a price certain is binding upon thepromissory if the promise is supported by a considerationdistinct from the price.

a. Bilateral The first paragraph refers to a bilateral reciprocal contract therebeing a promise to buy on the part of the buyer, and a promise to sell on thepart of the seller. This juridical relationship is reciprocally demandable. Theobject is a determinate thing and the price is certain. There is no need for acondition for this bilateral promise to buy and sell.

The bilateral promise gives to the contracting parties personal rightsto demand fulfillment of the obligation from each other. (Borromeo v. Franco, 5

Phil 49)

Hence: If bilateral --a bilateral promise to buy or to sella certain thing for a price certain gives to the contractingparties personal rights in that each has the right todemand from the other the fulfillment of the obligation

--a bilateral promise to buy and sell requires NOCONSIDERATION distinct from the selling price

--only the accepted unilateral promise to buy or sell thatneeds consideration distinct from the selling price

b. Unilateral The second paragraph refers to an accepted unilateral promise ofthe

(1) Buyer to buy a determinate property for a price certain; or

(2) Seller to sell a determinate property for a price certain.

Hence: If unilateral --the acceptance of a unilateralpromise to sell must be plain, clear and unconditional.Therefore, if there is qualified acceptance with termsdifferent from the offer there is no acceptance, that thereis no promise to buy and there is no perfected sale.

Option Contract An optional contract is a privilege existing in oneperson, for which he had paid a consideration, which gives him the right tobuy, for example, certain merchandise or certain specified property fromanother person at any time within the agreed period at a fixed price. Thecontract of option is a separate and distinct contract from the contractwhere the parties may enter into upon the consummation of the option. Aconsideration for an optional contract is just as important as theconsideration for any other kind of contract.

An option is a contract by which the owner of the propertyagrees with another person that the latter shall have the right tobuy the formers property at a fixed price within a certain time.It is a condition offered or contract by which the ownerstipulates with another that the latter shall have the right to buythe property at a fixed price within a certain time, or under, or incompliance with certain terms and conditions; or which gives to

the owner of the property the right to sell or demand a sale. Anoption is not of itself a purchase, but merely secures theprivilege to buy. It is not a sale of property but a sale of theright to purchase. (Eulogio v. Apeles)

Test to Determine Whether a Contract is a Contract of Sale or anOption Whether or not the agreement could be specifically enforced.

Effect of Breach of Promise to Buy or Sell The injured party can only seekdamages. The obligation arising from the option contract are not obligations togive but to do.

Acceptance of an Offer The acceptance of the offer must be unqualified and

absolute in order to be binding.Policitacion a unilateral promise to buy or sell which is not accepted by theother party. It produces no legal effect. It is a mere offer, and has not beenconverted into any contract.

1) OPTION defined

i. Case

Eulogio v. Apeles, GR No. 167884, Jan. 20, 2009

Facts: Spouses Apeles leased the subject property to Arturo Eulogio, Enricos father. Upon Arturos death, his son Enrico succeeded as lessor of the subject property. Enrico used thesubject property as his residence and place of business. Spouses Apeles and Enrico allegedlyentered into a Contract of Lease with Option to Purchase involving the subject property. Thecontract purportedly afforded Enrico, before the expiration of the three-year lease period, the

option to purchase the subject property. Before the expiration of the contract, Enrico exercisedhis option to purchase the subject property by communicating verbally and in writing to Luzhis willingness to pay the agreed purchase price, but the spouses Apeles supposedly ignoredEnricos manifestation .

In a letter to Enrico, the spouses Apeles demanded that he pay his rental and that he vacatesthe subject property since it would be needed by the spouses Apeles themselves. Withoutheeding the demand of the spouses Apeles, Enrico instituted a Complaint for SpecificPerformance with Damages against the spouses.

Issue: whether or not there was a perfected option contract.

Rule: The provision on the option to purchase in the Contract is unenforceable.

It is a contract by which the owner of the property agrees with another person that heshall have the right to buy his property at a fixed price within a certain time. He doesnot sell his land; he does not then agree to sell it; but he does sell something, i.e., theright or privilege to buy at the election or option of the other party. Its distinguishingcharacteristic is that it imposes no binding obligation on the person holding the option,aside from the consideration for the offer.

It is also sometimes called an "unaccepted offer." The second paragraph of Article 1479provides for the definition and consequent rights and obligations under an optioncontract. For an option contract to be valid and enforceable against the promissor,there must be a separate and distinct consideration that supports it. In the landmarkcase of Southwestern Sugar and Molasses Company v. Atlantic Gulf and Pacific Co.,declared that for an option contract to bind the promissor, it must be supported byconsideration. "An accepted unilateral promise" can only have a binding effect ifsupported by a consideration, which means that the option can still be withdrawn, evenif accepted, if the same is not supported by any consideration. Without considerationthat is separate and distinct from the purchase price, an option contract cannot beenforced; that holds true even if the unilateral promise is already accepted by theoptionee.

The consideration is "the why of the contracts, the essential reason which moves thecontracting parties to enter into the contract." To support an option contract, thereneed not be monetary. Actual cash need not be exchanged for the option. However, bythe very nature of an option contract, as defined in Article 1479, the same is anonerous contract for which the consideration must be something of value, although itskind may vary.

In Contract of Lease with Option to Purchase, there was no direct evidence to prove theexistence of consideration for the option contract. The only consideration agreed uponby the parties in the said Contract is the supposed purchase price for the subjectproperty in the amount not exceeding P1.5 Million, which could not be deemed to bethe same consideration for the option contract since the law and jurisprudence explicitlydictate that for the option contract to be valid, it must be supported by a considerationseparate and distinct from the price.

There no consideration was given by Enrico to the Spouses for the option contract. Theabsence of monetary or any material consideration keeps this Court from enforcing therights of the parties under said option contract.

ii) Remedy of Optionee for breach-Specific performance

2) Right of First Refusal

Right on the part of the owner that if he decides to sellthe property in the future, he would first negotiate its saleto the one he promised.

Ang Yu Asuncion vs. CA

Facts: On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ann Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and JoseTan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging,among others, that plaintiffs are tenants or lessees of residential and commercial spacesowned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that theyhave occupied said spaces since 1935 and have been religiously paying the rental andcomplying with all the conditions of the lease contract; that on several occasions before


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October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises andare giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjiengoffered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffsthereafter asked the defendants to put their offer in writing to which request defendantsacceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 askingthat they specify the terms and conditions of the offer to sell; that when plaintiffs did notreceive any reply, they sent another letter dated January 28, 1987 with the same request; thatsince defendants failed to specify the terms and conditions of the offer to sell and because ofinformation received that defendants were about to sell the property, plaintiffs were compelledto file the complaint to compel defendants to sell the property to them.

"After the issues were joined, defendants filed a motion for summary judgment which wasgranted by the lower court. The trial court found that defendants' offer to sell was neveraccepted by the plaintiffs for the reason that the parties did not agree upon the terms andconditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, thelower court ruled that should the defendants subsequently offer their property for sale at aprice of P11-million or below, plaintiffs will have the right of first refusal.

Issue: Whether or not there is perfected contract of sale

Held: In the law on sales, the so-called "right of first refusal" is an innovative juridical relation.Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 ofthe Civil Code. Neither can the right of first refusal, understood in its normal concept, per sebebrought within the purview of an option under the second paragraph of Article 1479,aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or anoffer would require, among other things, 10 a clear certainty on both the object and the causeor consideration of the envisioned contract. In a right of first refusal, while the object might bemade determinate, the exercise of the right, however, would be dependent not only on thegrantor's eventual intention to enter into a binding juridical relation with another but also onterms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can atbest be so described as merely belonging to a class of preparatory juridical relations governednot by contracts (since the essential elements to establish the vinculum juris would still beindefinite and inconclusive) but by, among other laws of general application, the pertinentscattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment,like here, its breach cannot justify correspondingly an issuance of a writ of execution under a

judgment that merely recognizes its existence, nor would it sanction an action for specificperformance without thereby negating the indispensable element of consensuality in theperfection of contracts. 11 It is not to say, however, that the right of first refusal would beinconsequential for, such as already intimated above, an unjustified disregard thereof, given,for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant arecovery for damages.

Note: right of first refusal cannot be deemed a perfected sale because it merely pertains to aspecific property w/out containing an agreement as to the price.

F. The Contract of Sale may be-

a. Absolute; or

Ramos v. Heruela. GR. No. 145330, Oct. 14, 2005

Absolute

a. ownership is transferred to the buyer upon deliveryregardless of when payment of price is made (note: it isnot payment of the price that transfers ownership, it isthe delivery of the thing which may be real orconstructive)

b. there is no stipulation in the contract that title to theproperty remains with the seller until full payment of thepurchase price

c. there is no stipulation giving the vendor the right tocancel unilaterally the contract the moment the vendeefails to pay within a fixed period

Facts : Spouses Ramos own a parcel of land, consisting of 1,883 square meters. They madean agreement with spouses Heruela covering 306 square meters of the land. According tothe spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruelaallege that the contract is a sale on installment basis.

The spouses Ramos filed a complaint for Recovery of Ownership with Damages against thespouses Heruela. The spouses Ramos allege that out of the P15,300 consideration for the saleof the land, the spouses Heruela paid only P4,000. The spouses Ramos assert that thespouses Heruelas unjust refusal to pay the balance of the purchase price caused thecancellation of the Deed of Conditional Sale. The Ramoses discovered that the spousesHeruela were already occupying a portion of the land. Spouses Pallori, daughter and son-in-law of the spouses Heruela, erected another house on the land. The spouses Heruela and thespouses Pallori refused to vacate the land despite demand by the spouses Ramos.

The trial court ruled that the contract is a sale by installment. The trial court ruled that thespouses Ramos failed to comply with Section 4 of Republic Act No. 6552 ("RA 6552"), 6 asfollows: SEC. 4. In case where less than two years of installments were paid, the seller shallgive the buyer a grace period of not less than sixty days from the date the installment became

due. If the buyer fails to pay the installments due at the expiration of the grace period, theseller may cancel the contract after thirty days from receipt by the buyer of the notice ofcancellation or the demand for rescission of the contract by a notarial act.

Ruling : The Agreement is a Contract to Sell

In this case, the agreement of the parties is embodied in a one-page, handwritten document.The document does not contain the usual terms and conditions of a formal deed of sale. Theoriginal document, elevated to this Court as part of the Records, is torn in part. Only the words"LMENT BASIS" is legible on the title. The names and addresses of the parties and the identityof the property cannot be ascertained.

In Manuel v. Rodriguez, et al., the Court ruled that to be a written contract, all the terms mustbe in writing, so that a contract partly in writing and partly oral is in legal effect an oral

contract. The Court reiterated the Manuel ruling in Alfonso v. Court of Appeals: . . . InManuel, "only the price and the terms of payment were in writing," but the most importantmatter in the controversy, the alleged transfer of title was never "reduced to any writtendocument. It was held that the contract should not be considered as a written but an oralone; not a sale but a promise to sell; and that "the absence of a formal deed of conveyance"was a strong indication "that the parties did not intend immediate transfer of title, but only atransfer after full payment of the price." Under these circumstances, the Court ruled Article1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to be inapplicable to thecontract in controversy a contract to sell or promise to sell "where title remains with thevendor until fulfillment of a positive suspensive condition, such as full payment of the price.

Spouses Heruela did not immediately take actual, physical possession of the land. According tothe spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy aportion of the land. Indeed, the spouses Ramos alleged that they only discovered in June 1982that the spouses Heruela were already occupying the land. In their answer to the complaint,the spouses Heruela and the spouses Pallori alleged that their occupation of the land is lawfulbecause having made partial payments of the purchase price, "they already consideredthemselves owners" of the land. 18 Clearly, there was no transfer of title to the spousesHeruela. The spouses Ramos retained their ownership of the land. This only shows that theparties did not intend the transfer of ownership until full payment of the purchase price.

RA 6552 is the Applicable Law. The trial court did not err in applying RA 6552 to the presentcase. Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contractsto sell, RA 6552 applies. In Rillo v. Court of Appeals, the Court declared: the Maceda Law,R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial,commercial, residential) the right of the seller to cancel the contract upon non-payment of aninstallment by the buyer, which is simply an event that prevents the obligation of the vendorto convey title from acquiring binding force. It also provides the right of the buyer oninstallments in case he defaults in the payment of succeeding installments . .

Sec. 3. In all transactions or contracts involving the sale or financing ofreal estate on installment payments, including residential condominiumapartments but excluding industrial lots, commercial buildings and sales totenants under Republic Act Numbered Thirty-eight hundred forty-four asamended by Republic Act Numbered Sixty-three hundred eighty-nine, where thebuyer has paid at least two years of installments, the buyer is entitled to thefollowing rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments duewithin the total grace period earned by him, which is hereby fixed at the rate ofone month grace period for every one year of installment payments made:Provided, That this right shall be exercised by the buyer only once in every fiveyears of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer thecash surrender value of the payments on the property equivalent to fifty per centof the total payments made and, after five years of installments, an additionalfive per cent every year but not to exceed ninety per cent of the total paymentsmade: Provided, That the actual cancellation of the contract shall take place afterthirty days from receipt by the buyer of the notice of cancellation or the demandfor rescission of the contract by a notarial act and upon full payment of the cashsurrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation ofthe total number of installments made.

Sec. 4. In case where less than two years of installments were paid, theseller shall give the buyer a grace period of not less than sixty days from thedate the installment became due. If the buyer fails to pay the installments due atthe expiration of the grace period, the seller may cancel the contract after thirtydays from receipt by the buyer of the notice of cancellation or the demand forrescission of the contract by a notarial act.

In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 ofRA 6552 applies. However, there was neither a notice of cancellation nor demand forrescission by notarial act to the spouses H eruela. In Olympia Housing, Inc. v. Panasiatic TravelCorp., the Court ruled that the vendor could go to court to demand judicial rescission in lieu ofa notarial act of rescission. However, an action for reconveyance is not an action forrescission. The Court explained in Olympia: The action for reconveyance filed by petit ionerwas predicated on an assumption that its contract to sell executed in favor of respondentbuyer had been validly cancelled or rescinded. The records would show that, indeed, no suchcancellation took place at any time prior to the institution of the action for reconveyance. . ..xxx xxx xxx

In the present case, there being no valid rescission of the contract to sell, the action forreconveyance is premature. Hence, the spouses Heruela have not lost the statutory graceperiod within which to pay. The trial court should have fixed the grace period to sixty daysconformably with Section 4 of RA 6552.The spouses Heruela are not entirely fault-free. Theyhave been remiss in performing their obligation. The trial court found that the spouses Heruelaoffered once to pay the balance of the purchase price. However, the spouses Heruela did notconsign the payment during the pendency of the case. In the meanwhile, the spouses Heruelaenjoyed the use of the land. WHEREFORE, we AFFIRM the RTC, dismissing the complaint forRecovery of Ownership with Damages, with MODIFICATION.

Absolute Sale Conditional SaleWhen title to the property passesto the vendee upon delivery of thething sold

Ownership remains with thevendor and does not pass to thevendee until full payment of thepurchase price.

When there is no stipulation in thecontract that title to the propertyremains with the seller until fullpayment of the purchase price

The full payment of the purchaseprice partakes of a suspensivecondition, and non-fulfillment ofthe condition prevents theobligation to sell from arising.

If there is no stipulation giving thevendor the right to cancelunilaterally the contract themoment the vendee fails to paywithin a fixed period


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c. Existing, or Future or Contingent

-future things may be sold but not future inheritance

Remember the following:Future Inheritance cannot be an object of sale

Future destruction or with potential destruction can be anobject of sale

Mere expectancy can be subject of sale as long as HOPEis not VAIN

While there can be a sale of future property, there cangenerally be no donation of future property

A person who has a right over a thing (although he is notthe owner of the thing itself) may sell such right. (ex. Ausufructuary may generally sell his usufructuary right)

Sale of an expected thing or Emptio Rei Sperati - If the expected thing doesnot materialize, the sale is not effective

Sale of the Hope itself or Emptio Spei - It does not matter whether the expectedthing materialized or not; what is important is that the hope itself validly existed- Ex. Sale of a valid sweepstakes ticket. Whether the ticket wins or not, the saleitself is valid - If the hope or expectancy itself is vain, the sale is itself void.

1) Sale of Future Inheritance -

invalid

Article 1461Tanedo vs Ca

Facts: On October 20, 1962, Lazaro Taedo executed a notarized deed of absolute sale infavor of his eldest brother, Ricardo Taedo, and the latters wife, Teresita Barera, privaterespondents herein, whereby he conveyed to the latter in consideration of P1,500.00, onehectare of whatever share I shall have over Lot No. 191 of the cadastral survey of Gerona,Province of Tarlac and covered by Title T- l3829 of the Register of Deeds of Tarlac, the saidproperty being his future inheritance from his parents (Exh. 1). Upon the death of his fatherMatias, Lazaro executed an Affidavit of Conformity dated February 28, 1980 (Exh. 3) to re-affirm, respect. acknowledge and validate the sale I made in 1962. On January 13, 1981,Lazaro executed another notarized deed of sale in favor of private respondents covering his

undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). Heacknowledged therein his receipt of P 10,000.00 as consideration therefor. In February 1981,Ricardo learned that Lazaro sold the same property to his children, petitioners herein, througha deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private respondentsrecorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and thecorresponding entry was made in Transfer Certificate of Title No. 166451 (Exh. 5). Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds ofsale executed by Lazaro in favor of private respondents covering the property inherited byLazaro from his father.

Issue: Is a sale of future inheritance valid?

Held: (n)o contract may be entered into upon a future inheritance except in cases expresslyauthorized by law.

Consequently, said contract made in 1962 is not valid and cannot be the source of any rightnor the creator of any obligation between the parties.Hence, the affidavit of conformity dated February 28, 1980, insofar as it sought to validateor ratify the 1962 sale, is also useless and, in the words of the respondent Court, suffers fromthe same infirmity. Even private respondents in their memorandum concede this.

d. Transferability of Ownership

Ownership

1. It need not exist at the perfection of the contract. Required at thetime of delivery

2. Subsequent acquisition of title by a vendor w/out title validates thesale

3. Acquisition of title by the vendee may depend upon a contingency(right of redemption)

The seller must have the right to transfer the ownership of the thing or rightsold to the buyer at the time of delivery and not at the time of the making of thecontract.

Nemo dat quod non habet, as an ancient Latin maxim says. One cannot givewhat does not have.

Note: When ownership is required At the time of sale but ownership may not bew/ the seller in case of future things.

Cases:

1. Sale by mortgagee of land not proper subject of mortgage

Cavite Development Bank v. Lim, 324 scra 346

Facts : Rodolfo Guansing obtained a fraudulent title by executing an Extra-Judicial Settlementof the Estate With Waiver where he made it appear that he and Perfecto Guansing were theonly surviving heirs entitled to the property, and that Perfecto had waived all his rightsthereto. Consequently he acquired title and used this to acquire a loan. CDB foreclosed themortgage and granted him the period of redemption, which he did not exercise.

It is not required that, at the perfection stage, the seller be the owner of the thing sold oreven that such subject matter of the sale exists at that point in time. Thus, under Art. 1434 ofthe Civil Code, when a person sells or alienates a thing which, at that time, was not his, butlater acquires title thereto, such title passes by operation of law to the buyer or grantee. Thisis the same principle behind the sale of "future goods" under Art. 1462 of the Civil Code.However, under Art. 1459, at the time of delivery or consummation stage of the sale, it isrequired that the seller be the owner of the thing sold. Otherwise, he will not be able tocomply with his obligation to transfer ownership to the buyer. It is the consummation stagewhere the principle of nemo dat quod non habet applies. In this case, the sale by CDB to Limof the property mortgaged in 1983 by Rodolgo Guansing must, therefore, be deemed a nullityfor CDB did not have a valid title to the said property. To be sure, CDB never acquired a validtitle to the property because the foreclosure sale, by virtue of which the property had awardedto CDB as highest bidder, is likewise void since the mortgagor was not the owner of theproperty foreclosed.

CDB cannot be considered a mortgagee in good faith. While petitioners are not expected toconduct an exhaustive investigation on the history of the mortgagor's title, CDB cannot beexcused from the duty of exercising the due diligence required of banking institutions in

ascertaining the validity of the title.

That after the payment of the 10% option money, the Offer to Purchase provides for thepayment only of the balance of the purchase price, implying that the "option money" formspart of the purchase price. This is precisely the result of paying earnest money under Art.1482 of the Civil Code. It is clear then that the parties in this case actually entered into acontract of sale, partially consummated as to the payment of the price.

2. Conveyance of privilege to purchase land before it is awardedto the tenant or occupant .

Hermosilla v. Remoquillo

Facts : Apolinario Hermosilla was occupying a lot in San Pedro Tunasan Homesite, a land ofthe Republic. He divided the lot into 2. The 1st portion was given to his son Salvador and theother(questioned lot) to his grandson Jaime Remoquillo through a Deed of Assignment. A law

was passed prohibiting the transfer of ownership of the said lot. Salvador and Jaime aftermade a Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na Lupang Solar (Kasunduan)whereby Jaime transferred ownership of the 65 square meters (the questioned property) infavor of Salvador. NHA awarded Jaime title. Salvador and his heirs questioned the title statingthey have their house and in actual possession of the questioned lot.

When the Kasunduan was executed in 1972 by Jaime in favor of Salvador petitioners'predecessor-in-interest Lot 19, of which the questioned property forms part, was still ownedby the Republic. Nemo dat quod non habet. Nobody can give what he does not possess. Jaimecould not thus have transferred anything to Salvador via the Kasunduan.

The transfer became one in violation of law and therefore void ab initio. Hence, petitionersacquired no right over the lot from a Void Kasunduan, for no rights are created. It is generallyconsidered that as between the parties to a contract, validity cannot be given to it by estoppelif it is prohibited by law or is against public policy.

Since the property was previously a public land, petitioners have no personality to imputeviolation of the law. If the title was in fact fraudulently obtained, it is the State which should

file the suit to recover the property through the Office of the Solicitor General. Consequently,Jaimes ownership was valid not being contrary to any law and since there was no pendingother application yet. That at the time he applied for title, he was recogned as the actualapplicant / occupant.

Heirs of Arturo Reyes v. Beltran G.R. No. 176474

(property not adjudicated)

The contract to sell on which the petitioners based theirclaim over the subject property was executed by MiguelSocco who was not the owner of the property, thereforehad NO right to transfer the same. Article 1459 providesthat the thing must be licit and vendor must have a rightto transfer ownership at the time of delivery.

Facts : A big parcel of lot was originally owned by Spouses Laquian. When the Spouses died,the property was left with the wifes siblings. Through an "Extrajudicial Settlement of theEstate of the Deceased Constancia R. Socco (wife)," the parcel of land was partitioned into 3lots. Before the partition, Miguel Socco, 1 of the heirs sold his share to Arturo Reyes asevidenced by the Contract to Sell stating that he is to inherit a particular portion. But uponpartition, the said portion sold was adjudicated to respondent, Elena Socco Beltran, and notto Miguel Socco.

SC : Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendormust have a right to transfer ownership thereof at the time it is delivered. The lawspecifically requires that the vendor must have ownership of the property at the time it isdelivered. Petitioners claim that the property was constructively delivered to them in 1954 byvirtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit inthe Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of


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the property and was only expecting to inherit it. Hence, there was no valid sale from whichownership of the subject property could have transferred from Miguel Socco to Arturo Reyes.Without acquiring ownership of the subject property, Arturo Reyes also could not haveconveyed the same to his heirs, herein petitioners.

The law specifically requires that the vendor must have ownership of the property at the timeit is delivered. Petitioners cannot derive title to the subject property by virtue of the Contractto Sell. It was stated in the Contract that the vendor was not yet the owner of the subjectproperty and was merely expecting to inherit the same. It was also declared that conveyanceof the subject to the buyer was a conditional sale. It is, therefore, apparent that the sale ofthe subject property in favor of Arturo Reyes was conditioned upon the event that MiguelSocco would actually inherit and become the owner of the said property. Absent suchoccurrence, Miguel R. Socco never acquired ownership of the subject property which he couldvalidly transfer to Arturo Reyes. Without acquiring ownership of the subject property, ArturoReyes also could not have conveyed the same to his heirs, herein petitioners.

-assignment was done prior to the application.

ARTICLES 1469-1474

Art. 1469. In order that the price may be considered certain, it shall besufficient that it be so with reference to another thing certain, or thatthe determination thereof be left to the judgment of a special person orpersons.

Should such person or persons be unable or unwilling to fix it, thecontract shall be inefficacious, unless the parties subsequently agreeupon the price.

If the third person or persons acted in bad faith or by mistake, thecourts may fix the price.

Where such third person or persons are prevented from fixing the priceor terms by fault of the seller or the buyer, the party not in fault mayhave such remedies against the party in fault as are allowed the selleror the buyer, as the case may be. (1447a)

Art. 1470. Gross inadequacy of price does not affect a contract of sale,except as it may indicate a defect in the consent, or that the partiesreally intended a donation or some other act or contract.

Art. 1471. If the price is simulated, the sale is void, but the act may beshown to have been in reality a donation, or some other act orcontract.

Art. 1472. The pr ice of securities, grain, liquids, and other things shallalso be considered certain, when the price fixed is that which the thingsold would have on a definite day, or in a particular exchange ormarket, or when an amount is fixed above or below the price on suchday, or in such exchange or market, provided said amount be certain.(1448)

Art. 1473. The fixing of the price can never be left to the discretion ofone of the contracting parties. However, if the price fixed by one of theparties is accepted by the other, the sale is perfected. (1449a)

Art. 1474. Where the price cannot be determined in accordance withthe preceding articles, or in any other manner, the contract isinefficacious. However, if the thing or any part thereof has beendelivered to and appropriated by the buyer he must pay a reasonableprice therefor. What is a reasonable price is a question of factdependent on the circumstances of each particular case.

I.Price sum certain in money or its equivalent.

Case :

General principles in theagreement as to price

Boston Bank of the Philippines v. Manalo, G. R. No. 158149, February 9,2006

FACTS : Boston Bank, now petitioner, filed the instant petition for review on certiorari assailingthe CA rulings. It maintains that, as held by the CA, the records do not reflect any schedule ofpayment of the 80% balance of the purchase price, or P278,448.00. Petitioner insists thatunless the parties had agreed on the manner of payment of the principal amount, including

the other terms and conditions of the contract, there would be no existing contract of sale orcontract to sell.47

WON : Petitioner, as seller, forged a perfect contract to sell over a real property torespondents, as buyer.

HELD : We agree with petitioners contention that, for a perfected contract of sale or contractto sell to exist in law, there must be an agreement of the parties, not only on the price of theproperty sold, but also on the manner the price is to be paid by the vendee.

A definite agreement as to the price is an essential element of a binding agreement to sellpersonal or real property because it seriously affects the rights and obligations of the parties.

Price is an essential element in the formation of a binding and enforceable contract of sale.The fixing of the price can never be left to the decision of one of the contracting parties. But aprice fixed by one of the contracting parties, if accepted by the other, gives rise to a perfectedsale.57

It is not enough for the parties to agree on the price of the property. The parties must alsoagree on the manner of payment of the price of the property to give rise to a binding andenforceable contract of sale or contract to sell. This is so because the agreement as to themanner of payment goes into the price, such that a disagreement on the manner of paymentis tantamount to a failure to agree on the price.58

In a contract to sell property by installments, it is not enough that the parties agree on theprice as well as the amount of downpayment. The parties must, likewise, agree on the mannerof payment of the balance of the purchase price and on the other terms and conditionsrelative to the sale. Even if the buyer makes a downpayment or portion thereof, such paymentcannot be considered as sufficient proof of the perfection of any purchase and sale betweenthe parties.

We agree with the contention of the petitioner that, as held by the CA, there is no showing, inthe records, of the schedule of payment of the balance of the purchase price on the propertyamounting to P278,448.00

A. Requisites:

a. The price must be REAL (1471)

Art. 1471. If the price is simulated, the sale is void, but the act may beshown to have been in reality a donation, or some other act orcontract.

price is real- when at the perfection of the sale, there is legal intention on thepart of the buyer to pay the price and the legal expectation on the part of theseller to receive such price as the value of the subject matter he obligateshimself to deliver.

price is false- the contract is valid but subject to reformation to indicate thereal price upon which the minds of the parties have met.

1.) Effect if price is simulated- produces no effect .

Cruzado v. Bustos, G. R. No. 10244, February 29, 1916s

Cruzado: father of the petitioner, No legal intention topay, bond for procurador

Bustos: old lady, no legal expectation to receive payment,not obligates herself to deliver the property

No right has been transmitted from a simulated sale. Hisalleged right cannot prevail against a third person who

FACTS : Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8,1910, amended on September 25, 1913, in which he alleged that plaintiff was the owner ofcertain rural property situated in the barrio of Dolores, formerly San Isidro, of the municipalityof Bacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in thecomplaint; that Estafania Bustos, during her lifetime, and now the administrator of her estate,together with the other defendant, Manuel Escaler, had, since the year 1906 up to thepresent, been detaining the said parcel of land, and had refused to deliver the possessionthereof to plaintiff and to recognize his ownership of the same, notwithstanding the repeateddemands made upon them; that by such detention, the plaintiff had suffered losses anddamages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to bethe owner of the said parcel of land and ordering defendants to return it to plaintiff and to paythe latter P3,500 for losses and damages, and the costs.

WON : The deed of sale of 65 balitas of land situated in the municipality of Bacolor,Pampanga, executed by Estefania Bustos, with the assistance of her husband BernardinoDizon, in favor of Agapito Geronimo Cruzado, for the sum of P2,200, was simulated.

HELD :The simulation of the said sale was effected by making a pretended contract whichbore the appearance of truth, when really and truly there was no contract, because thecontracting parties did not in fact intend to execute one, but only to formulate a sale in such amanner that, for the particular purposes sought by Bustos and Cruzado, it would appear tohave been celebrated solely that Cruzado might hold his office of procurador on the strengthof the security afforded by the value of the land feignedly sold.

This action is of course improper, not only because the sale was simulated, but also because itwas not consummated. The price of the land was not paid nor did the vendee take possessionof the property from the 7th of September, 1875, when the said sale was feigned, until thetime of his death; nor did any of his successors, nor the plaintiff himself until the date of hisclaim, enter into possession of the land.

That the contract of purchase and sale, as consensual, is perfected by consent as to the priceand the thing and is consummated by the reciprocal delivery of the one and the other, the fullownership of the thing sold being conveyed to the vendee, from which moment the rights ofaction derived from this right may be exercised.

It is, then, of the utmost importance to examine whether in the said sale the purchase pricewas paid and whether the vendee took possession of the land supposed to have been sold.


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2.) Effect if there is noconsideration null and void(non-existence of the contract ).

Doles v. Angeles, G. R. No. 149353, June 26, 2006

Sale is predicated on the loan, thus the sale is void forlack of consideration between petitioner and respondentsince they were not privy to the contract of loan.

FACTS : On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC acomplaint for Specific Performance with Damages against Jocelyn B. Doles (petitioner),docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to theformer in the concept of a personal loan amounting to P405,430.00 representing the principalamount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale",petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as theimprovements thereon, with an area of 42 square meters, covered by Transfer Certificate ofTitle No. 382532,4 and located at a subdivision project known as Camella TownhomesSorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that thisproperty was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to securepetitioners loan in the sum of P337,050.00 with that entity.

WON : The contract of sale on the parcel of land was executed for a cause.

HELD : Since the sale is predicated on that loan, then the sale is void for lack ofconsideration.

In view of these anomalies, the Court cannot entertain the possibility that respondent agreedto assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC,especially since the record is bereft of any factual finding that petitioner was, in the f irst place,endowed with any ownership rights to validly mortgage and convey the property. As thecomplainant who initiated the case, respondent bears the burden of proving the basis of hercomplaint. Having failed to discharge such burden, the Court has no choice but to declare thesale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwellon the issue of whether duress or intimidation had been foisted upon petitioner upon theexecution of the sale.

b. In money or its equivalent (1458)

Torres vs CA

Lapu-lapu subdivision lot case: no money for consideration; but theexpectation of profit (equivalent)

Facts: Petitioners and respondent entered into a joint venture agreement for the developmentof a parcel land located at Lapu-Lapu City island of Mactan into a subdivision. Pursuant to thecontract, petitioners executed a deed of sale covering the said parcel of land in favor of therespondent, who then had it registered in his name. Thereafter, respondent mortgaged theproperty in the bank, and according to the joint agreement, the money obtained amounting toP40,000.00 was to be used for the development of the subdivision. However, the project didnot push through, and the land was subsequently foreclosed by the bank. Because of this,petitioners filed a civil case before the Regional Trial Court of Cebu City, which was laterdismissed by the trial court. On appeal, the Court of Appeals affirmed the decision of the trialcourt. The appellate court held that the petitioner and respondent had formed a partnershipfor the development of the subdivision. Thus, they must bear the loss suffered by thepartnership in the same proportion as their share in the profits stipulated in the contract.

Aggrieved by the decision, petitioner filed the instant petition contending that the Court of Appeals erred in concluding that the transaction between the petitioners and respondent wasthat of a joint venture/partnership.

SC: The Joint Venture Agreement clearly states that the consideration for the sale was theexpectation of profits from the subdivision project. Its first stipulation states that petitionersdid not actually receive payment for the parcel of land sold to respondent. Consideration, moreproperly denominated as cause, can take different forms, such as the prestation or promise ofa thing or service by another. In this case, the cause of the contract of sale consisted not inthe stated peso value of the land, but in the expectation of profits from the subdivisionproject, for which the land was intended to be used. As explained by the trial court, "the land

was in effect given to the partnership as [petitioner's] participation therein. . . . There wastherefore a consideration for the sale, the [petitioners] acting in the expectation that, shouldthe venture come into fruition, they [would] get sixty percent of the net profits."

-expectations of profits from the subdivision projects is a valid form of consideration.

-it is sufficient if it can be determined by the stipulations of the contract made by the partiesthereto/ by reference to an agreement incorporated in the contract.

c. Certain or ascertainable (determinable)

1.) How determinedi.) By a third person (1469, pars. 1, 2, 4)-refer to case Barreto vs. Sta. Marina

aa) If the third person is unable or unwilling to fix the price, thecontract is inefficacious unless the parties come to an agreement

ii.) By the Courts (1469, par. 3) if there is bad faith or mistake of thethird party fixing the price

iii.) By reference to a definite day, a particular exchange or market(1472)

iv.) By reference to invoices- refer to case: McCulough v. Aenlle & Co.

v. ) By reference to the application of known factors, e.g. in proportionto variations in calories and ash content of coal2.)

Barreto v. Sta. Marina, G. R. No. L-8169, December 29, 1913

(***CAVEAT EMPTOR: PLS READ THE FULL TEXT. CASE DOCTRINE RELATED TO SALESNOT CLEARLY ESTABLISHED IN THE CASE)

FACTS : The La Insular cigar and cigarette factory is a joint account association with a nominalcapital of P865,000, the plaintiffs share being P20,000, or 4/173 of the whole. On March 14,1910, the plaintiffs attorneys wrote the defendants local representative a letter offering to sellto the defendant plaintiffs part icipation in the factory. The result of the correspondencebetween the parties and their representatives was that Exhibit G was duly executed on May 3,1910. In accordance with the terms of this exhibit a committee of appraisers was appointed toascertain and fix the actual value of La Insular. The committee rendered its report onNovember 14, 1910, fixing the net value at P4,428,194.44. Of this amount 4/173 partrepresented the plaintiffss share on his P20,000 of the nominal capital. In Exhibit J which wa sexecuted on November 22, 1910, the plaintiff acknowledged to have received from thedefendant that amount.

Subsequently to the execution of Exhibit J, demand was made by the plaintiff upon thedefendant for his share of the profits from June 30, 1909, to November 22, 1910. Thisdemand was refused and thereupon this action was instituted to recover said profits. Upon theevidence submitted at the hearing, the court below held: (1) That the agreement of May 3,1910, was by its terms a contract to sell in the future and did not pass title and (2) that thesale of plaintiffs interest did not include the profits in question. Judgment was renderedaccordingly, with interest and cost. The defendant appealed.

SC: It was the appraisers who were appointed to ascertain and fix the total net value of thefactory for the purpose of determining the true present value of the interest.

- The appraiser was the one who determined the total net value of the shares of the companyand thereafter that of Baretos share .

McCulough v. Aenlle & Co.,G. R. No. 1300, February 3, 1904

FACTS : Furniture and tobacco were sold, the furniture at 90% of the price shown in asubsequent inventory, and the tobacco at the invoice price.

WON : Is the price here already considered certain?

HELD : Yes. In view of the reference to certain amounts. (Paras, p.30)

The document of August 27 was a completed contract of sale. The articles which were thesubject of the sale were definitely and finally agreed upon. The appellee agreed to buy, amongother things, all of the leaf tobacco in the factory. This was sufficient description of the thingsold. The price for each article was fixed. It is true that the price of this tobacco, for example,was not stated in dollars and cents in the contract. But by its terms the appellee agreed to paytherefor the amount named in the invoices then in existence. The price could be made certainby a mere reference to those invoices. By the instrument of August 27 the contract wasperfected and thereafter each party could compel the other to fulfill it. By its terms theappellee was bound to take all the leaf tobacco then belonging to the factory and to paytherefor the prices named in the invoices. This obligation was absolute and did not depend atall upon the quality of the tobacco or its value. The appellee did not, in this contract, reservethe right to reject the tobacco if it were not of a specific crop. He did not buy tobacco of aparticular kind, class, or quality. He bought all the tobacco which the appellant owned andagreed to pay for it what the defendant had paid for it. The plaintiff testified that this was theexpress agreement.

2.) Effect of indeterminability contract is inefficacious

Sale of Improvements introducedin Hacienda

Robles v. Lizarraga Hermanos, G. R. No. L-26173, July 13, 1927

FACTS : This action was instituted in the Court of First Instance of Occidental Negros byZacarias Robles against Lizarraga Hermanos, a mercantile partnership organized under thelaws of the Philippine Islands, for the purpose of recovering compensation for improvementsmade by the plaintiff upon the hacienda "Nahalinan" and the value of implements and farmingequipment supplied to the hacienda by the plaintiff, as well as damages for breach of contract.Upon hearing the cause the trial court gave judgment for the plaintiff to recover of thedefendant the sum of P14,194.42, with costs. From this judgment the defendant appealed.

WON : The petitioner is allowed to recover the value of the improvements.

HELD : In the case before us the deed of conveyance purports to transfer to thedefendant only such interests in certain properties as had come to the conveyors byinheritance. Nothing is said concerning the rights in the hacienda which the plaintiff hadacquired by lease or concerning the things that he had placed thereon by way of improvementor had acquired by purchase. The verbal contract which the plaintiff has established in thiscase is therefore clearly independent of the main contract of conveyance, and evidence ofsuch verbal contract is admissible under the doctrine above stated. The rule that a preliminaryor contemporaneous oral agreement is not admissible to vary a written contract appears tohave more particular reference to the obligation expressed in the written agreement, and therule had never been interpreted as being applicable to matters of consideration or inducement.In the case before us the written contract is complete in itself; the oral agreement is alsocomplete in itself, and it is a collateral to the written contract, notwithstanding the fact that itdeals with related matters.

A contract for the sale of goods, chattels or things in action, at a price of not less than P100,shall be unenforceable unless the contract, or some note or memorandum thereof shall be inwriting and subscribed by the party charged, or by his agent; and it is insisted that the courterred in admitting proof of a verbal contract over the objection of the defendant's attorney.But it will be noted that the same subsection contains a qualification, which is stated in thesewords, "unless the buyer accept and receive part of such goods and chattels." In the casebefore us the trial court found that the personal property, consisting of farming implementsand other movables placed on the f arm by the plaintiff, have been utilized by the defendant inthe cultivation of the hacienda, and that the defendant is benefiting by those things.


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B. Earnest Money (1482)

Art. 1482. Whenever earnest money is given in a contract of sale, itshall be considered as part of the price and as proof of the perfection ofthe contract

a. It is considered part of the price, unless the contract is otherwiseb. It is proof of perfection of the contract

Earnest money - it is something of value that the buyer was really in earnestand given after the perfection of the contract.-part of the purchase price.

Option money - distinct consideration.

Manila Metal Container Corporation v. PNB

Petitioner was the owner of a parcel of land and to be able to secure a loan from PNB,petitioner executed a real party mortgage over the land. For its failure to pay, PNB foreclosethe mortgaged and sold at public auction for which PNB was the winning bidder, with a oneyear period of redemption by the petitioner. Petitioner requested that there be an extension oftime to redeem the property and it allowed to repurchase the property on installment.Meanwhile,the Special Assets Management Department had prepared a statement ofaccountof the petit ioners obligation to which amounted to 1.5M. petitioner thereafter remittedthte amount of 800,000 as deposit to repurchase the property. When SAMD recommended tothe management of the PNB that petitioner be allowed to repurchase the property at 1.5M, themanagement rejected and suggested that the property be purchased at 2.7M which was laterreduced to 1.9M. But petitioner refused.

Petitioner now filed a case for delivery of title, annulment of mortgage and specificperformance with damages. It was its contention that it already accepted the offer of SAMD to

sell the property at 1.5M, hence, PNB could no longer unilaterally withdraw its offer to sell theproperty. Its acceptance of the offer resulted in a perfected contract of sale.

Respondent contended that the parties never graduated for the negotiation stage all thattranspires was an exchange of proposal and counter-proposals and nothing more. There wasstill no agreement as to the amount and the manner of payment. The account made by SAMDcannot be classified as counter-offer because it was merely recital of facts of the obligations ofpetitioners.

WON the P800,000 deposited is an earnest money. -NO

The P800,000 could not be considered as an earnest money because an earnest money formspart of the purchase price. In this case, it did not. The P800,000 was merely a deposit thatwas accepted by PNB on the condition that the purchase price is subject to the approval of thePNB Board.

Serrano v Caguiat G.R. No. 139173

Facts : Caguiat offered to buy the lot owned by spouses Serrano. Respondent gave P100K aspartial payment, in turn, petitioners gave a receipt with a statement that respondent promisedto pay the balance of the purchase price. Respondents were leaving for abroad and sought tocancel the transaction. Petitioners contend that there is no perfected contract as there was noclear agreement between the parties as to the amount of consideration.SC : In holding that there is a perfected contract of sale, both courts mainly relied on theearnest money given by respondent to petitioners (Art. 1482). We are not convinced.

It is true that Article 1482 of the Civil Code provides that Whenever earnest m oney is given ina contract of sale, it shall be considered as part of the price and proof of the perfection of thecontract. However, this article speaks of earnest money given in a contract of sale. In thiscase, the earnest money was given in a contract to sell. The earnest money forms part of theconsideration only if the sale is consummated upon full payment of the purchase price. Now,since the earnest money was given in a contract to sell, Article 1482, which speaks of acontract of sale, does not apply.

As previously discussed, the suspensive condition (payment of the balance by respondent) didnot take place. Clearly, respondent cannot compel petitioners to transfer ownership of theproperty to him.

ARTICLES 1475-1488

I. RULES IN ORDINARY SALES

A. Form

a. General Rule (1483)

Art. 1483. Subject to the provisions of the Statute of Frauds and of anyother applicable statute, a contract of sale may be made in writing, orby word of mouth, or partly in writing and partly by word of mouth, ormay be inferred from the conduct of the parties. (n)

1. Verbal agreement of sale

Caoili v. CA

Verbal agreement of sale - Absence of a formal deed ofsale does not render the agreement null and void orwithout any effect. The necessity of a public document(art. 1358) is only for convenience, not for validity orenforceability

So long as the essential requisites of consent, object andcause of the obligation concur, there is a valid contract ofsale

- Partly in writing and party by word of mouth- May be inferred from the conduct of parties

Caoili was a lessee in the property of respondent. Respondent borrowed money from Caoili inthe amount of Php 30,000 which they stipulated would form part of their rentals. When rentalswas paid off, they entered into a not formal or written contract on the sale of the property.They executed a "Receipt" denominated as an "Addendum to Agreement dated August 8,1990". It was stated they received from petitioners the sum of P140,000.00, in addition to thepartial payment of P60,000.00, the "balance payable when the good title in the name of hereinvendor is delivered to the spouses." Yet respondent refused to execute document. Respondentsays that the Php 140,000 was for improvements and the Php 60,000 served as rental on theperiod they havent paying their rentals (amounts were claimed as partial payments by Caoili.RTC and CA both decided in favor of Caoili yet CA reduced the amount awarded.

1. (Not made in writing) The absence of a formal deed of sale does not render theagreement null and void or without any effect. The provision of Article 1358 of the CivilCode on the necessity of a public document is only for convenience, not for validity or

enforceability. It does not mean that no contract has been perfected so long as theessential requisites of consent of the contracting parties, object, and cause of theobligation concur. Under the agreement, private respondent was obligated to deliver agood title to petitioners and this condition is the operative act which would give rise tothe corresponding obligation of petitioners to pay the balance of the purchase price.Since it is not disputed that private respondent has not delivered a good title,petitioners have by law the right to either refuse to proceed with the agreement or towaive that condition pursuant to Article 1545 of the Civil Code.

The Addendum being notarized is a prima facie evidence of the facts stated therein

2. Effect of lack of technicaldescription in the contract

Naranja v. CA

Technical description is not necessary for there is noprescribed form of validity of contract of sale of realproperties.

What is mportant is that the subject of the contract of

sale is an object that is DETERMINATE or at leastDETERMINABLE

Note: if the sale of a piece of land or interest thereinwhen made thru an agent is VOID unless the a gentsauthority is in writing.

To be valid, a contract of sale need not contain a technical description of the subjectproperty. Contracts of sale of real property have no prescribed form for their validity;they follow the general rule on contracts that they may be entered into in whateverform, provided all the essential requisites for their validity are present. The failure ofthe parties to specify with absolute clarity the object of a contract by including itstechnical description is of no moment. What is important is that there is, in fact, anobject that is determinate or at least determinable, as subject of the contract of sale.The deed of sale clearly identifies the subject properties by indicating their respectivelot numbers, lot areas, and the certificate of title covering them.

One who alleges any defect, or the lack of consent to a contract by reason of fraud orundue influence, must establish by full, clear and convincing evidence, such specificacts that vitiated the partys consent. Petitioners adduced no proof that Roque had lostcontrol of his mental faculties at the time of the sale. Undue influence is not to beinferred from age, sickness, or debility of body, if sufficient intelligence remains.

The Deed of Sale which states receipt of which in full I hereby acknowledge to myentire satisfaction is an acknowledgment receipt in itself. Moreov er, the presumptionthat a contract has sufficient consideration cannot be overthrown by a mere assertionthat it has no consideration.

Heirs are bound by contracts entered into by their predecessors-in-interest. Havingbeen sold already to Belardo, the t wo properties no longer formed part of Roquesestate which petitioners could have inherited.

b. When Statute of Frauds Apply

Statute of Frauds applies only in cases for

a) Specific performance, andb) For damages based on breach of contract

Where the contract of sale has already been consummated, its enforcementcannot be barred by the Statute of Frauds, which applies on executoryagreement.

c. When Form is Essential

1) Under the Statute of Frauds

Realty- a sale of real property orally is valid. The buyer may compelthe seller to execute a formal deed of sale to be enforceable.

Goods and chattels at a price of not less than P 500.

2) Sale of land through an Agent (1874) authority shall be in writing.

B. Perfection of a contract of sale (Art. 1475)

a. General Rule - At the moment there is a meeting of the minds (consensual)

- The parties may reciprocally demand performance, subject to theprovisions of law governing the form of contracts

Requirements for perfection:

a. When parties are face to face when an offer is accepted withoutconditions nor qualifications


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b. Thru correspondence or telegram when the offeror has knowledgeof the acceptance

c. When sale is subject to a suspensive condition from the momentthe condition is fulfilled

Mere perfection of the contract does not necessarily transfer ownership.

Romulo Coronel, et al vs. CA and Alcaraz G.R. No. 103577, October 7,1996

FACTS: The Coronels sold their inherited house and lot to Ramona Patricia Alcaraz, with theconditions that they will effect the transfer of the title from their deceased father to theirnames upon receipt of the down payment, and after the transfer they will execute a Deed ofSale in favor of Alcaraz. The conditions were embodied in a document labeled Receipt ofDown Payment. Alcaraz paid, and the title was transferred in the Coronels name. However,the Coronels sold the property to Catalina Mabanag, rescinded the contract with Alcaraz, andeventually e

sales -marianne consolidated notes (chapters 1-3)

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