sales (ust)

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SALES

SALES

Q:Whatisasale?

A: Sale is a contract where one party (seller)obligateshimselftotransfertheownershipofand

to deliver a determinate thing, while the other

party (buyer) obligates himself to pay for saidthing a price certain in money or its equivalent.

(Tolentino,p.1,2000ed.)

229UNIVERSITY OF SANTO TOMAS

F a c u l t a d d e D e r e c h o i v i l

ACADEMICSCHAIR:LESTERJAYALANE.FLORESIIVICECHAIRSFORACADEMICS:KARENJOYG.SABUGO&JOHNHENRYC.MENDOZAVICECHAIRFORADMINISTRATIONANDFINANCE:JEANELLEC.LEEVICECHAIRSFORLAYOUTANDDESIGN:EARLLOUIEM.MASACAYAN&THEENAC.MARTINEZ

I.INTRODUCTION

A.DEFINITIONOFTHECONTRACTOFSALE

Q:Whatisacontractofsale?

A:Bythecontractofsale,oneofthecontractingparties obligates himself to transfer the

ownershipofandtodeliveradeterminate thing,

and the other to pay therefor a price certain in

moneyoritsequivalent.(Art.1458,NCC)

KINDSOFSALES

Q:Whatarethedifferentkindsofsales?

A:Asto:1. Natureofthesubjectmatter:

a. Saleofrealproperty;

b. Saleofpersonalproperty

2. Valueofthethingsexchanged:

a. Commutativesale;

b. Aleatorysale

3. Whether the object is tangible or

intangible:

a. Sale of property (tangible or

corporeal);

Note:Atangibleobject isalsocalledchoseinpossession

b. Sale of a right (assignment of a

right, or a credit or other

intangibles such as copyright,

trademark,orgoodwill);

Note: An intangible object is achoseinaction.

4. Validityordefectofthetransaction:

a. Valid

b. Rescissible

c. Voidable

d. Unenforceable

e. Void

5. Legalityoftheobject:

a. Licitobject

b. Illicitobject

6. Presenceorabsenceofconditions:

a. Absolute

b. Conditional

7. Wholesaleorretail:

a. Wholesale

b. Retail

8. Proximateinducement

for

the

sale:

a. Salebydescription

b. Salebysample

c. Salebydescriptionandsample

9. Whenthepriceistendered:

a. Cashsale

b. Saleoninstallmentplan

ASTOPRESENCEORABSENCEOFCONDITION

ABSOLUTESALE

Q:Whenisasaleabsolute?

A: The sale is absolute where the sale is notsubject to any condition whatsoever and where

thetitlepassestothebuyerupondeliveryofthe

thingsold.(DeLeon,p.15)

Q:Whenisadeedofsaleconsideredabsoluteinnature?

A:Adeedofsaleisconsideredabsoluteinnaturewhere there is neither a stipulation in the deed

that title to the property sold is reserved in the

selleruntilthefullpaymentoftheprice,norone

givingthevendortherighttounilaterallyresolve

the

contract

the

moment

the

buyer

fails

to

paywithinafixedperiod.

CONDITIONALSALE

Q:Whenisasaleconditional?

A:Itisconditionalwherethesalecontemplatesacontingency,andingeneral,wherethecontractis

subject to certain conditions, usually in the case

of the vendee, the full payment of the agreed

purchasepriceandinthecaseofthevendor,the

fulfillmentofcertainwarranties.(DeLeon,p.15)

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Q: Distinguish a conditional sale from an

absolutesale

230CIVILLAWTEAM:

ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;

ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.

FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

A:

CONDITIONALSALE ABSOLUTESALE

Onewheretheselleris

grantedthe

right

to

unilaterallyrescindthe

contractpredicatedon

thefulfillmentornon

fulfillment,asthecase

maybe,ofthe

prescribedcondition.

Onewherethetitleto

thepropertyisnot

reservedto

the

seller

or

ifthesellerisnot

grantedtherightto

rescindthecontract

basedonthefulfillment

ornonfulfillment,asthe

casemaybe,ofthe

prescribedcondition.

Contractexecuted

betweenthesellerand

thebuyer

Contracts,firstthe

contracttosell(whichis

conditionalor

preparatorysale)and

second,thefinaldeedof

saleortheprincipal

contractwhichis

executedafter

full

paymentofthepurchase

price

Q:Whatistheeffectofthenonperformanceof

the condition or if the condition did not take

place?

A: Where the obligation of either party to a

contractofsale issubjecttoanyconditionwhich

is not performed, such party may refuse to

proceed with the contract or he may waive

performance of the condition. Unlike in a non

fulfillmentofawarrantywhichwouldconstitutea

breachof

the

contract,

the

non

happening

of

the

condition, although it may extinguish the

obligationuponwhich it isbased,generallydoes

notamounttoabreachofacontractofsale.

Q:Inasalewithassumptionofmortgage,isthe

assumption of mortgage a condition without

which there will be no perfected contract of

sale?

A:Yes.Insaleswithassumptionofmortgage,the

assumption of mortgage is a condition to the

sellers consent so that without approval by the

mortgagee, no sale is perfected (Ramosv.Court

ofAppeals,G.R.No.108294Sept.15,1997)

B.ESSENTIALREQUISITES

OFACONTRACTOFSALE

Q:Whataretheelementsofacontractofsale?

A:ANE

1. Accidental elements dependent on

partiesstipulations;

Examples:

a. Conditions

b. Interest

c. time&placeofpayment

d. penalty

2. Natural elements those that are

inherent even in absence of contrary

provision.

E.g.warranties

3. Essentialelementsforvalidity:

a. Consent

b. Determinatesubjectmatter

c. Consideration

Q:Whatistheeffectand/orconsequenceofthe

absenceofconsentoftheownerinacontractof

saleofsaidproperty?

A: The contract of sale is void. One of the

essentialrequirementsofavalidcontractofsale

istheconsentoftheowneroftheproperty.

FORMALITIESREQUIRED

Q:Isthereaformalrequirementforthevalidity

ofacontractofsale?

A:

GR: No form is required. It is a consensual

contract.(Pineda,p.78)

XPN: Under Statute of Frauds, the following

contractsmustbe inwriting;otherwise, they

shallbeunenforceable:

1. Saleofpersonalpropertyatapricenot

lessthanP500;

2. Sale of a real property or an interest

therein;

3. Sale of property not to be performed

withinayearfromthedatethereof;

4. When

an

applicable

statute

requires

thatthecontractofsalebe inacertain

form.(Art.1403,par.2)

Note: Statute of Frauds applies only to executory

contracts but not to partially executed contracts.

(Pineda,p.81)

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SALES

Q: Are there instances where the Statute ofFrauds is not essential for the validity of acontractofsale?

A:Yes.1. When there is a note or memorandum

inwritingandsubscribedtobytheparty

orhis

agent

(contains

essential

terms

of

thecontract);

2.

When there has been partial

performance/execution (seller delivers

with the intent to transfer title/receives

price);

3. When there has been failure to object

to presentation of evidence aliunde as

to the existence of a contract without

beinginwritingandwhichiscoveredby

theStatuteofFrauds;

4. When sales are effected through

electroniccommerce.(Villanueva,p.92)




C.STAGES

OF

A

CONTRACT

OF

SALE

Q: What are the 3 stages involved in theformationofacontractofsale?

A:1. Negotiation/Policitation

2. Perfection

3. Consummation

1.NEGOTIATION/PREPARATORY

A.OFFER

Q:Whataretherulesintheconceptionstageabout

the

offer?

A:

OFFERISFLOATEDANDITIS:

RULE

Offerisfloated

Priortoacceptance,maybe

withdrawnatwillbyofferorbutno

authoritytomodifyit

Withaperiod

Mustbeacceptedwithintheperiod,

otherwise,extinguishedattheendof

periodandmaybewithdrawnatwill

byofferorbutmustnotbearbitrary,

otherwise,liable

for

damages

Withacondition

Extinguishedbyhappening/non

happeningofcondition

withoutperiod/

condition

Continuestobevaliddependingupon

circumstancesoftime,placeand

person

Withacounter

offer

Originalofferisextinguished

B.OPTIONCONTRACT

Q:Whatisanoptioncontract?

A: A contract granting a privilege in one person,forwhichhehaspaidaconsideration,whichgives

him the right to buy certain merchandise or

specified

property,

from

another

person,

at

anytimewithintheagreedperiod,atafixedprice.

Note: Consideration in an option contract may beanything or undertaking of value, unlike in sale

whereitmustbeapricecertaininmoney.

Q:Whatisthenatureofanoptioncontract?

A:It isapreparatorycontract inwhichonepartygrants to another, for a fixed period and at a

determined price, the privilege to buy or sell, or

todecidewhetherornottoenterintoaprincipal

contract. It binds the party who has given the

option not to enter into the principal contract

with

any

other

person

during

the

period

designated,andwithin that period, toenter into

suchcontractwiththeonewhomtheoptionwas

granted, if the latter should decide to use the

option.Itisaseparateanddistinctcontract.

Note:Iftheoptionisperfected,itdoesnotresultinthe perfection or consummation of the sale. (Diaz,

p.7)

Q:Whatistheperiodwithinwhichtoexercisetheoption?

A:

1.

Withinthe

term

stipulated

2.

Ifthere isnostipulation,thecourtmay

fixtheterm

Notes:Anactionforspecificperformancetoenforcetheoptiontopurchasemustbefiledwithin10years

fromthetimethecauseofactionaccrues.

The implied renewal of the lease on a monthto

monthbasisdidnothavetheeffectofextendingthe

life of the option to purchase which expired at the

endoftheoriginalleaseperiod.Thelessoriscorrect

inrefusingtosellonthegroundthattheoptionhad

expired.(2001BarQuestion)

Q:How

is

an

option

exercised?

A:Anoticeofacceptancemustbecommunicatedtoofferorevenwithoutactualpaymentaslongas

paymentisdeliveredintheconsummationstage.

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Q:Whatistheeffectofaseparateconsideration

inanoptioncontract?

A:

1. Withseparateconsideration:

a. Contractisvalid

b. Offeror cannot withdraw offer

untilafter

expiration

of

the

option

c. Issubject torescission&damages

butnotspecificperformance

2. Withoutseparateconsideration:

a. theoptioncontract isnotdeemed

perfected

b. offer may be withdrawn at any

timepriortoacceptance

Note: However, even though the option was not

supported by a consideration, the moment it was

accepted,contractofsaleisperfected.(Art.1324)

Q:

What

is

the

effect

of

acceptance

and

withdrawaloftheoffer?

A: If the offer had already been accepted and

such acceptance has been communicated to

before the withdrawal is communicated, the

acceptance creates a perfected contract, even if

noconsiderationwasasyetpaidfortheoption.

Inwhichcase,iftheofferordoesnotperformhis

obligationsundertheperfectedcontract,heshall

be liable for all consequences arising from the

breach thereof based on any of the available

remedies such as specific performance, or

rescissionwith

damages

in

both

cases.

C.RIGHTOFFIRSTREFUSAL

Q:Whatistherightoffirstrefusal?

A: It is a right of first priority, all things and

conditionsbeingequal; identityofthetermsand

conditions offered to the optionee and all other

prospective buyers, with optionee to enjoy the

rightoffirstpriority.Itcreatesapromisetoenter

into a contract of sale and it has no separate

consideration.

Note:A

deed

of

sale

executed

in

favor

of

a3rd

party

who cannot be deemed a purchaser in good faith,

and which is in violation of the right of first refusal

grantedtotheoptioneeisvalidbutrescissible. (Arts.

1380,1381[1])

232

Q: NDCandFirestoneenteredintoacontractof

leasewherein it isstipulatedthatFirestonehas

the right of first refusal to purchase the leased

property "should lessor NDC decide to sell the

same. After the rumor that NDC will transfer

thelottoPUP,Firestoneinstitutedanactionfor

specific performance to compel NDC to sell the

property

in

its

favor.

PUP

moved

to

intervene

arguing that the Memorandum issued by then

President Aquino ordered the transfer of the

whole NDC compound to the Government,

which in turn would convey it in favor of PUP.

CanFirestoneexerciseitsrightoffirstrefusal?

A: Yes. It is a settled principle in civil law that

when a lease contract contains a right of first

refusal, the lessor is under a legal duty to the

lessee not to sell to anybody at any price until

afterhehasmadeanoffertoselltothelatterata

certainpriceandthelesseehasfailedtoacceptit.

The lesseehasaright that the lessor's first offer

shallbe

in

his

favor.

(PUP

v.

CA,

G.R.

No.

143513,

Nov.14,2001)

Q: In a 20year lease contract over a building,

the lessee is expressly granted a right of first

refusalshouldthe lessordecidetosellboththe

land and building. However, the lessor sold the

propertytoathirdpersonwhoknewaboutthe

lease and in fact agreed to respect it.

Consequently,thelesseebringsanactionagainst

both the lessorseller and the buyer (a) to

rescind the sale and (b) to compel specific

performance of his right of first refusal in the

sense that the lessor should be ordered to

execute

a

deed

of

absolute

sale

in

favor

of

the

lessee at the same price. The defendants

contend that the plaintiff can neither seek

rescission of the sale nor compel specific

performance of a "mere" right of first refusal.

Decidethecase.

A:

a. Theaction filed by the lessee, for both

rescission of the offending sale and

specificperformanceoftherightoffirst

refusal which was violated, should

prosper.Therulingin(EquatorialRealty

Development, Inc. v. Mayfair Theater,

Inc.,G.R.

No.

106063,

Nov.

21,

1996),

a

case with similar facts, sustains both

rightsofactionbecausethebuyerinthe

subsequent sale knew the existence of

rightoffirstrefusal,hence,inbadfaith.

b. The action to rescind the sale and to

compeltherightoffirstrefusalwillnot

prosper. (Ang YuAsuncion v. CA, G.R.

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SALES

No. 109125, Dec. 2, 1994). The court

ruledthattherightoffirstrefusalisnot

foundeduponacontractbutonaquasi

delictual relationship covered by the

principlesofhumanrelationsandunjust

enrichment (Art19,et seq.CivilCode).

Hence,theonlyactionthatwillprosper

according

to

the

Supreme

Court

is

an

action for damages in a proper forum

forthepurpose.(1998BarQuestion)

Note:Theofferofthepersoninwhosefavortherightoffirstrefusalwasgivenmustconformwiththesame

termsandconditionsasthosegiventotheofferee.

Q:AndresleasedhishousetoIrisforaperiodof2years,attherateofP25,000monthly,payableannuallyinadvance.Thecontractstipulatedthatit may be renewed for another 2year periodupon mutual agreement of the parties. ThecontractalsograntedIristherightoffirstrefusal

topurchase

the

property

at

any

time

during

the

lease, if Andres decides to sell the property atthe same price that the property is offered forsaletoathirdparty.Twentythreemonthsafterexecutionofthe leasecontract,Andressoldthehousetohismotherwhoisnotathirdparty.IrisfiledanactiontorescindthesaleandtocompelAndres to sell the property to her at the sameprice. Alternatively, she asked the court toextend the lease for another two years on thesameterms.

Q: Can Iris seek rescission of the sale of thepropertytoAndresmother?

A: Iris can seek rescission because pursuant toEquatorialRealtyCo.v.MayfairTheaterrescission

isareliefallowedfortheprotectionofoneofthe

contracting parties and even third persons from

all injury and damage the contract of sale may

causeortheprotectionofsomeincompatibleand

preferredright.




Q: Will the alternative prayer for extension oftheleaseprosper?

A:No,theextensionofthe leaseshouldbeuponthe mutual agreement of the parties. (2008 Bar

Question)

Q:Isitnecessarythattherightoffirstrefusalbeembodiedinawrittencontract?

A:Yes,thegrantofsuchrightmustbeclearandexpress.

Note:Itisapplicableonlytoexecutorycontractsandnot to contracts which are totally or partially

performed.

Ifaparticular form is requiredunder theStatuteof

Frauds: sale is valid & binding between the parties

butnotto3rd

persons.

Q:Maytherightoffirstrefusalbewaived?

A:Yes.Likeother rights, therightof firstrefusalmay be waived or when a party entered into a

compromiseagreement.(Diaz,p.55)

Q: Differentiate an option contract fromarightoffirstrefusal.

A:Anoptioncontractisapreparatorycontractinwhich one party grants to another, for a fixed

periodandatadeterminedprice,theprivilegeto

buy

or

sell,

or

to

decide

whether

or

not

to

enter

into a principal contract. It binds the party who

has given the option not to enter into the

principal contract with any other person during

theperioddesignated,andwithinthatperiod,to

enter intosuch contractwith theone whom the

optionwasgranted,ifthelattershoulddecideto

use the option. It is a separate and distinct

contract.

Inarightoffirstrefusal,whiletheobjectmaybe

determinate, the exercise of the right would be

dependent not only on the grantors eventual

intentiontoenter intoabindingjuridicalrelation

with

another

but

also

on

terms,

including

theprice,thatareyettobefirmedup.(Diaz,p.54)

OPTIONCONTRACT

RIGHTOFFIRSTREFUSAL

Principalcontract;

standsonitsown

Accessory;cannotstand

onitsown

Needs separate

consideration

Doesnotneedseparate

consideration

Subjectmatter&price

mustbevalid

Theremustbesubject

matterbutpricenot

important

Notconditional Conditional

Notsubject tospecific

performance

Subjecttospecific

performance

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D.POLICITATION/MUTUALPROMISETOBUY

ANDSELL/

Q:Whatispolicitation?

A: Policitation is defined as an unaccepted

unilateralpromisetobuyorsell.Thisproducesno

judicialeffect

and

creates

no

legal

bond.

This

is

a

mereoffer,andhasnotyetbeenconvertedintoa

contract. It covers the period from the time the

prospective contracting parties indicate interest

in the contract to the time the contract is

perfected.(Villanueva,p.6).

Q: Is there a legal bond already created in the

negotiationstage?

A: None. In negotiation (policitation) stage, the

offerisfloatedaswellastheacceptance.

2. PERFECTION

Q:Whenisacontractofsaledeemedperfected?

A:

GR: It is deemed perfected at the moment

there is meeting of minds upon the thing

which is theobject of thecontractandupon

theprice.(Art.1475,par.1)

XPN:Whenthesaleissubjecttoasuspensive

conditionbyvirtueoflaworstipulation.

Q: Spouses Raet and Mitra negotiated with

Gatusaboutthepossibilityofbuyinghisrightsto

certain

units

at

a

subdivision

developed

by

Phil

Ville for them to be qualified to obtain loans

fromGSIS.TheypaidanamountforwhichGatus

issued them receipts in her own name. GSIS

disapproved their loan application. PhilVille

advisedthemtoseekothersourcesoffinancing.

In the meantime, they were allowed to remain

inthesubjectpremises. Isthereaperfectedand

enforceable contract of sale or at least an

agreement to sell over the disputed housing

units?

234

A:None.Therewasnocontractofsaleperfected

between the private parties over the said

property,there

being

no

meeting

of

the

minds

as

toterms,especiallyonthepricethereof.Atbest,

only a proposed contract to sell obtained which

didnotevenripen intoaperfectedcontractdue

at the first instance to private respondents'

inability tosecureapprovalof theirGSIShousing

loans. As it were, petitioners and private

respondents have not hurdled the negotiation

phaseofacontract,which istheperiodfromthe

time the prospective contracting parties indicate

intereston thecontract to the time thecontract

comes into existence the perfection stage upon

the concurrence of the essential elements

thereof. (Sps. Raet& Sps.Mitra v. CA,G.R.No.

128016,Sept.17,1998)

Q: Severino executed two deeds when he sold

hisproperty

to

Henry

so

that

Henry

can

obtain

a

loanwithPhilamLife.HealsoauthorizedHenry

tofileanejectmentsuitagainstthe lesseesand

when the prayer for ejectment was granted,

Henrytookpossessionoftheproperty.Severino

now claims ownership over the property

claimingthatthesaleisfictitiousthereforethere

wasnosaletospeakof.IsSeverinoscontention

correct?

A:No.Thereisaperfectedcontractofsaledueto

the second deed of sale in this case. The basic

characteristic of an absolutely simulated or

fictitiouscontract isthattheapparentcontract is

notreally

desired

or

intended

to

produce

legal

effectsoralterthejuridicalsituationoftheparties

in any way. However, in this case, the parties

already undertook certain acts which were

directed towards fulfillment of their respective

covenantsundertheseconddeed,indicatingthat

they intended to give effect to their agreement.

Further, the fact thatSeverinoexecuted the two

deeds, primarily so that Henry could eject the

tenant and enter into a loan/mortgage contract

with Philam Life, is a strong indication that he

intendedtotransferownershipofthepropertyto

Henry.Forwhy(HernandoR.Penalosav.Severino

Santos,G.R.No.133749,Aug.23,2001)

Q: What is the effect of Severinos and Henrys

failure to appear before the notary public who

notarizedthedeed?

A: None. The nonappearance of the parties

beforethenotarypublicwhonotarizedthedeed

does not necessarily nullify nor render the

parties' transaction void ab initio. Article 1358,

NCConthenecessityofapublicdocumentisonly

forconvenience,notforvalidityorenforceability.

Whereacontractisnotintheformprescribedby

law,thepartiescanmerelycompeleachotherto

observe that form, once the contract has been

perfected.

Note: Contracts are obligatory in whatever form

they may have been entered into, provided all

essentialrequisitesarepresent.(Penalosav.Santos,

G.R.No.133749,Aug.23,2001)

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Q:Whenisanauctionsaleperfected?

A: A sale by auction is perfected when theauctioneerannouncesitsperfectionbythefallof

thehammer,orinothercustomarymanner.(Art.

1476,par.2)

Q:

Does

the

seller

have

the

right

to

bid

in

an

auctionsale?

A: Yes. The seller has the right to bid providedthatsuchrightwasreservedandnoticewasgiven

tothateffect.(Pineda,p.53)

Q:Whenisasaleofforeignexchangeconsideredperfected?

A: A sale of foreign exchange is consideredperfected from the moment the Bangko Sentral

ng Pilipinas authorizes the purchase, even if the

foreign bank has not yet honored the letter of

credit.(Pacific

Oxygen

and

Acetylene

Co.

v.

CentralBank,G.R.No.L21881,Mar.1,1968)

3.CONSUMMATION

Q: How does the consummation stage in acontractofsaletakeplace?

A: It takes place by the delivery of the thingtogetherwiththepaymentoftheprice.

Q: A and PDS Development Corp. executed acontracttosellaparcelof land.Adiedwithouthaving completed the installment on the

property.His

heirs

then

took

over

the

contract

tosellandassumedhisobligationsbypayingthesellingpriceofthelotfromtheirownfunds,andcompleted the payment. To whom should thefinalDeedofAbsoluteSalebeexecutedbyPDS?

A:Havingsteppedintotheshoesofthedeceasedwith respect to the said contract, and being the

oneswhocontinuedtopaytheinstallmentsfrom

their own funds, As heirs became the lawful

ownersofthesaidlotinwhosefavorthedeedof

absolute sale should have been executed by

vendor PDS. (Dawson v. Register of Deeds of

QuezonCity,G.R.No.120600Sept.22,1998)

235

D.OBLIGATIONSCREATED

OBLIGATIONSOFTHEBUYER

Q:Whataretheobligationsofthebuyer?

A:

1.

Paymentof

the

price

GR:Sellerisnotboundtodeliverunlessthepurchasepriceispaid

XPN: A period of payment has beenfixed

2. Acceptdeliveryofthingsold

3. Payforexpensesofdelivery

Note: A grace period granted the buyer in case offailure to pay is a right not an obligation. Non

payment would still generally require judicial or

extrajudicialdemandbeforedefaultcanarise.

Q:Whataretheotherobligationsofthebuyer?

A:1.

To take care of the goods without the

obligation to return, where the goods

are delivered to the buyer and he

rightfullyrefusestoaccept;

Note:Thegoodsinthebuyerspossessionareatthesellersrisk.

2.

To be liable as a depositary if he

voluntarilyconstitutedhimselfassuch;

3.

Topay interest for theperiodbetween

delivery of the thing and the payment

ofthe

price

in

the

following

cases:

a. shouldithavebeenstipulated;

b. shouldthethingsoldanddelivered

producesfruitsorincome;or

c. should he be in default, from the

time of judicial or extrajudicial

demand for the payment of the

price.

OBLIGATIONSOFTHESELLER

Q:Whataretheobligationsoftheseller?

A:DDTWTP

1.

Deliverthe

thing

sold;

2. Deliver fruits & accessions/accessoriesaccruingfromperfectionofsale;

3.

Transfertheownership;4.

Warranties;5.

Takecareofthething,pendingdelivery,withproperdiligence;

6. Payfortheexpensesofthedeedofsaleunless there is a stipulation to the

contrary

UNIVERSITY OF SANTO TOMAS



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236CIVILLAWTEAM:




E.CHARACTERISTICSOFACONTRACTOFSALE

Q: What are the characteristics of a contract of

sale?

A:

1.

Consensual

2. Bilateral

3. GR:Commutative

XPN: Aleatory In some contracts of

sale,whatonereceivesmay intimebe

greater or smaller than what he has

given.(Tolentino,p.2,2000ed)

4. Principal

5. Title and not a mode of acquiring

ownership

6. Onerous

7. Reciprocal

8. Nominate

Q: Is acontract of sale identified as suchbased

on the nomenclature given to the contract by

theparties?

A: No. Contracts are not defined by the parties

butbyprinciplesoflaw.Todeterminethenature

of thecontract, thecourtsarenotboundby the

name or title given to it by the contracting

parties. It is the intention of the parties which

controls. (Diaz, Law on Sales as expounded by

Jurisprudence,2006ed.,p.1)

Q: What are the factors to be considered in

determiningthe

nature

of

the

contract?

A:

1. Languageofthecontract

2. Conductofparties

F.DISTINCTIONSOFTHECONTRACTOFSALE

WITHOTHERCONTRACTS

Q:DistinguishSalefromthefollowing:

1.

Donation.

SALE DONATION

Onerous Gratuitous/onerous

Consensual

Formalcontract

LawonSales LawonDonation

2.

Barter

SALE BARTER

Considerationisgiving

ofmoneyaspayment

Considerationis

givingofathing

Ifconsiderationconsistspartyinmoney&partlyby

thinglookatmanifestintention;

IfintentionisnotclearArt.1468

Valueof

thing

is

equal

orlessthanamountof

money=Sale

Valueof

thing

is

more

thanamountofmoney=

Barter

Bothare governedbylawonsales

3.

AgencytoSell

SALE AGENCYTOSELL

Buyerpaysforprice

ofobject

Agentnotobligedtopay

forprice;must

accountforthe

proceedsofthesale.

Buyerbecomes

ownerof

thing

Principalremainsthe

ownerevenifthe

objectdelivered

to

agent

Sellerwarrants

Agentassumesnopersonal

liabilityaslongas

withinauthoritygiven

Notunilaterally

revocable

Mayberevoked

unilaterallyevenw/o

ground

Sellerreceivesprofit Agentnotallowedtoprofit

Realcontract Personalcontract

4.

DacionenPago

SALE DACIONENPAGO

Nopre

existing

creditContract

where

property

is

alienatedtoextinguishpre

existingcredit/debt

Buyerseller

relationshipNovatescreditordebtor

relationshipintosellerbuyer

5.

Lease

SALE LEASE

Obligationtoabsolutely

transferownershipof

thing

Useofthingisfor

specifiedperiodonly

withobligationto

return

ConsiderationisthepriceConsiderationisthe

rental

Sellerneedstobeownerof

thingtotransfer

ownership.

Note:Leasewithoptionto

buyreallyacontractof

salebutdesignatedas

leaseinname.

Lessorneednotbe

owner

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G. CONTRACTTOSELL

Q:Whatisacontracttosell?

A: It is one form of conditional sale where

ownership or title is retained by the seller until

thefulfillmentofapositivesuspensivecondition,

normally

the

payment

of

the

purchase

price

by

thebuyer inthemanneragreedupon.(Gomezv.

CA,et.al.,G.R.120747,Sept.21,2000)

Q:Distinguishacontracttosell fromacontractofsale.

A:




CONTRACTOFSALE CONTRACTTOSELL

Asregardstransferofownership

Ownershipistransferred

tothebuyerupon

deliveryoftheobjectto

him.

Note:Vendorhaslostandcannotrecoverownershipuntiland

unlessthecontractis

resolvedorrescinded

Ownershipis

transferreduponfull

paymentofthe

purchaseprice.

Note:Priortofullpayment,ownershipis

retainedbytheseller.

Astonumbersofcontractsinvolved

Thereisonlyone

contractexecuted

betweenthesellerand

thebuyer.

Therearetwocontracts:

1.Thecontracttosell

Note:Conditionalorpreparatorysale

2.Thedeedofabsolute

sale

Note:The

principal

contractisexecuted

afterfullpaymentofthe

purchaseprice.

Paymentasacondition

Nonpaymentofthe

priceisaresolutory

condition.Vendorloses

ownershipoverthe

propertyandcannot

recoverituntiland

unlessthecontractis

resolvedorrescinded.

Fullpaymentofthe

priceisapositive

suspensivecondition.

Note:Failuretofullypaythepriceisnota

breachbutanevent

thatpreventsthe

obligationofthevendor

toconveytitlefrom

becomingeffective.

Remedies

available

1. Specific

2. Performance

3. Rescission

4. Damages

1. Resolution

2. Damages

Q: Having agreed to sell property which theyinherited fromtheirfather,whichwasthenstillintheirfathersname, theCoronelsexecuteda

document entitled "Receipt of Down Payment"in favor of Alcaraz for the purchase of theirhouse and lot, with the condition that Ramonawill make a down payment upon execution ofthe document. The Coronels would then causethe transfer of the property in the name ofRamonaandwillexecuteadeedofabsolutesale

in

favor

of

Ramona.

Ramona

paid

the

downpayment as agreed. Is there a perfectedcontractofsaleoramerecontracttosell?

A:Theagreementcouldnothavebeenacontracttosellbecausethesellershereinmadenoexpress

reservation of ownership or title to the subject

parcelof land. The Coronels had already agreed

tosellthehouseandlottheyinheritedfromtheir

father, completely willing to transfer full

ownership of the subject house and lot to the

buyer if the documents were then in order.

However, the TCT was then still in the name of

theirfather,thatiswhytheycausedtheissuance

ofanew

TCT

in

their

names

upon

receipt

of

the

downpayment.AssoonasthenewTCT isissued

in their names, they were committed to

immediately execute the deed of absolute sale.

Onlythenwill theobligationof thebuyertopay

the remainder of the purchase price arise. This

suspensive condition was fulfilled. Thus, the

conditional contract of sale became obligatory,

the only act required for the consummation

thereof being the delivery of the property by

means of the execution of the deed of absolute

sale in a public instrument, which they

unequivocally committed themselves to do as

evidenced by the "Receipt of Down Payment."

(Coronel,et

al.

v.

CA,

G.R.

No.

103577,

Oct.

7,

1996)

Q: InsteadofexecutingadeedofAbsoluteSalein favor of Ramona, the Coronels sold theproperty to Catalina and unilaterally andextrajudicially rescinded the contract withRamona. Ramona then filed a complaint forspecific performance. Will Ramonas actionprosper?

A: Yes. Under Article 1187, the rights andobligations of the parties with respect to the

perfected contract of sale became mutually due

and

demandable

as

of

the

time

of

fulfillment

or

occurrence of the suspensive condition. Hence,

petitionersellers' act of unilaterally and

extrajudicially rescinding the contract of sale

cannot be justified, there being no express

stipulation authorizing the sellers to

extrajudicially rescind the contract of sale.

(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,

1996)

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Q:Whataretheinstanceswhenwhatisinvolved

isacontracttosell?

A:

1. Wheresubjectmatterisindeterminate

2. Saleoffuturegoods

3. Stipulation that deed of sale &

corresponding

certificate

of

sale

would

beissuedonlyafterfullpayment

238CIVILLAWTEAM:




II.PARTIESTOACONTRACTOFSALE

Q:Whoarethepartiestoacontractofsale?

A:

1. Selleronewhosellsandtransfersthe

thingandownershiptothebuyer

2. Buyer one who buys the thing upon

payment of the consideration agreed

upon

A.CAPACITY

OF

THE

PARTIES

Q:Whomayenterintoacontractofsale?

A:

GR: Anypersonwhohascapacitytocontract

or enter into obligations, may enter into a

contractofsale,whetheraspartyselleroras

partybuyer.

XPN:

1. Minors, insane and demented persons

anddeafmuteswhodonotknowhow

towrite

2. Persons

under

a

state

of

drunkenness

orduringhypnoticspell

3. Husband and wife sale by and

betweenspouses

Note:Contractsofsaleenteredbysuch legally

incapacitated persons are merely voidable,

subject to annulment or ratification. However,

the action for annulment cannot be instituted

by the person who is capacitated since he is

disqualified fromalleging the incapacityof the

personwithwhomhecontracts.

However,statusofprohibitedsalesbetween

spouses

is

not

merely

voidable,

but

null

and

void.

XPNtoXPN:

1. Where necessaries are sold and

delivered to a minor or other person

without capacity to act, he must pay a

reasonablepricetherefor.

2. Incaseofsalebetweenspouses:

a. whenaseparationofpropertywas

agreed upon in the marriage

settlements;or

b. when there has been a judicial

separation of property agreed

uponbetweenthem

B.ABSOLUTE

INCAPACITY

Q:Whoarethoseabsolutelyincapacitatedto

enterintoacontractofsale?

A:

1. Unemancipatedminors(Art.1327,NCC);

2. Insaneordementedpersons,anddeaf

mutes who do not know how to write

(Art.1327,NCC)

Q: May a capacitated person file an action for

annulment using as basis the incapacity of the

incapacitatedparty?

A: No. He is disqualified from alleging the

incapacityofthepersonwhomhecontracts(Art.

1397,NCC);

Q: In a defective contract, where such defect

consists in the incapacity of a party, does the

incapacitated party have an obligation to make

restitution?

A:

GR:heincapacitatedpersonisnotobligedto

makeanyrestitution.

XPN:insofarashehasbeenbenefitedbythe

thing

or

price

received

by

him.

(Art.1399,

NCC)

C.RELATIVEINCAPACITY

Q: Who are those relatively incapacitated to

enterintoacontractofsale?

A:

1. Spouses(Art.1490,NCC)

2. Agents, Guardians, Executors and

Administrators, Public Officers and

Employees, Court Officers and

Employees,

and

others

specially

disqualifiedbylaw.(Art.1491,NCC)

Note: Under Art. 1490 of the NCC, spouses cannot

sellpropertytoeachother,except:

a. When a separation of property was

agreedinthemarriagesettlements;or

b. Whentherehasbeenajudicialseparation

ofpropertyagreeduponbetweenthem.

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Q:Whatisthestatusofthefollowingcontractsofsale?

A:1.

Thatenteredintobyminors:

a. Merely voidable, subject to

annulmentorratification

b.

Action

for

annulment

cannot

be

instituted by the person who is

capacitatedsincehe isdisqualified

fromallegingthe incapacityofthe

person with whom he contracts

(withpartialrestitutioninsofaras

the minor is benefited) where

necessaries are sold anddelivered

toaminororotherpersonwithout

capacity to act, he must pay a

reasonableprice(Art.1489)

2. Saleby&betweenspouses(Art.1490):

a. Statusofprohibitedsalesbetween

spouses:

GR:Nullandvoid

XPN: In case of sale betweenspouses:

i.

When a separation of

property was agreed upon in

themarriagesettlements;or

ii.

When there has been a

judicialseparationofproperty

agreeduponbetweenthem

Reasons:

i.

Preventdefrauding

creditors

ii. Avoid situation where

dominant spouse takes

advantage over the weaker

spouse

iii. Avoid circumvention on

prohibition of donation

betweenspouses

b. Contractofsalewith3rd

parties:

GR: Under the law on sales, itwould seem that a spouse may,

without the consent of the other

spouse, enter into sales

transactions

in

the

regular

or

normalpursuitof their profession,

vocationortrade.(in relationwith

Art.73,FamilyCode)

XPN: Even when the propertyregimeprevailingwastheconjugal

partnership of gains, the Supreme

Courtheldthesalebythehusband

ofaconjugalpropertywithoutthe

consent of the wife is void, not

merely voidable under Art. 124 of

theFamily

Code

since

the

resulting

contract lack one of the essential

elements of full consent. (Guiang

v. CA, G.R. No. 125172, June 26,

1998)

3. Between Common Law Spouses also

nullandvoid.

In CalimlimCanullas v. Fortun, the

Court decided that sale between

common law spouses is null and void

because Art. 1490 prohibits sales

between spouses to prevent the

exercise

of

undue

influence

by

one

spouse over the other, as well as to

protectthe institutionofmarriage.The

prohibitionappliestoacouple livingas

husband and wife without the benefit

ofmarriage,otherwise,theconditionof

those incurred guilt would turn out to

be better than those in legal union.

(CalimlimCanullasv.Fortun,et.al.,G.R.

No.L57499,June22,1984)

But when the registered property has

beenconveyedsubsequentlytoathird

partybuyer ingoodfaithandforvalue,

then

reconveyance

is

no

longer

available to commonlawspouseseller,

since under the Torrens system every

buyer has a right to rely upon the title

ofhisimmediateseller.(Cruzv.CA,G.R.

No.120122,Nov.6,1997)

Q:Whohastherighttoassailthevalidityofthetransactionbetweenspouses?

A:Thefollowingaretheonlypersonswhocanquestionthesalebetweenspouses:

1. The heirs of either of thespouses who

havebeenprejudiced;

2.

Priorcreditors;

and

3. The State when it comes to the

paymentofthepropertaxesdueonthe

transactions

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Q:Whoarethepersonswithrelativeincapacitytobethevendeeinacontractofsale?

A:AGECOP

RELATIVELY

INCAPACITATEDTOBUYPROPERTIESINVOLVED STATUSOFSALE RATIFICATION

Agents

Propertyentrustedtothemfor

administrationorsale

XPN:Whenprincipalgavehis

consent

Voidable

Canberatifiedafterthe

inhibitionhasceased

Reason:theonlywrongthat

subsistsistheprivatewrong

totheward,principalor

estate;andcanbecondoned

bytheprivateparties

themselves

Guardian

Propertyofthewardduring

periodofguardianship

Note:Contractsenteredby

guardianinbehalfofwardare

rescissibleifwardsufferslesion

bymorethanofthevalueof

property.

Executorsand

administrators

Propertyoftheestateunder

administration

Courtofficersand

employees

Propertyand

rights

in

litigation

or

leviedupononexecutionbefore

thecourtundertheirjurisdictionVoid

Cannotberatified

Reason:Itisaprivatewrong.

(Villanueva,LawonSales,p.

3031)

Othersspecially

disqualifiedbylaw

Pubicofficersand

employees

PropertyoftheStateentrustedto

themforadministration

Note:Prohibitionsareapplicabletosalesinlegalredemption,compromisesandrenunciations.

InthecaseofRubiasv.Batiller(51SCRA120), itsoughttodeclarethedifference inthenullitybetweencontracts

enteredintobyguardians,agents,administratorsandexecutors,fromthecontractsenteredintobyjudges,judicial

officers,fiscalsandlawyers.

240CIVILLAWTEAM:




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D.SPECIALDISQUALIFICATIONS

Q:Whoarethosepersonsspeciallydisqualifiedbylawtoenterintocontractsofsale?

A:ALIENUnOS1.

ALIENswhoaredisqualifiedtopurchaseprivateagriculturallands(Art.XIISecs.3

&7)

2. Unpaid seller having a right of lien orhavingstoppedthegoods intransitu, is

prohibitedfrombuyingthegoodseither

directlyor indirectlyintheresaleofthe

same at public/private sale which he

maymake(Art.1533[5];Art.1476[4])

3.

The Officer holding the execution ordeputy cannot become a purchaser or

be interested directly or indirectly on

any purchase at an execution. (Sec. 21

Rule39,RulesofCourt)

4.

In

Sale

by

auction,

seller

cannot

bid

unless notice has been given that such

sale issubjecttoarighttobid inbehalf

oftheseller.(Art.1476)

Q: Atty. Leon G. Maquera acquired his clientspropertyaspayment forhis legal services,thensold it and as a consequence obtained anunreasonable high fee for handling his clientscase.Didhevalidlyacquirehisclientsproperty?

A: No. Article 1491 (5) of the New Civil Codeprohibits lawyers acquisition by assignment of

the clients property which is the subject of the

litigation

handled

by

the

lawyer.

Also,

under

Article 1492, the prohibition extends to sales in

legal redemption. (In Re: Suspension from the

Practiceof Law in the territoryofGuamofAtty.

LeonG.Maquera,B.M.No.793,July30,2004)

241

UNIVERSITY OF SANTO TOMAS



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III.SUBJECTMATTEROFSALE

242CIVILLAWTEAM:




A.REQUISITESOFAVALIDSUBJECTMATTER

Q:Whataretherequisitesofaproperobjectof

sale?

A:

1. Things

a. Determinateordeterminable

b. Lawful (licit),otherwisecontract is

void

c. Should not be impossible (within

thecommerceofmen)

2. Rights

GR:Mustbetransmissible.

XPN:

a. Futureinheritance

b. Service

cannot

be

the

object

of

sale. They are not determinate

things and no transfer of

ownershipisavailablebutitcanbe

theobjectofcertaincontractssuch

uas contract for a piece of work.

(Pineda,Sales,2002ed.,p.13)

Q:RodriguezfirstpurchasedaportionofaLotA

consisting of 345 square meters located in the

middle of Lot B, which has a total area of 854

square meters, from Juan. He then purchased

another portion of said lot. As shown in the

receipt, the late Juan received P500.00 from

Rodriguez

as

"advance

payment

for

theresidential lot adjoining hispreviouslypaid lot

onthreesidesexceptingonthefrontage.Juans

heirs now contests the validity of the

subsequent sale, alleging that the object is not

determinateordeterminable.Decide.

A:Theircontention iswithoutmerit.There isno

disputethatRodriguezpurchasedaportionofLot

Aconsistingof345squaremeters.Thisportionis

locatedinthemiddleofB,whichhasatotalarea

of 854 square meters, and is clearly what was

referred to in thereceiptas the"previouslypaid

lot."Sincethe lotsubsequentlysoldtoRodriguez

issaid

to

adjoin

the

"previously

paid

lot"

on

three

sides thereof, the subject lot is capable of being

determined without the need of any new

contract. The fact that the exact area of these

adjoiningresidentiallotsissubjecttotheresultof

asurveydoesnotdetractfromthefactthatthey

aredeterminateordeterminable.Concomitantly,

theobjectofthesale iscertainanddeterminate.

(Heirs of San Andres v. Rodriguez, G.R. No.

135634,May31,2000)

Note:Wherelandissoldforalumpsumandnotso

much per unit of measure or number, the

boundaries of the land stated in the contract

determinetheeffectsandscopeofthesale,notthe

areathereof.Thevendorsareobligatedtodeliverall

the land included within theboundaries, regardless

of whether the real area should be greater or

smaller

than

that

recited

in

the

deed.

This

is

particularly true where the area is described as

"humigitkumulang,"thatis,moreorless.(Semirav.

CA,G.R.No.76031,Mar.2,1994)

Q:Canrightsbetheobjectsofsale?

A: Yes,iftheyaretransmissible.(Art.1347)

B.PARTICULARKINDS

Q:Whatmaybeobjectsofsale?

A:

1. ExistingGoods owned/ possessed by

selleratthetimeofperfection

2. Future Goods goods to be

manufactured,raised,acquiredbyseller

after perfection of the contract or

whose acquisition by seller depends

uponacontingency(Art.1462)

Note: Sale of future goods is valid only as an

executory contract tobe fulfilled by the acquisition

&deliveryofgoodsspecified.

3. SaleofUndividedInterestorShare

a. Sole owner may sell an

undividedinterest.

(Art.

1463)

Ex.Afractionorpercentageof

suchproperty

b. Saleofanundividedshareina

specific mass of fungible

goods makes the buyer a co

owner of the entire mass in

proportion to the amount he

bought.(Art.1464)

c. A coowner cannot sell more

than his share (Yturralde v.

CA)

4. SaleofThingsinLitigation

a. Sale of things under litigation

isrescissibleifenteredintoby

the defendant , without the

approvalofthelitigantsorthe

court(Art.1381)

b. Norescissionisallowedwhere

the thing is legally in the

possession of a 3rd

person

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SALES

who did not acted in bad

faith.

5.

Things subject to Resolutory Condition.

Ex. Things acquired under legal or

conventional right of redemption, or

subjecttoreservatroncal.(Art.1465)

6.

Indeterminate Quantity of Subject

Matter

a.

The fact that the quantity is

not determinate shall not be

an obstacle to the existence

of the contract provided it is

possible to determine the

same, without need ofanew

contract.(Art.1349)




IV.OBLIGATIONOFTHESELLERTOTRANSFEROWNERSHIP

Q:Shouldthesellerbetheowneratthetimeofperfectionofthecontract?

A:GR:No.Sellermusthavetherighttotransferownership at the time of delivery or

consummation stage. He need not be the

owner at the time of perfection of the

contract.

XPN:Foreclosuresalewhereinthemortgagorshouldbetheabsoluteowner.

Q:

EJ

was

subjected

to

a

buybust

operation

where police officers posed to buy 500 pesosworth of S. She was then charged with aviolation of the Dangerous Drugs Act fortraffickingdrugs. EJusesasdefenseher lackofpossession of theobject of the sale. Would hercontentionfreeherfromliability?

A: No. Though she was not in possession of theobject of sale, Article 1459 merely requires that

the vendor must have the right to transfer

ownership of the object sold at the time of

delivery. In the case at bar, though Beth is not

the owner, she had the right to dispose of the

prohibited

drug.

Ownership

was

thereafter

acquireduponherdeliverytothemeninthealley

after her payment of the price. (People v.

Ganguso,G.R.No.115430,Nov.23,1995)

A.SALEBYAPERSONWHODOESNOTOWNTHETHINGSOLD

Q:What isthestatusofasalebyapersonwhodoesnotownthethingsubjectofthesale?

A:Itdependsuponthestageofthesale.

1.

Whenseller

is

not

owner

at

perfection

stagethesaleisvalid.

Ownershipofthesubjectmatterbythe

seller at this stage is not an essential

requirementforthevalidityofsale.Itis

necessary at the time of delivery.

Hence,avalidcontractofsalecancover

subjectmatterthatisnotyetexistingor

even a thing having only a potential

existence at the time of perfection; or

even a thing subject to a resolutory

condition.

Note:Ifthesellerlateracquirestitlethereto

anddelivers

it,

title

passes

by

operation

of

law.

2.

When seller is not owner at

consummationstage

a. Old view the contract of sale is

valid, but the transfer of title is

void. (MindanaoAcademy, Inc. v.

Yap, G.R. No. L17681, Feb. 26,

1965)

b. New view the sale by a non

owner of the subject property is

void instead of treating the

tradition/delivery aspect as having

no

effect

on

transferring

ownership to the buyer. (DBP v.

CA,G.R.No.110053,Oct.16,1995)

Note:Nemodatquodnonhabetyoucannotgivewhatyoudonothave,properly

applicabletotheconsummationofasale.

Q: What is the legal effect of sale by a nonowner?

A:GR: The buyer requires no better title to thegoods than the seller had; caveat emptor

(buyerbeware).

XPN:1. Estoppel when the owner of the

goods isbyhisconductprecludedfrom

denyingthesellersauthoritytosell

2. When the contrary is provided for in

recordinglaws

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3. When thesale ismadeunderstatutory

power of sale or under the order of a

courtofcompetentjurisdiction

244CIVILLAWTEAM:




4. When thesale ismade inamerchants

store in accordance with the Code of

Commerceandspeciallaws

5. When a person who is not the owner

sells

and

delivers

a

thing,

and

subsequentlyacquiredtitlethereto

6. When the seller has a voidable title

whichhasnotbeenavoidedatthetime

ofthesale

7. Salebycoownerofthewholeproperty

oradefiniteportionthereof

8. Specialrightsofunpaidseller

Q: What are the instances when the Civil Code

recognizessaleofthings notactuallyoralready

ownedbytheselleratthetimeofsale?

A:

1. Sale

of

a

thing

having

potential

existence(Art.1461,NCC)

2. Saleoffuturegoods(Art.1462,NCC)

3. Contract for the delivery at a certain

price of an article, which the seller in

the ordinary course of business

manufactures/procuresforthegeneral

market,whetherthesameisonhandat

thetimeornot(Art.1467,NCC)

B.SALEBYAPERONHAVINGAVOIDABLETITLE

Q:Whatistheeffectofasalemadebytheseller

withvoidabletitleovertheobject?

A:

1. Perfectionstage:validbuyeracquires

titleofgoods

2. Consummationstage:validIfthetitle

hasnotyetbeenavoidedatthetimeof

saleandthebuyermustbuythegoods

underthefollowingconditions:

a. Ingoodfaith

b. Forvalue

c. Withoutnoticeofsellersdefectof

title

EMPTIOREISPERATAE EMPTIOSPEI

Saleof

thing

having

potentialexistence

Saleof

mere

hope

or

expectancy

Uncertaintyisw/regard

toquantity&quality

Uncertaintyisw/regard

toexistenceofthing

Contractdealsw/future

thing

Contractdealsw/

presentthinghope

orexpectancy

Saleisvalidonlyifthe

expectedthingwill

exist.

Saleisvalideventhough

expectedthingdoes

notcomeinto

existenceaslongas

thehopeitselfvalidly

existed.(eg.lotto)

Note:ThepresumptionisEmptioReiSperatae

Q: Jose, as coowner, sold the entire land in

favor of his minor daughter, Ida. Alleging that

Jose

had

fraudulently

registered

it

in

his

name

alone, his sisters, sued him for recovery of 2/3

share of the property. Ida did not pay for the

land.Isthesalevalid?

A: No. Jose did not have the right to transfer

ownership of the entire property to petitioner

since2/3thereofbelongedtohissisters.Also,Ida

couldnothavegivenherconsenttothecontract,

being a minor at the time. Consent of the

contracting parties is among the essential

requisites of a contract, including one of sale,

absent which there can be no valid contract.

Moreover,Idaadmittedlydidnotpayanycentavo

for

the

property,

which

makes

the

sale

void.

Article1471oftheCivilCodeprovides:Iftheprice

issimulated,thesale isvoid,buttheactmaybe

shown to have been in reality a donation, or

someotheractorcontract.(Labagalav.Santiago,

G.R.No.132305,Dec.4,2001)

V.PRICE

A.MEANINGOFPRICE

Q:Whatisaprice?

A:

Price

signifies

the

sum

stipulated

as

the

equivalent of the thing sold and also every

incidenttakenintoconsiderationforthefixingof

thepriceputtothedebitofthebuyerandagreed

tobyhim.(Villanueva,p.52)

B. REQUISITESFORAVALIDPRICE

Q:Whataretherequisitesofprice?

A:Mustbe:

1. Real

2. Inmoneyoritsequivalent

3. Certain or ascertainable at the time of

theperfection

of

the

contract

C. HOWPRICEISDETERMINED

Q:Whenispricecertain?

A:

1. Ifthereisastipulation

2. If itbewithreference toanother thing

certain

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3. If the determination of the price is left

tothejudgmentofspecifiedperson(s)

4. By reference to certain fact(s) as

referredtoinArt.1472(Art.1469)

Note:Ifthepriceisbasedonestimates,itisuncertain.




D.GROSSINADEQUACYOFTHEPRICE

Q:Whatistheeffectofgrossinadequacyofprice?

A:GR:Itdoesnotaffectthevalidityofthesaleifitisfixedingoodfaithandwithoutfraud

XPN: CoRDS1.

If Consent is vitiated (may be annulledorpresumedtobeequitablemortgage)

2. If the parties intended a Donation or

someother

act/

contract

3.

Iftheprice isso lowastobeShockingtotheconscience

4.

If in theeventofResale,abetterpricecanbeobtained

Note:GR:Thevalidityofthesaleisnotnecessarilyaffectedwherethe lawgivestheownertherightto redeem

because the lesser the price, theeasier it is for the

ownertoeffectredemption.

XPN:Whilethereisnodisputethatmereinadequacyofthepricepersewillnotsetasideajudicialsaleof

real

property,

nevertheless,

where

the

inadequacy

of

the price ispurely shocking to the conscience, such

thatthemindrevoltsatitandsuchthatareasonable

manwouldneitherdirectlyor indirectlybe likelyto

consentto it,thesamewillbesetaside.(Cometav.

CA351SCRA294)

Q:Whatistheeffectifthepriceissimulated?

A:GR:Contractofsaleisvoid.

XPN:Theactmaybeshowntohavebeeninrealityadonationorsomeotheractor

contract.

Q:Whatisconsideredreasonableprice?

A:Generallythemarketpriceatthetimeandplacefixedbythecontractorbylawforthe

deliveryofthegoods.

Q: What is the effect on the contract of sale incase of a breach in the agreed manner ofpayment?

A:None.Itisnottheactofpaymentofpricethatdetermines the validity of a contract of sale.

Paymentof thepricehasnothingtodowith the

perfection

of

the

contract,

as

it

goes

into

the

performance of the contract. Failure to pay the

consideration is different from lack of

consideration. Failure to pay such results in a

righttodemandthefulfillmentorcancellationof

theobligationunderanexistingvalidcontract.On

theotherhand,lackofconsiderationpreventsthe

existence of a valid contract. (Sps. Bernardo

Buenaventura and ConsolacionJoaqui v. CA,GR

No.126376,Nov.20,2003)

Q:Ispaymentofthepurchasepriceessentialtotransferownership?

A:Unless

the

contract

contains

astipulation

that

ownershipof thethingsoldshallnotpass to the

purchaser until he has fully paid the price,

ownershipofthethingsoldshallbetransferredto

the vendee upon the actual or constructive

deliverythereof.(Diaz,p.48)

E.WHENNOPRICEISAGREEDUPONBYTHEPARTIES

Q:Whatistheeffectoffailuretodeterminetheprice?

A:1.

Wherecontract

is

executory

ineffective

2.

Where the thinghas beendelivered to

and appropriated by the buyer the

buyer must pay a reasonable price

therefore

Note: The fixing of the price cannot be left to thediscretionofoneoftheparties.However,iftheprice

fixedbyoneofthepartiesisacceptedbytheother,

thesaleisperfected.

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F.MANNEROFPAYMENT

Q:What istheeffectofa breachof the agreed

mannerofpaymenttothecontractofsale?

246CIVILLAWTEAM:




A: None. A contract of sale being a consensual

contract, it becomes binding and valid upon the

meetingof

the

minds

as

to

price.

1. Ifthere issuchmeetingofthemindsas

to price, the contract of sale is valid,

despite the manner of payment, or

even the breach of that manner of

payment.

2. If the real price is not stated in the

contract, then the contract of sale is

validbutsubjecttoreformation.

3.

Ifthereisnomeetingofthemindsasto

thepricebecausethepricestipulatedin

the contract is simulated, then the

contract is void, in accordance with

Article 1471 of the Civil Code. (Sps.

Buenaventurav.

CA,

G.R.

No.

126376,

Nov.20,2003)

Note: A definite agreement on the manner of

paymentof theprice isanessentialelement in the

formation of a binding and enforceable contract of

sale.(Cov.CA,G.R.No.123908,Feb.9,1998)

Q: In an action for specific performance with

damages,Xallegedthattherewasanagreement

topurchasethe lotofY.Asregardsthemanner

of payment, however, Ys receipts contradicted

the testimony of X. The receipts failed to state

the total purchase price or prove that full

payment

was

made.

For

this

reason,

it

was

contended that there was no meeting of their

minds and there was no perfected contract of

sale.Decide.

A:Thequestion tobedeterminedshouldnotbe

whethertherewasanagreedprice,butwhatthat

agreed price was. The sellers could not render

invalid a perfected contract of sale by merely

contradictingthebuyersobligationregardingthe

price, and subsequently raising the lack of

agreement as to the price. (David v. Tiongson,

G.R.No.108169,Aug.25,1999)

Q: Distinguish the failure to pay the

considerationfromlackofconsideration.

A:

FAILURETOPAY

CONSIDERATION

LACKOF

CONSIDERATION

Astovalidityofcontractofsale

Itis

not

the

act

of

payment

ofpricethatdetermines

thevalidityofacontractof

sale.

Note:Paymentoftheprice

hasnothingtodowiththe

perfectionofthecontract.

Instead,itgoesintothe

performanceofthe

contract.

Lackofconsideration

preventsthe

existenceofavalid

contract.

Astoresultantright

Failuretopaythe

considerationresultsina

righttodemandthe

fulfillmentorcancellationoftheobligationunderan

existingvalidcontract.

Thecontractofsaleis

nullandvoidand

producesnoeffectwhatsoever

G.EARNESTMONEYVISAVISOPTIONMONEYY

OPTIONMONEY

Q:Whatistheeffectoffailuretodeterminethe

price?

A:

1. Where contract is executory

ineffective

2. Where the thing hasbeen delivered toand appropriated by the buyer the

buyer must pay a reasonable price

therefore

Note: The fixing of the price cannot be left to the

discretionofoneoftheparties.However,iftheprice

fixedbyoneoftheparties isacceptedbytheother,

thesaleisperfected.

Q:Whatisanoptionmoney?

A:Thedistinctconsideration incaseofanoption

contract. It does not form part of the purchase

price

hence,

it

cannot

be

recovered

if

the

buyer

didnotcontinuewiththesale.

Q:Whenispaymentconsideredoptionmoney?

A:Paymentisconsideredoptionmoneywhenitis

given as a separate and distinct consideration

from the purchase price. Consideration in an

option contract may be anything or undertaking

ofvalue.

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EARNESTMONEY

Q:Whatisanearnestmoneyorarras?

A: This is the money given to the seller by theprospectivebuyertoshowthatthe latter istruly

interestedinbuyingtheproperty,anditsaimisto

bindthe

bargain.

(Pineda,

p.

75)

Q: What is the effect of giving an earnestmoney?

A: Itformspartofthepurchasepricewhichmaybedeductedfromthetotalprice.Italsoservesas

aproofof theperfectionof the contractofsale.

The rule is no more than a disputable

presumption and prevails only in the absence of

contrary or rebuttable evidence. (PNBvCA,262

SCRA464,1996)

Note:Optionmoneymaybecomeearnestmoney if

theparties

so

agree.

Q: When is payment considered an earnestmoney?

A: When the payment constitutes as part of thepurchaseprice.Hence, incasewhenthesaledid

not happen, it must be returned to the

prospectivebuyer.

Q: Distinguish option money from earnestmoney.

A:




OPTIONMONEY

EARNEST

MONEY

Moneygivenas

distinct

considerationfor

anoptioncontract

Formspartofthe

purchaseprice

Appliestoasale

notyetperfected

Givenonlywhenthereis

alreadyasale

Prospectivebuyeris

notrequiredto

buy.

Whengiven,thebuyeris

boundtopaythe

balance.

Ifbuyerdoesnot

decidetobuy,it

cannotbe

recovered.

Ifsaledidnotmaterialize,

itmustbereturned.

(Villanueva,p.87,

Pineda,p.77)

Q: Bert offers to buy Simeon's property underthe following terms and conditions: P1 millionpurchaseprice, 10% option money, thebalancepayable in cash upon the clearance of theproperty of all illegal occupants. The optionmoney is promptly paid and Simeon clears thepropertyofallillegaloccupantsinnotimeatall.However, when Bert tenders payment of thebalance and asks for the deed of absolute sale,

Simeonsuddenlyhasachangeofheart,claimingthat the deal is disadvantageous to him as hehasfoundoutthatthepropertycanfetchthreetimes the agreed purchase price. Bert seeksspecific performance but Simeon contends thathe has merely given Bert an option to buy andnothing more and offers to return the option

moneywhich

Bert

refuses

to

accept.

1. Will Bert's action for specificperformanceprosper?Explain.

2. May Simeon justify his refusal toproceed with the sale by the fact thatthedeal is financiallydisadvantageoustohim?Explain.

A:1.

Bert's action for specific performance

will prosper because there was a

binding agreement of sale, notjust an

optioncontract.Thesalewasperfected

upon

acceptance

by

Simeon

of

10%

of

the agreed price. This amount is in

reality an earnest money which, under

Art. 1482, "shall be considered as part

of the price and as proof of the

perfection of the contract." (Topaciov.

CA, G.R. No. 102606, July 3, 1992;

VillongcoRealtyv.Bormaheco,G.R.No.

L26872,July25,1975).

2.

Simeon cannot justify his refusal to

proceed with the sale by the fact that

the deal is financially disadvantageous

to him. Having made a bad bargain is

not

a

legal

ground

for

pulling

out

of

a

bindingcontractofsale, intheabsence

ofsomeactionablewrongby theother

party (Vales v. Villa, G.R. No. 10028,

Dec.16,1916), and nosuchwronghas

been committed by Bert. (2002 BarQuestion)

VI.FORMATIONOFCONTRACTOFSALE

Note:seeIntroduction,StagesofContractofSalepp.230234

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VII.TRANSFEROFOWNERSHIP

248CIVILLAWTEAM:




A.MANNEROFTRANSFER

Q:Whatistheeffectofdelivery?

A:

GR:Title

/ownership

is

transferred

XPN: Contraryisstipulatedasinthecaseof:

1. Pactum reservatii in domini

agreement that ownership will remain

with seller until full payment of price

(Contracttosell);

2. Saleonacceptance/approval;

3. Saleonreturn;

4. There is implied reservation of

ownership;

Note:Sellerbearsexpensesofdelivery.

Q:

Spouses

Bernal

purchased

ajeepney

from

Union Motor to be paid in installments. They

thenexecutedapromissorynoteandadeedof

chattelmortgageinfavorofUnionMotorwhich

inturnassignedthe samewith JardineFinance.

Toeffectuatethesaleaswellastheassignment

of the promissory note and chattel mortgage,

the spouses were required to sign documents,

one of which was a sales invoice. Although the

Spouses have not yet physically possessed the

vehicle, Union Motors agent required them to

signthereceiptasaconditionforthedeliveryof

thevehicle.Itwasdiscoveredthatthesaidagent

stolethevehicleevenpriortoitsdeliverytothe

spouses.

Was

there

a

transfer

of

ownership

of

thesubjectvehicle?

A: No. The issuance of a sales invoice does not

prove transfer of ownership of the thing sold to

the buyer; an invoice is nothing more than a

detailed statement of the nature, quantity and

cost of the thing sold and has been considered

notabillofsale.

Theregistrationcertificatesignedbythespouses

does not conclusively prove that constructive

delivery was made nor that ownership has been

transferred to the respondentspouses. Like the

receipt

and

the

invoice,

the

signing

of

the

said

documentswasqualifiedbythefactthatitwasa

requirement of Union Motor for the sale and

financingcontracttobeapproved. Inallformsof

delivery, it is necessary that the act of delivery,

whether constructive or actual, should be

coupledwiththeintentionofdeliveringthething.

The act, without the intention, is insufficient.

Inasmuch as there was neither physical nor

constructive delivery of a determinate thing, (in

this case, the subject motor vehicle) the thing

sold remained at the sellers risk. The Union

Motor should therefore bear the loss of the

subject motor vehicle after its agent allegedly

stolethesame.(UnionMotorCorp.v.CA,G.R.No.

117187,July20,2001)

Q:How

may

the

buyer

accept

the

delivery

of

the

thingsold?

A:

1. Expresshe intimates tosellerthathe

hasaccepted

2. Implied

a. Buyer does not act inconsistent

with ownership of seller after

delivery

b. Retainswithoutintimatingtoseller

thathehasrejected

Q: What is the effect if the buyer refuses to

acceptdespite

delivery

of

the

object

of

the

sale?

A: Delivery is completed. Since delivery of the

subjectmatterofthesale isanobligationonthe

part of the seller, theacceptance thereofby the

buyer is notacondition for thecompletenessof

thedelivery.(Villanueva,p.117)

Note: Thus, even with such refusal of acceptance,

delivery (actual/constructive), will produce its legal

effects. (e.g. transferring the risk of loss of the

subject matter to the buyer who has become the

ownerthereof)(Villanueva,p.117)

UnderArt.

1588,

when

the

buyers

refusal

to

accept

the goods is without just cause, the title thereto

passes tohim from themoment they areplacedat

hisdisposal.(Villanueva,p.117)

Q: Ispaymentofthepurchasepriceessentialto

transferownership?

A:Unlessthecontractcontainsastipulationthat

ownershipof the thingsoldshallnotpass tothe

purchaser until he has fully paid the price,

ownershipofthethingsoldshallbetransferredto

the vendee upon the actual or constructive

deliverythereof.(Diaz,p.48)

Q: What are the effects of a sale of goods on

installment?

A:

1. Goods must be delivered in full except

whenstipulated

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2. Whennotexaminedbythebuyer it is

notaccepteduntilexaminedorat least

hadreasonabletimetoexamine

Q:Whenmaythebuyersuspendpaymentoftheprice?

A:

GR:1.

If he is disturbed in the possession or

ownershipofthethingbought

2.

If he has wellgrounded fear that his

possession or ownership would be

disturbed by a vindicatory action or

foreclosureofmortgage.

Note: These grounds are not exclusive. It canonly be exercised if the price or any part

thereofhasnotyetbeenpaidandthecontract

is not yet consummated. (Art. 1590) If the

disturbance iscausedby theexistenceofnon

apparentservitude,

the

remedy

is

rescission.

XPN:1. Sellergivessecurityforthereturnofthe

priceinapropercase;

2. A stipulation that notwithstanding any

suchcontingency,thebuyermustmake

payment;

3. Disturbance or danger iscausedby the

seller;

4.

If the disturbance is a mere act of

trespass;

5.

Uponfullpaymentoftheprice.




B.WHENDELIVERYDOESNOTTRANSFERTITLE

Q:Whendoesdeliverydoesnottransfertitle?

A:

1. SaleonTrial,Approval,orSatisfaction

2. When there is an EXPRESS

RESERVATION

a.

If it was stipulated that

ownership shall not pass to

the purchaser until he has

fullypaidtheprice(Art.1478)

3. When there is an IMPLIED

RESERVATION

a. a. When goods are shipped,

but the bill of lading states

that goods are deliverable to

the seller or his agent, or to

the order of the seller or his

agent

b. b. When the bill of lading is

retained by the seller or his

agent

c. c. when the seller of the

goodsdrawsonthebuyerfor

the price and transmits the

billofexchangeandthebillof

lading to the buyer , and the

latter does not honor the bill

of exchange by returning the

billof

lading

to

the

seller

4. WhensaleisnotVALID

5.

Whenthesellerisnottheownerofthe

goods

XPNs:a. Estoppel: when the owner is

precluded from denying the

sellersauthoritytosell

b.

Registered land bought in

good faith: Ratio: Buyer need

not go beyond the Torrens

title

c. OrderofCourts inaStatutory

Sale

d.

When

the

goods

are

purchased in a Merchants

store, Fair or Market (Art.

1505)

SALEONTRIAL,APPROVALORSATISFACTION

Q:Whatissaleontrial,approvalorsatisfaction?

A: It is a contract in the nature of an option topurchaseifthegoodsprovetobesatisfactory,the

approval of the buyer being a condition

precedent.

Q:

What

are

the

rules

in

case

of

sale

on

trial,

approvalorsatisfaction?

A:

Title Remainswithseller

RiskofLoss

GR:BornebysellerXPN:

1. Buyerisatfault

2. Buyeragreedto

beartheloss

Astotrial

GR:Buyermustgivegoodsatrial

XPN:Buyerneednotdosoifit

is

evident

that

it

cannot

performthework.

Whenperiodwithinwhichbuyer

mustsignifyhisacceptanceruns

Itrunsonlywhenalltheparts

essentialfortheoperationof

theobjecthasbeendelivered

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250CIVILLAWTEAM:




Validityof

stipulationthata

3rd

personmust

satisfyapprovalor

satisfaction

Valid,providedthe3rd

person

isingoodfath

Ifthesaleismade

toabuyerwhois

anexpert

on

the

objectpurchased

Generally,itcannotbe

consideredasale

on

approval

C.KINDSOFDELIVERY

Q:Whatarethedifferentkindsofdelivery?

A:

1. Actual thing sold is placed under the

controlandpossessionofbuyer/agent;

2. Constructivedoes notconferphysical

possession of the thing, but by

constructionoflaw,isequivalenttoacts

ofrealdelivery.

Requisites:

a. The seller must have control over

thething

b. The buyer must be put under

control

c. Theremustbe intention todeliver

the thing for purposes of

ownership

i. TradicionSymbolicadelivery

of certain symbols

representingthething

ii. Tradicion Instrumental

delivery

of

the

instrument

of

conveyance.

iii. Traditio Longa Manu

Delivery of thing by mere

agreement;whensellerpoints

to the property without need

ofactuallydelivering

iv. TradicionBreviManuBefore

contractofsale,thewouldbe

buyer was already in

possession of the wouldbe

subjectmatterofsale

v. ConstitutumPossessoriumat

the time of perfection of

contract,

seller

continues

to

have possession merely as a

holder

3. Quasitradition delivery of rights,

credits or incorporeal property, made

by:

a. Placing titles of ownership in the

handsofthebuyer;

b. Allowing buyer to make use of

rights

4. Tradition by operation of law

Execution of a public instrument is

equivalent to delivery. But to be

effective, it is necessary that the seller

have such control over the thing sold

that,at

the

moment

of

sale,

its

material

deliverycouldhavebeenmade.

GR:Thereispresumptionofdelivery

XPN:

a. Contrarystipulation;

b. When at the time of execution,

subject matter was not subject to

thecontrolofseller;

c. Sellerhasnocapacity to deliverat

timeofexecution;

d. Such capacity should subsist for a

reasonable time after execution of

instrument.

Note: Delivery should be coupled with intention of

delivering the thing, and acceptance on the part of

the buyer to give legal effect of the act. Without

suchintention,thereisnosuchtradition.

Q: Susan invested in commodity futures

trading in OCP, which involves the buying or

selling of a specified quantity and grade of a

commodity at a future date at a price

establishedatthe flooroftheexchange.Asper

termsofthetradingcontract,customer'sorders

shallbedirectlytransmittedbyOCPasbrokerto

itsprincipal,

Frankwell

Enterprises,

which

in

turn

mustplacethecustomer'sorderswiththeTokyo

Exchange. In this case, however, there is no

evidence of such transmission. When Susan

withdrew her investment, she was not able to

recover the entire amount. She thus filed a

complaintandthetrialcourtruled inher favor,

sayingthatthecontractisaspeciesofgambling

andthereforevoid.Isthecourtsrulingcorrect?

A:Yes.Atradingcontractisacontractforthesale

of products for future delivery, in which either

seller or buyer may elect to make or demand

delivery of goods agreed to be bought and sold,

but

where

no

such

delivery

is

actually

made.

In

this case, no actual delivery of goods and

commodity was intended and ever made by the

parties. In the realities of the transaction, the

parties merely speculated on the rise and fall in

thepriceofthegoods/commoditysubjectmatter

of the transaction. If Susans speculation was

correct, she would be the winner and OCP, the

loser,soOCPwouldhavetopayherthe"margin".

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But ifshewaswrong inherspeculationthenshe

wouldemergeas the loserandOCP, thewinner.

OCP would then keep the money or collect the

difference from her. This is clearly a form of

gambling provided for with unmistakable

certainty under Article 2018. (Onapal Phils.

Commodities,Inc.vs.CAandSusanChua,G.R.No.

90707,Feb.

1,

1993)

Note: Futures Commission Merchant/Broker refersto a corporation or partnership, which must be

registered and licensed as a Futures Commission

Merchant/Broker and is engaged in soliciting or in

accepting orders for the purchase or sale of any

commodity for future delivery on or subject to the

rulesofthecontractmarketandthat, inconnection

with such solicitation or acceptance of orders,

accepts any money, securities or property (or

extendscredit in lieu thereof)tomargin,guarantee

or secure any trade or contract that results ormay

resulttherefrom.

Q: Given that actual possession, control andenjoyment is a main attribute of ownership, issymbolicdeliverybymereexecutionofthedeedof conveyance sufficient to convey ownershipoverproperty?

A: Yes, possession is also transferred along withownership thereof by virtue of the deed of

conveyance. The mere execution of the deed of

conveyanceinapublicdocumentisequivalentto

the delivery of the property, prior physical

deliveryorpossession isnotlegallyrequired.The

deedoperatesasaformalorsymbolicdeliveryof

the

property

sold

and

authorizes

the

sales (ust)

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