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SALES REVIEWER

THERE ARE SALES WHICH ARE NOT CONSENSUAL BUT ARE VALID
I - DEFINITION
1. In cases of EXPROPRIATION. Under article 1488, the expropriation
of property for public use is governed by special laws.
2. 3 other kinds of sale under the law
ART. 1458 a. Ordinary Execution Sale
By the contract of sale one of the contracting parties obligates himself to RULE 39, Sec. 15, ROC, Notice of Sale of property on
transfer the ownership of and to deliver a determinate thing, and the other to execution
pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional. (1445a) b. Judicial Foreclosure Sale
RULE 68, ROC, Foreclosure of Real Estate Mortgage
The contract of sale is an agreement whereby one of the parties (called the
seller or vendor) obligates himself to deliver something to the other (called c. ExtraJudicial Foreclosure Sale
the buyer or purchaser or vendee) who, on his part, binds himself to pay ACT No. 3135 as Amended, An ACT TO REGULATE THE
therefor a sum of money or its equivalent (known as the price). SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN
OR ANNEXED TO REAL ESTATE MORGTAGES

II ESSENTIAL REQUISITES OF CONTRACT OF SALE OBJECT or SUBJECT MATTER


This refers to the determinate thing which is the object of the
contract.
Art. 1460 - A thing is determinate when it is particularly designated
REQUISITES OF A CONTRACT OF SALE or physical segregated from all other of the same class.
1. Consent or Meeting of Minds The requisite that a thing be determinate is satisfied if at the time the
2. Object or Subject Matter contract is entered into, the thing is capable of being made
3. Cause or Consideration determinate without the necessity of a new or further agreement
between the parties.
The thing must be determinate or at least capable of being made
determinate because if the seller and the buyer differ in regard to the
CONSENT thing sold, there is no meeting of the minds; therefore, there is no
sale
This refers to the consent on the part of the seller to transfer and Thing can either be personal or real property.
deliver and on the part of the buyer to pay. In Veterans Federation of the Philippines vs. Court of Appeals, 138
Under Arts 1489,1490, 1491 - The parties must have legal capacity SCAD 50, 345 SCRA 348 [2000], A buyer can only claim right of
to give consent and to obligate themselves. ownership over the object of the deed of sale and nothing else.
The essence of consent is the conformity of the parties on the terms Where the parcel of land described in the transfer certificate of title is
of the contract, the acceptance by one of the offer made by the not in its entirety the parcel sold, the court may decree that the
other. certificate of title be cancelled and a correct one be issued in favor of
The contract to sell is a bilateral contract. Where there is merely an the buyer, with- out having to require the seller to execute in favor of
offer by one party without the acceptance of the other, there is no the buyer an instrument to effect the sale and transfer of the property
consent (Salonga v. Farales) to the true owner.
The acceptance of payment by a party is an indication of his consent The sale of credits and other incorporeal rights is covered by Articles
to a contract of sale, thereby precluding him from rejecting its binding 1624 to 1635
effect. (Clarin vs. Rulova, 127 SCRA 512 [1984].)

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


TERMS USED IN THE LAW as SUBJECTS/OBJECT ART. 1475
The contract of sale is perfected at the moment there is a meeting of minds
Thing (Art. 1458) upon the thing which is the object of the contract and upon the price.
Article (Art. 1467) From that moment, the parties may reciprocally demand performance,
Goods (Art. 1462), subject to the provisions of the law governing the form of contracts.
Personal property (Art. 1484)
Property (Art. 1490), ART. 1191
Movable property (Art. 1498) The power to rescind obligations is implied in reciprocal ones, in case one of
Real estate (e.g., Art. 1539) the obligors should not comply with what is incumbent upon him.
Immovable (e.g., Ibid.) The injured party may choose between the fulfillment and the rescission of
Immovable property (e.g., Art. 1544) the obligation, with the payment of damages in either case. He may also
and real property. (Art. 1607.) seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.

CAUSE OR CONSIDERATION ART. 1403 (2) (the following must appear in a public document)
This refers to the price certain in money or its equivalent Those that do not comply with the Statute of Frauds as set forth in this
Such as a check or a prom- issory note, which is the consideration number. In the following cases an agreement hereafter made shall be
for the thing sold. unenforceable by action, unless the same, or some note or
It does not include goods or merchandise although they have their memorandum, thereof, be in writing, and subscribed by the party
own value in money. charged, or by his agent; evidence, therefore, of the agreement cannot
Interpretation of the word Equivalent be received without the writing, or a secondary evidence of its
In Republic vs. Phil. Resources Dev. Corp, the contents:
consideration need not be in money, so that there can be a sale
where the thing given as token of payment has been assessed and (a) An agreement that by its terms is not to be performed within a year
evaluated and [its] price equivalent in terms of money [has] been from the making thereof;
determined.
Art. 1471 - The price must be real, not fictitious; otherwise, the sale is (b) A special promise to answer for the debt, default, or miscarriage of
void although the transaction may be shown to have been in reality a another;
donation or some other contract.
David vs. Tiongson, 111 SCAD 242, 313 SCRA 63 [1999], A seller (c) An agreement made in consideration of marriage, other than a
cannot render invalid a perfected contract of sale by merely mutual promise to marry;
contradicting the buyers allegation regarding the price and
subsequently raising the lack of agreement as to the price. (d) An agreement for the sale of goods, chattels or things in action, at a
price not less than five hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the evidences, or some of
III- STAGES OF CONTRACT OF SALE them, of such things in action or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is made
ARTICLE 1315 by the auctioneer in his sales book, at the time of the sale, of the
Contracts are perfected by mere consent, and from that moment the parties amount and kind of property sold, terms of sale, price, names of the
are bound not only to the fulfillment of what has been expressly stipulated but purchasers and person on whose account the sale is made, it is a
also to all the consequences which, according to their nature, may be in sufficient memorandum;
keeping with good faith, usage and law. (1258)
(e) An agreement of the leasing for a longer period than one year, or for

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


the sale of real property or of an interest therein; thing, and the other to pay therefor a price certain in money or its
equivalent. A contract of sale may be absolute or conditional.
(f) A representation as to the credit of a third person Requisites for perfection of.The contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. From that moment, the
;
parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Consent. Consent is manifested by the meeting of the offer and
CASE DOCTRINES
the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute.
1. Polytechnic University of the Philippines v. Court of Appeals, 36
A qualified acceptance constitutes a counter-offer. An acceptance
SCRA 691 (2001)
may be express or implied.
A right of first refusal is neither amorphous nor merely preparatory
Acceptance which contains request for changes in offer but does not
and can be executed according to its terms. In contracts of sale, the
essentially change terms of offer does not constitute a counter-offer.
basis of the right of first refusal must be the current offer of the seller
It is true that an acceptance may contain a request for certain
to sell or the offer to purchase of the prospective buyer. Only after
changes in the terms of the offer and yet be a binding acceptance.
the grantee fails to exercise his right under the same terms and
So long as it is clear that the meaning of the acceptance is positively
within the period contemplated can the owner validly offer to sell the
and unequivocally to accept the offer, whether such request is
prop- erty to a third person, again, under the same terms as offered
granted or not, a contract is formed. The vendors change in a
to the grantee.
phrase of the offer to purchase, which change does not essentially
A contract of sale, as defined in the Civil Code, is a contract where
change the terms of the offer, does not amount to a rejection of the
one of the parties obligates himself to transfer the ownership of and
offer and the tender of a counter-offer.
to deliver a determinate thing to the other or others who shall pay
Payment of earnest money as part of price and as proof of perfection
therefore a sum certain in money or its equivalent;
of contract. The controlling fact is that there was agreement
The Civil Code provision on sale is, in effect, a catch-all provision
between the parties on the subject matter, the price and the mode of
which effectively brings within its grasp a whole gamut of transfers
payment and that part of the price was paid. Whenever earnest
whereby ownership of a thing is ceded for a consideration.
money is given in a contract of sale, it shall be considered as part of
A contract of sale, as defined in the Civil Code, is a contract where the price and as proof of the perfection of the contract.
one of the parties obligates himself to transfer the ownership of and
to deliver a determinate thing to the other or others who shall pay 3. Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602, December 2,
therefore a sum certain in money or its equivalent. 1994
It is therefore a general requisite for the existence of a valid and Among the sources of an obligation is a contract
enforceable contract of sale that it be mutually obligatory, i.e., there (Art. 1157, Civil Code), which is a meeting of minds between
should be a concurrence of the promise of the vendor to sell a two persons whereby one binds himself, with respect to the
determinate thing and the promise of the vendee to receive and pay other, to give something or to render some service (Art.
for the property so delivered and transferred. The Civil Code 1305, Civil Code).
provision is, in effect, a catchall provision, which effectively brings A contract undergoes various stages that include its
within its grasp a whole gamut of transfers whereby ownership of a negotiation or preparation, its perfection and, finally, its
thing is ceded for a consideration. consummation.
Negotiation covers the period from the time the prospective
2. Villonco Realty Company v. Bormaheco, Inc., 65 SCRA 352, July 25, contracting parties indicate interest in the contract to the time
1975 the contract is concluded (perfected).
By the contract of sale one of the contracting parties obligates The perfection of the contract takes place upon the
himself to transfer the ownership of and to deliver a determinate concurrence of the essential elements thereof. A contract
which is consensual as to perfection is so established upon a
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
mere meeting of minds, i.e., the concurrence of offer and provides that [w]hen one of the parties is unable to read, or if the
acceptance, on the object and on the cause thereof. A contract is in a language not understood by him, and mistake or
contract which requires, in addition to the above, the delivery fraud is alleged, the person enforcing the contract must show that the
of the object of the agreement, as in a pledge terms thereof have been fully explained to the former. In this case,
or commodatum, is commonly referred to as a real contract. as private respondent is the one seeking to enforce the claimed
In a solemn contract, compliance with certain formalities contract of sale, she bears the burden of proving that the terms of the
prescribed by law, such as in a donation of real property, is agreement were fully explained to Fortunato Ape who was an
essential in order to make the act valid, the prescribed form illiterate. This she failed to do. While she claimed in her testimony
being thereby an essential element thereof. that the contents of the receipt were made clear to Fortunato, such
The stage of consummation begins when the parties perform allegation was debunked by Andres Flores himself when the latter
their respective undertakings under the contract culminating took the witness stand.
in the extinguishment thereof.
In sales, the contract is perfected when the seller obligates 5. Torcuator v. Bernabe, 459 SCRA 439, June 8, 2005
himself, for a price certain, to deliver and to transfer The differences between a contract to sell and a contract of sale are
ownership of a thing or right to the buyer, over which the well-settled in jurisprudence. As early as 1951, we held that in a
latter agrees.Until the contract is perfected, it cannot, as contract of sale, title passes to the buyer upon delivery of the thing
an independent source of obligation, serve as a binding sold, while in a contract to sell, ownership is reserved in the seller
juridical relation. In sales, particularly, to which the topic for and is not to pass until the full payment of the purchase price is
discussion about the case at bench belongs, the contract is made. In the first case, non-payment of the price is a negative
perfected when a person, called the seller, obligates himself, resolutory condition; in the second case, full payment is a positive
for a price certain, to deliver and to transfer ownership of a suspensive condition. Being contraries, their effect in law cannot be
thing or right to another, called the buyer, over which the identical. In the first case, the vendor has lost and cannot recover the
latter agrees. ownership of the land sold until and unless the contract of sale is
itself resolved and set aside. In the second case, however, the title
remains in the vendor if the vendee does not comply with the
4. vda. De Ape v. Court of Appeals, 456 SCRA 193, April 15, 2005 condition precedent of making payment at the time specified in the
contract. In other words, in a contract to sell, ownership is retained
A contract of sale is a consensual contract, thus, it is perfected by by the seller and is not to pass to the buyer until full payment of the
mere consent of the parties. It is born from the moment there is a price or the fulfillment of some other conditions either of which is a
meeting of minds upon the thing which is the object of the sale and future and uncertain event the non-happening of which is not a
upon the price. Upon its perfection, the parties may reciprocally breach, casual or serious, but simply an event that prevents the
demand performance, that is, the vendee may compel the transfer of obligation of the vendor to convey title from acquiring binding force
the ownership and to deliver the object of the sale while the vendor
may demand the vendee to pay the thing sold. For there to be a 6. Ace Foods, Inc. vs. Micro Pacific Technologies Co. Ltd., GR No.
perfected contract of sale, however, the following elements must be 200602, December 11, 2013
present: consent, object, and price in money or its equivalent.
Contracts; Illiteracy; When one of the parties is unable to read, or if A contract of sale is classified as a consensual contract, which
the contract is in a language not understood by him, and mistake or means that the sale is perfected by mere consent. No particular form
fraud is alleged, the person enforcing the contract must show that is required for its validity. Upon perfection of the contract, the parties
the terms thereof have been fully explained to the former.In this may reciprocally demand performance, i.e., the vendee may compel
jurisdiction, the general rule is that he who alleges fraud or mistake in transfer of ownership of the object of the sale, and the vendor may
a transaction must substantiate his allegation as the presumption is require the vendee to pay the thing sold. In contrast, a contract to
that a person takes ordinary care for his concerns and that private sell is defined as a bilateral contract whereby the prospective seller,
dealings have been entered into fairly and regularly. The exception while expressly reserving the ownership of the property despite
to this rule is provided for under Article 1332 of the Civil Code which delivery thereof to the prospective buyer, binds himself to sell the

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


property exclusively to the prospective buyer upon fulfillment of the heir of the rest of the property will not affect the rights of the other
condition agreed upon, i.e., the full payment of the purchase price. A heirs who did not consent to the sale. Such sale is void with respect
contract to sell may not even be considered as a conditional contract to the shares of the other heirs. Regardless of their agreement,
of sale where the seller may likewise reserve title to the property Enrique could only convey to Marietta his undivided one-fourth share
subject of the sale until the fulfillment of a suspensive condition, of the property, and Marietta could only acquire that share. This is
because in a conditional contract of sale, the first element of consent because Marietta obtained her rights from Enrique who, in the first
is present, although it is conditioned upon the happening of a place, had no title or interest over the rest of the property that he
contingent event which may or may not occur. could convey.

7. Heirs of Gregorio Lopez, vs., Development Bank Of The 8. Dizon vs. Court of Appeals, G.R. No. 122544. January 28, 1999
Philippines [Now Substituted By Philippine Investment Two Sale is a consensual contract and he who alleges it must
(SPVAMC), Inc.], Respondents, G.R. No. 193551, November 19, show its existence by competent proof.Under Article
2014 1475 of the New Civil Code, the contract of sale is
perfected at the moment there is a meeting of minds
Sales; A seller can only sell what he or she owns, or that which he or upon the thing which is the object of the contract and
she does not own but has authority to transfer, and a buyer can only upon the price. From that moment, the parties may
acquire what the seller can legally transfer.We have consistently reciprocally demand performance, subject to the
upheld the principle that no one can give what one does not have. provisions of the law governing the form of contracts.
A seller can only sell what he or she owns, or that which he or she Thus, the elements of a contract of sale are consent,
does not own but has authority to transfer, and a buyer can only object, and price in money or its equivalent. It bears
acquire what the seller can legally transfer. This principle is stressing that the absence of any of these essential
incorporated in our Civil Code. It provides that in a contract of sale, elements negates the existence of a perfected contract
the seller binds himself to transfer the ownership of the thing sold, of sale. Sale is a consensual contract and he who
thus: Art. 1458. By the contract of sale, one of the contracting parties alleges it must show its existence by competent proof.
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent. The seller cannot perform this obligation if 9. Ainza v. Padua, 462 SCRA 614, June 30, 2005
he or she does not have a right to convey ownership of the thing. *NOTE THAT THE STATUS OF THE CONTRACT without THE
Hence, Article 1459 of the Civil Code provides: Art. 1459. The thing CONSENT of the other spouse under the civil code, is
must be licit and the vendor must have a right to transfer the VOIDABLE. In the new family code, sale without the consent of
ownership thereof at the time it is delivered. the other spouse is VOID.
any sale by one heir of the rest of the property will not affect the The sale made by Gimena is certainly a defective
rights of the other heirs who did not consent to the sale. Such sale is contract but of what category? The answer: it is a
void with respect to the shares of the other heirs.The heirs cannot voidable contract.
alienate the shares that do not belong to them. Article 493 of the Civil According to Art. 1390 of the Civil Code, among the
Code provides: Art. 493. Each co-owner shall have the full ownership voidable contracts are [T]hose where one of the parties
of his part and of the fruits and benefits pertaining thereto, and he is incapable of giving consent to the contract. (Par. 1.)
may therefore alienate, assign or mortgage it, and even substitute In the instant case Gimena had no capacity to give
another person in its enjoyment, except when personal rights are consent to the contract of sale. The capacity to give
involved. But the effect of the alienation or the mortgage, with consent belonged not even to the husband alone but to
respect to the co-owners, shall be limited to the portion which may be both spouses.
allotted to him in the division upon the termination of the co- The view that the contract made by Gimena is a voidable
ownership. Since Enriques right to the property was limited to his contract is supported by the legal provision that contracts
one-fourth share, he had no right to sell the undivided portions that entered by the husband without the consent of the wife when
belonged to his siblings or their respective heirs. Any sale by one such consent is required, are annullable at her instance during
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
the marriage and within ten years from the transaction In reciprocal obligations, neither party incurs in delay if the
questioned. other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other
begins.
IV - CHARACTERISTICS OF A CONTRACT OF SALE

Art. 1191 the power to rescind obligations is implied in


A. NOMINATE - it is given a special name or designa- tion in the Civil
reciprocal ones, in case one of the obligors should not
Code, namely, sale comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
B. CONSENSUAL
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
ART. 1475 - The contract of sale is perfected at the moment after he has chosen fulfillment, if the latter should become
there is a meeting of minds upon the thing which is the
impossible.
object of the contract and upon the price.
The court shall decree the rescission claimed, unless there
From that moment, the parties may reciprocally demand
be just cause authorizing the fixing of a period.
performance, subject to the provisions of the law governing
This is understood to be without prejudice to the rights of
the form of contracts
third persons who have acquired the thing, in accordance
It is perfected by mere consent with- out any further act with Articles 1385 and 1388 and the Mortgage Law. (1124)

C. BILATERAL and RECIPROCAL


both the contracting parties are bound to fulfill correlative
obligations towards each other the seller, to deliver and
transfer ownership of the thing sold and the buyer, to pay the
price;
Art. 1458 - By the contract of sale one of the contracting D. ONEROUS
parties obligates himself to transfer the ownership and to The thing sold is conveyed in considera- tion of the price and
deliver a determinate thing, and the other to pay therefor a vice versa
price certain in money or its equivalent. A contract of sale Art. 1350 - in onerous contracts the cause is understood to
may be absolute or conditional. be, for each contracting party, the prestation or promise of a
Art 1169 - Those obliged to deliver or to do something incur thing or service by the other; in remuneratory ones, the
in delay from the time the obligee judicially or extrajudicially service or benefit which is remunerated; and in contracts of
demands from them the fulfillment of their pure beneficence, the mere liberality of the benefactor.
obligation.However, the demand by the creditor shall not be
necessary in order that delay may exist:
E. COMMUTATIVE
(1) When the obligation or the law expressly so declare; or Because the thing sold is considered the equivalent of
(2) When from the nature and the circumstances of the the price paid and vice versa. However, the contract may
obligation it appears that the designation of the time when 2
the thing is to be delivered or the service is to be rendered be aleatory as in the case of the sale of a hope (e.g.,
was a controlling motive for the establishment of the sweepstakes ticket);
contract; or ART. 2010 - By an aleatory contract, one of the parties
(3) When demand would be useless, as when the obligor or both reciprocally bind themselves to give or to do
has rendered it beyond his power to perform. something in consideration of what the other shall give
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
or do upon the happening of an event which is uncertain, CONDITIONAL SALE CONTRACT TO SELL
or which is to occur at an indeterminate time. (1790)
In URSAL v. CA,

The fulfilment of the suspensive The fulfilment of the suspensive


condition renders the sale condition, which is the full payment of
absolute and affects the sellers the price, will not automatically
F. PRINCIPAL title thereto such that if there was transfer ownership to the buyer
previous delivery of the property, although the property may have been
the sellers ownership or title the previously delivered to him.
It does not depend for its existence and validity upon another
property is automatically
contract.
transferred to the buyer.

ART. 1488 (ONE OF THE SALES BY WHICH CONSENT IS NOT


V - KINDS OF SALE NECESSARY BUT RENDERS IT VALID)
The expropriation of property for public use is governed by special
laws. (1456)
ART. 1458 (2)
A contract of sale may be absolute or conditional. (1445a) ART. 1544 (IN CASES OF DOUBLE SALE)
If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.

ABSOLUTE SALE CONDTIONAL SALE Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Sale is not subject to any Contract is subject to certain Property.
condition whatsoever; conditions (usually the payment of
the purchase price); Should there be no inscription, the ownership shall pertain to the
Title passes to the buyer upon person who in good faith was first in the possession; and, in the
delivery of thing sold Title will only pass once the absence thereof, to the person who presents the oldest title, provided
conditions have been fulfilled there is good faith. (1473)

ART. 1403 (UNENFORCEABLE CONTRACTS)


The following contracts are unenforceable, unless they are ratified:
*Court makes finer distinctions between CONDITIONAL SALE and
CONTRACT TO SELL (1) Those entered into in the name of another person by one
who has been given no authority or legal representation, or who

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


has acted beyond his powers; MACEDA LAW: R.A. 6552
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
(2) Those that do not comply with the Statute of Frauds as set INSTALLMENT PAYMENTS.
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the Section 1. This Act shall be known as the "Realty Installment Buyer
same, or some note or memorandum, thereof, be in writing, and Act."
subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the Section 2. It is hereby declared a public policy to protect buyers of real
writing, or a secondary evidence of its contents: estate on installment payments against onerous and oppressive
conditions.
(a) An agreement that by its terms is not to be performed
within a year from the making thereof; Section 3. In all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential
(b) A special promise to answer for the debt, default, or condominium apartments but excluding industrial lots, commercial
miscarriage of another; buildings and sales to tenants under Republic Act Numbered Thirty-
eight hundred forty-four, as amended by Republic Act Numbered Sixty-
(c) An agreement made in consideration of marriage, three hundred eighty-nine, where the buyer has paid at least two years
other than a mutual promise to marry; of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred (a) To pay, without additional interest, the unpaid installments
pesos, unless the buyer accept and receive part of such due within the total grace period earned by him which is hereby
goods and chattels, or the evidences, or some of them, fixed at the rate of one month grace period for every one year of
of such things in action or pay at the time some part of installment payments made: Provided, That this right shall be
the purchase money; but when a sale is made by exercised by the buyer only once in every five years of the life
auction and entry is made by the auctioneer in his sales of the contract and its extensions, if any.
book, at the time of the sale, of the amount and kind of
property sold, terms of sale, price, names of the (b) If the contract is canceled, the seller shall refund to the
purchasers and person on whose account the sale is buyer the cash surrender value of the payments on the property
made, it is a sufficient memorandum; equivalent to fifty per cent of the total payments made, and,
after five years of installments, an additional five per cent every
(e) An agreement of the leasing for a longer period than year but not to exceed ninety per cent of the total payments
one year, or for the sale of real property or of an interest made: Provided, That the actual cancellation of the contract
therein; shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
(f) A representation as to the credit of a third person. contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
(3) Those where both parties are incapable of giving consent to
a contract. Down payments, deposits or options on the contract shall be included
in the computation of the total number of installment payments
made.lawphi1

Section 4. In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty days
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
from the date the installment became due. INSTALLMENTS:
1. SPECIFIC PERFORMANCE
If the buyer fails to pay the installments due at the expiration of the Cancellation of sale: If vendee fails to pay 2 or more
grace period, the seller may cancel the contract after thirty days from installments.
receipt by the buyer of the notice of cancellation or the demand for 2. When the seller cancels the sale by repossessing the property
rescission of the contract by a notarial act. sold, he is barred from exacting payment for its price.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell 3. FORECLOSURE OF CHATTEL MORTGAGE: IF BUYER FAILS TO
his rights or assign the same to another person or to reinstate the PAY 2 or MORE INSTALLMENTS.
contract by updating the account during the grace period and before If seller chooses this remedy, he shall have no further
actual cancellation of the contract. The deed of sale or assignment action to recover any unpaid balance, and any
shall be done by notarial act. stipulation to the contrary shall be void.
Motors vs. Sapinoso, (1970): What Art 1484 (3) prohibits
is further action against the purchaser to recover any
Section 6. The buyer shall have the right to pay in advance any
unpaid balance of the price; and although this Court
installment or the full unpaid balance of the purchase price any time
has construed the word action to mean any judicial
without interest and to have such full payment of the purchase price
or extrajudicial proceeding by virtue of which the vendor
annotated in the certificate of title covering the property.
may lawfully be enabled to exact recovery of the
supposed unsatisfied balance of the purchase price
Section 7. Any stipulation in any contract hereafter entered into from the purchaser or his privy, there is no occasion at
contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and this stage to apply the restrictive provision of the said
void. article because there has not yet been a foreclosure sale
resulting in a deficiency. The payment of the sum of
Section 8. If any provision of this Act is held invalid or unconstitutional, P1,250 of Sapinoso was a voluntary act on his part and
no other provision shall be affected thereby.lawphi1 did not result from a further action instituted by
Northern Motors.
Section 9. This Act shall take effect upon its approval.

Bachrach Motor Co., Inc. v. Millan, (1935): Purpose of


the law is to remedy the abuses committed in
foreclosure of chattel mortgages. It prevents
mortgagees from seizing the mortgaged property,
buying it at foreclosure sale for a low price and then
bringing the suit against the mortgagor for a deficiency
RECTO LAW- Special rule for sale of movables by installments judgment. The almost invariable result of this procedure
was that the mortgagor found himself minus the
This law covers contracts of sale of personal property by installments property and still owing practically the full amount of his
(Act No. 4122). It is also applied to contracts purporting to be leases of original indebtedness.
personal property with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing. (PCI Leasing and
Finance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July
12, 2007) Nonato vs. IAC (1985): Remedies are ALTERNATIVE, not
cumulative, i.e. exercise of one bars exercise of the
REMEDIES OF THE SELLER IF THE BUYER DOES NOT PAY 2 others

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


paragraph of article 1498 shall govern. In any other case wherein said
provisions are not applicable, the placing of the titles of ownership in
the possession of the vendee or the use by the vendee of his rights,
**MACEDA LAW IS BASED ON ARTICLE 1484 1486 with the vendor's consent, shall be understood as a delivery. (1464)

ART. 1484
In a contract of sale of personal property the price of which is payable CASE DOCTRINES:
in installments, the vendor may exercise any of the following remedies:
1. McCullough v. Berger, 43 Phil 823, September 26, 1922
(1) Exact fulfillment of the obligation, should the vendee fail to
pay;
EXECUTORY CONTRACT.'Where by a writing made in Manila B
guaranteed "the arrival of the tobacco in New York in good condition," and at
(2) Cancel the sale, should the vendee's failure to pay cover two
the time the tobacco was in transit on the high seas and by its terms the
or more installments; tobacco was to be delivered and received in New York, the contract was
executory and the title to it did not pass until after the arrival of the tobacco in
(3) Foreclose the chattel mortgage on the thing sold, if one has New York.
been constituted, should the vendee's failure to pay cover two
or more installments. In this case, he shall have no further SALE WAS NOT COMPLETE.Although the contract was made in Manila,
action against the purchaser to recover any unpaid balance of under the facts shown, articles 336 and 342 of the Code of Commerce do not
the price. Any agreement to the contrary shall be void. (1454-A- apply. The contract was executory and the sale was not complete until after
a) "the arrival of the tobacco in New York in good condition."

CONDITION PRECEDENT.Where under the terms of a contract made in


ART. 1485 Manila the defendant was to deliver "the tobacco in New York in good
The preceding article shall be applied to contracts purporting to be condition" at which time the plaintiff should pay the contract price, "the arrival
leases of personal property with option to buy, when the lessor has of the tobacco in New York in good condition" was a condition precedent to
deprived the lessee of the possession or enjoyment of the thing. (1454- the completion of the sale.
A-a)

ART. 1486 2. Dichoso v. Roxas, 5 SCRA 781, July 31, 1962


In the case referred to in two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee Sales; Assignment of right to repurchase and sale of same land to
shall be valid insofar as the same may not be unconscionable under the another; Paragraph 3, Article 1544, Civil Code, not applicable.The
circumstances. (n) provisions of paragraph 3, Article 1544 of the Civil Code of the
Philippines, do not apply to a case where the sale in favor of one party
was of the property itself, while the transaction in favor of another was
either a mere promise to assign or, at most, an actual assignment of the
right to repurchasethe same property.
ART. 1477
The ownership of the thing sold shall be transferred to the vendee upon
3. Luzon Brokerage v. Maritime Building, 43 SCRA 93, January 21,
the actual or constructive delivery thereof. (n)
1972
ART. 1501 (SIR ASKED THIS IN CLASS) Conditional sale; Default in payment of installments; Bad faith.The action
With respect to incorporeal property, the provisions of the first of Maritime in suspending payments to Myers Corporation was a breach of
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
contract tainted with fraud or malice (dolo), as distinguished from mere the right to collect the monthly rentals due on the first door (13-A) of the said
negligence (culpa), dolo being succinctly defined as a conscious and apartment; The above-cited provision characterizes the agreement between
intentional design to evade the normal fulfillment of existing obligations and the parties as a contract to sell, not a contract of sale. Ownership is retained
therefore incompatible with good faith. Maritime having acted in bad faith, it by the vendors, the Portics; I twill not be passed to the vendee, the
was not entitled to ask the court to give it further time to make pay ment and Cristobals, until the full payment of the purchase price. Such payment is a
thereby erase the default or breach that it had deliberately incurred. To positive suspensive condition, and failure to comply with it is not a breach of
extend the periods for payment would be to sanction a deliberate and obligation; it is merely an event that prevents the effectivity of the obligation
reiterated infringement of the contractual obligations incurred by Maritime, an of the vendor to convey the title. In short, until the full price is paid, the
attitude repugnant to the stability and obligatory force of contracts. vendor retains ownership.

Failure to pay not a casual breach of sale contract.In contracts to sell,


where ownership is retained by the seller and is not to pass until the full pay
ment of the price, such pay ment is a positive suspensive condition, the
failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding 5. Heirs of Jesus M. Mascunana v. Court of Appeals, 461 SCRA 186,
force, in accordance with Article 1117 of the Old Civil Code. To argue that June 23, 2005
there was only a casual breach is to proceed from the assumption that the
contract is one of absolute sale, where non-pay ment is a resolutory The condition in the deed that the balance of P1,000.00 shall be paid to the
condition. vendor by the vendee as soon as the property sold shall have been surveyed
in the name of the vendee and all papers pertinent and necessary to the
Article 1592 of the Civil Code of the Philippines inapplicable to case at bar. issuance of a separate certificate of title in the name of the vendee shall have
The appellant overlooks that its contract with appellee Myers is not the been prepared is not a condition which prevented the efficacy of the contract
ordinary sale envisaged by Article 1592, transferring ownership of sale. It merely provides the manner by which the total purchase price of
simultaneously with the delivery of the real property sold, but one in which the property is to be paid. The condition did not prevent the contract from
the vendor retained ownership of the immovable object of the sale, merely being in full force and effect: The stipulation that the payment of the full
undertaking to convey it provided the buy er strictly complied with the terms consideration based on a survey shall be due and payable in five (5) years
of the contract. In suing to recover possession of the building from Maritime, from the execution of a formal deed of sale is not a condition which affects
appellee Myers is not after the resolution or setting aside of the contract and the efficacy of the contract of sale. It merely provides the manner by which
the restoration of the parties to the status quo, as contemplated by Article the full consideration is to be computed and the time within which the same is
1592, but precisely enforcing the provisions of the agreement that it is no to be paid. But it does not affect in any manner the effectivity of the contract.
longer obligated to part with the ownership or possession of the property
because Maritime failed to comply with the specified condition precedent, In a a contract to sell, ownership is retained by a seller and is not to be
which is to pay the installment as they fell due. transferred to the vendee until full payment of the price. Such payment is a
positive suspensive condition, the failure of which is not a breach of contract
but simply an event that prevented the obligation from acquiring binding
4. Portic v. Cristobal, 456 SCRA 577, April 22, 2005 force. It bears stressing that in a contract of sale, the non-payment of the
price is a resolutory condition which extinguishes the transaction that, for a
In a contract to sell ownership is retained by the vendor and it will not be time, existed and discharges the obligation created under the transaction. A
passed to the vendee until full payment of the purchase price.The claim of seller cannot unilaterally and extrajudicially rescind a contract of sale unless
respondent cannot be sustained. The transfer of ownership of the premises there is an express stipulation authorizing it. In such case, the vendor may
in her favor was subject to the suspensive condition stipulated by the parties file an action for specific performance or judicial rescission.
in paragraph 3 of the MOA, which states as follows: 3. That while the
balance of P155,000.00 has not yet been fully paid the FIRST PARTY 6. Ursal v. Court of Appeals, 473 SCRA 52, October 14, 2005
OWNERS shall retain the ownership of the above described parcel of land
together with its improvements but the SECOND PARTY BUYER shall have

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


A contract to sell is a bilateral contract whereby the prospective seller, while Conditional Contracts of Sale; In a conditional contract of sale, if the
expressly reserving the ownership of the subject property despite delivery suspensive condition is fulfilled, the contract of sale is thereby perfected,
thereof to the prospective buyer, binds himself to sell the said property such that if there had already been previous delivery of the property subject
exclusively to the prospective buyer upon fulfillment of the condition agreed of the sale to the buyer, ownership thereto automatically transfers to the
upon, that is, full payment of the purchase price. In such contract, the buyer by operation of law without any further act having to be performed by
prospective seller expressly reserves the transfer of title to the prospective the seller.In a conditional contract of sale, if the suspensive condition is
buyer, until the happening of an event, which in this case is the full payment fulfilled, the contract of sale is thereby perfected, such that if there had
of the purchase price. What the seller agrees or obligates himself to do is to already been previous delivery of the property subject of the sale to the
fulfill his promise to sell the subject property when the entire amount of the buyer, ownership thereto automatically transfers to the buyer by operation of
purchase price is delivered to him. Stated differently, the full payment of the law without any further act having to be performed by the seller.
purchase price partakes of a suspensive condition, the non-fulfillment of Whereas in a contract to sell, upon fulfillment of the suspensive condition,
which prevents the obligation to sell from arising and thus, ownership is ownership will not automatically transfer to the buyer although the property
retained by the prospective seller without further remedies by the prospective may have been previously delivered to him. The prospective seller still has to
buyer. convey title to the prospective buyer by entering into a contract of absolute
sale.
Same; Same; Same; Contracts to Sell distinguished from Contracts of
Sale.Ownership in contracts to sell is reserved by the vendor and is not to
pass to the vendee until full payment of the purchase price, while in contracts 8. Sacobia Hills Devt Corp. v. Ty, 470 SCRA 395, September 20,
of sale, title to the property passes to the vendee upon the delivery of the 2005
thing sold. In contracts of sale the vendor loses ownership over the property
and cannot recover it unless and until the contract is resolved or rescinded, In a contract to sell, the payment of purchase price is a positive
while in contracts to sell, title is retained by the vendor until full payment of suspensive condition, the failure of which is not a breach, casual or serious,
the price. In contracts to sell, full payment is a positive suspensive condition but a situation which prevents the obligation of the vendor to convey title from
while in contracts of sale, non-payment is a negative resolutory condition. acquiring an obligatory force; Upon fulfillment of the suspensive condition,
A contract to sell may further be distinguished from a conditional contract of ownership will not automatically transfer to the buyer although the property
sale, in that, the fulfillment of the suspensive condition, which is the full may have been previously delivered to himthe prospective seller still has to
payment of the purchase price, will not automatically transfer ownership to convey title to the prospective buyer by entering into a contract of absolute
the buyer although the property may have been previously delivered to him. sale.Since the agreement between Sacobia and Ty is a contract to sell, the
The prospective vendor still has to convey title to the prospective buyer by full payment of the purchase price partakes of a suspensive condition, the
entering into a contract of absolute sale. While in a conditional contract of non-fulfillment of which prevents the obligation to sell from arising and
sale, the fulfillment of the suspensive condition renders the sale absolute and ownership is retained by the seller without further remedies by the buyer.
affects the sellers title thereto such that if there was previous delivery of the In Cheng v. Genato, we explained the nature of a contract to sell and its legal
property, the sellers ownership or title to the property is automatically implications in this wise: In a Contract to Sell, the payment of the purchase
transferred to the buyer. Indeed, in contracts to sellthe obligation of the seller price is a positive suspensive condition, the failure of which is not a breach,
to sell becomes demandable only upon the happening of the suspensive casual or serious, but a situation that prevents the obligation of the vendor to
condition, that is, the full payment of the purchase price by the buyer. It is convey title from acquiring an obligatory force. It is one where the happening
only upon the existence of the contract of sale that the seller becomes of the event gives rise to an obligation. Thus, for its non-fulfillment there will
obligated to transfer the ownership of the thing sold to the buyer. Prior to the be no contract to speak of, the obligor having failed to perform the
existence of the contract of sale, the seller is not obligated to transfer the suspensive condition which enforces a juridical relation. In fact with this
ownership to the buyer, even if there is a contract to sell between them. circumstance, there can be no rescission of an obligation that is still non-
existent, the suspensive condition not having occurred as yet. Emphasis
should be made that the breach contemplated in Article 1191 of the New Civil
Code is the obligors failure to comply with an obligation already extant, not a
7. Carrascoso, Jr. v. Court of Appeals, 477 SCRA 666, December 14, failure of a condition to render binding that obligation. In a contract to sell, the
2005 prospective seller does not consent to transfer ownership of the property to

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


the buyer until the happening of an event, which for present purposes, is the money or its equivalent.We disagree with the RTC and the Court of
full payment of the purchase price. What the seller agrees or obliges himself Appeals that the document is a perfected contract of sale. A contract of
to do is to fulfill his promise to sell the subject property when the entire sale is defined as an agreement whereby one of the contracting parties
amount of the purchase price is delivered to him. Upon the fulfillment of the obligates himself to transfer the ownership of and to deliver a
suspensive condition, ownership will not automatically transfer to the buyer determinate thing, and the other to pay therefore a price certain in money
although the property may have been previously delivered to him. The or its equivalent. It must evince the consent on the part of the seller to
prospective seller still has to convey title to the prospective buyer by entering transfer and deliver and on the part of the buyer to pay.
into a contract of absolute sale.
The fact that there is a stated total purchase price should not lead to the
Rescission; A non-existent obligation cannot be a subject of rescission.Ty conclusion that a contract of sale had been perfectedbefore a valid and
did not pay the full purchase price which is his obligation under the contract binding contract of sale can exist, the manner of payment of the purchase
to sell, therefore, it cannot be said that Sacobia breached its obligation. No price must first be established, as such stands as essential to the validity of
obligations arose on its part because respondents non-fulfillment of the the sale.The fact that there is a stated total purchase price should not lead
suspensive condition rendered the contract to sell ineffective and to the conclusion that a contract of sale had been perfected. In numerous
unperfected. Indeed, there can be no rescission under Article 1191 of the cases, the most recent of which is Swedish Match, AB v. Court of Appeals,
Civil Code because until the happening of the condition, i.e. full payment of we held that before a valid and binding contract of sale can exist, the manner
the contract price, Sacobias obligation to deliver the title and object of the of payment of the purchase price must first be established, as such stands as
sale is not yet extant. A non-existent obligation cannot be subject of essential to the validity of the sale. After all, such agreement on the terms of
rescission. Article 1191 speaks of obligations already existing, which may be payment is integral to the element of a price certain, such that a
rescinded in case one of the obligors fails to comply with what is incumbent disagreement on the manner of payment is tantamount to a failure to agree
upon him. on the price.

VI. SALES DISTINGUISHED FROM OTHER TRANSACTIONS


9. Keppel Bank V. Adao, 473 SCRA 372, October 19, 2005

Contract to Sell; Unlike in a contract of sale, in a contract to sell, there is A. DONATION


yet no actual sale nor any transfer of title, until and unless, full payment
is made.In this case, the contract to sell does not by itself give ART. 725
respondent the right to possess the property. Unlike in a contract of sale, Donation is an act of liberality whereby a person disposes gratuitously
here in a contract to sell, there is yet no actual sale nor any transfer of of a thing or right in favor of another, who accepts it. (618a)
title, until and unless, full payment is made. The payment of the purchase
price is a positive suspensive condition, the failure of which is not a
breach, casual or serious, but a situation that prevents the obligation of ART. 1471 PRICE IS SIMULATED
the vendor to convey title from acquiring an obligatory force. Respondent If the price is simulated, the sale is void, but the act may be shown to
must have fully paid the price to acquire title over the property and the have been in reality a donation, or some other act or contract.
right to retain possession thereof. In cases of non-payment, the unpaid
seller can avail of the remedy of ejectment since he retains ownership of
the property. IN COMPARISON:

SALE DONATION
10. Edrada v. Ramos, 468 SCRA 597, August 31, 2005 ONEROUS GRATUITIOUS
PERFECTED BY MERE MUST COMPLY WITH THE
A contract of sale is defined as an agreement whereby one of the CONSENT FOMALITIES REQUIRED BY LAW
contracting parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay the price certain in

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


B. BARTER ART. 1715
The contract shall execute the work in such a manner that it has the
ART. 1468 qualities agreed upon and has no defects which destroy or lessen its
If the consideration of the contract consists partly in money, and partly value or fitness for its ordinary or stipulated use. Should the work be
in another thing, the transaction shall be characterized by the manifest not of such quality, the employer may require that the contractor
intention of the parties. If such intention does not clearly appear, it shall remove the defect or execute another work. If the contract fails or
be considered a barter if the value of the thing given as a part of the refuses to comply with this obligation, the employer may have the
consideration exceeds the amount of the money or its equivalent; defect removed or another work executed, at the contractor's cost. (n)
otherwise, it is a sale.

ART. 1638 IN COMPARISON:


By the contract of barter or exchange one of the parties binds himself SALE CONTRACT OF PIECE OF WORK
to give one thing in consideration of the other's promise to give another Goods are manufactured or procured Goods are manufactured for
thing. (1538a) in the ordinary course of business customer upon his special order

ART. 1641
As to all matters not specifically provided for in this Title, barter shall For the general market, whether on Specifically for customer
be governed by the provisions of the preceding Title relating to sales. hand or not
(1541a)

IN COMPARISON: CASE DOCTRINES:


SALE BARTER
Consideration is price in money or its Consideration is another thing 1. Celestino & Co. v Collector, 99 Phil 841 (1956)
equivalent
The fact that the object were made by the seller only when customers placed
their orders, does not alter the nature of the contract of sale, for it only
accepted such orders as called for the employment of such materials as it
ordinarily manufactured or was in a position habitually to manufacture such.
C. CONTRACT OF PIECE OF WORK
2. Commissioner of Internal Revenue vs. Engineering Equipment & Supply
ART. 1467 Co. 64 SCRA 590 (1975)
A contract for the delivery at a certain price of an article which the
vendor in the ordinary course of his business manufactures or When each product or system executed is always UNIQUE and could not
procures for the general market, whether the same is on hand at the mass-produce the product because of its very nature, such is a contract for a
time or not, is a contract of sale, but if the goods are to be piece of work.
manufactured 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) 3. Engineering & Machinery Corp. vs. CA, 252 SCRA 156

ART. 1713 A contract for the fabrication and installation of a central air-conditioning
By the contract for a piece of work the contractor binds himself to system is one for a piece of work where it is not the contractors line of
execute a piece of work for the employer, in consideration of a certain business to manufacture airconditioning systems to be sold off-the-shelf.
price or compensation. The contractor may either employ only his labor Clearly, the contract in question is one for a piece of work. It is not
or skill, or also furnish the material. (1588a) petitioners line of business to manufacture air-conditioning systems to be
sold off-the-shelf. Its business and particular field of expertise is the
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
fabrication and installation of such systems as ordered by customers and in way of exception to the principle underlying Article 1311 between the owner,
accordance with the particular plans and specifications provided by the on the one hand, and those who furnish labor and/or materials, on the other.
customers. Naturally, the price or compensation for the system manufactured
and installed will depend greatly on the particular plans and specifications D. AGENCY TO SELL
agreed upon with the customers.
ART. 1466
4. Leighton Contractors Philippines, Inc., Vs. CNP Industries, Inc., G.R. No. In construing a contract containing provisions characteristic of both
160972, March 9, 2010 the contract of sale and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered. (n)
In contracts for a stipulated price like fixed lump-sum contracts, the recovery
of additional costs is governed by Article 1724 of the Civil Code. Settled is 1.Quiroga vs. Parsons, 38 Phil 501 (1918) 27.
the rule that a claim for the cost of additional work arising from changes in
the scope of work can only be allowed upon the: (1) written authority from the In the contract in the instant case, what was essential, constituting its cause
developer or project owner ordering or allowing the written changes in work and subject matter, was that the plaintiff was to furnish the defendant with the
and (2) written agreement of parties with regard to the increase in price or beds which the latter might order, at the stipulated price, and that the
cost due to the change in work or design modification. defendant was to pay this price in the manner agreed upon. These are
precisely the essential features of a contract of purchase and sale. There
the absence of one or the other conditions bars the recovery of additional was the obligation on the part of the plaintiff to supply the beds, and, on that
costs.Compliance with the two requisites of Article 1724, a specific of the defendant, to pay their price. These features exclude the legal
provision governing additional works, is a condition precedent for the conception of an agency or order to sell whereby the mandatary or agent
recovery. The absence of one or the other condition bars the recovery of receives the thing to sell it, and does not pay its price, but delivers to the
additional costs. Neither the authority for the changes made nor the principal the price he obtains from the sale of the thing to a third person, and
additional price to be paid therefor may be proved by any other evidence. if he does not succeed in selling it, he returns it.
Held: That this contract is one of purchase and sale, and not of commercial
5. Del Monte Phils vs. Aragones, 461 SCRA 139, June 23, 2005 agency.

Following Art. 1729 of the Civil Code which provides: ART. 1729. Those who
put their labor upon or furnish materials for a piece of work undertaken by the 3. Puyat vs. Arco Amusement Co., 72 Phil 402
contractor have an action against the owner up to the amount owing from the
latter to the contractor at the time the claim is made. x x x x x x (Italics The contract is the law between the parties and should include all the
supplied), Aragones having specially fabricated three casting machines and things they are supposed to have been agreed upon. What does not
furnished some materials for the production of the concrete blocks specially appear on the face of the contract should be regarded merely as
ordered and specified by MEGA-WAFF which were to be and indeed they "dealer's" or "trader's talk", which can not bind either party. (Nolbrook v.
were for the exclusive use of MEGA-WAFF, he has a cause of action upon Conner, 56 So., 576; 11 Am. Rep., 212; Bank v. Brosscell, 120 111.,
petitioner up to the amount it owed MEGA-WAFF at the time Aragones made 161; Bank v. Palmer, 47 111., 92; Hosser v. Copper, 8 Allen, 334; Doles
his claim to petitioner. v. Merrill, 173 Mass., 411.) The letters, Exhbits 1 and 2, by which the
respondent accepted the prices of $1,700 and $1,600, respectively, for
The intention of Art. 1729 of the Civil Code is to protect the laborers and the sound reproducing equipment subject of its contract with the
materialmen from being taken advantage of by unscrupulous contractors and petitioner, are clear in their terms and admit of no other interpretation
from possible connivance between owners and contractors.As Velasco v. than
CAexplains, the intention of Art. 1729 is to protect the laborers and
materialmen from being taken advantage of by unscrupulous contractors and
from possible connivance between owners and contractors. Thus, a 4. Ker and Co, Ltd. Vs. Lingad, 38 SCRA 524 (1971
constructive vinculum or contractual privity is created by this provision, by

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


The mere disclaimer in a contract that an entity like petitioner is not the NO PRE EXISTING DEBT THERE IS A PRE EXISTING
agent or legal representative x x x for any purpose whatsoever does not DEBT
suffice to yield the conclusion that it is an independent merchant if the control
over the goods for resale of the goods consigned is pervasive in character. IT CREATES AN OBLIGATION IT EXTINGUISHES
OBLIGATION
Tax Code; Where dealer held a commercial broker liable to tax under Section
194(t) of the Tax Code; Ride for distinguishing between contracts of sale and Price is more freely agreed Price is value of the thing given
of an agency to sell. The difficulty in distinguishing between the contracts of upon, fixed by the parties
sale and the creation of an agency to sell has led to the establishment of
rules by the application of which this difficulty may be solved. The decisions
say the transfer of title or agreement to transfer it for a price paid or promised
is the essence of sale. If such transfer puts the tranferee in the attitude or CASE DOCTRINES
position of an owner and makes him liable to the transferor as a debtor for
the agreed price, and not merely as an agent who must account for the 1. Philippine Lawin Bus Co. vs. CA, 374 SCRA 322 (2002)
proceeds of a resale, the transaction is a sale; while the essence of an
agency to sell is the delivery to an agent, not as his property, but as the
property of the principal, who remains the owner and has the right to control In dacion en pago, as a special mode of payment, the debtor
sales, fix the price, and terms, demand and receive the proceeds less the offers another thing to the creditor who accepts it as equivalent
agents commission upon sales made. of payment of an outstanding obligation. The undertaking really
partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for
which is to be charged against the debtors debt. As such, the
E. DACION EN PAGO essential elements of a contract of sale, namely, consent, object
certain, and cause or consideration must be present. In its
modern concept, what actually takes place in dacion en pago is
ART. 1245
an objective novation of the obligation where the thing offered as
an accepted equivalent of the performance of an obligation
Dation in payment, whereby property is alienated to the creditor in is considered as the object of the contract of sale, while the debt
satisfaction of a debt in money, shall be governed by the law of sales. is considered as the purchase price. In any case, common
(n) consent is an essential prerequisite, be it sale or novation, to
[20]
have the effect of totally extinguishing the debt or obligation.
ART. 1934
In this case, there was no meeting of the minds between the
An accepted promise to deliver something by way of commodatum or parties on whether the loan of the petitioners would be
simple loan is binding upon parties, but the commodatum or simple extinguished by dacion en pago. The petitioners anchor their
loan itself shall not be perfected until the delivery of the object of the claim solely on the testimony of Marciano Tan that
contract. he proposed to extinguish petitioners obligation by the surrender
There is a novation of the contract of loan into a contract of of the nine buses to the respondent acceded to as shown by
sale when the creditor agrees to accept a thing in payment of the [21]
receipts its representative made. However, the receipts
debt. Hence, if the thing given in payment turns out to belong to executed by respondents representative as proof of an
another, the creditors remedy should be governed by the law on agreement of the parties that delivery of the buses to private
sales, not loan. respondent would result in extinguishing petitioners obligation do
not in any way reflect the intention of the parties that ownership
SALE DACION EN PAGO thereof by respondent would be complete and absolute. The
receipts show that the two buses were delivered to respondent in

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


order that it would take custody for the purpose of selling the The Deed of Exchange of property between the Pachecos and Delpher
same. The receipts themselves in fact show that petitioners Trades Corporation cannot be considered a contract of sale. There was no
deemed respondent as their agent in the sale of the two vehicles transfer of actual ownership interests by the Pachecos to a third party. The
whereby the proceeds thereof would be applied in payment of Pacheco family merely changed their ownership from one form to another.
petitioners indebtedness to respondent. Such an agreement The ownership remained in the same hands. Hence, the private respondent
negates transfer of absolute ownership over the property has no basis for its claim of a right of first refusal under the lease contract.
to respondent, as in a sale. Thus, in Philippine National Bank v.
[
Pineda we held that where machinery and equipment were F. LEASE
repossessed to secure the payment of a loan obligation and not
for the purpose of transferring ownership thereof to the creditor ART. 1484
in satisfaction of said loan, no dacion en pago was ever n a contract of sale of personal property the price of which is payable in
accomplished. installments, the vendor may exercise any of the following remedies:
2. Dao Heng Bank vs. Sps. Lilia and Reynaldo Laigo, G.R. No.
173856, November 20, 2008 (1) Exact fulfillment of the obligation, should the vendee fail to
pay;
Being likened to that of a contract of sale, dacion en pago is
governed by the law on sales.Being likened to that of a contract of (2) Cancel the sale, should the vendee's failure to pay cover two
sale, dacion en pago is governed by the law on sales. The partial or more installments;
execution of a contract of sale takes the transaction out of the
provisions of the Statute of Frauds so long as the essential requisites (3) Foreclose the chattel mortgage on the thing sold, if one has
of consent of the contracting parties, object and cause of the been constituted, should the vendee's failure to pay cover two
obligation concur and are clearly established to be present. or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void. (1454-A-a
F. SUBSCRIPTION CONTRACT
ART. 1485
Delpher Trades Corporation vs. IAC, GR No. L-69259, January 26, 1988 The preceding article shall be applied to contracts purporting to be
leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing. (1454-
After incorporation, one becomes a stockholder of a corporation by A-a)
subscription or by purchasing stock directly from the corporation or from
individual owners thereof (Salmon, Dexter & Co. v. Unson, 47 Phil. 649, Heacock vs. Buntal Manufacturing Co., 66 Phil 245, September 26, 1938
citing Bole v. Fulton [1912], 233 Pa., 609). In the case at bar, in exchange for
their properties, the Pachecos acquired 2,500 original unissued no par value LEASE OR PURCHASE AND SALE OF PERSONALITY
shares of stocks of the Delpher Trades Corporation. Consequently, the ON lNSTALLMENTS; TRUE INTENTION OF THE PARTIES.The fact that
Pachecos became stockholders of the corporation by subscription. The the price of the machine was fixed in the contract makes the latter not a
essence of the stock subscription is an agreement to take and pay for lease but a purchase and sale because in contracts of lease, as
original unissued shares of a corporation, formed or to be formed. (Rohrlich distinguished from those of purchase and sale, it is plain redundancy to fix or
243, cited in Agbayani, Commentaries and Jurisprudence on the Commercial make any mention of the price of the thing given in lease (articles 1445,
Laws of the Philippines, Vol. III, 1980 Edition, p. 430) It is significant that the 1543, Civil Code). When the terms of a contract are not clear or conflict with
Pachecos took no par value shares in exchange for their properties. each other, as those appearing in Exhibit A, effect must be given to the
intention of the parties (article 1281, Civil Code) ; and the intention of plaintiff
and defendants in this case as we gather it from Exhibit A is that the contract

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


entered into between them is one of purchase and sale on installments and PART VII PARTIES TO A CONTRACT OF SALE
not a lease.

KINDS OF INCAPACITY:

A. ABSOLUTE B. RELATIVE
In the case of persons who cannot Where it exists only with reference to
bind themselves certain persons or a certain class of
property.

1. UNDER ABSOLUTE INCAPACITY:

A. Minors, Insane/Demented, deaf-mutes who do not know how to read


or write.

ART. 1327 THE FOLLOWING CANNOT GIVE CONSENT TO A


CONTRACT

(1) Unemancipated minors;


(2) Insane or demented persons, and deaf-mutes who do not know how
to write. (1263a)
ART. 1399
ART. 1397
When the defect of the contract consists in the incapacity of one of the
The action for the annulment of contracts may be instituted by all who parties, the incapacitated person is not obliged to make any restitution
are thereby obliged principally or subsidiarily. However, persons who except insofar as he has been benefited by the thing or price received
are capable cannot allege the incapacity of those with whom they by him.
contracted; nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their action upon
these flaws of the contract. (1302a)

The courts have laid down the rule that the sale of real estate effected by
minors who have already passed the ages of puberty and adolescence and
are now in the adult age, when they pre- tended to have already reached
their majority, while in fact they have not, is valid, and they cannot be
permitted afterwards to excuse themselves from compliance with the
obligations assumed by them or to seek their annulment. (see Mercado and
Mercado vs. Espiritu, 37 Phil. 265 [1917].)
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
The doctrine is entirely in accord with the provisions of the Rules of Court his or her fortune because of grave mismanagement or on account of
(see Rule 131, Sec. 1.) and the Civil Code (see Art. 1431.) which determine riotous living, his or her spouse, if any, and a majority of those entitled
cases of estoppel. to be supported by him or by her may petition the Court of First
Instance for the creation of the family home.
ART. 236
NECESSARIES: The family home may be dissolved upon the petition of the person who
has constituted the same, with the written consent of his or her spouse
ART. 1489 and of at least one half of all the other beneficiaries who are eighteen
years of age or over. The court may grant the petition if it is
All persons who are authorized in this Code to obligate satisfactorily shown that the best interest of the family requires the
themselves, may enter into a contract of sale, saving the dissolution of the family home.
modifications contained in the following articles.

Where necessaries are sold and delivered to a minor or other


person without capacity to act, he must pay a reasonable price 2. RELATIVE INCAPACITY
therefor. Necessaries are those referred to in article 290.
B. SALE BETWEEN SPOUSES
Contract with third parties:

EMANCIPATION ART. 73

ART. 399 The original of the affidavit required in the last preceding article,
together with a copy of the marriage contract, shall be sent by the
Emancipation by marriage or by voluntary concession shall terminate person solemnizing the marriage to the local civil registrar of the
parental authority over the child's person. It shall enable the minor to municipality where it was performed within the period of thirty days,
administer his property as though he were of age, but he cannot borrow after the performance of the marriage. The local civil registrar shall,
money or alienate or encumber real property without the consent of his however, before filing the papers, require the payment into the
father or mother, or guardian. He can sue and be sued in court only municipal treasury of the legal fees required in Article 65.
with the assistance of his father, mother or guardian. ART. 96

The existing laws which punish acts or omissions concerning the


marriage license, solemnization of marriage, authority to solemnize
marriages, and other acts or omissions relative to the celebration of
ART. 1397 marriage shall remain and continue to be in force. (n)
ART. 124
The action for the annulment of contracts may be instituted by all who If the marriage is between a citizen of the Philippines and a foreigner,
are thereby obliged principally or subsidiarily. However, persons who whether celebrated in the Philippines or abroad, the following rules
are capable cannot allege the incapacity of those with whom they shall prevail:
contracted; nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their action upon (1) If the husband is a citizen of the Philippines while the wife is a
these flaws of the contract foreigner, the provisions of this Code shall govern their relations;
ART. 234
(2) If the husband is a foreigner and the wife is a citizen of the
When there is danger that a person obliged to give support may lose Philippines, the laws of the husband's country shall be followed,
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
without prejudice to the provisions of this Code with regard to knowledge but without the approval of the wife, thereby resulting in a
immovable property. disagreement, such sale is annullable at the instance of the wife who
is given five (5) years from the date the contract implementing the
decision of the husband to institute the case.The particular
provision in the New Civil Code giving the wife ten (10) years to
annul the alienation or encumbrance was not carried over to the
Family Code. It is thus clear that alienation or encumbrance of the
DOCTRINES:
conjugal partnership property by the husband without the consent of
the wife is null and void. Hence, just like the rule in absolute
1. Sps Domingo vs. Reed, GR No. 157701, December 9, 2005
community of property, if the husband, without knowledge and
consent of the wife, sells conjugal property, such sale is void. If the
Lolita Reed argues that, even on the assumption that the SPA was indeed a
sale was with the knowledge but without the approval of the wife,
forgery, she was still justified in effecting a sale without her husbands
thereby resulting in a disagreement, such sale is annullable at the
consent. We are not persuaded. In addition to the fact that her rights over the
instance of the wife who is given five (5) years from the date the
property were merely inchoate prior to the liquidation of the conjugal
contract implementing the decision of the husband to institute the
partnership, there was absolutely no proof to her allegations that she used
case.
the proceeds of the sale to purchase necessities for the maintenance and
support of the family. Having failed to establish any of these circumstances,
she may not unilaterally bind the conjugal assets.
SALE BETWEEN SPOUSES (Wife and Husband are buyer and
seller respectively or vice versa)
2. Ravina vs. Villa Abrille, GR No. 160708, October 16, 2009
ART. 133
There is no issue with regard to the lot covered by TCT No. T-26471, which Every donation between the spouses during the marriage shall be void.
was an exclusive property of Pedro, having been acquired by him before his This prohibition does not apply when the donation takes effect after the
marriage to Mary Ann. However, the lot covered by TCT No. T-88674 was death of the donor.
acquired in 1982 during the marriage of Pedro and Mary Ann. No evidence
was adduced to show that the subject property was acquired through ART. 1490
exchange or barter. The presumption of the conjugal nature of the property The husband and the wife cannot sell property to each other, except:
subsists in the absence of clear, satisfactory and convincing evidence to
overcome said presumption or to prove that the subject property is (1) When a separation of property was agreed upon in the marriage
exclusively owned by Pedro. Petitioners bare assertion would not suffice to settlements; or
overcome the presumption that TCT No. T-88674, acquired during the
marriage of Pedro and Mary Ann, is conjugal. Likewise, the house built (2) When there has been a judicial separation or property under Article
thereon is conjugal property, having been constructed through the joint 191. (1458a)
efforts of the spouses, who had even obtained a loan from DBP to construct ART. 1492
the house. The prohibitions in the two preceding articles are applicable to sales in
legal redemption, compromises and renunciations. (n)
A sale or encumbrance of conjugal property concluded after the effectivity of
the Family Code on August 3, 1988, is governed by Article 124 of the same
The husband and the wife are prohibited by the above article from selling
Code that now treats such a disposition to be void if done (a) without the
property to each other. A sale between husband and wife in violation of
consent of both the husband and the wife, or (b) in case of one spouses
Article 1490 is inexistent and void from the beginning because such contract
inability, the authority of the court. Article 124 of the Family Code, the
is expressly prohibited by law.
governing law at the time the assailed sale was contracted, is explicit:
If the husband, without knowledge and consent of the wife,
sells conjugal property, such sale is void, and if the sale was with the
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
They are also prohibited from making donations to each other during the Every donation between the spouses during the marriage shall be void.
marriage except moderate gifts on the occasion of any family rejoicing. (Art. This prohibition does not apply when the donation takes effect after the
87, Family Code.) However, if there has been a separation of property death of the donor.
agreed upon in the marriage settlements, or when there has been a judicial
separation of prop- erty decreed between them by the court, the sales
between hus- band and wife are allowed. They have, therefore, in the two DOCTRINES:
cases mentioned, capacity to buy from or to sell to each other.
Incidentally, a marriage settlement (also called ante-nuptial contract) is an 1. Calimlim Canullas vs. Fortun, 129 SCRA 675 (1984)
agreement entered into by persons who are about to be united in marriage,
and in consideration thereof, for the purpose of fixing the property relations Consent of wife needed for validity of sale of land of husband on which
that would be followed by them for the duration of the marriage. conjugal house was constructed.The foregoing premises considered, it
follows that FERNANDO could not have alienated the house and lot to
Reason for prohibition under Article 1490. DAGUINES since MERCEDES had not given her consent to said sale.
The reason for the law is not based so much on the union of the personality
of the husband and wife nor on the weakness of the sex and on the Sale to concubine null and void.Anent the second issue, we find that the
possibility that the husband will induce his wife to engage in ruinous contract of sale was null and void for being contrary to morals and public
operations, but primarily, for the protection of third persons1 who, relying policy. The sale was made by a husband in favor of a concubine after he had
upon supposed property of either spouse, enters into a contract with either of abandoned his family and left the conjugal home where his wife and children
them only to find out that the property relied upon was transferred to the lived and from whence they derived their support. That sale was subversive
other spouse. (see 10 Manresa 95-96.) of the stability of the family, a basic social institution which public policy
cherishes and protects.

CASE DOCTRINES: 2. Ching vs. Goyanko, 506 SCRA 735

1. Medina vs. Collector, 1 SCRA 302 The contract of sale was null and void for being contrary to morals and public
policy. The sale was made by a husband in favor of a concubine after he
had abandoned his family and left the conjugal home where his wife
The facts of the case negative the xistence of an antenuptial agreement and children lived and from whence they derived their support. The sale
between husband and wife. Where the husband, in 1953, was already was subversive of the stability of the family, a basic social institution
apprised that his sales of logs to his wife were void under article 1400 of the which public policy cherishes and protects.
New Civil Code, and it was only in 1954 that he claimed that there was an Article 1409 of the Civil Code states inter alia that: contracts whose cause,
agreement between him and his wife for separation of property, such an object, or purposes is contrary to law, morals, good customs, public order, or
allegation cannot be given credence. public policy are void and inexistent from the very beginning.
Articles 7 and 10 of the Code of Commerce do not allow sales between Article 1352 also provides that: "Contracts without cause, or with unlawful
husband and wife. Said provisions merely state, under certain conditions, a cause, produce no effect whatsoever. The cause is unlawful if it is contrary to
presumption that the wife is authorized to engage in business and state the law, morals, good customs, public order, or public policy."
incidents that flow therefrom when she so engages therein. The transactions Additionally, the law emphatically prohibits the spouses from selling
permitted are those with strangers and they do not constitute exceptions to property to each other subject to certain exceptions.1wphi1 Similarly,
the prohibitory exceptions of article 1490 of the New Civil Code against sales donations between spouses during marriage are prohibited. And this is
between spouses. so because if transfers or conveyances between spouses were allowed
during marriage, that would destroy the system of conjugal partnership, a
basic policy in civil law. It was also designed to prevent the exercise of undue
APPLICABILITY TO COMMON LAW SPOUSES influence by one spouse over the other, as well as to protect the institution of
marriage, which is the cornerstone of family law. The prohibitions apply to
ART. 133 a couple living as husband and wife without benefit of marriage,

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


otherwise, "the condition of those who incurred guilt would turn out to The following persons cannot acquire by purchase, even at a public or
be better than those in legal union." judicial auction, either in person or through the mediation of another:

3. Matabuena vs. Cervantes, 38 Phil 284 (1971) (1) The guardian, the property of the person or persons who may be
under his guardianship;
While Art. 133 of the Civil Code considers as void a "donation between the
spouses during the marriage", policy considerations of the most exigent (2) Agents, the property whose administration or sale may have been
character as well as the dictates of morality require that the same prohibition entrusted to them, unless the consent of the principal has been given;
should apply to a common-law relationship. A 1954 Court of Appeals
decision Buenaventura v. Bautista, (50 O.G. 3679) interpreting a similar (3) Executors and administrators, the property of the estate under
provision of the old Civil Code speaks unequivocally. If the policy of the law administration;
is, in the language of the opinion of the then Justice J.B.L. Reyes of that
Court, "to prohibit donations in favor of the other consort and his (4) Public officers and employees, the property of the State or of any
descendants because of fear of undue and improper pressure and influence subdivision thereof, or of any government-owned or controlled
upon the donor, a prejudice deeply rooted in our ancient law; porque no se corporation, or institution, the administration of which has been
engaen despojandose el uno al otro por amor que han de consuno, intrusted to them; this provision shall apply to judges and government
[according to] the Partidas (Part. IV, Tit. Xl, LAW IV), reiterating the rationale experts who, in any manner whatsoever, take part in the sale;
Ne mutuato amore invicem spoliarentur of the Pandects (Bk 24, Tit. I, De
donat, inter virum et uxorem); then there is every reason to apply the same (5) Justices, judges, prosecuting attorneys, clerks of superior and
prohibitive policy to persons living together as husband and wife without inferior courts, and other officers and employees connected with the
benefit of nuptials. For it is not to be doubted that assent to such irregular administration of justice, the property and rights in litigation or levied
connection for thirty years bespeaks greater influence of one party over the upon an execution before the court within whose jurisdiction or
other, so that the danger that the law seeks to avoid is correspondingly territory they exercise their respective functions; this prohibition
increased. Moreover, as already pointed out by Ulpian (in his lib. 32 ad includes the act of acquiring by assignment and shall apply to lawyers,
Sabinum, fr. 1), it would not be just that such donations should subsist lest with respect to the property and rights which may be the object of any
the condition of those who incurred guilt should turn out to be better. So long litigation in which they may take part by virtue of their profession.
as marriage remains the cornerstone of our family law, reason and morality
alike demand that the disabilities attached to marriage should likewise attach (6) Any others specially disqualified by law. (1459a)
to concubinage.
ART. 1492
4. Cruz vs. CA, 281 SCRA 491 (1997)
Art. 1492. The prohibitions in the two preceding articles are applicable
Although under Art. 1490 the husband and wife cannot sell property
to sales in legal redemption, compromises and renunciations. (n)
to one another as a rule which, for policy consideration and the
dictates of morality require that the prohibition apply to common-law
4
relationships, petitioner can no longer seek reconveyance of the
property to her as it has already been acquired by respondent STATUS OF SUCH CONTRACTS:
Vizconde in good faith and for value from her own transferee.
1. Rubias vs. Batiller, 51 SCRA 120, May 29, 1973

Article 1491 of the Civil Code of the Philippines prohibits in its six paragraphs
C. SPECIAL DISQUALIFICATIONS certain persons, by reason of the relation of trust or their peculiar control
either directly or indirectly and "even at a public or judicial auction," as
follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and
ART. 1491
employees; (5) judicial officers and employees, prosecuting attorneys, and

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


lawyers; and (6) others specially disqualified by law. 2. AGENTS

Prohibited purchase void and produces no legal effect.Castan's rationale The agents incapacity to buy his principals property rests on the fact that the
for his conclusion that fundamental considerations of public policy render agent and the principal form one juridical per- son. Like the guardian, the
void and inexistent such expressly prohibited purchases (e.g. by public agent stands in a fiduciary relation with his principal. A sale made by an
officers and employees of government property intrusted to them and by agent to himself, directly or indi- rectly, without the permission of the principal
justices, judges, fiscals and lawyers of property and rights in litigation is ineffectual. (see Gregorio Araneta, Inc. vs. Tuazon de Paterno, supra;
submitted to or handled by them, under Article 1491, paragraphs (4) and (5) Barton vs. Leyte Asphalt and Mineral Co., 46 Phil. 938 [1924].) The consent
of the Civil Code of the Philippines) has been adopted in a new article of the of the principal removes the transaction out of the prohibition contained in
Civil Code of the Philippines, viz,Article 1409 declaring such prohibited Article 1491(2). (Distajo vs. Court of Appeals, 132 SCAD 577, 339 SCRA 52
contracts as "inexistent and void from the beginning. [2000].)

The nullity of such prohibited contracts is definite and permanent and cannot (1)The incapacity of the agent is only against buying the property he is
be cured by ratification. The public interest and public policy remain required to sell during the existence of the relationship. Therefore, an agent
paramount and do not permit of compromise or ratification. can buy for himself the property after the ter mination of the agency (Valera
vs. Velasco, 51 Phil. 695 [1928].) or other properties different from those he
The permanent disqualification of public and judicial officers and lawyers has been commissioned to sell. (Moreno vs. Villonea, [C.A.] 40 O.G. 2322.)
grounded on public policy differs from the first three cases of guardians,
agents and administrators (Article 1491, Civil Code), as to whose (2) Of course ,the agent may buy property placed in his hands for sale or
transactions, its has been opined, may be "ratified" by means of and "in the administration if the principal gives his consent thereto. (Cui vs. Cui, 100 Phil.
form of a new contract, in which case its validity shall be determined only by 913 [1957].)
the circumstances at the time of execution of such new contract. The causes
of nullity which have ceased to exist cannot impair the validity of the new (3) The prohibition does not apply where the sale of the property in dispute
contract. Thus, the object which was illegal at the time of the first contract, was made under a special power inserted in or attached to the real estate
may have already become lawful at the time of ratification or second mortgage pursuant to Section 5 of Act No. 3135, as amended, a special law
contract; or the service which was impossible may have become possible; or which governs extra-judicial foreclosure of real estate mortgage. The power
the intention which could not be ascertained may have been clarified by the to foreclose is not an ordinary agency that contemplates exclusively the
parties. The ratification or second contract would then be valid from its representation of the principal by the agent but is primarily an authority
execution; however, it does not retroact to the date of the first contract. conferred upon the mortgagee for the latters own protection. By virtue of the
exception, the title of the mortgagee-creditor over the property cannot be
GUARDIANDS, AGENTS, and ADMINISTRATORS impeached or defeated on the ground that the mortgagee cannot be a
purchaser at his own sale. (Fiestan vs. Court of Appeals, 185 SCRA 751
1. GUARADIANS [1990].)

The relation between guardian and ward is so intimate, the dependence 3. EXECUTORS and ADMINISTRATOR
so complete and the influence so great that any trans- action between
the two parties entered while the relationship exists are, in the highest The prohibition refers only to properties under the administration of the
sense, suspicious and presumptively fraudulent. This influence is executor or administrator at the time of the acquisition and does not extend,
presumed to last while the guardians functions are to any extent still therefore, to property not falling within this class.
unperformed, while the prop- erty is still under his control and until the
accounts have been finally settled. Executors do not administer the hereditary rights of any heir. Such rights do
not form part of the property delivered to the ex- ecutor for administration.
Consequently, the prohibition in No. (3) of Article 1491 does not apply to a
purchase by an executor of such hereditary rights (e.g., 1/10 interest in the
estate), even in those cases in which the executor administers the property
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
per- taining to the estate. (Naval vs. Enriquez, 3 Phil. 669 [1904]; see Garcia benefit of Mactal. If there was no such agreement, either express or implied,
vs. Rivera, 95 Phil. 831 [1954]. then the sale cannot be set aside. The subsequent purchase of Mactal, in
said case, cannot be annulled as there was no proof of a previous agreement
between Chioco and her. Two years had elapsed between the sales, and
such period of time was sufficient to dispel the natural suspicion of the
The disqualification of public officers differs from the first three cases guardians motives or actions. In the present case, only 1 week had elapsed.
of guardians, agents, and administrators, as to whose transactions, it And if we were technical, only 1 day had elapsed from the judicial approval of
has been opined that they may be ratified by means of and in the the sale (August 12), to the purchase by the guardian (August 13).
form of a new contract, in which case its validity shall be determined
only by the circumstances at the time of execution of such new
contract.
3. Rodriguez vs. Mactal, 60 Phil 13, April 4, 1934 (SALE is VALID, only
(a) The causes of nullity which have ceased to exist cannot impair the because there was proof that there was an agreement between Chioco
validity of the new contract. Thus, the object which was illegal at the and Mactal, also, the period of time be considered)
time of the first contract, may have already become lawful at the time of
the ratification or second contract; or the service which was impossible In Rodrigues v. Mactal, where the guardian Mactal sold in January 1926 the
may have be- come possible; or the intention which could not be property of her ward to Silverio Chioco, and in March 1928 she bought it from
ascertained may have been clarified by the parties. Chioco, the Court declared the in order to bring the sale in this case within
the part of Article 1459, quoted above, it is essential that the proof submitted
(b) The ratification or second contract could then be valid from its establish some agreement between Silverio Chioco and Trinidad Mactal to
execution; however, it does not retroact to the date of the first contract. the effect that Chioco should buy the property for the benefit of Mactal. If
(Director of Lands vs. Abragat, supra.) there was no such agreement, either express or implied, then the sale cannot
be set aside. The subsequent purchase of Mactal, in said case, cannot be
annulled as there was no proof of a previous agreement between Chioco and
her

4. Lee vs. RTC, GR No. 146006, February 23, 2004

Where the appropriation of estate properties is invalid, the subsequent sale


2. Philippine Trust Co. vs. Roldan, 99 Phil 392 (1956) thereof to a third party without court approval is likewise invalid.From the
above decision, it is clear that Juliana Ortaez, and her three sons, Jose,
As Guardianship is a trust of the highest order, the trustee cannot be Rafael and Antonio, all surnamed Ortaez, invalidly entered into a
allowed to have any inducement to neglect his ward's interest; and memorandum of agreement extrajudicially partitioning the intestate estate
whenever the guardian acquires the ward's property through an among themselves, despite their, knowledge that there were other heirs or
intermediary, he violates the provision of Article 1459 of the Civil Code claimants to the estate and before final settlement of the estate by the
and such transaction and subsequent ones emanating therefrom shall intestate court. Since the appropriation of the estate properties by Juliana
be annulled. Ortaez and her children (Jose, Rafael and Antonio Ortaez) was invalid, the
subsequent sale thereof by Juliana and Jose to a third party (FLAG), without
Rodriguez v. Mactal does not apply; length of time different, sufficient court approval, was likewise void.
to dispel suspicion In Rodrigues v. Mactal, where the guardian Mactal sold
in January 1926 the property of her ward to Silverio Chioco, and in March
1928 she bought it from Chioco, the Court declared the in order to bring the An heir can sell his right, interest, or participation in the property under
sale in this case within the part of Article 1459, quoted above, it is essential administration under Art. 533 of the Civil Code which provides that
that the proof submitted establish some agreement between Silverio Chioco possession of hereditary property is deemed transmitted to the heir without
and Trinidad Mactal to the effect that Chioco should buy the property for the interruption from the moment of death of the decedent. However, an heir can
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
only alienate such portion of the estate that may be allotted to him in the interest and public policy remain paramount and do not permit of
division of the estate by the probate or intestate court after final adjudication, compromise or ratification. In this aspect, their disqualification is
that is, after all debtors shall have been paid or the devisees or legatees shall grounded on public policy.
have been given their shares. This means that an heir may only sell his ideal
or undivided share in the estate, not any specific property therein. In the
present case, Juliana Ortaez and Jose Ortaez sold specific properties of
the estate (1,014 and 1,011 shares of stock in Philinterlife) in favor of
petitioner FLAG. This they could not lawfully do pending the final adjudication
of the estate by the intestate court because of the undue prejudice it would
cause the other claimants to the estate, as what happened in the present LAWYERS
case.

Juliana Ortaez and Jose Ortaez sold specific properties of the estate, Prohibition with respect to judges, etc., and lawyers.
without court approval. It is well-settled that court approval is necessary for
the validity of any disposition of the decedents estate. In the early case The prohibition in Article 1491(5) applies only to the sale or assignment of
of Godoy vs. Orellano we laid down the rule that the sale of the property of property which is the subject of litigation to the persons disqualified therein.
the estate by an administrator without the order of the probate court is void For the prohibition to operate, the sale or assignment must take place during
and passes no title to the purchaser. x x x Our jurisprudence is therefore the pendency of the litigation involving the property. (Laig vs. Court of
clear that (1) any disposition of estate property by an administrator or Appeals, 86 SCRA 641 [1978]; Valencia vs. Cabanteng, 196 SCRA 302
prospective heir pending final adjudication requires court approval and (2) [1991].) The prohibition applies when, for example, a lawyer has not paid for
any unauthorized disposition of estate property can be annulled by the the property and it was merely assigned to him in considera- tion of legal
probate court, there being no need for a separate action to annul the services rendered at a time when the property is still subject of a pending
unauthorized disposition. case. (Ordonio vs. Eduarte, 207 SCRA 229 [1992].) The prohibition on
purchase is all embracing to include not only sales to private individuals but
also public or judicial sales. (Ramos vs. Ngaseo, 445 SCRA 529 [2004].)

Prohibition with respect to public officials and employees. (1) When property considered in litigation. For property to be considered
in litigation, it is not required that some contest or litigation over the property
The prohibition refers only to properties: (1) belonging to the State, or of any should have been tried by the judge. Such property is in litigation from the
subdivision thereof, or of any government-owned or -controlled corporation or moment it became sub- ject to the judicial action of the judge who afterwards
institution, (2) the administration of which has been entrusted to the public purchased it. Hence, a purchase made by judge at a public auction of a prop-
officials or employees. Thus, a provincial governor or treasurer entrusted with erty pursuant to an order of execution issued by said judge is within the
the ad- ministration of property belonging to a province cannot buy said prohibition whether or not the property had been the subject of litigation in his
property while the school superintendent who has no charge of the same is court. (Gontingco vs. Pobinguit, 35 Phil. 81 [1911].)
not within the scope of the prohibition.
There is no violation of the prohibition (although it may be improper under the
Note that the prohibition includes judges and government experts who, in any Canons of Judicial Ethics) where the judge purchased the property in
manner, take part in the sale. question after the decision involving the property had already become final
because none of the par- ties therein filed an appeal within the reglementary
period; hence, the same was no longer in litigation. (Macariola vs. Asuncion,
The nullity of such prohibited contracts, i.e., by public officers and 114 SCRA 77 [1982].)
employees of government property entrusted to them and by justices,
judges, fiscals, and lawyers of property and rights in litigations (2) Where property acquired by lawyer in foreclosure sale after ter- mination
submitted to or handled by them, under paragraphs (4) and (5) is of case. A lawyer cannot purchase, directly or indirectly, the property or
definite and permanent and cannot be cured by ratification. The public rights which are the subject of litigation in which he takes part by virtue of his
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
profession. (see Rubias vs. Satiller, 51 SCRA 120 [1973].) The fact that the
property in question was first mortgaged by the client to his lawyer and only 5. Fabillo vs. IAC, 195 SCRA 28 (1991)
subsequently acquired by the latter in a foreclosure sale long after the
termina- tion of the case will not remove it from the scope of the prohibi- tion
for at the time the mortgage was executed the relationship of lawyer and The contract of services did not violate said provision of law. Article 1491 of
client still existed, the very relation of trust and confi- dence sought to be the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from
protected by the prohibition, when a lawyer occupies a vantage position to acquiring by purchase even at a public or judicial auction, properties and
press upon or dictate terms to a harassed client. To rule otherwise would be rights which are the objects of litigation in which they may take part by virtue
to countenance indi- rectly what cannot be done directly. (Fornilda vs. of their profession. The said prohibition, however, applies only if the sale or
Regional Trial Court, 166 SCRA 281 [1988].) assignment of the property takes place during the pendency of the litigation
involving the clients property. Hence, a contract between a lawyer and his
(3) Liability of lawyer for violation of prohibition. A violation of the client stipulating a contingent fee is not covered by said prohibition under
prohibition constitutes a breach of professional ethics and malpractice for Article 1491 (5) of the Civil Code because the payment of said fee is not
which the lawyer may be reprimanded, suspended or disbarred from the made during the pendency of the litigation but only after judgment has been
practice of the legal profession. Good faith is not a defense. (In re Attorney rendered in the case handled by the lawyer. In fact, under the 1988 Code of
Melchor E. Ruste, 70 Phil. 243 [1940]; Hernandez vs. Villanueva, 40 Phil. Professional Responsibility, a lawyer may have a lien over funds and
775 [1920]; Mananquil vs. Villegas, 189 SCRA 335 [1990].) property of his client and may apply so much thereof as may be necessary to
satisfy his lawful fees and disbursements.
(4) Where lawyer member of law firm involved. Contracts of sale or lease
where the vendee or lessee is a partnership, of which a lawyer is a member, The ambiguity of said provision, however, should be resolved against Murillo
over a property involved in a litigation in which he takes by virtue of his as it was he himself who drafted the contract. This is in consonance with the
profession are covered by the pro- hibition. rule of interpretation that in construing a contract of professional services
between a lawyer and his client, such construction as would be more
(5) Cases not covered. The prohibition does not include sale of the favorable to the client should be adopted if it would work prejudice to the
property of the client effected before it became involved in the action lawyer. Rightly so because of the inequality in situation between an attorney
(Gregorio Araneta, Inc. vs. Tuazon de Paterno, 91 Phil. 786 [1952].); nor who knows the technicalities of the law on the one hand and a client who
does it apply to an assignment of the amount of a judgment made by a usually is ignorant of the vagaries of the law on the other hand.
person to his attorney in payment of pro- fessional services in other cases
(Municipal Council of Iloilo vs. Evangelista, 55 Phil. 290 [1930].); nor to the
sale of a parcel of land, acquired by a client to satisfy a judgment in his favor,
to his attorney as long as the property was not the subject of the litiga- tion. JUDGES
(Daroy vs. Abecia, 100 SCAD 376, 298 SCRA 239 [1998].) It has also been
held that the law does not prohibit a lawyer from charging a contingent fee (to 6. Macariola vs. Asuncion, 114 SCRA 77 (1982)
be given in a case the suit is won) based on a certain percentage of the
value of the property in liti- gation (Recto vs. Harden, 100 Phil. 427 [1954].), The prohibition in the aforesaid Article applies only to the sale or assignment
because the pay- ment of said fee is not made during the pendency of the of the property which is the subject of litigation to the persons disqualified
litiga- tion but only after judgment has been rendered in the case han- dled therein. WE have already ruled that x x x for the prohibition to operate, the
by the lawyer. In fact, under the 1988 Code of Professional Responsibility sale or assignment of the property must take place during the pendencyof
(Rule 16.03, Canon 10 thereof.), a lawyer may have a lien over funds and the litigation involving the property
property of his client and may apply so much thereof as may be necessary to
satisfy his lawful fees and disbursements. (Fabillo vs. Intermediate Appellate In the case at bar, when the respondent Judge purchased on March 6,
Court, 195 SCRA 28 [1991].) 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he
rendered on June 8, 1963 was already final because none of the parties
therein filed an appeal within the reglementary period; hence, the lot in
question was no longer subject of the litigation. Moreover, at the time of the
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
sale on March 6, 1965, respondents order dated October 23, 1963 and the Effect of sale in violation of prohibition.
amended order dated November 11, 1963approving the October 16, 1963
project of partition made pursuant to the June 8, 1963 decision, had long If the sale is made, would the transaction be void or merely voidable?
become final for there was no appeal from said orders.
(1) With respect to Nos. 1 to 3, the sale shall only be voidable because
Furthermore, respondent Judge did not buy the lot in question on March 6, in such cases only private interests are affected. (see Wolfson vs.
1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Estate of Martinez, 20 Phil. 340 [1911].) The defect can be cured by
Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of ratification of the seller. (see Arts. 1392-1396.)
the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa
after the finality of the decision in Civil Case No. 3010. It may be recalled that (2) With respect to Nos. 4 to 6, the sale shall be null and void, public
Lot 1184 or more specifically one-half thereof was adjudicated in equal interests being involved therein. (see Art. 1409[1]; Rubias vs. Batiller,
shares to Priscilla Reyes, Adela Reyes. Luz Bakunawa, Ruperto Reyes and 51 SCRA 120 [1973].)
Anacorita Reyes in the project of partition, and the same was subdivided into
five lots denominated as Lot 1184-A to 1184-E. In a case, the Supreme Court affirmed the decision of a lower court
declaring invalid the sale made by the client in favor of his attorney.
(Director of Lands vs. Abragat, 53 Phil. 147 [1929]; see Fornilda vs.
OTHER KINDS: Regional Trial Court, 166 SCRA 281 [1988].)

Other persons especially disqualified.

Examples of persons especially disqualified by law are:


ART. XII SEC 7
(1) aliens who are disqualified to purchase private agricul- tural lands
(Art. XII, Secs. 3, 7, Constitution; see Krivenko vs. Register of Deeds, 79 Save in cases of hereditary succession, no private lands shall be
Phil. 461 [1947].); transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain.
(2) anunpaidsellerhavingarightoflienorhavingestopped the goods in SEC 8
transitu, who is prohibited from buying the goods either directly or
Notwithstanding the provisions of Section 7 of this Article, a natural-
indirectly in the resale of the same at a public or private sale which he
born citizen of the Philippines who has lost his Philippine citizenship
may make (Art. 1533, par. 5; Art. 1476[4].); and
may be a transferee of private lands, subject to limitations provided by
law.
(3) The officer conducting the execution sale or his deputies cannot
become a purchaser, or be interested directly or indirectly in any
purchase at an execution sale. (Sec. 19, Rule 39, Rules of Court.)
7. Miguel vs. Catalino, 28 SCRA 234, November 29, 1968
In the case of aliens, the disqualification is founded on express
In the present case, the sale of the land in 1928 by Bacaquio (a non-
provision of the Constitution and not by reason of any fiduciary
relationship. It has been held, however, that where a land is sold to an Christian inhabitant) to Catalino Agyapao, defendant's father, is null and
alien who later sold it to a Filipino, the sale to the latter can- not be void ab initio, for lack of executive approval (Mangayao, et al. v. Lasud, et al.,
L-19252, May 29, 1964). The laws applicable to the said sale are: Section
impugned. In such case, there would be no more public policy to be
145 (b) of the Administrative Code of Mindanao and Sulu, providing that no
served in allowing the Filipino seller or his heirs to recover the land as
conveyance or encumbrance of real property shall be made in that
the same is already owned by a qualified per- son. (Herrera vs. Tuy Kim
department by any non-christian inhabitant of the same, unless, among other
Guan, 1 SCRA 406 [1961]; Godinez vs. Fong Pak Luen, 120 SCRA 223
requirements, the deed shall bear indorsed upon it the approval of the
[1983].)
provincial governor or his representative duly authorized in writing for the

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


purpose; Section 146 of the same Code, declaring that every contract or
agreement made in violation of Section 145 "shall be null and void"; and Act
2798, as amended by Act 2913, extending the application of the above
provisions to Mountain Province and Nueva Viscaya.

Since the 1928 sale is technically invalid, Bacaquio remained, in law, the
owner of the land until his death in 1943, when his title passed on, by the law
on succession, to his heirs, the plaintiffs-appellant's.

Notwithstanding the errors aforementioned in the appealed decision, we are


of the opinion that the judgment in favor of defendant-appellee Florendo
Catalino must be sustained. For despite the invalidity of his sale to Catalino
Agyapao, father of defendant-appellee, the vendor Bacaquio suffered the
latter to enter, possess and enjoy the land in question without protest, from
1928 to 1943, when the seller died; and the appellants, in turn, while
succeeding the deceased, also remained inactive, without taking any step to
reivindicate the lot from 1944 to 1962, when the present suit was
commenced in court. Even granting appellant's proposition that no
prescription lies against their father's recorded title, their passivity and
inaction for more than 34 years (1928-1962) justifies the defendant-appellee
in setting up the equitable defense of laches in his own behalf. As a result,
the action of plaintiffs-appellants must be considered barred and the Court
below correctly so held. Courts can not look with favor at parties who, by
their silence, delay and inaction, knowingly induce another to spend time,
effort and expense in cultivating the land, paying taxes and making
improvements thereon for 30 long years, only to spring from ambush and
claim title when the possessor's 'efforts and the rise of land values offer an
opportunity to make easy profit at his expense (De
Lucas v. Gamponia, supra).

8. Estate of Salvador Serra Serra vs. Heirs of Primitivo Hernandez, 466


SCRA 120, August 9, 2005

Both the trial court and the Court of Appeals found that petitioners are
Spanish citizens and as such, disqualified from acquiring lands in the
Philippines. As a rule, only a Filipino citizen can acquire private lands in the
Philippines and the only instances when a foreigner can own private lands
are by hereditary succession and if he was formerly a natural-born Filipino
citizen who lost his Philippine citizenship. The records are bereft of any
showing that petitioners derived their title by any mode which would qualify
them to acquire private lands in the country. Petitioners bare allegation that
they acquired the subject lots from Salvador Serra Serra has no probative
value lacking sufficient proof that the latter is not disqualified to own or hold
private property and was able to legally transmit to petitioners title thereto.

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


PART VIII SUBJECT MATTER OF SALE common of such a share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass. If the
mass contains less than the number, weight or measure bought, the
A. MUST BE EXISTING, FUTURE, or CONTINGENT. buyer becomes the owner of the whole mass and the seller is bound to
make good the deficiency from goods of the same kind and quality,
ART 1459 unless a contrary intent appears. (n)

The thing must be licit and the vendor must have a right to transfer the ART. 1465 (SUBJECT TO RESOLUTORY CONDITION)
ownership thereof at the time it is delivered. (n) Things subject to a resolutory condition may be the object of the
ART. 1460 contract of sale. (n)

A thing is determinate when it is particularly designated or physical


segregated from all other of the same class. A resolutory condition is an uncertain event upon the happening of which the
obligation (or right) subject to it is extinguished. Hence, the right acquired in
The requisite that a thing be determinate is satisfied if at the time the virtue of the obligation is also extinguished.
contract is entered into, the thing is capable of being made determinate
without the necessity of a new or further agreement between the
parties. (n)
ART. 1461 (EMPTIO REI SPERATAE) EMPTIO REi SPERATAE EMPTIO SPEI
(THE SALE OF THING EXPECTED) (SALE OF HOPE)
Things having a potential existence may be the object of the contract of ART 1461 and 1347
sale. The sale of a thing not yet in The sale of the hope itself that the
existence subject to the condition thing will come into existence, where
that the thing will exist and on failure it is agreed that the buyer will pay the
The efficacy of the sale of a mere hope or expectancy is deemed
of the condition, the contract price even if the thing does not
subject to the condition that the thing will come into existence.
becomes ineffective and hence, the eventually exist.
buyer has no obligation to pay the
The sale of a vain hope or expectancy is void. (n) price.
ART. 1462
The goods which form the subject of a contract of sale may be either
existing goods, owned or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after the perfection of The future thing is certain as to itself it is not certain that the thing itself
the contract of sale, in this Title called "future goods." but uncertain as to its quantity and (winning a prize) will exist, much less
quality. Such sale is subject to the its quantity and quality.
There may be a contract of sale of goods, whose acquisition by the condition that the thing will come into
seller depends upon a contingency which may or may not happen. (n) existence whatever its quantity or
ART. 1463 quality
The sole owner of a thing may sell an undivided interest therein. (n)
ART. 1464 The contract deals with a future thing The contract relates to a thing which
In the case of fungible goods, there may be a sale of an undivided exists or is present the hope or
share of a specific mass, though the seller purports to sell and the expectancy.
buyer to buy a definite number, weight or measure of the goods in the
mass, and though the number, weight or measure of the goods in the
mass is undetermined. By such a sale the buyer becomes owner in

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


The sale is subject to the condition The second produces effect even belonging to B. Later, they executed a docu- ment wherein S transferred to B
that the thing should exist, so that if it though the thing does not come into all of Ss rights and interest over the 24,000 tons of iron ore, more or less
does not, there will be no contract by existence because the object of the that S had al- ready extracted from the mineral claims in consideration of a
reason of the absence of an contract is the hope itself, unless it is down payment of P10,000.00, and the balance of P65,000.00 which will be
essential element. a vain hope or expectancy paid out of the first shipment of iron ore and of the first amount derived from
the local sale of iron ore made from said claims, which amount was secured
by a surety bond executed by B in favor of S.

No sale of the approximately 24,000 tons of iron ore had been made nor had
the P65,000.00 been paid.
Presumption in case of doubt.
Issue: Is the obligation of B to pay the remaining P65,000.00 subordinated to
In case of doubt, the presumption is in favor of emptio rei speratae which is the sale or shipment of the ore as a condition precedent?
more in keeping with the commutative character of the contract.
Held: No. A contract of sale is normally commutative and onerous (see Art.
1458.): not only does each one of the parties assume a correlative obligation
(the seller to deliver and trans- fer ownership of the thing sold and the buyer
ART. 1347 (EMPTIO REI SPERATAE) to pay the price),

All things which are not outside the commerce of men, including future but such party anticipates performance by the other from the very start.
things, may be the object of a contract. All rights which are not
intransmissible may also be the object of contracts. (1) Contingent character of obligation to pay must clearly ap- pear. Where
in a sale, the obligation of one party can be law- fully subordinated to an
No contract may be entered into upon future inheritance except in uncertain event, so that the other un- derstands that he assumes that risk of
cases expressly authorized by law. receiving nothing for what he gives as in the case of a sale of hopes or
expectations (emptio spei), it is not in the usual course of business to do so,
hence, the contingent character of the obligation must clearly appear.
All services which are not contrary to law, morals, good customs,
public order or public policy may likewise be the object of a contract.
(1271a) (2) Surety bond negates such contingent character. In the case at bar,
nothing is found in the record to evidence that S desired or assumed to run
the risk of losing his rights over the ore without getting paid for it, or that B
ART. 1348
understood that S as- sumed any such risk. This is proven by the fact that S
insisted on a bond by a surety company to guarantee payment of the
Impossible things or services cannot be the object of contracts. (1272) P65,000.00; and the fact that B did put up such bond indicates that he
admitted the definite existence of his obligation to pay the balance of
P65,000.00.
TO ILLUSTRATE:

GAITE v. FONANCIER
DOCTRINES:
Buyer executed a surety bond in favor of seller to secure payment of the 1. Quijada vs. CA, GR No. 126444, December 4, 1988
balance of purchase price of iron ore, which balance shall be paid out of
amount derived from sale by buyer of the iron ore. In this case, that resolutory condition is the construction of the school. It
has been ruled that when a person donates land to another on the
Facts: S embarked upon the exploration and development of mining claims condition that the latter would build upon the land a school, the condition
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
imposed is not a condition precedent or a suspensive condition but a Before purchasing a parcel of land, it cannot be contended that the
resolutory one. Thus, at the time of the sales made in 1962 towards appellants who were the vendees did not know exactly the condition of the
1968, the alleged seller (Trinidad) could not have sold the lots since she land that they were buying and the obstacles or restrictions thereon that may
had earlier transferred ownership thereof by virtue of the deed of be put up by the government in connection with their project of converting Lot
donation. So long as the resolutory condition subsists and is capable of No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily
fulfillment, the donation remains effective and the donee continues to be assumed the risks attendant to the sale of said lot. One who buys something
the owner subject only to the rights of the donor or his successors-in- with knowledge of defect or lack of title in his vendor cannot claim that he
interest under the deed of donation. Since no period was imposed by the acquired it in good faith.
donor on when must the donee comply with the condition, the latter
remains the owner so long as he has tried to comply with the condition
within a reasonable period. C. MUST BE DETERMINATE or DETERMINABLE

When thing determinate. A thing is determinate or specific (not generic)


B. Must be Licit when it is particularly designated or physically segregated from all others of
the same class. (see Art. 1636[1].)
ART. 1347 (EMPTIO REI SPERATAE)
This requisite that the object of a contract of sale must be determinate is in
accordance with the general rule that the object of every con- tract must be
All things which are not outside the commerce of men, including future
determinate as to its kind. (Art. 1349.) A determi- nate thing is identified by its
things, may be the object of a contract. All rights which are not
individuality, e.g., my car (if I have only one); the watch I am wearing; the
intransmissible may also be the object of contracts.
house located at the cor- ner of Rizal and Del Pilar Streets, etc.;
No contract may be entered into upon future inheritance except in
(2) Sufficient if subject matter capable of being made determinate. It is not
cases expressly authorized by law.
necessary that the thing sold must be in sight at the time the contract is
entered into. It is sufficient that the thing is determinable or capable of being
All services which are not contrary to law, morals, good customs,
made determinate without the necessity of a new or further agreement
public order or public policy may likewise be the object of a contract.
between the parties (Art. 460, par. 2; see Melliza vs. City of Iloilo, 23 SCRA
(1271a)
477 [1968].) to ascertain its identity, quantity, or quality. The fact that such an
agreement is still necessary constitutes an obstacle to the exist- ence of the
ART 1459 contract (Art. 1349.) and renders it void. (Art. 1409[3].)

The thing must be licit and the vendor must have a right to transfer the Thus, a person may validly sell all the cavans of rice in a par- ticular bodega
ownership thereof at the time it is delivered. (n) or a parcel of land located at a particular street but if the bodega is not
ART. 1575 (SALE OF ANIMALS) specified and the seller has more than one bodega or owns more than one
The sale of animals suffering from contagious diseases shall be void. parcel of land at the particular street, and it cannot be known what may have
been sold, the con- tract shall be null and void. (Arts. 1378, par. 2; 1409[6].)
A contract of sale of animals shall also be void if the use or service for Similarly, an obligation by a person to sell one of his cars is limited to the
which they are acquired has been stated in the contract, and they are cars owned by him. The subject matter is determinable; it becomes
found to be unfit therefor. (1494a) determinate the moment it is delivered.

In a case, the respondent purchased a portion of a lot contain- ing 345


square meters, which portion is located in the middle of another lot with a
2. Martinez vs. CA, 56 SCRA 647, April 29, 1974
total area 854 square meters, and referred to in the receipt as the previously
WHEN A PROPERTY IS NOT CAPABLE FOR APPROPRIATION
paid lot. held: Since the lot subse- quently sold to respondent is said to
BECAUSE OF ITS NATURE.
adjoin the previously paid lot on three sides thereof, the subject lot is

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


capable of being determined without the need of any new contract. The fact make good the deficiency from goods of the same kind and quality,
that the exact area of these adjoining residential lots is subject to the result of unless a contrary intent appears. (n)
a survey does not detract from the fact that they are determinate or
determinable. (Heirs of Juino San Andres vs. Rodriguez, 337 SCRA 769
[2000].)
3. UNDIVIDED SHARE IN A MASS OF FUNGIBLE GOODS MAY BE
OBJECT OF SALE
ART. 1460
The sole owner of a thing may sell the entire thing; or only a specific portion
A thing is determinate when it is particularly designated or physical
thereof; or an undivided interest therein and such interest may be designated
segregated from all other of the same class.
as an aliquot part of the whole.

The requisite that a thing be determinate is satisfied if at the time the


The legal effect of the sale of an undivided interest in a thing is to make the
contract is entered into, the thing is capable of being made determinate
buyer a co-owner in the thing sold. As co-owner, the buyer acquires full
without the necessity of a new or further agreement between the
ownership of his part and he may, there- fore, sell it. Such sale is, of course,
parties. (n)
limited to the portion which may be allotted to him in the division of the thing
upon the termination of the co-ownership. (Article 493.)9 This rule operates
1. GENERIC THINGS as OBJECTS OF SALE similarly with respect to ownership of fungible goods.
ART. 1246
The Civil Code classifies movable goods into consumable or non-
When the obligation consists in the delivery of an indeterminate or
consumable (Art. 418.), thereby discarding the old classification (Art. 334, old
generic thing, whose quality and circumstances have not been stated,
Civil Code.) into fungible and non-fungible. This change of classification
the creditor cannot demand a thing of superior quality. Neither can the
seems to be in name only as the defi- nition of fungible goods as those which
debtor deliver a thing of inferior quality. The purpose of the obligation
cannot be used without being consumed under the old Civil Code is precisely
and other circumstances shall be taken into consideration. (1167a)
that of consumable goods. Article 1464, however, still speaks of fungible
goods.
ART. 1409
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained; (1) Meaning of fungible goods. It means goods of which any unit is, from
its nature or by mercantile usage, treated as the equivalent of any other unit
(Uniform Sales Act, Sec. 76.), such as grain, oil, wine, gasoline, etc.
2. UNDIVIDED INTEREST

ART. 1463 (2) Effect of sale. The owner of a mass of goods may sell only an
The sole owner of a thing may sell an undivided interest therein. (n) undivided share thereof, provided the mass is specific or capable of being
made determinate. (Art. 1460.)
ART. 1464 (FUNGIBLE FOODS)
In the case of fungible goods, there may be a sale of an undivided
share of a specific mass, though the seller purports to sell and the (a) By such sale, the buyer becomes a co-owner with the seller of the whole
buyer to buy a definite number, weight or measure of the goods in the mass in the proportion in which the definite share bought bears to the mass.
mass, and though the number, weight or measure of the goods in the
mass is undetermined. By such a sale the buyer becomes owner in (b) It must follow that the aliquot share of each owner can be determined only
common of such a share of the mass as the number, weight or measure by the measurement of the entire mass. If later on it be discovered that the
bought bears to the number, weight or measure of the mass. If the mass of fungible goods contains less than what was sold, the buyer becomes
mass contains less than the number, weight or measure bought, the the owner of the whole mass and furthermore, the seller shall supply
buyer becomes the owner of the whole mass and the seller is bound to whatever is lacking from goods of the same kind and quality, subject to any
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
stipulation to the contrary. conveyance.

(3) Risk of loss. If the buyer becomes a co-owner, with the seller, or other Where the real intention of the parties is the sale of a piece of land but there
owners of the remainder of the mass, it follows that the whole mass is at the is a mistake in designating the particular lot to be sold in the document, the
risk of all the parties interested in it, in proportion to their various holdings. mistake does not vitiate the consent of the parties, or affect the validity and
binding effect of the contract.
(4) Subject matter.Take note that in the sale of an undivided share, either
5. Heirs of Juan San Andres vs. Rodriguez, G.R. No. 135634 May 31,
of a thing (Art. 1463.) or of that of mass of goods (Art. 1464.), the subject
2000
matter is an incorporeal right. (Art. 1501.) Here, ownership passes to the
buyer by the intention of the parties
Where the lot sold is said to adjoin the previously paid lot on three sides
thereof the subject lot is capable of being determined without the need of any
(5) Applicability of Article 1464 to non-fungible goods. Al- though Article new contract, and the fact that the exact area of the adjoining residential lots
1464 speaks of fungible goods, nevertheless it may also apply to goods not is subject to the result of a survey does not detract from the fact that they are
strictly fungible in nature. Indeed, the earliest case in which the doctrine was determinate or determinable.Petitioners contention is without merit. There
applied related to bar- rels of flour. Though flour of the same grade is is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting
fungible in the strictest sense, barrels of flour are necessarily so. Other cases of 345 square meters. This portion is located in the middle of Lot 1914-B-2,
also have applied the doctrine to goods in barrels. So it has been ap- plied to which has a total area of 854 square meters, and is clearly what was referred
bales of cotton and even to cattle or sheep. It is obvious that all cattle are not to in the receipt as the previously paid lot. Since the lot subsequently sold
alike and that some cattle in a herd are more valuable than the others. But in to respondent is said to adjoin the previously paid lot on three sides thereof,
the cases under consideration, the parties had virtually agreed to act on the the subject lot is capable of being determined without the need of any new
assumption that all were alike and it can be seen that this is really the contract. The fact that the exact area of these adjoining residential lots is
essential thing. subject to the result of a survey does not detract from the fact that they are
determinate or determinate.
3. Melliza vs. City of Iloilo, 23 SCRA 477, April 30

The requirement of the law is that a sale must have for its object a 6. Yu Tek & Co. vs. Gonzales, 29 Phil 384 (1915)
determinate thing and this requirement is fulfilled as long as, at the time
the contract is entered into, the object of the sale is capable of being A contract of sale is not perfected until the parties have agreed upon the
made determinate without the necessity of a new or further agreement price and the thing sold. A contract whereby a party obligates himself to sell
between the parties (Art. 1273, old Civil Code; Art. 1460, new Civil for a price a certain specified quantity of sugar of a given quality, without
Code). designating any particular lot of sugar, is not perfected until the quantity
agreed upon has been selected and is capable of being physically
4. 1968 52. Atilano vs. Atilano, 28 SCRA 231 designated and distinguished from all other sugar.
(1969)

The remedy where there is simple mistake in the drafting of the document of
sale in designating the land object of the sale, is reformation of the
instrument, there being a meeting of the minds of the parties to a contract.

3. WHETHER QUANTITY OF OBJECT IS ESSENTIAL FOR


When reconveyance, not reformation of instrument, is proper.In this case, PERFECTION
the deed of sale need not be reformed. The parties have retained possession
of their respective properties conformably to the real intention of the parties ART. 1349
to that sale, and all they should do is to execute mutual deeds of

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


The object of every contract must be determinate as to its kind. The fact petitioner reserved title to the goods until private respondent had opened a
that the quantity is not determinate shall not be an obstacle to the letter of credit. Petitioner, in the course of its dealings with private
existence of the contract, provided it is possible to determine the same, respondent, did not incorporate any provision declaring their contract of sale
without the need of a new contract between the parties. (1273) without effect until after the fulfillment of the act of opening a letter of credit.
The opening of a letter of credit in favor of a vendor is only a mode of
payment. It is not among the essential requirements of a contract of sale
7. National Grains Authority, vs. IAc, 171 SCRA 131, 1989 enumerated in Articles 1305 and 1474 of the Civil Code, the absence of any
of which will prevent the perfection of the contract from taking place.
In case at bar, Soriano initially offered to sell palay grains produced in his
farmland to NFA. When the latter accepted the offer by noting in Sorianos
Farmers Information Sheet a quota of 2,640 cavans, there was already a
meeting of the minds between the parties. The object of the contract, being IX. PRICE
the palay grains produced in Sorianos farmland and the NFA was to pay the
same depending upon its quality. The fact that the exact number of cavans of
PRICE:
palay to be delivered has not been determined does not affect the perfection
of the contract.
ART. 1469
Contention that there was no contract of sale because of the absence of
consent not correct; acceptance referred to is the acceptance of the offer and In order that the price may be considered certain, it shall be sufficient
not of the goods delivered.The above contention of petitioner is not correct. that it be so with reference to another thing certain, or that the
Sale is a consensual contract, x x x, there is perfection when there is determination thereof be left to the judgment of a special person or
consent upon the subject matter and price, even if neither is delivered. persons.
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560). This is
provided by Article 1475 of the Civil Code which states: Art. 1475. The
Should such person or persons be unable or unwilling to fix it, the
contract of sale is perfected at the moment there is a meeting of minds upon
contract shall be inefficacious, unless the parties subsequently agree
the thing which is the object of the contract and upon the price. x x x. The
upon the price.
acceptance referred to which determines consent is the acceptance of the
offer of one party by the other and not of the goods delivered as contended
by petitioners. If the third person or persons acted in bad faith or by mistake, the
courts may fix the price.

8. Johannes Schuback & Sons, Phil. Trading Corp vs. CA, 227 SCRA 719 Where such third person or persons are prevented from fixing the price
(1993) or terms by fault of the seller or the buyer, the party not in fault may
have such remedies against the party in fault as are allowed the seller
or the buyer, as the case may be. (1447a)
ART. 1470
The opening of a letter of credit in favor of a vendor is only a mode of
payment; It is not among the essential requirements of a contract of sale Gross inadequacy of price does not affect a contract of sale, except as
enumerated in Arts. 1305 and 1474 of the Civil Code and therefore does not it may indicate a defect in the consent, or that the parties really
prevent the perfection of the contract between the parties.On the part of intended a donation or some other act or contract. (n)
the buyer, the situation reveals that private respondent failed to open an ART. 1471
irrevocable letter of credit without recourse in favor of Johannes Schuback of
Hamburg, Germany. This omission, however, does not prevent the perfection
of the contract between the parties, for the opening of a letter of credit is not If the price is simulated, the sale is void, but the act may be shown to
to be deemed a suspensive condition. The facts herein do not show that have been in reality a donation, or some other act or contract. (n)

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


ART. 1472 to be founded on
another true and
The price of securities, grain, liquids, and other things shall also be lawful price [Art
considered certain, when the price fixed is that which the thing sold 1353]
would have on a definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on such day, or in
such exchange or market, provided said amount be certain. (1448) (a) N.B.: Example of equivalent:
ART. 1473 Letters of credit

(b) If price is partly in money and


The fixing of the price can never be left to the discretion of one of the partly in another thing: Determine
contracting parties. However, if the price fixed by one of the parties is manifest intention of the parties to
by the other, the sale is perfected. (1449a) MUST BE IN MONEY OR see whether it was barter or sale. [Art
ART. 1474 EQUIVALENT 1468]
Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is inefficacious. (c) If intention does not clearly
However, if the thing or any part thereof has been delivered to and appear, it shall be considered a
appropriated by the buyer he must pay a reasonable price therefor. barter if the value of the thing exceed
What is a reasonable price is a question of fact dependent on the the amount of money or its
circumstances of each particular case. (n) equivalent. [Art 1468]

MUST BE CERTAIN OR
ASCERTAINABLE AT THE TIME OF
Price signifies the sum stipulated as the equivalent of the thing sold and also THE PERFECTION OF THE
every incident taken into consideration for the fixing of the price put to the CONTRACT
debit of the buyer and agreed to by him.

1. REAL
B. REQUISITES FOR A VALID PRICE
ART. 1471
When buyer has an intention to pay
and the seller has an expectation to
If the price is simulated, the sale is void, but the act may be shown to
receive the price
have been in reality a donation, or some other act or contract. (n)
(a) If simulated: Sale is VOID; BUT
act may be shown to have been a 1. Mapalo vs. Mapalo, 17 SCRA 114 (1966)
MUST BE REAL donation or some other act or
contract. [Art 1471] Contracts without cause or consideration; Statement of false consideration:
The rule under the Civil Code, be it the old or the new, is that
(b) If Price is false when the real contracts without a cause or consideration produce no effect whatsoever.
consideration is not the price stated (Art. 1275, Old Civil Code; Art. 1352, New Civil Code.) Nonetheless, under
in the contract: the Old Civil Code, the statement of a false consideration renders the
(i) Sale is void contract voidable, unless it is proven that it is supported by
(ii) UNLESS proved another real and licit consideration. (Art. 1276, Old Civil Code.)

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


them not merely voidable, but void ab initio: Without necessarily according all
Annulment of contract on the ground of falsity of consideration; Prescription: these assertions its full concurrence, but upon the consideration alone that
The action for annulment of a contract on the ground of falsity of the apparent gross, not to say enormous, disproportion between the
consideration shall last four years, the term to run from the date of the stipulated price (in each deed) of P1.00 plus unspecified and unquantified
consummation of the contract. (Art. 1301, Old Civil Code.) services and the undisputably valuable real estate allegedly soldworth at
least P10,500.00 going only by assessments for tax purposes which, it is
Contract that states false consideration construed: well-known, are notoriously low indicators of actual valueplainly and
A contract that states a false consideration is one that has in fact a real unquestionably demonstrates that they state a false and fictitious
consideration but the same is not the one stated in the document. (Manresa, consideration, and no other true and lawful cause having been shown, the
Codigo Civil, Tomo VIII, Vol. II, p. 354.) Court finds both said deeds, insofar as they purport to be sales, not merely
voidable, but void ab initio.

2. Ong vs. Ong, 19 SCRA 133 (1985)


4. Mate vs. CA, 290 SCRA 463 (1998)
Consideration; Conveyance of property for P1.00 consideration and other
valuable considerations, valid: A careful perusal of the subject deed reveals as admitted by petitioner, by virtue of the sale with pacto de retro, Josie
that the conveyance of the one-half () undivided portion of the above- Rey gave him, as vendor-a-retro, a postdated check in the amount of
described property was for and in consideration of the One (P1.00) Peso P1.4 Million, which represented the repurchase price of the two (2) lots.
and the other valuable considerations (italics supplied) paid by private Aside from the P1.4 Million check, Josie gave another postdated check
respondent Sandra Maruzzo, through her representative, Alfredo Ong, to to petitioner in the amount of P420,000.00, ostensibly as interest for six
petitioner Imelda Ong. Stated differently, the cause or consideration is not (6) months but which apparently was his fee for having executed the
the One (P1.00) Peso alone but also the other valuable considerations. pacto de retro document. Josie thus assumed the responsibility of paying
the repurchase price on behalf of petitioner to private respondent.
Bad faith and inadequacy of monetary consideration do not render a Unfortunately, the two checks issued by Josie Rey were worthless. Both
conveyance inexistent, as the assignor's liability may be sufficient cause for a were dishonored upon presentment by petitioner with the drawee banks.
valid contract: lt is not unusual, however, in deeds of conveyance adhering to However, there is absolutely no basis for petitioner to file a complaint
the AngloSaxon practice of stating that the consideration given is the sum of against private respondent Tan and Josie Rey to annul the pacto de retro
P1.00, although the actual consideration may have been much more. sale on the ground of lack of consideration, invoking his failure to encash
Moreover, assuming that said consideration of P1.00 is suspicious, this the two checks. Petitioners cause of action was to file criminal actions
circumstance, alone, does not necessarily justify the inference that Reyes against Josie Rey under B.P. 22, which he did. The filing of the criminal
and the Abellas were not purchasers in good faith and for value. Neither cases was a tacit admission by petitioner that there was a consideration
does this inference warrant the conclusion that the sales were null and of the pacto de retro sale.
void ab initio. Indeed, bad faith and inadequacy of the monetary
consideration do not render a conveyance inexistent, for the assignor's Between two innocent parties, the one who made it possible for the wrong to
liberality may be sufficient cause for a valid contract (Article 1350, Civil be done should be the one to bear the resulting loss.Petitioner then
Code), whereas fraud or bad faith may render either rescissible or voidable, postulates that it is not only illegal but immoral to require him to repurchase
although valid until annulled, a contract concerning an object certain entered his own properties with his own money when he did not derive any benefit
into with a cause and with the consent of the contracting parties, as in the from the transaction. Thus, he invokes the case of Singson vs. Isabela
case at bar." Sawmill, 88 SCRA 633, 643, where the Court said that where one or two
innocent persons must suffer, that person who gave occasion for the
3. Bagnas vs. CA, 176 SCRA 159 (1989) damages to be caused must bear consequences. Petitioners reliance on
this doctrine is misplaced. He is not an innocent person. As a matter of fact,
Consideration; The apparent gross disproportion between the stipulated price he gave occasion for the damage caused by virtue of the deed of sale with
and the undisputably valuable real estate allegedly sold, demonstrates that right to repurchase which he prepared and signed. Thus, there is the
the deeds of sale in question state a false consideration, thereby making equitable maxim that between two innocent parties, the one who made it

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


possible for the wrong to be done should be the one to bear the resulting
loss. 6. Gonzales vs. Trinidad, 67 Phil 682 (1939) Manila

CONTRACTS; PURCHASE AND SALE; CAUSE OR CONSIDERATION.


Articles 1305 and 1306 of the Civil Code are not applicable to the contract
5. Alino vs. Heirs of Lorenzo, 556 SCRA 139 entered into by the parties because they refer to contracts with an illegal
consideration or subject matter, whether the facts constitute an offense or
When the parties do not intend to be bound at all, the contract is absolutely misdemeanor or whether the consideration is only rendered illegal. The
simulated, but if the parties conceal their true agreement, then the contract contract of sale, being onerous, has for its cause or consideration the price of
is relatively simulated.It is a cardinal rule in the interpretation of contracts P10,000 (article 1274 of the Civil Code) ; and both this consideration as well
that the intention of the parties shall be accorded primordial consideration. as the subject matter of the contract, namely, the property, are lawful and not
Such intention is determined from the express terms of their agreement, as penalized by law. However, as ,the contract was in itself fictitious and
well as their contemporaneous and subsequent acts. When the parties do simulated and the supposed vendors did not receive the stipulated price, the
not intend to be bound at all, the contract is absolutely simulated; if the consideration being thus lacking, said contract is null and void per se or
parties conceal their true agreement, then the contract is relatively simulated. nonexistent (article 1261 of the 'Civil Code). As has been held by the Court of
Characteristic of simulation is that the apparent contract is not really desired Appeals, the object of the contracting parties or the motives which the
or intended to produce legal effects or in any way alter the juridical situation vendors had in entering into the simulated contract should not be confused
of the parties. with the consideration which was not present in the transaction. The former,
although illegal', neither determine nor take the place of the consideration.
The most protuberant index of simulation is the complete absence of an
attempt in any manner on the part of the vendee to assert his rights of 7. Banking Corporation vs. Silverio, 466 SCRA 438 (2005)
ownership over the disputed property.In Suntay v. Court of Appeals, 251
SCRA 430 (1995), the Court held that the most protuberant index of n absolutely simulated contract, under Article 1346 of the Civil Code, is
simulation is the complete absence of an attempt in any manner on the part void. It takes place when the parties do not intend to be bound at all. The
of the vendee to assert his rights of ownership over the disputed property. characteristic of simulation is the fact that the apparent contract is not really
desired or intended to produce legal effects or in any way alter the juridical
The concept of inadequacy or non-payment of price is irreconcilable with the situation of the parties. Thus, where a person, in order to place his property
concept of simulationif there exists an actual consideration for transfer beyond the reach of his creditors, simulates a transfer of it to another, he
evidenced by the alleged act of sale, no matter how inadequate it be, the does not really intend to divest himself of his title and control of the property;
transaction could not be a simulated sale; A sale between a mother and a hence, the deed of transfer is but a sham. Lacking, therefore, in a fictitious
daughter by itself cannot be considered an indication of simulation, absent an and simulated contract is consent which is essential to a valid and
indication of the absence of intent to be bound by the contract.Having enforceable contract.
resolved the core issue on the validity of the deed of sale, the Court sees no
need to further discuss the remaining matters raised in the petition. Suffice it It goes against ordinary human experience for a person to simply forget the
to state that the concept of inadequacy or non-payment of price is details of the day when he became poorer by P3,109,425.00 cash.If it were
irreconcilable with the concept of simulation. If there exists an actual true that money indeed changed hands on 11 September 1989 as evidenced
consideration for transfer evidenced by the alleged act of sale, no matter how by the assailed deed of sale, then, at the very least, Edmundo, as buyer,
inadequate it be, the transaction could not be a simulated sale. As to filial would definitely not have forgotten personally handing P3,109,425.00 to the
relationship, i.e., the sale was effected in the name of the daughter only, the seller, Ricardo, Sr. It goes against ordinary human experience for a person to
same, by itself, cannot be considered an indication of simulation, absent an simply forget the details of the day when he became poorer by
indication of the absence of intent to be bound by the contract, which in the P3,109,425.00 cash. The only logical conclusion is that there was actually no
present case was shown by subsequent acts of the parties. consideration for the said sale. Verily, a deed of sale in which the stated
consideration has not in fact been paid is a false contract that is void ab
initio. Likewise, a contract of purchase and sale is null and void and
a. SIMULATED PRICE produces no effect whatsoever where it appears that [the] same is without

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


cause or consideration which should have been the motive thereof, or the to rescind or cancel the deed of sale in view of petitioners failure to pay the
purchase price appears thereon as paid but which in fact has never been stipulated consideration. Montecillo v. Reynes, 385 SCRA 244 (2002), cited
paid by the purchaser to the vendor. by the appellate court, is particularly instructive in distinguishing the legal
effects of failure to pay consideration and lack of consideration: x x x
An indication of simulation of contract is the complete absence of an attempt Failure to pay the consideration is different from lack of consideration. The
in any manner on the part of the ostensible buyer to assert rights of former results in a right to demand the fulfillment or cancellation of the
ownership over the subject properties.As correctly pointed out by TMBC, obligation under an existing contract, while the latter prevents the existence
an indication of simulation of contract is the complete absence of an attempt of a valid contract. Where the deed of sale states that the purchase price has
in any manner on the part of the ostensible buyer to assert rights of been paid but in fact has never been paid, the deed of sale is null and
ownership over the subject properties. In herein case, Edmundo did not void ab initio for lack of consideration. x x x
attempt to have the 1989 deed of sale registered until 1993. He was not in
possession of the properties. He did not have a contract of lease with the Non-payment of the purchase price of property constitutes a very good
actual occupant of the properties. As late as 1991, it was Ricardo, Sr. who reason to rescind a sale for it violates the very essence of the contract of
was claiming to be the rightful owner of the properties in connection with an sale.Non-payment of the purchase price of property constitutes a very
ejectment case he filed against third persons. When asked to explain why it good reason to rescind a sale for it violates the very essence of the contract
was Ricardo, Sr. who was asserting ownership over the properties, Edmundo of sale. While it is preferable that respondent instead should have filed an
lamely replied because I am asking him so. Taken together with the other action to resolve or cancel the deed as the right to do so must be invoked
circumstances surrounding the sale, Edmundos failure to exercise acts of judicially, this shortcoming was cured when the complaint itself made out a
dominium over the subject properties buttresses TMBCs position that the case for rescission or resolution for failure of petitioner to comply with his
former did not at all intend to be bound by the contract of sale. In Suntay, as obligation to pay the full purchase price.
reiterated in such cases as Santiago v. Court of Appeals, Cruz v. Bancom
Finance Corporation and Ramos v. Heirs of Ramos, Sr., we held that the A necessary consequence of rescission is restitution with payment of
most proturberant index of simulation is the complete absence of an attempt damages.As previously noted, petitioner did not pay the full purchase price
in any manner on the part of the [ostensible buyer] to assert his rights of as stipulated in the contract whereas respondent complied with its obligation
ownership over the [properties] in question. The supposed buyers failure to when it delivered the two buses to petitioner. A necessary consequence of
take exclusive possession of the property allegedly sold or, in the alternative, rescission is restitution with payment of damages.
to collect rentals, is contrary to the principle of ownership. Such failure is a
clear badge of simulation that renders the whole transaction void pursuant to
Article 1409 of the Civil Code
When a contract is void, the right to set up its nullity or non-existence is
available to third persons whose interests are directly affected thereby. The
material interest of TMBC need not be belabored. Suffice it to say that as
judgment creditor of Ricardo, Sr., it has the right to protect its lien acquired
through a writ of preliminary attachment as security for the satisfaction of any
judgment in its favor.
2. MUST BE IN MONEY OR ITS EQUIVALENT

b. FALSE CONSIDERATION and NON-PAYMENT OF PRICE


ART. 1458
8. Macasaet vs. R. Transport Corp., 535 SCRA 503 (2007) By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent.
Legal effects of failure to pay consideration and lack of consideration A contract of sale may be absolute or conditional. (1445a)
distinguished in Montecillo vs. Reynes, 385 SCRA 244 (2002).Applying
these legal precepts to the case at bar, we hold that respondent has the right

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


ART. 1468 be considered as sufficient proof of the perfection of any purchase and sale
If the consideration of the contract consists partly in money, and partly agreement between the parties under article 1482 of the new Civil Code.
in another thing, the transaction shall be characterized by the manifest
intention of the parties. If such intention does not clearly appear, it shall
be considered a barter if the value of the thing given as a part of the
consideration exceeds the amount of the money or its equivalent; 11. San Miguel Properties Philippines vs. Huang, 336 SCRA 737 (2000)
otherwise, it is a sale.
mount given not as a part of the purchase price and as proof of the perfection
8. Republic vs. Philippine Resources, 102 Phil 960 (1958) of the contract of sale but only as a guarantee that respondents would not
back out of the sale.With regard to the alleged payment and acceptance of
Although Article 1458 of the new Civil Code provides that price * * * is always earnest money, the Court holds that respondents did not give the P1 million
paid in terms of money and the supposed payment being in kind it is no as earnest money as provided by Art. 1482 of the Civil Code. They
payment at all," yet the same article provides that the purchaser may pay "a presented the amount merely as a deposit of what would eventually become
price certain in money or its equivalent" which means that payment of the the earnest money or downpayment should a contract of sale be made by
price need not be money. them. The amount was thus given not as a part of the purchase price and as
proof of the perfection of the contract of sale but only as a guarantee that
respondents would not back out of the sale. Respondents in fact described
3. THE PRICE MUST BE CERTAIN OR ASCERTAINABLE the amount as an earnest-deposit.

9. Toyota Shaw vs. Court of Appeals, 244 SCRA 320 (1995) The first condition for an option period of 30 days sufficiently shows that
a sale was never perfected. As petitioner correctly points out, acceptance of
Definiteness as to the price is an essential element of a binding agreement to this condition did not give rise to a perfected sale but merely to an option or
sell personal property.This Court had already ruled that a definite an accepted unilateral promise on the part of respondents to buy the subject
agreement on the manner of payment of the price is an essential element in properties within 30 days from the date of acceptance of the offer. Such
the formation of a binding and enforceable contract of sale. This is so option giving respondents the exclusive right to buy the properties within the
because the agreement as to the manner of payment goes into the price period agreed upon is separate and distinct from the contract of sale which
such that a disagreement on the manner of payment is tantamount to a the parties may enter. All that respondents had was just the option to buy the
failure to agree on the price. Definiteness as to the price is an essential properties which privilege was not, however, exercised by them because
element of a binding agreement to sell personal property. there was a failure to agree on the terms of payment. No contract of sale
may thus be enforced by respondents.
C. MANNER OF PAYMENT OF PRICE MUST BE AGREED UPON
Option secured by respondents from petitioner was fatally
10. Velasco vs. CA, 51 SCRA 439 (1973) defective; Consideration in an option contract may be anything of value,
unlike in sale where it must be the price certain in money or its equivalent.
A definite agreement on manner of payment essential to a binding contract of Even the option secured by respondents from petitioner was fatally defective.
sale.It is not difficult to glean from the aforequoted averments that the Under the second paragraph of Art. 1479, an accepted unilateral promise to
petitioners themselves admit that they and the respondent still had to meet buy or sell a determinate thing for a price certain is binding upon the
and agree on how and when the down-payment and the installment promisor only if the promise is supported by a distinct consideration.
payments were to be paid. Such being the situation, it cannot, therefore, be Consideration in an option contract may be anything of value, unlike in sale
said that a definite and firm sales agreement between the parties had been where it must be the price certain in money or its equivalent. There is no
perfected over the lot in question. Indeed, this Court has already ruled before showing here of any consideration for the option. Lacking any proof of such
that a definite agreement on the manner of payment of the purchase price is consideration, the option is unenforceable.
an essential element in the formation of a binding and enforceable contract of
sale. The fact, therefore, that the petitioners delivered to the respondent the The manner of payment of the purchase price is an essential element
sum of P10,000.00 as part of the down-payment that they had to pay cannot before a valid and binding contract of sale can exist.The appellate court

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


opined that the failure to agree on the terms of payment was no bar to the payment of the price of the property to give rise to a binding and enforceable
perfection of the sale because Art. 1475 only requires agreement by the contract of sale or contract to sell.A definite agreement as to the price is an
parties as to the price of the object. This is error. In Navarro v. Sugar essential element of a binding agreement to sell personal or real property
Producers Cooperative Marketing Association, Inc., we laid down the rule because it seriously affects the rights and obligations of the parties. Price is
that the manner of payment of the purchase price is an essential element an essential element in the formation of a binding and enforceable contract of
before a valid and binding contract of sale can exist. Although the Civil Code sale. The fixing of the price can never be left to the decision of one of the
does not expressly state that the minds of the parties must also meet on the contracting parties. But a price fixed by one if the contracting parties, if
terms or manner of payment of the price, the same is needed, otherwise accepted by the other, gives rise to a perfected sale. It is not enough for the
there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals, agreement parties to agree on the price of the property. The parties must also agree on
on the manner of payment goes into the price such that a disagreement on the manner of payment of the price of the property to give rise to a binding
the manner of payment is tantamount to a failure to agree on the price. and enforceable contract of sale or contract to sell. This is so because the
agreement as to the manner of payment goes into the price, such that a
disagreement on the manner of payment is tantamount to a failure to agree
It is not the giving of earnest money, but the proof of the concurrence of all on the price.
the essential elements of the contract of sale which establishes the existence
of a perfected sale.It is not the giving of earnest money, but the proof of
the concurrence of all the essential elements of the contract of sale which
establishes the existence of a perfected sale. D. HOW PRICE IS DETERMINED:

1. BY THIRD PERSONS ART. 1469:


12. Boston Bank of the Phils. vs. Manalo, et al., G.R. No. 158149, February
9, 2006 In order that the price may be
considered certain, it shall be
For a perfected contract of sale or contract to sell to exist in law, there must sufficient that it be so with reference
be an agreement of the parties, not only on the price of the property sold, but to another thing certain, or that the
also on the manner the price is to be paid by the vendee.We agree with determination thereof be left to the
petitioners contention that, for a perfected contract of sale or contract to sell judgment of a special person or
to exist in law, there must be an agreement of the parties, not only on the persons.
price of the property sold, but also on the manner the price is to be paid by
the vendee. Under Article 1458 of the New Civil Code, in a contract of sale,
Should such person or persons be
whether absolute or conditional, one of the contracting parties obliges himself
unable or unwilling to fix it, the
to transfer the ownership of and deliver a determinate thing, and the other to
contract shall be inefficacious, unless
pay therefor a price certain in money or its equivalent. A contract of sale is
the parties subsequently agree upon
perfected at the moment there is a meeting of the minds upon the thing
the price.
which is the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what has been
expressly stipulated, but also to all the consequences which, according to If the third person or persons acted in
their nature, may be in keeping with good faith, usage and law. On the other bad faith or by mistake, the courts
hand, when the contract of sale or to sell is not perfected, it cannot, as an may fix the price.
independent source of obligation, serve as a binding juridical relation
between the parties. Where such third person or persons
are prevented from fixing the price or
A definite agreement as to the price is an essential element of a binding terms by fault of the seller or the
agreement to sell personal or real property because it seriously affects the buyer, the party not in fault may have
rights and obligations of the parties; The parties must agree on the manner of such remedies against the party in

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


fault as are allowed the seller or the the provisions
buyer, as the case may be. (1447a) of this Code.

2. BY THE COURT ART. 1469


6. WHEN NO PRICE AGREED Where the price cannot be
If the third person or persons acted in determined in accordance with the
bad faith or by mistake, the courts preceding articles, or in any other
may fix the price. manner, the contract is
inefficacious. However, if the thing
or any part thereof has been
delivered to and appropriated by
the buyer he must pay a
3. BY REFERENCE TO A DEFINITE The price of securities, grain, liquids,
reasonable price therefor. What is
DAY, PARTICULAR EXCHANGE and other things shall also be
a reasonable price is a question of
OR MARKET considered certain, when the price
fact dependent on the
fixed is that which the thing sold
circumstances of each particular
would have on a definite day, or in a
case.
particular exchange or market, or
when an amount is fixed above or
below the price on such day, or in
such exchange or market, provided
said amount be certain. (

4. BY REFERENCE TO ANOTHER
THING CERTAIN

5. BUT NEVER BY ONE PARTY ART. 1473 The Art. 1182


fixing of the price
can never be left When the
to the discretion fulfillment of
of one of the the condition
contracting depends upon
parties. However, the sole will of
if the price fixed the debtor, the
by one of the conditional
parties is by the obligation shall
other, the sale is be void. If it
perfected. depends upon
chance or upon
the will of a
third person,
the obligation
shall take
effect in
conformity with

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


E. GROSS INADEQAUCY OF PRICE

ART. 1355 13. Philippine Free Press, Inc. vs. CA, 473 SCRA 639, October 24, 2005
71. Bravo
Except in cases specified by law, lesion or inadequacy of cause shall
not invalidate a contract, unless there has been fraud, mistake or undue Gross inadequacy of the purchase price does not, as a matter of civil
influence. law, per se affect a contract of sale.Gross inadequacy of the purchase
ART. 1386 price does not, as a matter of civil law, per se affect a contract of sale.
Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take Article 1470 of the Civil Code says so. It reads: Article 1470. Gross
place with respect to contracts approved by the courts. (1296a) inadequacy of price does not affect a contract of sale, except as it may
ART. 1470 indicate a defect in the consent, or that the parties really intended a
Gross inadequacy of price does not affect a contract of sale, except as it may donation or some other act or contract.
indicate a defect in the consent, or that the parties really intended a donation
or some other act or contract. (n) Supreme Court found the following ruling of the Court of Appeals well-
ART. 1602 taken; It need not be overemphasized that by using the proceeds in this
The contract shall be presumed to be an equitable mortgage, in any of manner, Free Press only too clearly confirmed the voluntariness of its
the following cases: consent and ratified the sale.In the light of the foregoing disquisition,
the question of whether or not petitioners undisputed utilization of the
proceeds of the sale constitutes, within the purview of Article 1393 of the
(1) When the price of a sale with right to repurchase is
Civil Code, implied ratification of the contracts of sale need not detain us
unusually inadequate;
long. Suffice it to state in this regard that the ruling of the Court of
Appeals on the matter is well-taken. Wrote the appellate court: In the
(2) When the vendor remains in possession as lessee or case at bench, Free Presss own witnesses admitted that the proceeds of
otherwise; the 1973 sale were used to settle the claims of its employees, redeem
the shares of its stockholders and finance the companys entry into
(3) When upon or after the expiration of the right to repurchase money-market shareholdings and fishpond business activities (TSN, 2
another instrument extending the period of redemption or May 1988, pp. 16, 42-45). It need not be overemphasized that by using
granting a new period is executed; the proceeds in this manner, Free Press only too clearly confirmed the
voluntaries of its consent and ratified the sale. Needless to state, such
(4) When the purchaser retains for himself a part of the ratification cleanses the assailed contract from any alleged defects from
purchase price; the moment it was constituted (Art. 1396, Civil Code).

(5) When the vendor binds himself to pay the taxes on the thing
sold; 14. Guerrero vs. Bravo, 465 SCRA 244 (2005)

Simulation of Contract and Inadequacy of Price, Distinguish;


(6) In any other case where it may be fairly inferred that the real
Simulation of contract and gross inadequacy of price are distinct legal
intention of the parties is that the transaction shall secure the
concepts, with different effectsthe concept of a simulated sale is
payment of a debt or the performance of any other obligation.
incompatible with inadequacy of price; When the parties to an alleged
contract do not really intend to be bound by it, the contract is simulated and
In any of the foregoing cases, any money, fruits, or other benefit to be void; Gross inadequacy of price by itself will not result in a void contract, and
received by the vendee as rent or otherwise shall be considered as it does not even affect the validity of a contract of sale, unless it signifies a
interest which shall be subject to the usury laws. (n) defect in the consent or that the parties actually intended a donation or some
other contract.Simulation of contract and gross inadequacy of price are
distinct legal concepts, with different effects. When the parties to an alleged

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


contract do not really intend to be bound by it, the contract is simulated and Price on forced sales distinguished from ordinary sales.While in ordinary
void. A simulated or fictitious contract has no legal effect whatsoever sales for reasons of equity a transaction may be invalidated on the ground of
because there is no real agreement between the parties. In contrast, a inadequacy of price, or when such inadequacy shocks one's conscience as
contract with inadequate consideration may nevertheless embody a true to justify the courts to interfere, such does not follow when the law gives to
agreement between the parties. A contract of sale is a consensual contract, the owner the right to redeem, as when a sale is made at public auction,
which becomes valid and binding upon the meeting of minds of the parties on upon the theory that the lesser the price the easier it is for the owner to effect
the price and the object of the sale. The concept of a simulated sale is thus the redemption. And so it was aptly said that when there is the right to
incompatible with inadequacy of price. When the parties agree on a price as redeem, inadequacy of price should not be material, because the judgment
the actual consideration, the sale is not simulated despite the inadequacy of debtor may reacquire the property or also sell his right to redeem and thus
the price. Gross inadequacy of price by itself will not result in a void contract. recover the loss he claims to have suffered by reason of the price obtained at
Gross inadequacy of price does not even affect the validity of a contract of the auction sale.
sale, unless it signifies a defect in the consent or that the parties actually
intended a donation or some other contract. Inadequacy of cause will not
invalidate a contract unless there has been fraud, mistake or undue
influence. In this case, respondents have not proved any of the instances
that would invalidate the Deed of Sale. 16. Laperal vs. Rogers, 13 SCRA 26,, January 30, 1965

Certainly, there is nothing surprising in the sharp increase in the value Sale of real property to Japanese military forces during occupation
of the properties nine or twenty-seven years after the sale, particularly when under duress invalidated.The circumstances that: (1) it is of common
we consider that the properties are located in the City of Makati.The knowledge that the Japanese army of occupation did take private properties
subject Deed of Sale, however, was executed in 1970. The valuation of the in Manila without the consent of their owners; (2) at the time of the
Properties in 1979 or 1997 is of little relevance to the issue of whether questioned sale the plaintiff was a very rich man with extensive real estates
P16,000 was a grossly inadequate price to pay for the Properties in 1970. in Manila and from 1914 up to the date of said sale had not sold a single
Certainly, there is nothing surprising in the sharp increase in the value of the property; and (3) the purchase price was grossly inadequate considering the
Properties nine or twenty-seven years after the sale, particularly when we value of the property at the time of the sale, all lead to the conclusion that the
consider that the Properties are located in the City of Makati. deed of sale in question was executed under duress and due to threats of the
Japanese army.
Assuming that the vendees failed to pay the full price stated in the Deed When threats made by Japanese army not covered by collective and
of Sale, such partial failure would not render the sale void.Assuming that general duress rule.Where the evidence of a person seeking invalidation of
the vendees failed to pay the full price stated in the Deed of Sale, such a contract made during the enemy occupation proved that he was inspired by
partial failure would not render the sale void. In Buenaventura v. Court of a reasonable and well grounded fear of suffering and imminent and serious
Appeals, the Court held: x x x If there is a meeting of the minds of the parties injury to his person or property, including that of his family, if he did not
as to the price, the contract of sale is valid, despite the manner of execute the deed of sale to his property as demanded by the Japanese army
payment, or even the breach of that manner of payment. x x x It is not the authorities, it is held that the transaction is not covered by the theory of
act of payment of price that determines the validity of a contract of sale. general or collective duress, and therefore the deed in question should be
Payment of the price has nothing to do with the perfection of the contract. invalidated.
Payment of the price goes into the performance of the contract. Failure to Ratification not proven by status of bank current accounts which are
pay the consideration is different from lack of consideration. The former incomplete.The alleged ratification of a contract made under duress during
results in a right to demand the fulfillment or cancellation of the obligation the enemy occupation is not considered proven by a document purporting to
under an existing valid contract while the latter prevents the existence of a show the status of plaintiffs bank current account it appearing that said
valid contract. document is incomplete, not entirely reliable, and the entries appearing
thereon not having been properly identified by a competent witness.

15. De Leon vs. Salvador, 36 SCRA 566, December 28, 1970

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


X. PREPARATORY upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified
ART. 1479 acceptance constitutes a counter-offer.

A promise to buy and sell a determinate thing for a price certain is Acceptance made by letter or telegram does not bind the offerer except
reciprocally demandable. from the time it came to his knowledge. The contract, in such a case, is
presumed to have been entered into in the place where the offer was
An accepted unilateral promise to buy or to sell a determinate thing for made.
a price certain is binding upon the promissor if the promise is ART. 1325
supported by a consideration distinct from the price. (1451a) Unless it appears otherwise, business advertisements of things for sale
are not definite offers, but mere invitations to make an offer. (n)
ART. 1326
1. Policitation - A unilateral promise or offer to sell or to buy a thing which is Advertisements for bidders are simply invitations to make proposals,
not accepted creates no juridical effect or legal bond. Such unaccepted and the advertiser is not bound to accept the highest or lowest bidder,
imperfect promise or offer is called policitacion. A period may be given to the unless the contrary appears. (n)
offeree within which to accept the offer.

EXAMPLE: 1. Zayco vs. Serra, 44 Phil 326 (1923)

S offers or promises to sell to B his car at a stated price and B just let the
In order for an acceptance to have the effect of converting an offer to sell
promise go by without accepting it. Neither S nor B is bound by any contract.
into a perfect contract, it must be plain and unconditional, and it will not
Obviously, this is not the one con- templated in Article 1479.
be so, if it involves any new proposition, for in that case, it will not be the
acceptant's conformity with the offer which is what gives rise to the birth
of a contract. In this case the acceptance of the offer was not sufficient to
give life to the contract and is no ground for compelling the offerer to
2. Offer execute the sale offered.

ART. 1475
FORM OF ACCEPTANCE
The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the ART. 1319
contract and upon the price.
Consent is manifested by the meeting of the offer and the acceptance
From that moment, the parties may reciprocally demand
upon the thing and the cause which are to constitute the contract. The
performance, subject to the provisions of the law governing the
offer must be certain and the acceptance absolute. A qualified
form of contracts. (1450a)
acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except
Form of Offer from the time it came to his knowledge. The contract, in such a case, is
presumed to have been entered into in the place where the offer was
ART. 1319 made.

Consent is manifested by the meeting of the offer and the acceptance


REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
VICES VITIATING CONSENT Articles 1330, 1338, 1331 consideration for the option, then it cannot be enforced any more
than any other contract where no consideration exists. [Baviera]
ART. 1330 CONTRACT IS VOIDABLE ELEMENTS OF AN OPTION CONTRACT

CONSENT MEETING OF MINDS


A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable. (1265a)
SUBJECT MATTER an option right or accepted unilateral
ART. 1338 (DEFINITION OF FRAUD)
offer to buy, or an option right or
There is fraud when, through insidious words or machinations of one of
accepted unilateral offer to sell a
the contracting parties, the other is induced to enter into a contract
determinate object for a price certain,
which, without them, he would not have agreed to
including the manner of payment
ART. 1331
thereof
In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those
PRESTATION a consideration separate and distinct
conditions which have principally moved one or both parties to enter
from the purchase price for the
into the contract.
option given

Mistake as to the identity or qualifications of one of the parties will


vitiate consent only when such identity or qualifications have been the
principal cause of the contract.

A simple mistake of account shall give rise to its correction CASES:

2. De la Cavada vs. Diaz, 37 Phil 962 (1918)


3. OPTION CONTRACT
The contract was not an optional contract as that phrase in generally used.
It is clearly an absolute promise to sell a definite parcel of land for a fixed
ART. 1479 (DEFINITION OF AN OPTION CONTRACT) price upon definite conditions. Diaz promised to convey to Enriquez the land
in question as soon as the same was registered under the Torrens system,
A promise to buy and sell a determinate thing for a price certain is and Enriquez promised to pay to Diaz the sum of P70,000, under the
reciprocally demandable. condition named, upon the happening of that event.

The contract was not what is generally known as a contract of option. It


An accepted unilateral promise to buy or to sell a determinate thing for
differs very essentially from a contract of option. An optional contract is a
a price certain is binding upon the promissor if the promise is
privilege existing in one person, for which he had paid a consideration, which
supported by a consideration distinct from the price. (1451a)
gives him the right to buy, for example, certain merchandise of certain
ART. 1324 specified property, from another person, if he chooses, at any time within the
When the offerer has allowed the offeree a certain period to accept, the agreed period, at a fixed price. The contract of option is a separate and
offer may be withdrawn at any time before acceptance by distinct contract from the contract which the parties may enter into upon the
communicating such withdrawal, except when the option is founded consummation of the option. A consideration for an optional contract is just
upon a consideration, as something paid or promised. (n) as important as the consideration for any other kind of contract. If there was
An option is not of itself a purchase, but merely secures the privilege no consideration for the contract of option, then it cannot be enforced any
to buy. more than any other contract where no consideration exists. To illustrate, A
A consideration for an optional contract is just as important as the and B the sum of P100,000 for the option of buying his property within the
consideration for any other kind of contract. If there was no period of 30 days. While it is true that the conditions upon which A promises
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
to buy the property at the end of the period mentioned are usually fixed in the MEANING OF CONSIDERATION
option, the consideration from the consideration of the contract with
reference to which the option exists. A contract of option is a contract by 5. Villamor vs. CA, 202 SCRA 607 (1991)
virtue of the terms of which the parties thereto promise and obligate As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is
themselves to enter into another contract at a future time, upon the "the why of the contracts, the essential reason which moves the contracting
happening of certain events, or the fulfillment of certain conditions. parties to enter into the contract." The cause or the impelling reason on the
part of private respondent in executing the deed of option as appearing in the
deed itself is the petitioners' having agreed to buy the 300 square meter
portion of private respondents' land at P70.00 per square meter "which was
3. Carcellar vs. Court of Appeals, 302 SCRA 718 (1999) greatly higher than the actual reasonable prevailing price."

An option is a separate agreement distinct from the contract which the The acceptance of an offer to sell for a price certain created a bilateral
parties may enter into upon the consummation of the option.An option is a contract to sell and buy and upon acceptance, the offeree, ipso facto
preparatory contract in which one party grants to the other, for a fixed period assumes obligations of a vendee.In the instant case, the option offered by
and under specified conditions, the power to decide, whether or not to enter private respondents had been accepted by the petitioner, the promisee, in
into a principal contract. It binds the party who has given the option, not to the same document. The acceptance of an offer to sell for a price certain
enter into the principal contract with any other person during the period created a bilateral contract to sell and buy and upon acceptance, the
designated, and, within that period, to enter into such contract with the one to offeree, ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co.
whom the option was granted, if the latter should decide to use the option. It v. Cua Mian Tek, 102 Phil. 948). Demandability may be exercised at any time
is a separate agreement distinct from the contract which the parties may after the execution of the deed.
enter into upon the consummation of the option.
A contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
4. Limson vs. CA, 357 SCRA 209 (2001) A contract of sale is, under Article 1475 of the Civil Code," perfected at the
moment there is a meeting of minds upon the thing which is the object of the
An option is not of itself a purchase, but merely secures the privilege to buy; contract and upon the price. From that moment, the parties may reciprocally
Until acceptance, it is not, properly speaking, a contract, and does not vest, demand performance, subject to the provisions of the law governing the form
transfer, or agree to transfer, any title to, or any interest or right in the subject of contracts." Since there was, between the parties, a meeting of minds upon
matter, but is merely a contract by which the owner of the property gives the the object and the price, there was already a perfected contract of sale. What
optionee the right or privilege of accepting the offer and buying the property was, however, left to be done was for either party to
on certain terms.An option is not of itself a purchase, but merely secures
the privilege to buy. It is not a sale of property but a sale of the right to
purchase. It is simply a contract by which the owner of property agrees with
another person that he shall have the right to buy his property at a fixed price 6. Soriano vs. Bautista, 66 SCRA 946 (1962)
within a certain time. He does not sell his land; he does not then agree to sell
it; but he does sell something, i.e., the right or privilege to buy at the election The stipulation in a deed of mortgage which renders the mortgagors right to
or option of the other party. Its distinguishing characteristic is that it imposes redeem defeasible at the election of the mortgagee is not illegal or immoral,
no binding obligation on the person holding the option, aside from the being merely an option to buy sanctioned by Article 1479 of the Civil Code,
consideration for the offer. Until acceptance, it is not, properly speaking, a when supported by a consideration distinct from the purchase price.
contract, and does not vest, transfer, or agree to transfer, any title to, or any
interest or right in the subject matter, but is merely a contract by which the
owner of the property gives the optionee the right or privilege of accepting OPTION CONTRACT CONTRACT OF PURCHASE AND
the offer and buying the property on certain terms. SALE

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


UNILATERAL: gives right to buy or BILATERAL The offer and the acceptance are concurrent.The distinction between an
sell, but imposes no obligation on the option and a contract of sale is that an option is an unaccepted offer. It
option-holder, aside from states the terms and conditions on which the owner is willing to sell his land,
consideration for the offer if the holder elects to accept them within the time limited. If the holder does
so elect, he must give notice to the other party, and the accepted offer
thereupon becomes a valid and binding contract. If an acceptance is not
made within the time fixed, the owner is no longer bound by his offer, and the
Sale of right to purchase SALE OF A PROPERTY option is at an end. A contract of sale, on the other hand, fixes definitely the
relative rights and obligations of both parties at the time of its execution. The
offer and the acceptance are concurrent, since the minds of the contracting
parties meet in the terms of the agreement.
Except where a formal acceptance is so required, it may be made either
in a formal or an informal manner, and may be shown by acts, conduct, or
OPTION TO BUY IS NOT A CONTRACT OF PURCHASE AND SALE words of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell.A perusal of the contract in
7. Adelfa Properties vs. CA, 310 Phil 623 (1995) this case, as well as the oral and documentary evidence presented by the
parties, readily shows that there is indeed a concurrence of petitioners offer
An option is not a sale of property but a sale of the right to purchase. It to buy and private respondents acceptance thereof. The rule is that except
where a formal acceptance is so required, although the acceptance must be
is simply a contract by which the owner of property agrees with another
affirmatively and clearly made and must be evidenced by some acts or
person that he shall have the right to buy his property at a fixed price within a
conduct communicated to the offeror, it may be made either in a formal or an
certain time. He does not sell his land; he does not then agree to sell it; but
informal manner, and may be shown by acts, conduct, or words of the
he does sell something, that is, the right or privilege to buy at the election or
accepting party that clearly manifest a present intention or determination to
option of the other party.An option, as used in the law on sales, is a
accept the offer to buy or sell. Thus, acceptance may be shown by the acts,
continuing offer or contract by which the owner stipulates with another that
conduct, or words of a party recognizing the existence of the contract of sale.
the latter shall have the right to buy the property at a fixed price within a
certain time, or under, or in compliance with, certain terms and conditions, or
The test in determining whether a contract is a contract of sale or
which gives to the owner of the property the right to sell or demand a sale. It
purchase or a mere option is whether or not the agreement could be
is also sometimes called an unaccepted offer. An option is not of itself a
purchase, but merely secures the privilege to buy. It is not a sale of property specifically enforced.Thetest in determining whether a contract is a
contract of sale or purchase or a mere option is whether or not the
but a sale of the right to purchase. It is simply a contract by which the owner
agreement could be specifically enforced. There is no doubt that the
of property agrees with another person that he shall have the right to buy his
obligation of petitioner to pay the purchase price is specific, definite and
property at a fixed price within a certain time. He does not sell his land; he
certain, and consequently binding and enforceable. Had private respondents
does not then agree to sell it; but he does sell something, that is, the right or
chosen to enforce the contract, they could have specifically compelled
privilege to buy at the election or option of the other party. Its distinguishing
petitioner to pay the balance of P2,806,150.00. This is distinctly made
characteristic is that it imposes no binding obligation on the person holding
manifest in the contract itself as an integral stipulation, compliance with
the option, aside from the consideration for the offer. Until acceptance, it is
which could legally and definitely be demanded from petitioner as a
not, properly speaking, a contract, and does not vest, transfer, or agree to
consequence.
transfer, any title to, or any interest or right in the subject matter, but is
Same; Same; Same; Same; An agreement is only an option when no
merely a contract by which the owner of property gives the optionee the right
or privilege of accepting the offer and buying the property on certain terms. obligation rests on the party to make any payment except such as may be
agreed on between the parties as consideration to support the option until he
has made up his mind within the time specified.This is not a case where no
; An option is an unaccepted offer. It states the terms and conditions on
right is as yet created nor an obligation declared, as where something further
which the owner is willing to sell his land, if the holder elects to accept them
remains to be done before the buyer and seller obligate themselves, An
within the time limited. A contract of sale, on the other hand, fixes definitely
agreement is only an option when no obligation rests on the party to make
the relative rights and obligations of both parties at the time of its execution.
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
any payment except such as may be agreed on between the parties as Option to buy is governed by provision on reciprocal obligations.In the
consideration to support the option until he has made up his mind within the case of an option to buy, the creditor may validly and effectively exercise his
time specified. An option, and not a contract to purchase, is effected by an right by merely advising the debtor of the formers decision to buy and
agreement to sell real estate for payments to be made within a specified time expressing his readiness to pay the stipulated price, provided that the same
and providing for forfeiture of money paid upon failure to make payment, is available and actually delivered to the debtor upon xecution and delivery
where the purchaser does not agree to purchase, to make payment, or to by him of the corresponding deed of sale. Unless and until the debtor shall
bind himself in any way other than the forfeiture of the payments made. As have done this, the creditor is notand cannot be in default in the discharge of
hereinbefore discussed, this is not the situation obtaining in the case at bar. his obligation to pay. In other words, notice of the creditors decision to
exercise his option to buy need not be coupled with actual payment of the
price, so long as this is delivered to the owner of the property upon
WITHOUT CONSIDERATION VOID AS OPTION BUT VALID AS OFFER performance of his part of the agreement.

8. Sanchez vs. Rigos, 45 SCRA 368 (1972) Option to buy exercised by payment of sum in excess of rental.There is a
valid and effective exercise of the option to buy a property leased where the
Consideration not presumed in an accepted unilateral promise to buy or lessor acknowl-edges receipt from the lessee of sum in excess of the
lo sell.Article 1354 of the Civil Code which presumes the existence of a monthly rentals due and describes such payment as partial payment on the
consideration in every contract applies to contracts in general, whereas the purchase of the property described in the contract of lease with option to
second paragraph of Article 1479 thereof refers to sales in particular, and, buy.
more specifically, to an accepted unilateral promise to buy or to sell. It is
Article 1479 that controls defendants unilateral promise to sell her property
to the plaintiff. THERE MUST BE ACCEPTANCE OF OPTION

Promisee in an accepted unilateral promise to sell must prove existence of 10. Vasquez vs. Court of Appeals, 199 SCRA 102 (1991)
consideration.In order that said unilateral promise may be binding upon
the promisor, Article 1479 requires the concurrence of a condition, namely, The annotation and registration of the right to repurchase at the back of the
that the promise be supported by a consideration distinct from the price. certificate of title of the petitioners can not be considered as acceptance of
Accordingly, the promisee can not compel the promisor to comply with the the right to repurchase. Annotation at the back of the certificate of title of
promise, unless the former establishes the existence of said distinct registered land is for the purpose of bindingpurchasers of such registered
consideration. In other words, the promisee has the burden of proving such land. Thus, we ruled in the case of Bel Air Village Association, Inc. v.
consideration, Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino (154 SCRA 1
[1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]) that purchasers of
Accepted promise to sell is an offer to sell and when accepted becomes a a registered land are bound by the annotations found at the back of the
contract of sale.In accepted unilateral promise to sell, since there may be certificate of title covering the subject parcel of land. In effect, the annotation
no valid contract without a cause or consideration, the promisor is not bound of the right to repurchase found at the back of the certificate of title over the
by his promise and may, accordingly, withdraw it. Pending notice of its subject parcel of land of the private respondents only served as notice of the
withdrawal, his accepted promise partakes, however, of the nature of an offer existence of such unilateral promise of the petitioners to resell the same to
to sell which, if accepted, results in a perfected contract of sale. the private respondents. This, however, can not be equated with acceptance
of such right to repurchase by the private respondent.

Neither can the signature of the petitioners in the document called right to
PROPER EXERCISE OF OPTION repurchase signify acceptance of the right to repurchase. The respondents
did not sign the offer. Acceptance should be made by the promisee, in this
9. Nietes vs. Court of Appeals, 46 SCRA 654 (1972) case, the private respondents and not the promisors, the petitioners herein. It
would be absurd to require the promisor of an option to buy to accept his own
offer instead of the promisee to whom the option to buy is given.

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


that the said paragraph 8 grants the right of first refusal to Mayfair and is not
an option contract. It also correctly reasoned that as such, the requirement of
DISTINGUISHING OPTION FROM RIGHT OF FIRST REFUSAL a separate consideration for the option, has no applicability in the instant
case.
OPTION RIGHT OF FIRST REFUSAL
An option is a contract granting a privilege to buy or sell within an agreed
Separate consideration is necessary No need for a separate consideration time and at a determined price. It is a separate and distinct contract from that
which the parties may enter into upon the consummation of the option. It
Grantee has the right to buy or sell No right to buy or sell, only a right to must be supported by consideration. In the instant case, the right of first
match the 1st offer to buy should the refusal is an integral part of the contracts of lease. The consideration is built
grantor decide to sell into the reciprocal obligations of the parties.

The facts of the case and considerations of justice and equity require that we
order rescission here and now. Rescission is a relief allowed for the
protection of one of the contracting parties and even third persons from all
11. Equitorial Realty Development, Inc. vs. Mayfair Theater, Inc., 264 SCRA
injury and damage the contract may cause or to protect some incompatible
483 (1996)
and preferred right by the contract. The sale of the subject real property by
Carmelo to Equatorial should now be rescinded considering that Mayfair,
The aforecited contractual stipulation provides for a right of first refusal
which had substantial interest over the subject property, was prejudiced by
in favor of Mayfair. It is not an option clause or an option contract. It is a
the sale of the subject property to Equatorial without Carmelo conferring to
contract of a right of first refusal.
Mayfair every opportunity to negotiate within the 30-day stipulated period.
The rule so early established in this jurisdiction is that the deed of option or
the option clause in a contract, in order to be valid and enforceable, must,
among other things, indicate the definite price at which the person granting
12. Paranaque Kings vs. Court of Appeals, 268 SCRA 727 (1997)
the option, is willing to sell.
We hold, however, that in order to have full compliance with the contractual
An accepted unilateral promise which specifies the thing to be sold and the
right granting petitioner the first option to purchase, the sale of the properties
price to be paid, when coupled with a valuable consideration distinct and
for the amount of P9 million, the price for which they were finally sold to
separate from the price, is what may properly be termed a perfected contract
of option. This contract is legally binding, and in sales, it conforms with the respondent Raymundo, should have likewise been first offered to petitioner.
second paragraph of Article 1479 of the Civil Code, viz: ART. 1479. x x x An
Of course, under their contract, they specifically stipulated that the
accepted unilateral promise to buy or to sell a determinate thing for a price
Bonnevies could exercise the right of first priority, all things and conditions
certain is binding upon the promisor if the promise is supported by a
being equal. This Court interpreted this proviso to mean that there should be
consideration distinct from the price.
identity of terms and conditions to be offered to the Bonnevies and all other
prospective buyers, with the Bonnevies to enjoy the right of first priority. We
Observe however, that the option is not the contract of sale itself. The
hold that the same rule applies even without the same proviso if the right of
optionee has the right, but not the obligation, to buy. Once the option is
first refusal (or the first option to buy) is not to be rendered illusory.
exercised timely, i.e., the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both parties are then
From the foregoing, the basis of the right of first refusal must be
reciprocally bound to comply with their respective undertakings.
the current offer to sell of the seller or offer to purchase of any prospective
In the light of the foregoing disquisition and in view of the wording of the buyer. Only after the optionee fails to exercise its right of first priority under
questioned provision in the two lease contracts involved in the instant case, the same terms and within the period contemplated, could the owner validly
offer to sell the property to a third person, again, under the same terms as
we so hold that no option to purchase in contemplation of the second
offered to the optionee.
paragraph of Article 1479 of the Civil Code, has been granted to Mayfair
under the said lease contracts. Respondent Court of Appeals correctly ruled
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
13. Rosencor vs. Inquing, 354 SCRA 119 (2001) A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
A right of first refusal is not among those listed as unenforceable under the ART. 1319
statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the Consent is manifested by the meeting of the offer and the acceptance
New Civil Code presupposes the existence of a perfected, albeit unwritten, upon the thing and the cause which are to constitute the contract. The
contract of sale. A right of first refusal, such as the one involved in the instant offer must be certain and the acceptance absolute. A qualified
case, is not by any means a perfected contract of sale of real property. At acceptance constitutes a counter-offer.
best, it is a contractual grant, not of the sale of the real property involved, but
of the right of first refusal over the property sought to be sold. It is thus
Acceptance made by letter or telegram does not bind the offerer except
evident that the statute of frauds does not contemplate cases involving a
from the time it came to his knowledge. The contract, in such a case, is
right of first refusal. As such, a right of first refusal need not be written to be
presumed to have been entered into in the place where the offer was
enforceable and may be proven by oral evidence.
made.
ART. 1325
Unless it appears otherwise, business advertisements of things for sale
XI. PERFECTION
are not definite offers, but mere invitations to make an offer. (n)
ART. 1326
ART. 1475
Advertisements for bidders are simply invitations to make proposals,
The contract of sale is perfected at the moment there is a meeting of minds
and the advertiser is not bound to accept the highest or lowest bidder,
upon the thing which is the object of the contract and upon the price.
unless the contrary appears. (n)
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
ART. 1476
It is the proof of all the essential elements of the contract of sale, and not the
In the case of a sale by auction:
mere giving of earnest money, which establishes the existence of a perfected
sale.
(1) Where goods are put up for sale by auction in lots, each lot is the
subject of a separate contract of sale. 1. Cruz vs. Fernando, Sr., 477 SCRA 173, December 9, 2005

(2) A sale by auction is perfected when the auctioneer announces its Under Article 1458 of the Civil Code, a contract of sale is a contract by which
perfection by the fall of the hammer, or in other customary manner. one of the contracting parties obligates himself to transfer the ownership and
Until such announcement is made, any bidder may retract his bid; and to deliver a determinate thing, and the other to pay therefor a price certain in
the auctioneer may withdraw the goods from the sale unless the money or its equivalent. Article 1475 of the Code further provides that the
auction has been announced to be without reserve. contract of sale is perfected at the moment there is meeting of the minds
upon the thing which is the object of the contract and upon the price. From
(3) A right to bid may be reserved expressly by or on behalf of the that moment the parties may reciprocally demand performance subject to the
seller, unless otherwise provided by law or by stipulation. provisions of the law governing the form of contracts. In a contract of sale,
the title to the property passes to the vendee upon the delivery of the thing
(4) Where notice has not been given that a sale by auction is subject to sold, as distinguished from a contract to sell where ownership is, by
a right to bid on behalf of the seller, it shall not be lawful for the seller agreement, reserved in the vendor and is not to pass to the vendee until full
to bid himself or to employ or induce any person to bid at such sale on payment of the purchase price. Otherwise stated, in a contract of sale, the
his behalf or for the auctioneer, to employ or induce any person to bid vendor loses ownership over the property and cannot recover it until and
at such sale on behalf of the seller or knowingly to take any bid from unless the contract is resolved or rescinded; whereas, in a contract to sell,
the seller or any person employed by him. Any sale contravening this title is retained by the vendor until full payment of the price. In the latter
rule may be treated as fraudulent by the buyer. (n) contract, payment of the price is a positive suspensive condition, failure of
ART. 1479 (1)
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
which is not a breach but an event that prevents the obligation of the vendor
to convey title from becoming effective
SALE BY AUCTION Articles 1476, 1403 (2) (d), 1326

2. Fule vs. CA, 286 SCRA 685 (1998)


ART. 1476
The Civil Code provides that contracts are perfected by mere consent. From In the case of a sale by auction:
this moment, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according (1) Where goods are put up for sale by auction in lots, each lot is the
to their nature, may be in keeping with good faith, usage and law. A contract subject of a separate contract of sale.
of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price. Being (2) A sale by auction is perfected when the auctioneer announces its
consensual, a contract of sale has the force of law between the contracting perfection by the fall of the hammer, or in other customary manner.
parties and they are expected to abide in good faith by their respective Until such announcement is made, any bidder may retract his bid; and
contractual commitments. Article 1358 of the Civil Code which requires the the auctioneer may withdraw the goods from the sale unless the
embodiment of certain contracts in a public instrument, is only for auction has been announced to be without reserve.
convenience, and registration of the instrument only adversely affects third
parties. Formal requirements are, therefore, for the benefit of third parties. (3) A right to bid may be reserved expressly by or on behalf of the
Non-compliance therewith does not adversely affect the validity of the seller, unless otherwise provided by law or by stipulation.
contract nor the contractual rights and obligations of the parties thereunder.
(4) Where notice has not been given that a sale by auction is subject to
a right to bid on behalf of the seller, it shall not be lawful for the seller
3. National Grains Authority vs. IAC, 171 SCRA 131 (1989)
to bid himself or to employ or induce any person to bid at such sale on
his behalf or for the auctioneer, to employ or induce any person to bid
From the moment the contract of sale is perfected, it is incumbent upon the at such sale on behalf of the seller or knowingly to take any bid from
parties to comply with their mutual obligations or the parties may reciprocally the seller or any person employed by him. Any sale contravening this
demand performance thereof. rule may be treated as fraudulent by the buyer. (n)

ART. 1403 P. 2 (D)


Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or
WHEN DEVIATION ALLOWED memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot
4. Villonco vs. Bormacheco, 65 SCRA 352 (1975) be received without the writing, or a secondary evidence of its
contents:
It is true that an acceptance may contain a request for certain changes in the
terms of the offer and yet be a binding acceptance. So long as it is clear that An agreement for the sale of goods, chattels or things in action, at a
the meaning of the acceptance is positively and unequivocally to accept the price not less than five hundred pesos, unless the buyer accept and
offer, whether such request is granted or not, a contract is formed. The receive part of such goods and chattels, or the evidences, or some of
vendors change in a phrase of the offer to purchase, which change does not them, of such things in action or pay at the time some part of the
essentially change the terms of the offer, does not amount to a rejection of purchase money; but when a sale is made by auction and entry is made
the offer and the tender of a counter-offer. by the auctioneer in his sales book, at the time of the sale, of the

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


amount and kind of property sold, terms of sale, price, names of the It is not difficult to glean from the aforequoted averments that the petitioners
purchasers and person on whose account the sale is made, it is a themselves admit that they and the respondent still had to meet and agree
sufficient memorandum; on how and when the down-payment and the installment payments were to
be paid. Such being the situation, it cannot, therefore, be said that a definite
and firm sales agreement between the parties had been perfected over the
lot in question. Indeed, this Court has already ruled before that a definite
agreement on the manner of payment of the purchase price is an essential
ART. 1326
element in the formation of a binding and enforceable contract of sale. The
Advertisements for bidders are simply invitations to make proposals,
fact, therefore, that the petitioners delivered to the respondent the sum of
and the advertiser is not bound to accept the highest or lowest bidder,
P10,000.00 as part of the down-payment that they had to pay cannot be
unless the contrary appears. (n)
considered as sufficient proof of the perfection of any purchase and sale
agreement between the parties under article 1482 of the new Civil Code.

EARNEST MONEY
3. Sps. Doromal, Sr. vs. CA, 66 SCRA 575, 1975 93.
ART. 1482
While P5,000 might have indeed been paid to one of the co-owners, there is
Whenever earnest money is given in a contract of sale, it shall be nothing to show that the same was in the concept of the earnest money
considered as part of the price and as proof of the perfection of the contemplated in Article 1482 of the Civil Code as signifying perfection of the
contract. (1454a) sale. Viewed in the backdrop of the factual milieu thereof extant in the record,
the said P5,000 were paid in the concept of earnest money as the term was
understood under the Old Civil Code, that is, as a guarantee that the buyer
would not back out, considering that it is not clear that there was already
1. Goldenrod vs. Court of Appeals, 299 SCRA 141, November 24, definite agreement as to the price then and that the vendees were decided to
1998 91. buy 6/7 only of the property should one of the co-owners refuse to agree to
part with her 1/7 share.
Under Art. 1482 of the Civil Code, whenever earnest money
is given in a contract of sale, it shall be considered as part of the
purchase price and as proof of the perfection of the contract. 4. Serrno vs. Caguiat, 517 SCRA 57
Petitioner clearly stated without any objection from private
respondents that the earnest money was intended to form part of the It is true that Article 1482 of the Civil Code provides that Whenever earnest
purchase price. It was an advance payment which must be deducted money is given in a contract of sale, it shall be considered as part of the price
from the total price. Hence, the parties could not have intended that and proof of the perfection of the contract. However, this article speaks
the earnest money or advance payment would be forfeited when the of earnest money given in a contract of sale. In this case, the earnest
buyer should fail to pay the balance of the price, especially in the money was given in a contract to sell. The earnest money forms part of the
absence of a clear and express agreement thereon. By reason of its consideration only if the sale is consummated upon full payment of the
failure to make payment petitioner, through its agent, informed purchase price. Now, since the earnest money was given in a contract to sell,
private respondents that it would no longer push through with the Article 1482, which speaks of a contract of sale, does not apply.
sale. In other words, petitioner resorted to extrajudicial rescission of
its agreement with private respondents.
PLACE OF PERFECTION

2. Velasco vs. Court of Appeals, 51 SCRA 43, June 29, 1973 92. ART. 1391

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


The action for annulment shall be brought within four years.This Subject to the provisions of the Statute of Frauds and of
period shall begin: any other applicable statute, a contract of sale may be
made in writing, or by word of mouth, or partly in writing
In cases of intimidation, violence or undue influence, from the time and partly by word of mouth, or may be inferred from the
the defect of the consent ceases. conduct of the parties. (n)
ART. 1356
In case of mistake or fraud, from the time of the discovery of the Contracts shall be obligatory, in whatever form they may
same. have been entered into, provided all the essential
requisites for their validity are present. However, when
the law requires that a contract be in some form in order
And when the action refers to contracts entered into by minors or that it may be valid or enforceable, or that a contract be
other incapacitated persons, from the time the guardianship
proved in a certain way, that requirement is absolute
ceases. (1301a)
and indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised.

EXPENSES OF EXECUTION AND REGISTRATION ART. 1357


If the law requires a document or other special form, as
ART. 1487 in the acts and contracts enumerated in the following
article, the contracting parties may compel each other to
The expenses for the execution and registration of the sale shall be observe that form, once the contract has been perfected.
borne by the vendor, unless there is a stipulation to the contrary. This right may be exercised simultaneously with the
(1455a) action upon the contract.
ART. 1521
ART. 1358
Whether it is for the buyer to take possession of the goods or of the
seller to send them to the buyer is a question depending in each The following must appear in a public document:
case on the contract, express or implied, between the parties. Apart
from any such contract, express or implied, or usage of trade to the (1) Acts and contracts which have for their object the
contrary, the place of delivery is the seller's place of business if he creation, transmission, modification or extinguishment
has one, and if not his residence; but in case of a contract of sale of of real rights over immovable property; sales of real
specific goods, which to the knowledge of the parties when the property or of an interest therein a governed by Articles
contract or the sale was made were in some other place, then that 1403, No. 2, and 1405;
place is the place of delivery.
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal partnership
of gains;

(3) The power to administer property, or any other power


FORMALITIES OF THE CONTRACT which has for its object an act appearing or which
should appear in a public document, or should prejudice
a third person;
A. Form not important
(4) The cession of actions or rights proceeding from an
ART. 1483 act appearing in a public document.

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


All other contracts where the amount involved exceeds Court of Appeals, 250 SCRA 566 (1995), it was written: The purpose of the
five hundred pesos must appear in writing, even a registration is to give notice to third persons. And, privies are not third
private one. But sales of goods, chattels or things in persons. The vendors heirs are his privies. Against them, failure to register
action are governed by Articles, 1403, No. 2 and 1405. will not vitiate or annul the vendees right of ownership conferred by such
unregistered deed of sale. The non-registration of the deed of sale between
Martino and Purificacion is immaterial as it is binding on the petitioners who
are privies. Based on the privity between petitioner Esmeraldo and Martino,
5. Dalion vs. CA, 182 SCRA 872 (1990) the petitioner as a second buyer is charged with constructive knowledge of
prior dispositions or encumbrances affecting the subject property. The
second buyer who has actual or constructive knowledge of the prior sale
The necessity of a public instrument provided for in Art. 1358 is only for cannot be a registrant in good faith.
convenience, not for validity or enforceability.Assuming authenticity of his
signature and the genuineness of the document, Dalion nonetheless still
impugns the validity of the sale on the ground that the same is embodied in a
private document, and did not thus convey title or right to the lot in question
since acts and contracts which have for their object the creation,
transmission, modification or extinction of real rights over immovable EXCEPTIONS: WHEN FORM IS IMPORTANT STATUTE OF FRAUDS:
property must appear in a public instrument (Art. 1358, par 1, NCC). This
argument is misplaced. The provision of Art. 1358 on the necessity of a ART. 1403 (UNENFORCEABLE CONTRACTS)
public document is only for convenience, not for validity or enforceability. It is The following contracts are unenforceable, unless they are ratified:
not a requirement for the validity of a contract of sale of a parcel of land that
this be embodied in a public instrument.
(1) Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;
6. Secuya vs. Vda. De Selma, 326 SCRA 244 (2000)
(2) Those that do not comply with the Statute of Frauds as set forth in
While a sale of a piece of land appearing in a private deed is binding this number. In the following cases an agreement hereafter made shall
between the parties, it cannot be considered binding on third persons, if it is be unenforceable by action, unless the same, or some note or
not embodied in a public instrument and recorded in the Registry of memorandum, thereof, be in writing, and subscribed by the party
Property.Petitioners insist that Paciencia sold the disputed property to charged, or by his agent; evidence, therefore, of the agreement cannot
Dalmacio Secuya on October 20, 1953, and that the sale was embodied in a be received without the writing, or a secondary evidence of its
private document. However, such document, which would have been the contents:
best evidence of the transaction, was never presented in court, allegedly
because it had been lost. While a sale of a piece of land appearing in a
(a) An agreement that by its terms is not to be performed within a year
private deed is binding between the parties, it cannot be considered binding
from the making thereof;
on third persons, if it is not embodied in a public instrument and recorded in
the Registry of Property.
(b) A special promise to answer for the debt, default, or miscarriage of
another;
7. Vallido vs. Pono, 696 SCRA 381 (2013)
(c) An agreement made in consideration of marriage, other than a
mutual promise to marry;
The purpose of registration of the deed of sale is to give notice to third
persons. And, privies are not third persons. The vendors heirs are his
privies. Against them, failure to register will not vitiate or annul the vendees (d) An agreement for the sale of goods, chattels or things in action, at a
right of ownership conferred by such unregistered deed of sale.In Pilapil v. price not less than five hundred pesos, unless the buyer accept and
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
receive part of such goods and chattels, or the evidences, or some of 99.
them, of such things in action or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is made Where timely objections are made to the introduction of parol evidence to
by the auctioneer in his sales book, at the time of the sale, of the prove a contract of sale of real property and due exceptions are taken to the
amount and kind of property sold, terms of sale, price, names of the adverse rulings, such evidence must be disregarded and articles 1278 and
purchasers and person on whose account the sale is made, it is a 1279 of the Civil Code are not applicable.
sufficient memorandum;

(e) An agreement of the leasing for a longer period than one year, or for 10. Inigo vs. Estate of Maloto, 21 SCRA 246 (1967)
the sale of real property or of an interest therein;
The Statute of Frauds is applicable only to executory contracts, not to
(f) A representation as to the credit of a third person. contracts either totally or partially performed. Thus, where a contract of sale
is alleged to be consummated, it matters not that neither the receipt for the
consideration nor the sale itself was in writing, because oral evidence of the
(3) Those where both parties are incapable of giving consent to a alleged consummated sale is not forbidden by the Statute of Frauds and may
contract. not be excluded in court.

11. Alfredo vs. Boras, 404 SCRA 145 (2003)


ART. 1405
Contracts infringing the Statute of Frauds, referred to in No. 2 of Article The Statute of Frauds applies only to executory contracts and not to
1403, are ratified by the failure to object to the presentation of oral contracts either partially or totally performed.The Statute of Frauds applies
evidence to prove the same, or by the acceptance of benefit under only to executory contracts and not to contracts either partially or totally
them. performed. Thus, where one party has performed ones obligation, oral
ART. 1874 evidence will be admitted to prove the agreement. In the instant case, the
When a sale of a piece of land or any interest therein is through an parties have consummated the sale of the Subject Land, with both sellers
agent, the authority of the latter shall be in writing; otherwise, the sale and buyers performing their respective obligations under the contract of sale.
shall be void. (n) In addition, a contract that violates the Statute of Frauds is ratified by the
acceptance of benefits under the contract. Godofredo and Carmen benefited
from the contract because they paid their DBP loan and secured the
cancellation of their mortgage using the money given by Armando and
8. Paredes vs. Espino, 22 SCRA 1000 (1968)
Adelia. Godofredo and Carmen also accepted payment of the balance of the
purchase price.
Civil Law; Statute of Frauds; Exception; Note c memorandum sufficient.A
written note or memorandum, embodying the essentials of the contract and
signed by the party charged, or his agent, suffices to make the verbal
agreement enforceable, taking it out of the operation of the statute.
FORM IMPORTANT FOR VALIDITY
Contracts; Enforceability.Authenticity of the note or memorandum is
not necessary for the purpose of showing prima f acie that the contract is SALE OF REALTY THROUGH AN AGENT:
enforceable. Whether the agreement is in writing or not is a question of
evidence; and the authenticity of the writing need not be established until the ART. 1874
trial is held.
When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale
9. Baretto vs. The Manila Railroad Co., G.R. No. L-21313, March 29, 1924
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
shall be void. (n) the subject property from its lawful owner, F.P. HOLDINGS, to any interested
party including petitioner CITYLITE.

12. City of Lite vs. CA, 325 SCRA 385 (2000)


SALE OF LARGE CATTLE
When the sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall ART. 1581
be void.On the issue of whether a contract of sale was perfected between
petitioner CITYLITE and respondent F.P. HOLDINGS acting through its
The form of sale of large cattle shall be governed by special laws. (n)
agent Meldin Al G. Roy of Metro Drug, Art. 1874 of the Civil Code provides:
When the sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.
Petitioner anchors the authority of Metro Drug and Meldin Al G. Roy on (a) P.D 533: THE ANTI-CATTLE RUSTLING LAW OF 1974
the testimonies of petitioners three (3) witnesses and the admissions of Roy
and the lawyer of Metro Drug; (b) the sales brochure specifying Meldin Al G.
Roy as a contact person; (c) the guard posted at the property saying that
Metro Drug was the authorized agent; and, (d) the common knowledge WHEREAS, large cattle are indispensable to the livelihood and economic
among brokers that Metro Drug through Meldin Al G. Roy was the authorized growth of our people, particularly the agricultural workers, because such
agent of F.P. HOLDINGS to sell the property. large cattle are the work animals of our farmers and the source of fresh meat
and dairy products for our people, and provide raw material for our tanning
The Civil Code requires that an authority to sell a piece of land shall be and canning industries;
in writing.The Civil Code requires that an authority to sell a piece of land
shall be in writing. The absence of authority to sell can be determined from
the written memorandum issued by respondent F.P. HOLDINGS President WHEREAS, reports from the law-enforcement agencies reveal that there is a
requesting Metro Drugs assistance in finding buyers for the property. The resurgence of thievery of large cattle, commonly known as "cattle rustling",
memorandum in part stated: We will appreciate Metro Drugs assistance in especially in the rural areas, thereby directly prejudicing the livelihood of the
referring to us buyers for the property. Please proceed to hold preliminary agricultural workers and adversely affecting our food production program for
negotiations with interested buyers and endorse formal offers to us for our self-sufficiency in rice, corn and other staple crops, as well as in fresh meat;
final evaluation and appraisal.
WHEREAS, there is an urgent need to protect large cattle raising industry
For lack of a written authority to sell the Violago Property on the part and small time large cattle owners and raisers from the nefarious activities of
of Meldin Al G. Roy and/or Metro Drug, the sale should be as it is declared lawless elements in order to encourage our hardworking cattle raisers and
null and void.This obviously meant that Meldin Al G. Roy and/or Metro farmers to raise more cattle and concentrate in their agricultural works, thus
Drug was only to assist F.P. HOLDINGS in looking for buyers and referring to increasing our source of meat and dairy products as well as agricultural
them possible prospects whom they were supposed to endorse to F.P. production and allied industries which depend on the cattle raising industry;
HOLDINGS. But the final evaluation, appraisal and acceptance of the
transaction could be made only by F.P. HOLDINGS. In other words, Meldin NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic
Al G. Roy and/or Metro Drug was only a contact person with no authority to of the Philippines, by virtue of the powers vested in me by the Constitution
conclude a sale of the property. In fact, a witness for petitioner even admitted and pursuant to Proclamations No. 1081, dated September 21, 1972 and No.
that Roy and/or Metro Drug was a mere broker, and Roys only job was to 1104, dated January 17, 1973 and General Order No. 1 dated September 22,
bring the parties together for a possible transaction. Consequently, we hold 1972, do hereby order and decree as part of the law of the land.
that for lack of a written authority to sell the Violago Property on the part of
Meldin Al G. Roy and/or Metro Drug, the sale should be as it is declared null
and void. Therefore the sale could not produce any legal effect as to transfer Electronic Commerce Act RA 8792, Sections 7, 8, 11

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO


SECTION 7: electronic data massages or electronic documents, except the rules relating
to authentication and best evidence.
Legal Recognition of Electronic Documents - Electronic documents shall SECTION 8:
have the legal effect, validity or enforceability as any other document or legal Legal Recognition of Electronic Signatures. - An electronic signature on the
writing, and - electronic document shall be equivalent to the signature of a person on a
written document if that signature is proved by showing that a prescribed
procedure, not alterable by the parties interested in the electronic document,
(a) Where the law requires a document to be in writing, that
requirement is met by an electronic document if the said electronic existed under which -
document maintains its integrity and reliability and can be
authenticated so as to be usable for subsequent reference, in that - (a) A method is used to identify the party sought to be bound and to
indicate said party's access to the electronic document necessary for
i. The electronic document has remained complete and his consent or approval through the electronic signature;
unaltered, apart from the addition of any endorsement and
any authorized change, or any change which arises in the (b) Said method is reliable and appropriate for the purpose for which
normal course of communication, storage and display; and the electronic document was generated or communicated, in the light
of all circumstances, including any relevant agreement;
ii. The electronic document is reliable in the light of the
purpose for which it was generated and in the light of all (c) It is necessary for the party sought to be bound, in or order to
relevant circumstances. proceed further with the transaction, to have executed or provided
the electronic signature; and
(b) Paragraph (a) applies whether the requirement therein is in the
form of an obligation or whether the law simply provides (d) The other party is authorized and enabled to verify the electronic
consequences for the document not being presented or retained in signature and to make the decision to proceed with the transaction
its original from. authenticated by the same.
SECTION 11
(c) Where the law requires that a document be presented or retained Authentication of Electronic Data Messages and Electronic Documents. -
in its original form, that requirement is met by an electronic document Until the Supreme Court by appropriate rules shall have so provided,
if - electronic documents, electronic data messages and electronic signatures,
shall be authenticated by demonstrating, substantiating and validating a
claimed identity of a user, device, or another entity is an information or
i. There exists a reliable assurance as to the integrity of the
communication system, among other ways, as follows;
document from the time when it was first generated in its
final form; and
(a) The electronic signature shall be authenticated by proof than a letter ,
character, number or other symbol in electronic form representing the
ii. That document is capable of being displayed to the person
persons named in and attached to or logically associated with an electronic
to whom it is to be presented: Provided, That no provision of data message, electronic document, or that the appropriate methodology or
this Act shall apply to vary any and all requirements of security procedures, when applicable, were employed or adopted by such
existing laws on formalities required in the execution of person, with the intention of authenticating or approving in an electronic data
documents for their validity. message or electronic document;

For evidentiary purposes, an electronic document shall be the functional (b) The electronic data message or electronic document shall be
equivalent of a written document under existing laws. authenticated by proof that an appropriate security procedure, when
applicable was adopted and employed for the purpose of verifying the
This Act does not modify any statutory rule relating to admissibility of originator of an electronic data message and/or electronic document, or
REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO
detecting error or alteration in the communication, content or storage of an
electronic document or electronic data message from a specific point, which,
using algorithm or codes, identifying words or numbers, encryptions, answers
back or acknowledgement procedures, or similar security devices.

The supreme court may adopt such other authentication procedures,


including the use of electronic notarization systems as necessary and
advisable, as well as the certificate of authentication on printed or hard
copies of the electronic document or electronic data messages by electronic
notaries, service providers and other duly recognized or appointed
certification authorities.

The person seeking to introduce an electronic data message or electronic


document in any legal proceeding has the burden of proving its authenticity
by evidence capable of supporting a finding that the electronic data message
or electronic document is what the person claims it be.

In the absence of evidence to the contrary, the integrity of the information


and communication system in which an electronic data message or
electronic document is recorded or stored may be established in any legal
proceeding -

a.) By evidence that at all material times the information and communication
system or other similar device was operating in a manner that did not affect
the integrity of the electronic data message and/or electronic document, and
there are no other reasonable grounds to doubt the integrity of the
information and communication system,

b.) By showing that the electronic data message and/or electronic document
was recorded or stored by a party to the proceedings who is adverse in
interest to the party using it; or

c.) By showing that the electronic data message and/or electronic document
was recorded or stored in the usual and ordinary course of business by a
person who is not a party to the proceedings and who did not act under the
control of the party using the record.

REPOSARS NOTES SALES (DLSU-LAW) PROF: ATTY. OSH HAULO