From Atty. Deanabeth C.

Gonzales, Professor Rizal Technological University, CBET

Sept. 13, 2020

For everyone who will get hold of a copy or portions of this material:

This is posted online in the light of the pandemic covid-virus which adversely affect not just the
Philippines but the entire world. It is a privilege for me to teach part-time in a state university for more
than a decade now. I teach subjects in the College of Business and Entrepreneurial Technology
(CBET), subjects which are all part of the Board Exam for CPAs. Being a CPA-Lawyer, I know for a
fact that having a book is a must in studying any law subject. However, teaching in a school where
many students cannot afford to buy a book, my former students in the past years can attest to the fact
that I went out of my way to pay for books in advance and allow some students to pay me in
installments over the entire semester just for them to have a book. Nevertheless, some students still
cannot afford to buy a book, and attended classes by just walking to school. Being a product of the
Public School System in the Philippines, up to college in PUP Sta. Mesa for Accountancy, I fully
understand the money issue in buying books for many students.

With Social Distancing rules and hygienic issues during this pandemic, students are not encouraged to
make use of the university physical library and the online library is not yet that fully operational. Hence,
I decided to post portions of some books online to help those students who cannot afford to buy a
book, specially now that unemployment in the country has risen at all-time high.

Portions of the book were copied by former CBET students from the book Law on Sales, Agency and
Bailments by Hector De Leon (definitely not the latest edition) and from other books/sources (i.e., Law
on Sales, Agency, Pledges and Mortgages by Carlos Suarez, Alexander Suarez, 2008 ed.) when they
were asked to report in class. I wasn’t too happy to see reports which were mostly copied from the
books but I got the softcopies of their reports anyway sent thru email. In the end, I found myself having
a softcopy of many portions of the books on Law of Sales. There is no copyright infringement here
because it is for educational purposes and only portions of the book will be posted to help students who
cannot afford to buy a book in this pandemic times.

Note that the postings will not cover the entire assignment given for each session or particular day.
Rather, the postings will explain only some portions of the assignment for the day based on the books
previously used by the former CBET students. There is no new Civil Code to date so that the contents
of the books still apply. I will not prescribe any book on Sales for this semester in view of the financial
difficulty for most families. Students can buy (but NO available new stock of books in Rex Bookstore
per my online search as of September 10, 2020 nor in National Bookstores) or borrow any edition of
the book on sales by any author. Each student must download the proper civil code provisions from
the internet, make use of whatever postings available in the group/class messenger that can be helpful
for your classmates or do own research. The postings are for personal use of the student only and not
for mass production.

With no intent to have financial gain, but only to help students from the less privilege sector of our
society during this pandemic times, I hope many will benefit from this posting.

It may seem to be a cliché that “The Youth is the Hope of the Fatherland,” spoken by Dr. Jose Rizal.
Yet, in times like this, we need to give hope and to assist all students who will face more challenging
times ahead.

More power to all Filipinos and to all educators who in this pandemic times make extra efforts to
educate all learners.

May God who made heaven and earth continue to bless us all through Jesus Christ, by whose
blood shed on the cross save us all. Maraming salamat po.

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Notes 2 - Law on Sales

ART. 1469. In order that the price may be considered certain, it shall be sufficient that
it be so with reference to another thing certain, or that the determination thereof be left to
the judgment of a specified person or persons.
Should such person or persons be unable or unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts may fix the
price.
Where such third person or persons are prevented from fixing the price 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.

When price considered certain.

The price in a contract of sale ought to be settled for there can be no sale without a price. It must be
certain or capable of being ascertained in money or its equivalent; and money is to be understood as
currency, and its equivalent means promissory notes, checks and other mercantile instruments
generally accepted as representing money.

Under the above article, the price is certain if:

(1) The parties have fixed or agreed upon a definite amount;
(2) It be certain with reference to another thing certain; or
(3) The determination of the price is left to the judgment of a specified person or persons and
even before such determination.

Effect where price fixed by third person designated.

As a general rule, the price fixed by a third person designated by the parties is binding upon them.
There are, however, exceptions such as:
(1) When the third person acts in bad faith or by mistake as when the third person fixed the price
having in mind not the thing which is the object of the sale, but another analogous or similar thing in
which case the court may fix the price. But mere error in judgment cannot serve as a basis for
impugning the price fixed; and
(2) When the third person disregards specific instructions or the procedure marked out by the
parties or the data given him, thereby fixing an arbitrary price.

ILLUSTRATIVE CASES:
Facts: S executed a document whereby he agreed to transfer to B “ the whole of the right,
title, and interest” in a business. This whole was 4/173 of the entire net value of the business. The
parties agreed that the price should be 4/173 of the total net value. The ascertainment of such net
value was left unreservedly to the judgment of the appraisers.
Issue: Is the price certain?
Held: Yes, for the minds of the parties have met on the thing and the price. Nothing was left
unfinished and all questions relating thereto were settled. This is an example of perfected sale.

ART. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may
indicate a defect in the consent, or that the parties really intended a donation or some other
act or contract. (n)

ART. 1471. If the price is simulated, the sale is void, but the act may be shown to have been
in reality a donation, or some other act or contract.
Effect of gross inadequacy of price in voluntary sales.
(1) General rule. — While a contract of sale is commutative, mere inadequacy of the price or
alleged hardness of the bargain generally does not affect its validity when both parties are in a
position to form an independent judgment concerning the transaction.

(2) Where low price indicates a defect in the consent. — The inadequacy of price, however,
may indicate a defect in the consent such as when fraud, mistake, or undue influence is present
(Art. 1355.) in which case the contract may be annulled not because of the inadequacy of the price
but because the consent is vitiated.

(3) Where price simulated. — If the price is simulated or false such as when the vendor really
intended to transfer the thing gratuitously, then the sale is void but the contract shall be valid as a
donation

(4) Where parties do not intend to be bound at all. — If the contract is not shown to be a
donation or any other act or contract transferring ownership because the parties do not intend to be
bound at all, the ownership of the this is not transferred. The contract is void and inexistent.

Effect of gross inadequacy of price in involuntary sales.

(1) General rule. — A judicial or execution sale is one made by a court with respect to the
property of a debtor for the satisfaction of his indebtedness.

(2) Where price so low as to be “shocking to conscience”. — While it is true that mere
inadequacy of price is not a sufficient ground for the cancellation of a voluntary contract of sale, it
has been held that where the price is so low that “a man in his senses and not under a delusion”
would not accept it, the sale may be set aside and declared an equitable mortgage to secure a loan.

(3) Where seller given the right to repurchase. — The validity of the sale is not necessarily
affected where the law gives to the owner the right to redeem, as when a sale is made at public
auction, upon the theory that the lesser the price, the easier it is for the owner to buy back the
property.

ART. 1472. The price of securities, grain, liquids, and other things shall also be
considered certain, when the price fixed is that which the thing sold 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.

Price on a given day at particular market.

A price is considered certain if it could be determined with reference to another thing certain.
Note the last phrase of the above article: “provided said amount be certain.” When an amount is fixed
above or below the price on a given day or in a particular exchange or market, the said amount must be
certain; otherwise, the sale is inefficacious because the price cannot be determined.

This article is especially applicable to fungible things like securities, grain, liquids, etc. the price of which
are subject to fluctuations of the market.

ART. 1473. The fixing of the price can never be left to the discretion of one of the
contracting parties. However, if the price fixed by one of the parties is accepted by the other,
the sale is perfected.
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Fixing of price by one of the contracting parties, not allowed.
The reason for the rule is obvious.
(1) If consent is essential to a contract of sale, the determination of the price cannot be left to
the discretion of one of the contracting parties; otherwise, it cannot be said that the other consented
to a price he did not and could not previously know.
(2) Moreover, to be just, the price must be determined impartially by both parties (Art. 1458.) or left
to the judgment of a specified person or persons. (Art. 1469.)

ART. 1474. Where the price cannot be determined in accordance with the preceding
articles, or in any other 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 reasonable
price therefor. What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.

Effect of failure to determine price.

(1) Where contract executory. — If the price cannot be determined in accordance with
Articles 1469 and 1472, or in any other manner, and the bargain is still executory, the contract is
without effect.
(2) Where delivery has been made. — If the thing or any part thereof has already been
delivered and appropriated by the buyer, the latter must pay a reasonable price therefor.

ART. 1475. 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.

Perfection of contract of sale.

This article follows the general rule that contracts are perfected by mere consent. (Art. 1315.) The
contract of sale being consensual, it is perfected at the moment of consent without the necessity of
any other circumstances. From the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price (see Art. 1624.), the reciprocal obligations of the parties
arise even when neither has been delivered.

ART. 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a
separate contract of sale.
(2) A sale by auction is perfected when the auctioneer announces its perfection by
the fall of the hammer, or in other customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless
the auction has been announced to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.
(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 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 at such sale on behalf of the seller or knowingly to take any bid
from the seller or any person employed by him. Any sale contravening this rule may be
treated as fraudulent by the buyer.
Rules governing auction sales.

1. Sales of separate lots by auction are separate sales. — Where separate lots are the
subject of separate biddings and are separately knocked down, there is a separate contract in
regard to each lot. As soon as the hammer falls on the first lot, the purchaser of that lot has a
complete and separate bargain.

2. Sale perfected by the fall of the hammer. — In putting up the goods for sale, the seller is merely
making an invitation to those present to make offers which they do by making bids (Art. 1326.), one of
which is ultimately accepted. Each bid is an offer and the contract is perfected only by the fall of the
hammer or in other customary manner.

3. Right of seller to bid in the auction. — The seller or his agent may bid in an auction sale
provided: (a) such right was reserved; (b) notice was given that the sale is subject to a right to bid on
behalf of the seller; and (c) the right to bid by the seller is not prohibited by law or by stipulation.

ART. 1477. The ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.

ART. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.

Ownership of thing transferred by delivery.

The delivery of the thing sold is essential in a contract of sale. Without it, the purchaser may not
enjoy the thing sold to him. It is only after the delivery of the thing sold that the purchaser acquires a
real right or ownership over it.

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.

ART. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected,
from the moment of the perfection of the contract to the time of delivery, shall be governed by
articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made independently and for a single
price, or without consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according to weight, number, or measure,
the risk shall not be imputed to the vendee until they have been weighed, counted, or measured,
and delivered, unless the latter has incurred in delay. (1452a)