Part | SALES’ (Arts. 1458-1637.) Chapter 1 NATURE AND FORM OF THE CONTRACT Article 1458, 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 therefore a price certain In money or its equivalent. Acontract of sale may be absolute or conditional. Concept of contract of sale. The contract of sale is a contract whereby one of the parties (called the seller or vendor) obligates himself to deliver some- thing to the other (called the buyer or purchaser or vendee) who, on his part, binds himself to pay therefor a sum of money or its equivalent (known as the price). Characteristics of a contract of sale. The contract of sale is: (1) Consensual because it is perfected by mere consent without any further act at the moment there is meeting of minds "Book IV, Title VI, Civil Code,2 SALES Art. 1458, upon the thing which is the object of the contract and upon the price (Art. 1475.); (2) Bilateral because both contracting parties are bound to fulfill obligations reciprocally towards each other — the seller, to deliver and transfer ownership of the thing sold and the buyer, to pay the price; (3) Onerous because the thing sold is conveyed in consider- ation of the price and vice versa; (4) Commutative because the thing sold is considered the equivalent of the price paid and vice versa, (see ibid.) However, the contract may be aleatory' as in the case of the sale of a hope, e.g., sweepstakes ticket; (5) Nominate because it is given a special name or designation in the Civil Code, namely “Sale”; and (6) Principal because it does not depend for its e: validity upon another contract, unlike guaranty, aortgage. (infra.) Essential requisites of a contract of sale. The rules of law governing contracts in general are rs) licable to sales. Like every contract, “sale” has the following or elements: (1) Consent or meeting of the minds. — This refers to the consent on the part of the seller or vendor to transfer and deliver and on the part of the buyer or vendee to pay. (see Art?'1475.) The parties must have legal capacity to give consent and to ‘Obligate themselves. (Arts. 1489, 1490, 1491.) Where there is merely an offer by one party, without the acceptance of the other, there is no consent. The acceptance of payment by the seller i isan indication of his consent to a contract of sale; "Art. 2010. By an aleatory contract, one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. 2When not otherwise indicated, refers to article in the Civil Code.Art. 1458 NATURE AND FORM OF THE CONTRACT . 3 Note: There may, however, be a sale against the will of the owner as in the case of expropriation (forced sale) of property, execution sale to enforce a judgment of a court, and foreclosure sale of mortgaged or pledged property. A different set of law applies to each class of sale mentioned. (2) Object or subject matter, — This refers to the determinate thing which is the object of the contract. (Art. 1460.) The thing must be determinate or at least capable of being made determi- nate because if the seller and the buyer differ in regard to the” thing sold, there is no meeting of the minds; therefore, there is no sale. The subject matter may be real/immovable or personal/ movable property, tangible or intangible (see Arts. 1528, 1631.)' and it may be present or future property. (see Arts. 1347, 1461, 1462.) Furthermore, the subject matter must be licit and must be within the commerce of man. (Art. 1347.) (3) Cause or consideration. — This refers to the “price certain in money or its equivalent” (Art. 1458.) such as a check or a promissory note, or the assiimption by the buyer of the mortgage debt of the seller, which is the consideration for the thing sold. Broadly speaking, price is the cost, at which, something is obtained in exchange for something else. It does not generally include goods or merchandise and other things although they have their own value in money. (see Arts. 1468, 1638.) There can. beno sale without a price. (see Art. 1474.) The absence of price is to be distinguished from the failure to_ ‘pay the price agreed upon. (see Art. 1475.) Technically, the cause in sale is, as to the seller, the buyer’s promise to pay the price, and as to the buyer, the seller’s promise to deliver the thing sold. Art. 1458), “article” (eg., Art. 1467), *The terms used in the law’are “thing” (¢, ‘3 . 1484), “property” (eg., Art. 1490), “goods” (e.g., Art. 1462), “personal property” ( ea property” (eg., Art. 1498), “real estate” (e.g., Art. 1539), “immovable” (e.g., ibid.), “immovable property” (eg., Art. 1544), and “real property.” (Art. 1607.)4 SALES Art. 1459 Natural and accidental elements. The above are the essential elements of a contract of sale or those without the presence of all of which no sale can validly exist. They are to be distinguished from: (1) Natural elements or those which are deemed to exist in certain contracts, in the absence of any contrary stipulations like warranty against eviction (Art. 1548.) or hidden defects (Art. 1561.); and (2) Accidental elements or those which may be present or ab- sent depending on the stipulations of the parties, like conditions, interest, penalty, time or place of payment, etc. Two kinds of contract of sale. As to the presence or absence of conditions, a sale may be either: (1) Absolute. — Where the sale is not subject to any condition whatsoever and where title or ownership passes to the buyer upon delivery of the thing sold; or (2) Conditional. — Where the sale contemplates a contingency — (Arts. 1461, 1462, par. 2; Art. 1465.), and in general, where the contract is subject to certain conditions (see Art. 1503, par. 1.), usually the full payment of the purchase price. (Art. 1478.) The delivery of the thing sold does not transfer ownership until the condition is fulfilled.+ Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. “There are, of course, other kinds of sale depending on one’s point of view, ¢8. as to the nature of the subject matter (real or personal, tangible or intangible), 2s to ‘manner of payment of the price (cash or installment), as to its validity (valid, rescissible, unenforceable, void), ete.Art. 1459 NATURE AND FORM OF THE CONTRACT 5 Requisites concerning object. (1) Things. — Aside from being (a) determinate (Arts. 1458, 1460.), the Jaw requires that the subject matter must be (b) licit or lawful, that is, it should not be contrary to law, morals, good. customs, public order, or public policy (Arts. 1347, 1409[1, 4].), and should (c) not be impossiblé, (Art. 1348.) In other words, like any other object of a contract, the thing must be within the commerce of men. If the subject matter of the sale is illicit, the contract is void and cannot, therefore, be ratified. (Art. 1409.) Examples of things outside the commerce of men are those of public ownership, such as streets, bridges, parks, etc.; and those common to everybody such as air, sunshine, etc. (2) Rights. — All rights which are not intransmissiblé or personal may also be the object of sale (Art. 1347.), like the right of usufruct (Art. 572.), the right-of conventional redemption (Art. 1601.), etc. However, while services may be the object of a contract (Art. 1347, par. 3.), they cannot be the object of a contract of sale. (Art. 1458; see Art. 1467.) : Examples of rights which are intransmissible by law are the right to.vote, the right to public office, marital and parental tights, etc. Examples of rights which are personal in character are the right to be a partner ina partnership (Art. 1767.), theright to.act as an agent of another (Art. 1868.), the right of the bailee- to use.the thing loaned in a contract of commodatum (Arts. 1933, 1939.), ete: Kinds of illicit things. The thing may be illicit per se (of its nature) or per accidens, (because of some provisions of law declaring it illegal). Article 1459 refers to both. Decayed food unfit for consumption is illicit per se, while prohibited lottery tickets (Arts. 195, 196, Revised Penal Code.) and prohibited drugs (R.A. No. 9165, Comprehensive Dangerous Drugs Act of 2002.) are illicit per accidens. The same is true with respect to land sold to an alien because the sale is prohibited by the Constitution. (Art. XII, Sec. 7 thereof.)6 SALES Art. 1469 Right of vendor to transfer ownership. (1) One can sell only what he owns, — It is essential in order for a sale to be valid that the vendor must be able to transfer ownership (Art. 1458.) and, therefore, he must be the owner or atleast must be authorized by the owner of the thing sold. It is a well-known principle of law that nobody can dispose of that - which he does not have. (Azcona vs. Reyes & Larracas, 59 Phil. » 446; see Art. 1505.) ‘ There are exceptions to this rule. (see Art. 1505.) (2) Sufficient if right exists at time of delivery. — Article 1459, however, does not require that the vendor must have the right to transfer ownership of the property sold at the time of the _ perfection of the contract. It is sufficient if he has the-right to sell the thing at the time when the ownership is to pass. (Art. 1547[1].) The reason is obvious. Since future goods (Arts. 1461, par. 1; 1462, par. 1.) or goods whose acquisition by the seller depends upon a contingency (Art. 1462, par. 2.) may be the subject matter of sale, it would be inconsistent for Article 1459 to require that the thing sold must be owned by the seller at the time of the sale inasmuch as it is not possible for a person to own a'thing or right not in existence, An agreement providing for the sale of property yet to be adjudicated by a court is thus valid and binding. (Republic vs. Lichauco, 46 SCRA 305.) Art. 1460. A thing is determinate when it is par- ticularly designated or physically segregated from all others of the same class, The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing Is capable of being made determinate without the necessity of a new or further agreement between the parties, Subject matter must be determinate. (1) When thing determinate. — A thing is determinate or Specific (not generic) when it is particularly designated orArt. 1460 NATURE AND FORM OF THE CONTRACT 7 physically segregated from all others of the same class. 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 ‘contract must be determinate as to its kind. (Art. 1349.) _ A determinate thing is identified by its individuality, ¢.g., my car (if I have only one); the watch Iam wearing; the house located at the corner of Rizal and Del Pilar Streets, etc. It is not necessary, however, that the thing sold must be in sight at the _ time the contract is entered into. (2) Sufficient if subject matter capable of being made determinate. ~ It is sufficient that the thing is determinable or-capable of being made determinate without the necessity of anew or further - agreement between the parties (Art..1460, par. 2.) to ascertain its © identity, quantity, or quality. The fact that such an agreement is still necessary constitutes an obstacle to the existence of the contract (Art. 1349.) and renders it void. (Art. 1409[3].) * Thus, a person may validly sell all the cavans of rice in a particular bodega or a parcel of land located at a particular street but if the bodega is not specified and the seller has more than one bodega, or owns more than one parcel of land at the particular street, and it cannot be known what may. have been sold, the contract shall be null‘and. void. (Arts. 1378, par. 2; 1409[6].) Similarly, the obligation of a person to sell one of his cars is limited to the cars drove by him. The subject matter is determinable, it becomes determinate once it is delivered. ILLUSTRATIVE CASES: (1) A quantity of hemp delivered by the vendor into the warehouse of the vendee and thus set apart and distinguished from all other hemp was sold although the purchase price which had been agreed upon, had not yet been paid, (see Tan Leoncio vs. Go Inqui, 8 Phil. 531.) ° (2) A contract whereby a party obligates himself to sell for a price certain (P3,000.00) a specified quantity of sugar (600 piculs) of a given quality (of the first grade and second grade) without designating a particular lot of sugar, is not perfected until the quantity agreed upon has been selected and is capable of being a8 SALES Art 1464 physically designated and distinguished from all other sugar. (Yu ‘Tek & Co. vs. Gonzales, 29 Phil. 348.) In such a case, the contract is merely an executory contract to sell. * Art, 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expec- - tancy Is deemed subject to the condition that the thing will come into existence, The sale of a vain hope or expectancy Is vold. Sale of things having potential existence. Even a future thing (Arts. 1461, par. 1; 1347, par. 1.) not existing at the time the contract is entered into, may be the object of sale provided it has a potential or-possible existence, that is, it is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller, and the title will vest in the buyer the moment the thing comes into existence. F Thus, a valid sale may be made of “the wine a vine is ex- pected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon a sheep; or what may be taken at the next cast of a fisherman's net; or the goodwill ofa trade or the like. The thing sold, however, must be specific and identified. ‘They must be also owned by the vendor at the time.” (Sibal vs. Valdez, 50 Phil. 522-523.) Sale of a mere hope or expectancy. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing contemplated or expected will come into existence. (par. 2.) The sale really refers to an “expected thing” which is not yet in existence, and not to the hope or expectancy which already exists, in view of the condition that the thing will come into‘Art. 1462 NATURE AND FORM OF THE CONTRACT 9 existence. But the sale of hope or expectancy itself is valid even if the thing hoped or expected does not come into existence, unless the hope or expectancy is vain, in which case, the sale (e.g., sale of a falsified sweepstakes ticket which can never win) is void. (par. 3.) EXAMPLES: (1) S binds himself to sell for a specified price to Ba parcel of land if he wins a case for the recovery of said land pending in the Supreme Court. Here, the obligation of S to sell will arise, if the “expected thing,” the land, will’come into existence, i.e., if he wins the case. Before a decision is rendered, there is only “the mere hope or expectancy” that the thing will comé into existertce. _ (2) Bbuys a sweepstakes ticket in the hope of winning a prize. Here, the object of the contract is the hope itself. The sale is valid even if B does not win a prize because it is not subject to the condition that the hope will be fulfilled. 5 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 contract of sale, in this Title called “future goods.” There may be a contract of sale of goods, Whose acquisition by the seller depends upon a contingency which may or may not happen. Goods which may be the object of sale. Goods which form the subject of a contract of sale may be either: 5 (1) Existing goods or goods owned or possessed by the seller; or : (2) Future goods, or goods to be manufactured (like the sale - of milk bottles to be manufactured with the name of the buyer10 SALES Art. 1463 pressed in the glass), raised (like the sale of the future harvest of palay from a ricefield), or acquired (like the sale of a definite parcel of land the seller expects to buy). (Art. 1460.) Sale of future goods. Asale of future goods even though the contract is in the form of a present sale, is valid only as an executory contract to be fulfilled by the acquisition and delivery of the goods specified. In other words, “property or goods which at the time of the sale, are not owned by the seller but which thereafter are to be acquired by him, cannot be the subject of an executed sale but may be the subject of a contract for the future sale and delivery thereof,” even though the acquisition of the goods depends upon acontingency which may or may not happen. (Martin vs. Reyes, 91 Phil. 666; 55 CJ. 65.) Upon acquisition of the’goods, either party acquires the right to demand the execution of the contract of sale. The first paragraph of Article 1462 does not apply if the goods are to be manufactured especially for the buyer and not readily saleable to others in the manufacturer's regular course of * business. The contract, in such case, must. be considered as one for a piece of work. (Art. 1467.) Art. 1463. The sole owner of a thing may sell an undivided interest therein. Sale of undivided interest ina thing. | (1) By sale owner. — Article 1463 covers only the’sale By asole owner of a thing of an undivided share or interest'thereof, “The sole owner of a thing may sell the entire thing; or only a specific portion thereof; or an undivided interest therein and such interest may be designated as an aliquot part of the whole. The legal effect of the sale of an undivided interest in a thing is to. umake the buyer a co-owner in the thing sold. As such co-owner, he acquires full ownership of his part and he may, therefore, sell it. Such sale is, of course, limited to the portion which may beArt. 1464 NATURE AND FORM OF THE CONTRACT u allotted to him in the division of the thing upon the termination of the co-ownership. (Art: 493.4) (2) By co-owner, — The co-owner (¢.g., co-heir) of a thing, being the owner of his undivided interest therein, can dispose of his share even without the consent of the other ccwvnents the effect of the alienation shall be limited to the portion which may ‘be allotted to the vendor in the division of the property upon. termination of the co-ownership. EXAMPLE: S is the owner of a parcel of land with an area of 1,000 square meters. As the sole owner, S can sell to B the entire parcel of land; or only 500 square meters of the land by metes and bounds in which case he becomes the sole owner of the remaining 500 square meters and B, the portion sold; or he may sell an undivided half of the land without specially designating or identifying the portion sold, in which case, they become co-owners. Asaco-owner, S or B, can convey or transfer the title pertaining to the undivided half of the land, for vital to the validity of a’con- tract of sale is that the vendor be the owner of the thing sold. (Art. 1459.) ‘ Art. 1464. 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 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 common of such a share of the mass as the number, weight or measure SArt. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore allenate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.12 SALES Art 164 bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the 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, unless a contrary intent appears. Sale of an undivided share of a specific mass. (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 (U.S. Uniform Sales Act, Sec. 76.) such as grain, oil, wine, gasoline, etc. (2) Effect of sale. — The owner of a mass of goods may sell only an undivided share thereof, provided the mass is specific or capable of being made determinate. (Art. 1460.) (a) By such sale, the buyer becomes a co-owner with the seller of the whole mass in the proportion in which the definite share bought bears to the mass. (b) It must follow that the aliquot share of each owner can be determined only by the measurement of the entire mass. (c) If later on it be discovered that the mass of fungible goods contains less than what was sold, the buyer becomes the owner of the whole mass; furthermore, the seller shall supply whatever is lacking from goods of the same kind and quality, subject to any stipulation to the contrary. (3) Risk of loss. — If the buyer becomes a co-owner, with the seller, or other owners of the remainder of the mass, it follows that the whole mass is at the risk of all the parties interested in it, in proportion to their various holdings. (4) Subject matter, — Take note that in the sale of an undi- vided share, either of a thing (Art. 1463.) or that of goods (Art. 1464.), the subject matter is an incorporeal or intangible right. (Art. 1501.) Here, ownership passes to the buyer by the intention of the parties.Art. 1465 NATURE AND FORM OF THE CONTRACT 13 EXAMPLE: : $ owns 1,000 cavans of palay stored in his warehouse. If $ sells to B 250 cavans of such palay which cavans are not segregated from the whole mass, B becomes a co-owner of the said mass to the extent of 1/4 thereof while S, to the extent of 3/4. If the warehouse happens to contain only 200 cavans, $ must deliver the whole 200 cavans and supply the deficiency of 50 cavans of palay of the same kind and quality. In the same example, the number of cavans in the warehouse may be unknown or undetermined and § may sell only 1/4 share of the contents. The legal effect of such a sale is to make B a co-owner in that proportion. It is obvious that in such case, the obligation of the seller “to make good the deficiency” will not arise. Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale. ‘Sale of thing subject to a resolutory condition. A resolutory condition is an uncertain event upon the happen- ing of which the obligation (or right) subject to it is extinguished. Hence, the right acquired in virtue of the obligation is also extin- guished. (Art. 1181.) One of the obligations of the vendor is to transfer the ownership of the thing object of the contract. (Art. 1458.) If the resolutory condition attaching to the object of the contract, which object may include things as well as rights (Arts. 1427, 1347, par. 1.), should happen, then the vendor cannot transfer the ownership of what he sold since there is no object. EXAMPLES: (1). S (vendor a retro) sold a parcel of land to B (vendee @ retro) subject to the condition that $ can repurchase the property within two (2) years from the date of the sale. If S exercises the right to repurchase, then the sale made by B to C before the lapse of the two (2)-year period falls, The rule, however, that a vendor cannot transfer to his vendee a better right than he himself had, suffers ari exception in case of property with Torrens Title. :“ SALES Art 1466 (2) For failure to pay his debt, the land of S (mortgagor) was sold to B, the highest bidder and purchaser in an extrajudicial foreclosure of a real estate mortgage. Under the law (Act No. 3135, as amended.), the mortgagor may redeem the property at any time within one (1) year from and after the date of the sale, If S redeems the property, then the sale made to Bis extinguished. Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. Sale distinguished from agency to sell. By the contract of agency, a person binds himself to render... some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Art. 1868.) In order to classify a contract, due regard must be given to its essential clauses. A contract is what the law defines it to be, and not what it is called by the contracting parties. (Quiroga vs. Parson Hardware Co., 38 Phil. 501; see Ker Co., Ltd. vs. Lingad, 38 SCRA 524.) Sale may be distinguished from an agency (see Art. 1868.) to sell, as follows: (1) In a sale, the buyer receives the goods as owner; in an agency to sell, the agent receives the goods as the goods of the principal who retains his ownership over them; (2) Ina sale, the buyer has to pay the price; in an agency to sell, the agent has simply to account for the proceeds of the sale he may make on the principal's behalf; (3) In a sale, the buyer, as a general rule, cannot return the object sold; in an agency to sell, the agent can return the object in case he is unable to sell the same to a third person; and (4) Inasale, the seller warrants the thing sold (see Arts, 1547, 1548, 1561,); in an agency to sell, the agent makes no warranty for Which he assumes 1 liability as long as he acts within his authority and in the name of the seller;and ieArt. 1467 NATURE AND FORM OF THE CONTRACT 15 (5) In a sale, the buyer can deal with the thing soldvas he pleases, being the owner; in an agency to sell, the agenti with the thing received, must act and is bound according e instructions of his principal. EXAMPLE: $ grants B the right to sell the former’s appliances in the province. Sis to furnish B with the appliances which the latter may order. The price agreed upon is the invoice price of the appliances in Manila with a discount of 20%. Payment is to be made at the end of 30 days. Is the contract an agency to sell? No. Here, there is an obligation on the part of $ to supply the appliances and on the part of B to pay their price, on receiving them without any other consideration than the discount of 20% and regardless of whether B sells the appliances or not. But if under the terms of the agreement between them, S retains ownership of the appliance and B must account for the proceeds of the salés less the commission agreed upon, the contract is an agency to sell. (see Art. 1868, Part II.) Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be 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. Sale distinguished from contract for a piece of work. By the contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ his labor or skill, or also furnish the material, (Art. 1713.) (1) In a contract for work, labor or materials or for a piece of work, the thing transferred is one not in existence and which never would have existed but for the order of the party desiring16 \ SALES Art. 1468, to acquire it, while in a contract of sale, the thing transferred is ,one which would have existed and been the subject of sale to some other person, even if the order had not been given. (2) In the first case, the risk of loss before delivery is borne by the worker or contractor, not by the employer (the person'who ordered) (Arts. 1717, 1718.) and in the second, the risk of loss is borne by the buyer. (Arts. 1480, 1538, 1189.) (3) Contracts for a piece of work, unlike “contracts of sale,” are not within the Statute of Frauds. (Art. 1403[2].) EXAMPLE: If Sis buying a pair of shoes of a particular style and size from B which the latter manufactures or procures for the general market but the same is not available, an order for one would be a contract of sale (Art. 1462, par. 1.) to which the Statute of Frauds applies if the price of the article is not less than P500.00. (see Art. 1483.) On the other hand, if S places an order for a pair of shoes of a particular shape because his feet are deformed, the fact that such kind of shoes is not suitable for Sale to others in the ordinary course of the seller’s business and is to be manufactured especially for S and upon his special order, makes the contract one for a piece of work and takes the case out of the Statute. Art. 1468. If the consideration of the contract consists partly in money, and partly 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; otherwise, it is a sale. Sale distinguished from barter. By the contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing. (see Arts. 1638-1641.) On the other hand, in a contract of sale, the vendor gives a thing in consideration fora price in money. (Art. 1458.)Art. 1468 NATURE AND FORM OF THE CONTRACT 17 (1) The above distinction is not always adequate to distinguish one from the other, Hence, the rule in Article 1468 for those cases in which the thing given in exchange consists partly in money and partly in another thing. (a) In such cases, the manifest intention of the parties is paramount in determining whether it is one of barter or of sale and such intention may be ascettained by taking into account the contemporaneous and subsequent acts of the parties. (Art. 1371.) (b) If this intention cannot be ascertained, then the last sentence of the article applies. But if the intention is that the contract shall be one of sale, then such intention must be followed even though the value of the thing given as a part of the consideration is more than the amount of the money given. . (2) The only point of difference between the two (2) contracts is in the element which is present in sale but not in barter, namely: “price certain in money or its equivalent.” (see Art, 1641.) EXAMPLES: (1) S, a sugar miller, and B, a manufacturer and dealer in . whisky, entered into an agreement whereby S was to deliver sugar worth P10,000,00 to B who was to give 100 bottles of whisky worth also P10,000.00. This is a contract of barter. (2) Suppose at the date of delivery, B had only 25 bottles of whisky. With the consent of S, B paid the difference of 7,500.00 in cash. In this case, the contract is still barter. The consideration for the sugar is not cash but the whisky, and the amount of P7,500.00 paid by B is in consideration for the 75 bottles of liquor. (3) Suppose, in the same example, B had no whisky at the stipulated date of delivery and he paid § P10,000.00 instead of giving whisky. Did the contract become one of sale? No, because the payment is in consideration of the value of the whisky, and not of the sugar. The manifest intention of the parties was to enter into a contract of barter, But if B had whisky at the stipulated date of” delivery and he paid.P10,000.00 with the consent of S, the contract would become one of sale, a we’18 SALES Art. 1469 (4) Assume now that the contract between § and B was for S to deliver sugar to B who agreed to give 100 bottles of whisky or to pay P10,000.00 cash, If B, instead of whisky, paid P10,000.00 cash, it is clear that the resulting contract is that of sale, and not barter. (5) If the obligation of B is to deliver 50 bottles of whisky and pay, P5,000.00 cash, or 75 bottles of whisky and P2,500.00 cash, or . 25 bottles of whisky and 7,500.00 cash, the transaction ‘shall be considéred a barter or sale depending on the manifest intention of the parties. Under Article 1468, if such intention does not clearly _ appear, the contract shall be considered a barter, where, the cash involved is P2,500.00, or a sale, in case it is P7,500.00, or either in case, it is P5,000.00. . 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. (1) No sale if price not certain or ascertainable, — 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 rrency, and its equivalent means promissory notes, checks and other mercantile instruments generally accepted as representing ‘money.Art. 1469 NATURE AND FORM OF THE CONTRACT 19 (2) Cases when price considered certain. — Under the above article, the price is certain if: (a) The parties have fixed or agreed upon a definite amount; (b) It be certain with reference to another thing certain (see Art. 1472,); or i (c) The determination of the price is left to the judgment of a specified person or persons. It must be understood that the last two cases are applicable only when no specific amount has been stipulated by the parties. Effect where price fixed by third person designated. Asa general rule, the price fixed by the third person specified by the parties is binding upon them: There are, however, exceptions, such as: (1) When the third person acts.in bad faithior 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 disregarding the price fixed; and (2) When the third person disregarding specific instructions orthe procedure laid down by the parties, or the data given him, fixed an arbitrary price. (see 10 Manresa 53-54.) EXAMPLE: S sold to B a diamond ring. The determination of the price was left to C whom the parties thought was a jeweler, If C acted by mistake, as when he is incompetent to know the price of the diamond ring, or in bad faith as when he connived with §, the court may fix the price. ILLUSTRATIVE CASE: Facts: $ executed a document whereby he agreed to transfer to B “the whole of: the right, title, and interest” in a business.20 SALES ‘ ‘Art. 1470 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. (Barretto vs. Santa Maria, 26 Phil. 200 [1913].) Effect where price not fixed by third person _ designated. : (1) If the third person designated by the parties to fix the price refuses or cannot fix it (without fault of the seller and the buyer), the contract shall become ineffective, as if no price had been agreed upon unless of course, the parties subsequently agree upon the price. (par. 2.) (2) If such third person is prevented from fixing the price by the fault of the seller or the buyer, the party not in fault may obtain redress against the party in fault (par. 4.) which consists of a choice between rescission or fulfillment, with damages in either case. (Art. 1191, par. 2.) If the innocent party chooses fulfillment, the court shall fix the price. i 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. 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 the fact that the bargain was a hard one generally does not affect its validity when both parties _ are in a position to form an independent judgment concerning, the transaction: (Askay vs. Cosalan, 46 Phil. 79; Ereneta vs.Art. 1471 NATURE AND FORM OF THE CONTRACT" a Bezore, 54 SCRA 13.) This rule holds true in voluntary contracts of sale otherwise free from invalidating defects even if the price is inadequate or low. (2) Where low price indicates 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; or where the price is so grossly inadequate or low’as to be “shocking to court's conscience” that no man in his right mind would accept. (Infra.) Effect of gross inadequacy of price in involuntary or execution sales. (1) General rule. — A judicial or execution sale is one made by a court with respect to the’propetty of a debtor for the satisfaction of his unpaid indebtedness. Like in voluntary sale, mere inadequacy of price is not a sufficient ground for.the cancellation of an execution sale, (2) Where price is so low as to be “shocking to the conscience.” — If the “price is so inadequate as to shock the conscience of the Court,” a judicial sale, say, of real property will be set aside. (National Bank vs. Gonzales,'45 Phil. 693; Wames, Barnes & Co. vs. Santos, 15 Phil. 446.) Thus, in a case, the sale of a land with an assessed value of more than P60,000.00 for only P877.25 was set aside by the court. (Director of Lands vs. Abarca, 61 Phil. 70.) (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. (De Leon vs. Salvadar, 36 SCRA 567; Ravanera vs. Imperial, 79 SCRA 111.) Art. 1471. ifthe price is simulated, the sale Is vold, but the act may be shown to have been In reality a_- donation, or some other act or contract.2 SALES “Arc un, Effect where price simulated. (1) 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. (2) 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 (Art. 1345.), the ownership of the _ thing is not transferred, The contract is void and inexistent. (Art. 1409[2].) ; EXAMPLE: S sold to B his land worth P100,000.00 for only P70,000.00. This contract of sale is valid although the price is grossly inadequate. However, if it is shown that B induced S to sell the land through fraud, mistake, or undue influence, the contract may be annulled on that ground. If the price is simulated, B may prove another consideration, like the liberality of S and if such liberality is proved, then the contract is valid as a donation; or B may prove that the act is in reality some other contract, like barter and, therefore, the transfer. of ownership is unaffected. 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. “Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the’ parties conceal their true agreement. (n) . Art. 1346. An absolutely simulated or fictitious contract is void. A relative'simulation, when it does not prejudice a third person and is not intended for any purpose contrary te law moras good ‘customs, public order or public policy binds the parties to their real agreement. (n)Arts, 1473-1474 NATURE AND FORM OF THE CONTRACT 2 Price on a given day at particular market. The above provision follows the principle in Article 1469 that 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 (Art. 1474.) because the price cannot be determined. This article is especially applicable to fungible things like securities, grain, liquids, efc., the prices 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. Fixing of price by one of the contracting parties not allowed. The reason for this article is obvious. (1) If consent is essential to a contract of sale, the determi- nation 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. (seé 10 Manresa 58.) The validity or compliance of,the contract cannot be made to depend upon the will of one party. (Art. 1308.) (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.) However, where the price fixed by one party is accepted by ‘the other, the contract is deemed perfected because in this case, there exists a true meeting of minds upon the price. (Art. 1475.) Art. 1474, Where the price cannot be determined in accordance with the preceding articles, or in any es eel24 SALES ‘Art. 1475 other manner, the contract Is Inefficaclous. 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 deter- mined in accordance with Articles 1469 and 1472, or in any other manner, the contract is without effect. Consequently, there is no obligation on the part of the véndor to deliver the thing and on the part of the vendee to pay. (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: The reasonable price or value of goods is generally the market price at the time and place fixed by the contract or by law for the delivery of the goods. 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. ‘Stages of a contract of sale. The stages of a contract of sale are as follows: (1) Negotiation, covering, the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) Perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and‘Art. 1475 NATURE AND FORM OF THE CONTRACT 5 (3) Consummation, which begins when the parties perform their respective undertakings under the contract of sale, culmi- nating in the extinguishment thereof. Perfection of contract of sale. The above provision follows the general rule that contracts are perfected by mere consent. (Art. 1315.) The contract of sale being consensual (see Art. 1458.), it is perfected 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: The conduct of the parties may indicate the consent of the owner to the sale of his property and of the other party to acquire the same by purchase. But the ownership is nat transferred until delivery of the thing. (Arts. 1496, 1164.) In case: one of the contracting parties should not comply with what is incumbent upon him, the injured party may sue for fulfillment ox rescission aglipihe payment of damages in ‘either case. (Art, 1191, pars. 1 and 2. Right of owner to fix his own price. (1) The owner of a thing has the right to quote his own price, _ reasonable or unreasonable. It is up to the prospective buyer to” accept or reject it. He may even impose a condition hard to fulfill and name a price quite out of proportion to the real value of the thing offered for sale, (Cornejo vs. Calupitan, 87 Phil. 555 [1950].) (2) He is also well within his right to quote a small or nomi- nal consideration (see Arts, 1470-1471.) and such consideration is just as effectual and valuable a consideration as a larger sum stipulated or paid. (see Palacio vs. Adiosola, [C.A.] No. 7572-R, Sept. 10, 1952.) Effect of failure to pay price/absence of price. ; _ (1) Price stipulated. — The failure to pay the stipulated price after the execution of the contract does not convert the contract26 SALES Art. 1476 into one without cause or consideration as to vitiate the validity of the contract, it not being essential for the existence of cause that payment or full payment be made at the time of the contract. Such failure does not ipso facto resolve the contract in the‘abserice of any agreement to that effect. The vendor's remedy in such case is generally to demand specific performance or rescission or cancellation of the sale with damages in either.case. (2) No price stipulated. — The above situation is to be dis- tinguished from a contract of sale where the purchase price which appears thereon as paid, has in fact, never been paid by the buyer. In such case, the sale is void and non-existent as without cause or consideration. Of course, if there is no stipulation or meeting of the minds regarding the purchase price, there is no contract of sale. 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 each’: - 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) Aright 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 lven that a sale by auction Is subject to a right to bld qn 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Art. 1476 NATURE AND FORM OF THE CONTRACT oy 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. Such is the rule in No. 1 though no doubt the parties may subsequently consolidate all the purchases into one transaction — as by giving a single note — for the aggregate price. (see Williston on Sales, 3rd Ed., pp. 199-200.) (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. : It follows that the bidder may retract his bid and the auctioneer may withdraw the goods from sale any time before_ the hammer falls. However, if the sale has been announced to be without reserve, the auctioneer cannot withdraw the goods from sale once a bid has been made and the highest bidder has aright to enforce his bid. (see Williston on Sales, op. cit. pp. 200-201, 204-205.) (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 Jaw or stipulation. (see Arts, 2113-2114.) (a) Where no notice given of right to bid. — Where there is no notice that the sale is subject to seller’s right to bid, itshall: be unlawful for the seller to bid either directly or indirectly or for the auctioneer to employ or induce any person to bid on behalf of the seller. (No. 4.) The purpose of the notice is to prevent puffing or secret bidding by or on behalf of the seller by people who are not28 SALES Arts. 1477-1478 themselves bound. The employment of a puffer or by-bidder to enhance or inflate the price of goods sold:is a fraud upon the purchaser and a sufficient ground for relieving him from his bid and avoiding the sale. (see Fisher v. Hersey, 17 Hun. IN.Y.] 370.) (b) Where notice given of right to bid. — Though bidding by the seller or his agent is fraudulent, a:right to bid may be expressly reserved by or on behalf of the seller. (No. 3.) It is, therefore; the secrecy of puffing which renders it a fraud upon bidding. (Williston on Sales, op. -cit., p. 208.). Where there is notice of the intention to bid by the seller, the bidding in such a case would not operate as a fraud. 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. 1164.) The delivery may be actual (Art. 1497.) or constructive. (Arts. 1498-1501.) . Exception to the rule. ‘ The ownership of things is transferred by delivery. This is true even if the purchase price/has not yet been paid or the purchase has been made on credit. However, the parties may stipulate that despite the delivery, the ownership of the thing shall remain with the seller until the purchaser has fully paid.the price. (see Art. 1503.) Bie .Art. 1479 NATURE AND FORM OF THE CONTRACT 2 In other words, non-payment of the price, after the thing has been delivered, prevents the transfer of ownership only if such is the stipulation of the parties. 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 promisor if the promise is supported by a consideration distinct from the price. Kinds of promise treated in Article 1479. The above article applies specifically to a promise “to buy or to sell.” It refers to three (3) kinds of promise, namely: (1) An accepted unilateral promise to sell in which the promisee (acceptor) elects to buy; (2) An accepted unilateral promise to buy in which the promisee (acceptor) elects to sell; and (3) A bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to.exact fulfillment: (see 10 Manresa 71.) Effect of unaccepted unllateral promise. A unilateral promise or offer to sell or to buy a thing which is not accepted creates no juridical effect or legal bond. Such unaccepted offer is called policitation. EXAMPLE: If S offers or promises to sell to B his car at a stated price and B just let the promise go by without accepting it, neither $ nor B is bound by any contract. Obviously, this is not the one contemplated in Article 1479. Meaning of option. Option is a privilege (i.e., no binding obligation) existing in one person for which he.has paid a consideration which gives him30 SALES: Art.1479 the right to buy/sell, for example, certain merchandise or certain specified property, from/to another person, if he chooses, at any time within the agreed period at a fixed price, or under, or in compliance with certain terms and conditions. An option is a contract, a preparatory contract separate — and distinct from the main contract itself (subject matter of the option). It is only when the option is exercised when a sale may be perfected. * Effect of accepted unilateral promise. The second paragraph of Article 1479 refers to what is called as “option” in the commercial world. A unilateral promise to sell or to buy a determinate thing for a price certain does not bind the promisor even if accepted » and may be withdrawn at any time. It is only if the promise is supported by a consideration distinct and separate from the price that its acceptance will give rise to a perfected contract. (Art. 1475, par. 1; Southwestern Sugar & Molasses Company vs. Atlantic Gulf and Pacific Co., 97 Phil. 249; see Soriano vs. Bautista, 6 SCRA 946.) This is the clear meaning of the provision although this interpretation has been abandoned by our Supreme Court. (Infra.) The promisee has the burden of proving the existence of such consideration. EXAMPLE: In the preceding example, even if B accepts the promise of S (this is a case of an accepted unilateral, promise to sell), S is not bound to sell his car to B because there is no promise, in turn, on the part of B to buy, However, if the promise is covered by a consideration distinct from the price of the car, as when B paid or promised to pay a sum of money to S$ for giving him the right to buy the car if he chooses within an agreed period at a’ fixed price, its acceptance produces consent or meeting of the minds. It has been held by our Supreme Court, however, that if acceptance is made before a withdrawal, it constitutes a binding’ae Art. 1480 NATURE AND FORM OF THE CONTRACT 31 contract of sale although the option is given without consideration. Be that as it may, the offerer cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer. (Sanchez vs. Rigos, 45 SCRA 468 [1972]; also Atkins Kroll & Co. vs. Teh, 102 Phil. 948 [1958].) Effect, of bilateral promise to. buy and sell. ‘ When the promise is bilateral, that is, one party accepts the other’s promise to buy and the latter, the. former’s promise to sell, a determinate thing for a price certain, it has practically the same effect as a perfected contract of sale since it is reciprocally demandable. The concurrence of both acts — the offer and the acceptance — generates 'a binding contract of sale. (Ibid.) EXAMPLE: S promised to sell his car to B and B promised to buy the said car for P400,000.00. The parties are bound by their contract'so that in case one of them should ‘not comply with what is incumbent upon him; the other has the right to choose between the fulfillment and the rescission of the obligation, with payrent of damages in either case. (Art. 1191, par. 2, Civil Code.) 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. ‘i . 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.32 SALES Art. 1480 Risk of loss or deterioration. Four (4) rules may be given regarding risk of loss or deterio- ration: (1) Ifthe thing is lost before perfection (see Art. 1475.), the seller and not the one who intends to purchase it bears the loss (Roman vs. Grimalt, 6 Phil. 96.) in accordarice with the principle that the thing perishes with the owner (res perit domino); (2) If the thing is lost at the time of perfection, the contract is » void or inexistent. (Art. 1409[3].) The legal effect is the same as when the object is lost before the perfection of the contract of sale (see Art. 1493.); (3) If the thing is lost after perfection but before its delivery, that is, even before the ownership is transferred to the buyer, the risk of loss is shifted to the buyer as an exception to the rule of res- perit domino (Arts. 1480 [pars. 1 and 2], 1538, 1189, and 1269.); and (4) If the thing is lost after delivery, the buyer bears the risk of loss following the general rule of res perit domino. ; Scope of Article 1480. Article 1480 contemplates of two (2) rules. (1) The first applies to non-fungible things (par. 1.) and fungible things (see Art..1464.) sold independently: and for a single price or for a price fixed without consideration of their weight, number, or measure. (par. 2.) Under the first rule, which follows the Roman rule (see Rule No. 3, supra.), “the risk of the thing sold passes to the buyer, even though the thing has not yet been delivered to him: Therefore, if a house [sold] be destroyed wholly or partly by fire the loss falls upon the buyer who must pay the price, even though he has not received the thing. For the seller is not liable for anything which happens without his fraud or negligence. But if after the sale any alluvion has accrued to the land, the benefit goes to the buyer for the benefit ought to belong to him.who has the risk ” (Sherman, . Inchiridion Roman Juris, Sec. 296.)Art. 1481 NATURE AND PORM OF THE CONTRACT By In other words, the buyer asstimes the risk of loss caused by fortuitous event (Art. 1174.), without the fault of the seller (Art. 1262.), that is, in spite of the exercise of due diligence on his part (Art. 1163.) and before he has incurred in delay (Arts. 1165, 1170, 1262.), after the perfection of the contract to the time of delivery. (Art. 1480, par. 1.) With respect to the fruits, the buyer has a right to the same from the time the obligation to deliver the thing arises, (Art. 1164.) If the risk ought to belong to the buyer before delivery, “the benefit ought to belong to him who has the risk.” (see Arts. 1438, 1189[5].) Article 1480, paragraph 1 is applicable only where the thing is determinate. (Art. 1460.) It also applies to fungible things sold for a price not fixed in relation to weight, number, or measure because in such case the fungible things have been “particularly designated or physically segregated.” (Ibid., par. 2.) Is Article 1480 above in conflict with Article 1504 (Infra.)? (2) The second rule relates to fungible things (rice, corn, etc.) sold for a price fixed in relation to weight, number, or measure. Under the third paragraph, “the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered.” Paragraph 3 is an exception to the rule that the vendee bears the loss after the perfection of the contract and before delivery. However, the vendee assumes the risk if he has incurred in delay in receiving the goods sold. Art. 1481, In the contract of sale of goods by des- cription or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and If the contract be by sample as well as by description, it Is not sufficient that the bulk of goods correspond with the sample If they do not also correspond with the description. The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample.34 SALES Art, 1482 Sale of goods by description and/or sample. The above article covers a sale of goods by description, by sample, and by sample as well as by description. The buyer is given a reasonable opportunity of comparing the bulk with the description or the sample. (Art. 1481, par. 2.) The term bulk of the goods, as used in the law, does not designate the greater portion of the goods. It denotes the goods themselves as distinguished from the sample and/or description with which they must correspond. (1) Sale by description, — Sale by description occurs where a seller sells things as being of a particular kind, the buyer not knowing whether the seller’s representations are true or false, but relying on them as true; or, as otherwise stated, where the purchaser has not seen the article sold and relies on the description given him by the vendor, or has seen the goods but the want of identity is not apparent on inspection. (55 CJ. 738.) If the bulk of the goods delivered do not correspond with the description, the contract may be rescinded.,(Art. 1481.) (2) Sale by sample. — To constitute a sale by sample, it must appear that the parties contracted solely with reference to the sample, with the understanding that the bulk was like it. It must appear that the exhibition of the sample by the seller was an inducement of the sale or formed the sole basis thereof. (55.CJ. 416-417.) In a sale by sample, the vendor warrants that the thing sold and to be delivered by him shall conform with the sample in, kind, character, and quality. (55 C.J. 733-734.) (3) Sale by description and sample. — When a sale is made both by sample and by description, the goods must satisfy all the warranties (see Art. 1565.) appropriate to either kind of sale, and it is not sufficient that the bulk of the goods correspond with the sample if they do not also correspond with the description and vice versa. (55 C.J. 743.) Art. 1482, Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.Art. 1483 NATURE AND FORM OF THE CONTRACT 35 Meaning of earnest money. Earnest money is money given by the buyer to the seller to. bind the bargain. It is actually a partial payment of the purchase — price and is considered as proof of the perfection of the contract. Since earnest money constitutes an advance payment, it must be deducted from the total price. Earnest money and option money distinguished. They may be distinguished as follows: (1) Earnest money is part of the purchase price, while option money (see Art. 1479, par. 2.) is the money given as distinct consideration for the option contract; (2) Earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and (3) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy. But option money may become earnest money if the parties so agree. Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly In writing and partly by word of mouth, or may be Inferred from the conduct of the parties. Form of contract of sale. (1) General rule. — The form of a contract refers to the manner in which it is executed or manifested. As a general rule, a contract may be entered into in any form provided all the essential requisites for its validity are present. (Art. 1356.) (2) Where contract covered by Statute of Frauds. — In case the contract of sale should be covered by the Statute of Frauds, the law requires that it be in writing subscribed by the party charged,3% ; SALES Art 1483 otherwise the contract cannot be enforced by action (Art. 1403[2].); and where the “applicable statute” required that the contract of sale be in a certain form for its validity, the required form must be observed in order that the contract may be both valid and enforceable. (Art. 1356.) . Under the Statute of Frauds (Art. 1403[2].), the following contracts must be in writing, otherwise they cannot be enforced. in a court litigation: e (a) Sale of personal property at a price not less than _ P500.00; (b) Sale of real property or an interest therein regardless of the price involved; and P (c) Sale of property not to be performed within‘a year from the date thereof regardless of the nature of the property and the price involved. ~ (3) Where form is required in order that a contract may be valid. -- Where the “applicable statute” requires that the contract of sale be in certain form for its validity, the required form must be observed in order that the contract may be both valid and enforceable. (see Art. 1356.) j (4) Where the form is required only for the convenience of the parties, — In certain cases, a certain form (e.g., public instrument) is required for the convenience of the parties in order, that the sale may be registered in the Registry of Deeds to make effective as against third persons the right acquired under such sale. As between the contracting parties, the, form is not indispensable since they are allowed by law to compel each other to execute the contract of sale observing that form. (Arts. 1357, 1358[1).) Sale of real property or an interest therein. Asale of a piece of land or interest therein when made through an agent is void unless the agent's authority is in writing. (Art. 1874.) For the sale of real property to be effective against third persons, the sale must be registered in the Registry of Deeds (or Property) of the province or city where the property is located: The’ sale must be in a public instrument or document ‘(i.e,Art. 1484 NATURE AND FORM OF THE CONTRACT 37 acknowledged before a notary public or any official authorized by law to administer oath) for otherwise the registration will be refused. 1 The sale of land in a private instrument is valid as between the parties but it cannot be registered to bind or affect third persons. ° Statute of Frauds applicable only to executory contracts. It must be remembered that the Statute of Frauds is appli-— cable only to executory contracts (where no performance, i.e., -delivery and payment, has as yet been made by both parties) and not to contracts which are totally (consummated) or partially” performed. The reason for the rule is that partial performance, like the writing, furnishes reliable evidence of the intention of the parties or the existence of the contract. A contrary rule would result in injustice or unfairness to the party who has performed his obligation. (Art. 1405.) : EXAMPLES: (1) S orally sold to B a parcel of land. The sale is valid (Art. 1356.) but it is unenforceable because the law requires that it be in writing to be enforceable. (Art. 1403[3].) (2) If the contract of sale is in a private writing, then it is valid and binding but only as between the parties and not as against third persons without notice until the sale is registered in the Registry of Property. B has the right to compel § to put the contract in a public instrument so that it can be registered to affect third persons. (Art. 1357.) . Art. 1484. In a contract of sale of personal property, the price of which Is payable In Installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;38 SALES Art. 1484 (3) Foreclose the chattel mortgage on the thing sold, If one has been constituted, should the vendeo’s failure to pay cover two or more installme: In this case, he shall have no further action against the purchaser to recover any unpald balance of the price. Any agreement to the contrary shall be void. _ Remedies of vendor in sale of personal property payable in installments. The vendor of personal property payable in installments may exercise any of the following remedies: (1) Elect fulfillment upon the vendee’s failure to pay; (2) Cancel the sale, if the vendee shall have failed to pay two or more installments; or : : (3) Foreclose the chattel mortgage, ifone hasbeen constituted, if the vendee shall have failed to pay two or more installments. Nature of the remedies. These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to the others. Thus, where the vendor asks the court to order the vendee to pay the remaining unpaid sum of the purchase price, the vendor thereby waives the other remedies. Right of vendor to recover unpald balance of purchase price. (1) Remedy of specific performance. — The vendor who has chosen to exact the fulfillment of the obligation is not limited to the proceeds of the sale, on execution, of the mortgaged goods. He may still recover from the purchaser the unpaid balance of the price, if any on the real and personal properties of the purchaser not exempt by law from attachment’ or execution.* 7Attachment is the process whereby the property of a defendant is placed in custody of the law to await final determination of a sult. , "Execution is a remedy for the enforcement of a final judgment of a court.Art. 1485, NATURE AND FORM OF THE CONTRACT 39 (2) Remedy of cancellation. — If the vendor chooses rescission or cancellation of the contract upon the vendee’s failure to pay two or more installments, the latter can demand only the return of payments already made unless there is a stipulation about forfeiture. (see Art. 1468.) (3) Remedy of foreclosure. — If the vendor has chosen the third remedy of foreclosure of the chattel mortgage, he shall have no further action against the vendee for the recovery of any unpaid balance of the price and any agreement to the contrary is void. The foreclosure is effected by selling the mortgaged personal property at public auction and applying the proceeds of the sale to the satisfaction of the claim secured by the mortgage. (see Part mG.) Recovery of deficlency after foreclosure prohibited. ~ The principal object of Article’ 1484 (No. 3.) is to, remedy the abuses committed in connection with foreclosure of chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Inother words, in all proceedings for the foreclosure of chattel mortgages, the mortgagee is limited to the property included in the mortgage. (Bachrach Motor Co. vs. Milan, 61 Phil. 409.) Art. 1485. 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. Lease of personal property with option to buy. , Leases of personal property with option to buy on the part of the lessee who takes possession or enjoyment of the property40 SALES Art. 1486 leased are really sales of personalty payable in installments. Accordingly, the rules provided in Article 1484 are equally applicable to the so-called leases of personal property. The evident purpose of Article 1485 is to prevent vendors from resorting to this form of contract which, usually, is in reality a contract of sale of personal property payable in installments in contravention of the provisions of Article 1484: EXAMPLE: : B entered into a contract called “contract of lease” with $ whereby B leased the car of S. It is stipulated that B, the alleged lessee, shall pay P10,000.00, upon signing the contract, and on or before the 5th day of every month, P2,000.00 by way of rental. The contract fixed the value of the vehicle to be P100,000.00. It also provided that B has the option to purchase the car for the said amount and the payments made by way of rentals shall be deducted from the amount agreed in the option and upon the full value fixed being paid, the lease would terminate and title to the leased property would be transferred to B; and that S would have the right to terminate the contract and repossess the vehicle should B fail to make payments on the dates specified, and in such event, the payments theretofore made should remain the property of S and not be recoverable by B. ‘There can hardly be any question that the contract in this case is one of sale on installments (with $ as seller and B as buyer) and not lease and is, therefore, subject to the provision of Article 1485. Art. 1486. In the cases referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to. the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. Stipulation authorizing forfeiture of installments or rents paid. In sales of personal property by installments or leases of personal property with option to buy, the parties. may stipulate that the installments or rents paid are not to be returned.Arts, 1487-1488 NATURE AND FORM OF THE CONTRACT 41 Such a stipulation is valid “insofar as the same may not be unconscionable under the circumstances” otherwise the court has the power to order the return of a portion of the total amount id in installments or rents. (Zaragoza, etc. vs. Dimayuga, [C.A.] 62 O.G. 7028.) Art. 1487. The expenses for the execution and ~ registration of the sale shall be borne by the vendor, _ unless there is a stipulation to the contrary. Expenses for execution and registration. Under this article, the vendor has the duty to pay not only the expenses for the execution of the sale but also for the regis- tration of the same in the absence of any agreement between the parties to the contrary. Expenses incurred subsequent to the transfer of title are to be borne by the buyer, unless caused by the fault of the seller. Art. 1488. The expropriation of property for public use is governed by special laws. Expropriation of property for public use. The procedure for the exercise of the power of eminent domain is provided -for in Rule 67 of the Rules of Court. Expropriation must be decreed by competent authority and for public use and always upon payment of just compensation. (Art. 435, par. 1, Civil Code; Art, III, Sec. 9, Constitution of the Philippines.)42 L IL UL SALES STUDY GUIDE Definitions Define or give the meaning of the following: 1. Contract of sale; 7 2. Natural elements; 3. Sale by description; 4, Fungible goods; and 5.. Conditional sale. Discussions 1. Distinguish earnest money from option money. 2. (a) What remedies are available to a vendor in sale of personal property payable in installments? (b) Is the vendor allowed to recover the unpaid balance of the price? 3. Give the characteristics of a contract of sale. Explain at least three (3) of them. 4. Under the Statute of Frauds, what contract of sale must be in writing to be enforceable by court action? 5. Give at least three (3) distinctions between a contract of sale and a cantract of agency to sell. Problems Explain briefly the rule or reason for your answer. 1. Ssold to B certain goods, At the time of the sale, C is not the owner of the goods, May there be a valid sale to B? 2. Same example. The only problem now is that the goods sold have not yet been identified at the time of the contract? May there be a valid sale to B? 3. The property sold by Sis a portion of a parcel of land without indicating the specific portion thereof. May there be a valid sale to B? 2NATURE AND FORM OF THE CONTRACT ooo) 4. Same example. The only problem now is that S and B have not agreed upon a definite price at the time of sale. May there still be a valid contract of sale between them? -- 5. Same example. The only problem in the case is that the price was fixed only by S. Is the sale valid? —o00—Chapter 2 CAPACITY TO BUY OR SELL Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a con- tract of sale, saving the 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 therefor. Necessaries are those referred to in article 290." Person who may enter into a contract of sale. As a general rule, all persons, whether natural or juridical, who can bind themselves by contract have also legal capacity to buy and sell. There are exceptions to this rule.in those cases when the law determines that party suffers from either absolute or relative incapacity. Kinds of incapacity, Such incapacity is absolute in the case of persons who cannot bind themselves; and relative, where it exists only with reference tocertain persons or a certain class of property, (Wolfson vs. Estate of Martinez, 20 Phil, 340,) Persons who are merely relatively incapacitated are mentioned in Articles 1490-1491, *Now Article 194, Family Code. (E.O. No. 209, July 6, 1987.) 4Art 1490 CAPACTTY TO BUY OR SELL 6 There are no incapacities except those provided by law and such incapacities cannot be extended to other cases by implica- tion for the reason that such construction would be in conflict with the very nature of Article 1489. (Ibid.) Liability for necessaries of minor or other person without capacity to act. Necessaries are those things which are needed for sustenance, dwelling, clothing and medical attendance, in keeping with the financial capacity of the family of the incapacitated person, (Art. 194, Family Code.) Whether the nature of the contract is such _ that it can, under‘any circumstances, be regarded as a contract “for necessaries, is a question which depends upon the facts of the particular case. Generally, the contracts entered into by a:minor and other i i persons (¢.g., insane or demented persons, deaf- mutes who do not know how-to write) are voidable. (Arts. 1327, 1390.) However, where necessaries are sold and delivered to him (without the intervention of the parent or guardian), he must pay a reasonable price therefor. (Art. 1489, par. 2.) The contract is, therefore, valid but the minor has the right to recover any excess ~ above a reasonable value paid by him. Sale by minors. 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 pretended to have already reached their majority, while in fact they have not, is valid. 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),) Art. 1490, The husband and the wife cannot sell Property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or46 SALES ‘Art. 1490 (2) When there has been a judicial separation of property under article 191.* Relative incapacity of husband and wife. (1) The husband and the wife are prohibited by the above article from selling property to each other. A sale between husband and wife in violation of Article 1490 is inexistent and void from the beginning because such contract is expressly prohibited by law. (Art. 1409[7].) (2) They are also prohibited from making donations to each other during the marriage except moderate gifts on the occasion of any family rejoicing. (Art. 87, Family Code.) However, if there has been a separation of property agreed upon in the marriage settlements,’ or when there has been a judicial separation of property decreed between them by the court, the sales between husband and wife, are allowed. They have, therefore, in the two (2) cases mentioned, capacity to buy from or sell to each other. - Reason for prohibition under Article 1490. 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 possibility that the husband will induce his wife to engage in ruinous operations. The prohibition is primarily for the protection of third persons who, relying upon supposed property of either spouse, enters into a contract with either of them only to find out that the property relied upon was transferred to the other spouse. (see 10 Manresa 95-96.) Persons permitted to question sale, (1) Although certain transfers between husband and wife are prohibited under the above article, such prohibition can be *Now, Article 135, Family Code. 14 marriage settlement (also called “ante-nuptial contract”) is an 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 that would be followed by them for the duration of the marriage. (see Arts. 74-80, ibid.)Art 1491 CAPACITY TO BUY OR SELL 47 taken advantage of only by persons who bear such relation to the parties making the transfer or to the property itself that such transfer interferes with their rights or interests. Thus, the heirs of either spouse, as well as creditors at the time of the transfer,can attack the validity of the sale but not creditors who became such only after the transaction. (Cook vs. McMicking, 27 Phil. 10.) (2) The government can question the validity or legitimacy of sales subject to tax between husband and wife whenever necessary to prevent tax evasion. Art. 1491. The following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under hls guardianship; (2) Agents, the property whose administration or: sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any gov- ernment-owned or controlled corporation, or institu- tion, the administration of which has been intrusted to them; this provision shall apply to Judges, and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights In litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions;. this prohibition Includes. the act of acquiring by.assignment and shall apply to lawyers, with respect to the property and rights which may48 SALES ‘Art. 1491 be the object of any litigation In which they may take part by virtue of their profession; (6) Any others especially disqualified by law. Incapacity by reason of relation to property. The above article enumerates the persons who, because of their position and relation with the persons under their charge or property under their control, are prohibited from acquiring said property either directly or indirectly and whether in private or public sale. They are the: (1) guardians; (2) agents; (3) executors and administrators; (4) public officers and employees; (5) judicial officers and employees and lawyers; and (6) others especially disqualified by law. Reason for prohibition under Article 1491. The reason behind the article is to prevent frauds on the part of the persons enumerated therein and minimize temptati to the exertion of undue and improper.influence. The fear that greed might get the better of the sentiments of loyalty and disinterestedness is the reason underlying Article 1491. The law does not trust human nature to resist the temptations likely to arise out of antagonism between the interest of the seller and the buyer. (23 Scaevola 403; Gregorio Araneta, Inc. vs. Tuazon del Paterno, 91 Phil. 786.) Other persons especially disqualified. Examples of persons especially disqualified by law are: (1) Aliens who are ‘disqualified’ to purchase private agri- cultural lands (Art. XII, Secs. 3, 7, Constitution; see Krivenko vs. Register of Deeds, 79 Phil. 461.); (2), An unpaid seller; having a right of lien or having stopped , the goods in transitu, who is prohibited from buying the goods either directly or indirectly in the resale of the same at a public‘orArt. 1492 CAPACITY TO BUY OR SELL 49 private sale which he may make (Art. 1533, par. 5, Art. 1476[4].); and (3) The officer conducting an execution sale of property to enforce a court judgment rendered against the owner thereof cannot become a purchaser or be interested directly, or indirectly in any purchase at such sale. Effect of sale in violation of prohibition. If the sale is made, would the transaction be void or merely voidable? (1) With respect to Nos. 1 to'3, the sale shall only be voidable’ because in such cases. only private interests are affected. (see Wolfson vs. Estate of Martinez, 20 Phil. 340.) The defect can be cured by ratification of the seller. (see Arts. 1392-1396.) (2) With respect, however, to Nos. 4 to 6, the sale shall be null and void, public interests being involved therein. (see Art. 14091, 7].) Art. 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. Prohibition extends to sales in legal redemption, etc. : (1) The relative incapacity provided in Articles 1490 and 1491 applies also to'sales by virtue of legal redemption (see Art. 1619.), compromises, and renunciations. (a) Compromise is a contract whereby the parties, by reciprocal concessions, avoid a litigation or put an end to one, already commenced. (Art. 2028.) It is the amicable settlement of a controversy. (b) By renunciation, a creditor gratuitously abandons his right against his creditor. The other terms used by the law are condonation and remission. (see Art. 1270.) (2) The persons disqualified to buy referred to in Articles 1490 and 1491 are also disqualified to become lessees of the things mentioned therein. (Art. 1646.)SALES STUDY GUIDE Definitions Define or give the meaning of the following: 1. Necessaries; and 2. Compromise. Discussions 1. Are husband.and wife allowed to sell Property to each other? * Under the law, who may enter into’a Contract of ait Problems. i aay x Explain or state briefly the rule or reason: for 3 Your answer. 1.._ B,aminor, bought a pair of imported shoes worth P3,000.00 from a department store. Can F, father, cancel the sale on the ground of the minority of B? , 2. Hand Ware husband and wife. After selling his property to W, H borrowed a big amount of money from C. It appears that H is now bankrupt. Has C the right-to question the sale of H’s property to W in order to have said property answer for H’s indebtedness to him? —000—Chapter 3 EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST Art. 1493. If at the, time the contract of sale Is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect. But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. Effect of loss of thing at the time of sale. The loss or injury referred to in this article is one which has taken place before or at the time the contract of sale is perfected. It must be distinguished from the loss or injury mentioned in Articles 1480 and 1504 which occurs after the contract is perfected but prior to the time of delivery. (1) Thing entirely lost. ~ Where the thing is entirely lost at the time of perfection, the contract is inexistent and void (Art. 1409[3], Civil Code.) because there is no object. (Art. 1318, par. 2, ibid.) (2) Thing only partially lost. — If the subject matter is only partially lost, the vendee may elect between withdrawing from the contract and demanding the remaining part, paying its proportionate price. (Art. 1493, par. 2.) 5152 SALES Art. 1494 EXAMPLES: (1) $ sold his ¢ar to B. Unknown to both of them, the car has been totally destroyed before they agreed on the sale. In this case, there is no valid contract of sale for lack of object. S, as owner, bears the loss and B does not have to pay for the price. (2) If the car is only partially destroyed, there still remains of the object. However, since it is not of the character or in the condition contemplated by the parties, the buyer may withdraw from the contract or demand the delivery of the car, paying its proportionate price, i.e., the market price in its damaged state. When a thing considered lost. A thing is lost when it perishes or. goes out of commerce: or disappears in such a way that its existence is unknown or it cannot be recovered. (Art. 1189[2].) The word “perishes” is sufficiently inclusive as to cover a case where there has been material deterioration or complete change in the nature of the thing in such a manner that it loses its former utility taking into consideration the time the contract was entered into. (see 10 Manresa 129.) Art. 1494, Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as ‘to be substantially changed in character, the buyer may at his option treat the sale: (1) As avoided; or (2) As valid in all of the existing goods or in so much thereof as have not deterlorated, and as binding the buyer to pay the agreed price for the goods In which the ownership will pass, If the sale was divisible. Effect of loss in case of specific goods. “Article 1493 applies to a sale of specific thing, Article 1494, on the other hand, applies only to sales of goods, that is, the objectArt. 1494 EFFECTS OF THE CONTRACT WHEN 53, THE THING SOLD HAS BEEN LOST 7 of the sale consists of a mass of “specific goods” which means “goods identified and agreed upon at the time a contract of sale is made.” (Art. 1636.) . Both articles have actually the same essence providing two (2) alternative remedies to the buyer in case of deterioration or partial loss of the object prior to the sale. (1) Sale divisible. — The second option is available only if the sale is divisible. (Art. 1494, par. 2.) A’contract is divisible when its consideration is made tp of several parts. (see Art. 1420.) When the consideration is entire and single, the contract is indivisible. (2) Sale indivisible. — Suppose the sale is not divisible, what price is the buyer to pay for the remaining goods if he elects to continue with the sale? It is believed that the buyer should be made to pay only the proportionate price of the remaining goods as provided for in paragraph 2 of the preceding article. If the sale is indivisible, the object thereof may be considered as a specific thing. EXAMPLE: Suppose the subject matter sold was 100 cavans of rice in the warehouse of S at P1,000 per cavan or for a total price of P100,000. 160 cavans of rice were lost, B may, at his option, withdraw from the contract without the obligation to pay for the rice; or demand the delivery of the 40 cavans, but binding him to pay the agreed price thereof which is P40,000. If the contract is indivisible, that is, the 100 cavans of rice were sold for P100,000 fixed without consideration of the'number of cavans, B should be made to pay only the proportionate price of 40 cavans which is also P40,000. STUDY GUIDE L__ Definitions Define or give the meaning of the following: 1. Specific goods; and 2. Divisible contract.