32978410 27996031 sales and lease reviewer diory

8/9/2019 32978410 27996031 SALES and LEASE Reviewer Diory

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SALES AND LEASE REVIEWER(by Diory Rabajante)--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SALES

*CONTRACT OF SALE, defined (Art. 1458, CC)One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the

other to pay therefor a price certain in money or its equivalent.

* SOURCES OF RIGHTS / OBLIGATIONS (Art. 1156)1. Law2. Contracts3. Quasi Contracts4. Acts or omissions punished by law; and5. Quasi delicts

A contract of sale is a contract and is, therefore, a source of obligations. It has the force of law between the contracting parties,which should be complied with in good faith. (Art. 1159)

* CHARACTERISTICS OF A CONTRACT OF SALE

1. Nominate - law gave it a name, i.e . SALE

2. Principal- can stand on its own, unlike an accessory contract

3. Bilateral- imposes obligation on both partiesa. obligation of seller transfer ownership & deliverb. obligation of buyer pay price

Consequence of being bilateral: power to rescind is implied in bilateral contracts (Art. 1191)

4. Onerous imposes valuable considerationConsequence: all doubts in construing contract to be resolved in greater reciprocity of interest

5. Commutative a thing of value is exchanged for equal valueSubjective Test: as long as parties believe in all honesty that he is receiving equal value then it complies with the test &

would not be deemed a donation; but must not be absurd. Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale; sale may be annulled based on vice of consent regarding inadequacy but not on inadequacy per se

6. Consensual a contract of sale is perfected by mere consent.

7. Title & not a mode title gives rise to an obligation to transfer; it is not a mode w/c actually transfers ownership.

On its own, sale is not a mode which transfers ownership. It creates an obligation to transfer ownership. It is the deliverythat transfers ownership.

* CONTRACT OF ABSOLUTE SALE VS. CONTRACT OF CONDITIONAL SALEA contract of sale may be absolute or conditional. (Art. 1458)

True Test:A contract of sale gives rise to two obligations: for the seller, to transfer the ownership of and deliver a determinate thing;

for the buyer, the payment of the price.

If the condition is imposed on the sellers obligation to transfer the ownership of and deliver the thing, there is a conditionasale. Note that the essence of sale is the acquisition of ownership.

However, if the condition is imposed on the buyers obligation to pay the price, the sale is still absolute. Payment of thepurchase price is part of the consummation stage (not perfection stage) of the contract of sale. Perfection of the contract of saleis not affected by the fact that payment is subject to conditions, it being the case that a contract of sale is perfected by mereconsent.

HYPOTHETICAL QUESTIONS:

1. A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain pianoto B for P5,000. A and B further agreed that the piano will be delivered to B immediately after the execution of thecontract, and that B is given ten days to pay the price. The ownership is, however, reserved to A until the full paymentof the purchase price. Was the contract of sale entered into by A and B absolute?


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SALES AND LEASE REVIEWERby Diory Rabajante

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No. The contract of sale between A and B was conditional because there was a condition imposed on As obligation totransfer the ownership of the piano. Bs ownership of piano is automatically transferred to the buyer by operation oflaw upon fulfillment of a suspensive condition which is the payment of the purchase price.

2. A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain pianoto B for P5,000. They further agreed that payment of the price by B is subject to the condition that B will receive moneyfrom C. Is the contract of sale entered into by A and B absolute?

Yes. The condition is imposed only on the payment of the price.

Jurisprudential Doctrines:

People'sHomesite &Housing Corp. vsCA

There was no perfected sale of a lot when it was conditionally or contingently awardedsubject to the approval by the city council of the proposed consolidation subdivision plan andthe approval of the award by the valuation committee and higher authorities. When the planwas approved, the Mendozas should have manifested in writing their acceptance of the awardfor the purchase of the lot just to show that they were still interested in its purchase, althoughthe area was reduced. Yet, they did not do so. Article 1475 of the NCC provides that thecontract of sale is perfected at the moment there is a meeting of the minds..." Under the factsof this case, there was no meeting of minds on the purchase of Lot 4 with an area of 2,608.7square meters at P21 a square meter.

As to the conditional nature of the sale, Article 1181 of the NCC states that in conditionalobligations, the acquisition of rights, as well as the extinguishment or loss of those alreadyacquired, shall depend upon the happening of the event which constitutes the condition.

Dignos vs CA A deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"

where nowhere in the contract in question is a proviso or stipulation to the effect that title tothe property sold is reserved in the vendor until full payment of the purchase price, nor isthere a stipulation giving the vendor the right to unilaterally rescind the contract the momentthe vendee fails to pay within a fixed period. In this case, there is no such stipulationreserving the title of the property on the vendors nor does it give them the right to unilaterallyrescind the contract upon non-payment of the balance thereof within a fixed period.Furthermore, all the elements of a valid contract of sale under Article 1458 of the Civil Code,are present.

* CONTRACT OF SALE VS. CONTRACT TO SELL

CONDITIONAL CONTRACT OF SALE CONTRACT TO SELL

Failure to pay is a resolutory condition which putsan end to the transaction

Failure to pay is a positive suspensive condition

Title passes to the vendee after compliance withhis obligation Ownership is retained by the seller

After delivery, ownership is loss, unless it isrescinded

Delivery does not affect loss of ownership

First element (consent) is present albeitconditioned upon the happening of contingentevent which may or may not occur, in effect,contract of sale is automatically perfected withoutfurther act having to be performed by the seller

Ownership not automatically transferred to the buyer(even if there has been previous delivery to him)upon fulfillment of suspensive condition (i.e. fullpayment of purchase price). Seller still has to conveytitle to prospective buyer by entering into a contractof absolute sale.

With respect to sale to third person:- Upon fulfillment of suspensive condition,sale becomes absolute which affects sellerstitle- 3P becomes buyer in bad faith ifpossesses contrastive or actual knowledge of

defect in sellers title- Second buyer cannot defeat the firstbuyers title

With respect to sale to third person:- No double sale (bec no previous sale ofproperty despite fulfillment of suspensivecondition)- 3P not a buyer in bad faith- Prospective buyer cannot seek relief of

reconveyance of property, but only sue under Art19 (unjustified disregard of right)

* CONTRACT OF SALE VS. CONTRACT FOR A PIECE OF WORK

Article 1713: By the contract for a piece of work the contractor binds himself to execute a piece of work for theemployer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill oralso furnish the material.

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Article 1467:

CONTRACT OF SALE A contract for the delivery at a certain price of an article which the vendor in the ordinary course ofhis business manufactures or procures for the general market, whether the same is on hand at the time or not

CONTRACT FOR A PIECE OF WORK if the goods are to be manufactured specially for the customer AND upon his specialorder, and not for the general market. Here, service is the Subject Matter

BUT:

THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FOR PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT(ALWAYS A SALE)

JURISPRUDENTIAL DOCTRINES:

Celestino Co. vs Collector When a factory accepts a job that requires the use of extraordinary oradditional equipment, or involves services not generally performed by it,it thereby contracts for apiece of work.

- In the case at bar, the orders exhibited were not shown to be special.They were merely orders for work nothing is shown to call themspecial requiring extraordinary service of the factory. The factory soldmaterials ordinarily manufactured by it sash, panels, mouldings toTeodoro & Co., although in such form or combination as suited the fancy

of the purchaser. Such new form does not divest the the factory of itscharacter as manufacturer. Neither does it take the transaction out ofthe category of sales under Article 1467 above quoted, because althoughthe Factory does not, in the ordinary course of its business, manufactureand keep on stock doors of the kind sold to Teodoro, it could stockand/or probably had in stock the sash, mouldings and panels it usedtherefor (some of them at least).

Commissioner vs Engineering andSupply Company

The distinction between a contract of sale and one for work, labor andmaterials is tested by the inquiry whether the thing transferred is onenot in existence and which never would have existed but for the order ofthe party desiring to acquire it, or a thing which would have existed andhas been the subject of sale to some other persons even if the order hadnot been given.

If the article ordered by the purchaser is exactly such as the plaintiffmakes and keeps on hand for sale to anyone, and no change ormodification of it is made at defendant's request, it is a contract of sale,

even though it may be entirely made after, and in consequence of, thedefendants order for it.

The word "contractor" has come to be used with special reference to aperson who, in the pursuit of the independent business, undertakes todo a specific job or piece of work for other persons, using his own meansand methods without submitting himself to control as to the pettydetails.

IMPORTANCE OF DISTINCTION

Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) andapplication of SoF

Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existenceand which never would have existed but for the order of the party desiring to acquire it, or a thing which would have

existed and been subject of sale to some other person, even if the order had not been given. True test of a Contractor he renders service in the course of an independent occupation, representing the will of his

employer only as to the result of his work, and not as to the means by which it is accomplished (Luzon StevedoringCo v Trinidadand La Carlota Sugar Central v Trinidad).

More examples of CONTRACT OF SALE:o future sale of articles which he is habitually making although at the time not made or finished

article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of it ismade at defendants request although made after and in consequence of, defendants order for it

* CONTRACT OF SALE VS. CONTRACT OF AGENCY TO SELL

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Article 1868: By a contract of agency, a person binds himself to render some service or to do something in representation or onbehalf of another, with the consent or authority of the latter.

Article 1466: In construing a contract containing provisions characteristic of both the contract of sale and of the contract ofagency to sell, essential clauses of the whole instrument shall be considered.

SALE CONTRACT OF AGENCY TO SELL

Buyer pays the price Agent does not pay

Buyer acquires ownership over the object of thecontract

Agent does not acquire ownership

Seller warrants Agent does not warrant, unless he agreesEssence of sale: transfer of title or agreement totransfer it for the price paid or promised

Essence of agency: delivery to the agent of the goods not asthe agents property but of the principal who remains the ownerand has the right to control the sales by the agent, fix the priceand terms, demand and receive the proceeds of the sales lessthe agents commission


Quiroga vs ParsonsHardware Co.

Where the price of the objects is paid within the terms fixed without any other considerationand regardless as to whether the objects are sold, the contract is one of sale.

(In order to classify a contract, due regard must be given to its essential clauses. A contractis what the law defines it to be, and not what it is called by the contracting parties.)

- In the case at bar, it shows that the cause and subject matter which are to furnish thedefendant with beds and in turn, pay for the stipulated price, are precisely the essentialfeatures of contract of purchase and sale. There was an obligation on the part of the plaintiffto supply beds and on defendants part, to pay the price which in turn, excludes the legalconception of an agency.

- In an agency, there is an order to sell whereby the agent receives a thing to sell it and heis not required to pay its price but is required to turn over to the principal the price he obtainsfor the sale. If he does not succeed in selling it, he will have to return the thing. This is not thecase of the matter in the case at bar. By virtue of the contract between the plaintiff and thedefendant, the latter, on receiving the beds, was necessarily obliged to pay their price withinthe term fixed, without any other consideration and regardless as to whether he had or hadnot sold the beds. Hence, the contract by and between the parties is one of purchase and sale.

Kerr vs Lingad The transfer of title or agreement to transfer it for a price paid is the essence of sale. If suchtransfer puts the transferee in the position of an owner and makes him liable for the agreedprice, the transaction is a sale. On the other hand, the essence of an agency to sell is thedelivery to an agent, not as his property, but as the property of his principal, who remains the

owner and has the right to control sales, fix the price and terms, demand and receive theproceeeds less the agent's commission upon sales made.

- In the case at bar, the relationship between the petitioner and US Rubber International isone of brokerage or agency because of the following contractual stipulations:

*that petitioner can dispose of the products of the Company only to certain persons orentities and within stipulated limits, unless excepted by the contract or by the RubberCompany (Par. 2);

*that it merely receives, accepts and/or holds upon consignment the products, which remainproperties of the latter company (Par. 8);

*that every effort shall be made by petitioner to promote in every way the sale of theproducts (Par. 3);

*that sales made by petitioner are subject to approval by the company (Par. 12);*that on dates determined by the rubber company, petitioner shall render a detailed report

showing sales during the month (Par. 14);*that the rubber company shall invoice the sales as of the dates of inventory and sales

report (Par. 14);

*that the rubber company agrees to keep the consigned goods fully insured under insurancepolicies payable to it in case of loss (Par. 15);

*that upon request of the rubber company at any time, petitioner shall render an inventoryof the existing stock which may be checked by an authorized representative of the former(Par. 15); and

*that upon termination or cancellation of the Agreement, all goods held on consignmentshall be held by petitioner for the account of the rubber company until their disposition isprovided for by the latter (Par. 19).

* CONTRACT OF SALE VS. DACION EN PAGO

Article 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shallbe governed by the law of sales.

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There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment

of the debt.

If thing given in payment turns out to belong to another, creditors remedy governed by law on sales not on loan.

SALE DACION EN PAGO

No pre-existing credit Pre-existing creditGives rise to obligations Extinguishes obligations

Cause or consideration is the price from theviewpoint of the seller; or the obtaining of theobject, from the viewpoint

Cause or consideration from the viewpoint of the personoffering the dation in payment is the extinguishment of hisdebt; from the viewpoint of the creditor is the acquisition ofthe object offered in lieu of the original credit

Greater freedom in the determination of the price Less freedom in determining the priceGiving of the price may generally end theobligation of the buyer

Giving of the object in lieu of the credit may extinguishcompletely or partially the credit (depending on theagreement)

* CONTRACT OF SALE VS. BARTER

Article 1638: By a contract of barter or exchange, one of the parties binds himself togive one thing in considerationof the others promise to give another thing.

Article 1468: if the consideration of the contract consists partly in money and partly in another thing, the transactionshall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall beconsidered a:

BARTER: if value of the thing given as part of the consideration > amount of the money or its equivalent

Because the true cause of the contract for the other party is the thing transferred and not the money.

SALE: if

value of thing < amount of money or its equivalent

value of thing = value of money

Manifest intention judged by the parties contemporaneous and subsequent acts

Exceeds the amount of money CC does not provide to what extent the value of the thing given as a consideration shouldexceed the amount of money given for the contract to be considered as a barter

* CONTRACT OF SALE VS. LEASE

Article 1643: In the lease of things, one of the parties binds himself to give to another, the enjoyment or use of a

thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than 99years shall be valid.

Article 1484: Vendors alternative remedies in acontract of sale of personal property price of which is payable ininstallments:

1. Exact fulfillment of obligation in case of failure to pay (specific performance)2. Cancel sale in case of failure to pay two or more installments3. Foreclose the chattel mortgage

Article 1485: Art 1484 is also applicable to contracts purporting to be leases of personal property with option tobuy, when lessor has deprived lessee of the possession or enjoyment of thing.

So-called rents must be regarded as payment of prince in installments since due payment of the agreed amountresults in the transfer of title to the lessee


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Jose v. Barrueco, 67 Phil 747(1939)

The total rents being equal to the value of the thing leased, the SCconsidered the transaction as one of sale.

* PARTIES TO A CONTRACT OF SALE(DISQUALIFICATIONS)

Article 1489: All persons authorized in this Code to obligate themselves, may enter into contract of sale, saving themodifications 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 reasonableprice therefor. Necessaries are those referred to in Art 290 (now Art 194 of FC)

Cf Art 1399,CC: obligation of incapacitated person who entered into contract to restitute that which hehas benefited from

Article 234, Family Code: Emancipation takes place by the attainment of majority. Unless otherwise provided, majoritycommencies at the age of 18 years (RA 6809).

Article 44: The following are juridical persons:

(1) The State and its political subdivision

(2) Other corporations, institutions and entities for public interest or purpose, created by law;their personality beings as soon as they have been constituted according to law(3) Corporations, partnerships and associations for private interest or purpose to which thelaw grants a juridical personality, separate and distinct from that of each shareholder, partner ormember.

Article 46: Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil orcriminal actions, in conformity with the laws and regulations of their organization.

Article 36(6), Corporation Code: Every corporation incorporated under this Code has the power and capacity:

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and tosell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation ifit be a non-stock corporation;

a. Absolute Incapacity

Article 1327: The following cannot give consent to a contract:

(1) Unemancipated minors(2) Insane or demented persons and(3) Deaf-mutes who do not know how to write

Article 1328: Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkennessor during a hypnotic spell are voidable.

Article 1390: The following contracts are voidable or annullable, even though there may have been no damage tothe contracting parties:

(1) One of the parties is incapable of giving consent (want of capacity)(2) Consent is vitiated by mistake, violence, intimidation, undue influence or fraud (vitiatedconsent)

These contracts are binding, unless they are annulled by a proper court action. They are susceptible of ratification.

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Article 1393: Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if withknowledge of the reason which renders the contract voidable and such reason having ceased, the person who has aright to invoke it should execute an act which necessarily implies an intention to waive his right.

Article 1397: The action for annulment of the contracts may be instituted by all who are thereby obligedprincipally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom theycontracted; nor can those who exerted intimidation, violence or undue influence or employed fraud or caused mistakebase their action upon these flaws of the contract.

Article 1399: When the defect of the contract consists in the incapacity of one of the parties, the incapacitatedperson is not obliged to make any restitution except insofar as he has been benefited by the price or thing receivedby him.

Article 1489: (refer above)

Article 194, Family Code:Support comprises everything indispensable for sustenance, dwelling, clothing,medical attendance, education and transportation in keeping with the financial capacity of the family.

The education of the person to be supported referred to in the preceding paragraph shall include his schooling or trainingfor some profession, trade or vocation, even beyond the age of majority. Transportation shall include expenses in goingto and from school, or to and from place of work.

Necessaries: indispensable for support according to the social position of the family.

b. Relative Incapacity

Articles 1490: Husband and wife cannot sell property to each other, except

1. When separation of property was agreed upon in marriage settlements2. When there has been judicial separation of property under Art 191

REASON FOR THE RULE

Prevent commission of fraud or prejudice to third persons

Prevent one from unduly influencing the other

Avoid indirect donations

Article 1492: The prohibitions in the two preceding articles are applicable to sales in:

1. Legal redemption2. Compromises3. Renunciations

Article 73, Family Code: Either spouse may exercise any legitimate profession, occupation, business or activity withoutthe consent of the other. The latter may object only on a valid, serious and moral grounds.

In case of disagreement, the court shall decided, WON:

1. Objection is proper2. Benefit has accrued to the family prior to the objection (resulting obligation shall be enforced against

the separate property of the spouse who has not obtained consent) or thereafter.Foregoing provisions shall not prejudice the rights of creditors who acted in good faith.

Article 96, Family Code: The administration and enjoyment of the community property shall belong to both spousesjointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife forproper remedy, which must be availed of within five years from the date of the contract implementing such decision.

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In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the commonproperties, the other spouse may assume sole powers of administration. These powers do not include disposition orencumbrance without authority of the court or the written consent of the other spouse.In the absence of suchauthority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construedas a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a bindingcontract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by eitheror both offerors.

Prohibition can be taken advantage of only by persons who bear such a relationship to the spouses making the transfer or to the

property itself that such transfer interferes with their rights or interest.

c. Specific Incapacity

Article 1491: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person othrough the mediation of another: [GAEP-JS]

(1) The guardian, the property of the person or persons who may be under his guardianship;o Actual collusion is hard to prove between purchaser and guardian, but such fact can be deduced from the

very short time between the two sales and the relationship between them.

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consentof the principal has been given;

o Incapacity to buy rests on the fact that greed might get the better of the sentiments of loyalty anddisinterestedness which should animate an administrator or agent.

o A broker does not come within the prohibition because he is a mere go-between or middleman between the

seller and the buyer, bringing them together to make the contract themselves.

(3) Executors and administrators, the property of the estate under administration;o But an executor can buy the hereditary rights of an heir to the estate under his administration (Naval v

Enriquez)

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of anygovernment-owned or controlled corporation, or institution, the administration of which has been entrustedto them; this provision shall apply to judges and government experts who, in any manner whatsoevertake part in the sale;

o Intended not only to move remove any occasion for fraud but also to surround them with the prestige

necessary to carry out their functions by freeing them from all suspicion which although unfounded, tendsto discredit the institution by putting into question the honor of said functionaries.

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officersand employees connected with the administration of justice, the property and rights in litigation olevied upon an execution before the court within whose jurisdiction or territory they exercise theirespective functions; this prohibition includes the act of acquiring by assignment and shall apply tolawyers, with respect to the property and rights which may be the object of any litigation in which theymay take part by virtue of their profession.

o Law intends to avoid improper interference by a judge in a thing levied upon or sold by his order ( Gan

Tingco v Pabinquit).o Incapacity of SC or CA Justice extends to properties or rights in litigation in their territorial jurisdiction.

o CFI Judge can buy properties in litigation pending outside his territorial jurisdiction.o Prohibition likewise extends to properties levied upon an execution before the court within whose territoria

jurisdiction they exercise their respective functions.o As to lawyers: curtail any undue influence of the lawyer on his client on account of their confidentia

association.

o Violation of this prohibition also constitutes a breach of professional ethics.

o No prohibition if client assigns to the lawyer after the judgment has been rendered and became final.Contingent fee of lawyer maybe annotated as an adverse claim on property awarded to client.

(6) Any others specially disqualified by law.

Such contracts made in violation of this provision are void for public policy. They cannot be ratified neither can the

right to set up the defense of illegality be waived.

REASON FOR THE RULE:

1. The persons occupy fiduciary relationship with the owner of properties mentioned2. Prevent them from being tempted to take advantage of their position

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Mercado and Mercado vsEspiritu

The courts have laid down the rule that the sale of real property made by minors who havealready passed the ages of puberty and adolescence and are near the adult age when theypretend to have already reached their majority, while in fact they have not, is valid, and theycannot be permitted afterwards to excuse themselves from compliance with the obligaitonassumed by them or to seek their annulment. This doctrine is entirely in accord with theprovisions of the Rules of Court (Rule 131, Sec. 1) and the principle of estoppel.

Sia Suan vs Alcantara The ruling in Mercado case is affirmed.To bind a minor who represents himself to be of legal age, it is not necessary for his vendee

to actually part with cash, as long as the contract is supported by a valid consideration. Since

appellee's conveyance to the appellants was admittedly for and in virtue of a pre-existingindebtedness (unquestionably a valid consideration), it should produce its full force and effectin the absence of any other vice that may legally invalidate the same. It is not here claimedthat the deed of sale is null and void on any ground other than the appellee's minority.Appellee's contract has become fully efficacious as a contract executed by parties with fulllegal capacity.

The circumstance that, about one month after the date of the conveyance, the appelleeinformed the appellants of his minority, is of no moment, because appellee's previousmisrepresentation had already estopped him from disavowing the contract. Said belatedinformation merely leads to the inference that the appellants in fact did not know that theappellee was a minor on the date of the contract, and somewhat emphasizes appellee's hadfaith, when it is borne in mind that no sooner had he given said information than he ratifiedhis deed of sale upon receiving from the appellants the sum of P500.

Uy Sui Pin vs Cantollas The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because the formerhad no right to dispose of the land in controversy in view of the existence of the contract butbecause such sale comes within the prohibition of article 1458 of the Civil Code.

Maharlika Pub. Co. vsTagle

It is a policy of the law that public officers who hold positions of trust may not bid directly orindirectly to acquire prop properties foreclosed by their offices and sold at public auction.Article XIII, Section 1 of our Constitution states that: Public office is a public trust. Publicofficers and employees shall serve with the highest degree of responsibility, integrity, loyaltyand efficiency, and shall remain accountable to the people.

A Division Chief of the GSIS is not an ordinary employee without influence or authority. Themere fact that he exercises ample authority with respect to a particular activity, i.e.,retirement, shows that his influence cannot be lightly regarded.

The point is that he is a public officer and his wife acts for and in his name in any transactionwith the GSIS. If he is allowed to participate in the public bidding of properties foreclosed orconfiscated by the GSIS, there will always be the suspicion among other bidders and thegeneral public that the insider official had access to information and connections with hisfellow GSIS officials as to allow him to eventually acquire the property. It is precisely the needto forestall such suspicions and to restore confidence in the public service that the Civil Codenow declares such transactions to be void from the beginning and not merely voidable. The

reasons are grounded on public order and public policy. Assuming the transaction to be fairand not tainted with irregularity, it is still looked upon with disfavor because it places theofficer in a position which might become antagonistic to his public duty.

Bautista vs MontillaRubias vs Batiller The purchase by a lawyer of the property in litigation from his client is categorically

prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, and that consequently,plaintiff's purchase of the property in l itigation from his client (assuming that his client couldsell the same since his client's claim to the property was defeated and rejected) was void andcould produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code whichprovides that contracts "expressly prohibited or declared void by law are inexistent and that"these contracts cannot be ratified. Neither can the right to set up the defense of illegality bewaived."

Fornilda vs RTC The fact that the property in question was first mortgaged by the client to his lawyer andonly subsequently acquired by the latter in a foreclosure sale long after the termination of thecase will not remove it from the scope of the prohibition for at the time the mortgage wasexecuted the relationship of lawyer and client still existed, the very relation of trust and

confidence sought to be protected by the prohibition, when a lawyer occupies a vantageposition to press upon or dictate terms to a harassed client. To rule otherwise would be tocountenance indirectly what cannot be done directly.

Director of Lands vsAbada

Article 1491 prohibits only the sale or assignment between the lawyer and his client, ofproperty which is the subject of litigation.The prohibition in said article applies only to a saleor assignment to the lawyer by his client of the property which is the subject of litigation. Inother words, for the prohibition to operate, the sale of the property must take place during thependency of the litigation involving the property.

A contract for a contingent fee is not covered by Article 1491 because the tranfer orassignment of the property in litigation takes effect only after the finality of a favorable

judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half(1/2) of whatever Maximo Abarquez might recover from his share in the lots in question, iscontingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is,the transfer or assignment of one-half (1/2) of the property in litigation will take place only if

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the appeal prospers. Therefore, the tranfer actually takes effect after the finality of a favorablejudgment rendered on appeal and not during the pendency of the litigation involving theproperty in question. Consequently, the contract for a contingent fee is not covered by Article1491.

Krivenko vs Register ofDeeds

Aliens are disqualified to purchase agricultural lands (1987 Consitution, Art. XII, Secs. 3 and7). Our lands form part of our heritage thus we should preserve them. We need to nationalizethem otherwise foreigners might end up owning them which would make a mockery out of ourindependence. They can lease lands if they wish or if they really want to own land, they canalways acquire Filipino citizenship.

Sarsosa vda. de Barsobiavs Cuenco

Where a land is sold to an alien who later sold it to a naturalized Filipino, the sale to thelatter cannot be impugned. In such case, there would be no no more public policy to be servedin allowing the FIlipino seller of his heirs to recover the land as the same is already owned bya qualified person.

Herrera vs Luy Kim Guan Where a land is sold to an alien who later sold it to a Filipino, the sale to the latter cannot beimpugned. In such case, there would be no no more public policy to be served in allowing theFIlipino seller of his heirs to recover the land as the same is already owned by a qualifiedperson.

Vicente Godinez vs FongPak Luen

Prescription may never be invoked to defend that which the Constitution prohibits. However,where a land is sold to an alien who later sold it to a Filipino, the sale to the latter cannot beimpugned. In such case, there would be no no more public policy to be served in allowing theFIlipino seller of his heirs to recover the land as the same is already owned by a qualifiedperson

Jacobus Bernard Hulst vsPR Builders, Inc.

Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, foreignnationals can own Philippine real estate through the purchase of condominium units ortownhouses constituted under the Condominium principle with Condominium Certificates of

Title. It expressly allows foreigners to acquire condominium units and shares in condominiumcorporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation. Under this set up, the ownership of the land is legallyseparated from the unit itself. The land is owned by a Condominium Corporation and the unitowner is simply a member in this Condominium Corporation. As long as 60% of the membersof this Condominium Corporation are Filipino, the remaining members can be foreigners.

* ELEMENTS OF A CONTRACT OF SALE

* CONSENT

-See Perfection Stage

A contract of sale isperfected by mere consent. (Art. 1475)

Consent= meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art.1319)

ELEMENTS OF CONSENT:1. Subjects / Contracting parties

2. Concurrence of offer and acceptance (Arts. 1319 - 1326)3. Legal Capacity of the Contracting parties (Arts. 1327 1329)4. The consent must be intelligent, free and spontaneous (Arts. 1330 1336)

* SUBJECT MATTER

ELEMENTS OF SUBJECT MATTER

1. It must be existing, future, or subject to resolutory condition. (It must be at least a possible subject matter)2. It must be licit.

3. It must be determinate or determinable.

POSSIBLE THING -EMPTIO SPEI sale of a mere hope or expectancy (e.g. sale of a sweepstake ticket for P100 where the buyer purchases

the ticket with the hope that upon the draw the ticket would win him a million pesos. The object of sale here is not the prize,but rather the ticket or the chance to win)

EMPTIO REI SPERATAE sale of a thing with potential existence, subject to a suspensive condition that the thing willcome into existence. If the subject matter does not come into existence, the contract is deemed extinguished as soon as thetime expires or if it has become indubitable that the event will not take place. (e.g. sale of pending crops)

LICIT A thing is licit and may be the object of a contract when it is not outside the commerce of men, and all rights which are notintransmissible.

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Examples of void sale due to being illicit:

- Sale of animals suffering from contagious diseases (Art. 1575)- Sale of animals if the use or service for which they are acquired has been stated in the contract, and they are found to

be unfit therefor (Art. 1575)

- Sale of future inheritance. (Art. 1347)

DETERMINATE OR AT LEAST DETERMINABLE(Art. 1460) A thing is determinate when it is particularly designated or physically segregated from all others of the same

class.A thing is determinable (and this satisfies the requirement that the thing be determinate as per Art. 1458) when thefollowing concur:(a) If at the time the contract is entered into, the thing is capable of being made determinate; and(b) Without the necessity of a new or further agreement between the parties.

Martin vs Reyes Property or goods which at the time of the sale are not owned by the seller but whichthereafter are to be acquired by him, cannot be the subject of an executed sale but maybe the subject of a contract for the future sale and delivery thereof, even though theacquisition of the goods depends upon a contingency which may or may not happen. Insuch case, the vendor assumes the risk of acquiring the title and making the conveyance,or responding in damages for the vendee's loss of his bargain.

Melizza vs City ofIloilo

The requirement of the law that a sale must have for its object a determinate thing, isfulfilled as long as, at the time the contract is entered into, the object of the sale iscapable of being made determinate without the necessity of a new or further agreementbetween the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific

mention of some of the lots plus the statement that the lots object of the sale are the onesneeded for city hall site; avenues and parks, according to the Arellano plan, sufficientlyprovides a basis, as of the time of the execution of the contract, for rendering determinatesaid lots without the need of a new and further agreement of the parties.

Appellant however fails to consider that the area needed under that plan for city hall sitewas then already known; it could be determined which, and how much of the portions ofland contiguous to those specifically named, were needed for the construction of the cityhall site.

National GrainsAuthority vs IAC

The object of the contract, being the palay grains produced in Soriano's farmland andthe NFA was to pay the same depending upon its quality. The fact that the exact numberof cavans of palay to be delivered has not been determined does not affect the perfectionof the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that thequantity is not determinate shall not be an obstacle to the existence of the contract,provided it is possible to determine the same, without the need of a new contract betweenthe parties." In this case, there was no need for NFA and Soriano to enter into a newcontract to determine the exact number of cavans of palay to be sold. Soriano can deliverso much of his produce as long as it does not exceed 2,640 cavans.

Pichel vs Alonzo A valid sale may be made of "the wine a vine is expected to produce; or the grain a fieldmay grow in a given time; or the milk a cow may yield during the coming year; or thewool that shall thereafter grow upon a sheep; or what may be taken at the next cast of afisherman's net; or the goodwill of a trade, or the like. The thing sold, however, must bespecific and identified. They must be also owned by the vendor at the time.

Domingo Realty vsCA

The object of a contract, in order to be considered as "certain," need not specify suchobject with absolute certainty. It is enough that the object is determinable in order for it tobe considered as "certain."

-In the instant case, the title over the subject property contains a technical descriptionthat provides the metes and bounds of the property of petitioners. Such technicaldescription is the final determinant of the extent of the property of petitioners. Thus, thearea of petitioners property is determinable based on the technical descriptions containedin the TCTs.

*Art. 1459 provides that the seller must have the right to transfer the ownership at the time the thing is delivered. Hence, itis not required that the seller is the owner of the thing at the moment of the perfection of the contract of sale.

GEN. RULE: The owner need not be the owner of the thing at the time of perfection.EXCEPTION: Conchita Nool vs CA and Cavite Development Bank vs Lim

Cavite DevelopmentBank, et al vs CyrusLim, et al.

In the case at bar, a contract of sale was perfected. The sum of P30,000.00,although denominated in the offer to purchase as "option money," is actually in thenature of earnest money or down payment when considered with the other terms ofthe offer. Contracts are not defined by the parties thereto but by principles of law. Indetermining the nature of a contract, the courts are not bound by the name or titlegiven to it by the contracting parties.

- However, a legal obstacle has rendered it impossible in the case at bar, to performits obligation. The sale to Lim of the property mortgaged by Rodolfo is deemed anullity for CDB never acquired a valid title to the property because the foreclosure

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sale, in which CDB has been awarded the property is also a nullity since themortgagor is not the real owner of the said property.

Conchita Nool vs CA Article 1505 of the Civil Code provides that "where goods are sold by a person whois not the owner thereof, and who does not sell them under authority or with consentof the owner, the buyer acquires no better title to the goods than the seller had,unless the owner of the goods is by his conduct precluded from denying the seller'sauthority to sell." Here, there is no allegation at all that petitioners were authorizedby DBP to sell the property to the private respondents. Jurisprudence, on the otherhand, teaches us that "a person can sell only what he owns or is authorized to sell;

the buyer can as a consequence acquire no more than what the seller can legallytransfer." As petitioners "sold" nothing, it follows that they can also "repurchase"nothing. In this light, the contract of repurchase is also inoperative and by thesame analogy, void.


1. A brought B to the place where As property is located. A told B that the size of his land is as big as far as Bs eyes cansee. A offered to sell this land to B for P500k. B accepted the offer. Is there a perfected contract?Yes. The subject matter is determinable or capable of being made determinate without the need for a new or furtheragreement between A and B.

2. In 1911, the sale of alcoholic drinks to members of the non-Christian tribes is prohibited. During that time, A sold B (amember of the non-Christian tribe) an alcoholic drink. In 1912, Congress passed a law decriminalizing the sale of

alcoholic drinks to members of non-Christian tribes. Is the sale between A and B valid?No. The contract of sale is still void for being illegal. The validity of the contract is determined as of the time it isperfected.

3. A sold B a very old lottery ticket (dated 1965). Is the sale valid?It is void as it is a sale of vain hope. However, if the lottery ticket is a collectors item, there is a valid sale.

* PRICE

Why should the price be certain?

What is the meaning of or its equivalent?This means that there is certainty as to the price but what is given as payment is an object (e.g. P50k worth of Maggi

noodles)

Simulated price vs Simulated contract?

Article 1249 is applicable only to negotiable instruments issued by a person other than the debtor. (?) {See Diorys codal forcomments}

ELEMENTS OF PRICE1. Real (not simulated)2. Certain or Ascertainable3. In money or its equivalent4. Manner of payment must be agreed upon


1. A offered to sell his parcel of land to B. B accepted the offer. However, there is no agreement as to the price. Aappointed C to fix the price. C fixed the price at P500k. Is there a perfected contract?

No, there is none. There must be an agreement as to the price.

2.* STAGES IN THE LIFE OF A CONTRACT OF SALE

* NEGOTIATION STAGE (OPTION CONTRACT, RIGHT OF FIRST REFUSAL)

What is an option contract?Option Contract vs Contract of Sale?Is an option contract necessary to have a perfected contract of sale?Can there be an option contract without a consideration?Option Contract vs Right of First Refusal?

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Option Contract vs Earnest Money?


1. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). B said he will give the consideration on 30 August 2009. Rule the case.

2. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). On 2 July 2009, B accepted the offer. Rule the case.

3. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). On 2 June 2009, B accepted the offer. Rule the case.

4. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). On 2 June 2009, B accepted the offer. However, on 3 June 2009, A said that he is no longer interested in sellingthe land. Rule the case.

5. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). On 2 June 2009, A wanted to withdraw the offer, but he was unable to communicate the withdrawal to B. Baccepted the offer on 3 June 2009. Rule the case.

6. On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July2009). They further agreed that should B give P5k, A will not withdraw the offer prior to the expiration of the period

given to B. On 2 June 2009, B offered to A the P5k consideration. A, however, said that he would not accept the P5k ashe is willing to enter into an option contract with B even without the payment of P5k. Rule the case.

Jurisprudential Doctrines:

Southwestern Sugar andMolasses Co. vs AtlanticGulf & Pacific Co. (1955)

When an option is not supported by a separate consideration, it isvoid and can be withdrawn notwithstanding the acceptance madepreviously by the offeree.

Atkins Kroll & Co. vs CuaHien Tek (1958)

Upon accepting the offer, a bilateral promise to sell and to buyensues; the buyer assumes ipso facto the obligations of a purchaser,and not merely the right subsequently to buy or not to buy. Theconcurrence of both acts the offer and the acceptance generates abinding contract of sale.

Navarro vs SugarProducers, Inc. (1961)

A consideration in an option to buy is essential for a perfection of acontract. In the case at bar, the sale lacks the most essential element-

the manner of payment of the purchase price, therefore there was nocomplete meeting of the minds of the parties necessary for theperfection of a contract of sale. Consequently, defendant was justifiedin withdrawing its offer to sell the molasses in question.

Sanchez vs Rigos (1972) If acceptance is made before withdrawal, it constitutes a bindingcontract of sale allthough the option is given without consideration.Before acceptance, the offer may be withdrawn as a matter of right.Be that as it may, the offerer cannot revoke, before the period hasexpired, in an arbitrary manner the offer without being liable fordamages which the offeree may suffer under Article 19 f the CivilCode.

This view has the advantage of avoiding a conflict between Article1324 and Article 1479, in line with the cardinal rule of statutoryconstruction that, in construing different provisions of one and thesame law or code, such interpretation should be favored as willreconcile or hamonize said provisions and avoid a conflict between the

same. The decision in Soutwestern case considers Article 1479 as anexception to Article 1324, and exceptions are not favored unless theintention to the contrary is clear, and it is not so insofar as said twoarticles are concerned.

(The doctrine laid down in the Atkins case is reaffirmed, and, insofaras inconsistent therewith, the view adhered to in Southwestern caseshould be deemed abandoned or modified.)

Rural Bank of Paranaquevs CA (1985)

The commitment by a bank to resell a property within a specifiedperiod, although accepted by the party in whose favor it was made,was considered an option not supported by a consideration. Lackingsuch consideration, the option was held void pursuant toSouthwestern Sugar and Molasses Co. case.

Natino vs IAC (1991) Citing Rural Bank of Paranaque, Inc. case, the Supreme Court heldthat the promise made by the President of a bank to allow the

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petitioners to buy (or to re-sell them) the foreclosed property (notredeemed since the offer took place after the expiration of theredemption period) at any time they have money is not binding on thebank because it was a promise unsupported by a consideration distinctfrom the re-purchase price.

Ang Yu Asuncion vs CA(1994)

Rules where a period is given to the offeree within which to accept:

1. If the period itself is not founded upon or supported by aseparate consideration, the offerer is still free and has the rightto withdraw the offer before its acceptance, or if an acceptance

has been made, before the offerors coming to know of suchfact, by communicating that withdrawal to the offeree. (this is inaccordance with Sanchez doctrine)

2. The right to withdraw, however, must not be exercisedwhimsically or arbitrarily; otherwise, it could give rise to adamage claim under Article 19 of the Civil Code.

3. If the period has a separate consideration, a contract of optionis deemed perfected, and it would be a breach of that contractto withdraw the offer during the agreed period.

4. The option, however, is an independent contract by itself, and itis to be distinguished from the projected main agreement(subject matter of the option) which is obviously yet to beconcluded. If, in fact, the optioner-offeror wwithdraws the offerbefore its acceptance (exercise of option) by the optionee-offeree, the latter may not sue for specific performance on the

proposed contract (object of the option) since it has failed toreach its own stage of perfection. The optioner-offeror,however, renders himself liable for damages for breach of theoption.

5. In these cases, care should bo taken of the real nature of theconsideration given, for if in fact, it has been intended to be partof the consideration for the main contract with a right ofwithdrawal on the part of the optionee, the main contract couldbe deemed perfected; a similar instance would be an earnestmoney in contract of sale that can evidence its perfection.

Nietes vs CA (1972) Notice of the exercise of the option need not be coupled with actualpayment of the price, so long as this is delivered to the owner of theproperty upon performance of his part of the agreement.

* PERFECTION STAGE (OFFER AND ACCEPTANCE)

A contract of sale isperfected by mere consent. (Art. 1475)

Consent= meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art.1319)

ELEMENTS OF CONSENT:5. Subjects / Contracting parties

6. Concurrence of offer and acceptance (Arts. 1319 - 1326)7. Legal Capacity of the Contracting parties (Arts. 1327 1329)8. The consent must be intelligent, free and spontaneous (Arts. 1330 1336)

ELEMENTS OF OFFER:1. Complete2. Definite as to the certainty of price and identity of the object3. Intentional

Mirror Image theory The person making the offer may fix time, place, and manner of acceptance, all of which must becomplied with. (Art. 1321)

Cognition theory the offer is deemed accepted when the acceptance has come to the knowledge of the offeror.

*Form of offer

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Article 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause whichare to constitute the contract. The offer must be certain, and the acceptance absolute. A qualified acceptanceconstitutes a counter-offer.

Article 1325: Unless it appears otherwise, business advertisements are of things for sale are not definite offers,but mereinvitation to make an offer.

Article 1326: Advertisements for bidders are simply invitations to make proposals, and the advertiser is not boundto accept the highest or lowest bidders unless the contrary appears.

* Form of acceptance

Article 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause whichare to constitute the contract. The offer must be certain, and the acceptanceabsolute. A qualified acceptanceconstitutes a counter-offer.

Acceptance must be plain and unconditional. Any condition necessarily involves a new proposal, which must be accepted bythe other party to give rise to a binding agreement. Acceptance must be in accordance with the terms and conditions of theoffer to effectively bind the offeror.

*The object need not be owned by the seller at the time of perfection . It is sufficient that the seller has the right to transferthe ownership of the object at the time of delivery.EXCEPTION to this rule: CDB vs Lim and Nool vs CA

CaviteDevelopment Bank,et al vs Cyrus Lim,et al.

In the case at bar, a contract of sale was perfected. The sum ofP30,000.00, although denominated in the offer to purchase as "optionmoney," is actually in the nature of earnest money or down payment whenconsidered with the other terms of the offer. Contracts are not defined by theparties thereto but by principles of law. In determining the nature of acontract, the courts are not bound by the name or title given to it by thecontracting parties.

- However, a legal obstacle has rendered it impossible in the case at bar, toperform its obligation. The sale to Lim of the property mortgaged by Rodolfois deemed a nullity for CDB never acquired a valid title to the propertybecause the foreclosure sale, in which CDB has been awarded the property isalso a nullity since the mortgagor is not the real owner of the said property.

Conchita Nool vs CA Article 1505 of the Civil Code provides that "where goods are sold by aperson who is not the owner thereof, and who does not sell them underauthority or with consent of the owner, the buyer acquires no better title tothe goods than the seller had, unless the owner of the goods is by his conductprecluded from denying the seller's authority to sell." Here, there is noallegation at all that petitioners were authorized by DBP to sell the property tothe private respondents. Jurisprudence, on the other hand, teaches us that "aperson can sell only what he owns or is authorized to sell; the buyer can as aconsequence acquire no more than what the seller can legally transfer." Aspetitioners "sold" nothing, it follows that they can also "repurchase" nothing.In this light, the contract of repurchase is also inoperative and by the same

analogy, void.


1. A offered to transfer the ownership of and deliver a piano to B for P5k. B accepted the offer. However, beforedelivery by A and payment by B, A sold the piano to C. Rule the case.

2. A offered to sell a bag of shabu to B for P500k. B accepted the offer. Is there a perfected contract of sale?

3. A (15 years old) bought a kilo of rice from B for P35. Is the sale perfected?

4. A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Is the sale between B and C perfected?

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5. A wanted to sell his only car for P500k. He advertised this in a newspaper. B read the advertisement, and thereafterwent to A to purchase the car. A, however, told B that he is no longer interested in selling the car. Can B compel Ato sell the car?

6. B offered to sell a parcel of land to A, and told the latter that the acceptance should be made only on the 3rd dayafter the offer was communicated. Furthermore, B said that the acceptance of the offer should be sent through fax.A was very much interested to buy the land, so he sent B an e-mail message on the 3rd day after the offer wascommunicated, informing B that he is accepting the offer. Was there a perfected contract of sale?

*CONSUMMATION STAGE

EXTINGUISHMENT OF OBLIGATIONSObligations are extinguished:1. by payment or performance2. by loss of the thing due3. by condonation or remission4. by confusion or merger of the rights of creditor and debtor5. by compensation6. by novationOther causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and

prescription, are governed elsewhere in this Code.

*For purposes of extinguishing an obligation, payment and performance of the obligation are the same. (Arts. 1232 and1233)

* Question: In a contract of sale, is delivery of the property the only means to transfer ownership? See Article 1434(Estoppel: the seller is not the owner of the thing)

EFFECT OFESTOPPELHypothetical Question: A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Thereafter, B was able to purchase Lot 1 from A.

Who has the better right to Lot 1? (Stated differently, who owns Lot 1?)(Art. 1434) When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor

acquires title thereto, such title passes by operation of lawto the buyer or grantee.

* FORMATION OF CONTRACTS

*Article 1483: Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of salemay be made:

1. In writing2. Word of mouth3. Partly in writing and partly by word of mouth4. May be inferred from the conduct of parties

*If notary public is not authorized deed of sale of land is still valid because public instrument is not even essential for thevalidity of the sale (Sorfano v Latono)

*The only purpose of the Statute of Frauds is to prove the existence of contracts. It cannot be made to apply to contractswhich are not executory.

* Can there be a reformation of an oral contract of sale?An oral contract of sale cannot be reformed.

* Electronic Commerce Act

Section 7, Republic Act No. 8792, Electronic Commerce Act: Legal Recognition of Electronic Documents. Electronic documentsshall have the legal effect, validity or enforceability as any other document or legal writing, and -

(a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the saidelectronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequentreference, in that -

(i) The electronic document has remained complete and unaltered, apart from the addition of anyendorsement and any authorized change, or any change which arises in the normal course ofcommunication, storage and display; and

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(ii) The electronic document is reliable in the light of the purpose for which it was generated and in the light ofall the relevant circumstances.

(b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply providesconsequences for the document not being presented or retained in its original form.

(c) Where the law requires that a document be presented or retained in its original form, that requirement is met by anelectronic document if -

(i) There exists a reliable assurance as to the integrity of the document from the time when it was firstgenerated in its final form; and

(ii) That document is capable of being displayed to the person to whom it is to be presented: Provided, That no

provision of this Act shall apply to vary any and all requirements of existing laws on formalities required inthe execution of documents for their validity.

For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under existing laws.

This Act does not modify any statutory rule relating to the admissibility of electronic data messages or electronic documents,except the rules relating to authentication and best evidence.

Section 8, Republic Act No. 8792, Electronic Commerce ActLegal Recognition of Electronic Signatures. - An electronic signatureon the electronic document shall be equivalent to the signature of a person on a written document if that signature is proved byshowing that a prescribed procedure, not alterable by the parties interested in the electronic document, existed under which -

(a) A method is used to identify the party sought to be bound and to indicate said partys access to the electronic documentnecessary for his consent or approval through the electronic signature;

(b) Said method is reliable and appropriate for the purpose for which the electronic document was generated orcommunicated, in the light of all the circumstances, including any relevant agreement;

(c) It is necessary for the party sought to be bound, in order to proceed further with the transaction, to have executed orprovided the electronic signature; and

(d) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed with thetransaction authenticated by the same.

Section 11, Republic Act No. 8792, Electronic Commerce ActAuthentication of Electronic Data Messages and ElectronicDocuments. - Until the Supreme Court by appropriate rules shall have so provided, electronic documents, electronic datamessages and electronic signatures, shall be authenticated by demonstrating, substantiating and validating a claimed identity ofa user, device, or another entity in an information or communication system, among other ways, as follows:

(a) The electronic signature shall be authenticated by proof that a letter, character, number or other symbol in electronicform representing the persons named in and attached to or logically associated with an electronic data message,electronic document, or that the appropriate methodology or security procedures, when applicable, were employed or

adopted by a person and executed or adopted by such person, with the intention of authenticating or approving anelectronic data message or electronic document;

(b) The electronic data message and electronic document shall be authenticated by proof that an appropriate securityprocedure, when applicable was adopted and employed for the purpose of verifying the originator of an electronic datamessage and/or electronic document, or in detecting error or alteration in the communication, content or storage of anelectronic document or electronic data message from a specific point, which, using algorithm or codes, identifying wordsor numbers, encryptions, answers back or acknowledgment procedures, or similar security devices.The Supreme Court may adopt such other authentication procedures, including the use of electronic notarizationsystems as necessary and advisable, as well as the certificate of authentication on printed or hard copies of theelectronic document or electronic data messages by electronic notaries, service providers and other duly recognized orappointed certification authorities.

The person seeking to introduce an electronic data message and electronic document in any legal proceeding has theburden of proving its authenticity by evidence capable of supporting a finding that the electronic data message andelectronic document is what the person claims it to be.

In the absence of evidence to the contrary, the integrity of the information and communication system in which an electronicdata message or electronic document is recorded or stored may be established in any legal proceeding -

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

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

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


1. A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. Is the contract

valid?The contract is valid but unenforceable. SeeArt. 1403 (2) (e).

1.1 May the contracting parties compel each other to observe the form?Yes. SeeArts. 1357 and 1406.

2. A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. B already paid 500kbut A refused to deliver the land arguing that the contract they entered into is unenforceable.As argument is untenable. The Statute of Frauds is applicable only to executory contracts.

3. A owns a parcel of land. B is an agent of A. B sold As land to C. What is the status of the contract?The contract is void, absent any written document giving B the authority to sell As land. See Regina Dizon vs CA.

Regina Dizon vs CA Article 1874 of the Civil Code is explicit that: "When a sale of apiece of land or any interest therein is through an agent, theauthority of the latter shall be in writing; otherwise, the sale shall

be void."

4. A owes B P500k. To defraud B, A sold his only property to C, who was in good faith. What are the remedies available toB?SeeArticle 1177.

5. A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. There is no writtennote or memorandum to prove the contract but the offer and acceptance were made through e-mail. Is the contractvalid and enforceable?Yes. The Electronic Commerce Act (RA 8792) is applicable.

5.1. If the offer and acceptance were made through SMS, is the contract still valid and enforceable?I think so.

6. A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. When the suit wasbrought to the court to assail the enforceability of the contract, one party (A), failed to object to the presentation ofevidence aliunde made by B. Is the contract valid?Yes. SeeArticle 1405.

7. A entered into a contract of sale with B where the former engages to sell a parcel of land for $500k. B was mistaken tobelieve that the price is P500k. Is there a perfected contract? If in the affirmative, is the sale valid? Can the contract bereformed?

* LEGALITY OF SALE

Article 1409: the following contracts are inexistent and void from the beginning

(1) Whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy

(2) Those which are absolutely simulated or fictitious(3) Those whose cause or object did not exist at the time of the transaction(4) Those whose object is outside the commerce of men(5) Those which contemplate an impossible service(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained(7) Those whose expressly prohibited or declared void by the law

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Article 1411: when the nullity proceeds from the illegality of the cause or object of the contract and the act constitutes acriminal offense, both parties being in pari delicto, they shall have no action against each other and both shall be prosecuted.

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Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to thethings or the price of the contract.

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given andshall not be bound to comply with his promise.

IN PARI DELICTO RULE (for illegal cause or object)

1. BOTH are in pari delicto No action against each other BOTH will be prosecuted RPC provision relative to the disposal of effects/instruments of a crime shall apply

2. ONLY ONE is guilty INNOCENT PARTY may claim what he has given INNOCENT PARTY not bound to comply with his promise

Article 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition is designed for the protectionof the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.

Article XII, Section 2, 1987 Constitution: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oilsall forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the

State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development,and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertakesuch activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, orcorporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for aperiod not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions asmay be provided by law. In cases of water rights for irrigation, water supply fisheries, or industrial uses other than thedevelopment of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, andreserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fishfarming, with priority to subsistence fishermen and fish- workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance folarge-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the generaterms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. Insuch agreements, the State shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from itsexecution.

Article XII, Section 3, 1987 Constitution: Lands of the public domain are classified into agricultural, forest or timber, mineralands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to whichthey may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations oassociations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-fiveyears, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of thePhilippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase,homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian

reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, orleased and the conditions therefor.

Article XII, Section 7, 1987 Constitution : Save in cases of hereditary succession, no private lands shall be transferred orconveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

Article XII, Section 8, 1987 Constitution: Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of thePhilippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.

* OBLIGATIONS OF A VENDOR1. Deliver the thing and transfer its ownership to the vendee2. Preservation of the thing (Article 1163)

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3. Deliver the fruits and accessories (Arts. 1164, 1166, 1495, 1537)4. Make Warranties5. Taking-out Insurance Coverage (Art. 1523)

*DELIVERY- the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

- SeeArts. 1477, 1496, 1497

- Thevendor must have the right to transfer the ownership of the thing at the time it is delivered (Art 1459)

Reason for this rule: NEMO DAT QUOD NON HABET (He who does not own the thing cannot dispose of the same)

Philippine SuburbanDevelopment Corp. vsAuditor General

The Court held that in the absence of an express stipulation to thecontrary, the payment of the purchase price of the goods is not a conditionprecedent to the transfer of title to the buyer, but title passes by thedelivery.

Balatbat vs CA Devoid of any stipulation that "ownership in the thing shall not pass tothe purchaser until he has fully paid the price", ownership in thing shallpass from the vendor to the vendee upon actual or constructive delivery ofthe thing sold even if the purchase price has not yet been fully paid. Thefailure of the buyer has not yet been fully paid. The failure of the buyer tomake good the price does not, in law, cause the ownership to revest to theseller unless the bilateral contract of sale is first rescinded or resolvedpursuant to Article 1191 of the New Civil Code. Non-payment only creates aright to demand the fulfillment of the obligation or to rescind the contract.

* REQUISITES OF DELIVERY(3 Is)1. Identity2. Integrity

Consing vs CA SC recognized the right of a buyer in a subdivision land to compel the seller tocomplete the roads and other facilities of the subdivision, even when nothing tothat effect is stipulated in the contract of sale. A sellers duty is to deliver thething sold in a condition suitable for its enjoyment by the buyer for the purposescontemplated and a proper access to a residence is essential to its enjoyment.The seller cannot shift to the buyer the burden of providing for an access to andfrom the subdivision, and when the seller has so defaulted in such obligation, thebuyer should be entitled to a proportionate reduction in her purchase price of thetwo lots.

3. IntentionAbuan vs Garcia The critical factor in all different modes of effecting delivery, which gives legal

effect to the act, is the actual intention of the seller to deliver, and itsacceptance by the buyer. Without that intention, there is no tradition

Quijada vs CA In all forms of delivery, it is necessary that the act of delivery, whetherconstructive or actual, should be coupled with the intention of delivering thething. The act, without the intention, is insufficient. The critical factor in thedifferent modes of effecting delivery which gives legal effect to the act, is theactual intention of the vendor to deliver, and its acceptance by the vendee.Without that intention, there is no tradition.

The Supreme Court recognized that the sale of a land previously donated bythe seller to a local government unit under a resolutory condition, was a validsale even though at the time of sale, ownership in the property was still withthe local government. However, when the resolutory condition did occur whicheffectively reverted ownership back to the seller, under Article 1434 the sellerstitle passes by operation of law to the buyer. The Court expressly recognized

that the rule under Article 1434 of the Civil Code applies not only to sale ofgoods, but also to other kinds of property, including real property.


1. A and B entered into a contract of sale whereby A engages to sell his watch at P1k to B. Because B was so excitedto have the watch, he stole the same from A. Three days later, he sold the same to C. Was there already a deliveryof the watch to B?There was no delivery. Delivery must be intentional.

2. A and B are friends. They entered into an agreement whereby A would deliver and transfer the ownership of a goldbar to B in exchange of P500k. Instead of delivering a gold bar, A delivered a silver bar. Rule the case.

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As obligation to B as to the delivery of the gold bar still subsists as there was no delivery of the subject matter yet.In order to effect the delivery, the very object of the contract of sale (gold bar) must be delivered (this pertains tothe identity).

* SALE OF GOODS BY DESCRIPTION OR BY SAMPLE

By SAMPLE sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the bulk, whichis not present and as to which there is no opportunity to inspect or examine; goods must correspond with sample shown

By DESCRIPTION sale where a seller sells a thing as being of a certain kind, and the buyer merely relies on the sellersrepresentations or representations; goods must correspond with description

Where the goods delivered do not correspond with the description or sample or, as in the case of sale by description andsample, the goods do not correspond with either the description or sample the remedy is RESCISSION.

* 2 KINDS OF DELIVERY1. ACTUAL when the thing sold is placed in the control and possession of the vendee2. CONSTRUCTIVE

a. Execution of public