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Sales and Lease

AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Part 1 the obligation, parties)


1. Essential Requirements of Contractual special – present only in
Obligations certain contracts
(Art. 1305, 1306, 1316, 1318, 1356) (delivery in real
contracts, form in
ARTICLE 1305. A contract is a meeting of solemn contracts)
minds between two persons whereby one binds
himself, with respect to the other, to give extraordinary – unique
something or to render some service. (1254a) to a specific contract
(price in a contract of
Contract (cum traho)- meeting of the minds sale)
between 2 persons whereby one binds himself, Natural elements derived from the nature
with respect to the other, to give something or to of the contract and
render some service. ordinarily accompany
– agreement the same
– limited exclusively to those agreements
which produce patrimonial obligations presumed by law
– specie although can be
– juridical convention manifested in legal excluded by the
form, by virtue of which one or more contracting parties
persons bind themselves in favor of Accidental elements Exist only when the
another or others, or reciprocally to the parties expressly
fulfillment of a prestation to give, to do, or provide for them for the
not to do. purpose of limiting or
modifying the normal
convention – includes any kind of agreement effects of the contract.
which may create,modify, or extinguish patrimonial
and even family relations auto-contract – there is only one party involved
but said party merely acts in the name and for the
– genus
account of two distinct contracting parties.
1. When a representative of another contracts
Contract distinguished from other terms:
with himself
Source of rights Contract – agreement of the 2. when as representative of 2 persons brings
and obligations parties about contract with himself and the
principals
Others – law
Nature of the rights Contract- concrete, limited, characteristics of contracts (OMAR)
and obligations and transitory 1st: obligatory force or character
– contracting parties are bound, not only to
others- elastic, absolute, the fulfillment of what has been expressly
permanent stipulated, but also to all of the
consequences thereof.
Elements of contracts: 2nd mutuality of contracts
– contracts are binding upon both of the
Essential elements- Common – present in all
parties
without which there can contracts (consent of
3rd autonomy of contracts
be no contracts both parties, object of
the contract, cause of – parties may establish such agreements as
they may deem convenient, provided they

Jmvdg 1 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

are not contrary to law, morals, good Accdg. To • Things


customs, public order, or public policy. subject matter • services
4th relativity of contracts
– take effect only between the parties, their Nature of the • Unilateral – gives rise to
assigns and heirs. vinculum an obligation for only one
which they of the parties
3 phases or stages of the life of contract produce • bilateral – gives rise to
1st stage:GENERATION reciprocal obligation
– preliminary preparation, conception of Accdg. To • Onerous – 1 of the
generation, period of negotiation, ending at cause parties aspire to procure
the moment of agreement of the parties for himself a benefit
through the giving of an
2nd stage: PERFECTION equivalent or
– moment when parties come to agree on compensation
the terms of the contracts • gratuitous – 1 of the
parties proposes to give
3rd stage: CONSUMMATION to the other a benefit
– fulfillment or performance of the terms without equivalent or
agreed upon in the contract compensation.
Classification of contracts: Accdg. To risk • Commutative – each of
involved the parties acquires an
Accdg to their • Preparatory – necessary
relation to equivalent of his
as a preliminary step
other prestation and such
towards the celebration of
contracts equivalent is pecuniarily
another subsequent
appreciable and already
contract
determined.
• principal – can subsist
• aleatory – which each of
independently
the parties has to his
• accessory – can exist
account the acquisition of
only as a consequence of
an equivalent of his
another prior contract.
prestation although
Accdg. to their • Consensual – perfected pecuniarily appreciable
perfection by mere agreement of the and such is not yet
parties determined.
• real – perfected with the Accdg. to • Nominate – have their
consent of the parties and norms own individuality,
the delivery of the object regulated by special
by one party to the other. provisions of law
Accdg. To • Common or informal – • innominate – lack
form no particular form individuality, not regulated
• special or formal – by special provisions of
require some particular law
form
Accdg. To their • Transfer of ownership
purpose • conveyance of use
• rendition of service

Jmvdg 2 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

ARTICLE 1306. The contracting parties with respect to the object or cause of the contract.
may establish such stipulations, clauses, terms – signifies the birth of the contract as
and conditions as they may deem convenient, obligatory tie, resulting from the
provided they are not contrary to law, morals, concurrence of the wills of the contracting
good customs, public order, or public policy. parties.- Manresa
(1255a)
General rule: Perfection of a contract is produced
***right of the contracting parties to establish any by mere consent.
stipulation, clause, term or condition as they may Exception:
deem convenient. (constitutional and statutory • contracts of commodatum, pledge, and
right) deposit are perfected upon delivery of the
object by one of the contracting parties.
limitations: stipulation, clause, term or condition
established must not be contrary to: consensuality – some submit that this is one of
• law the fundamental characteristic of a contract But
this does not hold water in those Real contracts
– mandatory or prohibitive in character
which requires delivery before its perfection.
– expressive of fundamental principles of
justice
Consensual contracts – perfected by mere
– impose essential requisites consent of the parties
• morals real contracts – perfected after delivery of the
– principles which are incontrovertible object (pledge, commodatum, depositum, mutuum)
and are universally admitted and which
have received social and practical It is only when there is a complete
recognition manifestation of the meeting of the offer and
• good customs the acceptance upon the thing and the cause
– includes even those moral precept not which are to constitute the contract.
recognized universally but is
sanctioned by the practice of a certain ARTICLE 1318. There is no contract
community unless the following requisites concur:
• public order (1) Consent of the contracting parties; cdtai
– safety, peace and order of the country (2) Object certain which is the subject matter
or of any particular community of the contract;
• public policy (3) Cause of the obligation which is
– no person can lawfully do that which established. (1261)
has a tendency to be injurious to the
public or against public good. bases of contract:
elements law will of the
test: WON restraint is reasonably necessary for
contracting
the protection of the parties
parties

ARTICLE 1316. Real contracts, such as Essential are... Imposed Conformed to.
deposit, pledge and commodatum, are not Natural are... presumed Accepted or
perfected until the delivery of the object of the repudiated
obligation. (n)
Accidental are... Authorized established
perfection of contracts – moment in the life of the
contract where the parties come to an agreement

Jmvdg 3 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

ARTICLE 1356. Contracts shall be forms of contracts:


obligatory, in whatever form they may have been • necessary for the convenience of the
entered into, provided all the essential requisites contracting parties or for the efficacy of the
for their validity are present. However, when the contract (Arts. 1356-1358)
law requires that a contract be in some form in • necessary for the validity of the contract
order that it may be valid or enforceable, or that a (scattered provisions of the Code and
contract be proved in a certain way, that some special laws)
requirement is absolute and indispensable. In • necessary for the enforceability of the
such cases, the right of the parties stated in the contract (Statute of Frauds)
following article cannot be exercised. (1278a)
spiritual system of the Spanish Code – the law 2. Sales distinguished from other contracts
looks more at the spirit/intent rather than at the
forms of the contract. a. Sale vs. Piece of work
contract for a piece of work – contractor binds
General Rule: contracts shall be obligatory, himself to execute a piece of work for the
provided all the essential elements of a contract employer, in consideration of a certain price or
are present. compensation; the contractor may either employ
Exceptions: only his labor or skill, or also furnish the material.
• when the law requires that the contract (Art. 1713)
must be in a certain form in order to be
valid Similarity between sale & piece of work
◦ must appear in writing “Transfer of title or an agreement to transfer it for a
price paid or promised to be paid is the essence of
▪ donation and acceptance of
sale. Ineluctably, whether the contract be one of
personal property whose value
sale or one of piece of work, a transfer of
exceeds P5,000.00
ownership is involved and a party necessarily
▪ sale of a piece of land or any
walks away with an object. (CIR vs CA & ADMU)
interest therein through an agent
▪ agreements regarding payment of Statutory rule on distinguishing sale for
interest in contract of loan contact-for-piece of work (Art. 1467)
▪ antichresis  Sale - Manufacturing in the ordinary course
◦ must appear in public document of business
▪ donations of immovable properties - workman or contractor furnishes both
regardless of value labor and the materials (Tolentino, Civil
▪ partnerships where immovable Code Book V, pp. 11)
property or real rights are
contributed to the common fund  Contracts for piece-of-work –
◦ must be registered manufacturing upon special order of
▪ chattel mortgages customers.
▪ sales or transfer of large cattle
• when the law requires that the contract “Special order” under Art. 1467 is not one of
must be in a certain form in order to be timing, or habit, but actually must be drawn from
enforceable. the nature of the work to be performed and the
◦ Covered by the Statutes of Frauds products to be made; it must be of the nature that
the products are not ordinary products of the
Case: BF Corp vs CA – contract may not be limited manufacturer, and they would require extraordinary
in a single document or writing skills or equipment, if to be performed by a
manufacturer. (Celestino Co. vs Collector of

Jmvdg 4 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Internal Revenue) b. Sale vs. Agency to Buy and Sell

the main distinguishing factor between a sale and Agency – a person binds himself to render some
a contract for a piece-of-work is the essence of service or to do something in representation or on
why the parties enter into it, if the essence is: behalf of the principal, with the consent of authority
• object – sale of the latter (Art. 1868)
• service, knowledge or even reputation of - a principal, nominate, bilateral, preparatory,
the person who executes or manufactures commutative, and generally onerous contract.
the object – piece-of work
Sale Agency to sell/Buy
practical needs for being able to distinguish Not unilaterally Essentially revocable
sale and piece-of-work: revocable even in the presence of
Aspect Sale Piece-of-work an irrevocability clause
The buyer himself The agent is not obliged
warranty of the Covered by Art. pays for the price of to pay the price, and is
contractor 1714 the object which merely obliged to
tax Higher Much lower constitutes his main deliver the price which
obligation he may receive for the
Type of Real obligation Personal buyer
obligation (to give) obligation (to After delivery, the The agent does not
do) buyer becomes the become the owner of
Action for proper Not allowed owner of the subject the thing subject of the
specific (against matter agency.
performance involuntary The seller warrants The agent who effects
servitude) the sale assumes no
apply Art. 1715 personal liability as long
as he acts within his
Applicability of Only when the
authority and in the
Art. 1165 subject matter
name of the principal.
is
indeterminate Contract of sale is Must comply with the
or generic valid and enforceable Statute of Frauds for its
in whatever form it enforceability
Applicability of Covered by Not covered by may be entered into.
the Statute of Statute of Statute of Exception: Sale of a
Frauds Frauds Frauds piece of land or any
interest therein
Schools of Thought: through an agent (Art.
• Masschusetts Rule – if especially done at 1874)
the order of another, this is a contract for a The buyer who The agent must account
piece of work. (we follow this rule in the obtains a discount for all benefits or
Philippines) does not have to discounts received from
• New York Rule – if the thing already exists, reveal such facts to the seller.
it is a SALE; if not, WORK its own buyer.
• English Rule – if material is more valuable,
SALE; if skill is more valuable, WORK ***because of the highly fiduciary nature of agency,
the agent is disqualified from receiving any
personal profit from the transaction covered by the
agency, and any profit received should pertain to

Jmvdg 5 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

the principal of money given or its equivalent


o Sale – where the value of the thing
***the essential clauses of the whole instrument given as part of the consideration
shall be considered in construing contracts equals or is less than the amount of
containing provisions characteristic of both sales money given
and agency to sell. (Art. 1466)
***It is legally impossible for an agent or a broker to Article 1641 provides that barter shall be governed
voluntarily bind himself to the warranties of the by the Law on Sales.
seller. (Schmid & Oberly, Inc. vs. RJL Martinez) - if one party fails to perform, the other can
demand resolution of the contract.
***The essence of an agency to sell is the delivery
to an agent, not as his property, but as a property Where difference between barter and sales is
of the principal, who remains the owner and has critical:
the right to control the sale, fix the price and terms,  Rules on Statute of Frauds which apply to
demand and receive the proceeds less the agent's the sale of real or personal property bought
commission upon sales made. (Tolentino, Civil at P500.00 or more, do not apply to barter
Code Book V pp.10 quoting Kerr & Co. vs Lingad)  The right of legal redemption granted by
law to an adjoining owner of an urban land
c. Sale vs. Barter or Exchange covers only resale and does not cover
exchanges of properties.
Sale Barter
One of the parties One of the parties d. Sale vs. Dacion en Pago
binds himself to deliver binds himself to give
a thing in consideration one thing in Dation in payment – property is alienated to the
of the other’s consideration of the creditor in full satisfaction of a debt in money.
undertaking to pay the other’s promise to - constitutes the delivery and
price in money or its give another thing transmission of a thing by the debtor to the
equivalent (Art. 1638) creditor as an accepted equivalent of the
performance of an obligation.
Barter - Governed by the Law on Sales since it
• consensual contract essentially involves the transfer of
• consummated only from the time the ownership of a subject matter.
parties mutually take possession of the - Consent of both the debtor and creditor
things exchanged in this special mode of payment to
e.g. extinguish the existing obligation is an
bills of local currency to coins – barter essential requisite.
local currency for foreign currency – sale - As a special mode of payment, dacion
en pago falls on the stage of
Rules to determine whether contract is sale or consummation of the contract.
barter: (Art. 1468)
 Manifest intention of the parties Requisites:
• performance of the prestation in lieu of
 When Intention does not appear and payment (animo solvendi) which may
consideration consists partly in money and consist in the delivery of a corporeal thing
partly in another thing or a real right or a credit against 3rd person.
o Barter – when the value of the • Some differences between the prestation
thing given as part of the due and that which is given in substitution
consideration exceeds the amount (aliud pro alio)

Jmvdg 6 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• agreement between creditor and debtor


that the obligation is immediately Sale vs. Loan
extinguished by reason of the performance in a loan, the amount is substantially smaller than
of a prestation different from that due. the value of the security given.

Sale Dacion En Pago


Sale vs. Lease
There is no pre-existing There is a pre-existing in sale, the seller transfers ownership; in a lease,
credit credit the lessor or landlord transfers merely the
Gives rise to obligations Extinguishes the temporary possession and use of the property.
obligation
3. Definition
The cause or The cause or a. Contract of Sale
consideration here is consideration here, from
the price, from the point the viewpoint of the sale – venditio; do ut des
of view of the seller; or person offering the
ARTICLE 1458. By the contract of sale one
the obtaining of the dation in payment, is the
of the contracting parties obligates himself to
object, from the extinguishment of his
transfer the ownership and to deliver a
viewpoint of the buyer debt; from the viewpoint
determinate thing, and the other to pay therefor a
of the creditor, it is the
price certain in money or its equivalent.
acquisition of the object
A contract of sale may be absolute or conditional.
offered in lieu of the
(1445a)
original credit.
2 obligations of the Seller:
There is greater There is less freedom in  Transfer the ownership
freedom in the determining the price  Deliver the possession of the subject
determination of the matter
price
The giving of the price The giving of the object Obligation of the Buyer:
may generally end the in lieu of the credit may  accept the delivery
obligation of the buyer extinguish completely or  Pay the price
partially the credit
(depending on the ***Both are real obligation which can be the proper
agreement) subject of actions for specific performance

e. Sale vs. Chattel Mortgage ***in the delivery of a determinate thing, the buyer
in addition to the right to recover damages may
compel the seller to make the delivery.
Sale Chattel Mortgage
Principal contract or Accessory contract, Essential characteristics of sale (npcbroct)
obligation Security for the 1. nominate and principal
performance of an nominate – it has been given a particular
obligation name by law; governed by a set of rules in
the Civil Code
Does not require Must be registered in
principal – it can stand on its own and does
registration to be the Chattel Mortgage
not depend on another contract for its
binding upon 3rd Register
validity or existence
persons; entry in the
***the Court looks at the intent not the
Book of Entry will suffice
nomenclature to determine the nature of

Jmvdg 7 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

the contract begins, without the need of prior demand


***all other contracts which have or their
objective the transfer of ownership and **A party cannot simply just choose not to
delivery of possession of a determinate proceed with the sale by offering also the
subject matter for a valuable consideration other party not to be bound by his
are governed necessarily by the Law on obligation
sales. **Each party has the remedy of specific
performance
2. consensual **rescission or resolution cannot be
- contract of sale is perfected by mere enforced by defaulting party upon the other
consent (Art. 1475) party who is ready and willing to proceed
- contract of sale becomes a valid and with the fulfillment of his obligation
binding contract upon the meeting of the
minds as to the price. (Buenaventura vs 4. onerous
CA) contract of sale imposes a valuable
– Art. 1358 (requirement for certain consideration as a prestation, which ideally
contracts to be in a public instrument) is is a price certain in money or its equivalent
only for convenience and registration only
affects 3rd persons. Non-compliance to 5. commutative
formal requirements does not adversely equivalence
affect the validity of the contract nor the in contract of sale, a thing of value is
contractual rights and obligations of the exchanged for equal value
parties thereunder (Fule vs CA)
 modalities that affect the commutativeness is an essential
characteristic of consensuality characteristics of a sale, but the test for
o suspensive term or condition compliance therewith is not objective but
o incomplete meeting of the rather subjective (Gaite vs Fonacier)
minds
belief of the parties that they are receiving
3. bilateral and reciprocal the appropriate and proper value for what
sale imposes obligations on both parties… they each in turn gave up is enough to
the obligation or promise of each party is comply with the characteristics of
the cause or consideration for the commutativeness.
obligation or promise of the other
Inadequacy of price does not affect
obligations in a contract of sale are to be ordinary sale
performed simultaneously such that the
performance of one is conditioned upon the Inadequacy of price may show vice of
simultaneous fulfillment of the other. consent, in which case the sale may be
annulled, but such annulment is not for
Effects: inadequacy of price but rather for vitiation
 The power to rescind is implied of consent. (Art. 1470)
 Neither party incurs delay if the other
party does not comply, or is not ready to 6. sale is title and not mode
comply in a proper manner with what is delivery or tradition – mode to transfer
incumbent upon him ownership and possession to the buyer
 From the moment one of the parties
fulfill his obligation, the default by the other mode- legal means by which dominion or
ownership is created, transferred, or

Jmvdg 8 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

destroyed
***It is not the bulk or quantity of the goods sold but
title- transfer of ownership rather, the use to which the goods sold is put by
the buyer, that should control
**Sale does not by itself transfer or affect
ownership, the most that sale does is to create the contracts to sell:
obligation to transfer ownership, it is tradition or • power of the promisor to refuse the
delivery as a consequence of sale, that actually conveyance and retain the sums of
transfers ownership. installments already received
• positive suspensive condition not
Essential Elements of contract of sale happening is not breach, but simply an
 consent- meeting of the minds to transfer event that prevented the obligation of the
ownership in exchange for the price vendor to convey title
 determinate subject matter • property may be delivered with the
 price- certain in money or its equivalent understanding that the title thereto shall not
pass until the performance of some
Natural elements of contract of sale: condition, and such understanding or
• warranty against eviction intention must be given effect as between
• warranty against hidden defects parties.
• Reservation of ownership (pactum
***perfected/valid contract of sale – all 3 elements reservati dominii)
are present
***void contract of sale – some of the essential Contract of sale Contract to sell
element are not present; or
– as mandated by Article 1409 Non-payment of the payment in full of the
***voidable contract of sale – vitiation of consent price is a resolutory price is a positive
condition suspensive condition
Stages in the life of Sale Title over the property Ownership is retained
 policitacion – negotiation or preparation passes to the buyer by the seller, regardless
stage; upon delivery of delivery and is not to
o time the prospective contracting pass until full payment
parties indicate their interests in the of the price.
contract to the time the contract id
perfected After delivery has been Since the seller retains
 perfection – conception or birth made, the seller has ownership, despite
o takes place upon the concurrence lost ownership and delivery, he is enforcing
cannot recover it unless and not rescinding the
of the essential elements of the
the contract is resolved contract if he seeks to
sale
or rescinded oust the buyer for failure
 consummation – death
to pay.
o parties perform their respective
undertaking under the contract of Jus in rem is created Jus in personam is
sale, culminating in the created
extinguishment thereof
Option Contract
wholesale vs retail sale: ➢ accepted unilateral promise supported by a
wholesale – if to be resold for a profit the goods consideration distinct from the price
being unaltered when resold, the quantity being ➢ preliminary contract to a contract of sale.
large ➢ Consideration in an option contract is just

Jmvdg 9 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

as important as the consideration for any purchase price if it is stipulated that it will not be
other kind of contract. forfeited. There is a different period for the option
➢ Does not pass title or dominion over the money & earnest money, thus there is no conflict
property but only gives a right to demand with regard the two. <3
the fulfillment of the contract in proper
cases or damages for a breach where it is PARTIES TO A CONTRACT
not possible to carry it out. Capacity to Contract: (Arts. 1327, 1489-1492)
➢ In the event of breach, the injured party
cannot sue for the delivery of the thing or General rule: Any person who has the capacity to
the payment of the price because the act or the power to do acts with legal effects, or
obligations arising from the contract are to with the power to obligate himself, may enter into a
do hence, the obligation is converted into contract of sale, whether as seller or buyer.
one for indemnity for damages.
➢ “A contract granting privilege to buy or Natural persons – age of majority is 18 y.o
sell within an agreed time and at a Juridical persons – a juridical personality
determined price. It is a separate and separate, and distinct from that of the
distinct contract from that which the shareholders, partners or members is expressly
parties may enter into upon the recognized by law, with full juridical capacity and
consummation of the option. It must be capacity to act to such juridical persons to obligate
supported by a consideration.” (Limson themselves and enter into a valid contract.
vs CA, 375 SCRA 209)
capacity of the contracting parties – essential
Option contract Sale element of a contract; indispensable requisite of a
onerous consent
Consideration may be Consideration must be
anything of value the price certain in Incapacity to contract may be absolute or
money or its relative incapacity.
equivalent, or • Absolute incapacity – their personality is
essentially a “valuable restricted; these persons cannot enter into
consideration. a contract by themselves, but only through
Consensual their legal representatives.
Unilateral contract Bilateral contract ◦ Except: for necessaries delivered to
Subject matter is the Subject matter is the them, they are obliged to pay a
option to purchase subject matter of the reasonable price (Art. 1489)
the subject matter sought sale. • Relative incapacity – incapacity by reason
(accepted promise to of the parties' relation to each other or their
sell or the accepted relation to the thing which is the object of
promise to buy) of the the sale.
sale
Incapacitated to give consent:
Earnest money – considered payment of part of 1. unemancipated minors – absolute
the price and as a proof of perfection of the incapacity
contract. It may be given as a guarantee that the exception:
vendee will not back out. • when it is entered into by a minor who
misrepresents his age
Converting the option money into an earnest ▪ based on the principle of estoppel
money WILL NOT violate the definition that option ▪ must be active not merely
money must be separate and distinct from constructive

Jmvdg 10 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• when it involves the sale and delivery • Prohibition relating to spouses selling
of necessaries to the minor (Art.1449) to one another is applicable even to
***there are no more emancipated minors since the sales in legal redemption, compromises
age of majority has been raised to 18 y.o. and renunciations. (Art. 1492)
• Said transactions are null and void.
Necessaries – everything indispensable for (Medina vs Colector, 1 SCRA 302) The
sustenance, dwelling, clothing, medical prohibition is a matter of public policy
attendance, education and transportation, in • Who may assail the validity of the
keeping with the financial capacity of the family… contract?
[and education] includes his schooling or training ◦ Heirs of either spouses who have
for some profession, trade, or vocation, even been prejudiced
beyond the age of majority. Transportation shall ◦ Prior creditors
include expenses in going to and from school, or to ◦ State when it comes to the
and from place of work. (Art. 194, Family Code) payment of the proper taxes due on
the transactions.
2. insane or demented persons – absolute
• Who may NOT assail the validity of
incapacity
the contract?
• contracting parties are unable to
◦ Spouses – because of pari delicto
understand the nature and
◦ Creditors after the transaction – it
consequences of the contract at the
cannot be said that they have been
time of its execution by reason of any
prejudiced
cause affecting his intellectual or
sensitive faculties. (includes • Rationale for prohibition: (Medina vs
drunkenness, or under hypnotic spell) Collector, 1 SCRA 302)
• contracts entered into during lucid ◦ To prevent a spouse defrauding his
interval is valid. creditors by transferring his
properties to the other spouse.
• A question of act which must be
decided by the court ◦ To avoid a situation where the
dominant spouse would unduly
3. deaf-mutes who do not know how to take advantage of the weaker
write – absolute incapacity spouse, thereby effectively
defrauding the latter; and
• there is no way that the stipulations in
the contract be explained to them to ◦ To avoid an indirect violation of the
insure that they understand what they prohibition against donations
are entering into. between spouses under Art. 133,
CC (now Art. 87, Family Code)
4. Husband and wife to each other – • Art. 87 of the Family Code added the
relative incapacity provision “The prohibition shall also
• General rule: (Art. 1490, Civil Code) apply to persons living together as
Spouses cannot sell property to each husband and wife without a valid
other. marriage.”
◦ Exception:
Read Matabuena vs Cervantes, 38
▪ When a separation of property
SCRA 284, (1971)
was agreed upon in the
marriage settlement
“And this is so because if transfers or
▪ When there had been a judicial conveyances between spouses were
decree for the separation of the allowed during the marriage, that would
property destroy the system of conjugal

Jmvdg 11 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

partnership, a basic policy in civil law. It (Art. 1491) – relative incapacity


was also designed to prevent the • 1st group
exercise of undue influence by one ◦ Agent – with respect to the property
spouse over the other, as well as to whose administration or sale had been
protect the institution of marriage, entrusted to him, unless the consent of
which is the cornerstone of family law. the principal has been given.
The prohibition apply to a couple living ◦ Guardian – with respect to the property
as husband and wife without the of the person who is under his
benefit of marriage, otherwise, “the guardianship
condition of those who incurred guilt ◦ Executor or administrator – with
would turn out to be better than those respect to the property of the estate
in legal union.” Those provisions are under his administration except the
dictated by public interest and their sale of hereditary rights of an heir to
criterion must be imposed upon the will the executor or administrator as rights
of the parties.” (Calimlim-Canullas vs of an heir is not subject to
Fortun, 129 SCRA 675) administration.
• 2nd group
Cruz vs CA (281 SCRA 491) reiterated the
◦ Public officers or employees – with
Calimlim-Canullas ruling but further held
respect to the property of the State or
that, when registered property has been
any subdivision thereof, or of any
conveyed subsequently to a third-party-
government-owned or controlled
buyer in good faith and for value, the
corporation or institution, the
reconveyance is no longer available to
administration of which has been
common-law spouses, since under the
entrusted to them; it includes judges
Torrens system every buyer has a right to
and government experts who in any
rely upon the title of his immediate seller.
manner take part in the sale.
◦ Justices, judges, prosecuting
Art. 1490 Art. 133
attorneys, COCs, and other officers
Civil Code (now Art. 87, FC)
and employees connected with the
Exempts from its Do not make such
administration of justice – with
prohibition sales exception in case of
respect to the property and rights in
between spouses donations
litigation or levied upon an execution
governed by the
before the court within whose
complete separation of
jurisdiction of territory they exercise
property regime
their respective functions;
Reason:
▪ this is to avoid fraud and to free
Donation between spouses governed by CSP
such official from any suspicion
regime, being a gratuitous contract, would
which may cause discredit to the
necessarily reduce the estate of the donor and
judicial system.
increase the estate o the donee, while a sale
between such spouses, being an onerous and ◦ Lawyers – with respect to the property
commutative contract, would result in the separate and tights which may me the object of
estates of the spouses being of the same value as any litigation in which they may take
before the sale and no fraud could result, either to part by virtue of their profession.
the spouses or to their creditors. ▪ Consequence in case of violation
are voidable contract of sale and
5. Specific Incapacity to enter into a subject of the lawyer to disciplinary
contract of sale as mandated by law action for malpractice.
• Such prohibitions apply to sales in legal

Jmvdg 12 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

redemption, compromises and recover back the land sold even if


renunciations (Art. 1492) an offer to pay back the purchase
• Only sales by agents are valid when made price is made.
with the express consent of their principals • married woman in cases specified by
and no such exception is granted in all the law
other instances covered by the article. • incompetent (Sec. 2 of Rule 92 of the
• Contracts entered into in violation of Art. New Rules of Court) includes:
1491 are ▪ persons suffering from civil
◦ Villanueva: “inexistent and void from interdiction
the beginning.” (Art. 1409, CC; Rubias ▪ hospitalized lepers
vs Batiller, 51 SCRA 120) ▪ prodigals
◦ Tolentino: are not void but voidable ▪ deaf and dumb who are unable to
• incapacity is based on moral reasons, and read
is intended to avoid situations where a ▪ who are of unsound mind
person may find his personal interests ▪ those who by reason of age, weak
conflicting with the interests of those whom mind or other similar cases, cannot,
they represent. without aid from other, take care of
themselves and manage their
1st group 2nd group property becoming thereby easy
disqualification is for Disqualification is prey fro deceit and exploitation.
the interest of the grounded on public Purchase made by Intermediary:
principal, ward and policy and interest To set aside a purchase made by an intermediary,
estate it is necessary to prove that there is an agreement
Private wrong to the Public wrong which is between the intermediary and the disqualified
ward, principal or damage to public person person that the former will make the
estate service or to the high purchase for the benefit of the latter.
esteem that should be
accorded to the Effects:
administration of • Defective contract – effect of incapacitated
justice in our society persons entering into a contract not
May be ratified by Even when the parties through a parent or agent.
means of and in the seek to ratify the • Voidable contracts – only one of the
form of a new contract private wrong by contracting parties is incapacitated to give
executing a new consent.
contract, such cannot • Unenforceable contracts – when both
resurrect and calidate parties are incapacitated to give consent..
a relationship, which
continues to be OBJECT OF CONTRACTS
tainted with a public requisites:
wrong 1. it must be a possible thing
2. it must be licit
3. it must be determinate or at least
6. other incapacitated persons determinable
• aliens as to real property – mandated
by Sec. 5, Art. XIII of the Constitution lack of any requisite enumerated would either
▪ a sale made in violation of the engender a “no contract” situation (buyer can still
provision is null and void but recover the amount based on the principle of
although void, the vendor cannot unjust enrichment) or the resulting contract of sale

Jmvdg 13 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

would be void (no remedy can be maintained and increment or usual incident of
generally the courts will leave the party where they something already in existence,
are). then belonging to the vendor
o the title will pass to the buyer the
Licit moment the thing comes into
• The illegality of the subject matter existence.
undermines the demandability of the o Validity of the sale of things with
underlying obligation of the seller to deliver, potential existence depends upon
and renders the sale void. the intention of the parties.
• Prohibition: Public land & homestead  Emptio rei speratae –
(within the 5-year prohibition) cannot be the (purchase of an expected
object of sale, even if the buyer is in good thing) if the parties make a
faith. contract depend upon the
existence of the thing, so
Determinate that of the thing DOES NOT
• particularly designated or physically come into existence the
segregated from all others of the same contract is considered as
class (Art. 1460) not made and there is no
• Includes generic objects which are at least obligation to pay the price.
“determinable”  Emptio spei – (purchase of
• in case of determinable object, the a hope or expectancy); the
requisite that the thing be determinate is parties intend the contract
satisfied if at the time the contract is to exist at all events, so that
entered into, the thing is capable of being the buyer will have to pay
made determinate without the necessity of the price even if the thing
a new or further agreement between the does not actually come into
parties (Art. 1460) existence; the contract is
aleatory. Sale of a vain
Nature of the Object: hope or expectancy is void.
• Future Goods (Art. 1462)
o property or goods, which at the • Undivided interests of share
time of the sale are not yet owned • things in litigation
by the seller, but which are • things subject to conditions
thereafter to be acquired by him ◦ Whether the contract of sale involves a
o cannot be subject of an executed present object, or a future thing subject
SALE to a suspensive condition, or a present
o such contract for the future sale object subject to a resolutory condition,
and delivery of goods which seller the subject matter must be existing or
has not in possession but which he must come to existence to be delivered
intends to acquire is valid as an to the buyer, otherwise the contract of
executory contract to be fulfilled by sale is void, or an existing contract of
acquiring and delivering the goods sale is extinguished with the obligation
specified in the contract. on the part of the seller to return what
***things with potential existence (Art. he has received thereby.
1461)
o things which though not yet in PRICE AND OTHER CONSIDERATION
existence, is reasonably certain to by definition under Art. 1458, the ideal
come into existence as the natural consideration for a sale would be a “price” as a

Jmvdg 14 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

sum certain in money or its equivalent. had met, but not declared, and when
However, sale may still be valid when it has for its what is stated in the covering deed is
cause or consideration an item other than the not the one intended to be paid.
price. o Instrument with false consideration
are valid but subject to reformation to
Price – a sum certain in money or its equivalent reveal the real intent of the parties.
– Ideal consideration in contract of sale o Failure to pay the price or the
– Sum stipulated as the equivalent of the balance thereof does not render the
thing sold and also every incident taken sale inexistent or invalid, but merely
into consideration for the fixing of the price gives rise to a right in favor of the seller
put to the debit of the buyer and agreed to to either demand specific performance
by him. (Inchausti & Co. vs Cromwell, 20 or rescission of the contract of sale.
PHIL 345) (Province of Cebu vs. Heirs of Morales,
546 SCRA 315)
A seller cannot unilaterally increase the price o “A contract of sale being
previously agreed upon with the buyer, even when consensual, it is perfected by
the need to adjust the price of sale is due to mere consent of the parties.
increased construction cost (GSIS vs CA, 228 Delivery of the thing bought or
SCRA 183); otherwise, it would be a violation of payment of the price is not
the essential characteristics of “obligatory force” of necessary for the perfection of the
contracts of sale (Art. 1308, CC). contract; and failure of the vendee
to pay the price after the execution
Requisites: of the contract does not make the
 must be real sale null and void for lack of
o There must be a legal intention on consideration but results at most
the part of the buyer to pay the price, in default on the part of the
and legal expectation on the part of the vendee, for which the vendor may
seller to receive such price as the value exercise his legal remedies.”
of the subject matter he obligates (Balatbat vs CA, 261 SCRA 128)
himself to deliver. Otherwise, the price o delivery of the subject matter made
is simulated and the sale is void for pursuant to a sale that is void for lack
lack of consideration. of consideration therefore does not
o Remedy for simulated contracts: transfer ownership to the buyer
parties may recover form each other
what they may have given under the  must be in money or its equivalent
contract. (Heirs of Sps. Balite vs Lim, o valuable consideration
446 SCRA 54) o Art. 1468 recognizes that if the
o Principle of in pari delicto nonovitar consideration of the contract consists
actio applies only to cases where the partly in money and partly in another
nullity arises from the illegality of the thing, the transaction can still be
consideration or the purpose of the considered a contract of sale when this
contract (Modina vs CA, 317 SCRA is the manifest intention of the parties.
696) but does not apply to inexistent o Although the cause is not stated in
and void contracts where the price is the contract, it is presumed that it exists
merely simulated (Yu Bun Guan vs and is lawful, unless the debtor proves
Ong, 367 SCRA 559). the contrary. (Art. 1354)
o False price – there is a real price Philippine jurisprudence has not accepted
upon which the minds of the parties the Anglo-Saxon concept that “any”

Jmvdg 15 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

consideration is enough to support a case may be. (Art. 1469, cross refer to
contract, what prevails in Philippine Art. 1186)
jurisprudence is that for a consideration to o Designation of a 3rd party to fix the
support an onerous contract, such as a subject matter of the contract is not
contract of sale, it wold have yo be a provided by law.
valuable consideration under the Roman
Law concept. Designation to 3rd Designation to 3rd
party as to the price party as to the
 must be certain or ascertainable. subject matter
o Certain – expressed and agreed in Obligation to pay the Obligation to deliver
term of specific pesos and/or centavos. price is a fungible the subject matter is a
o Ascertainable – it shall be sufficient obligation species obligation
that it be so with reference to another Price, subject of the A 3rd party may choose
thing certain or that the determination obligation of the buyer a subject matter
thereof be left to the judgment of a is generic and beyond the capacity of
specified person or persons. generally cannot be the seller to comply
o Designation of a 3rd party to fix the extinguished by a with his obligation to
price is valid. fortuitous event deliver the same.
o Even before the fixing of the price o Art. 1472
by the designated 3rd party, a contract o Manner of payment of the price
of sale is deemed perfected and goes into the essence of what makes
existing, albeit conditional. (Barretto vs. price certain or ascertainable.
Santa Marina, 26 Phil 200) o The buyer was free to decide on
o Fixing of the price cannot be validly the manner of payment of the purchase
left to the discretion of one of the price. (Bortikey vs. AFP retirement and
contracting parties. Separation benefits System, 477 SCRA
o 2 instances where the parties can 511)
seek court remedy to fix the price o When the manner of the purchase
designated to 3rd party. (Art. 1469) price is discussed after the acceptance,
 Designated 3rd party acted then such acceptance did not produce
in bad faith a binding and enforceable contract of
 Designated 3rd person sale; there was therefore no complete
acted by mistake. meeting of the minds and there is no
o Inefficacious contract – when price basis to sue on a contract that does not
cannot be ascertained with any of the exist. (Navarro vs Sugar Producer’s
rules stated in Art. 1474 Corp., 1 SCRA 511)
- inability to produce the o Although a down payment had
effect wanted already been made by the buyer and
- does not exclude void sale received by the seller, there was still no
contracts when the sale is valid sale. The court held that although
neither certain or part of the down payment has been
ascertainable. paid, a definite agreement on the
o When the 3rd party designated is manner of payment on the purchase
prevented from fixing the price by fault price was an essential element in the
of either the buyer or the seller, the formation of a binding and enforceable
party not at fault may have such contract of sale. (Velasco vs CA, 51
remedies against the party at fault as SCRA 439; Limketkai Sons Milling, Inc.
are allowed the seller or buyer, as the vs. CA, 255 SCRA 626)

Jmvdg 16 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

o The terms of payment being an may also apply to void sale contract
integral part of the price, would have situation where the defect is as to the price.
the same requisites that the law  Remedy clause in favor of the seller who
imposes on price to support a valid has delivered the subject matter in
contract of sale: certain or at least accordance with an agreement (though it
ascertainable. may not be a full contract yet) with the
o Fixing of the terms of payment may buyer who has received it and appropriated
also be designated to a 3rd party. it.
o “Every obligation, whose
performance does not depend upon a The gravamen of Art 1474 would mean that in spite
future or uncertain event, or upon a of the lack of an agreement as to the price or
past event unknown to the parties, is defect in the agreement as to price, there would
demandable at once.” (Art. 1179) nevertheless be a valid contract of sale upon which
o In the absence of any stipulation or an action for specific performance would prosper
agreement or actuation indicating that for the recovery of the price when the following
a different term of payment would be elements are present:
applicable and for which a meeting of (a) There was a meeting of the minds
the minds must be achieved, the price of the parties to a sale and purchase as to
is deemed to be by operation of law the subject matter;
immediately demandable upon the (b) There was an agreement that price
perfection of the contract. would be paid which fails to meet the
o Art. 1474 present the only criteria being certain or ascertainable; and
exception when there would still be a (c) There was delivery by the seller
valid sale even when there has been and appropriation by the buyer, of the
no meeting of the minds as to the price subject matter of the sale.
or any other consideration.
 “If the thing or any part From the rulings of the Supreme Court in Raet vs.
thereof has been delivered to and CA (295 SCRA 677) and NHA vs. Grace Baptist
appropriated by the buyer, he must Church (424 SCRA 147), the concept of
by a reasonable price therefore. x x “appropriation” under Art 1474 is not applicable to
x the court have authority to fix the real estate and that the rights of the parties to a
reasonable price for the subject purported sale would be under the principles
matter appropriated by the buyer” applicable to builders in good faith.
(Art. 1474)
o “Preceding article” in Art. 1474 It may also be an indication that “appropriation”
under Art 1474, even when applied only to
starts at Art. 1469 to Art. 1473
movables, would necessarily entail a
“transformation” of the subject matter of sale such
Doctrine of Appropriation (Art. 1474)
that it can no longer be returned to its original
 Based on the principle of unjust enrichment
state, as to warrant the fixing of reasonable price to
directed against the buyer who is not
prevent unjust enrichment.
allowed to retain the subject matter of the
sale without being liable to pay the price
“The best evidence to prove payment of the price
even when no such agreement on the price
is the official receipt issued by the seller.” (El Oro
was previously made
Engravers vs. CA, 546 SCRA 42)
 Applies even to “no contract” situation
because of no meeting of the minds as to
“These documents [receipts and invoices] are not
the price, although there was a meeting of
mere scraps of paper bereft of probative value but
the minds as to the subject matter, and
vital pieces of evidence of commercial

Jmvdg 17 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

transactions. They are written memorials of the the contract their intention.
details of the consummation of contracts.” (Lagon
vs Hooven Camalco Industries Inc., 349 SCRA It has no legal effect Does not even affect the
363) (void) as there is no real validity of the contract of
agreement between the sale unless it signifies a
INADEQUACY OF PRICE parties defect in th econsent or
Lesion or inadequacy of cause shall not invalidate that the parties actually
a contract, unless there has been fraud, mistake, intended a donation or
or undue influence. (Art. 1355) some other contrac.

General rule: “Gross inadequacy of price does not Gross inadequacy of price is ground for rescission
affect a contract of sale, except as it may indicate a of conventional sale (Art. 1381, NCC)
defect in the consent, or that the parties really
intended a donation or some other act or contract. Sales with right to repurchase
(Art. 1470) - the gross inadequacy of price raises the
presumption of equitable mortgage (Art.
***The characteristic that a contract of 1602, Civil Code)
sale is onerous is met whenever the - remedy of the seller: have the contract
consideration is a “valuable reformed or declare a mortgage contract
consideration and the test for its and to pay the indebtedness which is
“commutativeness” is met when the secured.
parties believe honestly that they - Remedy of the buyer: foreclose on the
received good value or what they equitable mortgage (Briones-Vasquez vs.
have given up in exchange. CA, 450 SCRA 644)

Exception: Gross inadequacy of price may avoid MOTIVE


judicial sale of real property. - different from the consideration
Reason: the sale here is not the result of Cause Motive
negotiations and bargaining; in fact, the property of Essential reason which Particular reason of a
the supposed seller would be sold at public auction moves the contracting contracting party
without his intervention) parties to enter into a which does not affect
Requisites: such inadequacy must be such as to contract the other party
be Cause is the immediate, direct, and proximate
(a) shocking to the conscience of man reason which justifies the creation of an obligation
(Pascua vs. Simeon, 161 SCRA 1) and through the will of the contracting parties.
(b) there must be a showing that, in the
event of resale, a better price can be General rule: A party’s motive for entering into the
obtained (Cu Bie vs. CA, 15 SCRA 307) contract does not affect the contract.
Exception to the exception: when there is a right Exception: When the motive predetermines the
of redemption – since the more adequate the cause, the motive may be regarded as the cause
winning bid is, the more easily it is for the owner to (Uy vs CA, 314 SCRA 69)
redeem the property (De Leon vs. Salvador, 36
SCRA 567) PERFECTION OF THE CONTRACT
Until a sale is perfected, it cannot be an
Simulated price Gross inadequacy of independent source of obligation, nor serve as a
price binding juridical relation.
Parties do not really Parties are bound by General Rule: A contract of purchase and sale is
intend to be bound by the contract based on perfected from the moment the parties have

Jmvdg 18 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

agreed upon a: of possible, licit, determinate or


• determinate thing, the object of the contract determinable; and with a price that has
• certain price thereof, whether in money or the requisites of being real, mney or its
its equivalent equivalents, and must be certain or at
Exceptions: least ascertainable, including on the
• when by virtue of the stipulation of the terms of the payment thereof.
parties or by provision of law, the sale is ◦ The absence of either just one of the
subject to a suspensive condition essential requisites pertaining to either
• if the contract of sale is subject to the subject matter or price in the terms of
approval of higher authorities the offer makes the offer “not certain”,
and cannot give rise to a valid sale,
modification: Art. 1476; even when such offer is absolutely
• auction sale is perfected when the accepted by the offeree.
auctioneer pounded his hammer • the acceptance must be absolute
• seller in the auction sale cannot bid but he ◦ the acceptance to have the effect of
may do so provided he gives adequate converting an offer to sell into a
notice that he will participate in the bidding perfected contract, it must be plain and
through another. unconditional, and will not be so if
involves any new proposition
Effects of Perfection: ◦ such acceptance should be
• gives right to the vendee a right to compel unequivocal and unconditional and the
the vendor to deliver the thing acceptance and proposition shall be
• vendee acquires personal right over the without any variation whatsoever. Any
thing until the delivery is made modification or deviation from the terms
• if a party refuses to proceed with the sale, of the offer annuls the latter and frees
he is guilty of breach of contract. the offeror.

General rule: the ownership of the thing is The owner of property offered for sale at public or
transferred only from the time of delivery thereof, private auction has the right to prescribe the
either actual or constructive, even if the price is not manner, conditions and terms of such sale.
fully paid.
Exception: if the sale is conditional and ownership Assignment
is transferred, not upon delivery, but upon full • agreement by virtue of which the owner of
payment of the price a credit (assignor), transfers his credits and
its accessory rights to another(assignee),
who acquires the power to enforce it to the
pactum reservati dominii – ownership is reserved same extent as the assignor could have
in the seller and is not to pass until the full payment enforced it against the debtor.
of the purchase price is made • legal causes where assignment may be
done:
Art. 1319 defines consent or meeting of minds as ◦ sale
manifested by the meeting of the offer and the ◦ dation in payment
acceptance upon the thing and the cause which ◦ exchange or donation
are to constitute the contract. • covers not only assignment of credits but
• The offer must be certain also other incorporeal rights
◦ when it is floated by the offeror having • a specie of the genus sale; all the
within its terms the description of the characteristics of and jurisprudential
subject matter that has all 3 requisites doctrines pertaining to the genus sale must

Jmvdg 19 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

necessarily pertain to assignment; except sale is registered with the municipal


to the extent modified by the chapter treasurer who shall issue a certificate of
dealing specifically on assignment. transfer; and
• Characteristics: • sale of land by “non-muslim hill tribe
◦ consensual cultural minorities all throughout the
◦ reciprocally Philippines is void if not approved by the
◦ onerous NCIP
◦ commutative
• effects: Documents of Title
◦ transfers to the assignee the right to • quedan=negotiable instrument=warehouse
collect the full value of the credit, even receipts
if he paid a price less than such value • exception to the general rule of nemo dat
◦ all the accessory rights (guaranty, quod non habet
mortgage, pledge or preference) are • includes any bill of lading, dock warrant,
transferred quedan, or warehouse receipt or order for
◦ debtor can set up against the assignee the delivery of goods, or any other
the defenses he could have set up document used in the ordinary course of
against the assignor business in the sale or transfer of goods,
as proof of the possession or control of the
• transfer of right by assignment takes place
goods
upon the perfection of the contract.
• functions:
• Does not affect 3rd persons, including the
debtor, unless they have knowledge ◦ as evidence of the possession or
thereof (must appear in a public control of the goods described therein
instrument) ◦ as the medium of transferring title and
• exceptions are assignments made: possession over the goods described
1. To a co-heir or co-owner of the right therein, without having to effect actual
assigned; delivery thereof.
2. To a creditor in payment of his credit;
3. To the possessor of a tenement or Through the document of title, the seller is
piece of land which is subject to the allowed, by fiction of law, to deal with the goods
right in litigation assigned. described therein as though he had physically
delivered them to the buyer; and the buyer may
• Reason for the exception:
take the document of title as though he had
1. the position of the assignee to enforce
actually taken possession and control over the
the right is merely strengthened
goods described therein.
FORMALITIES
Dealings through documents of title
General rule: a sale being a consensual contract,
represent a species of constructive delivery, and
no form is really required for its validity
therefore operate under the same premise as other
Exception:
forms of delivery, namely that the seller had
• the power to sell a piece of land or
ownership of the goods described thereon to effect
interests therein must be in writing,
proper delivery.
otherwise, the sale thereof by the agent
Nevertheless when the document of title is
(even if the sale its elf be in writing) would
negotiable in character, the public policy behind the
be void
State's protective mantle on the effects of
• sale of large cattels must be in writing, negotiation, the invalidity of the underlying sale or
otherwise the sale would be void; and no the actual lack of ownership of the seller of the
sal eof arge cattle shall be valid unless the goods described therein, would still effectively

Jmvdg 20 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

transfer ownership to the buyer who takes the commerce


document of title in due course.
Partial execution under Art. 1403 par. 2 (d) does
Types of Documents of Title not cover land.
• Negotiable Documents of Title
◦ goods referred therein are deliverable Sales Effected as Electronic Commerce
“to bearer”, or “to order” of any person electronic document – that information or the
named in such document representation of information, data, figures,
• Non-Negotiable Documents of Title symbols or other modes of written expression,
◦ document of title which does not state described or however represented, by which a fact
that the goods referred to therein are may be proved or affirmed, which is received,
deliverable either to bearer or to the recorded, transmitted, stored, processed, retrieved
order of any person named therein. or produced electronically.

Statute of Frauds For evidentiary purposes, an electronic document


the purpose of Art. 1403 (Statute of Frauds) is to shall be the functional equivalent of a written
prevent fraud and perjury in the enforcement of document under existing laws.
obligations depending for their evidence upon the
unassisted memory of witnesses. Under Sec. 16 (1) of the E-Commerce Act, except
Since the rules under the SoF pertains not to as otherwise agreed by the parties, an offer, the
perfection, but to enforceability and proof, then acceptance of an offer and such other elements
they operate only when there is an underlying required under existing laws for the formation of
contract that is validly perfected. contracts may be expressed in, demonstrated and
proved by means of electronic data messages or
The following agreements shall be unenforceable electronic documents and no contract shall be
by action, “unless the same, or some note or denied on the sole ground that it is in the form of
memorandum thereof, be in writing, and an electronic data message or electronic
subscribed by the party charged, or by his agent.” documents.
• sale agreement which by its terms is not to
be performed within a year from the Reformation
making thereof • used when the true intention of the parties
• an agreement for the sale of goods, to a perfected and valid contract are not
chattels or things in action, at a price not expressed in the instrument purporting to
less than P500.00 embody their agreement by reason of
mistake, fraud, inequitable conduct or
• A sale of real property or of an interest
accident
therein.
• based on justice and equity
Exceptions to coverage of statute in sales • requisites:
contracts: • meeting of the minds of the contracting
• when there is a note or memorandum parties
thereof in writing, and subscribed by the • true intention not expressed in the
party charged or his agent instrument
• when there had been partial consummation • such failure to express their true
of the sale intention is due to mistake, fraud,
• when there has been a failure to object to inequitable conduct, or accident.
the presentation of evidence aliunde as to
the existence of a contract
• when sales are effected through electronic

Jmvdg 21 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Reformation of Annulment of contract the vendor has elected to avail himself of any of
contract these remedies, he is deemed to have renounced
the others.
Presupposes a valid Based on a defective
contract in which there contract in which there Recto Law
has already been a has been no meeting of
meeting of the mind the minds because the
• Art. 1484 specifically provides that if the
consent of one or both seller should foreclose on the mortgage
of the contracting constituted on the thing sold, he shall
parties has been have no further action against the
vitiated. purchaser to recover “any unpaid balance
Remedy when there Not a remedy when of the price and any agreement to the
has been no meeting of there has been fraud, contrary shall be void.
the minds because of mistake, inequitable • The passage of the Recto Law was meant
mistake, fraud, conduct or accident. to remedy the abuses committed in
inequitable conduct, or connection with the foreclosure of chattel
accident mortgages and to prevent mortgagees from
seizing the mortgaged property, buying it at
SALE ON INSTALLMENT foreclosure sale for a low price and then
bringing suit against the mortgagor for a
Remedies available to Vendor deficiency of judgment.
[in case of default in 2 or more payments in a sale • The provisions of the Recto law are
by installment: (Art. 1484)] applicable to financing transactions derived
• Exact fulfillment of the obligation (specific or arising from sales of movables on
performance); installment, even if the underlying contract
◦ if this remedy is availed, the vendor is at issue is a loan because the promissory
not limited to the property under Chattel note had been assigned or negotiated by
mortgage. The judgment he secures the original seller.
can be enforced by attachment and
execution upon the mortgaged Art. 1485, NCC expressly made the provisions of
property, and in case of deficiency, also Art. 1484 applicable to contracts purporting to be
upon any other property not exempt leases of personal property with option to buy,
from execution. when the lessor has deprived the lessee of the
◦ If the specific performance becomes possession or enjoyment of the thing.
impossible, the vendor may still choose
rescission pursuant to the provisions of Maceda Law
Art. 1191, NCC • prior to the passage of the Maceda law, the
• Cancel the sale; legal provisions governing the remedies of
parties covering sales of immovables were
◦ a stipulation of forfeiture of all amounts
Arts. 1191, 1591 and 1592, NCC.
paid in case of cancellation is not
unconscionable. • The Maceda law has declared that whether
it be a contract of sale or a contract to sell,
• Foreclose the chattel mortgage on the
the actual rescission or cancellation thereof
thing sold, if one has been constituted.
shall take place “thirty days from receipt by
the buyer of the notice of cancellation or
Art. 1484 refers only to sale of PERSONAL
the demand for rescission of the contract
property payable in installments.
by a notarial act.”
There remedies are alternative, not cumulative. If

Jmvdg 22 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

OBLIGATIONS OF THE VENDEE ▪ when he does an act inconsistent


• to pay with the ownership of seller
◦ if the seller delivers the article without • continued possession of the
asking simultaneous payment, he may goods
demand payment of the price at any • resale of the goods
time after the delivery. • offering the goods for sale
◦ Mere sending of a letter by the buyer • mortgaging the goods
expressing his intention to pay without ▪ when he retains the good without
the accompanying payment is not intimating to the seller that he has
considered a valid tender of payment rejected them.
◦ The vendee shall owe interest for the ◦ General rule: acceptance of the goods
period between the delivery of the thing by the buyer shall not discharge the
and the payment of the price, in the seller from liability in damages or other
following three cases: legal remedy for breach of any promise
▪ Should it have been so stipulated; or warranty in the contract of sale.
▪ Should the thing sold and delivered ◦ The buyer must give the seller a notice
produce fruits or income; within a reasonable time after he knew
▪ Should he be in default, from the or under the circumstances should
time of judicial or extrajudicial have known of the breach
demand for the payment of the
price. The purchaser will not be released from his
obligation to accept and pay for the goods by
• to accept delivery deviations on the part of the seller from the exact
◦ place of delivery in case of default of terms of the contract, if the purchaser acquiesces
agreement is the seller's place of in such deviations after due notice thereof.
business or at his place of residence
▪ in case of sale of specific goods, OBLIGATIONS OF VENDOR
the place where the goods are is To preserve the subject matter
the place of delivery • the goods remain at the sellers risk until
◦ The buyer is in no obligation to accept the ownership therein is transferred to the
the partial tender, but may refuse the buyer (Art. 1502)
same and maintain his action for the To deliver the subject matter
breach of the contract as a whole. • the means by which the seller can transfer
◦ The buyer is entitled to a fair the ownership of the subject matter is by
opportunity to inspect or examine the the mode of tradition or delivery, whether
goods tendered to determine whether actual or constructive.
they conform to the contract. • As a consequence of a valid sale, the
◦ The right to inspect implies the right to delivery of the subject matter ipso jure
reject them if they are not of the quality transfers its ownership to the buyer.
required by the contract. • Types of delivery:
◦ A denial of the buyer's right to examine ◦ actual delivery (Art. 1497)
the goods affords a ground for the ▪ when the thing sold is placed in
recover of the buyer of money control and possession of the
advanced. buyer
◦ There is acceptance when: ▪ although possession is the best
▪ the buyer intimates to the seller that gauge when there is control,
he has accepted the goods; or nonetheless, control can take other

Jmvdg 23 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

forms other than actual physical possession of the object even


possession before the sale (San Lorenzo
▪ the keyword is control, not Dev't Corp vs CA)
possession ▪ traditio longa manu
◦ constructive delivery (Art. 1496) • delivery by mere agreement
***existence of an agreement • pointing of the hand
between seller and buyer that latter • by mere consent or agreement
is understood to have control over if the movable sold cannot yet
the subject matter of the sale be transferred to the
▪ execution of a public instrument possession of the buyer at the
• Art. 1498: in the case of both time of the sale (San Lorenzo
movables and immovables, Dev't Corp vs CA)
when the sale is made through ▪ delivery by negotiable document of
a public instrument, the title
execution thereof shall be ▪ quasi tradition or delivery of
equivalent to the delivery of the incorporeal property
subject matter of sale if in the • the placing of the titles of
deed the contrary does not ownership in the possession of
appear or cannot be clearly the vendee or the use by the
inferred vendee of his rights, with the
▪ symbolic delivery vendor's consent, shall be
• delivery of the keys of the place understood as a delivery.
or depository where the
▪ On sale or return
movable is stored or kept
• Art. 1502: “When goods are
• must involve or cover the
delivered to the buyer "on sale
subject matter and cannot take
or return" to give the buyer an
the form relating to the payment
option to return the goods
of the purchase price
instead of paying the price, the
▪ constitutum possessorium ownership passes to the buyer
• takes effect when at the time of on delivery, but he may revest
the perfection of the sale, the the ownership in the seller by
seller held possession of the returning or tendering the
subject matter in the concept of goods within the time fixed in
an owner, and pursuant to the the contract, or, if no time has
contract, the seller continues to been fixed, within a reasonable
hold physical possession time.
thereof no longer in the concept • When goods are delivered to
of an owner, but as a lessee or the buyer on approval or on trial
any other form of possession, or on satisfaction, or other
other than in concept of owner similar terms, the ownership
• where the seller remains in therein passes to the buyer:
possession of the property in a ◦ When he signifies his
different capacity. (San Lorenzo approval or acceptance to
Dev't Corp vs CA) the seller or does any other
▪ traditio brevi manu act adopting the
• opposite of constitutum transaction;
possessorium ◦ If he does not signify his
• if the buyer already had

Jmvdg 24 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

approval or acceptance to sale of one having voidable title


the seller, but retains the • Art. 1506: Where the seller of goods has a
goods without giving notice voidable title thereto, but his title has not
of rejection, then if a time been avoided at the time of the sale, the
has been fixed for the buyer acquires a good title to the goods,
return of the goods, on the provided he buys them in good faith, for
expiration of such time, value, and without notice of the seller's
and, if no time has been defect of title.
fixed, on the expiration of a
reasonable time. What is a Double sale
reasonable time is a • considered double sale if the same
question of fact. property has been sold by the same person
▪ delivery through carrier who has an existing right over such
property, to two different persons
To deliver the fruits and accessories • rules of preference:
• General rule: (Art. 1537) “The vendor is ◦ 1st who recorded it with the the proper
bound to deliver the thing sold and its registry of property
accessions and accessories in the
◦ should there be no entry, the one who
condition in which they were upon the
1st took possession thereof
perfection of the contract. All the fruits shall
pertain to the vendee from the day on ◦ the one with oldest title, provided there
which the contract was perfected.” is good faith
• Except: if the thing is loss or destroyed expenses of sale
due to a fortuitous event
• Art. 1487: The expenses for the execution
• the obligation to deliver the thing sold and registration of the sale shall be borne
arises upon the perfection of the contract; by the vendor, unless there is a stipulation
thus, the fruits of the thing shall belong to to the contrary.
the vendee from the time of such perfection
RISK OF LOSS
To warrant the subject matter before perfection:
• risk of loss pertains to the purported seller
sale by a person not the owner; (Art. 1505)
since he owns the thing
• a seller without title cannot transfer a better
title than what he has, unless some at the time of perfection:
principle of estoppel comes into operation.
• Art. 1493, par. 1:If at the time the contract
• The purchaser of property which has been
of sale is perfected, the thing which is the
stolen from the owner, has been held to
object of the contract has been entirely
acquire no title thereto even though he
lost, the contract shall be without any
purchases for value and good faith
effect.
• estoppel
◦ Exception: in sale that are aleatory, the
◦ the owner of goods may by his conduct
vendor will be entitled to the price, even
be precluded from denying the seller's
if the thing had ceased to exist at the
authority to sell
time of the contract.
◦ for this to apply, the owner must by
◦ if the loss is by fault of the vendor, or
word or conduct have caused or
he knew at the time of the contract that
allowed it to appear that the title is in
it had already been loss, he must pay
the seller and the buyer must have
damages to the vendee.
been thereby misled to his damage

Jmvdg 25 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• Art. 1493, par. 2: If the thing should have party at fault.


been lost in part only, the vendee may
choose between withdrawing from the WARRANTIES
contract and demanding the remaining express warranty
part, paying its price in proportion to the • makes the seller liable for damages
total sum agreed upon. • requisites
◦ This applies even when the loss is only ◦ it must be an affirmation of the fact or
an insignificant part as the law makes any promise by the seller relating to the
no distinction. subject matter of the sale
• ARTICLE 1494. Where the parties purport ◦ the natural tendency of such affirmation
a sale of specific goods, and the goods is to induce the buyer to purchase the
without the knowledge of the seller have thing; and
perished in part or have wholly or in a ◦ the buyer purchases the thing relying
material part so deteriorated in quality as to on such affirmation or promise thereon
be substantially changed in character, the • a mere expression of an opinion does not
buyer may at his option treat the sale: signify fraud, unless made by a expert and
▪ As avoided; or the other party has relied on the former's
▪ As valid in all of the existing goods special knowledge (Art. 1341)
or in so much thereof as have not
deteriorated, and as binding the implied warranty
buyer to pay the agreed price for • those which the law constitute parts of
the goods in which the ownership every contract of sale, WON the parties
will pass, if the sale was divisible. were aware of them, and WON the parties
◦ Sale of good “as is”, not covered by this intended them.
provision. • Examples:
◦ Warranty that seller has the right to sell
After perfection, but before delivery: ◦ warranty against eviction
• although the SC has held that the general ◦ warranty against non-apparent
rule under the Philippine jurisdiction is that servitude
after perfection but before delivery, the risk ◦ warranty against hidden defects
of loss is borne by the seller under the rule
of res perit domino, the statutory bases for buyer's option in case of beach of warranty (Art.
such doctrine are not clear-cut and 1559)
sometimes conflicting. • accept or keep the goods and set up
◦ Art. 1504 against the seller, the breach of warranty
◦ Art. 1163 to 1165, cross refer to Art. by way of recoupment in diminution or
1262 extinction of the price
◦ Art. 1538, cross refer to Art. 1189 • accept or keep the goods and maintain an
action against the seller for damages for
after delivery the breach of warranty
• under Art.1504, when ownership of the • refuse to accept the goods, and maintain
goods has been transferred to the buyer, an action against the seller for damages
the goods shall be at the buyer's risk. and breach of warranty
• Exception • rescind the contract of sale and refuse to
◦ actual delivery had been delayed receive the goods or ifteh goods have
through the fault of either buyer or already been received, return them or offer
seller, the goods are at the risk of the to return them to the seller and recover the

Jmvdg 26 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

price or any part thereof which has been breach but an event that
paid prevents the vendor’s
obligation to convey title
the retailer shall be subsidiarily liable under from acquiring binding
the warranty in case of failure of both the force.
manufacturer and distributor to honor the warranty,
and that in such case would be to proceed.

The warranty rights can be enforced by BULK SALES LAW


presentment to the immediate seller either the intended as a specie of bankruptcy and
warranty card or the official receipt along with the fraudulent transactions law meant to protect suppl
produced to be serviced or returned to the creditors or businessmen against preferential or
immediate seller. No other documentary fraudulent transfers done by merchants.
requirement shall be demanded from the
purchaser. (Art. 68, RA 7394) the primary objective of the law is to
compel the seller in bulk to execute and deliver a
implied warranty shall endure not less than verified lists of his creditors to his buyer, and notice
60 days nor more than 1 year following the sale of of intended sale to be sent in advance to said
the new consumer products (Art. 68, RA 7394) creditors, and to use the proceeds to cover
outstanding liabilities.
REDEMPTION AND
EXTINGUISHMENT OF SALE This law is constitutional as being a valid
exercise of the State's police power (Liwanag vs
Sales are extinguished by the same causes Mengraj)
as all other obligations; and by conventional or
legal redemption. transactions covered by the law
• Extraordinary sale of goods. A stock of
RESCISSION goods, wares, merchandise, provisions, or
material NOT in the ordinary course of
Art. 1191 Art 1383
trade and the regular prosecution of the
While Article 1191 uses rescission under Article business of the seller, mortgagor,
the term rescission, the 1383 is a subsidiary transferor, or assignor
original term used in action limited to cases • Extraordinary sale of fixtures and
Article 1124 of the old of rescission for lesion equipments. All or substantially all of the
Civil Code, from which under Article 1381 of fixtures and equipment used in or about the
Article 1191 was based, the New Civil Code business of the seller, mortgagor,
was resolution. transferor, or assignor
Resolution is a principal • Sale of business enterprise. All, or
action that is based on substantially all, of the business or trade
breach of a party, theretofore conducted by the seller,
the obligor’s failure to mortgagor, transferor, or assignor.
comply with an
obligation already WON the transaction is meant to defraud creditors,
extant, not a failure of a or WON the seller is in a state of solvency or
condition to render insolvency, would be irrelevant; as long as the
binding that obligation. transaction falls within any of the 3 defined
Failure to pay, in this transactions, it s covered by the law.
instance, is not even a
Obligations of seller/encumbrancers when

Jmvdg 27 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

transaction is a bulk sale:


• to deliver a sworn statement of listing of Retail trade
creditors • any act, occupation or calling of habitually
• pro-rata application of proceeds selling direct to the general public
• written advance disclosure to creditors merchandise, commodities or goods for
• bulk transfer for nominal value consumption.
• Exempted transactions
consequences of violation of the law: ◦ sales by a manufactirer, processor,
• imprisonment for not less than 6 months to laborer or worker to the general public
more than 5 years or fine in any sum not of the products manufactured,
exceeding P5k or by both such fine and processed or produced by him if his
imprisonment, in the discretion of the court. capital does not exceed P100k
◦ sale by a farmer or agriculturist of the
RETAIL TRADE LIBERALIZATION ACT products of his farm, regardless of
capital
Section 2. Declaration of Policy. – It is the policy of
the State to promote consumer welfare in attracting ◦ sales in restaurant operations by a
promoting and welcoming productive investment hotel owner or inn-keeper irrespective
that will bring down price for the Filipino consumer, of the amount of capital, provided that
create more jobs, promote tourism, assist small the restaurant is incidental t the hotel
manufacturers, stimulate economic growth and business
enable Philippine goods and services to become ◦ sales to the general public, through a
globally competitive through the liberalization of the single outlet owned by a manufacturer
retail trade sector. of products manufactured, processed
or assembled in the Philippines,
Pursuant to this policy, the Philippine retail industry irrespective of capitalization
is hereby liberalized to encourage Filipino and ◦ sales to industrial and commercial
competitive retail trade sector in the interest of users or consumers who use the
empower the Filipino consumer through lower products bought by them to render
prices, higher quality goods, better services and service o the general public and/or
wider choices. produce or manufacture of goods which
are in turn sold by them, and
Repealed Retail Trade Nationalization Law – ◦ sales to the government and/or its
nationalized the retail trade system and which agencies and GOCCs.
allowed only citizens and juridical entities which
are 100% Filipinos to engage in retail trade. Categories of Retail Trade Enterprises
RTLA liberalized the Philippine retail industry to
• Category A – with paid up capital of the
peso equivalebt of less than US$2.5M
encourage Filipino and foreign investors to forge
an efficient and competitive retail trade sector in • Category B – minimum paid up capital of
the interest of empowering the Filipino consumer the peso equivalent of US$2.5M but less
through lower prices, higher quality goods, better than US$7.5M, procided in no case shall
services, and wider choices. the investments for establishing a store be
less than the peso equivalent of US$30,k
A natural born citizen of the Philippines who has • Category C – paid up capital of the peso
lots his Philippine citizenship but who resides in the equialent of US$7.5M or more provided
Philippines shall be granted the same rights as that in no case shall the investments for
Filipino citizens for purposes of retail trade under establishing a store be less than the peso
the RTLA. equivalent of US$380k

Jmvdg 28 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

• Category D – specializing in high end or In order to constitute Ownership is not


luxury products with a paid up capital of the usufruct, one must be required to constitute
peso equivalent of US$250k per store the owner of the thing lease (case of sublease)
Owner allows the Lessor places and
CONSUMER ACT OF THE PHILIPPINES
usufructuary to use and maintain the lessee in
Article 2. Declaration of Basic Policy. – It is the
enjoy the property the enjoyment of the
policy of the State to protect the interests of the
thing
consumer, promote his general welfare and to
establish standards of conduct for business and Includes all possible May be limited to
industry. Towards this end, the State shall uses and manner of particular uses by the
implement measures to achieve the following enjoyment of the contract
objectives: property
(a) protection against hazards to health and May be for an indefinite Must be for a
safety; period of time determinate period
(b) protection against deceptive, unfair and
unconscionable sales acts and practices;
(c) provision of information and education to Lease of a thing:
facilitate sound choice and the proper • one of the parties binds himself to give to
exercise of rights by the consumer; another the enjoyment or use of a thing for
(d) provision of adequate rights and means of a price certain and for a period which may
redress; and be definite or indefinite
(e) involvement of consumer representatives • subject matter must be within the
in the formulation of social and economic commerce of man, otherwise it is void
policies. • the lease of a building naturally includes
the lease of the lot
PART 2: LEASE • special characteristics
◦ essential purpose is to transmit the use
The contract of lease may be of a thing, or enjoyment of a thing
work, or service. ◦ it is consensual
Characteristics: ◦ it is onerous
• temporary duration ◦ its price is fixed in relation to the period
• onerous of use or enjoyment
• the price is fixed according to the duration ◦ it is temporary
of the contract. • the rent may be paid in money, or in fruits,
or in some other useful things
Sale Lease • rent must be serious or substantial
There is a permanent There is a transfer of • duration of lease must not go beyond 99
transmission of use or enjoyment of the years
ownership of the thing thing, and only for a
sold determinate period of General rule: consumable goods cannot be the
time subject of a contract of lease,
exceptions:
• when they are merely to be exhibited or
Usufruct Lease • when they are accessory to an industrial
Both involves the use and enjoyment of the thing establishment
Always is a real right Real right only when it is lease of work or service
registered
• one of the parties binds himself to execute

Jmvdg 29 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

a piece of work or to render to the other the necessary repairs in order to keep it
some service for a price certain suitable for the use to which it has been
Lease of services Agency devoted, unless there is a stipulation to the
contrary;
There is no Principle of ◦ this obligation of the lessor may be
representation representation is waived by the lessee thus relieving the
present former of his duty to make such repairs
There must be a price Gratuitous ◦ lessee shall make notifications to the
lessor for the latter to make the
Will of both parties is The will of one party is
necessary repairs
necessary for the sufficient to extinguish a
extinguishment of the contract of agency. ◦ in default of special stipulation, the
obligation custom of the place shall be observed
with regard to the kinds of repairs on
urban property (Art. 1686)
The lessee cannot assign the lease without the
• To maintain the lessee in the peaceful and
consent of the lessor.
adequate enjoyment of the lease for the
entire duration of the contract.
Assignment Sublease ◦ The non-fulfillment by the lessor of this
Transfer to a 3rd person Merely another contract obligation releases the lessee from the
of the rights and of lease obligation to pay what is stipulated in
obligations arising from the contract from the date he ceased to
the contract occupy the premises
◦ this duty of the lessor is merely a
Sale of a lessee's right The original lessee
warranty that the lessee shall not be
becomes in turn a
disturbed in his legal, not physical
lessor
possession
Original lessee is The original lease ◦ the lessee has the obligation to notify
released from his contract subsists and is the lessor of the necessity of making
obligations under the binding on the lessee the repairs.
contract ◦ The remedy of the tenants where
Consent of the lessor is Consent of lessor may lessor refuses to make an urgent repair
needed or may not be secured is to make the urgent repairs
themselves and charge the costs
thereof to lessor.
Obligations of the Lessor
• To deliver the thing which is the object of ◦ The lessor is not obliged to answer for
the contract in such a condition as to a mere act of trespass which a third
render it fit for the use intended; person may cause on the use of the
thing leased; but the lessee shall have
◦ if the dwelling place or building is in
a direct action against the intruder. (Art.
such a condition that its use brings
1664)
imminent and serious danger to life or
health, the lessee may terminate the ▪ trespass in fact
lease at one by informing the lessor • de mero hecho
◦ the lessor cannot alter the form of the • no juridic intention on the part
thing leased in such a way as to impair of the trespasser
the use to which the thing is devoted • affects only the use of the
under the terms of the leased. property leased and therefore it
• To make on the same during the lease all is incumbent upon the lessee to

Jmvdg 30 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

repel it possessor in bad faith. (ARTICLE 1671)


• the lessor is not liable for this • In case of an implied new lease, the
kind of trespass obligations contracted by a third person for
▪ trespass in law the security of the principal contract shall
• disturbance of the possession cease with respect to the new lease.
warranted by the lessor (ARTICLE 1672)
• by judicial or extra-judicial
acts3rd person questioned the “If the period for the lease has not been fixed, it is
rights of the lessee to enjoy the understood to be from year to year, if the rent
property or the lease, and agreed upon is annual; from month to month, if it is
claims it for himself by virtue of monthly; from week to week, if the rent is weekly;
a right pertaining to him. and from day to day, if the rent is to be paid daily.
• The lessor is liable to the However, even though a monthly rent is paid, and
lessee for the disturbance of no period for the lease has been set, the courts
the latter's possession may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the
Obligations of the Lessee rent is weekly, the courts may likewise determine a
• To pay the price of the lease according to longer period after the lessee has been in
the terms stipulated; possession for over six months. In case of daily
rent, the courts may also fix a longer period after
◦ this obligation arises only where the
the lessee has stayed in the place for over one
contract has been actually carried into
month”. (ARTICLE 1687)
effect by the delivery of the thing
leased
Payment shall be made in the place designated in
◦ only the owner has the right to fix the
the obligation.
rent
There being no express stipulation and if the
• To use the thing leased as a diligent father undertaking is to deliver a determinate thing, the
of a family, devoting it to the use stipulated; payment shall be made wherever the thing might
and in the absence of stipulation, to that be at the moment the obligation was constituted.
which may be inferred from the nature of In any other case the place of payment shall be the
the thing leased, according to the custom domicile of the debtor.
of the place; If the debtor changes his domicile in bad faith or
• To pay expenses for the deed of lease. after he has incurred in delay, the additional
expenses shall be borne by him.
Lease with a fix term These provisions are without prejudice to venue
• ceases upon the day fixed without need of under the Rules of Court. (ARTICLE 1251)
demand
• when a contract contains a provision that
the term of the lease may be extended for
a further similar period, the extension is to
be understood as having been promised to
the lessee and the latter, without need of
further consent of the lessor can continue
the lease and occupy the premises on
notice to the lessor
• If the lessee continues enjoying the thing
after the expiration of the contract, over the
lessor's objection, the former shall be
subject to the responsibilities of a

Jmvdg 31 1st Sem/A.Y. 2010-2011


Sales and Lease
AUF School of Law (outline by Atty. Marianne Beltran-Angeles)

Sources:
• Civil Code of the Philippines, Book V,
Tolentino, 1992
• Civil Code of the Philippines, Book II,
Tolentino, 1992
• Law on Sales, 2009 ed., Cesar L.
Villanueva
• Civil Code of the Philippines, Book V,
Paras
• Comments and Jurisprudence on
Obligations and Contracts, 11th revised
Edition, Jurado

Jmvdg 32 1st Sem/A.Y. 2010-2011