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Definition of Sales:

In reciprocal obligations, neither party incurs in


Art. 1458. By the contract of sale one of the delay if the other does not comply or is not
contracting parties obligates himself to transfer ready to comply in a proper manner with what
the ownership and to deliver a determinate is incumbent upon him. From the moment one
thing, and the other to pay therefor a price of the parties fulfills his obligation, delay by the
certain in money or its equivalent. other begins. (1100a)

A contract of sale may be absolute or Art. 1191. The power to rescind obligations is
conditional. implied in reciprocal ones, in case one of the
obligors should not comply with what is
What is the concept of sale? incumbent upon him.
- Art. 1458. By the contract of sale one of the
contracting parties obligates himself to The injured party may choose between the
transfer the ownership and to deliver a fulfillment and the rescission of the obligation,
determinate thing, and the other to pay with the payment of damages in either case.
therefor a price certain in money or its He may also seek rescission, even after he has
equivalent. chosen fulfillment, if the latter should become
impossible.
A contract of sale may be absolute or
conditional. The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing
Elements of Contract of Sale: of a period.
1. Consent or meeting of the minds of the parties; This is understood to be without prejudice to
2. Determinate subject matter; the rights of third persons who have acquired
3. Amount certain in money or its equivalent the thing, in accordance with Articles 1385 and
1388 and the Mortgage Law.
What are the characteristics of the contract of sale?
1. Principal - A reciprocal obligation means that the
2. Consensual obligations of the parties are to be
3. Reciprocal performed simultaneously, so that the
4. Onerous Contract performance of one is conditioned upon
5. Title not mode the simultaneous fulfillment of the other.

1. Principal - The power to rescind is implied in


- A contract of sale is what the law defined it reciprocal obligation in case one of the
to be, taking into considerations its obligors should not comply with what is
essential elements, and not what the incumbent upon him, and without need of
contracting parties call it. prior demand.

2. Consensual
- A contract of sale is not real, but a - In the case of Macasaet:
consensual contract, and becomes valid The SC held that the contract of sale is
and binding perfected when there is a meeting of the
minds upon the thing, which is the object of the
3. Reciprocal contract, and the price.

Art. 1169. Those obliged to deliver or to do - From that moment alone, parties may
something incur in delay from the time the reciprocally demand performance subject
obligee judicially or extrajudicially demands to the provision of the law governing such
from them the fulfillment of their obligation. form of contract.
However, the demand by the creditor shall not
be necessary in order that delay may exist: Question in relation to this case:

(1) When the obligation or the law expressly so 1. Is reciprocity required to be stated in order
declare; or to be demanded?

(2) When from the nature and the Ans:


circumstances of the obligation it appears o When the contract of sale is
that the designation of the time when the possessed on reciprocal prestation,
thing is to be delivered or the service is to the contract of sale is implied in
be rendered was a controlling motive for reciprocal.
the establishment of the contract; or o Meaning, it is not necessary that
reciprocity must be stated in order
(3) When demand would be useless, as when for it to be demanded, because it
the obligor has rendered it beyond his is already implied. (Legal basis: Art.
power to perform. 1191)
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Art. 1355. Except in cases specified by law, lesion or
Also in this case, the SC ruled that the sale inadequacy of cause shall not invalidate a
involves an obligation to do or deliver contract, unless there has been fraud, mistake or
something. undue influence.

So what is the effect if there is delay in the Art. 1470. Gross inadequacy of price does not
performance (do or deliver) of the thing: affect a contract of sale, except as it may indicate
a defect in the consent, or that the parties really
Art. 1169. Those obliged to deliver or to do intended a donation or some other act or contract.
something incur in delay from the time the
obligee judicially or extrajudicially demands Sale is not a mode, but merely a title. A mode is the
from them the fulfillment of their obligation. legal means by which dominion or ownership is
However, the demand by the creditor shall not created, transferred or destroyed, but title is only
be necessary in order that delay may exist: the legal basis by which to affect dominion or
ownership. Sale by itself does not transfer or affect
(4) When the obligation or the law expressly so ownership; the most that sale does is to create the
declare; or obligation to transfer ownership. It is tradition or
delivery, as a consequence of sale, that actually
(5) When from the nature and the transfers ownership.
circumstances of the obligation it appears
that the designation of the time when the Seller’s ownership of the thing sold is not an
thing is to be delivered or the service is to element of perfection; what the law requires is that
be rendered was a controlling motive for seller has the right to transfer ownership at the time
the establishment of the contract; or of delivery.

(6) When demand would be useless, as when


the obligor has rendered it beyond his SALE DISTINGUISHED FROM SIMILAR CONTRACTS
power to perform. A contract is what the law defines it to be, taking into
consideration its essential elements, and the title given
In reciprocal obligations, neither party to it by the parties is not as much significant as its su
incurs in delay if the other does not comply bstance. The transfer of ownership in exchange for a
or is not ready to comply in a proper price paid or promised is the very essence of a contract
manner with what is incumbent upon him. of sale.
From the moment one of the parties fulfills
his obligation, delay by the other begins. In determining the real character of sale, courts look at
the intent of the parties, their true aim and purpose in
4. Onerous Contract – there must be consideration. entering into the contract, as well as “by their conduct,
words, actions and deeds prior to, during and
- Art. 1355. Except in cases specified by law, immediately after executing the agreement,” and not
lesion or inadequacy of cause shall not at the nomenclature used to describe it.
invalidate a contract, unless there has
been fraud, mistake or undue influence. 1. Donation (Arts. 725 and 1471)

- Art. 1470. Gross inadequacy of price does Art. 725. Donation is an act of liberality whereby a
not affect a contract of sale, except as it person disposes gratuitously of a thing or right in favor of
may indicate a defect in the consent, or another, who accepts it.
that the parties really intended a donation
or some other act or contract. Art. 1471. If the price is simulated, the sale is void, but
the act may be shown to have been in reality a
“In case of doubt, the doubt shall be resolved in the donation, or some other act or contract.
greatest reciprocity of interest”.
Unlike a donation, sale is a disposition for valuable
Ex. If the purchase price is less than the market value, it consideration with no diminution of the estate but
cannot be considered a sale; otherwise it is a contract merely substitution of values, with the property sold
of sale. replaced by the equivalent monetary consideration;
unlike donation, a valid sale cannot have the legal
What ang gibayran kay medya-medya lang? effect of depriving the compulsory heirs of their
legitimes. The rules on double sales under Art. 1544 find
- It can be a contract of lease or contract of no relevance to donations.
mortgage.
2. Barter (Arts. 1468, 1638 to 1641)
But how to determine whether the parties entered into
a contract of lease or contract of mortgage? Art. 1468. If the consideration of the contract consists
- Look at the real intention of the parties. partly in money, and partly in another thing, the
transaction shall be characterized by the manifest
5. Title, not a Mode intention of the parties. If such intention does not clearly
appear, it shall be considered a barter if the value of
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the thing given as a part of the consideration exceeds “Ineluctably, whether the contract be one of sale or
the amount of the money or its equivalent; otherwise, it one for a piece of work, a transfer of ownership is
is a sale. involved and a party necessarily walks away with an
object.”
Art. 1638. By the contract of barter or exchange one of
the parties binds himself to give one thing in In both, the provisions on warranty of title against
consideration of the other's promise to give another hidden defects apply.
thing.
When a person stipulates for the future sale of articles
Art. 1639. If one of the contracting parties, having which he is habitually making, and which at the time
received the thing promised him in barter, should prove are not made or finished, it is essentially a contract of
that it did not belong to the person who gave it, he sale and not a contract for labor; even when he
cannot be compelled to deliver that which he offered executes production thereof only after an order is
in exchange, but he shall be entitled to damages. placed by customers. If the thing is specially done only
upon the specific order of another, this is a contract for
Art. 1640. One who loses by eviction the thing received a piece of
in barter may recover that which he gave in exchange work; if the thing is manufactured or procured for the
with a right to damages, or he may only demand an general market in the ordinary course of business, it is a
indemnity for damages. However, he can only make contract of sale.
use of the right to recover the thing which he has
delivered while the same remains in the possession of To Tolentino, the distinction depends on the intention of
the other party, and without prejudice to the rights parties: if parties intended that at some future date an
acquired in good faith in the meantime by a third object has to be delivered, without considering the
person. work or labor of the party bound to deliver, the
contract is one of sale; but if one of the parties accepts
Art. 1641. As to all matters not specifically provided for the undertaking on the basis of some plan, taking into
in this Title, barter shall be governed by the provisions of account the work he will employ personally or through
the preceding Title relating to sales. another, the contract is for a piece of work.

3. Contract for Piece-of-Work (Arts. 1467, 1713 to 4. Agency to Sell (Art. 1466)
1715)
Art. 1466. In construing a contract containing provisions
Art. 1467. A contract for the delivery at a certain price characteristic of both the contract of sale and of the
of an article which the vendor in the ordinary course of contract of agency to sell, the essential clauses of the
his business manufactures or procures for the general whole instrument shall be considered.
market, whether the same is on hand at the time or not,
is a contract of sale, but if the goods are to be Assumption by “agent” of the risk pertaining to the cost
manufactured specially for the customer and upon his or price of the subject matter makes the relationship
special order, and not for the general market, it is a that of buyer-seller, for the agent does not assume risk
contract for a piece of work. with respect to the price or the property subject of the
relationship.
Art. 1713. By the contract for a piece of work the
contractor binds himself to execute a piece of work for Consequently:
the employer, in consideration of a certain price or (a) the contractual relationship is not inherently
compensation. The contractor may either employ only revocable.
his labor or skill, or also furnish the material. (b) the purported agent does not have to account for
the profit margin earned from acquiring the property
Art. 1714. If the contractor agrees to produce the work for the purported principal.
from material furnished by him, he shall deliver the thing
produced to the employer and transfer dominion over One factor that most clearly distinguishes agency from
the thing. This contract shall be governed by the other legal concepts, including sale, is control; one
following articles as well as by the pertinent provisions person – the agent – agrees to act under the control or
on warranty of title and against hidden defects and the direction of another – the principal. Commercial broker,
payment of price in a contract of sale. commission merchant or indentor is a middleman
acting in his own name, and acts as agent for both
Art. 1715. The contract shall execute the work in such a seller and buyer to effect a sale between them.
manner that it has the qualities agreed upon and has Although he is neither seller nor buyer to the contract
no defects which destroy or lessen its value or fitness for effected he may voluntarily assume warranties of seller.
its ordinary or stipulated use. Should the work be not of
such quality, the employer may require that the 5. Dacion En Pago (Arts. 1245 and 1934)
contractor remove the defect or execute another
work. If the contract fails or refuses to comply with this Art. 1245. Dation in payment, whereby property is
obligation, the employer may have the defect alienated to the creditor in satisfaction of a debt in
removed or another work executed, at the contractor's money, shall be governed by the law of sales.
cost.
Art. 1934. An accepted promise to deliver something by
way of commodatum or simple loan is binding upon
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parties, but the commodatum or simple loan itself shall Art. 1484. In a contract of sale of personal property
not be perfected until the delivery of the object of the the price of which is payable in installments, the
contract. vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the
Governed by the law on sales, dation in payment is a vendee fail to pay;
transaction that takes place when property is alienated (2) Cancel the sale, should the vendee's failure to
to the credito r in full satisfac tion of a debt in money – it pay cover two or more installments;
involves the delivery and transmission of ownership of a (3) Foreclose the chattel mortgage on the thing
thing as an accepted equivalent of the performance sold, if one has been constituted, should the
of the obligation . vendee's failure to pay cover two or more
installments. In this case, he shall have no further
In its modern concept, what actually takes place in action against the purchaser to recover any
dacion en pago is an objective novation of the unpaid balance of the price. Any agreement to
obligation where the thing offered as an accepted the contrary shall be void.
equivalent of the performance of an obligation is
considered as the object of the contract of sale, while Art. 1485. The preceding article shall be applied to
the debt is considered as the purchase price. contracts purporting to be leases of personal
property with option to buy, when the lessor has
Elements of dation in payment: deprived the lessee of the possession or enjoyment
of the thing.
(a) performance of the prestation in lieu of payment
(animo solvendi ) which may consist in the delivery of a When rentals in a “lease” are clearly meant to be
corporeal thing or a real right or a credit against the installment payments to a sale contract, despite the
third nomenclature given by the parties, it is a sale by
person; installments and governed by the Recto Law.

(b) some difference between the prestation due and II. PARTIES TO A CONTRACT OF SALES
that which is given in substitution (aliud pro alio); and 1. General Rule: Every person having legal capacity to
obligate himself, may validly enter into a contract of
(c) agreement between the creditor and debtor that sale, whether as seller or as buyer. (Art. 1489)
the obligation is immediately extinguished by reason of 2. Minors, Insane and Demented Persons, Deaf-Mutes
the performance of a presentation different from that (Arts. 1327, 1397 and 1399)
due. A minor cannot be deemed to have given her consent
to a contract of sale; consent is among the essential
There is no dation in payment where there is no transfer requisites of a contract, including one of sale, absent of
of ownership in the creditor’s favor, as when the which there can be no valid contract.
possession of the thing is merely given to the creditor by
way of security.; as when the possession is only by way
of security.; there must be actu al delivery of the prop a. NECESSARIES (Arts. 1489 and 290)
erty to the credit or by way of extinguishment of the
pre-existing debt. Art. 1489. All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale,
In a true dacion en pago, the assignment of the saving the modifications contained in the following
property extinguishes the monetary debt. articles.

A creditor, especially a bank, which enters into dacion b. Protection of the Senile and Elderly (Art. 24) and
en pago, should know and must accept the legal Illiterates (Art. 1332)
consequence thereof, that the pre-existing obligation is
totally extinguished. Art. 1332. When one of the parties is unable to read, or
if the contract is in a language not understood by him,
A property subject to a real estate mortgage, which and mistake or fraud is alleged, the person enforcing
has not been foreclosed, may validly be the subject of the contract must show that the terms thereof have
dacion en pago, for a mortgage does not take away been fully explained to the former.
the property rights of the mortgagor; however, the
creditor who becomes the buyer of the property is Under Art. 1332, when one of the parties is unable to
subject to the real estate mortgage lien. read, or if the contract is in a language not understood
by him, and mistake or fraud is alleged , the person
A dacion en pago is governed by the law of sales, and enforcing the contract the terms thereof have been
contracts of sale come with warranties, either express (if fully explained to the former; otherwise, sale is void.
explicitly stipulated by the parties) or implied (under
Article 1547 et seq. of the Civil Code). The implied While a person is not incompetent to contract merely
warranty in case of eviction is waivable and cannot be because of advanced years or by reason of physical
invoked if the buyer knew of the risks or danger of infirmities, when such age or infirmities have impaired
eviction and assumed its consequences. the mental faculties so as to prevent the person from
properly, intelligently or firmly protecting his property
6. Lease (Arts. 1484 and 1485) rights, then he is undeniably incapacitated, and the
sale he entered into is void.
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3. Sales By and Between Spouses: Under Art. 124 of Family Code, sale by husband of a
a. Contracts with Third Parties (Arts. 73, 96, and 124, conjugal property without the wife’s consent is void
Family Code) and not merely voidable, since the resulting contract
lacks one of the essential elements of “full consent”.
Art. 73. Either spouse may exercise any legitimate
profession, occupation, business or activity without the A wife affixing her signature to a Deed of Sale as a
consent of the other. The latter may object only on witness is deemed to have given her consent.
valid, serious, and moral grounds.
In case of disagreement, the court shall decide As an exception, husband may dispose of conjugal
whether or not: property without wife s consent if such sale is
necessary to answer for conjugal liabilities mentioned in
(1) The objection is proper; and
Articles 161 and 162.
(2) Benefit has occurred to the family prior to the
c. Between Spouses (Arts. 133, 1490, 1492; Sec. 87,
objection or thereafter. If the benefit accrued
Family Code)
prior to the objection, the resulting obligation
shall be enforced against the separate
property of the spouse who has not obtained
Art. 1490. The husband and the wife cannot sell
consent.
property to each other, except:
(1) When a separation of property was agreed
The foregoing provisions shall not prejudice the rights of
upon in the marriage settlements; or
creditors who acted in good faith.
(2) When there has been a judicial separation
or property under Article 191.
Art. 96. The administration and enjoyment of the
community property shall belong to both spouses
Art. 1492. The prohibitions in the two preceding
jointly. In case of disagreement, the husband's decision
articles are applicable to sales in legal
shall prevail, subject to recourse to the court by the wife
redemption, compromises and renunciations.
for proper remedy, which must be availed of within five
years from the date of the contract implementing such Sales between spouses who are not governed by a
decision. complete separation of property regime are void, not
In the event that one spouse is incapacitated or just voidable.
otherwise unable to participate in the administration of
the common properties, the other spouse may assume Since the spouses cannot validly sell property to one
sole powers of administration. These powers do not
another under Art. 1490, then policy consideration and
include disposition or encumbrance without authority of
the dictates of morality require that the prohibition
the court or the written consent of the other spouse. In
should apply also to common-law relationships.
the absence of such authority or consent, the
disposition or encumbrance shall be void. However, the
Sale by husband of conjugal land to his concubine is
transaction shall be construed as a continuing offer on
null and void for being contrary to morals and public
the part of the consenting spouse and the third person,
policy and “subversive of the stability of the family, a
and may be perfected as a binding contract upon the
basic social institution which public policy cherishes and
acceptance by the other spouse or authorization by
protects.”
the court before the offer is withdrawn by either or both
offerors.
Nevertheless, when property resold to a third-party
buyer in good faith and for value, reconveyance is no
Art. 124. The administration and enjoyment of the
longer available.
conjugal partnership shall belong to both spouses
jointly. In case of disagreement, the husband's decision
The in pari delicto doctrine would not apply to the
shall prevail, subject to recourse to the court by the wife
spouses-parties under Art. 1490, since only the heirs and
for proper remedy, which must be availed of within five
the creditors can question the sale’s nullity.
years from the date of the contract implementing such
decision. 6. Others Relatively Disqualified (Arts. 1491
In the event that one spouse is incapacitated or and 1492)
otherwise unable to participate in the administration of
the conjugal properties, the other spouse may assume Art. 1491. The following persons cannot acquire by
sole powers of administration. These powers do not purchase, even at a public or judicial auction, either in
include disposition or encumbrance without authority of
person or through the mediation of another:
the court or the written consent of the other spouse. In
(1) The guardian, the property of the person or persons
the absence of such authority or consent, the
who may be under his guardianship;
disposition or encumbrance shall be void. However, the
(2) Agents, the property whose administration or sale
transaction shall be construed as a continuing offer on
may have been entrusted to them, unless the consent
the part of the consenting spouse and the third person,
of the principal has been given;
and may be perfected as a binding contract upon the
(3) Executors and administrators, the property of the
acceptance by the other spouse or authorization by
estate under administration;
the court before the offer is withdrawn by either or both
offerors.
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(4) Public officers and employees, the property of the (a) Sale of the land acquired by a client to satisfy a
State or of any subdivision thereof, or of any judgment to his attorney as long as the property was
government-owned or controlled corporation, or not the subject of the litigation.
institution, the administration of which has been
intrusted to them; this provision shall apply to judges (b) Contingency fee arrangement granting the lawyer
and government experts who, in any manner proprietary rights to the property in litigation since the
whatsoever, take part in the sale; payment of said fee is not made during the pendency
(5) Justices, judges, prosecuting attorneys, clerks of of litigation but only after judgment has been rendered.
superior and inferior courts, and other officers and
employees connected with the administration of c. Judges
justice, the property and rights in litigation or levied A judge should restrain himself from participating in the
upon an execution before the court within whose sale of properties—it is incumbent upon him to advise
jurisdiction or territory they exercise their respective the parties to discontinue the transaction if it is contrary
functions; this prohibition includes the act of acquiring to law.
by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of A judge who buys property in litigation before his court
any litigation in which they may take part by virtue of after the judgment becomes final does not violate Art.
their profession. 1491, but he can be administratively disciplined for
(6) Any others specially disqualified by law. violation of the Code of Judicial Ethics.

Art. 1492. The prohibitions in the two preceding articles Even when the mai n cause is a collect ion of a sum of
are applicable to sales in legal redemption, money, the prope rties levied are still subject to the
compromises and renunciations. prohibition.

Contracts entered into in violation of Arts. 1491 and III. SUBJECT MATTER OF SALE
1492 are not merely voidable, but are null and void . “Transfer of title or an agreement to transfer it for a
price paid or promised to be paid is the essence of
a. Guardians, Agents and Administrators sale.”

Hereditary rights are not included in the prohibition The Civil Code provisions defining sales is a “catch-all”
insofar as administrator or executor of the estate of the provision which effectively brings within it grasp a whole
deceased. gamut of transfers whereby ownership of a thing is
ceded for a consideration.
No more need to comply with which required showing
that a third party bought as conduit/nominee of the Where under an agreement, a party renounces and
buyer disqualified under Art. 1491; rather, the transfers whatever rights, interests, or claims she has
presumption now is that such disqualified party over a parcel of land in favor of another party in
obtained the property in violation of said article. consideration of the latter s payment of therein loan,
the agreement is essentially a sale, and the rule on
Prohibition against agents does not apply if the
delivery effected through a public instrument apply.
principal consents to the sale of the property in the
hands of the agent.
1. Subject Must at Perfection Be Existing, Future or
Contingent (Arts. 1347, 1348, and 1462)
b. Attorneys
(1) Prohibition against attorneys purch asing the prope
Art. 1347. All things which are not outside the
rties of their clients in litigatio n applies:
commerce of men, including future things, may be the
• Only while litigation is pending . object of a contract. All rights which are not
intransmissible may also be the object of contracts.
• Even though litigation is not adversarial in nature or
when it is a certiorari proceeding that may has no No contract may be entered into upon future
merit. inheritance except in cases expressly authorized by
law.

• Only to a lawyer of record , and does not cover All services which are not contrary to law, morals, good
assignment of the property given in judgment made by customs, public order or public policy may likewise be
a the object of a contract.
client to an attorney, who has not taken part in the
case.
Art. 1348. Impossible things or services cannot be the
• Not applicable to a lawyer who acquired property object of contracts.
prior to the time he intervened as counsel in the suit
involving such property. Art. 1362. If one party was mistaken and the other
acted fraudulently or inequitably in such a way that the
(2) Pr ohi bit ion doe s not apply to : instrument does not show their true intention, the former
may ask for the reformation of the instrument.

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a. Empt io Rei Speratae (Arts. 1461 and 1347) Art. 1459. The thing must be licit and the vendor must
have a right to transfer the ownership thereof at the
Art. 1461. Things having a potential existence may be time it is delivered.
the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy Art. 1575. The sale of animals suffering from contagious
is deemed subject to the condition that the thing will diseases shall be void.
come into existence.
A contract of sale of animals shall also be void if the use
The sale of a vain hope or expectancy is void. or service for which they are acquired has been stated
in the contract, and they are found to be unfit therefor.
Art. 1347. All things which are not outside the
commerce of men, including future things, may be the 3. Must Be Determinate or At Least “Determinable” (Art.
object of a contract. All rights which are not 1460)
intransmissible may also be the object of contracts.
Art. 1460. A thing is determinate when it is particularly
No contract may be entered into upon future designated or physical segregated from all other of the
inheritance except in cases expressly authorized by same class.
law.
The requisite that a thing be determinate is satisfied if at
All services which are not contrary to law, morals, good the time the contract is entered into, the thing is
customs, public order or public policy may likewise be capable of being made determinate without the
the object of a contract. necessity of a new or further agreement between the
parties.

Pending crops which have potential existence may be When deed of sale erroneously describes the lot
valid object of sale and such transaction cannot be adjacent to the land seen and eventually delivered to
considered to effectively be sale of the land or any the buyer, such vetted land is the one upon which the
part thereof. minds have met, and not that erroneously described in
the deed. Prudent people buy land on the basis of
what they see, and not on what is technically
described in the Torrens title.
b. Emptio Spei (Art. 1461)
Art. 1461. Things having a potential existence may a. Non-Specific Things (Generic) May Be the Object of
be the object of the contract of sale. Sale (Arts. 1246 and 1409[6])

The efficacy of the sale of a mere hope or Art. 1246. When the obligation consists in the delivery of
expectancy is deemed subject to the condition an indeterminate or generic thing, whose quality and
that the thing will come into existence. circumstances have not been stated, the creditor
cannot demand a thing of superior quality. Neither can
The sale of a vain hope or expectancy is void. the debtor deliver a thing of inferior quality. The
purpose of the obligation and other circumstances shall
c. Subject to Resolutory Condition (Art. 1465) be taken into consideration.
Art. 1465. Things subject to a resolutory condition
may be the object of the contract of sale. Art. 1409. The following contracts are inexistent and
void from the beginning:
(1) Those whose cause, object or purpose is contrary to
law, morals, good customs, public order or public
policy;
2. Must Be Licit (Arts. 1347, 1459 and 1575) (2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the
Under Art. 1347, a sale involving future inheritance is time of the transaction;
void and cannot be the source of any right (4) Those whose object is outside the commerce of
nor create any obligation. men;
(5) Those which contemplate an impossible service;
Article 1347 does not cover waiver of hereditary rights (6) Those where the intention of the parties relative to
which is not equivalent to sale, since waiver is a mode the principal object of the contract cannot be
of extinction of ownership in favor of the other persons ascertained;
who are co-heirs. (7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the
Mortgagor can legally sell the mortgaged property-- right to set up the defense of illegality be waived.
mortgage is merely an encumbrance that does not
affect his p rincipal attribute as owner thereof. Law Subject matter is determinable when from the formula
even considers void a stipulation forbidding owner from or description adopted at perfection there is a way by
alienating mortgaged immovable. which the courts can delineate it independent of the
will of the parties .

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Where the lot sold is said to adjoin the “previously paid Art. 1462. The goods which form the subject of a
lot” on three sides thereof, the subject lot is capable of contract of sale may be either existing goods, owned
being determined without the need of any new or possessed by the seller, or goods to be
contract, even when the exact area of the adjoining manufactured, raised, or acquired by the seller after
residential lot is subject to the result of a survey. the perfection of the contract of sale, in this Title called
"future goods."
As the above-quoted portion of the kasunduan shows There may be a contract of sale of goods, whose
[giving reference to the area, the locality located, and acquisition by the seller depends upon a contingency
vicinity with reference of old trees], there is no doubt which may or may not happen.
that the object of the sale is determinate.
Art. 1505. Subject to the provisions of this Title, where
Determinable subject matter of sale are not subject to goods are sold by a person who is not the owner
risk of loss until they are physically segregated or thereof, and who does not sell them under authority or
particularly designated. with the consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the
b. Undivided Interest (Art. 1463) or Undivided Share in a owner of the goods is by his conduct precluded from
Mass of Fungible Goods (Art. 1464) –May result it co- denying the seller's authority to sell.
ownership . Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or
Art. 1463. The sole owner of a thing may sell an any other provision of law enabling the apparent
undivided interest therein. (n) owner of goods to dispose of them as if he were the
true owner thereof;
Art. 1464. In the case of fungible goods, there may be a (2) The validity of any contract of sale under statutory
sale of an undivided share of a specific mass, though power of sale or under the order of a court of
the seller purports to sell and the buyer to buy a definite competent jurisdiction;
number, weight or measure of the goods in the mass, (3) Purchases made in a merchant's store, or in fairs, or
and though the number, weight or measure of the markets, in accordance with the Code of Commerce
goods in the mass is undetermined. By such a sale the and special laws.
buyer becomes owner in common of such a share of
the mass as the number, weight or measure bought a. Seller’s Ownership Need Not Exist at Perfection:
bears to the number, weight or measure of the mass. If Sale of copra for future delivery does not make seller
the mass contains less than the number, weight or liable for estafa for failing to deliver because the
measure bought, the buyer becomes the owner of the contract is still valid and the obligation was civil and not
whole mass and the seller is bound to make good the criminal.
deficiency from goods of the same kind and quality,
unless a contrary intent appears. A perfected sale cannot be challenged on the ground
of the seller’s non-ownership of the thing sold at the
4. Quantity of Goods as Subject Matter Not Essential for time of the perfection; it is at delivery that the law
Perfection [?] (Art. 1349) requires the seller to have the ownership of the thing
sold.
Art. 1349. The object of every contract must be
determinate as to its kind. The fact that the quantity is It is essential that seller is owner of the property he is
not determinate shall not be an obstacle to the selling. The principal seller “to transfer the ownership of”
existence of the contract, provided it is possible to the property sold (Art. 1458). This law s toebmligsa
determine the same, without the need of a new ftrioonm otfh ae principle that nobody can dispose of
contract between the parties. that which does not belong to him. NEMO DAT QUOD
NON HABET .
Sale of grains is perfected even when the exact
quantity or quality is not known, so long as the source of That the sellers are no longer owners of the goods at
the subject is certain. perfection does not appear to be one of the void
contracts enumerated in Art. 1409 of Civil Code; and
Where seller quoted to buyer the items offered for sale, Art. 1402 ther eof recognizes a sale where the goods
by item number, part number, description and unit are to be “acquired . . . by the seller after the
price, and the buyer had sent in reply a purchase order perfection of the contract of sale,”clearly implying that
without indicating the quantity being order, there was a sale is possible even if the seller was not the owner at
already a perfected contract of sale, even when the time of sale, provided he acquires title to the
required letter of credit had not been opened by the property later on; nevertheless such contract may be
buyer. deemed to be inoperative and may thus fall, by
analogy, under Art. 1409(5): “Those which contemplate
5. Seller s Obligation to Transfer Title to Buyer (Art. 1459, an impossible service.”
1462, and 1505)
b. Subsequent Acquisition of Title by Non-Owner Sel ler
(Art. 1434) – Title passes to the seller by operation of law
Art. 1459. The thing must be licit and the vendor must
.
have a right to transfer the ownership thereof at the
time it is delivered.
Art. 1434. When a person who is not the owner of a
thing sells or alienates and delivers it, and later the seller
8
or grantor acquires title thereto, such title passes by a. Special Laws: narcotics (R.A. 6425); wild bird or
operation of law to the buyer or grantee. mammal (Act 2590, Sec. 7); rare wild plants (Act 3983);
poisonous plants or fruits (R.A. 1288); dynamited fish (R.A
c. Acquisition by the Buyer May Even Depend on 428); gunpowder and explosives (Act 2255); firearms
Contingency (Art. 1462) and ammunitions (P.D. 9); sale of realty by non-
Christians (Sec. 145, Revised Adm. Code, R.A. 4252)
Art. 1462. The goods which form the subject of a
contract of sale may be either existing goods, owned b. Following Sales of Land Void:
or possessed by the seller, or goods to be • By Non-Christian if not approved by Provincial
manufactured, raised, or acquired by the seller after Governor per Sec. 145 of Revised Administrative Code.
the perfection of the contract of sale, in this Title called
"future goods."
• Friar land without consent of Secretary of Agriculture
There may be a contract of sale of goods, whose required under Act No. 1120.
acquisition by the seller depends upon a contingency
which may or may not happen. • Made in violation of land reform laws declaring
tenant-tillers as the full owners of the lands they tilled.
6. Illegality of Subject Matter (Arts. 1409, 1458, 1461,
1462, and 1575)
• Reclaimed lands are of the public domain and
Art. 1409. The following contracts are inexistent and cannot, without congressional fiat, be sold, public or
void from the beginning: private.
(1) Those whose cause, object or purpose is contrary to
law, morals, good customs, public order or public IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474)
policy;
(2) Those which are absolutely simulated or fictitious; Art. 1469. In order that the price may be considered
(3) Those whose cause or object did not exist at the certain, it shall be sufficient that it be so with reference
time of the transaction; to another thing certain, or that the determination
(4) Those whose object is outside the commerce of thereof be left to the judgment of a special person or
men; persons.
(5) Those which contemplate an impossible service; Should such person or persons be unable or unwilling to
(6) Those where the intention of the parties relative to fix it, the contract shall be inefficacious, unless the
the principal object of the contract cannot be parties subsequently agree upon the price.
ascertained; If the third person or persons acted in bad faith or by
(7) Those expressly prohibited or declared void by law. mistake, the courts may fix the price.
These contracts cannot be ratified. Neither can the Where such third person or persons are prevented from
right to set up the defense of illegality be waived. fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies
Art. 1458. By the contract of sale one of the contracting against the party in fault as are allowed the seller or the
parties obligates himself to transfer the ownership and buyer, as the case may be. (1447a)
to deliver a determinate thing, and the other to pay Art. 1470. Gross inadequacy of price does not affect a
therefor a price certain in money or its equivalent. A contract of sale, except as it may indicate a defect in
contract of sale may be absolute or conditional. the consent, or that the parties really intended a
donation or some other act or contract. (n)
Art. 1461. Things having a potential existence may be Art. 1471. If the price is simulated, the sale is void, but
the object of the contract of sale. the act may be shown to have been in reality a
The efficacy of the sale of a mere hope or expectancy donation, or some other act or contract. (n)
is deemed subject to the condition that the thing will Art. 1472. The price of securities, grain, liquids, and other
come into existence. things shall also be considered certain, when the price
The sale of a vain hope or expectancy is void. (n) fixed is that which the thing sold would have on a
definite day, or in a particular exchange or market, or
Art. 1462. The goods which form the subject of a when an amount is fixed above or below the price on
contract of sale may be either existing goods, owned such day, or in such exchange or market, provided said
or possessed by the seller, or goods to be amount be certain. (1448)
manufactured, raised, or acquired by the seller after Art. 1473. The fixing of the price can never be left to the
the perfection of the contract of sale, in this Title called discretion of one of the contracting parties. However, if
"future goods." the price fixed by one of the parties is accepted by the
There may be a contract of sale of goods, whose other, the sale is perfected. (1449a)
acquisition by the seller depends upon a contingency Art. 1474. Where the price cannot be determined in
which may or may not happen. accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the
Art. 1575. The sale of animals suffering from contagious thing or any part thereof has been delivered to and
diseases shall be void. A contract of sale of animals appropriated by the buyer he must pay a reasonable
shall also be void if the use or service for which they are price therefor. What is a reasonable price is a question
acquired has been stated in the contract, and they are of fact dependent on the circumstances of each
found to be unfit therefor. particular case.

9
“Price” signifies the sum stipulated as the equivalent of
When the parties intended to be bound but the deed
the thing sold and also every incident taken into
did not reflect the actual price agreed upon, there is
consideration for the fixing of the price put to the debit
only a relative simulation of the contract which remains
of the buyer and agreed to by him.
valid and enforceable, but subject to reformation.
Seller cannot unilaterally increase the price previously
agreed upon with the buyer, even when due to When price indicated in deed of absolute sale is
increased construction costs. undervalued consideration pursuant to intention to
avoid payment of higher capital gains taxes, the price
Buyer who opted to purchase the land on installment stated is false, but the sale is still valid and binding on
basis with imposed interest, cannot unilaterally disavow the real terms.
the obligation created by the stipulation in the contract
c. Non-Payment of Price
which sets the interest at 24% p.a. “The rationale behind
Sale being consensual, failure of buyer to pay the price
having to pay a higher sum on the installment is to
does not make the contract void for lack of
compensate the vendor for waiting a number of years
consideration or simulation, but results in buyer’s
before receiving the total amount due. The amount of
default, for which the seller may exercise his legal
the stated contract price paid in full today is worth
remedies.
much more than a series of small payments totaling the
same amount. x x x To assert that mere prompt
payment of the monthly installments should obviate “In a contract of sale, the non-payment of the price is a
imposition of the stipulated interest is to ignore an resolutory condition which extinguishes the transaction
economic fact and negate one of the most important that, for a time, existed and discharges the obligations
principles on which commerce operates.” created remedy of an unpaid seller in a contract of
sale is to seek either specific perform athnecree uonr
1. Price Must Be Real (Art. 1471) dreesr.ci[s?s]ioTnh.”e

Art. 1471. If the price is simulated, the sale is void, but


the act may be shown to have been in reality a Badge That Price Is Simu lated, Not Jus t Unpaid: It is a
donation, or some other act or contract. badge of simulated price, which render the sale void,
when the price, which is stipulated thereon to have
a. When Price “Simulated” been paid, has in fact never been paid by the
(1) √Mapalo v. Mapalo , 17 SCRA 114 (1966), versus: purchaser to the seller.
When two aged ladies, not versed in English, sign a
Deed of Sale on representation by buyer that it was 2. Must Be in Money or Its Equivalent (Arts. 1458 and
merely to evidence their lending of money, the 1468)
situation constitutes more than just fraud and vitiation of
consent to give rise to a voidable contract, since there Art. 1458. By the contract of sale one of the contracting
was in fact no intention to enter into a sale, there was parties obligates himself to transfer the ownership and
no consent at all, and more importantly, there was no to deliver a determinate thing, and the other to pay
consideration or price agreed upon, which makes the therefor a price certain in money or its equivalent.
contract void ab initio. A contract of sale may be absolute or conditional.

(3) √Mate v. CA, 290 SCRA 463 (1998), versus: Art. 1468. If the consideration of the contract consists
When Deed of Sale was executed to facilitate partly in money, and partly in another thing, the
transfer of property to buyer to enable him to transaction shall be characterized by the manifest
construct a commercial building and to sell the intention of the parties. If such intention does not clearly
property to the children, such arrangement appear, it shall be considered a barter if the value of
being merely a subterfu ge on the part of the thing given as a part of the consideration exceeds
buyer, the agreement cannot also be taken as the amount of the money or its equivalent; otherwise, it
a consideration and sale is void. is a sale.
(3) Effects When Price Simu lated – The principle of in Price must be “valuable consideration” as mandated
pari delicto nonoritur action, which denies all recovery by Civil Law, instead of “any price” mandated in
to the guilty parties inter se, where the price is common law.
simulated; the doctrine applies only where the nullity
arises from the illegality of the consideration or the Consideration for sale can take different forms, such as
purpose of the contract. the prestation or promise of a thing or service by
another, thus:
b. When Price is “False” (Arts. 1353 and 1354) • When deed provides that the consideration was the
Art. 1353. The statement of a false cause in contracts
expected profits from the subdivision project.
shall render them void, if it should not be proved that
they were founded upon another cause which is true
Cancellation of liabilities on the property in favor of the
and lawful. (1276)
seller.
• Assumption of mortgage constituted on the property
Art. 1354. Although the cause is not stated in the
sold.
contract, it is presumed that it exists and is lawful, unless
the debtor proves the contrary.

10
3. Must Be Certain or Ascertainable at Perfection (Art.
1469) c. Effects of Un-Ascer tainability Price: Sale Is
Inefficacious .
Art. 1469. In order that the price may be considered BUT: If Buyer Appropriates the Object, He Must Pay Reas
certain, it shall be sufficient that it be so with reference onable Price (Art. 1474)
to another thing certain, or that the determination
thereof be left to the judgment of a special person or Art. 1474. Where the price cannot be determined in
persons. accordance with the preceding articles, or in any other
Should such person or persons be unable or unwilling to manner, the contract is inefficacious. However, if the
fix it, the contract shall be inefficacious, unless the thing or any part thereof has been delivered to and
parties subsequently agree upon the price. appropriated by the buyer he must pay a reasonable
If the third person or persons acted in bad faith or by price therefor. What is a reasonable price is a question
mistake, the courts may fix the price. of fact dependent on the circumstances of each
Where such third person or persons are prevented from particular case.
fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies The e can be no concept of “appropriati on” w hen it
against the party in fault as are allowed the seller or the com es to land? – Where a church organization has
buyer, as the case may be. been allowed possession and introduce improvements
on the land as part of its application to purchase with
a. How Price Determined to Be Ascertainable the NHA, and thereafter it refused the formal resolution
of the NHA
(i) Set by Third Person Appointed at Perfection (Art. Board setting the price and insisted on paying the lower
1469) price allegedly given by the NHA Field Office, there
(ii) Set by the Courts (Art. 1469) can be no binding contract of sale upon which an
(iii) By Reference to a Definite Day, Particular Exchange action for specific performance can prosper, not even
or Market (Art. 1472) on fixing the price equal to the fair market value of the
Art. 1472. The price of securities, grain, liquids, and other property.
things shall also be considered certain, when the price
fixed is that which the thing sold would have on a Even when there was no meeting on the minds of the
definite day, or in a particular exchange or market, or price, this Court rules that to deny petitioner’s claim
when an amount is fixed above or below the price on would unjustly enrich respondent who had benefited
such day, or in such exchange or market, provided said from the repairs of their four elevators.
amount be certain.
4. Manner of Payment of Price ESSENTIAL (Art. 1179)
(iv) By Reference to Another Thing Certain, such as to
invoices then in existence and clearly identified by the Art. 1179. Every obligation whose performance does
agreement; or known factors or stipulated formula. not depend upon a future or uncertain event, or upon
a past event unknown to the parties, is demandable at
Price is ascertainable if the terms of the contract once.
furnishes the courts a basis or measure for determining Every obligation which contains a resolutory condition
the amount agreed upon, without having to refer back shall also be demandable, without prejudice to the
to either or both parties. effects of the happening of the event.

Where the sale involves an asset under a privatization A definite agreement on the manner of payment of
scheme which attaches a peculiar meaning or signi price is an essential element in the formation of a
fication to the term “indicati ve price” as merely consti binding and enforceable contract sale; without it the
tuting a ball-park figure, then the price is not certain. sale is void and an action for specific performance
must fail.
Consideration is generally agreed upon as whole even
if it consists of several parts, and even if it is contained in When the manner of payment of the price is discussed
one or more instruments; otherwise there would be no after “acceptance,” then such “acceptance” did not
price certain, and the contract of sale not perfected. produce a binding and enforceable contract of sale.

b. Price Never Set By One or Both Parties (Arts. 1473, Where there is no other basis for the payment of the
1182), unless th e price is separately accepted by the subsequent amortizations in a Deed of Conditional
other party . Sale, the reasonable conclusion one can reach is that
the subsequent payments shall be made in the same
Art. 1473. The fixing of the price can never be left to the amount as the first payment.
discretion of one of the contracting parties. However, if
the price fixed by one of the parties is accepted by the 5. Inadequacy of Price Does Not Affect Ordinary Sale
other, the sale is perfected. (Arts. 1355 and 1470)

Art. 1182. When the fulfillment of the condition depends Art. 1355. Except in cases specified by law, lesion or
upon the sole will of the debtor, the conditional inadequacy of cause shall not invalidate a contract,
obligation shall be void. If it depends upon chance or unless there has been fraud, mistake or undue
upon the will of a third person, the obligation shall take influence.
effect in conformity with the provisions of this Code.
11
Art. 1470. Gross inadequacy of price does not affect a (3) When upon or after the expiration of the right to
contract of sale, except as it may indicate a defect in repurchase another instrument extending the period of
the consent, or that the parties really intended a redemption or granting a new period is executed;
donation or some other act or contract. (4) When the purchaser retains for himself a part of the
purchase price;
Mere inadequacy of the price does not affect the (5) When the vendor binds himself to pay the taxes on
validity of the sale when both parties are in a position to the thing sold;
form an independent judgment concerning the (6) In any other case where it may be fairly inferred that
transaction, unless fraud, mistake, or undue influence the real intention of the parties is that the transaction
indicative of a defect in consent is present. The shall secure the payment of a debt or the performance
contract may be annulled for vitiated consent and not of any other obligation.
due to the inadequacy of price. In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
Absent any evidence of the fair market value of a land otherwise shall be considered as interest which shall be
as of the time of sale, it cannot be concluded that the subject to the usury laws.
price was inadequate.

a. Gross Inadequacy of Price May Avoid Judicial Sale :


(i) Only when it is shocking to the conscience of man. V. FORMATION OF CONTRACT OF SALE
an d
(ii) There is showing that, in the event of a resale, a A. P OLICITACION STAGE (Art. 1479)
better price can be obtained.
Art. 1479. A promise to buy and sell a determinate thing
UNLESS: There is right of redemption, in which case the for a price certain is reciprocally demandable.
proper remedy is to redeem. An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
BUT: By way of extraordinary circumstances perceived, the promissor if the promise is supported by a
when in a judicial sale the right of redemption has been consideration distinct from the price.
lost, where the inadequacy of the price is purely
shocking to the conscience, such that the mind revolts Policitation stage covers the doctrine of “freedom to
at it and such that a reasonable man would neither contract ” which signifies the right to choose with whom
directly or indirectly be likely to consent to it, the same to contract. A property owner is free to offer his
will be se aside. property for sale to any interested person, and is not
duty bound to sell the same to the occupant thereof,
Gross inadequacy of price by itself will not result in a absent any prior agreement vesting the occupants the
void contract; it does not even affect the validity of a right of first priority to buy.
contract of sale; unless it signifies a defect in the
consent ( i.e., there has been fraud, mistake or undue A negotiation is formally initiated by an offer, which,
influence) or that the parties actually intended a however, must be certain. At any time prior to the
donation or some other contract. perfection of the contract, either negotiating party
may stop the negotiation. At this stage, the offer may
There is “gross inadequacy in price” if it is such that a be withdrawn; the withdrawal is effective immediately
reasonable man will not agree to di spose of his after its manifestation. To convert the offer into a
property. contract, the acceptance must be absolute and must
not qualify the terms of the offer; it must be plain,
When judicial sale is voided without fault of purchaser, unequivocal, unconditional and without variance of
the latter is entitled return of price with simple interest, any sort from the proposal.
together with all sums paid out by him in improvements
introduced on the property, taxes, and other expenses. An unaccepted unilateral promise (offer to buy or to
sell) prior to acceptance, do es not give rise to any
b. Lesion of more than 1/4 of value of thing makes sale obligation or right. Where the offer is given with a stated
rescissible unless approved by court (Art. 1386) time for its acceptance, the offer is terminated at the
expiration of that time.
Art. 1386. Rescission referred to in Nos. 1 and 2 of Article
1381 shall not take place with respect to contracts The Letter of Intent to Buy and Sell is just that—a
approved by the courts. manifestation of offeror s intention to sell the property

c. Gross inadequacy of price may raise the and offeree s intention to acquire the same—w hich is
presumption of equitable mortgage (Art. 1602) neither a contract to sell nor a conditional contract of
sale.
Art. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases: When the offeree negotiates for a much lower price, it
(1) When the price of a sale with right to repurchase is constitutes a counter-offer and is therefor not an
unusually inadequate; acceptance of the offer of offeror.
(2) When the vendor remains in possession as lessee or
otherwise; 1. OPTION CONTRACT

12
An option is a preparatory contract in which one party deemed to have been included in the implied renewal
grants to the other, for under specified conditions, the (tacita reconduccion) of the lease.
power to decide, whether or not to enter into a p rain
cfiixpeadl cpoenritoradc ta. nIdt binds the party who Proper exercise of an option gives rise to the reciprocal
has given the option, not to enter into the principal obligations of sale which must be enforced with ten
contract with any other person during the period (10) years as provided under Art. 1144.
designated, and, within that period, to enter into such
contract with the one to whom the option was There must be “virtual” exercise of option with the
granted, if the latter should decide to use the option. It option period.
is a separate agreement distinct from the contract of
sale which the parties may enter into upon the 2. RIGHT OF FIRST REFUSAL
consummation of the option. A right of first refusal cannot be the subject of specific
performance, but breach would allow a recovery of
An option imposes no binding obligation on the person damages.
holding the option aside from the consideration for the
offer. Until accepted, it is not treated as a sale. Rights of first refusal only constitute “innovative juridical
relations”, but do not rise to the level of contractual
Tenants, not being the registered owners, cannot grant commitment since with the absence of agreement on
an option on the land, much less any “exclusive right” price certain, they are not subject to contractual
to buy the property under the Latin saying “ nem dat enforcement.
quod non habet .”
Right of first refusal contained in a lease, when
a. Meaning of “Separate Consideration” (Arts. 1479 and breached by promissor allows enforcement by the
1324) promisee by way of rescission of the sale entered into
with the third party, pursuant to Arts. 1381(3) and 1385
Art. 1479. A promise to buy and sell a determinate thing of Civil Code.
for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a In a right of first refusal, while the object might be made
determinate thing for a price certain is binding upon determinate, the exercise of the right would be
the promissor if the promise is supported by a dependent not only on the grantor’s eventual intention
consideration distinct from the price. to enter into a binding juridical relation with another but
also on terms, including the price, that are yet to be
Art. 1324. When the offerer has allowed the offeree a firmed up. . . the “offer” may be withdrawn anytime by
certain period to accept, the offer may be withdrawn communicating the withdrawal to the other party.
at any time before acceptance by communicating
such withdrawal, except when the option is founded A right of first refusal clause simply means that should
upon a consideration, as something paid or promised. the lessor decide to sell the leased property during the
term of the lease, such sale should first be offered to the
A unilateral promise to sell, in order to be binding upon lessee; and the series of negotiations that transpire
the promissor, must be for a price certain and between the lessor and the lessee on the basis of such
supported by a consideration separate from such price. preference is deemed a compliance of such clause
even when no final purchase agreement is perfected
The “separate consideration” in an option may be between
anything of value, unlike in sale where it must be the the parties. The lessor was then at liberty to offer the
price certain in money or its equivalent. sale to a third party who paid a higher price, and
there is no violation of the right of the lessee.
when the option is attached to a real estate mortgage
When a lease contract contains a right of first refusal,
Although no consideration is expressly mentioned in an the lessor has the legal not to sell the leased property to
option contract, it is presumed that it exists and may be anyone at any price until after the lessor made adnu
proved, and once proven, the option is binding. toy ffteor thtoe sleesll stehee property to the lessee and
the lessee has failed to accept it. Only after the lessee
b. No Separate Consideration: Void as Option, Valid as has failed to xercise his right of first priority could the
a Certain Offer lessor sell the property to other buyers under the same
terms and conditions offered to the lessee, or under
BUT LATELY : If the option is without any consideration, terms and conditions more favorable to the lessor.
the offeror may withdraw his offer by communicating
such withdrawal to the offeree at any time before A right of first refusal is a contractual grant, not of the
acceptance. If it is founded upon a consideration, the sale of a property, but of the first priority to buy the
offeror cannot withdraw his offer before the lapse of property in the event the owner sells the same. As
the period agreed upon. distinguished from an option contract, in a right of first
refusal, whole the object might be made determinate,
c. There Must Be Acceptance of Option Offer. the exercise of the right of first refusal would be
dependent not only on the owner’s eventual intention
d. Proper Exercise of Option Contract. to enter into a binding juridical
An option attached to a lease when not exercised relation with another but also on terms, including the
within the option period is extinguished and cannot be price, that are yet to be firmed up.
13
rnicge t.h eF rfoomrm thoaf tc omnotrmacetnst., xthe
A right of first refusal in a lease in favor of the lessee parties may reciprocally demand performance
cannot be availed of by the sublessee.
Mutual consent being a state of mind, its existence may
4. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): “T RU only be inferred from the confluence of two acts of the
E C ONTRACT TO SELL ” parties: an offer certain as to the object of the contract
and its consideration, and an acceptance of the offer
Art. 1479. A promise to buy and sell a determinate thing which is absolute in that it refers to the exact object
for a price certain is reciprocally demandable. and consideration embodied in said offer
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon If a material element of a contemplated contract is left
the promissor if the promise is supported by a for future negotiations, the same is too indefinite to be
consideration distinct from the price. enforceable. For a contract to be enforceable, its terms
must be certain and explicit, not vague or indefinite.
In this case the certainty of the price must also exist,
otherwise, there is no valid and enforceable contract So long as there is any uncertainty or indefiniteness, or
to sell. future negotiations or consideration yet to be had
between the parties, there is no contract at all.
An accepted bilateral promise to buy and sell is in a
sense similar to, but not exactly the same, as a The essence of consent is the conformity of the part ies
perfected contract of sale because there is already a on the terms of the contr act, that is, the acceptance
meeting of minds upon the thing which is the object of by one of the offer made by the other. However, the
the contract and upon the price. acceptance must be absolute; otherwise, the same
constitutes a counter-offer and has the effect of
But a contract of sale is consummated only upon rejecting the offer.
delivery
and payment, whereas in a bilateral promise to buy
and sell gives the contracting parties rights in 1. Absolute Acceptance of a Certain Offer (Art. 1475)
personam, such that each has the right to demand
from the other the fulfillment of their respective Art. 1319. Consent is manifested by the meeting of the
undertakings. offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer
The cause of action under a mutual promise to buy and must be certain and the acceptance absolute. A
sell is 10 years. qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind
B. PERFECTION STAGE (Arts. 1475, 1319, 1325 and 1326 ) the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
Art. 1475. The contract of sale is perfected at the to have been entered into in the place where the offer
moment there is a meeting of minds upon the thing was made.
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally Under Article 1319, the acceptance of an offer must
demand performance, subject to the provisions of the therefore be unqualified and absolute. In other words, it
law governing the form of contracts. must be identical in all respects with that of the offer so
as to produce consent or meeting of the minds. This
Art. 1319. Consent is manifested by the meeting of the was not the case herein considering that petitioner’s
offer and the acceptance upon the thing and the acceptance of the offer was qualified, which amounts
cause which are to constitute the contract. The offer to a rejection of the srcinal offer.
must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer. A qualified acceptance or one that involves a new
Acceptance made by letter or telegram does not bind proposal constitutes a counter-offer and a rejection of
the offerer except from the time it came to his the srcinal offer. The acceptance must be identical in
knowledge. The contract, in such a case, is presumed all respects with that of the offer so as to produce
to have been entered into in the place where the offer consent or meeting of minds.
was made.
Placing the word “Noted” and signing such note at the
Art. 1325. Unless it appears otherwise, business bottom of the written offer cannot be considered an
advertisements of things for sale are not definite offers, acceptance that would give rise to a valid contract of
but mere invitations to make an offer. sale.

Art. 1326. Advertisements for bidders are simply If sale subject to sus pensive condition: No perfected
invitations to make proposals, and the advertiser is not sale of a lot where the award thereof was expressly
bound to accept the highest or lowest bidder, unless made subject to approval by the higher authorities and
the contrary appears. there eventually was no acceptance manifested by
the supposed awardee.
Sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the 2. When “Deviation” Allowed:
csoubnjteracct tt oa tnhde luapwo ng otvheer npi
14
It is true that an acceptance may contain a request for accept and receive part of such goods and
certain changes in the terms of the offer and yet be a chattels, or the evidences, or some of them, of
binding acceptance, so long as it is clear that the such things in action or pay at the time some
meaning of the acceptance is positively and part of the purchase money; but when a sale is
unequivocally to accept the offer, whether such made by auction and entry is made by the
request is granted or not, a contract is formed. The auctioneer in his sales book, at the time of the
vendor’s change in a phrase of the offer to purchase, sale, of the amount and kind of property sold,
which change does not essentially change the terms of terms of sale, price, names of the purchasers
the offer, does not amount to a rejection of the offer and person on whose account the sale is
and the tender or a counteroffer. made, it is a sufficient memorandum;
(e) An agreement of the leasing for a longer
3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326) period than one year, or for the sale of real
property or of an interest therein;
Art. 1476. In the case of a sale by auction: (f) A representation as to the credit of a third
(1) Where goods are put up for sale by auction person.
in lots, each lot is the subject of a separate (3) Those where both parties are incapable of
contract of sale. giving consent to a contract.
(2) A sale by auction is perfected when the
auctioneer announces its perfection by the fall The terms and conditions provided by the owner of
of the hammer, or in other customary manner. property to be sold at auction are binding upon all
Until such announcement is made, any bidder bidders, whether they knew of such conditions or not.
may retract his bid; and the auctioneer may
withdraw the goods from the sale unless the An auction sale is perfected by the fall of the hammer
auction has been announced to be without or in other customary manner and it does not matter
reserve. that another was allowed to match the bid of the
(3) A right to bid may be reserved expressly by highest bidder.
or on behalf of the seller, unless otherwise
provided by law or by stipulation. 4. Earnest Money (Art. 1482)
(4) Where notice has not been given that a
sale by auction is subject to a right to bid on Art. 1482. Whenever earnest money is given in
behalf of the seller, it shall not be lawful for the a contract of sale, it shall be considered as part
seller to bid himself or to employ or induce any of the price and as proof of the perfection of
person to bid at such sale on his behalf or for the contract.
the auctioneer, to employ or induce any
person to bid at such sale on behalf of the Earnest money given by the buyer shall be considered
seller or knowingly to take any bid from the as part of the price and as proof of the perfection of
seller or any person employed by him. Any sale the contract. It constitutes an advance payment to be
contravening this rule may be treated as deducted from the total price.
fraudulent by the buyer.
Absent proof of the concurrence of all the essential
Art. 1403. The following contracts are elements of a contract of sale, the giving of earnest
unenforceable, unless they are ratified: money cannot establish the existence of a perfected
(1) Those entered into in the name of another contract of sale.
person by one who has been given no
authority or legal representation, or who has Article 1482 does not apply when earnest money given
acted beyond his powers; in a contract to sell especially where by stipulation the
(2) Those that do not comply with the Statute buyer has the right to walk away from the transaction,
of Frauds as set forth in this number. In the with no obligation to pay the balance, although he will
following cases an agreement hereafter made forfeit the earnest money.
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, Whenever earnest money is given in a contract of sale,
be in writing, and subscribed by the party it shall be considered as part of the price and as proof
charged, or by his agent; evidence, therefore, of the perfection of the contract. But when there is no
of the agreement cannot be received without contract of sale because the parties never went pass
the writing, or a secondary evidence of its the negotiation stage, or more accurately, have not
contents: reached the perfection stage with the present of the
(a) An agreement that by its terms is not to be three essential elements of the contract of sale, the
performed within a year from the making concept of earnest money is certainly inapplicable. The
thereof; earnest money forms part of the consideration only if
(b) A special promise to answer for the debt, the sale is
default, or miscarriage of another; consummated upon full payment of the purchase
(c) An agreement made in consideration of price. Hence, there must first be a perfected contract
marriage, other than a mutual promise to of sale before we can speak of earnest money. When
marry; there is no provision for forfeiture of earnest money in
(d) An agreement for the sale of goods, the event the sale fails to materialize, then with the
chattels or things in action, at a price not less rescission it becomes incumbent upon seller to return
than five hundred pesos, unless the buyer
15
the earnest money as legal consequence of mutual parties thereto, because it is not the function of the
restitution. notary public to validate an instrument that was never
intended by the parties to have any binding legal
5. Difference Between Earnest Money and Option effect.
Money. Buyer’s immediate taking of possession of subject
property corroborates the truthfulness and authenticity
of the deed of sale.
6. Sale Deemed Perfected Where Offer Was Made. (Art. Conversely, the seller’s continued possession of the
1319) property makes dubious the contract of sale between
them.
Art. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the Any substantial difference between the terms of the
cause which are to constitute the contract. The offer Contract to Sell and the concomitant Deed of Absolute
must be certain and the acceptance absolute. A Sale (such as difference in subject matter, and
qualified acceptance constitutes a counter-offer. difference in price and/or the terms thereof), does not
Acceptance made by letter or telegram does not bind make the transaction between the seller and the buyer
the offerer except from the time it came to his void, for it is truism that the execution of the Deed of
knowledge. The contract, in such a case, is presumed Absolute Sale effectively rendered the previous
to have been entered into in the place where the offer Contract to Sell ineffective and cancelled [through the
was made. process of novation].

C. FORMAL REQUIREMENTS OF SALES (Arts. 1357, 1358, b. Value of Business Forms to Prove Sale
1406 and 1483) Business forms, e.g., order slip, delivery charge invoice
and the like, which are issued by the seller in the
1. Form Not Important for Validity of Sale ordinary course of the business are not always fully
accomplished to contain all the necessary information
Sale of land under private instrument is valid. describing in detail the whole business transaction—
more often than not they are accomplished
Articles 1357 and 1358, in relation to Art. 1403(2), require perfunctorily without proper regard to any legal
that the sale of real property must be in writing for it to repercussion for such neglect such that despite their
be enforceable, it need not be notarized for there is being often incomplete, said business forms are
nothing in those provisions which require that it must be commonly recognized in ordinary commercial
executed in a public document to be valid. transactions as valid between the parties and at the
very least they serve as an acknowledgment that a
but both its due execution and its authenticity must be business transaction has in fact transpired.
proven, pursuant to Sec. 20, Rule 132 of the Rules of
Court. Such documents are not mere scraps of paper bereft
of probative value but vital pieces of evidence of
Although the conveyance of land is not made in a commercial transactions. They are written memorials of
public document, it does not affect the validity of such the details of the consummation of contracts.
conveyance. Article 1358 of Civil Code does not
require the accomplishment of the acts or contracts in 2. WHEN FORM IMPORTANT IN SALE
a public instrument in order to validate the act or a. To Bind Third Parties
contract but only to insure its efficacy. Article 1358 which requires the embodiment of certain
contracts in a public instrument is only for convenience,
a. Other Rulings on Deeds of Sale: and registration of the instrument only adversely affects
Seller may agree to a deed of absolute sale before third parties. Formal requirements are, therefore, for the
benefit of third parties; and non-compliance therewith
full payment of the purchase price. does not adversely affect the validity of the contract
Assuming that the buyers failed to pay the full price nor the contractual rights and obligations of the parties
stated in the Deed of Sale, such partial failure would thereunder.
not render the sale void.
That marital consent was executed prior to the Deed Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument,
of Absolute Sale does not indicate that it is a phoney.
in only for convenience; and registration of the
A Deed of Sale when acknowledged before a notary instrument only adversely affects third parties, and non-
public, enjoys the presumption of regularity and due compliance therewith does not adversely affect the
execution. To overthrow that presumption, sufficient, validity of the contract or the contractual rights and
clear and convincing evidence is required, otherwise obligations of the parties thereunder.
the document should be upheld.
Notarization of Deeds of Sale by one who was not a While sale of land appearing in a private deed is
notary public does not affect the validity thereof; said binding between the parties, it cannot be considered
documents were merely converted into private binding on third persons, if it is not embodied in a public
documents. instrument and recorded in the Registry of Deeds.
Notarization of a deed of sale does not guarantee its
b. For Enforceability Between the Parties: STATUTE OF
validity nor is it conclusive of the true agreement of the FRAUDS (Arts. 1403 and 1405)

16
evidence can be received except the documentary
Art. 1403. The following contracts are unenforceable, evidence referred to.
unless they are ratified:
(1) Those entered into in the name of another person (ii) Agency to Sell or to Buy – As contrasted
by one who has been given no authority or legal from sale, an agency to sell does not belong to any of
representation, or who has acted beyond his powers; the three categories of contracts covered by Arts. 1357
(2) Those that do not comply with the Statute of Frauds and 1358 and not one enumerated under the Statutes
as set forth in this number. In the following cases an of Frauds in Art. 1403.
agreement hereafter made shall be unenforceable by (iii) Rights of First Refusal – A “right of first refusal”
action, unless the same, or some note or is not covered by the statute of frauds. Furthermore, Art.
memorandum, thereof, be in writing, and subscribed by 1403(2)(e) of Civil Code presupposes the existence of a
the party charged, or by his agent; evidence, perfected, albeit unwritten, contract of sale; a right of
therefore, of the agreement cannot be received first refusal, such as the one involved in the instant case,
without the writing, or a secondary evidence of its is not by any means a perfected contract of sale of real
contents: property.
(a) An agreement that by its terms is not to be (iv) Equitable Mortgage – Statute does not
performed within a year from the making thereof; stand in the way of treating an absolute deed as a
(b) A special promise to answer for the debt, default, or mortgage, when such was the parties intention,
miscarriage of another;
although the agreement for redemption or defeasance
(c) An agreement made in consideration of marriage,
is proved by parol evidence.
other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or
(v) Right to Repurchase – The deed and the
things in action, at a price not less than five hundred
verbal agreement allowing the right of repurchase
pesos, unless the buyer accept and receive part of
should be considered as an integral whole; the deed of
such goods and chattels, or the evidences, or some of
sale is itself the note or memorandum evidencing the
them, of such things in action or pay at the time some
contract.
part of the purchase money; but when a sale is made
by auction and entry is made by the auctioneer in his
Under Art. 1403, an exception to the unenforceability of
sales book, at the time of the sale, of the amount and
contracts pursuant to the Statute of Frauds is the
kind of property sold, terms of sale, price, names of the existence of a written note or memorandum
purchasers and person on whose account the sale is evidencing the contract. The memorandum may be
made, it is a sufficient memorandum; found in several writings, not necessarily in one
(e) An agreement of the leasing for a longer period document, and constitutes
than one year, or for the sale of real property or of an the written evidence that such a contract was entered
interest therein;
into. The existence of a written contract of the sale is
(f) A representation as to the credit of a third person.
not necessary so long as the agreement to sell real
(3) Those where both parties are incapable of giving
property is evidenced by a written note or
consent to a contract.
memorandum, embodying the essentials of the
Art. 1405. Contracts infringing the Statute of Frauds,
contract and signed by the party charged or his agent.
referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to
BUT : The memoranda must be signed by the party
prove the same, or by the acceptance of benefit
sought to be charged, and must clearly provide a
under them.
deed of sale categorically conveying the subject
property.
The term “Statute of Frauds” is descriptive of the
statutes which require certain classes of contracts, such
For the memorandum to take the sale out of the
as agreements for the sale of real property, to be in
coverage of the Statute of Frauds, it must contain “all
writing, the purpose being to prevent fraud and perjury
the essential terms of the contract” of sale.
in the enforcement of obligations depending for their
evidence on the unassisted memory of witnesses by
even when scattered into various correspondences
requiring certain enumerated contracts and
which can be brought together
transactions to be evidenced by a writing signed by the
party to be charged. EXCEPTION: Electronic Documents under the E-
COMMERCE ACT (R.A. 8792) (3) Partial Execution (Art.
Presupposes Valid Contract of Sale – “The application 1405)
of the Statute of Frauds presupposes the existence of a
perfected contract.” When the records show that there Art. 1405. Contracts infringing the Statute of Frauds,
was no perfected contract of sale, there is no basis for
referred to in No. 2 of Article 1403, are ratified by the
the application of the Statute of Frauds.
failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefit
(1) Coverage:
under them.
(i) Sale of Real Propert y – A sale of realty
cannot be proven by means of witnesses, but must
Delivery of the deed to buyer’s agent, with no intention
necessarily be evidenced by a written instrument, duly
to part with the title until the purchase price is paid,
subscribed by the party charged, or by secondary
does not take the case out of the Statute of Frauds.
evidence of the contents of such document. No other

17
The Statute of Frauds does not apply to contracts either • Agent is the son of the owner.
partially or totally performed. In addition, a contract
that violates the Statute of Frauds is ratified by the • There is partial payment of the price received by the
acceptance of benefits under the contract, such as supposed agent
the acceptance of the purchase price and using the • In the case of a corporate owner of realty.
proceeds to pay outstanding loans.
When Contract to Sell was signed by the co-owners
(4) Waiver – (Art. 1405) Cross-examination on the themselves as witnesses, the written authority for their
contract is deemed a waiver of the defense of the agent mandated under Article 1874 of the Civil Code is
Statute. no longer required.

When the purported buyer’s exhibits failed to establish d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised
the perfection of the contract of sale, oral testimony Adm. Code)
cannot take their place without violating the parol
evidence rule. It was therefore irregular for the trial X Art. 1585. The buyer is deemed to
court to have admitted in evidence testimony to prove have accepted the goods when he intimates
the existence of a contract of sale of a real property to the seller that he has accepted them, or
between the parties, despite the persistent objection when the goods have been delivered to him,
made by the purported seller’s counsel as early as the and he does any act in relation to them which
first scheduled hearing, even when crossexamination is inconsistent with the ownership of the seller,
was made on the basis of the witnesses affidavit-form or when, after the lapse of a reasonable time,
testimony. he retains the goods without intimating to the
seller that he has rejected them.
(5) Rulings on Receipts and Other Documentary
Evidence of Sale Since a contract of sale is perfected D. SIMULATED SALES
by mere consent, then when the dealer of motor
vehicles accepts a deposit of P50,0000 and pulls out a Characteristic of simulation is that the apparent
unit from the assembler for that purpose, it was in contract is not really desired or intended to produce
breach of contract when it sold the car subsequently to legal effect or in any way alter the parties juridical
another buyer. situation, or that the parties have no intention to be
bound by the contract. The requisites are: (a) an
A sales invoice is a commercial document-commercial outward declaration of will different from the will of the
documents or papers are those used by merchants or parties; (b) false appearance must have been
businessmen to promote or facilitate trade or credit intended by mutual agreement; and (c) purpose is to
transactions—they are not mere scraps of paper bereft deceive third persons.
of probative value, but vital pieces of evidence of
commercial transactions, written memorials of the 1. Badges and Non-badges of Simulation:
details of the consummation of contracts.
• Non-payment of the stipulated consideration,
Sales invoices are not evidence of payment of the
price, but evidence of the receipt of the goods; since absence of any attempt by the buyers to assert their
the best evidence to prove payment is the official alleged rights over the subject property.
receipt.
• Failure of alleged buyers to collect rentals from
A receipt which is merely an acknowledgment of the alleged seller. But not when there appears a legitimate
sum received, without any indication therein of the lessor-lessee relationship between the vendee and the
total purchase price of the land or of the monthly vendor.
installments to be paid, cannot be the basis of valid • Although the agreement did not provide for the
sale.
absolute transfer ownership of the land to buyer, that
did not amount to simulation, since delivery of
In itself, the absence of receipts, or any proof of
certificate of ownership and execution of deed of
consideration, would not be conclusive of the
absolute sale were
inexistence of a sale since consideration is always
expressly stipulated as suspensive conditions, which
presumed.
gave rise to the corresponding obligation on part of
buyer to pay the last installments.
Receipts proves payment which takes the sale out of
the Statute of Frauds.
• When signature on a deed of sale is a forgery . But
c. For Validity: Sale of Realty Through Agent, Authority bare assertions that the signature appearing on the
Must Be in Writing (Art. 1874) Deeds of Sale is not that of her husband is not enough
to allege simulation, since forgery is not presumed; it
Art. 1874. When a sale of a piece of land or any interest must be proven by clear, positive and convincing
therein is through an agent, the authority of the latter evidence.
shall be in writing; otherwise, the sale shall be void. • Simulation of contract and gros s inadequacy of price
When sale of a piece of land or any interest therein is are distinct lega l concepts, with different effects – the
through an agent, the authority of the latter shall be in concept of a simulated sale is incompatible with
writing; otherwise, the sale shall be void ,75 even when: inadequacy of price. When the parties to an alleged

18
contract do not really intend to be bound by it, the characterized and punctuated by good faith and fair
contract is simulated and void. Gross inadequacy of dealing.
price by itself will not result in a void contract, and it
does not even affect the validity of a contract of sale, Alien who purchases land in the name of his Filipina
unless it signifies a defect in the consent or that the lover, has no standing to seek legal remedies to either
parties actually intended a donation or some other recover the property or the purchase price paid, since
contract. the transaction is void ab initio for being in violation of
the constitutional prohibition.
2. When Motive Nullifies the Sale
In sale, consideration is, as a rule, different from the VI. CONSUMMATION (Arts. 1493-1506) AND
motive of parties, and when the primary motive is PERFORMANCE OF CONTRACT OF SALE (Arts. 1536-1544,
illegal, such as when the sale was executed over a land 1582-1590)
to illegally frustrate a person’s right to inheritance and
to avoid payment of estate tax, the sale is void Art. 1493. If at the time the contract of sale is perfected,
because illegal motive predetermined purpose of the the thing which is the object of the contract has been
contract. entirely lost, the contract shall be without any effect.
But if the thing should have been lost in part only, the
Where the parties to a contract of sale agreed to a vendee may choose between withdrawing from the
consideration, but the amount reflected in the final contract and demanding the remaining part, paying its
Deed of Sale was lower, their motivation being to pay price in proportion to the total sum agreed upon.
lower taxes on the transaction, the contract of sale (1460a)
remains valid and enforceable upon the terms of the Art. 1494. Where the parties purport a sale of specific
real consideration. Although illegal, the motives neither goods, and the goods without the knowledge of the
determine nor take the place of the consideration. seller have perished in part or have wholly or in a
material part so deteriorated in quality as to be
An action or defense for the declaration of the substantially changed in character, the buyer may at
inexistence of a contract is imprescriptible. On the other his option treat the sale:
hand, an action to rescind is founded upon and (1) As avoided; or
presupposes the existence of a contract. A contract (2) As valid in all of the existing goods or in so much
which is null and void is no contract at all and hence thereof as have not deteriorated, and as binding the
could not be the subject of rescission. buyer to pay the agreed price for the goods in which
the ownership will pass, if the sale was divisible. (n)
3. Remedies Allowed When Sale Simulated

When a contract of sale is void, the right to set up its Art. 1495. The vendor is bound to transfer the ownership
nullity or non-existence is available to third persons of and deliver, as well as warrant the thing which is the
whose interests are directly affected thereby. Likewise, object of the sale. (1461a)
the remedy of accion pauliana is available when the Art. 1496. The ownership of the thing sold is acquired by
subject matter is a conveyance, otherwise valid, the vendee from the moment it is delivered to him in
undertaken in fraud of creditors. any of the ways specified in Articles 1497 to 1501, or in
any other manner signifying an agreement that the
The rescissory action to set aside contra cts in fraud of possession is transferred from the vendor to the vendee.
creditors is accion pauliana, essentially a subsidiary (n)
remedy accorded under Article 1383 which the party
suffering damage can avail of only when he has no SECTION 2. - Delivery of the Thing Sold
other legal means to obtain reparation for the same. In
such action, it must be shown that both contracting Art. 1497. The thing sold shall be understood as
parties have acted malic iously so as to preju dice the delivered, when it is placed in the control and
creditors who were prevented from collecting their possession of the vendee. (1462a)
claims. Rescission if generally unavailing should a third Art. 1498. When the sale is made through a public
person, acting in good faith, is in lawful possession of instrument, the execution thereof shall be equivalent to
the property since he is protect by law against a suit for the delivery of the thing which is the object of the
rescission by the registration of the transfer to him in the contract, if from the deed the contrary does not
registry. appear or cannot clearly be inferred.
With regard to movable property, its delivery may also
4. Effect When Sale Declared Void: be made by the delivery of the keys of the place or
• The action for the declaration of the contract’s nullity depository where it is stored or kept. (1463a)
is imprescriptible—an action for reconveyance of Art. 1499. The delivery of movable property may
property on a void contract of sale does not prescribe. likewise be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be
• Possessor is entitled to keep the fruits during the period transferred to the possession of the vendee at the time
of the sale, or if the latter already had it in his possession
for which the buyer held the property in good faith.
for any other reason. (1463a)
Art. 1500. There may also be tradition constitutum
• Then restoration of what has been given is in order, possessorium. (n)
since the relationship between parties in any contract Art. 1501. With respect to incorporeal property, the
even if subsequently voided must always be provisions of the first paragraph of article 1498 shall
19
govern. In any other case wherein said provisions are whether actual delivery has been made or not, except
not applicable, the placing of the titles of ownership in that:
the possession of the vendee or the use by the vendee (1) Where delivery of the goods has been made to the
of his rights, with the vendor's consent, shall be buyer or to a bailee for the buyer, in pursuance of the
understood as a delivery. (1464) contract and the ownership in the goods has been
Art. 1502. When goods are delivered to the buyer "on retained by the seller merely to secure performance by
sale or return" to give the buyer an option to return the the buyer of his obligations under the contract, the
goods instead of paying the price, the ownership goods are at the buyer's risk from the time of such
passes to the buyer of delivery, but he may revest the delivery;
ownership in the seller by returning or tendering the (2) Where actual delivery has been delayed through
goods within the time fixed in the contract, or, if no time the fault of either the buyer or seller the goods are at
has been fixed, within a reasonable time. (n) the risk of the party in fault. (n)
When goods are delivered to the buyer on approval or Art. 1505. Subject to the provisions of this Title, where
on trial or on satisfaction, or other similar terms, the goods are sold by a person who is not the owner
ownership therein passes to the buyer: thereof, and who does not sell them under authority or
(1) When he signifies his approval or acceptance to the with the consent of the owner, the buyer acquires no
seller or does any other act adopting the transaction; better title to the goods than the seller had, unless the
(2) If he does not signify his approval or acceptance to owner of the goods is by his conduct precluded from
the seller, but retains the goods without giving notice of denying the seller's authority to sell.
rejection, then if a time has been fixed for the return of Nothing in this Title, however, shall affect:
the goods, on the expiration of such time, and, if no (1) The provisions of any factors' act, recording laws, or
time has been fixed, on the expiration of a reasonable any other provision of law enabling the apparent
time. What is a reasonable time is a question of fact. (n) owner of goods to dispose of them as if he were the
Art. 1503. When there is a contract of sale of specific true owner thereof;
goods, the seller may, by the terms of the contract, (2) The validity of any contract of sale under statutory
reserve the right of possession or ownership in the goods power of sale or under the order of a court of
until certain conditions have been fulfilled. The right of competent jurisdiction;
possession or ownership may be thus reserved (3) Purchases made in a merchant's store, or in fairs, or
notwithstanding the delivery of the goods to the buyer markets, in accordance with the Code of Commerce
or to a carrier or other bailee for the purpose of and special laws. (n)
transmission to the buyer. Art. 1506. Where the seller of goods has a voidable title
Where goods are shipped, and by the bill of lading the thereto, but his title has not been avoided at the time
goods are deliverable to the seller or his agent, or to of the sale, the buyer acquires a good title to the
the order of the seller or of his agent, the seller thereby goods, provided he buys them in good faith, for value,
reserves the ownership in the goods. But, if except for and without notice of the seller's defect of title.
the form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the Art. 1536. The vendor is not bound to deliver the thing
seller's property in the goods shall be deemed to be sold in case the vendee should lose the right to make
only for the purpose of securing performance by the use of the terms as provided in Article 1198. (1467a)
buyer of his obligations under the contract. Art. 1537. The vendor is bound to deliver the thing sold
Where goods are shipped, and by the bill of lading the and its accessions and accessories in the condition in
goods are deliverable to order of the buyer or of his which they were upon the perfection of the contract.
agent, but possession of the bill of lading is retained by All the fruits shall pertain to the vendee from the day on
the seller or his agent, the seller thereby reserves a right which the contract was perfected. (1468a)
to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the Art. 1538. In case of loss, deterioration or improvement
price and transmits the bill of exchange and bill of of the thing before its delivery, the rules in Article 1189
lading together to the buyer to secure acceptance or shall be observed, the vendor being considered the
payment of the bill of exchange, the buyer is bound to debtor. (n)
return the bill of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill of lading Art. 1539. The obligation to deliver the thing sold
he acquires no added right thereby. If, however, the bill includes that of placing in the control of the vendee all
of lading provides that the goods are deliverable to the that is mentioned in the contract, in conformity with the
buyer or to the order of the buyer, or is indorsed in following rules:
blank, or to the buyer by the consignee named therein, If the sale of real estate should be made with a
one who purchases in good faith, for value, the bill of statement of its area, at the rate of a certain price for a
lading, or goods from the buyer will obtain the unit of measure or number, the vendor shall be obliged
ownership in the goods, although the bill of exchange to deliver to the vendee, if the latter should demand it,
has not been honored, provided that such purchaser all that may have been stated in the contract; but,
has received delivery of the bill of lading indorsed by should this be not possible, the vendee may choose
the consignee named therein, or of the goods, without between a proportional reduction of the price and the
notice of the facts making the transfer wrongful. (n) rescission of the contract, provided that, in the latter
Art. 1504. Unless otherwise agreed, the goods remain at case, the lack in the area be not less than one-tenth of
the seller's risk until the ownership therein is transferred that stated.
to the buyer, but when the ownership therein is The same shall be done, even when the area is the
transferred to the buyer the goods are at the buyer's risk same, if any part of the immovable is not of the quality
specified in the contract.
20
The rescission, in this case, shall only take place at the severable, giving rise to a claim for compensation but
will of the vendee, when the inferior value of the thing not to a right to treat the whole contract as broken. (n)
sold exceeds one-tenth of the price agreed upon. Art. 1584. Where goods are delivered to the buyer,
Nevertheless, if the vendee would not have bought the which he has not previously examined, he is not
immovable had he known of its smaller area of inferior deemed to have accepted them unless and until he
quality, he may rescind the sale. (1469a) has had a reasonable opportunity of examining them
Art. 1540. If, in the case of the preceding article, there is for the purpose of ascertaining whether they are in
a greater area or number in the immovable than that conformity with the contract if there is no stipulation to
stated in the contract, the vendee may accept the the contrary.
area included in the contract and reject the rest. If he Unless otherwise agreed, when the seller tenders
accepts the whole area, he must pay for the same at delivery of goods to the buyer, he is bound, on request,
the contract rate. (1470a) to afford the buyer a reasonable opportunity of
Art. 1541. The provisions of the two preceding articles examining the goods for the purpose of ascertaining
shall apply to judicial sales. (n) whether they are in conformity with the contract.
Art. 1542. In the sale of real estate, made for a lump
sum and not at the rate of a certain sum for a unit of Where goods are delivered to a carrier by the seller, in
measure or number, there shall be no increase or accordance with an order from or agreement with the
decrease of the price, although there be a greater or buyer, upon the terms that the goods shall not be
less area or number than that stated in the contract. delivered by the carrier to the buyer until he has paid
The same rule shall be applied when two or more the price, whether such terms are indicated by marking
immovables as sold for a single price; but if, besides the goods with the words "collect on delivery," or
mentioning the boundaries, which is indispensable in otherwise, the buyer is not entitled to examine the
every conveyance of real estate, its area or number goods before the payment of the price, in the absence
should be designated in the contract, the vendor shall of agreement or usage of trade permitting such
be bound to deliver all that is included within said examination. (n)
boundaries, even when it exceeds the area or number Art. 1585. The buyer is deemed to have accepted the
specified in the contract; and, should he not be able to goods when he intimates to the seller that he has
do so, he shall suffer a reduction in the price, in accepted them, or when the goods have been
proportion to what is lacking in the area or number, delivered to him, and he does any act in relation to
unless the contract is rescinded because the vendee them which is inconsistent with the ownership of the
does not accede to the failure to deliver what has seller, or when, after the lapse of a reasonable time, he
been stipulated. (1471) retains the goods without intimating to the seller that he
Art. 1543. The actions arising from Articles 1539 and 1542 has rejected them. (n)
shall prescribe in six months, counted from the day of Art. 1586. In the absence of express or implied
delivery. (1472a) agreement of the parties, acceptance of the goods by
Art. 1544. If the same thing should have been sold to the buyer shall not discharge the seller from liability in
different vendees, the ownership shall be transferred to damages or other legal remedy for breach of any
the person who may have first taken possession thereof promise or warranty in the contract of sale. But, if, after
in good faith, if it should be movable property. acceptance of the goods, the buyer fails to give notice
Should it be immovable property, the ownership shall to the seller of the breach in any promise of warranty
belong to the person acquiring it who in good faith first within a reasonable time after the buyer knows, or
recorded it in the Registry of Property. ought to know of such breach, the seller shall not be
Should there be no inscription, the ownership shall liable therefor. (n)
pertain to the person who in good faith was first in the Art. 1587. Unless otherwise agreed, where goods are
possession; and, in the absence thereof, to the person delivered to the buyer, and he refuses to accept them,
who presents the oldest title, provided there is good having the right so to do, he is not bound to return them
faith. to the seller, but it is sufficient if he notifies the seller that
he refuses to accept them. If he voluntarily constitutes
Art. 1582. The vendee is bound to accept delivery and himself a depositary thereof, he shall be liable as such.
to pay the price of the thing sold at the time and place (n)
stipulated in the contract. Art. 1588. If there is no stipulation as specified in the first
If the time and place should not have been stipulated, paragraph of article 1523, when the buyer's refusal to
the payment must be made at the time and place of accept the goods is without just cause, the title thereto
the delivery of the thing sold. (1500a) passes to him from the moment they are placed at his
Art. 1583. Unless otherwise agreed, the buyer of goods is disposal. (n)
not bound to accept delivery thereof by installments. Art. 1589. The vendee shall owe interest for the period
Where there is a contract of sale of goods to be between the delivery of the thing and the payment of
delivered by stated installments, which are to be the price, in the following three cases:
separately paid for, and the seller makes defective (1) Should it have been so stipulated;
deliveries in respect of one or more instalments, or the (2) Should the thing sold and delivered produce fruits or
buyer neglects or refuses without just cause to take income;
delivery of or pay for one more instalments, it depends (3) Should he be in default, from the time of judicial or
in each case on the terms of the contract and the extrajudicial demand for the payment of the price.
circumstances of the case, whether the breach of (1501a)
contract is so material as to justify the injured party in Art. 1590. Should the vendee be disturbed in the
refusing to proceed further and suing for damages for possession or ownership of the thing acquired, or should
breach of the entire contract, or whether the breach is he have reasonable grounds to fear such disturbance,
21
by a vindicatory action or a foreclosure of mortgage,
he may suspend the payment of the price until the A contract to sell, or a condition contract of sale where
vendor has caused the disturbance or danger to the suspensive condition has not happened, even
cease, unless the latter gives security for the return of when found in a public document, cannot be treated
the price in a proper case, or it has been stipulated as constituting constructive delivery, especially when
that, notwithstanding any such contingency, the from the face of the instrument it is shown that the seller
vendee shall be bound to make the payment. A mere owner of the property and was only expecting to inherit
act of trespass shall not authorize the suspension of the it.”
payment of the price.
One can sell only what one owns or is authorized to sell,
A. OBLIGATIONS OF SELLER and the buyer can acquire no more than what the
1. Preserve Subject Matter (Art. 1163) seller can transfer legally.
Art. 1163. Every person obliged to give something is also
obliged to take care of it with the proper diligence of a A tax declaration, by itself, is not considered conclusive
good father of a family, unless the law or the stipulation evidence of ownership – it is merely an indicium of a
of the parties requires another standard of care. claim of ownership. When at the time of delivery there is
(1094a) no proof that the seller had ownership and as in fact
the tax declaration to the subject property was in the
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, name of another person, then there was no transfer of
1495, 1537) ownership by delivery.
Art. 1164. The creditor has a right to the fruits of the
thing from the time the obligation to deliver it arises. b. General Doctrines on Tradition, Whether Actual or
However, he shall acquire no real right over it until the Constructive:
same has been delivered to him. It may be stipulated that ownership in the thing shall not
pass to buyer until he has fully paid price (Art. 1478).
Art. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and Art. 1478. The parties may stipulate that
accessories, even though they may not have been ownership in the thing shall not pass to the
mentioned. purchaser until he has fully paid the price.

Art. 1495. The vendor is bound to transfer the ownership In the absence of such stipulation to the contrary,
of and deliver, as well as warrant the thing which is the tradition produces its natural effects in law, most
object of the sale. important of which being conveyance of ownership,
without prejudice to right of the seller to claim payment
Art. 1537. The vendor is bound to deliver the thing sold of the price.
and its accessions and accessories in the condition in
which they were upon the perfection of the contract. Delivery contemplates “the absolute giving up of the
All the fruits shall pertain to the vendee from the day on control and custody of the property on the part of the
which the contract was perfected. vendor, and the assumption of the same by the
vendee. Non nudis pactis sed traditione dominia rerum
3. DELIVER THE SUBJECT MATTER (Art. 1477) transferantur . And there is said to be delivery if and
when the thing sold “is placed in the control and
Art. 1477. The ownership of the thing sold shall be possession of the vendee.”
transferred to the vendee upon the actual or
constructive delivery thereof. “Delivery ” as used in Sales refers to the concurrent
transfer of two things: (1) possession and (2) ownership.
a. Legal Premises for Doctrines on Tradition If the vendee is placed in actual possession of the
When the sale is void or fictitious, no valid title over the property, but by agreement of the parties ownership of
subject matter can be conveyed to the buyer even the same is retained by the vendor until the vendee has
with delivery. Nemo potest nisi quod de jure potest – No fully paid the
man can do anything except what he can do lawfully . price, the mere transfer of the possession of the
property subject of the sale is not the “delivery”
When seller had no ownership over the subject matter contemplated in the Law on Sales or as used in Article
at the time of delivery, no valid title can pass in favor of 1543 of the Civil Code.
the buyer. Nemo dat quod non habet – No man can
give that which he does not have. Since delivery of subject matter of sale is an ob ligation
on the part of the seller, the acceptance thereof by the
A forged deed of sale is null and void and conveys no buyer is not a condition for the completeness of
title. It is a well-settled principle that no one can give delivery.
what one does not have, nemo dat quod non habet.
One can sell only what one owns or is authorized to sell, In the absence of an express stipulation to the contrary,
and the buyer can acquire no more right than what the payment of purchase price of the goods is not a
seller can transfer legally. condition precedent to the transfer of title to the buyer,
but title passes by the delivery of the goods. xPhil.
Article 1459 of the Civil Code on contracts of sale Failure of the buyer to make good the price does not,
“specifically requires that the vendor must have in law, cause the ownership to revest to the seller unless
ownership of the property at the time it is delivered.”
22
the bilateral contract of sale is first rescinded or There is nothing in Article 1498 that provides that
resolved pursuant to Art. 1191. execution of a deed of sale is a conclusive presumption
of delivery of possession; presumptive delivery can be
A contract to sell, or a condition contract of sale where negated by the failure of the vendee to take actual
the suspensive condition has not happened, even possession of the land or the continued enjoyment of
when found in a public document, cannot be treated possession by the vendor.
as constituting constructive delivery, especially when
from the face of the instrument it is shown that the seller The presumptive delivery by the execution of a public
“was not yet the owner of the property and was only instrument can be negated by the failure of the
expecting to inherit it.” vendee to take actual possession of the land sold.

c. Physical Delivery (Art. 1497) (i) As to Movables (Arts. 1498-1499, 1513-1514;


Art. 1498. When the sale is made through a
Art. 1497. The thing sold shall be understood as public instrument, the execution thereof shall
delivered, when it is placed in the control and be equivalent to the delivery of the thing which
possession of the vendee. is the object of the contract, if from the deed
It is not necessary that seller himself delivers title to the the contrary does not appear or cannot clearly
buyer because the thing sold is understood as delivered be inferred.
when it is placed in control and possession of buyer. With regard to movable property, its delivery
Thus, when sellers themselves introduced the tenant to may also be made by the delivery of the keys
the buyer as the new owners of the land, and from that of the place or depository where it is stored or
time kept. (1463a)
on the buyer acted as landlord thereof, there was
delivery that transferred title to the buyer. Art. 1499. The delivery of movable property
may likewise be made by the mere consent or
agreement of the contracting parties, if the
d. Constructive Delivery: EXECUTION OF A PUBLIC thing sold cannot be transferred to the
INSTRUMENT (Art. 1498) possession of the vendee at the time of the
sale, or if the latter already had it in his
Art. 1498. When the sale is made through a possession for any other reason.
public instrument, the execution thereof shall
be equivalent to the delivery of the thing which Art. 1513. A person to whom a negotiable
is the object of the contract, if from the deed document of title has been duly negotiated
the contrary does not appear or cannot clearly acquires thereby:
be inferred. (1) Such title to the goods as the person
With regard to movable property, its delivery negotiating the document to him had or had
may also be made by the delivery of the keys ability to convey to a purchaser in good faith
of the place or depository where it is stored or for value and also such title to the goods as the
kept. person to whose order the goods were to be
delivered by the terms of the document had or
Where deed of sale or any agreement analogous to a had ability to convey to a purchaser in good
deed of sale, is made through a public instrument, its faith for value; and
execution is equivalent to the delivery of the property. (2) The direct obligation of the bailee issuing
the document to hold possession of the goods
Under Art. 1498, the mere execution of the deed of for him according to the terms of the
conveyance in a public instrument is equivalent to the document as fully as if such bailee had
delivery of the property, and that prior physical delivery contracted directly with him. (n)
or possession is not legally required, since ownership
and possession are two entirely different legal Art. 1514. A person to whom a document of
concepts. title has been transferred, but not negotiated,
Notwithstanding the presence of illegal occupants on acquires thereby, as against the transferor, the
the subject property, transfer of ownership by symbolic title to the goods, subject to the terms of any
delivery under Art. 1498 can still be effected through agreement with the transferor.
the execution of the deed of conveyance. If the document is non-negotiable, such person
also acquires the right to notify the bailee who
As a general rule, when the sale is made through a issued the document of the transfer thereof,
public instrument, the execution thereof shall be and thereby to acquire the direct obligation of
equivalent to the delivery of the thing which is the such bailee to hold possession of the goods for
object of the contract, if from the deed the contrary him according to the terms of the document.
does not appear or cannot clearly be inferred. In order Prior to the notification to such bailee by the
the execution of a public instrument to effect tradition, transferor or transferee of a non-negotiable
the purchaser must be placed in control of the thing document of title, the title of the transferee to
who does not have actual possession of the thing sold the goods and the right to acquire the
cannot transfer constructive spoolds.s eAs psieorns obligation of such bailee may be defeated by
obny the execution and delivery of a public instrument. the levy of an attachment of execution upon
the goods by a creditor of the transferor, or by
a notification to such bailee by the transferor or
23
a subsequent purchaser from the transfer of a B UT S EE : Under Art. 1495, seller is obliged to transfer
subsequent sale of the goods by the transferor. title over the property and deliver the same to the
vendee.
Where it is stipulated that deliveries must be made to
the buyer or his duly authorized representative named (2) Customary Steps in Selling Immovables –
in the contracts, the seller is under obligation to deliver “Customarily, in the absence of a contrary agreement,
in accordance with such instructions. the submission by an individual seller to the buyer of the
following papers would complete a sale of real estate:
Execution by supposed buyers of a chattel mortgage (1) owner s duplicate copy of the Torrens title; (2)
over subject vehicle in favor of the financing company signed deed of absolute sale; (3) tax declaration; and
does not mean that ownership had been transferred to (4) latest realty tax receipt. They buyer can retain the
them, for delivery must be on the part of the seller. amount for the capital gains tax and pay it upon
authority of the seller, or the seller can pay the tax,
Neither issuance of an invoice, which is not a
depending on the agreement of the parties.”
document of title nor of the registration certificate of
vehicle would constitute constructive delivery.
The execution of the notarized deed of sale and the
delivery of the owner s duplicate copy of the srcinal
certificate of title to the buyer is tantamount to
(ii) As to Immovables (Art. 1498) constructive delivery of the object of the sale.

Art. 1498. When the sale is made through a (iii) As to Incorporeal Property (Arts. 1498 and 1501).
public instrument, the execution thereof shall
be equivalent to the delivery of the thing which Art. 1498. When the sale is made through a
is the object of the contract, if from the deed public instrument, the execution thereof shall
the contrary does not appear or cannot clearly be equivalent to the delivery of the thing which
be inferred. is the object of the contract, if from the deed
With regard to movable property, its delivery the contrary does not appear or cannot clearly
may also be made by the delivery of the keys be inferred.
of the place or depository where it is stored or With regard to movable property, its delivery
kept. may also be made by the delivery of the keys
of the place or depository where it is stored or
Issuance of an acknowledgment receipt of partial kept. (1463a)
payment, when it is not a public instrument does not
convey title. Art. 1501. With respect to incorporeal property,
the provisions of the first paragraph of article
In case of immovables, when sale is made through a 1498 shall govern. In any other case wherein
public instrument, the execution thereof shall be said provisions are not applicable, the placing
equivalent to the delivery of the thing which is the of the titles of ownership in the possession of the
object of the contract, if from the deed the contrary vendee or the use by the vendee of his rights,
does not appear or cannot clearly be inferred. and with the vendor's consent, shall be understood
that prior physical delivery or possession is not legally as a delivery.
required since In the sale of shares of stock, physical delivery
execution of the deed is deemed equivalent to of a stock certificate is one of the essential
delivery. requisites for the transfer of ownership of the
Provided That: stocks purchased. Filinvest’s failure to delivery
(a) The thing sold is subject to the control of the seller the stock certificates representing the shares of
(b) Such control should remain within a reasonable stock purchased by TEMI and Garcia
period after the execution of the instrument amounted to a substantial breach of their
contract which gave rise to a right to rescind
EXCEPT: When buyer assumes the risks of ownership and the sale.
possession.
e. Constitutum Possessorium (Art. 1500) – A provision in
Execution of Deed of Conditional Sale with provision the deed of sale granting to seller a right to lease the
that final deed of sale to be executed upon full subject matter of the sale is valid: the possession is
payment does not transfer ownership of the subject deemed to be constituted in the vendee by virtue of
matter. this mode of tradition.

(1) Registration of Title I s Separate Mode from f. Traditio Brevi Manu – Prior to the sale, petitioners were
Execution o f Public Instrum ent – The recording of the in possession of the subject property as lessees. Upon
sale with the proper Registry of Deeds and the transfer sale to them of the rights, interests and participation as
of the certificate of title in the name of the buyer are to the ½ portion pro indiviso, they remained in
necessary only to bind third parties to the transfer of possession, not in the concept of lessees anymore but
ownership. As between the seller and the buyer, the as owners now through symbolic delivery known as
transfer of ownership takes effect upon the execution traditio brevi manu.
of a public instrument conveying the real estate.

24
4. Transfer Ownership to Vendee Upon Delivery (Arts. the buyer by the consignee named therein,
1477, 1478, and 1496) one who purchases in good faith, for value, the
bill of lading, or goods from the buyer will
Art. 1477. The ownership of the thing sold shall obtain the ownership in the goods, although
be transferred to the vendee upon the actual the bill of exchange has not been honored,
or constructive delivery thereof. (n) provided that such purchaser has received
delivery of the bill of lading indorsed by the
Art. 1478. The parties may stipulate that consignee named therein, or of the goods,
ownership in the thing shall not pass to the without notice of the facts making the transfer
purchaser until he has fully paid the price. wrongful.
5. Taking-Out Insurance Coverage (Art. 1523)
Art. 1496. The ownership of the thing sold is
acquired by the vendee from the moment it is Art. 1523. Where, in pursuance of a contract of
delivered to him in any of the ways specified in sale, the seller is authorized or required to send
Articles 1497 to 1501, or in any other manner the goods to the buyer, delivery of the goods
signifying an agreement that the possession is to a carrier, whether named by the buyer or
transferred from the vendor to the vendee. not, for the purpose of transmission to the buyer
is deemed to be a delivery of the goods to the
a. When Buyer Refuses to Accept (Art. 1588) buyer, except in the case provided for in Article
Art. 1588. If there is no stipulation as specified in 1503, first, second and third paragraphs, or
the first paragraph of article 1523, when the unless a contrary intent appears.
buyer's refusal to accept the goods is without Unless otherwise authorized by the buyer, the
just cause, the title thereto passes to him from seller must make such contract with the carrier
the moment they are placed at his disposal. on behalf of the buyer as may be reasonable,
b. In Case of Express or Implied Reservation (Arts. 1478 having regard to the nature of the goods and
and 1503) the other circumstances of the case. If the
Art. 1478. The parties may stipulate that seller omit so to do, and the goods are lost or
ownership in the thing shall not pass to the damaged in course of transit, the buyer may
purchaser until he has fully paid the price. decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller
Art. 1503. When there is a contract of sale of responsible in damages.
specific goods, the seller may, by the terms of Unless otherwise agreed, where goods are sent
the contract, reserve the right of possession or by the seller to the buyer under circumstances
ownership in the goods until certain conditions in which the seller knows or ought to know that
have been fulfilled. The right of possession or it is usual to insure, the seller must give such
ownership may be thus reserved notice to the buyer as may enable him to
notwithstanding the delivery of the goods to insure them during their transit, and, if the seller
the buyer or to a carrier or other bailee for the fails to do so, the goods shall be deemed to be
purpose of transmission to the buyer. at his risk during such transit.
Where goods are shipped, and by the bill of 6. Time and Place of Delivery (Art. 1521)
lading the goods are deliverable to the seller or Art. 1521. Whether it is for the buyer to take
his agent, or to the order of the seller or of his possession of the goods or of the seller to send
agent, the seller thereby reserves the ownership them to the buyer is a question depending in
in the goods. But, if except for the form of the each case on the contract, express or implied,
bill of lading, the ownership would have passed between the parties. Apart from any such
to the buyer on shipment of the goods, the contract, express or implied, or usage of trade
seller's property in the goods shall be deemed to the contrary, the place of delivery is the
to be only for the purpose of securing seller's place of business if he has one, and if
performance by the buyer of his obligations not his residence; but in case of a contract of
under the contract. sale of specific goods, which to the knowledge
Where goods are shipped, and by the bill of of the parties when the contract or the sale
lading the goods are deliverable to order of was made were in some other place, then that
the buyer or of his agent, but possession of the place is the place of delivery.
bill of lading is retained by the seller or his Where by a contract of sale the seller is bound
agent, the seller thereby reserves a right to the to send the goods to the buyer, but no time for
possession of the goods as against the buyer. sending them is fixed, the seller is bound to
Where the seller of goods draws on the buyer send them within a reasonable time.
for the price and transmits the bill of exchange Where the goods at the time of sale are in the
and bill of lading together to the buyer to possession of a third person, the seller has not
secure acceptance or payment of the bill of fulfilled his obligation to deliver to the buyer
exchange, the buyer is bound to return the bill unless and until such third person
of lading if he does not honor the bill of acknowledges to the buyer that he holds the
exchange, and if he wrongfully retains the bill goods on the buyer's behalf.
of lading he acquires no added right thereby. Demand or tender of delivery may be treated
If, however, the bill of lading provides that the as ineffectual unless made at a reasonable
goods are deliverable to the buyer or to the hour. What is a reasonable hour is a question of
order of the buyer, or is indorsed in blank, or to fact.
25
Unless otherwise agreed, the expenses of and 1. In Case of Movables (Art. 1522 and 1537, 1480)
incidental to putting the goods into a Art. 1522. Where the seller delivers to the buyer
deliverable state must be borne by the seller. a quantity of goods less than he contracted to
7. Expenses of Execution and Registration (Art. 1487), sell, the buyer may reject them, but if the buyer
and of Putting Goods in Deliverable Estate (Art. 1521) accepts or retains the goods so delivered,
knowing that the seller is not going to perform
Art. 1487. The expenses for the execution and the contract in full, he must pay for them at the
registration of the sale shall be borne by the contract rate. If, however, the buyer has used
vendor, unless there is a stipulation to the or disposed of the goods delivered before he
contrary. knows that the seller is not going to perform his
contract in full, the buyer shall not be liable for
more than the fair value to him of the goods so
Art. 1521. Whether it is for the buyer to take received.
possession of the goods or of the seller to send Where the seller delivers to the buyer a quantity
them to the buyer is a question depending in of goods larger than he contracted to sell, the
each case on the contract, express or implied, buyer may accept the goods included in the
between the parties. Apart from any such contract and reject the rest. If the buyer
contract, express or implied, or usage of trade accepts the whole of the goods so delivered
to the contrary, the place of delivery is the he must pay for them at the contract rate.
seller's place of business if he has one, and if Where the seller delivers to the buyer the goods
not his residence; but in case of a contract of he contracted to sell mixed with goods of a
sale of specific goods, which to the knowledge different description not included in the
of the parties when the contract or the sale contract, the buyer may accept the goods
was made were in some other place, then that which are in accordance with the contract
place is the place of delivery. and reject the rest.
Where by a contract of sale the seller is bound In the preceding two paragraphs, if the subject
to send the goods to the buyer, but no time for matter is indivisible, the buyer may reject the
sending them is fixed, the seller is bound to whole of the goods.
send them within a reasonable time. The provisions of this article are subject to any
Where the goods at the time of sale are in the usage of trade, special agreement, or course
possession of a third person, the seller has not of dealing between the parties.
fulfilled his obligation to deliver to the buyer
unless and until such third person Art. 1537. The vendor is bound to deliver the
acknowledges to the buyer that he holds the thing sold and its accessions and accessories in
goods on the buyer's behalf. the condition in which they were upon the
Demand or tender of delivery may be treated perfection of the contract.
as ineffectual unless made at a reasonable All the fruits shall pertain to the vendee from
hour. What is a reasonable hour is a question of the day on which the contract was perfected.
fact.
Unless otherwise agreed, the expenses of and Art. 1480. Any injury to or benefit from the thing
incidental to putting the goods into a sold, after the contract has been perfected,
deliverable state must be borne by the seller. from the moment of the perfection of the
contract to the time of delivery, shall be
Unless otherwise stipulated: (a) under Art. 1487 the governed by Articles 1163 to 1165, and 1262.
expenses for the registration be shouldered by the This rule shall apply to the sale of fungible
vendor ;f tahned s (able) dshuotyu ltdo withhold taxes things, made independently and for a single
due on the sale is imposed on seller. price, or without consideration of their weight,
number, or measure.
Buyer has more interest in having the capital gains tax Should fungible things be sold for a price fixed
paid immediately since this is a pre-requisite to the according to weight, number, or measure, the
issuance of a new Torrens title in his name. Nevertheless, risk shall not be imputed to the vendee until
as far as the government is concerned, the capital they have been weighed, counted, or
gains tax remains a liability of the seller since it is a tax measured and delivered, unless the latter has
on the seller’s gain from the sale of the real estate. incurred in delay.
Payment of the capital gai ns tax, however, is not a
pre-requisite to the transfer of ownership to the buyer. When the contract does not provide for the measuring
The transfer of ownership takes effect upon the signing or weighing of a sold specific mass, and the price
and notarization of the deed of absolute sale.” agreed upon was not based on such measurement,
then “[t]he subject matter of the sale is, therefore, a
A judgment on a contract of sale that decrees seller’s determinate object, the mass, and not the actual
obliga tions to execute and deliver the deed of number of units or tons contained therein, so that all
absolute sale and the certificate of title, does not that is required of seller was to deliver in good faith to
necessarily include within its terms the obligation to pay his buyer all of those found
for the expenses in notarizing a deed of sale and in in the mass, notwithstanding that the quantity delivered
obtaining new certificate of title. is less than the amount estimated in the contract.”

B. SPECIAL RULES ON COMPLETENESS OF DELIVERY a. Rules on Delivery to Carrier (Art. 1523)


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similar terms, the ownership therein passes to
Art. 1523. Where, in pursuance of a contract of the buyer:
sale, the seller is authorized or required to send (1) When he signifies his approval or
the goods to the buyer, delivery of the goods acceptance to the seller or does any other act
to a carrier, whether named by the buyer or adopting the transaction;
not, for the purpose of transmission to the buyer (2) If he does not signify his approval or
is deemed to be a delivery of the goods to the acceptance to the seller, but retains the goods
buyer, except in the case provided for in Article without giving notice of rejection, then if a time
1503, first, second and third paragraphs, or has been fixed for the return of the goods, on
unless a contrary intent appears. the expiration of such time, and, if no time has
Unless otherwise authorized by the buyer, the been fixed, on the expiration of a reasonable
seller must make such contract with the carrier time. What is a reasonable time is a question of
on behalf of the buyer as may be reasonable, fact.
having regard to the nature of the goods and In a “sale or return,” the ownership passes to the buyer
the other circumstances of the case. If the on delivery pursuant to a perfected contract of sale;
seller omit so to do, and the goods are lost or and the subsequent return of the goods reverts
damaged in course of transit, the buyer may ownership back to the seller. In such case, tradition as a
decline to treat the delivery to the carrier as a mode of acquiring ownership must be in consequence
delivery to himself, or may hold the seller of a contract.
responsible in damages.
Unless otherwise agreed, where goods are sent satisIfna cati on“s”)a,l eth eo nd elaivpeprryo voaf lt”h
by the seller to the buyer under circumstances e( aolsboje cct adlloeeds n“soat letr anosnf ear
in which the seller knows or ought to know that cocwenpetarsnhciep, to“s tahlee bounye rt rsiainl”c eo
it is usual to insure, the seller must give such trh e“s daeleli veorny
notice to the buyer as may enable him to was not for purposes of transferring ownership, since the
insure them during their transit, and, if the seller prestation to effect a meeting of the minds to give rise
fails to do so, the goods shall be deemed to be to a valid contract is incumbent on the buyer.
at his risk during such transit.
(i) FAS Sales – “The seller pays all charges and is subject
to risk until the goods are placed alongside the vessel”.

(ii) FOB Sales – In mercantile contracts of American


srcin, “F.O.B.” stand for the words “Free on Board,” i.e.,
that the seller shall bear all expenses until the goods are
delivered according as to whether the goods are to be
delivered “F.O.B.” at the point of shipment or at the
point of destination determines the time when property
passes.

(iii) CIF Sales “C.I.F.” found in British contracts stand for


costs, insurance, and freight; they signify that the price
fixed covers not only the costs of the goods, but the
expense of freight and insurance to be paid by the
seller.

Under an arrangement “c.i.f. Pacific Coast”


(destination), “the vendor is to pay not only the cost of
the goods, but also the freight and insurance expenses,
and, as it was judicially interpreted, this is taken to
indicate that the delivery is to be made at the port of
destination.”

b. Sale on Approval, Trial or Satisfaction (Art. 1502)

Art. 1502. When goods are delivered to the


buyer "on sale or return" to give the buyer an
option to return the goods instead of paying
the price, the ownership passes to the buyer of
delivery, but he may revest the ownership in
the seller by returning or tendering the goods
within the time fixed in the contract, or, if no
time has been fixed, within a reasonable time.
(n)
When goods are delivered to the buyer on
approval or on trial or on satisfaction, or other

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