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SALES MIDTERMS REVIEWER|1st SEM| AY 2010-2011|SANCHEZ I. INTRODUCTION A. ESSENTIAL REQUIREMENTS OF A CONTRACT ART.

1318 ESSENTIAL ELEMENTS without which there would be no contract 1. Consent Consent is manifested by the MEETING of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. 2. Object a. All things not outside the commerce of man b. All rights not intransmissible c. All services not contrary to law, morals, good customs, public, or public policy Requisite of Object of Contracts 1. Within the commerce of man (Art 1347) 2. Licit, not contrary to law, morals, good customs, public policy or public order (Art 1347) 3. Possible (Art 1348) 4. Determinate as to its kind Art 1349 The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. 3. Cause CAUSE the immediate and most proximate purpose of the contract, the essential reason which impels the contracting parties to enter into it and which explains and justifies the creation of the obligation through such contract The motive may be said to be the secondary or indirect purpose a. Onerous Contracts Prestation or promise of a thing or service by the other Need not be adequate or an exact equivalent in point of actual value especially in dealing with objects which have rapidly fluctuating price b. Remuneratory Contracts One where a party gives something to another because of some service or benefit given or rendered by the latter to the former where such service or benefit was not due as a legal obligation E.g. bonuses

c. Contracts of pure beneficence (Gratuitous) Essentially agreements to give donations B. DEFINITIONS 1. CONTRACTS OF SALE ART. 1458: a) One party (SELLER) obligates himself to transfer ownership and to deliver a determinate thing b) Other party (BUYER) to pay a price certain in money or its equivalent Both REAL OBLIGATIONS = to give; cf. PERSONAL OBLIGATIONS = to do May be proper subject of Action for SPECIFIC PERFORMANCE; cf. PERSONAL OBLIGATIONS can only claim damages in case of breach Civil Code expands the meaning of determinate; as applied to the Law on Sales, also includes generic things which are at least determinable ELEMENTS OF A CONTRACT OF SALE 1. CONSENT: to transfer ownership in exchange for a price 2. DETERMINATE SUBJECT-MATTER 3. PRICE CERTAIN: in money or its equivalent CASES TOPACIO v CA: Contract of Sale Consent: Meeting of minds BPI agreed to sell as 1.25M (offer); accepted by Topacio (Nov. 27); BPI issued a receipt for the 375K downpayment Acceptance of earnest money; forms part of purchase price in COS (Art. 1482) BPI did not reserve title to property NO Rescission; in COS requires (both lacking): a. judicial notice/notarial act b. stipulation of automatic rescission LAFORTEZA v MACHUCA: Contract of Sale (and Lease) denominated as Contract to Sell a. no express reservation of title b. no stipulation that non-payment would make it unenforceable COS: elements are all present a. Consent b. Determinate subject-matter: house and lot c. Price: 600K balance to be paid upon issuance of a new certificate of title PERFECTED: a. earnest money paid b. 6month period only a condition for the payment c. non-payment of rent if partition took longer than 6m = Machuca was already owner

NOT RESCINDED (by Lafortezas) a. no notarial/judicial rescission b. no stipulation of automatic rescission *Letter from Lafortezas saying they were rescinding the contract given 5days after Machuca offered to pay *Right to ask for rescission vested on Machuca; he was ready to comply with his obligation when the Lafortezas were not. CAVITE v LIM: Contract of Sale in favor of Lim by CDB; NOT an Option Contract OPTION CONTRACT (Preparatory) - only when option is exercised may a sale be perfected CONTRACT OF SALE a. Consent: meeting of minds (PERFECTION) b. Thing: determinate subject matter c. Price NOT required at PERFECTION that the SELLER be the owner of the thing sold; only at CONSUMMATION does it matter (Nemo dat quod non habet) Re: 10% down payment; if: a. Option money: remains with CDB b. Earnest money: returned to Lim UNENFORCEABLE SALE recovery of money paid - cannot be consummated; incapacity to deliver - CDB liable = bad faith; Rodolfos title cancelled by the time CDB foreclosed mortgage ALMIRA v CA: Perfected Contract of Sale Almira sold to Briones (a) 65K; (b) 85K Separate title in the name of Julio Garcia condition on obligation (to pay 85K) NOT on PERFECTION. (NOT) Contract to Sell - Ownership, by agreement, reserved to vendor - Ownership shall NOT pass until full payment of the price Contract of Sale - Title passes to the vendee upon delivery of the thing sold - Non-payment of vendee entitles the vendor to demand specific performance or rescission, both with damages (Art. 1191) a) Object: lot 1642 b) Price: 150K - Separate title only a condition for Briones to pay balance BUT there was already a perfected contract. ALFREDO v BORRAS: Perfected and Consummated Contract of Sale Alfredo mortgaged to DBP (7K) Borras paid loan and balance to Alfredos (15K) DBP gave Borras copy of OCT; Carmen Alfredo issued a receipt for the received balance (8K)

A re-sold property on the basis of a copy of the title obtained judicially; claims sale with B not valid under the Statutes of Fraud because it was oral Contract of Sale 1. Perfected a. consent b. object land c. price 15K 2. Consummated - Physical delivery of subject land transfer of ownership Even if orally entered into Receipt = note/memo of the sale Under SOF, only voidable and may be ratified when Godofredo A introduced B to tenants of land Redounded on the conjugal partnership (Art. 161) BLAS v HUTALLA: Contract of Sale (2nd) Executed 3 contracts a. Original (in PH): only to convince stepmom and nephew to vacate b. Deed of Sale (US) c. REPCRD (US): incidental to 2nd agreement SC: 2nd contract is binding - 1st did not show the true intention of the parties - Blas made partial payments under REPCRD 2nd Contract = Contract of Sale - Title passes to vendee upon constructive or actual delivery - May be rescinded by notarial deed Blas failed to pay balance; Hutalla judicially rescinded Abandoned MACEDA LAW of sale of real property is done on an installment basis, the buyer will be given a grace period. CRUZ v FERNANDO: Kasunduan is a Contract to Sell No definite manner of payment = no consent Absence of any formal deed (Aside from payment) failure to perform other suspensive condition - For Cruz to relocate house near the rear portion of the lot - Non-compliance prevented Gloriosos from proceeding with the sale VALDEZ v CA: Contract of Sale Sale to Lagon (Contract of Sale) - Consideration: a. Payment b. Transfer of Bank c. Build commercial building - No reservation of title; non-payment is resolutory MANILA METAL CONTAINER CORP. v PNB: NOT perfected contract of sale (repurchase) Acceptance of an offer should be absolute - Qualified acceptance = counter offer

- No acceptance of purchase price by either MMCC of PNB = NO CONSENT 725K merely a deposit to be applied to purchase price in the event that PNB accepts/approves recommendation of SAMD to accept MMCCs offer. ABSOLUTE ACCEPTANCE = PERFECTION - Through acts; conduct; words - Clearly manifest intention ROBERTS v PAPIO: Contract of Sale and Lease; NOT Equitable Mortgage A. Sale of Papio to Roberts = SALE - Not pacto de retro with repurchase - Not equitable mortgage: (a) enteres into contract of sale; (b) intent: to secure debt by mortgage - No right to repurchase B. Payment of Lease Contract of Sale - No evidence that Ventura was given the authority as agent to receive payment (only lease) HERRERA v CAGUIAT: Contract to Sell Ownership reserved to seller - Not to pass until full payment of purchase price Receipt of Partial Payment shows true agreement 1. Ownership retained by Herrera - Not to pass until full payment - Right to rescind unilaterally 2. Agreement NOT embodied in a deed of sale - Shows that the parties did not intend immediate transfer of ownership 3. H retained possession of the CTC of the lot - No transfer either by actual or constructive delivery Money given NOT earnest money under Art. 1482 (Contract of Sale). In Contract to Sell EM only forms part of consideration if sale is consummated. 2. CONTRACT TO SELL CASES ADELFA PROPERTY INC. v CA: Contract to Sell No intention to transfer ownership except upon full payment of the purchase price NOT OPTION there was already CONSENT meeting of offer and acceptance OPTION (Period; Privilege) a. No Consent b. Object: Right to buy (privilege) refers to a specific property c. Price: option money (may or may not exist) May be unilaterally rescinded - Failure of Adelfa to consign purchase price after the case filed by the nieces and nephews was dismissed - July 27 letter: announced rescission

LAFORTEZA v MACHUCA (supra): Contract of Sale and Lease CASTILLO v REYES: Contract of Sale Perfected by mere CONSENT - OFFER + ACCEPTANCE = meeting of minds re: subject-matter and price CHECK/CASH need not be considered (form of payment) as long as LEGAL TENDER CITY OF CEBU v HEIRS OF RUBI: Contract of Sale Acceptance of City when it passed the RESOLUTION; letter from Mayor OFFER by buyer; delay in payment laches BUOT v CA: Contract to Sell No title; Reston had to apply for it Title transferred to vendee only upon full payment of purchase price NOT OPTION - Should have or be exercised within a SPECIFIED DURATION/PERIOD - Privilege to buy or sell PLATINUM PLANS INC. v CUCUECO: Contract to Sell Did not agree when 2nd installment will be paid = NO CONSENT WITH express reservation LESSEE: even if in possession, title is still reserved to owner Platinum to return 2M; Cucuenco to pay rentals from date of agreement between parties BOWE v CA: Contract to Sell No formal deed of conveyance: intent: transfer title only upon full payment Albolarios asked for return of down payment - Would not have done so if they thought they owned the property - would have reduced it in writing New implied lease RAYOS v CA: Contract to Sell Retained ownership until full payment Non-fulfillment of Mirandas obligation to pay - Contract ineffective; without force and effect Case at bar, M may reinstate contract to sell by paying balance - Demand made by R - Action instituted to collect balance R ordered to convey property to M upon payment of the balance; provided, it has not been sold to a 3rd party. UNITED MUSLIM & CHRISTIAN URBAN POOR ASSOCIATION INC. v BRYC-V DEVELOPMENT CORP.: Letter of Intent; neither contract of sale nor contract to sell. Executed to facilitate loan application with NHMF

- Not a contract NOT binding upon parties - almost offer CONDITIONAL SALE - Automatic transfer of ownership upon suspensive condition CONTRACT TO SELL - No automatic transfer upon happening of condition Mere INTENT 3. CONDITIONAL CONTRACT OF SALE CONDITIONAL CONTRACT OF SALE Failure to pay is a resolutory condition which puts an end to the transaction Title passes to the vendee after compliance with his obligation (automatic; United Muslim v BRYC-V) After delivery, ownership is loss, unless it is rescinded First element (consent) is present albeit conditioned upon the happening of contingent event which may or may not occur, in effect, contract of sale is automatically perfected without further act having to be performed by the seller With respect to sale to third person: Upon fulfillment of suspensive condition, sale becomes absolute which affects sellers title 3P becomes buyer in bad faith if possesses contrastive or actual knowledge of defect in sellers title Second buyer cannot defeat the first buyers title CONTRACT TO SELL Failure to pay is a positive suspensive condition Ownership is retained by the seller

The sale of a vain hope or expectancy is void. ART. 1462: The goods which form the subject of a contract of sale may be either

1. 2.

Existing goods owned or possessed by the seller Goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale Future goods There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. aleatory FUTURE GOODS are those still to be

Manufactured Raised (e.g. young animals) Acquired by the seller after perfection of the contract (e.g. land which
seller expects to buy) Things whose acquisition depends upon a contingency which may or may not happen

Delivery does not affect loss of ownership Ownership not automatically transferred to the buyer (even if there has been previous delivery to him) upon fulfillment of suspensive condition (i.e. full payment of purchase price). Seller still has to convey title to prospective buyer by entering into a contract of absolute sale. With respect to sale to third person: No double sale (bec no previous sale of property despite fulfillment of suspensive condition) 3P not a buyer in bad faith Prospective buyer cannot seek relief of reconveyance of property, but only sue under Art 19 (unjustified disregard of right)

ART. 1645 Things subject to a resolutory condition may be the object of the contract of sale. e.g. of thing subject to resolutory condition i. Legal or conventional right of redemption ii. Subject to reserva troncal ART. 1503: Bill of Lading: 1. CIF (Cost, Insurance, Freight): - Everything paid for by the buyer - Ownership transfers once the thing is given to the carrier 2. FOB (Fee on Board) - Seller pays for everything - Ownership transfers once the thing reaches the port of the buyer ART. 1478: Right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer CASES PEOPLES HOMESITE & HOUSING CORP. v CA: Conditional Contract of Sale Condition: subject to approval of QC council

ART. 1461: Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence.

Art. 1181: Conditional obligations _ acquisition/extinguishment/loss of rights, shall depend upon happening of event which constitutes the condition 1st offer was agreed upon; 2nd offer NO agreement LIM v CA: Contract to Sell Condition: (1) 160 K full consideration; (2) conveyance of Caloocan lot Title remained with bank PINGOL v CA: Absolute Contract of Sale No reservation as to title Vendor delivered actual and constructive possession No judicial/notarial rescission Heirs are entitled to pay and become owners 4. OPTION ART. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell (option contract) a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. Also known as contract of option The period (which is supported by consideration) that is given to offeree within which to accept the offer OPTION generally unilateral; continuing offer upon sufficient consideration for a specified time. Implied obligation to to keep the offer open for the time specified. Can be withdrawn before acceptance if there is no consideration (Art 1324, CC). o UNACCEPTED OPTION unilateral contract, lacking the mutual elements of a contract o ACCEPTED OPTION an executory contract arises which is mutually binding upon the parties; ceases to become an option and becomes a mutual binding agreement of sale A privilege existing in one person (the buyer) for which he had paid a consideration which gives him the right to buy from another person if he chooses, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. Parties are still undecided whether or not to buy the property A contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into another contract at a future time, upon the happening of certain events or the fulfillment of certain conditions A consideration for an optional contract is just as important for any other kind of contract. It is separate and distinct from the consideration

in the contract in which the parties may enter into upon their exercise of the option An accepted unilateral promise to buy or sell a determinate thing for a price certain supported by consideration distinct from the price. Offeror is bound to comply with his undertaking but optionee (who has option) has the right but not obligation to buy or sell. The optionee can sue for damages only, but he cannot sue for specific performance on the proposed contract. POLICITACION unaccepted unilateral promise to buy or sell (opposite of option contract); imperfect promise which is merely an offer

ART. 1482: Whenever earnest money is given in a contract of sale, it shall be considered as: o part of the price o proof of the perfection of the contract EARNEST MONEY paid in advance of the purchase price agreed upon by the parties in a contract of sale, given by the buyer to the seller, to bind the seller to the bargain EARNEST MONEY OPTION MONEY In giving an earnest money, buyer Buyer is still undecided whether or manifest his earnest desire to buy not to buy or sell the property the property in question Part of the purchase price Given only when there is a perfected contract of sale Buyer is bound to pay the balance Given as a distinct consideration for an option contract Applies to a sale not yet perfected Would-be buyer not required to buy at all

GENERAL RULE ACCEPTED OPTION: WITH or WITHOUT consideration: CANNOT be withdrawn. (Atkins, Kroll & Co. v Cua Hian Tek) CASES SOUTHWESTERN SUGAR v AG&P: consideration may be withdrawn Accepted Option = Option

Accepted

option

WITHOUT

ATKINS, KROLL & CO. v CUA HIAN TEK: Overturned Southwestern ACCEPTED OPTION (without consideration) = PERFECTED CONTRACT OF SALE/TO SELL If no separate consideration (option money) Option

Acceptance without consideration cannot be withdrawn


SANCHEZ v RIGOS: Prevailing doctrine: Reiterated Atkins Abandoned Southwestern ruling Acceptance of option = BILATERAL contract even without consideration LIMSON v CA (2000): Reiterated Sounthwestern Consideration necessary NOOL v CA: Southwestern Option valid If there is no consideration No perfected contract of sale TOPACIO v CA (supra): Contract of Sale Cannot be cancelled without following Art. 1592 - Judicial/notarial act - Stipulation of automatic rescission C. CONTRACT OF SALE DISTINGUISHED FROM CONTRACTS 1. PIECE OF WORK ART. 1713: By the contract for a piece of work the contractor binds himself to a piece of work for the employer, in consideration of a certain compensation. The contractor may either employ only his labor OR also furnish the material. OTHER

which it is accomplished (Luzon Stevedoring Co v Trinidad and La Carlota Sugar Central v Trinidad). More examples of CONTRACT OF SALE: o future sale of articles which he is habitually making although at the time not made or finished o article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of it is made at defendants request although made after and in consequence of, defendants order for it

CASES INCHAUSTI & CO. v CROMWELL: Contract of Sale Baled hemp TEST: Whether the thing transferred is (a) one not in existence and which never would have existed but for the order of the party desiring to acquire it; or (b) a thing which would have existed and been the subject of sale to some other person even without the order. CELESTINO v CIR: Sash factory: contract of Sale TEST of special orders under Art. 1467: Habit or Timing Sale of Service v Sale of Object Habitually makes doors, panes, sashes, etc. (TEST) Even contending that they make them upon order, there orders are not shown to be special work requiring extraordinary service of the factory. CIR v ENGINEERING EQUIPMENT & SUPPLY CO.: Piece of Work TEST: Nature of the object (Inchausti definition) Each product or system executed by it had, by its nature, to be unique and always different from the other orders. Even if it wanted to, EEI could not stock pile or even mass produce the products because of their very nature. CONCRETE AGGREGATES INC. v CTA: Contract of Sale Asphalt and concrete mix NOT specialty contractor: does not require special skill or use of specialized building trades or crafts ENGINEERING & MACHINERY CORP v CA: Piece of Work (air-con units) TEST (TOLENTINO): Intention of the parties A. Contract of Sale: at some future date and object has to be delivered; without considering the work or labor of the party bound to deliver B. Piece of Work: one of the parties accept the undertaking on the basis of some plan, taking into account the work he will employ personally or through another DEL MONTE PHIL. INC. v ARAGONES: Piece of Work Supply agreement specified S-shaped blocks required 3 machines to be made for the exclusive use of MEGA-WAFF

execute price or or skill

ART. 1467: CONTRACT OF SALE A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not CONTRACT FOR A PIECE OF WORK if the goods are to be manufactured specially for the customer AND upon his special order, and not for the general market IMPORTANCE OF DISTINCTION Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and application of SoF Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been subject of sale to some other person, even if the order had not been given. True test of a Contractor he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by

Aragones did not have those machined in his usual business = special order 2. AGENCY TO BUY OR SELL ART. 1466: In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, essential clauses of the whole instrument shall be considered. ART. 1868: By a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. SALE Buyer pays the price Buyer acquires ownership over the object of the contract Seller warrants Not unilaterally revocable CONTRACT OF AGENCY TO SELL Agent does not pay Agent does not acquire ownership

QUIROGA v PARSONS HARDWARE: Contract of Sale Essential Clause: payment was to be made at the end of 60days, or before, at the plaintiffs request, or in cash, if the defendant so preferred, and in the last 2 cases an additional discount was to be allowed for prompt payment. Plaintiff was to supply beds; defendant was to pay the price ASBESTOS INTEGRATED MANUFACTURING INC. v PERALTA: Contract of Sale between Sanvar and Eternit (Sanvar NOT an agent) Essential clause: Savar buys from Eternit, receives and pays for them, sell them for its own account and NOT in behalf of Eternit. VICTORIAS MILLING CO. v CA: Contract of Sale between CSC and STM A1868: basis of agency is the REPRESENTATION and CONTROL CSC NOT an agent of STM, it BOUGHT SLDR, intent was not there. 3. BARTER AND EXCHANGE ART. 1638: By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the others promise to give another thing. ART. 1641: As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. ART. 1468: If the consideration of the contract consists partly in money and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a: BARTER: if value of the thing given as part of the consideration > amount of the money or its equivalent

Essence of sale: transfer of title or agreement to transfer it for the price paid or promised

Agent does not warrant, unless he agrees Essentially revocable becasue of fiduciary relationship; Agent disqualified from receiving any personla profit from the transaction Essence of agency: delivery to the agent of the goods not as the agents property but of the principal who remains the owner and has the right to control the sales by the agent, fix the price and terms, demand and receive the proceeds of the sales less the agents commission

Agent receives the thing to be sold and does not pay for its price, but delivers to the principal the price he obtains form the sale of the thing to a third person, and if he does not succeed in selling it, he returns the thing. (Quiroga v Parsons Hardware Co) Agent is exempted from all liability in the discharge of his commission, provided he acts in accordance with the instructions received from his principals, and the latter (principal) must indemnify the agent for all the damages which he may incur in carrying out the agency without fault on his part.

SALE: if

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

CASES G. PUYAT & SONS v ARCO AMUSEMENTS: Contract of Sale Not Agency to buy Letter between the parties clearly stipulated for fixing of the price on the equipment Agreed to purchase from the petitioner the equipment in question

value of thing < amount of money or its equivalent value of thing = value of money

Manifest intention judged by the parties contemporaneous and subsequent acts

Exceeds the amount of money CC does not provide to what extent the value of the thing given as a consideration should exceed the amount of money given for the contract to be considered as a barter IMPORTANCE: Statute of Frauds (Art. 1403), which applies to sale of real property and personal property bought at 500 or more, do not apply to the contract of barter. CASE FULE v CA: Valid barter or sale SC only held that it was valid but made no substantial distinction as to the nature of the two contracts. Perfected by mere CONSENT 4. DACION EN PAGO ART. 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

No extringuishment of obligation; true intention was to use property to facilitate payment AQUINTEY v TIBONG: VALID Dacion Requisites of Dacion 1) (animo solvendi) performance of the prestation in lieu of payment 2) (aliud pro alio) difference between prestation due and what is given as substitute 3) agreement between debtor and creditor that obligation is immediately extinguished by reason of the performance of a prestation different from that due PHILIPPINE LAWIN BUS CO. V CA:NOT dacion Transfer of property between debtor and creditor does not automatically amount to dacion en pago. Iti s essential that the transfer of property must be accompanied by a meeting of the minds between the parties on whether the loan... would be extinguished by dacion en pago. LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.: VALID Dacion There was dacion en pago in the assignment of credit but the obligations are breached by Lo SALE The subject obliged is the whole world The vendor warrants against eviction and hidden defects ASSIGNMENT OF CREDIT After the transfer, a third person is obliged Assignor warrants the existence or legality of the credit and in some cases, the insolvency of the debtor

There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment of the debt. If thing given in payment turns out to belong to another, creditors remedy governed by law on sales not on loan. DACION EN PAGO Pre-existing credit Extinguishes obligations Cause or consideration from the viewpoint of the person offering the dation in payment is the extinguishment of his debt; from the viewpoint of the creditor is the acquisition of the object offered in lieu of the original credit Less freedom in determining the price Giving of the object in lieu of the credit may extinguish completely or partially the credit (depending on the agreement)

SALE No pre-existing credit Gives rise to obligations Cause or consideration is the price from the viewpoint of the seller; or the obtaining of the object, from the viewpoint

Greater freedom in the determination of the price Giving of the price may generally end the obligation of the buyer

CASES YUSON v VITAN:NOT Dacion Atty. Vitan claims there was a valid Dacion: payment of a loan by PRCP. No Dacion in this case; 2nd deed of sale reconveyed land to Vitan No intention to sell or relinquish ownership over Bulacan property

FILINVEST CREDIT CORP v PHILIPPINE ACETYLENE CO., INC.: NO Dacion VDA DE JAYME v CA: VALID Dacion Dacion: delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation SPECIAL MODE OF PAYMENT: Really in the nature of a sale: creditor is buying a thing or property from the debtor; payment from the debtors obligation Consent-Object-Cause also present OBJECTIVE NOVATION: thing offered as an accepted equivalent of the obligation is considered the object of the contract of sale; debt = purchase price SSS v CA (ATLANTIC GULF): SSS Commission has no jurisdition on suits for specific performance; VALID Dacion Dispute in this case: Non-implementation of the approved and agreed dacion en pago on the part of SSS due to the change of amount

Not regarding the accountability of AG&P (would mean within the jurisdiction of the SSS Comission) PNB v PINEDA:NO Dacion Equipment and machinery were re-possessed to secure the paymen of a loan obligaton and not for the purpose of transferring owneship to the creditor in satisfaction of said loan. Dation in payment requires delivery and transmission of ownership pf a thing owned by the debtor to the creditor as an accepted equivalent of the obligation When there is no such transfer, as when re-possession of the subjectmatter of a trust recipt is only by way of security, there is no dation in payment NOT A CONSENSUAL CONTRACT A REAL CONTRACT that novates the original debt relationship into a consummated sale. ESTANISLAO v EAST WEST BANKING CORP: VALID Dacion Deed of assignment; nature was a dation in payment whereby property is alienated to the creditor in satisfaction of a debt of money 5. CHATTEL MORTGAGE ART. 2140: By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded is delivered to the creditor or a third person, the contract is pledge and not a chattel mortgage. 6. LEASE ART. 1484: Vendors alternative remedies in a contract of sale of personal property price of which is payable in installments 1. Exact fulfillment of obligation in case of failure to pay (specific performance) 2. Cancel sale in case of failure to pay two or more installments 3. Foreclose the chattel mortgage ART. 1485: Art 1484 also applicable to contracts purporting to be leases of personal property with option to buy, when lessor has deprived lessee of the possession or enjoyment of thing. So-called rents must be regarded as payment of prince in installments since due payment of the agreed amount results in the transfer of title to the lessee CASES JOSE v BARNUECO: Contract of Sale

Ownership was intended to be transferred to Ando upon the compliance

of the conditions of the contract Lease agreement which have stipulations that the title shall vest upon the buyer upon payment of the rents are really contracts of sale. ELISCO TOOL MANUFACTURING CORP. V CA: Contract of Sale Sale with payment in installments Practice of vendors of personal property of denominating a contract of sale on installment as a lease to prevent the ownership of the object from passing to the buyer until full payment. Rentals for the car were actually amortization for the price thereof FILINVEST CREDIT CORP. V CA: Contract of Sale When a lease clearly shown that the rentals are meant to be installment payments ti a sale contract despite the nomenclature given by the parties, it is a sale by installments. II. ESSENTIAL ELEMENTS OF A CONTRACT OF SALE A. CONSENT OF THE CONTRACTING PARTIES 1. PARTIES TO THE CONTRACT a. CAPACITY TO CONTRACT ART. 1327: The following cannot give consent to a contract:

(1) Unemancipated minors (2) Insane or demented persons and (3) Deaf-mutes who do not know how to
write CASES RUBIAS v BATILLER: Invalid sale: Rubias got it from his father-in-law Rubias was the lawyer and barred from buying the proeprty of the client under litigation EXCEPTION: as contingent fee, AFTER litigation ONLY LAWYER OF CLIENT is barred ARANETA INC. V TUAZON DEL PATERNO: AGENT v BROKER AGENT: effects the sale on behalf of the principal BROKER: only looks for buyers for the seller MANGAYAO v DE GUZMAN: Executive approval of sale needed; without it = defect in capacity PARAGAS v HEIRS OF DOMINADOR BALACANO: Grand children; vitiated consent of the grandfather

GENERAL RULE: a person is not incompetent to contract merely becasue of advanced years or by reason of physical infirmities. BUT: when such age or infirmity has impaired the mental faculties so as to prevent the person from proeprly, intelligently and firmly protecting his property right, then incapacitated. b. INCAPACITY ART. 1490: Husband and wife cannot sell property to each other, except

1. When separation of property was agreed upon in marriage

settlements 2. When there has been judicial separation of property under Art 191 REASON FOR THE RULE

Prevent commission of fraud or prejudice to third persons Prevent one from unduly influencing the other Avoid indirect donations

ART. 1491: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

(1) The guardian, the property of the person or persons who may

be under his guardianship; o Actual collusion is hard to prove between purchaser and guardian, but such fact can be deduced from the very short time between the two sales and the relationship between them. (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; o Incapacity to buy rests on the fact that greed might get the better of the sentiments of loyalty and disinterestedness which should animate an administrator or agent. o A broker does not come within the prohibition because he is a mere go-between or middleman between the seller and the buyer, bringing them together to make the contract themselves. (3) Executors and administrators, the property of the estate under administration; o But an executor can buy the hereditary rights of an heir to the estate under his administration (Naval v Enriquez) (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or

institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; o Intended not only to move remove any occasion for fraud but also to surround them with the prestige necessary to carry out their functions by freeing them from all suspicion which although unfounded, tends to discredit the institution by putting into question the honor of said functionaries. (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. o Law intends to avoid improper interference by a judge in a thing levied upon or sold by his order (Gan Tingco v Pabinquit). o Incapacity of SC or CA Justice extends to properties or rights in litigation in their territorial jurisdiction. o CFI Judge can buy properties in litigation pending outside his territorial jurisdiction. o Prohibition likewise extends to properties levied upon an execution before the court within whose territorial jurisdiction they exercise their respective functions. o As to lawyers: curtail any undue influence of the lawyer on his client on account of their confidential association. o Violation of this prohibition also constitutes a breach of professional ethics. o No prohibition if client assigns to the lawyer after the judgment has been rendered and became final. Contingent fee of lawyer maybe annotated as an adverse claim on property awarded to client. (6) Any others specially disqualified by law.

Such contracts made in violation of this provision are void for public policy. They cannot be ratified neither can the right to set up the defense of illegality be waived. REASON FOR THE RULE: 1. The persons occupy fiduciary relationship with the owner of properties mentioned

2. Prevent them from being tempted to take advantage of


their position cf. ART. 1409: The following contracts are inexistent and void from the beginning: (7) Those whose expressly prohibited or declared void by the law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. CONSTITUTION, ART. XII: Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor. Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law. RA 6713: CODE OF CONDUCT AND ETHICAL STANDARDS FOR PUBLIC OFFICIALS AND EMPLOYEES Section 7. Prohibited Acts and Transactions. - In addition to acts and omissions of public officials and employees now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts and transactions of any public official and employee and are hereby declared to be unlawful: (a) Financial and material interest. - Public officials and employees shall not, directly or indirectly, have any financial or material interest in any transaction requiring the approval of their office. (b) Outside employment and other activities related thereto. Public officials and employees during their incumbency shall not: (1) Own, control, manage or accept employment as officer, employee, consultant, counsel, broker, agent, trustee or

nominee in any private enterprise regulated, supervised or licensed by their office unless expressly allowed by law; (2) Engage in the private practice of their profession unless authorized by the Constitution or law, provided, that such practice will not conflict or tend to conflict with their official functions; or (3) Recommend any person to any position in a private enterprise which has a regular or pending official transaction with their office. These prohibitions shall continue to apply for a period of one (1) year after resignation, retirement, or separation from public office, except in the case of subparagraph (b) (2) above, but the professional concerned cannot practice his profession in connection with any matter before the office he used to be with, in which case the one-year prohibition shall likewise apply. (c) Disclosure and/or misuse of confidential information. - Public officials and employees shall not use or divulge, confidential or classified information officially known to them by reason of their office and not made available to the public, either: (1) To further their private interests, or give undue advantage to anyone; or (2) To prejudice the public interest. (d) Solicitation or acceptance of gifts. - Public officials and employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office. As to gifts or grants from foreign governments, the Congress consents to: (i) The acceptance and retention by a public official or employee of a gift of nominal value tendered and received as a souvenir or mark of courtesy; (ii) The acceptance by a public official or employee of a gift in the nature of a scholarship or fellowship grant or medical treatment; or (iii) The acceptance by a public official or employee of travel grants or expenses for travel taking place entirely outside the Philippine (such as allowances, transportation, food, and lodging) of more than nominal value if such acceptance is appropriate or consistent with the interests of the Philippines, and permitted by the head of office, branch or agency to which he belongs. The Ombudsman shall prescribe such regulations as may be necessary to carry out the purpose of this subsection, including pertinent reporting and disclosure requirements.

Nothing in this Act shall be construed to restrict or prohibit any educational, scientific or cultural exchange programs subject to national security requirements. RA 6766: ORGANIC ACT FOR THE CORDILLERA AUTONOMOUS REGION Section 7. The people of the Cordilleras have the right, especially through their voluntary organizations and movements, to participate and be equitably represented at appropriate levels of social, economic and political decision-making and in the formulation and implementation of local, regional and national priorities, plans, programs and projects, and to monitor their implementation. CASES SOTTO v SAMSON: VOID SALE VOID under Art. 1491 (5); even if subsequently ratified (confirmation of the deed of sale) Lawyer since 1926: to curtail any undue influence of the lawyer upon the client on account of their confidential association RUBIAS v BATILLER (supra): INVALID SALE to lawyer CALIMLIM-CANULLAS v FORTUN: INVALID SALE TO MISTRESS Sale of land was contrary to law, public morals and public interest Prohibition (spouses selling to one another) applier to common-law relationships CHING v GOYNAKO, JR.: VOID SALE Selling and donating of spouses prohibited by law; include common-law relationships FABILLO v IAC: Lawyers contingent fee: ALLOWED Did not violate Art. 1491, did not take place during the pendency of the litigation Lawyer did not exert undue influence on his clietn; no fraud or imposition; compensation is clearly not an escesive amount = VALID CONTINGENT FEE Reduced amount since it was the lawyer Murillo who drafted it, excessive 2. PERFECTION OF THE CONTRACT ART. 1475: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

ART. 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain, and the acceptance absolute. A qualified acceptance constitutes a counter-offer. ART. 1325: Unless it appears otherwise, business advertisements are of things for sale are not definite offers, but mere invitation to make an offer. ART. 1326: Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidders unless the contrary appears. ART. 1330: A contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable. ART. 1338: There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

Insidious machinations signifies a deceitful scheme or plot with an evil design or with frauduluent purpose Deceit need not be by means of misrepresentation in words Failure to disclose facts constitutes fraud when there is a duty to reveal them (e.g. parties are bound by confidential relations) - Art 1339

ART. 1476: In the case of a sale by auction: (1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. (2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. without reserve goods cannot be withdrawn from the sale after a bid is made

(3) A right to bid may be reserved


expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. WHEN SELLER MAY BE ALLOWED TO PARTICIPATE IN THE BIDDING a. Upon notice of such fact b. Provide d by law or by stipulat ion REASON FOR PROHIBITION AGAINST SELLER TO PARTICIPATE secret employment of puffers for the purpose of enhancing the price renders the sale fraudulent and consequently, void. ART. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. CASES SLDC v CA: Sale does NOT transfer OWNERSHIP Only upon delivery is ownership transferes No double sale in the case; 1st one was Contract to SELL only LIM, JR. V SUN: VALID SALE Vitiated consent must be established by clear and convincing evidence

Brother did not vitiate Pazs consent No intent to file criminal charges ASIAIN v JALANDONI: VOID Mutual mistake as to the quantity of the land sold and the amount of the crop RESCISIBLE at the option of the buyer VOID sale DELA CAVADA v DIAZ: PROMISE TO SELL NOT an option Promise made by one party is sufficient cause for the other to comply with his obligation A promise made in accordance with forms required by law may be a good consideration for another partys promise ROBERTS v PAPIO (supra): NOT an equitable mortgage MMCC v PNB (supra): NO Perfecter contract VILLONCO v BORMAHECO: Perfected COntract Bromhecos acceptance of As counter offer Essentially, Counter Offer = Same as original offer 3. FORMALITIES ART. 1483: Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made:

1. 2. 3. 4.

In writing Word of mouth Partly in writing and partly by word of mouth May be inferred from the conduct of parties

If notary public is not authorized deed of sale of land is still valid

because public instrument is not even essential for the validity of the sale (Soriano v Latono) Stages of a contract: a) Negotiation time when prospective contracting parties indicate interest in the contract to the time contract is perfected b) Perfection concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of contract upon the price c) Consummation parties perform their respective undertakings under contract of sale, culminating in the extinguishment thereof

cf. ART. 1403: STATUTE OF FRAUDS: The following contracts are unenforceable unless they are ratified: has been given no authority or legal representation or who has acted beyond the powers (unauthorized contracts) 2. Those that do not comply with the SoF as set forth in this number. Agreement shall be made unenforceable by action, UNLESS some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent, evidence therefore of the agreement cannot be received without the writing or a secondary evidence of its contents (Statute of Frauds) d. Agreement for the sale of goods, chattels or things in action, at a price not less than P500 unless: - buyer accept and receive part of such goods and chattels or evidences or some of them, of such things in action, or pay at the time some part of the purchase money (partial performance) e. Agreement for the leasing for a longer period than one year OR for the sale of real property or an interest therein 3. Those where both parties are incapable of giving consent to a contract (both parties incapacitated) ART. 1405: Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the

1. Entered into the name of another person by one who

Will constitute fraud if permitted to oppose the performance of his part after allowed or induced the other to perform in reliance upon the agreement. ART. 1874: When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise the sale shall be void. CASES CITY-LITE REALTY v CA: AGENT needs written authority No contract between parties since Meldin Roy was only an agent of the seller AGASEN v CA: VALID SALE Notarized documents = public document Sale by Leonora evidenced by memorandum = record of ionstallement payment LOPEZ v ALVAREZ: VOID Sale of Mortgage Credit When sale of mortgage credit was undertaken, it was no longer owned byEvaristo (debtor) but by Lopez (assignee) No effects as to the part of the credit owned by Lopez and could not deprive him of his property. SORIANO v LATONO: VALID Deed of Sale Need not be notarized to be valid Elements of a valid contract are present Perfertec Sale A sale by the guardian may be approved before the deed is executed, depending on the intention of the court and providing that faithful compliance with the conditions proposed or imposed has been made. PAREDES v ESPINO: NOT Barred by SOF Letter, together with telegram, constitutes an adequate memorandum of the transaction INIGO v MALOTO: VALID SALE SOF can only apply to executory contracts Contract in the case already consummated Inigo exercised possession and dominion over the property CLARIN v RULONA: PERFECTED Contract of Sales Authorization letter and receipt COS; but in themselves evidence that sale was perfected Contract already partially fulfilled and executed SOF no longer covers case; partially executed

Failure to object to the presentation of oral evidence to prove the


same Acceptance of benefits under them

Statute of Frauds apply only to executory contracts, not to contracts either totally or partially performed. SoF does not apply where the verbal contract of sale of land is adduced not for the purpose of enforcing performance thereof, but as the basis of lawful possession of the applicant entitling him to have the land registered in his name (Almirol v Monserrat). E.g of Partial performance which takes the matter away from the operation of Statue of Frauds: o Possession of a portion of the land o Relinquishment of her claim to the entire land, building improvements on the land o Tender of payment o Surveying and segregation of the portion which defendant promised to sell to plaintiffs

MAHARLIKA PUBLICHING CORP. v TAGLE: DONATO C. CRUZ TRADING CORP. v CA: FORMS and CIRCUMSTANCE sufficient to prove liability Business forms issued by the seller in the ordinary course of business are not always fully accomplished to contain every detail. Despite this, business forms are valid between the parties and at the very least they serve as an acknowlegment that a transaction has transpired. Documents by themselves not adegquate to establish the case, but becasue of circumstances (testimony, demand letters) = sufficient LAGON v HOOVEN COMALCO INDUSTRIES, INC.: Receipts, order slips, and invoices are not mere scraps of paper bereft of probative value but vital pieces of evidence in commercial transactions. They are written memorials of the details of the consummation of contracts. FULE v CA (supra): Contracts are perfected by mere CONSENT DALION v CA: Need not be embodied in a public document ALFREDO v BORRAS (supra): Perfected and Consummated Contract of Sale TOYOTA SHAW, INC. V CA: Bernardo had no authority to bind Toyota If it was intended as contract of sale, it would only be on installment basis. NO CONSENT = BA Finance did not approve Sosas application of a sale on installment basis

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