Updated Sales Notes from Atty. Espejo Lectures

Updated Sales Review Notes from the lectures of Atty.
Espejo (2014)
CONCEPT OF SALE
Article 1458, Civil Code
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Article 1458 does not only define what a contract of sale is but also lists down the obligation of the
parties.
It is also further classified as either absolute or conditional
Characteristics of a contract of sale

1.
Nominate and Principal
Nominate:
A contract of sale is what the law defines it to be, taking into consideration its essential elements, and not
what the contracting parties call it. Santos v. CA, 337 SCRA 67 (2000).
It is also governed by specific provisions of the law.
Principal:
It can stand on its own and does not depend upon another contract for its own validity and existence as
distinguished by a preparatory and accessory contract.
2.
Consensual
Article 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. (1450a)
It is perfected by mere consent. Its perfection is not subordinated by some other condition like the execution
of deeds, forms and solemnities.
Perfection Distinguished from Demandability Not all contracts of sale become automatically and
immediately effective. In sales with assumption of mortgage, there is a condition precedent to the sellers
consent and without the approval of the mortgagee, the sale is not perfected. Bian Steel Corp. v. CA, 391
SCRA 90 (2002).
When there is no meeting of the minds on price, the contract is not perfected and does not serve as a
binding juridical relation between the parties. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006),
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Prepared By: ONG ABRANTES, KIANG
Additional Notes from Atty Saronas Sales Review Notes 2009
& Law on Sales by Villanueva
Updated Sales Review Notes from the lectures of Atty. Espejo (2014)
and should be more accurately denominated as inexistent, as it did not pass the stage of generation to the
point of perfection. NHA v. Grace Baptist Church, 424 SCRA 147 (2004).
3.
Bilateral and Reciprocal (Arts. 1169 and 1191)
Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the
time when the thing is to be delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. (1100a)
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law. (1124)
Reciprocal:
A contract of sale gives rise to reciprocal obligations, which arise from the same cause with
each party being a debtor and creditor of the other, such that the obligation of one is dependent upon
the obligation of the other; and they are to be performed simultaneously, so that the performance of
one is conditioned upon the simultaneous fulfillment of the other. Cortes v. CA, 494 SCRA 570 (2006).
Bilateral:
A perfected contract of sale is bilateral because it carries the correlative duty of the seller to
deliver the property and the obligation of the buyer to pay the agreed price. Congregation of the
Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
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Synallagmatic contract meaning bilateral contract

d. Onerous and Commutative
Onerous:
It has a consideration of something valuable
Commutative:
A thing of value is exchanged for equal value as opposed to an aleatory contract like insurance because
the premium that you pay is not equivalent to the cash expectation that you will receive.
In a contract of sale, there is no requirement that the price be equal to the exact value of the subject matter
of sale; all that is required is that the parties believed that they will receive good value in exchange for what
they will give. Buenaventura v. CA, 416 SCRA 263 (2003).
4.
Sale Is Title and Not Mode
Sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created,
transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Sale by
itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. San Lorenzo
Dev. Corp. v. CA, 449 SCRA 99 (2005)
Sellers ownership of the thing sold is not an element of perfection; what the law requires is that seller has
the right to transfer ownership at the time of delivery. Quijada v. CA, 299 SCRA 695 (1998).
Consequences of the characterization
As reciprocal:
In the case of Macasaet vs Art Transport Corp.(2007), the Supreme Court said that being a consensual
contract, a sale is perfected at the moment there is a meeting of the minds. From that moment thereon, each
party has the right to demand subject to the provision governing the form of sale. Xxxx Failure to comply by a
party entitled another to rescind as the power to rescind is implied in reciprocal obligations.
Remember also that in reciprocal obligation, neither party incurs in delay unless the other is ready to
comply with what is incumbent upon him.
Take note that the power to rescind is only given to the INJURED party
As Onerous:
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Article 1350. In onerous contracts the cause is understood to be, for each contracting party, the prestation or
promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated;
and in contracts of pure beneficence, the mere liberality of the benefactor. (1274)
Article 1378. When it is absolutely impossible to settle doubts by the rules established in the preceding
articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of
rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest
reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what
may have been the intention or will of the parties, the contract shall be null and void. (1289)
Article 1378 greatest reciprocity of interest (GRI)
Example:
For consideration given, there is doubt if it is a sale or lease. So we resolve it in favor of the GRI which means
that if the consideration is more or less equivalent to the subject matter of the contract, you resolve it in
favor of the greatest reciprocity of interest. That would be sale rather than lease.
As Commutative
Equivalent values are given as compared to an aleatory contract (lottery ticket). In aleatory contract, there is
a perceived inequality of the values exchanged. (perceived lang daw kay in reality you only pay for the
chance of winning not the amount to be won)
How do you determine whether or not the contract is aleatory or commutative?
It is subjective.
In a contract of sale, there is no requirement that the price be equal to the exact value of the subject matter
of sale; all that is required is that the parties believed that they will receive good value in exchange for what
they will give. Buenaventura v. CA, 416 SCRA 263 (2003).
As Title not a Mode

Non nudis pactis, sed traditionis dominia rerum transferantur
(It is delivery as a consequence of certain contracts that transfers ownership not the contract itself)
Take note thatin Article 712, mode is classified into two classes.
Article 712. Ownership is acquired by occupation and by intellectual creation.
Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate
and intestate succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription. (609a)
ELEMENTS OF A CONTRACT
Article 1318
Article 1318. There is no contract unless the following requisites concur:
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(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
Essential Elements
consent or meeting of the minds;
determinate subject matter; and
price certain in money or its equivalent
What is the effect if one is missing?
Article 1409 it is void or inexistent from the very beginning.
Article 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) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be
ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
BUT Villanueva proposes a different classification where one element is missing.
According to him, it is not a void contract but a NO CONTRACT SITUATION
No Contract Situation versus Void Contract Absence of consent (i.e., complete meeting of minds)
negates the existence of a perfected sale. Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
The contract then is null and void ab initio, absolutely wanting in civil effects; hence, it does not create,
modify, or extinguish the juridical relation to which it refers. Cabotaje v. Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the contract is not perfected and does not serve as a
binding juridical relation between the parties. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006), and
should be more accurately denominated as inexistent, as it did not pass the stage of generation to the point
of perfection. NHA v. Grace Baptist Church, 424 SCRA 147 (2004).
SIR: YOU HAVE TO MASTER DISTINCTIONS

SALE DISTINGUISHED FROM SIMILAR CONTRACTS
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WHY DISTINGUISH?
3 REASONS
1.
2.
3.
A contract is what the law defines it to be, taking into consideration its essential elements, and the
title given to it by the parties is not as much significant as its substance. Santos v. CA, 337 SCRA 67
(2000).
A contract which is called otherwise by the parties is susceptible of the remedy of reformation.
It can be called void ab initio when you enter into something what you feel is a binding contract but
the law tells you that it is not. This contract cannot be ratified.
Sale v. Barter
Barter contract where majority of the consideration is in the form of another thing and a minor part
of the consideration is in money
Article 1468. If the consideration of the contract consists partly in money, and partly in another thing, the
transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly
appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale. (1446a)
Article 1638. By the contract of barter or exchange one of the parties binds himself to give one thing in
consideration of the other's promise to give another thing. (1538a)
Article 1639. If one of the contracting parties, having received the thing promised him in barter, should prove
that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in
exchange, but he shall be entitled to damages. (1539a)
Article 1640. One who loses by eviction the thing received in barter may recover that which he gave in
exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only
make use of the right to recover the thing which he has delivered while the same remains in the possession
of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third
person. (1540a)
Article 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. (1541a)
If amount of money > thing = Intention first, if cannot be determined, it is sale.

If amount of money = thing = Intention first, if cannot be determined, it is sale.
Note: it is only if there is a doubt as to the intention that you will apply the rules
Sale
money for a thing
Statute of frauds apply
there is right of retention
Barter
a thing for a thing
Statute of Frauds does not
apply
no right of retention
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Sale v. Donation
Donation an act of liberality which is gratuitous in character
Main consideration: love and affection
A donation is a transfer of ownership of ones property wherein the main consideration is not money. It is an
act of liberality of the donor.
Main consideration of a contract of sale: purchase price
Sale
Consensual
Bilateral
Onerous
Title
Donation
Formal or solemn
Purely unilateral
Gratuitous
An Act, a contract and
Mode of acquisition
Sale v. Contract for a Piece of Work
Contract for a piece of work contractor binds himself to execute a piece of work for the employer,
consideration of a certain price or compensation.
in
test: thing is specially manufactured for the customer and upon his special order
(Dino v. CA, June 20, 2001)
Sale if the article is manufactured or procured for the general market in the ordinary course of
business, WHETHER THE SAME IS ON HAND AT THE TIME OR NOT
Test: thing is manufactured in the ordinary course of business (1467)
This means that the thing is specially manufactured for you.

Quantity will not determine if it is a piece of work.
If anyone can buy it, it is a contract of sale. If it is exclusive, it is a contract for a piece of work. If it is
displayed thereafter, it is a sale.
ARTICLE 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of his business manufactures or procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon
his special order, and not for the general market, it s a contract for a piece of work. (n)
Example:
A cake which has a face of you on it contract for a piece
of work
Crux: Ineluctably, whether the contract be one of sale or one for a piece of work, a transfer of ownership is
involved and a party necessarily walks away with an object. Commissioner of Internal Revenue v. CA, 271
SCRA 605 (1997)
Facts:
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ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture.
Occasionally, it accepts sponsorships for its research activities from international organizations, private
foundations and government agencies.
On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency contractors
tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec 205 of Tax Code
and is also subject to 3% contractors tax under Sec 205 of the same code. (Independent Contractor means
any person whose activity consists essentially of the sale of all kinds of services for a fee regardless of
whether or not the performance of the service calls for the exercise or use of the physical or mental faculties
of such contractors or their employees.)
Issue:
WON ADMU is an independent contractor hence liable for tax? NO.
WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of
work? NEITHER.
Held:
1)Hence, to impose the three percent contractors tax on Ateneos Institute of Philippine Culture, it should be
sufficiently proven that the private respondent is indeed selling its services for a fee in pursuit of an
independent business.
2)Records do not show that Ateneos IPC in fact contracted to sell its research services for a fee. In the first
place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of
services were ever entered into by the private respondent. Funds received by the Ateneo de Manila University
are technically not a fee. They may however fall as gifts or donations which are tax-exempt. Another fact that
supports this contention is that for about 30 years, IPC had continuously operated at a loss, which means that
sponsored funds are less than actual expenses for its research projects.
In fact, private respondent is mandated by law to undertake research activities to maintain its university
status. In fact, the research activities being carried out by the IPC is focused not on business or profit but on
social sciences studies of Philippine society and culture. Since it can only finance a limited number of IPCs
research projects, private respondent occasionally accepts sponsorship for unfunded IPC research projects
from international organizations, private foundations and governmental agencies. However, such
sponsorships are subject to private respondents terms and conditions, among which are, that the research is
confined to topics consistent with the private respondents academic agenda; that no proprietary or
commercial purpose research is done; and that private respondent retains not only the absolute right to
publish but also the ownership of the results of the research conducted by the IPC.
SALE vs. CONTRACT FOR PIECE OF WORK
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. By its
very nature, a contract of sale requires a transfer of ownership. In the case of a contract for a piece of work,
the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or
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compensation. If the contractor agrees to produce the work from materials furnished by him, he shall deliver
the thing produced to the employer and transfer dominion over the thing. Whether the contract be one of
sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an
object. In this case, there was no sale either of objects or services because there was no transfer of
ownership over the research data obtained or the results of research projects undertaken by the Institute of
Philippine Culture.
When a person stipulates for the future sale of articles which he is habitually making, and which at the time
are not made or finished, it is essentially a contract of sale and not a contract for labor Inchausti & Co. v.
Cromwell, 20 Phil. 345 (1911); even when he executes production thereof only after an order is placed by
customers. Celestino & Co. v. Collector, 99 Phil. 841 (1956).
If the thing is specially done only upon the specific order of another, this is a contract for a piece of work; if
the thing is manufactured or procured for the general market in the ordinary course of business, it is a
contract of sale. Commissioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590
(1975).
To Tolentino, the distinction depends on the intention of parties: if parties intended that at some future date
an object has to be delivered, without considering the work or labor of the party bound to deliver, the
contract is one of sale; but if one of the parties accepts the undertaking on the basis of some plan, taking into
account the work he will employ personally or through another, the contract is for a piece of work.
Engineering & Machinery Corp. v. CA, 252 SCRA 156 (1996).
NOTE: NO specific performance in contract for piece of work if what you want to compel is the execution of
the thing because of involuntary servitude
REMEDIES
Article 1715. The contract shall execute the work in such a manner that it has the qualities agreed upon and
has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work
be not of such quality, the employer may require that the contractor remove the defect or
execute another work. If the contract fails or refuses to comply with this obligation, the
employer may have the defect removed or another work executed, at the contractor's cost. (n)
Sale v. Dacion en Pago
Dacion En Pago / Dation in payment

money.
property is alienated to the creditor in satisfaction of a debt in
This contract is governed by the law on sales (1245)

Sale
Contract
Creates an obligation
Dacion en pago
Mode to Extinguish the contract
Obligation previously contracted is extinguished
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ARTICLE 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law on sales. (n)
This is different from pactum commissorium, wherein there is automatic appropriation. You should be
able to distinguish dacion en pago from pactum commissorium.
SSS v. AG&P, April 30, 2008
Dacion en pago is the 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 where the debtor offers another thing to the creditor who accepts it as
equivalent of payment of an outstanding debt.
Partakes in one sense of the nature of sale, that is the creditor is really buying the thing or property of
the debtor, payment for which is to be charged against the debtors debt.
The essential elements of a contract of sale, namely, consent, object certain, and cause or
consideration must be present.
In its modern concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the debt is considered as the purchase price. In any
case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally
extinguishing the debt or obligation.
Rules on sale will apply.
SSS vs. AGP (April 30, 2008)
FACTS: Plaintiff informed the SSS in writing of its premiums and loan amortization delinquencies. AG&P
chose to settle its obligation with the SSS through dacion en pago. AG&P was, thereafter, directed by the
defendant to submit certain documents, such as Transfer Certificate of Title, Tax Declaration covering the
subject lot, and the proposed subdivision plan, which requirements AG&P immediately complied. SSS
approved AG&Ps proposal to settle its and SEMIRARAs delinquencies through dacion en pago. A
Deed
of
Assignment has to be executed between the plaintiffs and the defendant. Because of SSS failure to come up
with the required Deed of Assignment to effect said transfer, AG&P prepared the draft and submitted it to the
Office of the Vice-President. Unfortunately, the defendant failed to take any action on said Deed of
Assignment causing AG&P to re-submit it to the same office.
More than a year after the approval of AG&Ps proposal, defendant sent the revised copy of the Deed of
Assignment to AG&P. However, the amount of the plaintiffs obligation appearing in the approved Deed of
Assignment has ballooned allegedly because of the additional interests and penalty charges assessed on
plaintiffs outstanding obligation from April 2001, the date of approval of the proposal, up to January 2003.
AG&P demanded for the waiver and deletion of the additional interests on the ground that delay in the
approval of the deed and the subsequent delay in conveyance of the property in defendants name was solely
attributable to the defendant. Defendant, however, refused to accept the payment through dacion en pago,
unless plaintiffs also pay the additional interests and penalties being charged.
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10
SSS moved for the dismissal of the complaint for lack of jurisdiction and non-exhaustion of administrative
remedies.
ISSUE: Which body has jurisdiction to entertain a controversy arising from the non-implementation of a
dacion en pago agreed upon by the parties as a means of settlement of private respondents liabilities.
HELD: The action then is one for specific performance which case law holds is an action incapable of
pecuniary estimation falling under the jurisdiction of the Regional Trial Court, and does not fall within the
jurisdiction of the Social Security Commission.
Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as
an accepted equivalent of the performance of the obligation. It is a special mode of payment where the
debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt.
The undertaking really partakes in one sense of the nature of sale, that is the creditor is really buying the
thing or property of the debtor, payment for which is to be charged against the debtors debt. As such, the
essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be
present. In its modern concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the debt is considered as the purchase price. In any
case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally
extinguishing the debt or obligation.
The controversy, instead, lies in the non-implementation of the approved and agreed dacion en pago on
the part of the SSS. As such, respondents filed a suit to obtain its enforcement which is, doubtless, a suit for
specific performance and one incapable of pecuniary estimation beyond the competence of the Commission.
(Jazzie Sarona )
Sale v. Lease
Lease- use of thing for a price and return of the same after the period. If use of thing without the price, it
is commodatum.
RENT TO OWN - When the lease gives the lessee the option to buy for a small consideration at the end of
the term, after crediting to the price all the so-called rents, such contract may be regarded a contract of sale
on installments. Articles 1484 and 1485 will apply (Filinvest v. CA, 178 SCRA 188)
FILINVEST CREDIT vs. CA 178 SCRA 188
FACTS: Private respondents spouses Jose and Iluminada are engaged in the sale of gravel and acquired the
services of Gemini Motor Sale to look for a rock crusher. Private respondents applied for financial assitance
from Filinvest Credit with the conditions that the machinery be purchased in the name of Filinvest and that it
be leased for 2 years with option to purchase upon the termination of the lease period to private respondent.
Filinvest foreclosed the mortgaged property executed by private respondent. Private respondent filed a
complaint for the rescission of the contract of lease.
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11
HELD: Contracts in the form of lease, either with an option for the buyer to purchase for a small
consideration at the end of the term provided all installments are paid or with stipulation that if the rent
throughout the term is paid, title shall vest in the lessee, are loans in name only. Contracts of this nature are
actually contracts of sale. The intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon completion of payment, the machinery would become the property of the
private respondent.
ARTICLE 1484 In a contract of sale of personal property the price of which is payable in instalments, the
vendor may exercise any of the following remedies:
(1) Exact fulfilment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more instalments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure
to pay cover two or more instalments. In this case, he shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)
ARTICLE 1485. The preceding article shall be applied to contract purporting to be leases of personal property
with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.
1484 and 1485

1484 relief available to an unpaid installment seller
1485- 1484 is applicable if there is lease of personal property and lessor deprives the lessee of
possession or enjoyment of the SM
ELEMENTS OF A CONTRACT OF SALE

Essential Elements
consent or meeting of the minds;
determinate subject matter; and
price certain in money or its equivalent
1st element: CONSENT
Basic premise: Only capacitated parties can give their consent to buy or sell
Art. 1489 : any person who is authorized in the Civil Code to obligate himself
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ARTICLE 1489. All persons who are authorized in the Code to obligate themselves, may enter into a contract
of sale, saving the modifications contained in the following articles.
Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay
a reasonable price therefore. Necessaries are those referred to in Article 290. (1457 a)
Incapacitated Parties
Absolute incapacity = incapacitated to bind themselves under all circumstances as a general rule.
Relative incapacity = incapacitated to bind themselves with reference to persons, circumstances and
properties.
GENERAL RULE: Contracts entered into by minors, insane and demented persons, deaf mutes who
cannot read and write are VOIDABLE (1327)
The voidable contract cannot be avoided by capacitated party (1397)
ABSOLUTELY INCAPACITATED
ARTICLE 1327. The following cannot give consent to a contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (1263a)
ARTICLE 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom
they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or
caused mistake base their action upon these flaws of the contract. (1302a)
If buang ka, you can enter into a contract kapag lucid interval.
If entered into under hypnotic spell or state of drunkenness, voidable
Period to institute annulment
Article 1391. The action for annulment shall be brought within four years.
This period shall begin:
In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the discovery of the same.
And when the action refers to contracts entered into by minors or other incapacitated persons, from the time
the guardianship ceases. (1301a)
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Notes AS TO MINORS
In the case of ___ vs Bildo? December 1917, SC did not allow the minor to allege his incapacity. This is a
contract entered into by minors when they pretended that they are of age.
EXCEPTION: If contracts of these incapacitated persons are for NECESSARIES or those things which are
indispensable for his support, they must pay a reasonable price therefor (1489)
What are necessaries?
(Art 290 of the FC cf. 194 of family code)
Art. 194. Support compromises everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation, in keeping with the financial capacity of the family.
The education of the person entitled to be supported referred to in the preceding paragraph shall include his
schooling or training for some profession, trade or vocation, even beyond the age of majority. Transportation
shall include expenses in going to and from school, or to and from place of work. (290a)
2 requisites for sale of necessaries to minor to be valid and not merely voidable
1. Perfection of the sale
2. Delivery of the necessaries
SPECIAL DISQUALIFICATION
Special disqualifications to persons under civil interdiction.
PERSONS RELATIVELY INCAPACITATED
SPOUSES AS PARTIES
Contracts with Third Parties
(Arts. 73, 96, and 124, Family Code)
Art. 73. Either spouse may exercise any legitimate profession, occupation, business or activity without the
consent of the other. The latter may object only on valid, serious, and moral grounds.
In case of disagreement, the court shall decide whether or not:
(1) The objection is proper, and
(2) Benefit has occurred to the family prior to the objection or thereafter. If the benefit accrued prior to the
objection, the resulting obligation shall be enforced against the separate property of the spouse who has not
obtained consent.
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The foregoing provisions shall not prejudice the rights of creditors who acted in good faith. (117a)
Art. 96. The administration and enjoyment of the community property shall belong to both spouses jointly. In
case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the contract implementing such
decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
common properties, the other spouse may assume sole powers of administration. These powers do not
include disposition or encumbrance without authority of the court or the written consent of the other spouse.
In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting spouse and the third
person, and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors. (206a)
Art. 124.
The administration and enjoyment of the conjugal partnership shall belong to both spouses
jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the
wife for proper remedy, which must be availed of within five years from the date of the contract
implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole powers of administration. These powers do not
include disposition or encumbrance without authority of the court or the written consent of the other spouse.
In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting spouse and the third
person, and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors. (165a)
As a General rule, spouses can enter into contract as to third persons because of Art. 73 of the Family Code.
Ainza vs Padua
(SC applied Civil Code here not the family Code since the sale was made in 1987)
The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal
partnership made by the wife without the consent of the husband.
The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable
contract.
According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose where one of the parties
is incapable of giving consent to the contract." (Par. 1.) In the instant case Gimena had no capacity to give
consent to the contract of sale. The capacity to give consent belonged not even to the husband alone but to
both spouses.
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The view that the contract made by Gimena is a voidable contract is supported by the legal provision that
contracts entered by the husband without the consent of the wife when such consent is required, are
annullable at her instance during the marriage and within ten years from the transaction questioned. (Art.
173, Civil Code).
Gimenas contract is not rescissible for in such a contract all the essential elements are untainted but
Gimenas consent was tainted. Neither can the contract be classified as unenforceable because it does not fit
any of those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent
because it is not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it must
perforce be a voidable contract.
Under Art. 124 of Family Code, sale by husband of a conjugal property without the wifes consent is void and
not merely voidable, since the resulting contract lacks one of the essential elements of full consent. Guiang
v. CA, 291 SCRA 372 (1998).
A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her consent. Pelayo v.
Perez, 459 SCRA 475 (2005).
As an exception, husband may dispose of conjugal property without wifes consent if such sale is necessary to
answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos v. Macatangay, Jr., 439 SCRA 64
(2004).
Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Article 133. Every donation between the spouses during the marriage shall be void. This prohibition does not
apply when the donation takes effect after the death of the donor.
Neither does this prohibition apply to moderate gifts which the spouses may give each other on the occasion
of any family rejoicing. (1334a)
Article 1490. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation of property under article 191. (1458a)
Article 1492. The prohibitions in the two preceding articles are applicable to sales in legal redemption,
compromises and renunciations. (n)
Art. 87. Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the
marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any
family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a
valid marriage. (133a)
Reason: Spouses are one in law. He cannot give or sell something to himself.
Sales between spouses who are not governed by a complete separation of property regime are void, not just
voidable. Medina v. Collector, 1 SCRA 302 (1960).
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Since the spouses cannot validly sell property to one another under Art. 1490, then policy consideration and
the dictates of morality require that the prohibition should apply also to common-law relationships. cf.
Matabuena v. Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and public
policy and subversive of the stability of the family, a basic social institution which public policy cherishes and
protects. Agapay vs Palang(check this) Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).
Nevertheless, when property resold to a third-party buyer in good faith and for value, reconveyance is no
longer available. Cruz v. CA, 281 SCRA 491 (1997).
Sale between spouses
General rule: NO (Article 1490), UNLESS
when a separation of property was agreed upon in the marriage settlements; OR
when there has been a judicial separation of property under Article 191 (when spouse is sentenced to a
penalty which carries with it civil interdiction or has been declared absent or in case of legal separation)
If the spouses are separated only in fact, apply the general rule that they cannot sell property to each other.
Q: If they are not legally separated, can they still sell to each other?
A: Yes, if they go for a voluntary separation of property.
WHO CAN QUESTION THE SALE?
-
The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since only the
heirs and the creditors can question the sales nullity. Modina v. CA, 317 SCRA 696 (1999).
o The spouses cannot question only the heirs and creditors
However in Medina vs Collector (old case), BIR or govt can assail the sale because they are parties to
taxable transactions and needless to say, can question the validity of the transactions.
So, the heirs, creditors or the government

STATUS of the contract here is NULL AND VOID
Sale against public policy

Persons who cannot acquire by purchase, even at a public or judicial auction the following property:
(Article 1491)
guardians, property of his ward

Araneta vs Perez
SC said donation is valid because the prohibition is only in simple donation.
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17
The new Civil Code, in prohibiting a trustee from donating properties entrusted to him does so for the
protection of the trust beneficiaries and evidently contemplates gifts of pure beneficence, that is, those which
are supported by no other cause than the liberality of the donor. But when the donation, as in the present
instance, is clearly in their interest, to say it cannot be done would be contrary to the spirit and intent of the
law.
agents, property whose administration or sale has

consents
executors, property of state under administration
been entrusted to him, unless principal
No more need to comply with Rodriquez v. Mactal, 60 Phil. 13 (1934) which required showing that a third
party bought as conduit/nominee of the buyer disqualified under Art. 1491; rather, the presumption now is
that such disqualified party obtained the property in violation of said article. Philippine Trust Co. v. Roldan, 99
Phil. 392 (1956).
public officers & employees, property of the state or subdivision or GOCC entrusted to them
includes JUDGES and GOVT EXPERTS
Maharlika vs Tagle July 9, 1986

In so providing, the Code tends to prevent fraud, or more precisely, tends not to give occasion for fraud,
which is what can and must be done (Francisco, Sales, p. 111). We, therefore, reject the contention of
respondents that the fact that Edilberto Tagle was, at the time of the public bidding, a GSIS official, will not
alter or change the outcome of the case.
A Division Chief of the GSIS is not an ordinary employee without influence or authority. The mere fact that he
exercises ample authority with respect to a particular activity, i.e., retirement, shows that his influence
cannot be lightly regarded.
The point is that he is a public officer and his wife acts for and in his name in any transaction with the GSIS. If
he is allowed to participate in the public bidding of properties foreclosed or confiscated by the GSIS, there will
always be the suspicion among other bidders and the general public that the insider official had access to
information and connections with his fellow GSIS officials as to allow him to eventually acquire the property. It
is precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil
Code now declares such transactions to be void from the beginning and not merely voidable (Rubias vs.
Batiller, 51 SCRA 120). The reasons are grounded on public order and public policy. We do not comment on
the motives of the private respondents or the officers supervising the bidding when they entered into the
contract of sale. Suffice it to say that it fags under the prohibited transactions under Article 1491 of the Civil
Code and, therefore, void under Article 1409.
justices, judges, prosecuting attorneys, clerks of inferior and superior courts, other officers
and employees connected with the administration of justice, property and rights in litigation /
levied within their jurisdiction. Shall apply to lawyers who are members to the firm involved.
Summary:
If pending, the contract is void.
If final na, the contract is valid.
Properties sold to lawyer pending appeal, void.
Properties sold to counsel pending certiorari procedures, void.
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18
Lawyer acquired as payment in another case, valid because not the same case.
Lawyer acquired long before he intervened in the case, valid.
Properties before the court action, valid.
Purchase after finality, valid.
Property to serve as payment in the form of contingent fee, valid, because this takes effect after favourable
judgment.
Fornilda vs RTC
Foreclosure was made after termination of the case but the mortgage was during the pendency of the case,
still VOID
Nonetheless, considering that the mortgage contract, entered into in contravention of Article 1491 of the Civil
Code, supra, is expressly prohibited by law, the same must be held inexistent and void ab initio (Director of
Lands vs. Abagat, 53 Phil. 147).
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;
xxx
xxx
xxx
(7)
Those expressly prohibited or declared void by law. These contracts cannot be ratified.
Neither can the right to set up the defense of illegality be waived. (Civil Code)
Being a void contract, the action or defense for the declaration of its inesistence is imprescriptible (Article
1410, Civil Code). The defect of a void or inexistence contract is permanent. Mere lapse of time cannot give it
efficacy. Neither can the right to set up the defense of illegality be waived (Article 1409, Civil Code).
STATUS: contracts violative of Art. 1490 & 1491 are null and void (Medina v. Collector, 1 SCRA 302)
ARTICLE 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;
(2) Agents, the property whose administration or sale may have

consent of the principal
has been given;
been entrusted to them, unless the
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State or of

any subdivision thereof, or of any
government-owned or controlled corporation, or institution, the administration of
which
has
been
intrusted to them; this provision shall apply
to judges and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in
litigation or levied
upon an execution before the court within
whose jurisdiction or territory they exercise their respective
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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.
(6) Any others specially disqualified by law. (1459a)
Take note: unless with consent only applies to agent and principal; others are considered null and void
SURPRISE QUIZ
2013 Bar exam question
Rica petitioned for the annulment of her ten-year old marriage to Richard. Richard hired Atty. Cruz to
represent him in the proceedings. In payment for Atty. Cruz's acceptance and legal fees, Richard conveyed to
Atty. Cruz a parcel of land in Taguig that he recently purchased with his lotto winnings. The transfer
documents were duly signed and Atty. Cruz immediately took possession by fencing off the property's entire
perimeter.
Desperately needing money to pay for his mounting legal fees and his other needs and despite the transfer to
Atty. Cruz, Richard offered the same parcel of land for sale to the spouses Garcia. After inspection of the land,
the spouses considered it a good investment and purchased it from Richard. Immediately after the sale, the
spouses Garcia commenced the construction of a three-story building over the land, but they were prevented
from doing this by Atty. Cruz who claimed he has a better right in light of the prior conveyance in his favor.
Is Atty. Cruz's claim correct? (8%)

Answer: xxxxx
2nd ELEMENT: SUBJECT MATTER
MUST BE:
existing, or it may be future or even contingent (Art. 1462);
licit (Art. 1459); and
determinate or at least determinable (Art. 1460).
ARTICLE 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or
possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency
which may or may not happen. (n)
ARTICLE 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at
the time it is delivered. (n)
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20
ARTICLE 1460. A thing is determinate when it is particularly designated or physical segregated from all other
of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate without the necessity of a new or further
agreement between the parties. (n)
EXISTING
Subject Matter must be existing, future thing or based on a contingency
FUTURE: Do not view as to physical existence or non-existence
BUT check if Science and technology will allow said SM to come into existence
things subject to a resolutory condition may be a valid SM
e.g. property in a reserva troncal, SM under legal redemption
Emptio Rei Speratae v. Emptio Spei

Emptio Rei subject has potential existence and the uncertainty lies in the quantity or quality of the
thing. If the thing comes into existence, there is a VALID contract
Emptio Spei- subject matter is a vain hope or expectancy and the uncertainty lies in the existence of
the thing. The contract is VOID
Example:
I promise to sell to you the fruits of my coconut trees. If he has no coconut trees, then it is a vain hope.
Hope as a subject matter is valid for as long as it will exist.
Future things are valid. Why? because ownership of the subject matter is required only at the time of delivery.
A expects or hopes to acquire a house in January 2007, can he sell the same? Yes subject to the suspensive
condition that he will acquire said house.
Article 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.
The sale of a vain hope or expectancy is void. (n)
Article 1465. Things subject to a resolutory condition may be the object of the contract of sale. (n)
DETERMINATE
SM must be determinate OR at least determinable (Art. 1460)
determinate particularly designated or physically segregated from all others of the same
class
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DETERMINABLE capable of being made determinate without the necessity of a new or

further agreement between the parties
DETERMINATE: generic objects, undivided interested of a sole owner (1463), undivided share
of a specific mass (1464)
ARTICLE 1463. The sole owner of a thing may sell an undivided interest therein. (n)
ARTICLE 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass,
though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in
the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a
sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass. If the mass contains less than the number,
weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make
good the deficiency from goods of the same kind and quality, unless a contrary intent appears. (n)
Determinable
Atilano v. Atilano wrong designation of a lot does not vitiate the sale since the parties before
entering into the contract saw the actual setting and metes and bounds of the subject matter
ATILANO vs. ATILANO (May 21, 1969)
FACTS: In 1916, Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then
municipality of Zamboanga cadastre. In 1920 he had the land subdivided into five parts. Eulogio Atilano I,
for the sum of P150.00, executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio Atilano
II, who thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions were
likewise sold to other persons, the original owner, Eulogio Atilano I, retaining for himself only the remaining
portion of the land. Upon his death the title to this lot passed to Ladislao Atilano.
On December 6, 1952, Eulogio Atilano II having become a widower upon the death of his wife Luisa
Bautista, he and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as
co-owners. They had the land resurveyed so that it could properly be subdivided; and it was then discovered
that the land they were actually occupying on the strength of the deed of sale executed in 1920 was lot No.
535-A and not lot 535-E, as referred to in the deed, while the land which remained in the possession of the
vendor, Eulogio Atilano I, and which passed to his successor, defendant Ladislao Atilano, was lot No. 535-E
and not lot No. 535-A.
The heirs of Eulogio Atilano II , filed the present action in the Court of First Instance of Zamboanga,
alleging, inter alia, that they had offered to surrender to the defendants the possession of lot No. 535-A and
demanded in return the possession of lot No. 535-E, but that the defendants had refused to accept the
exchange.
The trial court rendered judgment for the plaintiffs on the sole ground that since the property was
registered under the Land Registration Act the defendants could not acquire it through prescription.
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ISSUE: Whether or not the heirs of Atilano II are entitled to Lot No 535-E, the bigger lot.
RULING: The logic and common sense of the situation lean heavily in favor of the defendants' contention.
When one sells or buys real property a piece of land, for example one sells or buys the property as he
sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned
to it in the certificate of title. In the particular case before us, the portion correctly referred to as lot No. 535-A
was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein,
even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its
owner, Eulogio Atillano I. In like manner the latter had his house on the portion correctly identified, after the
subdivision, as lot No. 535-E, even adding to the area thereof by purchasing a portion of an adjoining property
belonging to a different owner. The two brothers continued in possession of the respective portions the rest of
their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959,
when the mistake was discovered for the first time.
The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the
contract between them. The new Civil Code provides a remedy for such a situation by means of reformation
of the instrument. This remedy is available when, there having been a meeting of the funds of the parties to a
contract, their true intention is not expressed in the instrument purporting to embody the agreement by
reason of mistake, fraud, inequitable conduct on accident. In this case, the deed of sale executed in 1920
need no longer reformed. The parties have retained possession of their respective properties conformably to
the real intention of the parties to that sale, and all they should do is to execute mutual deeds of conveyance.
(Jazzie Sarona )
Naranja vs CA
To be valid, a contract of sale need not contain a technical description of the subject property. Contracts of
sale of real property have no prescribed form for their validity; they follow the general rule on contracts that
they may be entered into in whatever form, provided all the essential requisites for their validity are
present.22 The requisites of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.
The failure of the parties to specify with absolute clarity the object of a contract by including its technical
description is of no moment. What is important is that there is, in fact, an object that is determinate or at
least determinable, as subject of the contract of sale. The form of a deed of sale provided in Section 127 of
Act No. 496 is only a suggested form. It is not a mandatory form that must be strictly followed by the parties
to a contract.
In the instant case, the deed of sale clearly identifies the subject properties by indicating their respective lot
numbers, lot areas, and the certificate of title covering them. Resort can always be made to the technical
description as stated in the certificates of title covering the two properties.
Subject matter is still determinable
Determinable despite lack of specific quantity
National Grains v. IAC subject matter was the rice to be harvested from sellers farmland
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23
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 for a further agreement
NATIONAL GRAINS AUTHORITY, CABAL vs. IAC, SORIANO (March 8, 1989)
FACTS: National Grains Authority (now National Food Authority, NFA for short) is a government agency
wherein one of its incidental functions is the buying of palay grains from qualified farmers.
Soriano offered to sell palay grains to the NFA, through William Cabal, the Provincial Manager of NFA
stationed at Tuguegarao, Cagayan. Private respondent Soriano's documents were processed and accordingly,
he was given a quota of 2,640 cavans of palay. The quota noted in the Farmer's Information Sheet
represented the maximum number of cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24, 1979, Soriano delivered 630
cavans of palay. The palay delivered during these two days were not rebagged, classified and weighed. when
Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in
abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona
tide farmer and the palay delivered by him was not produced from his farmland but was taken from the
warehouse of a rice trader, Ben de Guzman.
Cabal wrote Soriano advising him to withdraw from the NFA warehouse the 630 cavans Soriano delivered
stating that NFA cannot legally accept the said delivery on the basis of the subsequent certification of the
BAEX technician, Napoleon Callangan that Soriano is not a bona fide farmer.
Soriano insisted that the palay grains delivered be paid. He then filed a complaint for specific
performance and/or collection of money with damages. The trial court rendered judgment ordering petitioner
National Food Authority, its officers and agents to pay respondent Soriano. The IAC upheld the findings of the
trial court.
ISSUE: Whether or not there was a contract of sale in the case at bar.
RULING: The petition is not impressed with merit. In the case at bar, Soriano initially offered to sell palay
grains produced in his farmland to NFA. When the latter accepted the offer by noting in Soriano's Farmer's
Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds between the parties.
The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the
same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not
been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ".
. .. 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." In
this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number
of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640
cavans.
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The acceptance referred to which determines consent is the acceptance of the offer of one party by the
other and not of the goods delivered as contended by petitioners.
The reason why NFA initially refused acceptance of the 630 cavans of palay delivered by Soriano is that it
(NFA) cannot legally accept the said delivery because Soriano is allegedly not a bona fide farmer. The trial
court and the appellate court found that Soriano was a bona fide farmer and therefore, he was qualified to
sell palay grains to NFA.
(Jazzie Sarona )
LICIT
SM must be LICIT: (Art. 1347)
licit not outside the commerce of man, includes all rights which are transmissible
sale of future inheritance, sale of animals suffering from contagious disease ARE void
ARTICLE 1347. All things which are not outside the commerce of men, including future things, may be the
object of a contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good customs, public order or public policy may likewise be
the object of a contract. (1271a)
Illegal Sale due
to Illegal Subject Matter

narcotics (RA 6425, RA 9165)
wild bird / mammal (Art No. 2950)
rare wild plants (Art No. 3893)
poisonous plants / fruits (RA 1288)
dynamited fish (RA 428)
gunpowder and explosives (Act No.2255)
firearms and ammunitions (PD#9)
Note:
People vs Alejandro William outside the commerce of men (drugs defense)
The probative value of an object evidence is not affected by the fact that it is beyond the commerce of man.
Appellants raise the strange argument that Exhibit "C" has probative value because the subject thereof
marijuana is beyond the commerce of man This is simply absurd. The transfer of marijuana was incidental
to the arrest of appellants and the confiscation of the subject matter of the crime. Exhibit "C" is in the same
category as a death certificate and autopsy report which are admissible evidence of the subject of the crime
the human cadaver which is also beyond the commerce of man. Transfer of goods as a consequence or by
virtue of police or state action such as forfeiture, seizure, condemnation, confiscation did not fall within the
phrase "commerce of man" even in its broadest meaning.
3rd ELEMENT: PRICE
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25
Price sum stipulated as the equivalent of the thing sold and also every incident taken into
consideration for the fixing of the price put to the debit of the buyer and agreed to by him
Price signifies the sum stipulated as the equivalent of the thing sold and also every incident taken
into consideration for the fixing of the price put to the debit of the buyer and agreed to by him.
Inchausti & Co. v. Cromwell, 20 Phil. 345 (1911).
Price must be:

Real not simulated or fictitious
in money or its equivalent
certain or ascertainable at perfection by:
a third person
the courts
reference to a definite day/particular

exchange or market
reference to another thing certain
never by one party to the contract (VOID)

Effect if:
There is no price void contract for lack of consideration
Mapalo v. Mapalo illiterate farmers signed a contract which provided for P500 consideration when
the amount was never paid. Since there was no real consideration, the contract is VOID
MAPALO VS. MAPALO
FACTS: Sps. Miguel and Candida Mapalo, (illiterate) farmers, were registered owners of a 1,635 square-meter
residential land in Manaoag, Pangasinan with OCT No. 46503 They decided to donate the eastern half of the
property to Maximo (brother of Miguel) who was about to get married. The OCT was delivered. As a result
however, they were deceived into signing a deed of absolute sale over the entire land in his (maximo) favor.
Their signature thereto were procured by fraud, that is, they were made to believe by Maximo Mapalo and the
attorney who acted as notary public who "translated" the document, that the same was a deed of donation in
Maximo's favor covering one half (the eastern half) of their land. Although the document of sale stated a
consideration of Five Hundred (P500.00) Pesos, the aforesaid spouses did not receive anything of value for
the land.
Following the execution of the afore-stated document the spouses Miguel Mapalo and Candida Quiba
immediately built a fence of permanent structure in the middle of their land segregating the eastern portion
from its western portion.Not known to them, meanwhile, Maximo, on March 15, 1938, registered the deed of
sale in his favor and obtained in his name Transfer Certificate of Title over the entire land. On October 20,
1951, he sold for P2,500.00 said entire land in favor the Narcisos, which was subsequently registered and a
TCT issued in their name over the entire property.
The Narcisos took possession only of the eastern portion of the land in 1951, after the sale. On February
7, 1952 they filed suit in the Court of First Instance of Pangasinanto be declared owners of the entire land; for
possession of its western portion; for damages; and for rentals. It was brought against the Mapalo spouses as
well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with
the consent of the spouses Mapalo.
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26
CFI ruled in favor of spouses Mapalo but CA reversed the decision upon appeal, solely on the ground that
the consent of the Mapalo sps. to the deed of sale having been obtained by fraud, was voidable, not void ab
initio. Hence, the action to annul the same had long prescribed. It reckoned said notice of the fraud from the
date of registration of the sale on March 15, 1938. The Court of First Instance and the Court of Appeals are
therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on
prescription that they lost in the Court of Appeals.
ISSUE: W/N the sale (as to the western portion) was void or voidable (Appelants contention was that it was
void for being absolutely simulated)
HELD: The sale is void. The Court of Appeals is right in that the element of consent is present as to the deed
of sale of October 15, 1936. For consent was admittedly given, albeit obtained by fraud. Accordingly, said
consent, although defective, did exist. In such case, the defect in the consent would provide a ground for
annulment of a voidable contract, not a reason for nullity ab initio.The parties are agreed that the second
element of object is likewise present in the deed of October 15, 1936, namely, the parcel of land subject
matter of the same.Not so, however, as to the third element of cause or consideration. And on this point the
decision of the Court of Appeals is silent.
As to the sale of the eastern portion of the land, there is no question, it being admitted that said land was
donated to Maximo. However, as regards the western portion, the question is whether or not there was a
cause or consideration to support the existence of a contract of sale.
The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever. Nonetheless, under the Old Civil Code, the statement of a false
consideration renders the contract voidable, unless it is proven that it is supported by another real and licit
consideration. And it is further provided by the Old Civil Code that the action for annulment of a contract on
the ground of falsity of consideration shall last four years, the term to run from the date of the consummation
of the contract.
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should be asked whether
its case is one wherein there is no consideration, or one with a statement of a false consideration. If the
former, it is void and inexistent; if the latter, only voidable, under the Old Civil Code. As observed earlier, the
deed of sale of 1936 stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however,
said consideration was totally absent. The problem, therefore, is whether a deed which states a consideration
that in fact did not exist is a contract without consideration, and therefore void ab initio, or a contract with a
false consideration, and therefore, at least under the Old Civil Code, voidable.
From the foregoing it can be seen that where, as in this case, there was in fact no consideration, the
statement of one in the deed will not suffice to bring it under the rule of Article 1276 of the Old Civil Code as
stating a false consideration.
(Hanniyah Sevilla )
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27
Effect if:
Simulated represented to have been paid BUT was NOT in fact paid
If price is SIMULATED, the sale is VOID but the contract may be shown to have been in reality a
donation or some other contract (1471)
It is void because the third element (price) is lacking.
For example: the contract in reality is a donation but it was simulated as a contract of sale to pay lesser taxes
ARTICLE 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a
donation, or some other act or contract. (n)
Illustration:
Ong v. Ong - P1.00 and other valuable considerations void sale but may be a donation
Bagnas v. CA - gross disproportion between consideration stipulated and value of the thing shows that
the price is false and fictitious. The contract is VOID
ONG VS ONG
FACTS: Records show that on February 25, 1976 Imelda. Ong, for and in consideration of One (P1.00) Peso
and other valuable considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a
Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her
heirs and assigns, all her rights, title, interest and participation in the ONE-HALF (1/2) undivided portion of the
parcel of land consisting of an area of 125 sq. m.
On November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January
20, 1982 donated the whole property described above to her son, Rex Ong Jimenez.
On June 20,1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the Regional Trial
Court of Makati, Metro Manila an action against petitioners, for the recovery of ownership/possession and
nullification of the Deed of Donation over the portion belonging to her and for Accounting.
On December 12, 1983, the trial court rendered judgment in favor of respondent Maruzzo and held that
the Quitclaim Dead is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the
latter. Petitioners appealed to the respondent Intermediate Appellate Court. They reiterated their argument
below and, in addition, contended that the One (P1.00) Peso consideration is not a consideration at all to
sustain the ruling that the Deed of Quitclaim is equivalent to a sale.
On June 20, 1984, respondent Intermediate Appellate Court promulgated its Decision affirming the
appealed judgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or
consideration; that the consideration is the One (P1.00) Peso which is clearly stated in the deed itself; that
the apparent inadequacy is of no moment since it is the usual practice in deeds of conveyance to place a
nominal amount although there is a more valuable consideration given.
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ISSUE: w/n the quitclaim was a deed of sale, and if so w/n the same was valid. (YES)
HELD: A careful perusal of the subject deed reveals that the conveyance of the one-half () undivided portion
of the above described property was for and in consideration of the One (Pl.00) Peso and the other valuable
considerations paid by private respondent Sandra Maruzzo, through her representative, Alfredo Ong, to
petitioner Imelda Ong. Stated differently, the cause or consideration is not the One Peso alone but also the
other valuable considerations. As aptly stated by the Appellate Court "x x x although the cause is not stated
in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil
Code). One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r),
Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract
even if such cause is not stated therein. This presumption cannot be overcome by a simple assertion of lack
of consideration especially when the contract itself states that consideration was given, and the same has
been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption
of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper
action.
(Hanniyah Sevilla )
BAGNAS vs. CA, RETONIL, ENCARNACION AND NAMBAYAN
FACTS: Hilario Mateum of Kawit, Cavite, died on March 11, 1964, single, without ascendants or descendants,
and survived only by collateral relatives, of whom petitioners herein, his first cousins, were the nearest.
Mateum left no will, no debts, and an estate consisting of twenty-nine parcels of land in Kawit and Imus,
Cavite, ten of which are involved in this appeal.
On April 3, 1964, the private respondents, themselves collateral relatives of Mateum though more remote
in degree than the petitioners, registered with the Registry of Deeds for the Province of Cavite two deeds of
sale purportedly executed by Mateum in their (respondents') flavor covering ten parcels of land. Both deeds
were in Tagalog, save for the English descriptions of the lands conveyed under one of them; and each recited
the consideration of P1.00 and services rendered to and for Mateum's benefit.
On May 22, 1964 the petitioners commenced suit against the respondents in the Court of First Instance of
Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as
donations void for want of acceptance embodied in a public instrument. Claiming ownership pro indiviso of
the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners prayed for
recovery of ownership and possession of said lands, accounting of the fruits thereof and damages.
Defendants aver that they were collateral relatives of Hilario Mateum and had done many good things for
him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales.
Trial court dismissed the petition on the ground that the plaintiff's evidence of alleged fraud was
insufficient, the fact that the deeds of sale each stated a consideration of only P1 .00 not being in itself
evidence of fraud or simulation. Also on the ground (laid down in Armential vs. Patriarca) that the plaintiffs as
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29
mere collateral relatives could not legally question the disposition made by the deceased during his life time.
CA affirmed the decision.
ISSUE: w/n the deeds of sale were void or inexistent from teh beginning or merely voidable.
[f they were only voidable, then it is a correct proposition that since the vendor Mateum had no forced
hairs whose legitimes may have been impaired, and the petitioners, his collateral relatives, not being bound
either principally or subsidiarily to the terms of said deeds, the latter had and have no actionable right to
question those transfers.
On the other hand, if said deeds were void ab initio because to all intents and purposes without
consideration, then a different legal situation arises since if there has no cause or consideration, the property
allegedly conveyed never really leaves the patrimony of the transferor, and upon the death without
testament, such property would have passed to the transferors' heirs intestate and can be recoverable by
them, or by the Administrator of the transferor's estate.. (so in this case pwede ma-recover ng petitioners)]
HELD: The deeds of sale are void and of no force or effect whatsoever. Upon the consideration alone that the
apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P1 .00 plus
unspecified and unquantilled services and the undisputably valuable real estate allegedly sold - worth at least
P10,500.00 going only by assessments for tax purposes which, it is well-known, are notoriously low indicators
of actual value - plainly and unquestionably demonstrates that they state a false and fictitious consideration,
and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they
purport to be sales, not merely voidable, but void ab initio.
The transfers in question being void, it follows as a necessary consequence and conformably to the
concurring opinion in Armentia, with which the Court fully agrees, that the properties purportedly conveyed
remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate
heirs, the petitioners herein, whose status as such is not challenged.
(Hanniyah Sevilla )
Effect if Price is
Uncertain - the contract is inefficacious but if buyer nevertheless appropriates the object he must
pay reasonable price (Art. 1474)
Manner of payment must be agreed upon
ARTICLE 1474. Where the price cannot be determined in accordance with the preceding articles, or in any
other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to
and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a
question of fact dependent on the circumstances of each particular case. (n)
Inadequacy of price: Effect
Voluntary sale - does not affect the validity of sale
But the price must not be grossly disproportionate

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Inadequacy of Price: Judicial Sale
General rule: may avoid the judicial sale when it is shocking to the conscience of man
Exception: when theres a right of redemption
Inadequacy of Price: Sales A Retro

Raises the presumption of equitable mortgage
Inadequacy of Price: Wards and Guardians
sale by guardians or by representatives when wards/persons represented suffer lesion of > of the
value of the things rescissible contract unless approved by court (Art.1381, Art.1386)
ARTICLE 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by
more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding
number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due
them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission. (1291a)
ARTICLE 1386. Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take place with respect to
contracts approved by the courts. (1296a)
Lesion as to wards and guardians: If the price is P 750,000 of P 1M, it is still valid. Lesion suffered is equal
(not more) to of the value of the thing.
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31
SUMMARY
FORMATION OF A CONTRACT OF SALE

3 stages
CONSENT
SUBJECT
MATTER
PRICE
Spouses
Emptio rei v.
Emptio spei
Rules on
inadequacy
Minors, insane,
demented, deaf
mute who cant
read and write
Generic
No price
Guardians,
Illegal objects
judges, attorneys,
agents, public
officers,
executors
Determinate
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32
Simulated
Uncertain
FIRST PHASE: PREPARATORY

period of negotiation and bargaining ending at the moment of agreement of the parties
CONTRACTS IN THE FIRST PHASE
Policitation
Option Contract
Right of First Refusal
Contract to Sell
POLICITACION
UNACCEPTED unilateral promise to buy or sell. Even if accepted by the other party, it is not binding
upon the promissor and may be withdrawn at any time.
violation does not give rise to any relief on the part of the other party since there is no valid contract
Take note that public advertisements are mere invitations to make an offer
Article 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the contrary appears. (n)
BAR 1999
A promised to sell property to B if B passes the Bar Exam
A sold house to C before B passed the Bar
Is the sale VALID?
Is B entitled to rentals since he there was a promise to sell?
ANSWER
Yes, the sale to C is valid. A merely made an unaccepted unilateral promise to sell to B in the nature
of a policitacion. This contract does not give rise to any obligation. It does not prevent the owner from
selling the thing to another.
No, B is not entitled to rentals. A's promise to sell was unilateral and unaccepted. Hence, there was
no perfected contract of sale that will transfer ownership over the thing to B. B is not entitled to
rentals because he does not own the property.
BAR
A contract granting a privilege to a person, for which he has paid a consideration, which gives him the right to
buy certain merchandise or specified property, from another person, at anytime within the agreed period, at a
fixed price. What contract is being referred to?
a) Option Contract
b) Contract to Sell
c) Contract of Sale
d) Lease
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33
OPTION CONTRACT
ACCEPTED unilateral promise to buy or sell a determinate thing which is supported by a consideration
distinct from the price
if with consideration gives rise to a case for damages but NOT for specific performance
Option contract must have consideration separate and distinct from the purchase price. Otherwise,
the option contract is VOID (Sugar Molasses case)
If there is no consideration, the contract is VOID BUT offer can still be accepted until it is withdrawn
(Sanchez v. Rigos)
LIMSON V. CA
An option is a continuing offer or contract by which the owner stipulates with another that the latter
shall have the right to buy the property at a fixed price within a time certain, or under, or in
compliance with, certain terms and conditions, or which gives to the owner of the property the right
to sell or demand a sale. An option is not itself a purchase, but merely secures the privilege to buy. It
is not a sale of property but a sale of right to purchase.
LIMSON VS C.A.( 357 s 209 )
FACTS: Petitioner Limson filed a complaint alleging that in July 1978, Spouses de Vera, through their agent
Marcosa Sanchez, offered to sell to petitioner a parcel of land.
Petitioner agreed to buy the property and gave P20k as earnest money. Respondent spouses signed a
receipt and gave petitoner a 10-day option period to purchase the property and informed them that the
property was mortgage to Ramoses, and asked Limson to pay the balance of the purchase price to enable to
settle their obligation with Ramoses.
On Aug. 5, 1978, Petitioner agreed to meet respondent spouses and the Ramoses to consummate the
transaction but due to failure of respondent spouses and the Ramose to appear, no transaction was
formalized.
On Aug. 11,1978, petitioner claimed that she was willing to pay the balance but the transaction again did
not materialized as respondent spouse failed to pay the back taxes. Subsequently, petitioner gave 3 checks
(P36,170.00) for the settlement of the back taxes and for payment of the quitclaims of the 3 tenants. The
amount was considered part of the purchase price with a receipt signed by respondent spouses.
On Sept. 5 1978, petitioner was surprised to learn that the property was the subject of a negotiation for
the sale to Sunvar Realty Devt Corp. represented by Cuenca. As a consequence, petitoner filed an affidavit of
Adverse Claim with the Registry of Deeds and informed Cuenca of her contract to purchase the property.
On Sept. 15 1978, the Deed of Sale was executed between respondent spouses and Sunvar, and a TCT
was issued in favor of Sunvar with the adverse claim annotated therein.
ISSUE: WON there was perfected contract to sell between petitioner and respondent spouses? NO
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HELD: The agreement between the parties was a contract of option and not a contract to sell.
An option, is a continuing offer or contract by which the owner stipulates with another that the latter shall
have the right to buy the property at a fixed price within a time certain, or under certain terms and conditions
or which gives to the owner the right to sell or demand a sale. It is also called an unaccepted offer. It is not
itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to
purchase. An option imposes no binding obligation on the person holding the option, aside from the
consideration for the offer.
On the other hand, a contract, like a contract to sell, involves the meeting of minds between two persons
whereby one binds himself with respect to the other, to give something or to render some service. Contracts,
in general, are reflected by mere consent, which 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.
In this case, the receipt readily shows that the parties entered into was a contract of option, which
respondent spouses agreed with petitioner the right to buy the formers property at a fixed price within 10days, and did not sell their property; they did not also agree to sell it; but they sold something, and the
agreement imposed no binding obligation on petitioner, aside from the consideration for the offer.
The consideration of P20k paid by petitioner to respondent spouses was not earnest money but option
money.
Earnest money and option money are not the same but distinguished thus:
Earnest money is part of the purchase price, while option money is the money given as a distinct
consideration for an option contract;
Earnest money is given only where there is already a sale, while option money applies to a sale not yet
perfected;
When earnest money is given, the buyer is bound to pay the balance, while when the would be buyer
gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option.
In this case, there is nothing in the receipt which indicates that the P20k was part of the purchase price.
Moreover, it was not shown that there was a perfected sale between the parties where earnest money was
given. Finally, the receipt did not reveal that petitioner was bound to pay the balance of the purchase price. In
fact, respondent spouses could even forfeit the money given if the terms of the option were not met. The
option period having expired and acceptance was not made by petitioner, the purchase of subject property by
Sunvar was perfectly valid and entered into in good faith.
(from: Erwin Vicente)
BAR 1996, 1998
A gave B an option to purchase his apartment for P5M
B offered to buy for P4.5 M
Counter-offer was not acceptable to A
A sold to C who bought it at P5 M
Can B compel A to cancel sale to C and execute deed in his favor?
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35
ANSWER
B cannot compel A to execute a deed in his favor because what B only had was an option contract.
Said contract was not a valid one since it was not supported by a consideration distinct from the
purchase price.
Even if with consideration, B can only sue A for damages but not for specific performance
Ang Yu Asuncion vs CA reiterated in Equitorial vs Mayfair

An option or an offer would require, among other things, a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual
intention to enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a
class of preparatory juridical relations governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application,
the pertinent scattered provisions of the Civil Code on human conduct
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action for specific performance without thereby negating
the indispensable element of consensuality in the perfection of contracts. It is not to say, however, that the
right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a
recovery for damages.
So that is the reason why you can only ask for damages and not specific performance
BAR 2002
If the parties entered into an option contract which is supported by a separated consideration from
the purchase price and the option contract is not respected, can the would-be-buyer ask for specific
performance?
Can the seller escape liability by saying honoring the option contract would be financially
disadvantageous to him?
ANSWER
An option contract with separate consideration will only give rise to a case for damages and not for
specific performance.
Seller cannot escape liability by claiming economic lesion since seller who enters into an option
contract has the obligation to sustain offer until the end of agreed period.
Right to enter into contractual relations is an ABSOLUTE right, meaning, you cannot be forced to enter into
contract. You cannot be compelled to do something against your will.
RIGHT OF FIRST REFUSAL
Contract or a stipulation in a contract which grants a person the right to buy a property before it is offered
to another. This doesnt need a separate consideration since such stipulation is part and parcel of the
entire contract. Therefore, what is deemed to be the consideration of the sale is also the consideration of
the right of first refusal.
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36
KATUNGOD NA UNA MUBALIBAD

This is usually present if you are the lessee.
If
offeree and offerrors terms are IDENTICAL
offeror violates the agreement
SPECIFIC PERFORMANCE
If
offeree and offerrors terms are DIFFERENT

offeror violates the agreement
DAMAGES
Status of the contract of sale: if there is uniformity in terms and conditions between the owner and the
lessee, but the owner sells it to another, the contract of sale is rescissible.
Right of first refusal contained in a lease, when breached by promissor allows enforcement by the promisee
by way of rescission of the sale entered into with the third party, pursuant to Arts. 1381(3) and 1385 of Civil
Code. Guzman, Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992)
Right of First Refusal; Lessee; Effect (1996)
Ubaldo is the owner of a building which has been leased by Remigio for the past 20 years. Ubaldo has
repeatedly assured Remigio that if he should decide to sell the building, he will give Remigio the right of first
refusal. On June 30, 1994, Ubaldo informed Remigio that he was willing to sell the building for P5 Million. The
following day, Remigio sent a letter to Ubaldo offering to buy the building at P4.5 Million. Ubaldo did not reply.
One week later, Remigio received a letter from Santos informing him that the building has been sold to him
by Ubaldo for P5 Million, and that he will not renew Remigio's lease when it expires. Remigio filed an action
against Ubaldo and Santos for cancellation of the sale, and to compel Ubaldo to execute a deed of absolute
sale in his favor, based on his right of first refusal.
a.
b.
Will the action prosper? Explain.

If Ubaldo had given Remigio an option to purchase the building instead of a right of first refusal, will
your answer be the same? Explain.
SUGGESTED ANSWER:
No, the action to compel Ubaldo to execute the deed of absolute sale will not prosper. According to Ang Yu v.
Court of Appeals (238 SCRA 602), the right of first refusal is not based on contract but is predicated on the
provisions of human relations and, therefore, its violation is predicated on quasi-delict. Secondly, the right of
first refusal implies that the offer of the person in whose favor that right was given must conform with the
same terms and conditions as those given to the offeree. In this case, however, Remigio was offering only
P4.5 Million instead of P5 Million.
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37
ALTERNATIVE ANSWER:
No, the action will not prosper. The lessee's right of first refusal does not go so far as to give him the power to
dictate on the lessor the price at which the latter should sell his property. Upon the facts given, the lessor had
sufficiently complied with his commitment to give the lessee a right of first refusal when he offered to sell the
property to the lessee for P5 Million, which was the same price he got in selling it to Santos. He certainly had
the right to treat the lessee's counter-offer of a lesser amount as a rejection of his offer to sell at P5 Million.
Thus, he was free to find another buyer upon receipt of such unacceptable counter-offer (Art. 1319. NCC).
SUGGESTED ANSWER:
Yes, the answer will be the same. The action will not prosper because an option must be supported by a
consideration separate and distinct from the purchase price. In this case there is no separate consideration.
Therefore, the option may be withdrawn by Ubaldo at any time. (Art. 1324, NCC)
A owns a house which is leased to B
B was given the right of first refusal - P5M
B offered to buy for P4.5 M - not acceptable counter-offer
A sold the house to C for P5 M
Can B compel A to cancel the sale with C and sell the house to him?
ANSWER
B cannot compel A to execute a deed of sale in his favor because Bs counter-offer is not the same as
As price.
However, since there was a breach of the right of first refusal since the property was not sold to B as
the lessee, B may file a case for damages.
CONTRACT TO SELL
Bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is,
full payment of the purchase price.
Take note again: Contract to sell is different from conditional sale
CONTRACT TO SELL IS NOT A CONTRACT OF SALE
The first essential element of consent of parties is ABSENT
The seller does not consent to transfer ownership to the buyer until the happening of an
event, which may be the full payment of price which is a suspensive condition, the non-fulfillment of
which prevents the obligation from arising (Coronel v. CA, Oct. 7,1996)
CONTRACT OF SALE V. CONTRACT TO SELL
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38
Title passes to
Vendor
the buyer
reserves
uponownership
delivery ofand
SM will not pass until full payment of price
Non-payment is a negative Full

resolutory
payment
condition
is a positive resolutory condition
ndor has
Titlelost
remains
control
in and
the vendor
can recover
and he
only
can
if eject
K is rescinded
vendee for non-compliance with suspensive condition
CONTRACT TO SELL IS NOT A CONDITIONAL SALE

In a conditional sale, the first element of consent is present although it is conditioned on the
happening of an event.
There is no consent to transfer ownership in a contract to sell
In the case of Ventura vs Spouses Endaya:

A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving
the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell
the said property exclusively to the latter upon his fulfillment of the conditions agreed upon, i.e., the full
payment of the purchase price and/or compliance with the other obligations stated in the contract to sell.
Given its contingent nature, the failure of the prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising. As discussed in Sps.
Serrano and Herrera v. Caguiat:
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation
to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive
condition does not take place, the parties would stand as if the conditional obligation had never existed. x x
x.
To note, while the quality of contingency inheres in a contract to sell, the same should not be confused with a
conditional contract of sale. In a contract to sell, the fulfillment of the suspensive condition will not
automatically transfer ownership to the buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale. On the other hand, in a conditional contract of sale, the fulfillment of the suspensive condition
renders the sale absolute and the previous delivery of the property has the effect of automatically
transferring the sellers ownership or title to the property to the buyer
2012 BAR
a) A contract to sell is the same as a conditional contract of sale. Do you agree? Explain your answer. (5%)
Of course, you disagree. So you have to master distinctions here
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CORONEL V. CA
Receipt of Downpayment contains the ff:
Juan has given Maria P50,000 as downpayment for a lot of Maria
Since the lot is under the name of Marias father who is deceased, Maria will have the lot
transferred under her name
After Maria has the TCT in her name, she will execute a deed of sale
Juan will then pay the balance of P1,119,000
Maria sold the lot to Pedro
Can Juan sue Maria for specific performance?
Contract to sell or conditional sale?
ANSWER: Conditional sale

Receipt shows that Maria intended to transfer title to Juan if not for the fact that lot was still under the
name of Marias father
Maria did not reserve title to the lot and agreed to execute a deed of absolute sale in the name of
Juan
Juan can sue for specific performance with damages
CORONEL vs CA (263 S 15 October 7, 1996)

FACTS:This case has its roots in a complaint for specific performance to compel herein petitioners to
consummate the sale of a parcel of land with its improvements located along Roosevelt Ave., QC entered in to
by the parties sometime in January 1985 for the price of P1,240,000.00.
On January 19, 1985, Coronel, et. al executed a document entitled Receipt of Down Payment in favor of
plaintiff Ramona Patricia Alcaraz after plaintiff-appellee Concepcion Alcaraz, mother of Ramona, paid the
down payment of P50,000.00. However, on February 18, 1985, the Coronels sold the property to intervenorappellant Catalina Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Coronels
cancelled and rescinded the contract with Ramona by depositing the down payment paid in the bank in trust
for Ramona.
On February 22, 1985, Concepcion, et.al filed a complaint for specific performance against the Coronels.
RTC-QC rendered judgment favorable to Concepcion and ordered the cancellation of sale to Mabanag.
Concepcions Motion for Reconsideration was denied; hence an appeal was made to Ca which affirmed RTCs
decision.
Hence, this petition where Concepcion contended that the Receipt of Down Payment embodied a
perfected contract of sale, while Coronels insisted that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona, who left for
the USA, said contract could not possibly ripen into a contract of absolute sale.
ISSUE: WON the Receipt of Down Payment was a binding contract of sale? (contract of sale vs. contract to
sell; contract to sell and conditional contract of sale)
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RULING: The document entitled Receipt of Down Payment which was offered in evidence by both the parties
embodied the binding contract between Ramona and the Coronels, pertaining to a particular house and lot.
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or render some service.
Art. 1458. by the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or
its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following:
Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
Determinate subject matter; and
Price certain in money or its equivalent.
Contract to sell may not be considered as a Contract of Sale because the first essential element is
lacking. In Contract to Sell, the prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of property
subject of the contract to sell until the happening of an event, which for present purposes we shall take as the
full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the
full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents
the obligation to sell from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer.
A Contract to Sell may thus be defined as a bilateral contract whereby the prospective seller while
expressly reserving the ownership of the subject property despite deliver thereof to the prospective buyer,
binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, that is full payment of the purchase price.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey the title to the prospective buyer by
entering into a contract of absolute sale.
In conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have nay title to transfer to any third person. Applying Art. 1544
of the CC, such second buyer of the property who may have had actual or constructive knowledge of such
defect in the sellers title, or atleast was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyers title. In case the title is issued to
the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
When the Receipt of Down Payment is considered in its entirety, it becomes more manifest that there
was a clear intent on the part of petitioners to transfer title to the buyer, but since the Transfer Certificate of
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Title (TCT) was still in the name of petitioners father, they could not fully effect such transfer although the
buyer was then willing and able to immediately pay the purchase price.
The agreement could not have been a contract to sell because the seller herein made no express
reservation of ownership or title to the subject parcel of land.
What is clearly established by the plain language of the subject document is that when the said Receipt
of Down Payment was prepared and signed by petitioners Romeo Coronel, et. al, the parties had agreed to a
conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate
of title from the name of petitioners father, Constancio Coronel, to their names.
Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners name was fulfilled on February 6,19854, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private respondent Ramona Alcaraz, the buyer, and to
immediately execute the Deed of Absolute Sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
(Jazzie Sarona )
BAR 1997
Compare a conditional sale from an absolute sale
ANSWER
An absolute sale is a contract where the seller has transferred ownership over a property to the buyer
and the latter has given the seller the full consideration for the sale
A conditional sale is likewise a contract of sale where the seller agrees to transfer ownership to the
buyer, however, subject to the happening of suspensive condition.
SECOND PHASE - PERFECTION
What do you think is the shortest stage in the stages of a contract? Its the perfection because it happens
upon the meeting of the minds.
WHAT HAPPENS
meeting of the minds
consent offer must be certain and acceptance absolute
meeting of offer and acceptance
qualified acceptance is merely a counter-offer which in turn must be absolutely accepted to give rise
to a valid and binding contract
Article 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.
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Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer
was made. (1262a)
If A is selling his property for P 5M and B is willing to pay P 4M for it, there is no meeting of the minds. The
counter-offer has to be accepted by the seller before we can say that there is a meeting of the minds
WHAT HAPPENS
acceptance by letter / telegram becomes effective from the time acceptance comes to the
knowledge of offeror
earnest money considered part of the price and proof of the perfection of a contract
If you sell your laptop for P 60T and buyer will inform you, through e-mail that he will buy it for P60T, there is
perfection if you get the acceptance of the buyer. If you did not open your inbox to read the buyers
acceptance, there is no perfection of the contract of sale.
SECOND PHASE: PERFECTION
Earnest Money
Option Money
Part of the purchase price Distinct and separate from

the purchase price
Presupposes perfected
contract of sale
No perfected contract of sale

yet
Buyer is bound to pay the Optioner is not required to

balance after the earnest pay
money is paid
Prima facie evidence of
the perfected contract
Perfection of the option

contract only
An earnest payment is a specific form of security

deposit to demonstrate an earnest of good
faith about wanting to complete the transaction. In
ancient times, the earnest payment was called
variously an earnest penny, Aries penny, or God's
silver (in Latin Argentum Dei ). It was either money
or a valuable coin or token given to bind a bargain,
notably for the purchase or hiring of a servant.
What is the treatment of earnest money in the Civil
Code?
Article 1482. Whenever earnest money is given in a

contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
(1454a)
When can you say that it is earnest and not option contract?
It depends,
If given during the negotiation stage, it is not earnest but mere guaranty for buyer not to back out.
If given during the perfection stage, it is earnest money and therefore, proof of the perfection of the contract.
If it a means to reserve the property for the prospect fo a future transaction, the rules on option will apply.
Adelfa Properties vs CA
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There are clear distinctions between earnest money and option money, viz.:
(a) earnest money is part of the purchase price, while option money ids the money given as a distinct
consideration for an option contract;
(b) earnest money is given only where there is already a sale, while option money applies to a sale not yet
perfected; and
(c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer
gives option money, he is not required to buy.
Sir
(d) Earnest money is merely creates disputable presumption of the contract of sale. In option, payment is
evidence of a contract of privilege to buy at a certain property at a certain price and for a certain period,
(e) Earnest Money can be recovered if there is stipulation. Option Money, cannot be recovered unless
stipulated.
(f)The payment of Earnest Money would mean that it is partially executed hence, Statute of frauds will not
apply while OM as a consideration is not governed by Statute of frauds.
BAR 2006
Biong and Linda are spouses who own real property.
Ray prepared a deed of sale and a managers check for P2 M.
After receiving the P2M, Biong signed the deed of sale but Linda was abroad
When Linda returned, she refused to sign since she changed her mind.
Linda filed a case to nullify the sale and for damages against Ray
Will the case prosper?
ANSWER
Lindas case to annul the sale will not prosper since all the elements of a perfected contract of sale
are present.
When the couples offer was accepted by Ray and the acceptance was made known to the couple,
there was already a perfected contract of sale. Absent any ground to annul, Lindas action will not
prosper
BAR 2013
Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long been interested
in the property, succeeded in persuading Sergio to sell it to him. On June 2, 2012, they agreed on the
purchase price of P600,000 and that Sergio would give Marcelo up to June30, 2012 within which to raise the
amount. Marcelo, in a light tone usual between them, said that they should seal their agreement through a
case of Jack Daniels Black and P5,000 "pulutan" money which he immediately handed to Sergio and which
the latter accepted. The friends then sat down and drank the first bottle from the case of bourbon.
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On June 15, 2013, Sergio learned of another buyer, Roberto, who was offering P800,000 in ready cash for the
land. When Roberto confirmed that he could pay in cash as soon as Sergio could get the documentation
ready, Sergio decided to withdraw his offer to Marcelo, hoping to just explain matters to his friend. Marcelo,
however, objected when the withdrawal was communicated to him, taking the position that they have a firm
and binding agreement that Sergio cannot simply walk away from because he has an option to buy that is
duly supported by a duly accepted valuable consideration.
(A) Does Marcelo have a cause of action against Sergio? (5%)
(B) Can Sergio claim that whatever they might have agreed upon cannot be enforced because any
agreement relating to the sale of real property must be supported by evidence in writing and they
never reduced their agreement to writing? (3%)
Suggested Answer:
A. Yes Marcelo has a cause of action against Sergio because there existed an option to buy through the
payment of pulutan money. Applying Ang Yu case, Marcelo has a cause of action for damages.
B. Yes Sergio can claim that whatever they might have agreed upon cannot be enforced because any
agreement relating to the sale of real property must be supported by evidence in writing and they never
reduced their agreement to writing. The SOF provides that any sale of real property or interest must be in
writing to be enforceable.
Atty. Espejos Answer :
A. Yes, Marcelo has a cause of action there exist a perfected contract of sale for the following reasons:
There is already a meeting of the minds. There was acceptance of the thing and the cause which are to
constitute the contract. The fact that Marcelo is given a period is not the duration of the option to buy but the
period within which to pay the consideration of the contract itself.
Based on the facts, the parties sealed their agreement by the payment of P5,000 pulutan money. It is
submitted that this constitute earnest money which is proof of the contract between the parties.
B. No Sergio cannot claim that whatever they might have agreed upon cannot be enforced because any
agreement relating to the sale of real property must be supported by evidence in writing. In effect, Sergio is
claiming that any sale of real property or interest therein must be in writing to be enforceable. However,
jurisprudence dictates that SOF only applies to executor and not to executed or partially executed contracts.
In this case, there is already payment which takes it out of the purview of statute of frauds.
BAR 2012
Which of the following statements is correct?

a) Offers in interrelated contracts are perfected upon consent.
b) Offers in interrelated contracts require a single acceptance.
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c) Business advertisements are definite offers that require specific acceptance.

d) Advertisements for Bidders are only invitations to make proposals and the advertiser is not bound
to accept the highest/lowest bidder, unless it appears otherwise.
FORM OF SALES
Subject to the provision of statute of fraud, a contract of sale may be made in writing, by word of
mouth or partly in writing and party by word of mouth or may be inferred from the conduct of the parties.
General Rule: no form required

Exception:
a) statute of frauds (Art 1403 and 1405)
b) sale of realty through agent
ARTICLE 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by action, unless the same, or 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:
(a) An agreement that by its terms is not to be performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred
pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of
them, of such things in action or pay at the time some part of the purchase money; but when a sale is made
by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
(e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an
interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract.
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ARTICLE 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by
the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefit
under them.
STATUTE OF FRAUDS 1403(2)

UNENFORCEABLE unless in writing:
Sale agreement which is not to be performed within 1 year from making of agreement
Agreement for sale of goods, chattels or movables valued at P500 or more
Sale of real property or any interest therein
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to
waive objections to the venue of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by
the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
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(15) Any other act of strict dominion. (n)

Yoshizaki vs Joy Training Center of Aurora
As a general rule, a contract of agency may be oral. However, it must be written when the law requires a
specific form. Specifically, Article 1874 of the Civil Code provides that the contract of agency must be written
for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale shall be void. A
related provision, Article 1878 of the Civil Code, states that special powers of attorney are necessary to
convey real rights over immovable properties.
The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the authorized act. We unequivocably declared in Cosmic Lumber
Corporation v. Court of Appeals that a special power of attorney must express the powers of the agent in
clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. When
there is any reasonable doubt that the language so used conveys such power, no such construction shall be
given the document. The purpose of the law in requiring a special power of attorney in the disposition of
immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another and to caution the buyer to assure himself of the specific authorization of the
putative agent.
BAR 2012
Which of the following contracts is void?
a) An oral sale of a parcel of land.
b) A sale of land by an agent in a public instrument where his authority from the principal is oral.
c) A donation of a wrist watch worth P 4,500.00.
d) A relatively simulated contract.
Which of the following contracts of sale is void?
a) Sale of EGMs car by KRP, EGMs agent, whose authority is not reduced into writing.
b) Sale of EGMs piece of land by KRP, EGMs agent, whose authority is not reduced into writing.
c) Sale of EGMs car by KRP, a person stranger to EGM, without EGMs consent or authority.
d) Sale of EGMs piece of land by KRP, a person stranger to EGM, without EGMs consent or authority.
Aligada orally offered to sell his two-hectare rice land to Balane for P 10Million. The offer was orally accepted.
By agreement, the land was to be delivered (through execution of a notarized Deed of Sale) and the price was
to be paid exactly one-month from their oral agreement. Which statement is most accurate?
a) If Aligada refuses to deliver the land on the agreed date despite payment by Balane, the latter may
not successfully sue Aligada because the contract is oral.
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48
b) If Aligada refused to deliver the land, Balane may successfully sue for fulfillment of the obligation
even if he has not tendered payment of the purchase price.
c) The contract between the parties is rescissible.
d) The contract between the parties is subject to ratification by the parties.
THIRD PHASE: CONSUMMATION and PERFORMANCE
Obligations of the Seller

Obligations of the Buyer
Double Sales
Sale by non-owner
Sale by one having voidable title
Obligations of the seller
Preserve the thing (1163)

Deliver the subject matter
ARTICLE 1163. Every person obliged to give something is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties requires another
standard of care. (1094a)
Why Deliver?
Ownership is transferred to the buyer upon actual or constructive delivery (1477)

ownership of SM is acquired by the vendee from the moment it is delivered to him in any of the ways
specified in articles 1497-1501 (1496)
ARTICLE 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. (n)
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to
him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee. (n)
ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and
possession of the vendee. (1462a)
ARTICLE 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent
to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred.
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With regard to movable property, its delivery may also be made by the delivery of the keys of the place or
depository where it is stored or kept. (1463a)
ARTICLE 1499. The delivery of movable property may likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of
the sale, or if the latter already had it in his possession for any other reason. (1463a)
ARTICLE 1500. There may also be tradition constitutum possessorium. (n)
ARTICLE 1501. With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall
govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in
the possession of the vendee or the use by the vendee of his rights, with the vendor's consent, shall be
understood as a delivery. (1464)
Delivered but no transfer of ownership?
1478 parties may stipulate that ownership shall not pass to the buyer until he has fully paid
Article 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he
has fully paid the price. (n)
Types of Delivery
Physical Delivery (1497) when the SM is placed in the possession and control of the vendee
Constructive delivery- IMMOVABLES
sale through public instrument, execution of instrument = delivery if the contrary does not appear in
the deed (1498)
Placing the title of ownership in vendees possession with vendor's consent (1501)
Constructive delivery-MOVABLES
delivery of the keys or depository where it is stored (1498)

tradition longa manu - delivery by consent of the parties if SM cannot
be transferred to buyer at the time of sale or the buyer already had possession before sale (1499)
Constitutum Possessorium (Art. 1500) A provision in the deed of sale granting to seller a right to
lease the subject matter of the sale is valid: the possession is deemed to be constituted in the vendee
by virtue of this mode of tradition. Amigo v. Teves, 96 Phil. 252 (1954).
Traditio Brevi Manu Prior to the sale, petitioners were in possession of the subject property as
lessees. Upon sale to them of the rights, interests and participation as to the portion pro indiviso,
they remained in possession, not in the concept of lessees anymore but as owners now through
symbolic delivery known as traditio brevi manu. Heirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).
person to whom negotiable document of title has been negotiated

acquires the right of person to whom delivery shall be made by the terms of the document (1513)
ARTICLE 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
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(1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a
purchaser in good faith for value and also such title to the goods as the person to whose order the goods
were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith
for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according
to the terms of the document as fully as if such bailee had contracted directly with him. (n)
Documents of Title
Bill of lading, dock warrant, quedan, warehouse receipt or any document used in the ordinary course
of business in the sale or transfer of goods as proof of possession and control or authorizing or
purporting to authorize the possessor of the document to transfer or receive either by endorsement
or delivery the goods covered by the document (1636)
ARTICLE 1636. In the preceding articles in this Title governing the sale of goods, unless the context or subject
matter otherwise requires:
(1) "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or
order for the delivery of goods, or any other document used in the ordinary course of business in the sale or
transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize
the possessor of the document to transfer or receive, either by endorsement or by delivery, goods
represented by such document.
"Goods" includes all chattels personal but not things in action or money of legal tender in the Philippines. The
term includes growing fruits or crops.
"Order" relating to documents of title means an order by endorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at the time a contract of sale is made.
An antecedent or pre-existing claim, whether for money or not, constitutes "value" where goods or
documents of title are taken either in satisfaction thereof or as security therefor.
(2) A person is insolvent within the meaning of this Title who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts as they become due, whether insolvency proceedings
have been commenced or not.
(3) Goods are in a "deliverable state" within the meaning of this Title when they are in such a state that the
buyer would, under the contract, be bound to take delivery of them. (n)
Documents of Title Purpose

Evidence of control and possession or control of goods described
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Medium of transferring possession and control of goods described without having to undertake actual
delivery
Types of Documents of Title
Negotiable states that goods will be delivered to bearer or to the order of one person
Non-Negotiable- does not state that the goods referred to therein will be delivered to the bearer or
the order of any person
Delivery through Carrier
1523 - delivery of goods to the carrier is deemed delivery of goods to the buyer
ARTICLE 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the case provided
for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of
the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the
case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline
to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the
seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer as may
enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be deemed to
be at his risk during such transit. (n)
F.A.S. sales - seller pays all charges and is subject to all risks until the goods are places alongside the
vessel
F.O.B. sales - free on board seller shall bear all expenses until the goods are delivered whether at
the point of shipment or the point of destination
C.I.F. sales - cost, insurance & freight price covers cost of goods and freight and insurance costs
paid by the seller
Accessory Obligations
Delivery of the fruits
Article 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition
in which they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)
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Article 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him. (1095)
Warranty of the thing sold
Express Warranty
Article 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if
the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the
buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller
made such affirmation or statement as an expert and it was relied upon by the buyer. (n)
Implied Warranties
Article 1547. In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful
possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other
person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has
a legal or equitable interest. (n)
Seller Has Right to Sell

Warranty Against Eviction (Arts. 1548-1560)
1.
Buyer is Evicted in whole or in part from the subject matter of sale
2.
Final Judgment
3.
Basis of eviction is a right Prior to sale or act imputable to seller
4.
Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party
defendant through 3rd party complaint brought by buyer
5.
No waiver on the part of the buyer Note: For eviction disturbance in law is required and not just
trespass in fact.
d. Warranty Against Hidden Defects (Arts. 1561-1580)
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Article 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold
may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness
for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or
would have given a lower price for it; but said vendor shall not be answerable for patent defects or those
which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade
or profession, should have known them. (1484a)
Article 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden
faults or defects in the thing sold. (1485)
REMEDY
Article 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either
case. (1486a)
Action quanti minoris
Warranty for redhibitory defects
Article 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be
of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as
redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable
for damages. (1495)
Redhibitory does not refer to the defect but it refers to the nature of the remedy given by law.
OBLIGATIONS OF THE BUYER
Pay price of thing sold (1582)

Accept delivery of thing sold (1582-1585)
Pay expenses of delivery
ARTICLE 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and
place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be made at the time and place of
the delivery of the thing sold. (1500a)
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ARTICLE 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be delivered by stated installments, which are to be separately
paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer
neglects or refuses without just cause to take delivery of or pay for one more instalments, it depends in each
case on the terms of the contract and the circumstances of the case, whether the breach of contract is so
material as to justify the injured party in refusing to proceed further and suing for damages for breach of the
entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right
to treat the whole contract as broken. (n)
ARTICLE 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not
deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for
the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the
contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to
afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether
they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the
buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the
price, whether such terms are indicated by marking the goods with the words "collect on delivery," or
otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of
agreement or usage of trade permitting such examination. (n)
ARTICLE 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has
accepted them, or when the goods have been delivered to him, and he does any act in relation to them which
is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has rejected them. (n)
Problematic Sales
DOUBLE SALES
Elements
2 or more sales must be valid sales

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2 or more sales must pertain to exactly the same subject

2 buyers must each represent conflicting interests
2 buyers must each have bought from the
very same seller
Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith. (1473)
Double Sales (2001)

On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the same land to
Jose. Who has a better right if:
a.
b.
the first sale is registered ahead of the second sale, with knowledge of the latter. Why? (3%)
the second sale is registered ahead of the first sale, with knowledge of the latter? Why? (5%)
SUGGESTED ANSWER:
(a) The first buyer has the better right if his sale was first to be registered, even though the first buyer knew
of the second sale. The fact that he knew of the second sale at the time of his registration does not make him
as acting in bad faith because the sale to him was ahead in time, hence, has a priority in right. What creates
bad faith in the case of double sale of land is knowledge of a previous sale.
b) The first buyer is still to be preferred, where the second (2) years, or until 3 June 1973. It is further stated
therein sale is registered ahead of the first sale but with knowledge of the latter. This is because the second
buyer, who at the time he registered his sale knew that the property had already been sold to someone else,
acted in bad faith. (Article 1544, C.C.)
Double Sales (2004)
JV, owner of a parcel of land, sold it to PP. But the deed of sale was not registered. One year later, JV sold the
parcel again to RR, who succeeded to register the deed and to obtain a transfer certificate of title over the
property in his own name. Who has a better right over the parcel of land, RR or PP? Why? Explain the legal
basis for your answer. (5%)
SUGGESTED ANSWER:
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It depends on whether or not RR is an innocent purchaser for value. Under the Torrens System, a deed or
instrument operated only as a contract between the parties and as evidence of authority to the Register of
Deeds to make the registration. It is the registration of the deed or the instrument that is the operative act
that conveys or affects the land. (Sec. 51, P.D. No. 1529).
In cases of double sale of titled land, it is a well-settled rule that the buyer who first registers the sale in good
faith acquires a better right to the land. (Art. 1544, Civil Code).
Persons dealing with property covered by Torrens title are not required to go beyond what appears on its face.
(Orquiola v. CA 386, SCRA 301, [2002]; Domingo v. Races 401 SCRA 197, [2003]). Thus, absent any showing
that RR knew about, or ought to have known the prior sale of the land to PP or that he acted in bad faith, and
being first to register the sale, RR acquired a good and a clean title to the property as against PP.
Kaning last na principle, can you recall this? This is what we call Mirror Principle. Because it seems that in
titled lands, the buyer need not go beyond the title of the land. This is on the principle that the certificate
mirrors the actual status of the land.
In land titles we have 3 principles:
1.
2.
3.
Mirror
Curtain
Insurance
Take note in order for article 1544 to apply:

1.
Both conveyances must be sales.
It does not apply if one is a mortgage and the other is a sale.

Example:
A sold the land to B. After the sale, A mortgaged the land to C. C with knowledge of the sale, registers the
mortgage. Who is preferred? Again, its not 1544 because there is a mortgage subsequent to the sale. A is
preferred even if C registers the mortgage. Its not a double sale under Article 1544 and it will not give C any
preference. 2nd when A mortgage the property, he was no longer the owner. Cs knowledge of the prior sale
makes him a mortgagee in bad faith.
2.
Both must purport to convey the same subject matter to different vendees in a way that delivery to
one of them is impossible.
Example.
On January 14, A sold his car a retro to B. They stipulated that the right to repurchase can be exercised
within 1 year from the date of sale. A then sold the same to C, stipulating that the delivery can be made
within 1 month. Is there a double sale?
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NO. because there is still a chance that A can deliver the car to B. Delivery to B is not impossible thus there is
no double sale.
The principle to remember is if delivery is impossible to both transaction, deleivery to one of them is
impossible because of the double sales transactions, then article 1544 applies.
3.
Both contract must be valid sales where it not for the fact that there had been a double sale. So no
double sale is 1 of the contracts is not valid.
X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she advised her
sister Y via overseas call to sell the land and sign a contract of sale on her behalf.
Y thus sold the land to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1 fully
paid the purchase price.
B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but asked Y for her authority from
X. Without informing X that she had sold the land to B1, Y sought X for a written authority to sell.
X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001 to B2 on monthly
installment basis for two years, the first installment to be paid at the end of May 2001.
Who between B1 and B2 has a better right over the land? Explain. (5%)
Answer:
Neither sale is valid. Subject matter here is unregistered land. Sale of unregistered land must appear in public
instrument. Also, the authority of an agent to sell must be in writing. Take note
Under PD 1529
Section 113. Recording of instruments relating to unregistered lands. No deed, conveyance, mortgage, lease,
or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as
between the parties thereto, unless such instrument shall have been recorded in the manner herein
prescribed in the office of the Register of Deeds for the province or city where the land lies.
As an exception to Article 1544, In sales of unregistered land, there must be recording for you to get
preference.
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to
waive objections to the venue of an action or to abandon a prescription already acquired;
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(4) To waive any obligation gratuitously;

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by
the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the
things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (n)
Article 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does
not include the power to sell. (n)
Sale by one who is not an owner

Nemo dat quod non habet, literally meaning "no one gives what he doesn't have
Article 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner
thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent
owner of goods to dispose of them as if he were the true owner thereof;
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(2) The validity of any contract of sale under statutory power of sale or under the order of a court of
competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce
and special laws. (n)
What is the effect? The buyer acquires no title therefrom. So if you are a buyer, as a general rule, you merely
step in the shoes of your immediate transferor. If your transferor has a voidable title. Dili pud ka kaacquire ug
higher rights. Dili nimo pde lampas an imong transferor. Thats the general rule except sa land titles,
sometimes sale by non-owner can lead to a valid title.
Status of contract here is VOID
Jurisprudence
Article 559
Article 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless,
one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in
possession of the same.
If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. (464a)
Aznar vs Yapdiangco
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time
of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and
without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should
have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller had no title at all.
Vicente Marella did not have any title to the property under litigation because the same was never delivered
to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired
ownership or title to the subject matter thereof only by the delivery or tradition of the car to him.
Naay Theft so article 559 applies because there is unlawful deprivation.
Exceptions:
1.
2.
3.
When the owner is precluded from denying title the sellers authority on account of his action.
Herethere is estoppel.
When the contrary is provided for in recording clause. ( under the torrens system) teher are cases
under the TS that unlawful deprivation/forgery can be a source of valid title for innocent purchaser
for value and in good faith.
When sale is made under statury or order of the court. Example foreclosure sale.
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4.
When the sale is made in Merchants store. But this should not relieve the Merchants from liability
under fencing laws.
Example:
A, a non-owner sells the thing and delivers to buyer. Later, A becomes the owner. Effect: title automatically
passes to the buyer although the sale previously not valid is in effect validated.
2005 bar
Rod, the owner of an FX taxi, found in his vehicle an
envelope containing TCT No. 65432 over a lot registered in
Cesar's name. Posing as Cesar, Rod forged Cesar's signature
on a Deed of Sale in Rod's favor. Rod registered the said
document with the Register of Deeds, and obtained a new
title in his name. After a year, he sold the lot to Don, a buyer
in good faith and for value, who also registered the lot in his
name.
a) Did Rod acquire title to the land? Explain. (2%)
SUGGESTED ANSWER:
No, Rod did not acquire title to the land. The inscription in
the registry, to be effective, must be made in good faith. The
defense of indefeasibility of a Torrens Title does not extend
to a transferee who takes the certificate of title with notice of
a flaw. A holder in bad faith of a certificate of title is not
entitled to the protection of the law, for the law cannot be
used as a shield for frauds. (Samonte v. Court of Appeals, G.R.
No. 104223, July 12, 2001)
In the case at bar, Rod only forged Cesar's signature on the
-Deed of Sale. It is very apparent that there was bad faith on
the part of Rod from the very beginning. As such, he is not
entitled to the protection of the Land Registration Act.
b) Discuss the rights of Don, if any, over the property.
(2%)
SUGGESTED ANSWER:
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
It is a well-known rule in this jurisdiction that persons
dealing with registered land have the legal right to rely on the
face of the Torrens Certificate of Title and to dispense with
the need to inquire further, except when the party concerned
has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry.
(Naawan Community Rural Bank v. Court of Appeals, G.R. No.
128573, January 13, 2003)
In the given problem, the property was already registered in
the name of Rod when he bought the same from the latter.
Thus, Don could be considered as a buyer in good faith and
for value. However, since Rod did not actually sell any
property to him, Don has no right to retain ownership over
the property. He has only the right to recover the purchase
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price plus damages.

Again the general rule is you merely step into the shoes of your immediate transferor. But in this situation
diba the forger has no rights? Is it not? He does not even have any title to the property was registered thru
fraud, but the transferee in IFV AND in Good faith can rely the cert of title except when the party concerned
has actual knowledge of facts and circumstances that wouldimpel a reasonably cautious man to make such
inquiry.
2009
Before migrating to Canada in 1992, the spouses Teodoro and Anita entrusted all their legal papers and
documents to their nephew, Atty. Tan. Taking advantage of the situation, Atty. Tan forged a deed of sale,
making it appear that he had bought the couples property in Quezon City. In 2000, he succeeded in
obtaining a TCT over the property in his name. Subsequently, Atty. Tan sold the same property to Luis, who
built an auto repair shop on the property. In 2004, Luis registered the deed of conveyance, and title over the
property was transferred in his name.
In 2006, the spouses Teodoro and Anita came to the Philippines for a visit and discovered what had happened
to their property. They immediately hire you as lawyer. What action or actions will you institute in order to
vindicate their rights? Explain fully. (4%)
Answer:
Atty. Tan did not acquire title necause he forged the signature of the real owner. Since the vendor is a non
owner, Luis did not acauire title to the land despite his registration. He acquires no better title than the non
owner who sold the lot to him.
Seller has voidable title
Article 1506. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value,
and without notice of the seller's defect of title. (n)
ELEMENTS (1506)
-Seller has a voidable title

-Title has not been avoided at the time of the sale
-The buyer acquires a good title to the goods, provided he buys them
in good faith
for value and
without notice of sellers defect of title
Remember that a voidable title is valid until annulled.

What does time of the sale mean?
The phrase means at the time of the delivery of the subject matter since it is the fact of DELIVERY
which transfers ownership
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Latin: Non nobis factis sed traditionis dominio di na nakis maapas si sir xxxx
It is delivery as a consequence of contracts that transfers ownership not the contract itself.
Okay so lets go to scenarios here
SCENARIO 1
A and B already agreed on a sale

A has voidable title, B does not know about it
As title is annulled after perfection but BEFORE delivery
= B does not obtain good title over the thing
Why: because when there was transfer of ownership, the title of the seller has already been avoided. Even if it
was annulled only after perfection.
SCENARIO 2
A and B already agreed on a sale

A has voidable title, B does not know about it
annulment takes place after perfection and AFTER delivery
B obtains good title over the thing as long as he is an innocent purchaser for value
So ireckon nimo kanus a ban a siya na avoid.

INNOCENT PURCHASER FOR VALUE
Special animal under the law.

One who buys property of another,
without notice that some other person has a right to, or an interest in such property
pays a full and fair price for the same at the time of such purchase, or before he has
notice of the claim or interest of some other person in the property
JURISPRUDENCE
A sold his car to B, B issued a check

Check bounced
C bought the car from B, in good faith and for value
Ruling:
C acquires good title to the car
A can only rescind but sale must be set aside by the court first before A can recover title
BUT A must reimburse C the price paid (Tagatac v. Jimenez)
TAGACTAC VS. JIMENEZ
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FACTS: Tagactac sold the car to Feist, who sold it to Sanchez, who sold it to Jimenez. Feist failed to pay, so
Tagactac wants to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it
by reason of Feists deception.
HELD: no unlawful deprivation since there was delivery

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagactac has been unlawfully deprived of her
car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced
to part with it by reason of the chicanery practiced on her by Feist. Certainly, swindling, like robber is an
illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived'
of her car, for the way by which Feist induced her to part with it is illegal and punishable by law. But does this
unlawful deprivation come within the scope of Article 559 of the New Civil Code?
The fraud and deceit practiced by Feist earmarks this sale as a voidable contract (Art 1390). Being a
voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to
annul it is extinguished (Art 1392) and the contract is cleansed from all its defects (Article 1396, NCC); if the
contract is annulled, the contracting parties are restored to their respective situations before the contract and
mutual restitution follows as a consequence (Art 1398).
However, as long as no action is taken by the party entitled, either that of annulment or of ratification,
the contract of sale remains valid and binding. When plaintiff-appellant Tagactac delivered the car to Feist by
virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist
acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix his title was avoided
and he therefore conferred good title on the latter, provided he bought the car in good faith, for value and
without notice of the defect in Feists title (Art 1506).
Principle: Check does not go into the perfection of the contract but as to the performance of the contract.
BAR 1998
A sold car to B
B paid by using a falsified check
B registered the sale with LTO
B sold the car to C who knew nothing about the check
ANSWER
A can recover from C only when the court annuls the sale between B and C
In this case, B had a voidable title which was not yet annulled at the time C purchased the car. C acquired
the car for value, in good faith and without notice as to defect in B's title. Hence, C has good title to the car
and A can only recover the car by reimbursing C the purchase price the latter paid.
Using a falsified managers check, Justine, as the buyer, was able to take delivery of a second hand car which
she had just bought from United Car Sales Inc. The sale was registered with the Land Transportation Office.
A week later, the seller learned that the check had been dishonored, but by that time, Justine was nowhere
to be seen. It turned out that Justine had sold the car to Jerico, the present possessor who knew nothing about
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the falsified check. In a suit by United Car Sales, Inc. against Jerico for recovery of the car, plaintiff alleges it
had been unlawfully deprived of its property through fraud and should, consequently, be allowed to recover it
without having to reimburse the defendant for the price the latter had paid. Should the suit prosper?
SUGGESTED ANSWER:
The suit should prosper as to the recovery of the car. However, since Jerico was not guilty of any fraud and
appears to be an innocent purchaser for value, he should be reimbursed for the price he paid. This is without
prejudice to United Car Sales, Inc. right of action against Justine. As between two innocent parties, the party
causing the injury should suffer the loss. Therefore, United Car Sales, Inc. should suffer the loss.
ALTERNATIVE ANSWER:
Yes, the suit will prosper because the criminal act of estafa should be deemed to come within the meaning of
unlawful deprivation under Art. 559, Civil Code, as without it plaintiff would not have parted with the
possession of its car.
ANOTHER ANSWER:
No, the suit will not prosper. The sale is valid and Jerico is a buyer in good faith.
ANOTHER ANSWER:
Under the law on Sales, when the thing sold is delivered by the seller to the buyer without reservation of
ownership, the ownership is transferred to the buyer. Therefore in the suit of United Car Sales, Inc. against
Jerico for the recovery of the car, the plaintiff should not be allowed to recover the car without reimbursing
the defendant for the price that the latter paid. (EDCA Publishing and Distributing Corp. vs. Santos, 184 SCRA
614. April 26, 1900).
BAR 2001
A bought condominium from developer
A was not given CTC
developer mortgaged condominium to bank and mortgage was foreclosed, valid auction sale?
NO. Bank is not an IPV, a financial institution is unlike a normal buyer since SOP requires a bank to look
beyond the title and investigate
LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS
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It depends kung kanusa nahitabo ang loss, deterioration, fruits and other benefits
Loss:
Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of
the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood
that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary. (1122)
That definition of LOSS should be memorized because that is the only definition of loss.
Rules:
TIME
PREPARATORY
STAGE
LOSS
DETERIORATION FRUITS
SELLER
SELLER
SELLER
CONSUMMATION BUYER
BUYER
BUYER
BEFORE
SELLER
DELIVERY AFTER
PERFECTION
BUYER
BUYER
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AFTER
BUYER
PERFECTION
AND
AFTER
DELIVERY
BUYER
BUYER
Remember this principle: res perit domino : the thing perishes with the owner
-
So it means that if you are the owner of the thing at that point of the transaction, you will bear the
risk of loss. The owner also bears the benefits and the deterioration subject to certain exceptions.
Before perfection of contract, any LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS shall be with
the owner who, in the contract of sale, is the seller.
At the time of perfection but before delivery, suppose the buyer or seller or both are not aware that
the subject matter is loss, it will depend if the subject matter is specific/determinate or
generic/indeterminate.
o If specific and total loss, the obligation is extinguished, the seller cannot demand payment
and he bears the loss.
o If generic, its loss will not extinguish the contract of sale based on genus nunquam perit
(genus never perishes).
o IF loss is in part only, the vendee can choose between withdrawing and demanding the
remaining part paying only in proportion to the total price. So there is recoupment or
reduction of the price (quanti minoris) ( an action quanti minoris)
o Sale of several goods
Article 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the
seller have perished in part or have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible. (n)
If loss after perfection but before delivery

o
The seller being the owner bears the risk of loss
Except:
-
When loss is caused by the buyer, the buyer bears the loss
Where goods are delivered to the buyer, but under the contract the ownership of the
goods has been retained by the seller mainly to secure the performance of the buyer of
his obligations.
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67
Should the buyer be made to pay if the loss is after perfection but before delivery without the fault of the
seller or the buyer?
No definite answer to this question.
Paras view:
The buyer still has to pay the price because pursuant to Article 1189, the obligation of the seller is
extinguished. So the obligation of the seller to transfer ownership is extinguished since compliance therewith
is impossible.
Tolentinos view:
The buyers obligation to pay the price is extinguished because a contract of sale involves reciprocal
obligations. The ext of obligation due to loss of the thing affects both the d and c . this is the result of
recirprocal obligations. He who gives nothing has no reason to demand.
How about deterioration or improvement?
Again lets look if it is after perfection before delivery
Article 1538. In case of loss, deterioration or improvement of the thing before its delivery, the rules in article
1189 shall be observed, the vendor being considered the debtor. (n)
Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of
the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood
that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the
creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary. (1122)
How about fruits?
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68
They all pertain to the buyer after perfection regardless of whether there is delivery or not.
Why?
Article 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him. (1095)
Article 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition
in which they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)
What about after delivery?
The buyer as owner already bears the loss, fruits and benefits pursuant to the rule of res perit domino.
What if there is transfer of ownership but the thing is not delivered to the buyer?
Article 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been retained by the seller merely to secure performance by the
buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery;
(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the
risk of the party in fault. (n)
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69
REMEDIES IN CASE OF BREACH
Breach by Seller:
Breach
Relief
Non-delivery Specific
performance
with
damages
(
if
the
breach
is
substantial,
buyer
can
ask
for
rescission
under Article
1191
Warranty
Accept
Accept
goods plus goods plus
-- Seller has recoupment damages
right to sell
Dont
accept
plus
damages
-- Against
eviction
Rescind,
refuse
to
accept
or
return
-- Hidden
defects
-- Nonapparent
servitude
Mutually exclusive
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70
Disturbance Suspend
NOTE:
in
payment of Trespassing
possession price until
is not
end of
disturbance
disturbance
To know that seller committed breach, know first the obligations of the seller (see previous discussion)
Recoupment means to get everything back, restored to the place where you were before the contract
Arrow (mutally exclusive) means that you cannot do everything. You must choose your option.
Contract of Sale; Marital Community Property; Formalities (2006)

Spouses Biong and Linda wanted to sell their house. They found a prospective buyer, Ray. Linda negotiated
with Ray for the sale of the property. They agreed on a fair price of P2 Million. Ray sent Linda a letter
confirming his intention to buy the property. Later, another couple, Bernie and Elena, offered a similar house
at a lower price of P 1.5 Million. But Ray insisted on buying the house of Biong and Linda for sentimental
reasons. Ray prepared a deed of sale to be signed by the couple and a manager's check for P2 Million. After
receiving the P2 Million, Biong signed the deed of sale. However, Linda was not able to sign it because she
was abroad. On her return, she refused to sign the document saying she changed her mind. Linda filed suit
for nullification of the deed of sale and for moral and exemplary damages against Ray.
Will the suit prosper? Explain. (2.5%)
ALTERNATIVE ANSWER:
No, the suit will not prosper. The contract of sale was
In a CONTRACT OF SALE, ownership is transferred to
perfected when Linda and Ray agreed on the object of the sale and the price [Art. 1475, New Civil Code]. The
consent of Linda has already been given, as shown by her agreement to the price of the sale. There is
therefore consent on her part as the consent need not be given in any specific form. Hence, her consent may
be given by implication, especially since she was aware of, and participated in the sale of the property
(Pelayo v. CA, G.R. No. 141323, June 8, 2005). Her action for moral and exemplary damages will also not
prosper because the case does not fall under any of those mentioned in Art. 2219 and 2232 of the Civil Code.
ALTERNATIVE ANSWER:
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71
The suit will prosper. Sale of community property requires written consent of both spouses. The failure or
refusal of Linda to affix her signature on the deed of sale, coupled with her express declaration of opposing
the sale negates any valid consent on her part. The consent of Biong by himself is insufficient to effect a valid
sale of community property (Art. 96, Family Code; Abalos v. Macatangay, G.R. No. 155043, September 30,
2004).
Does Ray have any cause of action against Biong and Linda? Can he also recover damages from the spouses?
Explain. (2.5%)
Considering that the contract has already been perfected and taken out of the operation of the statute of
frauds, Ray can compel Linda and Biong to observe the form required by law in order for the property to be
registered in the name of Ray which can be filed together with the action for the recovery of house [Art. 1357
New Civil Code]. In the alternative, he can recover the amount of Two million pesos (P2,000,000.00) that he
paid. Otherwise, it would result in solutio indebiti or unjust enrichment.
Ray can recover moral damages on the ground that the action filed by Linda is clearly an unfounded civil suit
which falls under malicious prosecution {Ponce v. Legaspi, G.R. No. 79184, May 6,1992).
Breach by Buyer
Breach
Relief
Movable is Rescission
sold and
delivery is
unaccepted
Delivery is Rescission
accepted but
no price is
paid
Title is
passed but
price is not
paid
Sue for price

plus
damages
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72
Repudiation Rescission
of sale
with
before
damages
delivery
Inability to
pay before
delivery
Rescission
with
damages
Does not pay Possessory Stoppage in Special

price
Lien
transitu
right to
resale
Special
right to
rescind
Concept: Unpaid Seller
whole of the price has not been paid or tendered

negotiable document of title was received as conditional payment and condition was broken
Article 1525. The seller of goods is deemed to be an unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has been broken by reason of the dishonor of
the instrument, the insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been
indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other
person who is in the position of a seller. (n)
Special Remedies
Possessory Lien
Stoppage in transitu
Special right of resale
Special right to rescind
Special Rights 3&4 (resale and rescind) can only be used when Right 1 or 2 has been
exercised
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73
As special rights, you must first choose either possessory lien or stoppage in transitu before you can choose
between resale or rescind.
Possessory Lien (1526)
ownership has been transferred to the buyer

Seller is still unpaid
seller may retain goods for the price while still in possession of the goods
Can only be exercised when
goods were sold without any stipulation as to credit OR
goods were sold on credit but term of credit has expired OR
buyer becomes insolvent
ARTICLE 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may
have passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with
the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other
remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in
transitu where the ownership has passed to the buyer. (n)
Stoppage in Transitu (1526, 1530)
Seller no longer has possession of thing

Buyer becomes insolvent
Seller can stop the goods in transitu or resume possession at any time while goods are in transit
Seller enjoys same rights as if he never parted possession with thing
Goods are deemed in transit
Period between delivery to the carrier for transmission to the buyer until buyer claims them
from the carrier
Goods are rejected by the buyer and carrier continues to have possession even if the seller
refuses to take goods back
ARTICLE 1530. Subject to the provisions of this Title, when the buyer of goods is or becomes insolvent, the
unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that
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74
is to say, he may resume possession of the goods at any time while they are in transit, and he will then
become entitled to the same rights in regard to the goods as he would have had if he had never parted with
the possession. (n)
In this case, time is of the essence.
Status of Sale Made by Buyer while in transitu
If buyer sells thing without consent of seller while in transitu, the seller's right of stoppage in transitu
IS NOT AFFECTED (1535)
Right of stoppage DOES NOT defeat title of an innocent purchaser for value who is issued a
negotiable document of title (1535)
ARTICLE 1535. Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage in transitu is
not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller
has assented thereto.
If, however, a negotiable document of title has been issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee
who issued such document, of the seller's claim to a lien or right of stoppage in transitu. (n)
Special right to Resell Goods
Available only after exercise of either possessory lien or stoppage in transitu

Can be exercised when:
goods are perishable in nature
seller expressly reserves the right to resell in case of buyers default
buyer has been in default for an unreasonable period of time
Special Right to Rescind 1526, 1534
After exercise of possessory lien or stoppage

May hold buyer liable for damages
ARTICLE 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind
the transfer of title and resume the ownership in the goods, where he expressly reserved the right to do so in
case the buyer should make default, or where the buyer has been in default in the payment of the price for
an unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of sale, but may
recover from the buyer damages for any loss occasioned by the breach of the contract.
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75
The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by
notice to the buyer or by some other overt act an intention to rescind. It is not necessary that such overt act
should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to
rescind shall be relevant in any issue involving the question whether the buyer had been in default for an
unreasonable time before the right of rescission was asserted. (n)
Rescission of Sale of Immovable
1592 - in the sale of immovables, even if it was stipulated that upon failure to pay the price at the
time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after
the expiration of the period FOR AS LONG AS NO DEMAND FOR RESCISSION OF THE CONTRACT HAS BEEN
MADE UPON HIM EITHER JUDICIALLY OR BY A NOTARIAL ACT
ARTICLE 1592. In the sale of immovable property, even though it may have been stipulated that upon failure
to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee
may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new
term. (1504a)
Immovable Property; Rescission of Contract (2003)

X sold a parcel of land on 01 January 2001, payment and delivery to be made on 01 February 2002. It was
stipulated that if payment were not to be made by Y on 01 February 2002, the sale between the parties would
automatically be rescinded. Y failed to pay on 01 February 2002, but offered to pay three days later, which
payment X refused to accept, claiming that their contract of sale had already been rescinded. Is Xs
contention correct? Why? 5%
SUGGESTED ANSWER:
No, X is not correct. In the sale of immovable property, even though it may have been stipulated, as in this
case, that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission
of the contract has been made upon him either judicially or by a notarial act (Article 1592, New Civil code).
Since no demand for rescission was made on Y, either judicially or by a notarial act, X cannot refuse to accept
the payment offered by Y three (3) days after the expiration of the period.
SALE ON INSTALLMENT
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76
RECTO LAW 1484

Article 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure
to pay cover two or more installments. In this case, he shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)
Options when seller discontinues instalments
exact fulfillment of the obligation

cancel the sale if the buyer fails to pay TWO OR MORE installments
foreclose the chattel mortgage if the buyer fails to pay TWO OR MORE installments (without right to
sue for unpaid balance)
Recto Law: Sale of Movables on Installments

Remedies under 1484 are alternative and not cumulative.
should enrich himself at the expense of another.
This is based on the principle that no one
When the unpaid seller has already enforced the obligation by collecting the amount due, he can no
longer rescind or cancel the same. He cannot also foreclose the mortgage over the subject matter. For the
exercise of one in full forecloses the right to exercise remedies (Nonato v. CA, Nov. 22, 1985)
Recto Law: Sale of Movables on Installments
If the seller forecloses the chattel mortgage, it can no longer sue for deficiency/balance of purchase
price
If the seller choses specific performance in a replevin suit for damages, seller is still entitled to alias
writ of execution for unsatisfied balance (Industrial v. Ramirez)
Recall: In chattel mortgage, the general rule is that there is right to the balance and to the excess. The
exception is the Recto law
Take note: Options are mutually exclusive
MACEDA LAW RA 6552
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77
COVERED SALES
residential real estate

sales on installments
financing of real estate on installment payments
residential condominium apartments
When the buyer defaults
Number of Option 1
installments
Option 2
Less than 2 Grace period of 60

annual
days
If no payment within
grace period, sale
will be cancelled
within 30 days from
receipt of notice of
cancellation
2 or more
annual
Pay without interest CASH SURRENDER

within grace period VALUE = 50%
Grace period: 1
month for every
year of installment
made
PLUS 5% for every

year in excess of 5
years BUT
Grace period: used

once every 5 years
NOT MORE THAN

90% of installments
made
Installments include
option money,
downpayment
Cash Surrender Value
4 years of installments at P100,000 per year = 50% of P400,000 = P200,000
6 years of installments at P100,000 a year = 50% of P600,000 = P300,000 + 5% (P600,000) =

P330,000
When developer commits breach of contract: PD 957
Buyer desists from paying further installments because
Owner or developer fails to develop the subdivision or condominium according to approved plans and
within the time limit
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78
Buyer is entitled to reimbursement of all installments made
Maceda Law (2000)

Priscilla purchased a condominium unit in Makati City from the Citiland Corporation for a price of P10
Million, payable P3 Million down and the balance with interest thereon at 14% per annum payable in sixty
(60) equal monthly installments of P198,333.33. They executed a Deed of Conditional Sale in which it is
stipulated that should the vendee fail to pay three (3) successive installments, the sale shall be deemed
automatically rescinded without the necessity of judicial action and all payments made by the vendee
shall be forfeited in favor of the vendor by way of rental for the use and occupancy of the unit and as
liquidated damages. For 46 months, Priscilla paid the monthly installments religiously, but on the 47th
and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due but the
vendor refused to receive the payments tendered by her. The following month, the vendor sent her a
notice that it was rescinding the Deed of Conditional Sale pursuant to the stipulation for automatic
rescission, and demanded that she vacate the premises. She replied that the contract cannot be
rescinded without judicial demand or notarial act pursuant to Article 1592 of the Civil Code.
a.
b.
Is Article 1592 applicable? (3%)

Can the vendor rescind the contract? (2%)
SUGGESTED ANSWER:
a) Article 1592 of the Civil Code does not apply to a
conditional sale. In Valarao v. CA, 304 SCRA 155, the Supreme Court held that Article 1592 applies only
to a contract of sale and not to a Deed of Conditional Sale where the seller has reserved title to the
property until full payment of the purchase price. The law applicable is the Maceda Law.
SUGGESTED ANSWER:
b) No, the vendor cannot rescind the contract under the circumstances. Under the Maceda Law, which is
the law applicable, the seller on installment may not rescind the contract till after the lapse of the
mandatory grace period of 30 days for every one year of installment payments, and only after 30 days
from notice of cancellation or demand for rescission by a notarial act. In this case, the refusal of the seller
to accept payment from the buyer on the 49th month was not justified because the buyer was entitled to
60 days grace period and the payment was tendered within that period. Moreover, the notice of rescission
served by the seller on the buyer was not effective because the notice was not by a notarial act. Besides,
the seller may still pay within 30 days from such notarial notice before rescission may be effected. All
these requirements for a valid rescission were not complied with by the seller. Hence, the rescission is
invalid.
Maceda Law; Recto Law (1999)

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What are the so-called "Maceda" and "Recto" laws in connection with sales on installments? Give the most
important features of each law. (5%)
SUGGESTED ANSWER:
The MACEDA LAW (R.A. 655) is applicable to sales of immovable property on installments. The most important
features are (Rillo v. CA, 247 SCRA 461):
(1) After having paid installments for at least two years, the buyer is entitled to a mandatory grace period of
one month for every year of installment payments made, to pay the unpaid installments without interest.
If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to fifty
percent (50%) of the total payments made, and after five years of installments, an additional five percent
(5%) every year but not to exceed ninety percent (90%) of the total payments made.
(2) In case the installments paid were less than 2 years, the seller shall give the buyer a grace period of not
less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand
for rescission by notarial act. The RECTO LAW (Art. 1484} refers to sale of movables payable in installments
and limiting the right of seller, in case of default by the buyer, to one of three remedies:
a) exact fulfillment;
b) cancel the sale if two or more installments have not been paid;
c) foreclose the chattel mortgage on the things sold, also in case of default of two or more
installments, with no further action against the purchaser.
Non-Payment of Amortizations; Subdivision Buyer; When

justified (2005)
Bernie bought on installment a residential subdivision lot from
DEVLAND. After having faithfully paid the installments for
48 months, Bernie discovered that DEVLAND had failed to
develop the subdivision in accordance with the approved
plans and specifications within the time frame in the plan. He
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80
thus wrote a letter to DEVLAND informing it that he was

stopping payment. Consequently, DEVLAND cancelled the
sale and wrote Bernie, informing him that his payments are
forfeited in its favor.
a) Was the action of DEVLAND proper? Explain. (2%)
SUGGESTED ANSWER:
No, the action of DEVLAND is not proper. Under Section 23 of
Presidential Decree No. 957, otherwise known as the Subdivision and Condominium Buyer's Protection
Decree, non-payment of amortizations by the buyer is justified if non-payment is due to the failure of the
subdivision owner to develop the subdivision project according to the approved plans and within the limit for
complying.
(Eugenio v. Drilon, G.R. No. 109404, January 22, 1996)
b) Discuss the rights of Bernie under the circumstances. (2%)
SUGGESTED ANSWER:
Under P.D. No. 957, a cancellation option is available to Bernie. If Bernie opts to cancel the contract,
DEVLAND must reimburse Bernie the total amount paid and the amortizations interest, excluding delinquency
interest, plus interest at legal rate. (Eugenio v. Drilon, G.R. No. 109404, January 22, 1996)
c) Supposing DEVLAND had fully developed the subdivision but Bernie failed to pay further installments after
4 years due to business reverses. Discuss the rights and obligations of the parties. (2%)
SUGGESTED ANSWER:
In this case, pursuant to Section 24 of P.D. No. 957, R.A. No. 6552 otherwise known as the Realty Installment
Buyer Protection Act, shall govern. Under Section 3 thereof, Bernie is entitled: 1) to pay without additional
interest the unpaid installments due within a grace period of four (4) months or one month for every year of
installment paid; 2) if the contract is cancelled, Bernie is entitled to the refund of the cash surrender value
equal to 50% of the total payments made.
DEVLAND on the other hand has the right to cancel the contract after 30 days from receipt by Bernie of notice
of cancellation. DEVLAND is however obliged to refund toBernie e 50% of the total payments made (Rillo vs
CA 1997)
EXTINGUISHMENT OF SALE
Article 1231. Obligations are extinguished:
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81
(1) By payment or performance;

(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in this Code. (1156a)
GROUNDS
payment/performance
loss of SM
condonation/remission
confusion/merger of rts of creditor & debtor
compensation
novation
annulment
rescission
conventional/legal redemption (additional)
Recall: Pacto de Retro (sale with right to repurchase) seller has right to redeem
REDEMPTION
Right to redeem must already be incorporated in the contract of sale

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82
It must reduced in public instrument (Statute of Frauds)
Q: Can you redeem if there is no period provided?

A: Yes, the law will automatically set it at 4 years
Among
Co-Heirs (1088)
An heir sells his hereditary rights to a stranger before partition
Any or all co-heirs may be subrogated to buyer's rights by reimbursing him for the price
Co-heirs must redeem within 1 month from time they were notified in writing of the sale
ARTICLE 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of
the co-heirs may be subrogated to the rights of purchaser by reimbursing him for the price of the sale,
provided they do so within the period of one month from the time they were notified in writing of the sale by
the vendor. (1067a)
Among
Co-Owners (1620)
If a co-owner sells his share to a third person
A co-owner may redeem from the third person
Rule in case of redemption by two or more co-owners: Redemption shall be in proportion to the share
they may have in the thing owned in common
ARTICLE 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other
co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in
proportion to the share they may respectively have in the thing owned in common. (1522a)
BAR 2001, 2002
When can a co-owner legally redeem property?

Among Adjoining Owners
Rural Land area should not exceed 1 hectare unless grantee does not own rural land
Urban Land small urban land is situated that a major portion cannot be used for any practical
purpose within a reasonable period
Sale of
Credit in Litigation (1634)

Creditor assigns his right to credit to a third person
Debtor may extinguish the credit by reimbursing the assignee for the price he paid for the credit
Debtor may reimburse within 30 days from time assignee demands payment from him
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83
ARTICLE 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the price the latter paid therefore, the judicial costs incurred by
him, and the interest on the price from the day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning
the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from
him. (1535)
Example: A borrows P 1M from B. B sues A to get P 1M plus interest. B cannot wait and sells his right to C to
get the P 1M for P 700,000. A can talk to C that instead of paying P1M, A will instead pay C P 700,000.
Take note: assignment in sales is different.

Period of Redemption
Right to redeem shall not be exercised except within 30 days from notice in writing by prospective
seller or seller
Deed of sale shall not be recorded in Registry of Property unless with seller's affidavit that he has sent
written notices to all possible redemptioners (1623)
ARTICLE 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days
from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he
has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
Seller is obligated to co-owner, adjoining owner, debtor, co-heir to said a written notice if he sells to a
stranger.
This is not strictly followed but it is nonetheless the law.
If you were not informed, you can file an action for breach of this provision.
Redemption = repurchase
Xx SURPRISE QUIZ xX
BULK SALE LAW

This is still good law a favorite of Bar Examiners.
ACT No. 3952
THE BULK SALES LAW (as amended)
Purpose and general scheme of the Bulk Sales Law.
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84
(a) Purpose. Bulk Sales Act is designed to prevent the defrauding of creditors by the secret sale in bulk of
substantially all of a merchant's stock of goods.
(b) General scheme The general scheme of these statutes is to declare such bulk sales fraudulent and void
as to creditors of the vendor, or presumptively so, unless specified formalities are observed, such as the
demanding and the giving of a list of creditors, the giving of actual or constructive notice to such creditors, by
record or otherwise, and the making of an inventory. (27 C.J. Sec. 881.)
Transactions Covered
Sale, transfer, mortgage or assignments of:
(a) all or substantially all stock of goods, wares, merchandise, provisions or materials otherwise than in the
ordinary course of trade
(b) all or substantially all of the business or trade thereto conducted by the seller, mortgagor, transferor or
assignor and
(c) all or substantially all, of the fixtures and equipment used in & about the business of the seller,
mortgagor, transferor or assignor
Exceptions It will not be deemed a sale and transfer in bulk in contemplation of this Act,
(1) if such vendor, mortgagor, transferor, or assignor produces and delivers a written waiver of the provisions
of this Act from his creditors as shown by verified statements (Sec. 2, Bulk Sales Law), or
(2) if such vendor, mortgagor, transferor, or assignor is an executor, administrator, receiver assignee in
insolvency, or public officer, acting under judicial process. (Sec. 8, Bulk Sales Law.)
(3)"Exempt properties," not within the law. Bulk sales statutes are intended to operate only on property to
which creditors may look for satisfaction of their claims and consequently have no application to property
which is exempt. (27 C.J. Sec. 889.) See "Property exempt from execution," Sec. 12, Rule 39, Rules of Court.
See also Sec. 35, Act No. 3428, as amended; Arts. 223 et seq., and 1708, new Civil Code; and Sec. 17, Rep.
Act No. 1161 (refer to annotations placed above Sec. 48, Insolvency Law, in Volume 2.)
Obligations of Seller
Delivery of sworn statement of listing of creditors who might be affected by the sale in bulk
Make an inventory of items of the sale in bulk
If sold, pro-rata application of proceeds among the creditors
written advance disclosure to creditors
Penalty for Violation

Imprisonment = not less than 6 mos. OR Fine = not exceeding P5,000.00 OR both
BAR 2007
Seeking to streamline its operations and to bail out its losing ventures, the stockholders of X
Corporation unanimously adopted a proposal to sell substantially all of the machineries and
equipment used in and out its manufacturing business and to sink the proceeds of the sale for the
expansion of its cargo transport services.
Would the transaction be covered by the provisions of the Bulk Sales Law?
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85
ANSWER
Yes, the proposed sale is covered by the Bulk Sales Law. The sale involves all or substantially all, of
the fixtures and equipment used in & about the business of the seller. Hence, X Corp must deliver a
sworn statement of listing of creditors, make a pro-rata application of proceeds and a written advance
disclosure to creditors
That is still the duty of the corporation despite the fact that there is no mention of creditors.
2006 BAR
Pursuant to a writ of execution issued by the Regional Trial Court in "Express Bank v. Don Rubio," the sheriff
levied and sold at public auction 8 photocopying machines of Don Rubio. Is the sheriff's sale covered by the
Bulk Sales Law? 5%
No. The bulk sales law only covers of all or substantiall all use din or about the seller mortgager assignor or
transfere. Furthere, the law seeks to prevent the seller from disposing the proeprtues without the consent of
the creditors. In this case, it was the sheriff who disposed the machisne pursuant of the court order. Udner
Section 6 of the bulk sales law, an officer selling under judicial process is not covered by the said law.
LAUREL VS ABROGAR (NOT REALLY BULK SALES but SIR MENTIONED IT )

FACTS
Laurel was charged with Theft under Art. 308 of the RPC for allegedly taking, stealing, and using PLDT's
international long distance calls by conducting International Simple Resale (ISR) a method of outing and
completing international long-distance calls using lines, cables, antennae, and/or air wave frequency which
connect directly to the local/domestic exchange facilities of the country where the call is destined. PLDT
alleged that this service was stolen from them using their own equipment and caused damage to them
amounting to P20,370,651.92.
PLDT alleges that the international calls and business of providing telecommunication or telephone service
are personal properties capable of appropriation and can be objects of theft.
ISSUE
WON Laurel's act constitutes Theft
HELD
Art.308, RPC: Theft is committed by any person who, with intent to gain but without violence against, or
intimidation of persons nor force upon things, shall take personal property of another without the latters
consent.
Elements of Theft under Art.308, RPC:
1.
There be taking of Personal Property;

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86

2.
Said Personal Property belongs to another;
3.
Taking be done with Intent to Gain;
4.
Taking be done without the owners consent;
5.
No violence against, or intimidation of, persons or force upon things
Personal Property anything susceptible of appropriation and not included in Real Property
Thus, the term personal property as used in Art.308, RPC should be interpreted in the context of the Civil
Code's definition of real and personal property. Consequently, any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation may be the subject of theft (*US v Carlos; US v Tambunting;
US v Genato*), so long as the same is not included in the enumeration of Real Properties under the Civil Code.
The only requirement for personal property to capable of theft, is that it be subject to appropriation.
Art. 416 (3) of the Civil Code deems Forces of Nature which are brought under the control of science, as
Personal Property.
The appropriation of forces of nature which are brought under control by science can be achieved by
tampering with any apparatus used for generating or measuring such forces of nature, wrongfully redirecting
such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature.
In the instant case, the act of conducting ISR operations by illegally connecting various equipment or
apparatus to PLDTs telephone system, through which petitioner is able to resell or re-route international long
distance calls using PLDTs facilities constituteSubtraction.
Moreover, interest in business should be classified as personal property since it is capable of appropriation,
and not included in the enumeration of real properties.
Therefore, the business of providing telecommunication or telephone service are personal property which can
be the object of theft under Art. 308 of the RPC. The act of engaging in ISR is an act of subtraction
penalized under the said article.
While international long-distance calls take the form of electrical energy and may be considered as personal
property, the said long-distance calls do not belong to PLDT since it could not have acquired ownership over
such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex
communications infrastructure and facilities.
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87
Since PLDT does not own the said telephone calls, then it could not validly claim that such telephone calls
were taken without its consent.
What constitutes Theft is the use of the PLDT's communications facilities without PLDT's consent. The theft
lies in the unlawful taking of the telephone services & businesses.
The Amended Information should be amended to show that the property subject of the theft were services
and business of the offended party.
RA 8762 RETAIL TRADE LIBERALIZATION ACT OF 2000
Retail Trade means any act, occupation or calling of habitually selling direct to the general public
merchandise, commodities or good for consumption.
The restriction of this law shall not apply to the following::
(a) Sales by a manufacturer, processor, laborer, or worker, to the general public the products
manufactured, processed or produced by him if his capital does not exceed P 100,000.00;
(b) Sales by a farmer or agriculturist selling the products of his farm;
(c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of
capital: Provided, That the restaurant is incidental to the hotel business: and
(d) Sales which are limited only to products manufactured, processed or assembled by a
manufacturer through a single outlet, irrespective of capitalization.
High-end or luxury goods shall refer to goods which are not necessary for life maintenance and
whose demand is generated in large part by the higher income groups. Luxury goods shall include, but
are not limited to, products such as: jewelry, branded or designer clothing and footwear, wearing apparel,
leisure and sporting goods, electronics and other personal effects
Treatment of Natural-Born Citizens
Natural-born citizen of the Philippines who has lost his Philippine citizenship but who resides in the
Philippines shall be granted the same rights as Filipino citizens for purposes of this Act.
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88
Foreign Equity Participation

Categor Capitalization Ownershi Comment
y
p
A
< US$2.5 M
Wholly by
Filipinos
US$2.5M<US$7.5M
1st 2
years
from this
law- 60%
foreign
Thereafte
r-100%
foreignowned
Investment
shall
not
be
US$7.5 M or
more
Wholly
foreignowned
less
start of
than
operation
US$830,00 s
0
US$250,000 Wholly High-end or

or more
foreign- luxury
owned if products
If foreign
equity
>80%,
must
offer 30%
of their
equity to
Filipinos
within
eight
years
from
Maintenance of Capital
Foreign investor must maintain the full amount of the prescribed minimum capital
UNLESS foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and
cease operations in the Philippines.
Failure to maintain the full amount of the prescribed minimum capital prior to notification of SEC and
the DTI = penalties or restrictions on any future trading activities/business in the Philippines.
Foreign retail stores shall secure a certification from the Bangko Sentral ng Pilipinas and the DTI,
which will verify or confirm inward remittance of the minimum required capital investment.
Qualifications of Foreign Retailers
(a) A minimum of US$200 Million net worth in its parent corporation for Categories B and C, and
US$50 Million net worth in its parent corporation for Category D;
(b) Five retailing branches or franchises in operation anywhere around the world unless such retailer
has at least one store capitalized at a minimum of US$25 Million;
(c) Five (5)-year track record in retailing; and

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89
(d) Only nationals from, or juridical entities

formed or incorporated in countries which allow the
entry of Filipino retailers shall be allowed to engage in retail trade in the Philippines. (based on the
principle of reciprocity)
These qualifications are cumulative.
Promotion of Locally-Manufactured Products
For 10 years after the effectivity of this Act, at least 30% of the aggregate cost of the stock inventory
of foreign retailers falling under Categories B and C and 10% for Category D shall be made in the
Philippines.
Qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their
accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives,
door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities:
Provided,
That
a
detailed
list
of
prohibited
activities
shall
hereafter be formulated by the DTI.
Penalties
Imprisonment of not less than 6 years and 1 day but not more than 8 years, and a fine of not less
than P1 Million but not more than 20 Million .
In the case of associations, partnerships or corporations penalty imposed on partners, president,

directors, manager and other officers responsible for the violation.
Foreign offender - deported immediately after service of sentence.
Filipino public officer offender- penalty plus dismissal and permanent disqualification from public
office.
MCQs
Can future inheritance be the subject of a contract of sale?
(A) No, since it will put the predecessor at the risk of harm from a tempted buyer, contrary to public
policy.
(B) Yes, since the death of the decedent is certain to occur.
(C) No, since the seller owns no inheritance while his predecessor lives.
(D) Yes, but on the condition that the amount of the inheritance can only be ascertained after the
obligations of the estate have been paid.
An agent, authorized by a special power of attorney to sell a land belonging to the principal succeeded in
selling the same to a buyer according to the instructions given the agent. The agent executed the deed of
absolute sale on behalf of his principal two days after the principal died, an event that neither the agent nor
the buyer knew at the time of the sale. What is the standing of the sale?
(A) Voidable.
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90
(B) Valid.
(C) Void.
(D) Unenforceable.
A buyer ordered 5,000 apples from the seller at P20 per apple. The seller delivered 6,000 apples. What are
the rights and obligations of the buyer?
(A) He can accept all 6,000 apples and pay the seller at P20 per apple.
(B) He can accept all 6,000 apples and pay a lesser price for the 1,000 excess apples.
(C) He can keep the 6,000 apples without paying for the 1,000 excess since the seller delivered them
anyway.
(D) He can cancel the whole transaction since the seller violated the terms of their agreement.
Lino entered into a contract to sell with Ramon, undertaking to convey to the latter one of the five lots he
owns, without specifying which lot it was, for the price of P1 million. Later, the parties could not agree which
of five lots he owned Lino undertook to sell to Ramon. What is the standing of the contract?
(A) Unenforceable.
(B) Voidable.
(C) Rescissible.
(D) Void.
Knowing that the car had a hidden crack in the engine, X sold it to Y without informing the latter about it. In
any event, the deed of sale expressly stipulated that X was not liable for hidden defects. Does Y have the
right to demand from X a reimbursement of what he spent to repair the engine plus damages?
(A) Yes. X is liable whether or not he was aware of the hidden defect.
(B) Yes, since the defect was not hidden; X knew of it but he acted in bad faith in not disclosing the
fact to Y.
(C) No, because Y is in estoppel, having changed engine without prior demand.
(D) No, because Y waived the warranty against hidden defects.
Acme Cannery produced sardines in cans known as "Sards." Mylene bought a can of Sards from a store, ate it,
and suffered from poisoning caused by a noxious substance found in the sardines. Mylene filed a case for
damages against Acme. Which of the following defenses will hold?
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91
(A) The expiry date of the "Sards" was clearly printed on its can, still the store sold and Mylene
bought it.
(B) Mylene must have detected the noxious substance in the sardines by smell, yet she still ate it.
(C) Acme had no transaction with Mylene; she bought the "Sards" from a store, not directly from
Acme.
(D) Acme enjoys the presumption of safeness of its canning procedure and Mylene has not overcome
such presumption.
X, who was abroad, phoned his brother, Y, authorizing him to sell Xs parcel of land in Pasay. X sent the title to
Y by courier service. Acting for his brother, Y executed a notarized deed of absolute sale of the land to Z after
receiving payment. What is the status of the sale?
(A) Valid, since a notarized deed of absolute sale covered the transaction and full payment was made.
(B) Void, since X should have authorized agent Y in writing to sell the land.
(C) Valid, since Y was truly his brother Xs agent and entrusted with the title needed to effect the sale.
(D) Valid, since the buyer could file an action to compel X to execute a deed of sale.
In a true pacto de retro sale, the title and ownership of the property sold are immediately vested in the
vendee a retro subject only to the resolutory condition of repurchase by the vendor a retro within the
stipulated period. This is known as
(A) equitable mortgage.
(B) conventional redemption.
(C) legal redemption.
(D) equity of redemption.
_FIN
Sometimes the odds are against you but sometimes you are stronger than the odds
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Article 1458, Civil Code

Characteristics of a contract of sale

Nominate and Principal

Bilateral and Reciprocal (Arts. 1169 and 1191)

Synallagmatic contract meaning bilateral contract

Sale Is Title and Not Mode

As Title not a Mode

(1) Consent of the contracting parties;

SIR: YOU HAVE TO MASTER DISTINCTIONS

If amount of money > thing = Intention first, if cannot be determined, it is sale.

Sale v. Contract for a Piece of Work

Test: thing is manufactured in the ordinary course of business (1467)

This means that the thing is specially manufactured for you.

A cake which has a face of you on it contract for a piece

Sale v. Dacion en Pago

Dacion En Pago / Dation in payment

property is alienated to the creditor in satisfaction of a debt in

This contract is governed by the law on sales (1245)

Prepared By: ONG ABRANTES, KIANG

SSS vs. AGP (April 30, 2008)

1484 and 1485

ELEMENTS OF A CONTRACT OF SALE

1st element: CONSENT

So, the heirs, creditors or the government

Sale against public policy

guardians, property of his ward

agents, property whose administration or sale has

executors, property of state under administration

been entrusted to him, unless principal

Maharlika vs Tagle July 9, 1986

be under his guardianship;

(2) Agents, the property whose administration or sale may have

been entrusted to them, unless the

(3) Executors and administrators, the property of the estate

(4) Public officers and employees, the property of the State or of

Is Atty. Cruz's claim correct? (8%)

Emptio Rei Speratae v. Emptio Spei

SM must be determinate OR at least determinable (Art. 1460)

DETERMINABLE capable of being made determinate without the necessity of a new or

ATILANO vs. ATILANO (May 21, 1969)

NATIONAL GRAINS AUTHORITY, CABAL vs. IAC, SORIANO (March 8, 1989)

SM must be LICIT: (Art. 1347)

Illegal Sale due

to Illegal Subject Matter

Price must be:

reference to a definite day/particular

reference to another thing certain

never by one party to the contract (VOID)

MAPALO VS. MAPALO

BAGNAS vs. CA, RETONIL, ENCARNACION AND NAMBAYAN

Inadequacy of price: Effect

Voluntary sale - does not affect the validity of sale

But the price must not be grossly disproportionate

Inadequacy of Price: Judicial Sale

Inadequacy of Price: Sales A Retro

ARTICLE 1381. The following contracts are rescissible:

FORMATION OF A CONTRACT OF SALE

FIRST PHASE: PREPARATORY

Ang Yu Asuncion vs CA reiterated in Equitorial vs Mayfair

KATUNGOD NA UNA MUBALIBAD

offeree and offerrors terms are IDENTICAL

offeror violates the agreement