Chapter 2

CAPACITY TO BUY OR SELL

Art. 1489. All persons who are authorized in this 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 therefor. Necessaries are those referred to an article
290.*

Person whom may enter into a contract of sale.

As a general rule, all persons, whether natural or juridical, who can bind themselves by
contract have also legal capacity to buy or sell. There are exceptions to this rule in those cases
when the law determines that party suffers from either absolute or relative incapacity.

Kinds of incapacity.

Such incapacity is absolute in the case of persons who cannot bind themselves; and
relative, where it exists only with reference to certain persons or a certain class of property.
(Wolfson vs. Estate of Martinez, 20 Phil. 340.) Persons who are merely relatively incapacitated
are mentioned in Articles 1490-1491.

There are no incapacities except those provided by law and such incapacities cannot be
extended to other cases by implication for the reason that such construction would be in conflict
with the very nature of Article 1489. (Ibid.)

Liability for necessaries of minor or other

person without capacity to act.

Necessaries are those things which are needed for sustenance, dwelling, clothing and
medical attendance, in keeping with the financial capacity of the family of the incapacitated
person. (Art. 194, Family Code.) Whether the nature of the contract is such that it can, under any
circumstances, be regarded as a contract of necessaries, is a question which depends upon the
facts of the particular case.

Generally, the contracts entered into by a minor and other incapacitated persons (e.g.
insane or demented persons, deaf-mutes who do not know how to write), are voidable. (Arts.
1327, 1390.) However, where necessaries are sold and delivered to him (without the intervention
of the of the parent guardian), he must pay a reasonable price therefor. (Art. 1489, par. 2.) The
contract is, therefore, valid but the minor has the right to recover any excess above a reasonable
value paid by him.

Sale by minors.

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 The courts have laid down the rule that the sale of real estate effected by minors who
have already passed the ages of puberty and adolescence and are now in the adult age, when they
pretended to have already reached their majority, while in fact they have not, is valid. They
cannot be permitted afterwards to excuse themselves from compliance with the obligations
assumed by them or to seek their annulment. (see Mercado and Mercado vs. Espiritu, 37 Phil.
265[1917].)

Art. 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.*

Relative incapacity of husband

and wife.

(1) The husband and the wife are prohibited by the above article from selling property to
each other. A sale between husband and wife in violation of Article 1490 is inexistent and void
from the beginning because such contract is expressly prohibited by law. (Art.1409 [7].)

(2) They are also prohibited from making donations to each other during the marriage
except moderate gifts on the occasion of any family rejoicing. (Art. 87, Family Code.) However,
if there has been a separation of property agreed upon in the marriage settlements, or when there
has been a judicial separation of property decreed between them by the court. the sales between
husband and wife are allowed. They have, therefore, in the two cases mentioned, capacity to buy
or sell to each other.

Reason for prohibition under article 1490.

The reason for the law is not based so much on the union of the personality of the
husband and wife nor on the weakness of the sex and on the possibility that the husband will
induce his wife to engage in ruinous operations. The prohibition is primarily for the protection of
third persons who, relying upon supposed property of either spouse, enters into a contract with
either of them only to find out that the property relied upon was transferred to the other spouse.
(see 10 Manresa 95-96.)

Persons permitted to question sale.

(1) Although certain transfers between husband and wife are prohibited under the above
article, such prohibition can be taken advantage of only be persons bear such relation to the
parties making the transfer or to the property itself that such transfer interferes with their rights
or interests. Thus, the heirs of either spouse, as well as creditors at the time of the transfer, can
attack the validity of the sale but not creditors who became such only after the transaction. (Cook
vs. McMicking, 27 Phil. 10.)

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 (2) The government can question the validity or legitimacy of sales subject to tax
between husband and wife whenever necessary to prevent tax evasion.

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

(1) The guardian, the property of the person or persons who may be under his
guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given;
(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 entrusted 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, clerk of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take part by virtue of their
profession;

(6) Any others especially disqualified by law.

Incapacity by reason of relation to property.

The above article enumerates the persons who, because of their position and relation with
the persons under their charge or property either directly or indirectly and whether in private or
public sale. They are the: (1) guardians; (2) agents; (3) executors and administrators; (4) public
officers and employees; (5) judicial officers and employees and lawyers; and (6) others
especially disqualified by law.

Reason for prohibition under Article 1491.

The reason behind the article is to prevent frauds on the part of the persons enumerated
therein and minimize temptations to the exertion of undue and improper influence. The fear that
greed might get the better of the sentiments of loyalty and disinterestedness is the reason
underlying Article 1491.

The law does not trust human nature to resist the temptations likely to arise out of the
antagonism between the interest of the seller and the buyer. (23 Scaevola 403; Gregorio araneta,
Inc. vs. Tuazon del Paterno, 91 Phil. 786.)

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Other persons especially disqualified.

Examples of persons especially disqualified by law are:

(1) Aliens who are disqualified to purchase private agricultural lands. (Art. XII, Secs. 3,
7, Constitution; see Krivenko vs. Register of Deeds, 79 Phil. 461.);

(2) An unpaid seller, having a right of alien or having stopped the goods in transit, who is
prohibited from buying the goods either directly or indirectly in the resale of the same at a public
or private sale which he may make (Art. 1533, par. 5 Art. 1476[4].); and

(3) The officer conducting an execution sale of property to enforce a court judgment
rendered against the owner thereof cannot become a purchaser or be interested directly; or
indirectly in any purchase at such sale.

Effect of sale in violation of prohibition.

If the sale is made, would the transaction be void or merely voidable?

(1) With respect to Nos. 1 to 3, the sale shall only be voidable because in such cases only
private interests are affected. (see Wolfson vs. Estate of Martinez, 20 Phil. 340.) The defect can
be cured by ratification of the seller. (see Arts. 1392-1396.)

(2) With respect, however, to Nos. 4 to 6, the sale shall be null and void, public interests
being involved therein. (see Art. 1409[1, 7].)

Art. 1492. The prohibitions in the two p-receding articles are applicable to sales in legal
redemption, compromises and renunciations.

Prohibition extends to sales in legal redemption, etc.

(1) The relative incapacity provided in Articles 1490 and 1491 applies also to sales by
virtue of legal redemption (see Art. 1619.), compromises, and renunciations.

(a) Compromise is a contract whereby the parties, by reciprocal concessions, avoid

litigation or put an end to one already commenced. (Art. 2028.) It is the amicable settlement of a
controversy.

(b) By renunciation, a creditor gratuitously abandons his right against his creditor. The
other terms used by the law are condonation and remission. (see Art. 1270.)

(2) The persons disqualified to buy referred to an Articles 1490 and 1491 are also
disqualified to become lessees of the things mentioned therein. (Art. 1646.)

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